<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
---------------
(MARK ONE)
<TABLE>
<S> <C>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-7558
</TABLE>
LAWTER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-1370818
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
ONE TERRA WAY, 8601 95(TH) STREET, 53158
PLEASANT PRAIRIE, WISCONSIN (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (414) 947-7300
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------------------------------ ------------------------------------
<S> <C>
Common Stock, $1.00 par value per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
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<PAGE>
As of February 12, 1999, 33,068,076 common shares were outstanding. The
aggregate market value of the common shares (based upon the February 12, 1999
closing price of these shares on the New York Stock Exchange) of Lawter
International, Inc. held by non-affiliates was approximately $288 million.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for the year ended December 31, 1998--Parts I and
II.
Proxy Statement to Stockholders for the 1999 Annual Meeting--Part III.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
FORM 10-K
ITEM NO. NAME OF ITEM PAGE
- ---------- -------------------------------------------------------------------------------------------- -----
<S> <C> <C>
Part I
Item 1. Business.................................................................................... 2
Item 2. Properties.................................................................................. 4
Item 3. Legal Proceedings........................................................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......................................... 5
Item 4A. Executive Officers of the Registrant........................................................ 5
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................... 5
Item 6. Selected Financial Data..................................................................... 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.................................. 11
Item 8. Financial Statements and Supplementary Data................................................. 12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 12
Part III
Item 10. Directors and Executive Officers of the Registrant.......................................... 12
Item 11. Executive Compensation...................................................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and Management.............................. 12
Item 13. Certain Relationships and Related Transactions.............................................. 12
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................. 13
Report of Independent Public Accountants on Schedule and Consent of
Independent Public Accountants........................................................................ 28
Signatures.............................................................................................. 30
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS--
INDUSTRY SEGMENTS.
The Company has concluded that it operates primarily in one segment, the
specialty polymers segment, since all of its revenues are derived from the
manufacture and sale of its specialty polymers. Within this segment the Company
has two main product lines, printing ink vehicles and slip additives, and
synthetic and hydrocarbon resins. These products are manufactured, warehoused
and sold using essentially the same systems, sales force and distribution
network.
NARRATIVE DESCRIPTION OF BUSINESS--
PRINCIPAL PRODUCTS.
Reference is made to the information set forth under the caption "About
Lawter International, Inc." on the inside front cover of the Company's 1998
Annual Report to Stockholders (hereby incorporated by reference) for this
information.
Information with respect to sales by product group is as follows:
<TABLE>
<CAPTION>
(PERCENT OF NET SALES) 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Printing Ink Vehicles and Slip Additives................................ 47.5 44.2 43.3
Synthetic and Hydrocarbon Resins........................................ 51.1 53.0 52.2
Other................................................................... 1.4 2.8 4.5
</TABLE>
No material part of the business of the Company is dependent upon a single
product for any customer or a small group of customers.
The Company manufactures its products in four plants in the United States
and in five plants in foreign countries (Belgium, China(2), Ireland and
Singapore). Products are sold primarily by Company employed salesmen.
RAW MATERIALS.
The basic ingredients of the Company's products are purchased from others,
including larger chemical firms. Such ingredients are normally in adequate
supply. A portion of the Company's resin production is used by it in the
manufacture of printing ink vehicles and substantially all of the Company's
rosin production is used by it to manufacture resins.
PATENTS.
The Company owns certain patents on its products, but no single patent is
considered to be materially important to its business.
SEASONAL INFLUENCES.
The business of the Company is not in any material respect subject to
seasonal influences.
BACKLOG.
Since the Company generally fills orders for its products out of current
inventories, there is no significant backlog of orders at any time.
2
<PAGE>
CUSTOMERS.
The Company sells the majority of its products to both large and small ink
companies. Lawter is a major supplier of printing ink vehicles and resins for
printing inks and, therefore, sells substantial quantities to the larger ink
companies around the world. Dianippon Ink and Chemicals is Lawter's largest
multilocation customer with twenty-three percent of consolidated net sales for
the most recently completed fiscal year.
COMPETITION.
The Company encounters keen competition in the conduct of its business.
Industry data indicating the relative ranking of competitive companies is not
available. The Company competes with several other independent producers of
printing ink vehicles and slip additives. The larger printing ink manufacturers
produce some of the vehicles required in their own operations, although
generally they do not sell vehicles in competition with the Company. The Company
is considered to be one of the medium sized to smaller producers of synthetic
and hydrocarbon resins. Several other producers of synthetic and hydrocarbon
resins are large chemical companies with much greater total sales and resources
than those of the Company.
In the sale of its principal products, printing ink vehicles, slip
additives, and synthetic and hydrocarbon resins, the Company's principal methods
of meeting competition are in the areas of product performance and service. The
Company specializes in products prepared primarily for specific end uses such as
vehicles used in printing inks having particular characteristics, including fast
setting and mar resistant inks, ink systems designed to produce less waste and
resins used in the production of specialty inks and protective coatings. The
Company is capable of fulfilling the requirements of customers either from
inventories or from production runs on relatively short notice.
The Company has approximately 15 direct competitors in the sale of its line
of printing ink vehicles and slip additives, and approximately 40 competitors in
the sale of its synthetic and hydrocarbon resins.
RESEARCH.
During the fiscal years ended December 31, 1998, 1997 and 1996, the Company
spent approximately $5,375,000, $5,342,000 and $5,049,000, respectively, on
research activities relating to the development of new products and the
improvement of existing products.
ENVIRONMENTAL MATTERS.
Environmental laws regulate the discharge of materials into the environment
and may require the Company to remove or minimize the environmental effects of
the disposal of waste. Environmental expenditures are expensed or capitalized
depending upon their future economic benefit. Expenditures that relate to an
existing condition caused by past operations and that have no future economic
benefits are expensed. Liabilities are recorded when environmental assessment
and/or remediation is probable and the costs can be reasonably estimated.
Expenditures for environmental matters during the fiscal years ended December
31, 1998, 1997 and 1996 were not material to the consolidated financial
statements of the Company.
It has been and is the Company's policy to voluntarily install equipment
deemed necessary to control the discharge of pollutants into the environment.
The Company has voluntarily installed numerous in-line
incinerators/after-burners at its major manufacturing facilities in order to
minimize the generation of vapor, liquid or solid waste. The Company believes
that its facilities and products comply in all material respects with applicable
environmental regulations and standards.
The Company believes that compliance with the Federal, state and local
environmental laws has had no material effect upon the capital expenditures or
competitive position of the Company. Environmental
3
<PAGE>
capital expenditures in 1999 are not anticipated to be material. The Company
does not believe, based on information available at this time, that the level of
future expenditures for environmental matters will have a material effect on its
consolidated financial position.
EMPLOYEES.
At December 31, 1998, the Company had 613 employees.
FOREIGN SALES--
Reference is made to Note 9 in the Consolidated Financial Statements which
are included in this Form 10-K Annual Report as indicated in Item 14.
ITEM 2. PROPERTIES.
Information with respect to the principal properties, all of which are of
masonry and metal clad construction, in which the Company's operations are
conducted is as follows:
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA
(SQUARE PRINCIPAL PRODUCTS OWNED OR
LOCATION FEET) OR ACTIVITIES LEASED
- --------------------------------------- ------------ ----------------------------------------------- ---------
<S> <C> <C> <C>
Pleasant Prairie, Wisconsin 250,000 Corporate headquarters Owned
Printing ink vehicles and slip additives
Synthetic and hydrocarbon resins
Research facilities
Warehouse
Moundville, Alabama 250,000 Synthetic and hydrocarbon resins (1)
Warehouse
La Vergne, Tennessee 27,000 Printing ink vehicles Owned
Warehouse
Newark, New Jersey 50,000 Slip additives Leased
Warehouse
Bell, California 15,000 Warehouse Leased
Kallo, Belgium 230,000 Printing ink vehicles and slip additives Owned
Synthetic and hydrocarbon resins
Research facilities
Warehouse
Rexdale, Ontario, Canada 66,000 Warehouse Owned
Dazhou, Fujian, Peoples Republic 35,000 Gum rosin derivatives Owned
of China Warehouse
Tanggu, Peoples Republic of China 40,000 Printing ink vehicles Owned
Synthetic resins
Warehouse
Waterford, Ireland 97,000 Synthetic resins Owned
Ibaraki, Japan 11,000 Technical service center Leased
Warehouse
Jurong Town, Singapore 10,000 Printing ink vehicles Owned
Warehouse
</TABLE>
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(1) The Moundville, Alabama plant is leased as described in Note 7 in the
Consolidated Financial Statements which are included in this Form 10-K
Annual Report as indicated in Item 14.
4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
On September 25, 1995, the U.S. EPA filed an administrative complaint
alleging record keeping violations under the Toxic Substance Control Act (TSCA).
Simultaneously, Lawter and the U.S. EPA entered into a consent order fully
settling the complaint. Pursuant to the consent order, and without admitting any
liability, the Company has paid $280,000 to the U.S. EPA and has conducted a
TSCA compliance audit. The Company decided to settle this matter in order to
avoid protracted litigation and related costs. The outcome of this compliance
audit has not been determined, however, any potential liability related to this
matter has been fully accrued.
The Company believes that it is the subject of a federal grand jury
investigation in Mobile, Alabama. This investigation was initiated in 1997 into
the classification for tariff purposes of certain products imported by the
Company. The grand jury has subpoenaed Company records. One current Company
employee and one former Company employee have appeared before the grand jury.
The Company is cooperating with the investigation. The Company believes that its
classification of such products was proper, and has presented its position to
the U.S. Attorney's office in Mobile, Alabama. The U.S. Customs Service has
initiated proceedings seeking to recover the duties on such products, as well as
certain penalties. The Company is contesting the position of the Customs
Service, and is preparing a written response to the Customs Service.
Reference is made to Note 8 in the Consolidated Financial Statements which
are included in this Form 10-K Annual Report as indicated in Item 14 for
additional information.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders in the fourth
quarter of the year ended December 31, 1998.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the executive officers of the Company is as
follows:
<TABLE>
<CAPTION>
YEAR
NAME POSITION AGE ELECTED
- --------------------------- -------------------------------------------------------------- --- ---------
<S> <C> <C> <C>
John P. O'Mahoney.......... Chairman of the Board and Chief Executive Officer 42 1996
Mark W. Joslin............. Chief Financial Officer, Treasurer and Secretary 39 1996
Jacob F. Baarends.......... Vice President 51 1998
Nathan L. Goodnow.......... Vice President 36 1998
</TABLE>
Mr. O'Mahoney served as Vice President of the Company, 1993-1995. Mr. Joslin
served as the Corporate Controller of ANGUS Chemical Company, 1991-1996. Mr.
Baarends served as the European and Pacrim Technical Director of the Company,
1991-1998. Mr. Goodnow served as Operations Manager of BASF Corporation,
1993-1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) MARKET INFORMATION. The Company's Common Stock is traded on the New
York Stock Exchange.
The following table sets forth the high and low sales prices of the
Company's Common Stock, as reported on the New York Stock Exchange for the
periods indicated:
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
QUARTER HIGH LOW HIGH LOW
- ------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
First........................................................ 12 1/2 10 3/8 12 3/4 11 1/4
Second....................................................... 11 7/16 9 1/4 12 5/8 10 5/8
Third........................................................ 11 7 14 1/8 12 1/8
Fourth....................................................... 11 5/8 6 1/8 12 1/2 10 5/8
</TABLE>
(b) As of February 12, 1999, the number of holders of record of the
Company's Common Stock was approximately 1,969.
5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
Information with respect to selected financial data is as follows. This
information should be read in conjunction with the Consolidated Financial
Statements which are included in this Form 10-K Annual Report as indicated in
Item 14.
TEN YEAR FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998(1) 1997(1) 1996(1) 1995 1994
--------- --------- --------- --------- ---------
Net Sales................................................ $ 212,843 $ 206,539 $ 193,814 $ 204,835 $ 191,056
--------- --------- --------- --------- ---------
Gross Profit............................................. 64,933 63,100 60,433 45,801(7) 59,294
Selling, Administrative, Research and Distribution
Expenses............................................... 28,584 27,283 24,793 28,762(7) 24,102
Subsidiary Closure Costs................................. -- 9,535(5) -- -- --
--------- --------- --------- --------- ---------
Operating Income......................................... 36,349 26,282 35,640 17,039 35,192
Net Investment Income (Expense).......................... (5,683) 2,333 4,914 6,170 4,470
Sale of Affiliate........................................ -- 32,030(6) -- -- --
--------- --------- --------- --------- ---------
Earnings Before Income Taxes and Cumulative Effect of
Accounting Change...................................... 30,666 60,645 40,554 23,209 39,662
Provision for Income Taxes............................... 9,201 23,319 11,779 6,931 10,257
--------- --------- --------- --------- ---------
Earnings Before Cumulative Effect of Accounting Change... 21,465 37,326 28,775 16,278 29,405
Cumulative Effect of Change in Accounting for Income
Taxes.................................................. -- -- -- -- --
--------- --------- --------- --------- ---------
Net Earnings............................................. $ 21,465 $ 37,326 $ 28,775 $ 16,278 $ 29,405
--------- --------- --------- --------- ---------
Depreciation and Amortization............................ $ 6,233 $ 5,832 $ 5,499 $ 5,447 $ 4,344
Cash Provided by Operating Activities.................... 25,474 10,792 25,253 13,766 23,047
Cash Dividends........................................... 14,629 18,173 18,077 17,989 17,951
Capital Expenditures, net................................ 6,788 10,485 25,925 21,928 10,613
Gross Property, Plant and Equipment...................... 134,603 127,451 141,346 126,406 102,788
Net Working Capital...................................... 76,709 117,961 74,410 71,722 88,993
Total Assets............................................. 254,250 276,184 293,123 261,474 231,827
Long-term Obligations.................................... 129,050 29,050 29,050 4,100 4,152
Stockholders' Equity..................................... 33,524 161,357 145,615 133,189 131,185
Average Shares Outstanding(2)............................ 36,554 45,431 45,175 45,018 44,874
Earnings per Share(2):
Earnings Before Cumulative Effect of Accounting Change... $ .59 $ .82 $ .64 $ .36 $ .66
Cumulative Effect of Change in Accounting for Income
Taxes.................................................. -- -- -- -- --
--------- --------- --------- --------- ---------
Net Earnings............................................. $ .59 $ .82 $ .64 $ .36 $ .66
--------- --------- --------- --------- ---------
Cash Dividends per Share(2).............................. .40 .40 .40 .40 .40
Stockholders' Equity per Share(2)........................ .92 3.55 3.22 2.96 2.92
Cash Dividends to Net Earnings........................... 68.2% 48.7% 62.8% 110.5% 61.0%
Net Earnings to Average Equity........................... 22.0% 24.3% 20.6% 12.3% 24.0%
</TABLE>
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(1) See Management's Discussion and Analysis for analysis of changes between
years.
(2) Average shares outstanding and per share amounts are adjusted to reflect the
four-for-three stock splits in 1991 and 1990.
(3) Represents cumulative effect on prior years' earnings of adopting SFAS No.
109 which was adopted January 1, 1993.
(4) Includes additional tax provision of $21.6 million for future repatriation
of foreign earnings.
6
<PAGE>
TEN YEAR FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
Net Sales.................................................. $ 172,249 $ 167,568 $ 152,893 $ 150,005 $ 136,006
--------- --------- --------- --------- ---------
Gross Profit............................................... 46,628 53,933 50,543 48,397 40,576
Selling, Administrative, Research and Distribution
Expenses................................................. 21,495 22,641 20,401 20,717 18,074
Subsidiary Closure Costs................................... -- -- -- -- --
--------- --------- --------- --------- ---------
Operating Income........................................... 25,133 31,292 30,142 27,680 22,502
Net Investment Income (Expense)............................ 4,318 5,271 6,221 4,963 3,929
Sale of Affiliate.......................................... -- -- -- -- --
--------- --------- --------- --------- ---------
Earnings Before Income Taxes and Cumulative Effect of
Accounting Change........................................ 29,451 36,563 36,363 32,643 26,431
Provision for Income Taxes................................. 28,449(4) 9,548 9,893 9,223 6,963
--------- --------- --------- --------- ---------
Earnings Before Cumulative Effect of Accounting Change..... 1,002 27,015 26,470 23,420 19,468
Cumulative Effect of Change in Accounting for Income
Taxes.................................................... 4,025(3) -- -- -- --
--------- --------- --------- --------- ---------
Net Earnings............................................... $ 5,027 $ 27,015 $ 26,470 $ 23,420 $ 19,468
--------- --------- --------- --------- ---------
Depreciation and Amortization.............................. $ 4,291 $ 4,179 $ 3,900 $ 3,521 $ 3,550
Cash Provided by Operating Activities...................... 23,811 34,440 23,192 34,240 20,388
Cash Dividends............................................. 17,909 17,556 14,947 12,582 12,561
Capital Expenditures, net.................................. 12,940 7,548 8,902 6,198 3,073
Gross Property, Plant and Equipment........................ 87,856 78,491 74,022 66,271 57,421
Net Working Capital........................................ 87,523 96,082 87,075 82,560 70,200
Total Assets............................................... 209,477 187,334 178,218 153,500 133,988
Long-term Obligations...................................... 4,206 4,858 5,238 5,137 5,083
Stockholders' Equity....................................... 114,025 129,659 117,315 105,090 87,752
Average Shares Outstanding(2).............................. 44,772 43,913 43,318 43,011 42,940
Earnings per Share(2):
Earnings Before Cumulative Effect of Accounting Change..... $ .02 $ .62 $ .61 $ .54 $ .45
Cumulative Effect of Change in Accounting for Income
Taxes.................................................... .09(3) -- -- -- --
--------- --------- --------- --------- ---------
Net Earnings............................................... $ .11 $ .62 $ .61 $ .54 $ .45
--------- --------- --------- --------- ---------
Cash Dividends per Share(2)................................ .40 .40 .35 .29 .29
Stockholders' Equity per Share(2).......................... 2.55 2.95 2.71 2.44 2.04
Cash Dividends to Net Earnings............................. 356.3% 65.0% 56.5% 53.7% 64.5%
Net Earnings to Average Equity............................. 4.1% 21.9% 23.8% 24.3% 23.3%
</TABLE>
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(5) Represents costs associated with the closure of several subsidiaries. The
after tax effect of these costs was $.20 per share.
(6) Represents the gain on the sale of the Company's 28% share of Hach Company
common stock. This resulted in an after tax gain of $.43 per share.
(7) The 1995 Gross Margin was reduced by $10,562,000 for restructuring and other
charges. The 1995 Selling, Administrative, Research and Distribution
Expenses includes $2,791,000 in restructuring charges. The after tax effect
of these charges was $.24 per share.
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
On April 1, 1998, the Company repurchased 11,503,130 shares of Lawter
International, Inc.'s common stock held by the estate of Daniel J. Terra, at a
price of $11.375 per share. The total price of $130,800,000 plus related costs
was financed through a $100,000,000 note issued to Prudential Insurance Company
of America at an interest rate of 6.91%, with the principal to be repaid in five
annual installments of $20,000,000 each beginning April 1, 2006 and a final
maturity date of April 1, 2010. The remaining amount was funded with cash on
hand.
Lawter's cash and equivalents, net of short-term borrowings, decreased
$47,600,000 from $59,900,000 at December 31, 1997 to $12,300,000 at December 31,
1998. This decrease was the result of the repurchase of the Company's common
stock held by the estate of Daniel J. Terra, acquisition of the ink resin
business of Robert Kraemer GmbH, and the buildup of strategic raw materials due
to favorable pricing.
The Company generally relies upon internally generated funds from operations
to satisfy working capital requirements and to fund capital expenditures.
However, in certain circumstances, the Company finds it is more advantageous to
borrow funds to satisfy these requirements.
In 1998 and 1997, the majority of Lawter's capital expansion program was
financed with internally generated funds. In 1996, the Company used external
financing for the new manufacturing facility in Belgium. The capital
expenditures budget for 1998 was $9,000,000. Actual expenditures were in line
with the budget. Lawter's capital expenditures for 1999 are estimated at
$9,500,000. These expenditures include funds for improved raw material sourcing
and product line expansion as well as additions to and maintenance of existing
facilities. The Company currently anticipates using internally generated funds
for the majority of these capital expenditures.
RESULTS OF OPERATIONS
1998 VERSUS 1997
NET SALES. The Company's consolidated net sales increased 3% when compared
to 1997. Higher sales volume in North America and the Pacrim was somewhat offset
by lower average selling prices due to a change in product mix and the stronger
U.S. dollar versus European and Pacrim currencies.
By region, net sales increased 9% in North America and 14% in the Pacrim
while decreasing 5% in Europe when compared to 1997. In North America, sales
improved as a result of increased market share, sales of new products and
industry growth. The higher sales in the Pacrim were attributable to increased
product and customer base, partially offset by a downturn in the economy.
European sales were impacted by more intense competition, by the Company's
decision not to renew participation in certain low margin business and by a
stronger U.S. dollar.
GROSS PROFIT. Gross profit as a percent of sales was 30.5% and 30.6% for
1998 and 1997, respectively. Included in the gross profit for 1997 was the
impact of the accounting for business interruption insurance claims (see
"Insurance" below). Excluding the effect of the business interruption insurance
claims, the gross margin increased from 29.3% in 1997 to 30.5% in 1998 as a
result of a change in product mix to higher margin products and lower raw
material costs worldwide.
SELLING, ADMINISTRATIVE, RESEARCH AND DISTRIBUTION EXPENSES. Selling,
administrative, research and distribution expenses increased from $27,283,000 in
1997 to $28,584,000 in 1998. The increase from 1997 was primarily attributable
to higher distribution and commission costs in Japan to support higher sales
volumes, higher freight charges as a result of higher volumes domestically and a
change in product mix to more sales of solutions which incur higher distribution
cost per pound shipped.
8
<PAGE>
INVESTMENT INCOME. Investment income decreased in 1998 when compared to
1997 as a result of the sale, in July of 1997, of the Company's investment in
Hach Company which had accounted for about $3,100,000 in investment income on an
annualized basis at the time of the sale, and as a result of lost investment
income from cash used for the repurchase of the shares of the Company's Common
Stock from the estate of Daniel J. Terra in April of 1998.
INTEREST EXPENSE. Lawter financed the majority of the repurchase of the
Company's Common Stock with a $100,000,000 note issued to Prudential Insurance
Company of America in April of 1998 resulting in the increase in interest
expense from 1997 to 1998.
INCOME TAXES. The effective tax rates for 1998 and 1997 were 30.0% and
38.5%, respectively. Included in 1997 was a 38.9% effective tax rate on the sale
of the Hach Company stock and a minimal tax benefit from the subsidiary closure
costs along with a one-time tax benefit from restructuring of an international
operation. Excluding these items, the effective tax rate in 1997 would have been
comparable to 1998.
1997 VERSUS 1996
NET SALES. The Company's consolidated net sales increased 7% when compared
to 1996. Included in 1997 are $20,900,000 in sales of products, mostly in
Europe, relating to the Wolstenholme and Hercules acquisitions, which were
acquired in the fourth quarter of 1996. Excluding the Wolstenholme and Hercules
products from both years, consolidated net sales decreased 3% as a result of the
impact of a stronger U.S. dollar versus most European currencies and lower
average selling prices caused by a change in product mix, partially offset by
increased volume in all geographic areas.
By region, net sales increased 12% in Europe, 24% in the Pacific Rim and
less than 1% in North America when compared to 1996. In addition to the impact
of Wolstenholme and Hercules sales, higher sales volumes in Europe were
partially offset by the stronger U.S dollar versus European currencies. The
increase in the Pacific Rim was the result of increased customer and product
base.
GROSS PROFIT. Gross profit as a percent of sales was 30.6% and 31.2% for
1997 and 1996, respectively. The gross profit in 1997 and 1996 included the
impact of the accounting for business interruption insurance claims (see
"Insurance" below). Excluding the effect of the business interruption insurance
claims, the gross margin increased from 28.2% in 1996 to 29.3% in 1997 as the
result of lower raw material costs in North America, decreased operating costs
as a result of the restructuring plan described in "Restructuring Charges" below
and the startup costs of the new polymer facility in Belgium included in 1996.
SELLING, ADMINISTRATIVE, RESEARCH AND DISTRIBUTION EXPENSES. Selling,
administrative, research and distribution expenses increased from $24,793,000 in
1996 to $27,283,000 in 1997. The higher expenses in 1997 were due principally to
increased sales volume, higher distribution costs caused by the shutdown of
various manufacturing facilities and increased commission and royalty payments
as the result of acquisitions.
SUBSIDIARY CLOSURE COSTS. Subsidiary closure costs represent $4,236,000 for
the write off of goodwill related to the Company's Italian subsidiary along with
$3,299,000 for the write off of accumulated foreign currency translation losses
at foreign subsidiaries and $2,000,000 for other costs related to other
subsidiaries that have been or are in the process of being closed. The after tax
effect of these costs was $.20 per share.
INVESTMENT INCOME. Investment income decreased in 1997 when compared to
1996 as a result of the Company's July 1997 sale of its equity investment in
Hach Company and the liquidation of its stock portfolio in 1996 which had
resulted in appreciation gains in 1996.
9
<PAGE>
SALE OF AFFILIATE. During the third quarter of 1997, the Company sold its
28% share of Hach Company common stock for $59,987,000. This resulted in an
after tax gain of $19,570,000 or $.43 per share.
INCOME TAXES. The effective tax rates for 1997 and 1996 were 38.5% and
29.0%, respectively. The higher effective tax rate in 1997 was the result of a
38.9% effective tax rate on the sale of the Hach Company stock along with a
minimal tax benefit from the subsidiary closure costs. Excluding these items,
the effective tax rate in 1997 would have been 29.1%.
OTHER MATTERS
RESTRUCTURING CHARGES. In the fourth quarter of 1995, a new management team
was formed. The new management, taking into account a change in market
conditions, developed a new corporate strategy. Part of the decision making
process included an evaluation of the feasibility of continuing to utilize older
manufacturing facilities. With the anticipated completion of construction of the
new ink vehicle and resin facility in Belgium combined with the new ink vehicle
and resin facility in the U. S., the Company decided to implement a
restructuring plan. This plan included the decommissioning of older ink vehicle
and resin plants. These restructuring activities commenced in the fourth quarter
of 1995 and were substantially completed as of the end of 1997.
INSURANCE. In April 1996, there was an explosion and fire at the Company's
resin facility in Ireland. The facility was shut down for several months. The
Company was adequately insured and, therefore, recorded business interruption
insurance proceeds of $4,000,000 in 1996 and $2,622,000 in 1997 for lost sales
and additional expenses incurred. This was recorded as a reduction to Cost of
Products Sold. This facility is now fully operational.
The Company also received proceeds of $1,864,000 in 1996 for the final
settlement of claims arising from an explosion and fire at its U.S. resin
facility in 1994. This amount was also recorded as a reduction to Cost of
Products Sold.
YEAR 2000. The Company is taking the actions described below to evaluate
and address its exposure to year 2000 ("Y2K") issues, which may result from the
inability of some computer programs to identify the Year 2000 properly,
potentially leading to errors or system failure.
The Company is conducting Y2K reviews of each of the following areas: (i)
internal information systems, (ii) embedded systems, (iii) research and
development equipment, and (iv) suppliers providing products and services to the
Company.
The Company's internal information systems have been inventoried and
assessed. The Company believes its enterprise software in North America is fully
Y2K compliant. Its North American hardware and operating system software are
scheduled to be upgraded by April 30, 1999. In Europe, the Company believes that
the internal information systems software and hardware are fully Y2K compliant.
In the Pacrim, the Company believes that all critical systems are Y2K compliant.
Embedded systems, specifically the Foxboro production system, which is used
in the Company's resin facilities in Wisconsin and Kallo, Belgium, have been
assessed and are currently awaiting upgrades. The Company expects to complete
these upgrades by June 30, 1999.
The Company is in the process of testing and upgrading its research and
development equipment. Various systems have been upgraded. The Company expects
to complete this testing by March 31, 1999 and to complete the remaining
upgrades by June 30, 1999.
Key suppliers were surveyed as to their Y2K compliance. Sixty-four percent
of these suppliers in North America and eighty percent in Europe have responded
that they are addressing the issue, and plan to be compliant. Meaningful
responses from suppliers in the Pacrim have not yet been received. The Company
will continue to seek assurances from suppliers that they will be Y2K compliant.
The Company
10
<PAGE>
has initiated contingency planning and expects to finalize such plans for each
of the areas identified above before yearend 1999.
In a worst case scenario, any failure by the Company or any key supplier or
customer to become Y2K compliant could result in disruption of the Company's
normal operations and the inability or unwillingness of its customers to
purchase the Company's products. Any such failure or disruption could have a
material adverse affect on the Company's business, financial condition or
results of operations.
The Company expects costs associated with Y2K remediation to be
approximately $250,000, which will be expensed as incurred and will not have a
material impact on the financial position, results of operations or cash flow of
the Company. To date, approximately $125,000 of such costs have been incurred.
MARKET RISK. The Company is exposed to various market risks, including
changing interest rates and foreign currency rates. At December 31, 1998, the
Company had $129,000,000 in fixed rate long term debt, $27,800,000 in variable
rate short term debt and $25,900,000 in variable rate short term deposits. The
book value of all debt and deposits approximates market value. Based on the
Company's overall interest rate exposure, a change in interest rates would not
have a material impact on the consolidated financial position, results of
operation or cash flows of the Company. Historically, the Company has not
entered into interest rate protection agreements.
The Company transacts approximately fifty percent of its business in various
foreign currencies, primarily in Europe, the Pacrim and Canada. A significant
change in currency rates could have a material effect on the consolidated
financial position, results of operation or cash flows of the Company. The
Company does not have any foreign currency related derivative instruments. A ten
percent adverse change in foreign currency rates would decrease earnings by
about $.04 per share.
EURO. The Company has significant operations in Europe. During 1998, the
Company addressed the impact of the Euro. The Company believes that it is fully
prepared to transact business in the Euro and that the conversion from national
currencies to the Euro will have no material impact on the consolidated
financial position, results of operation or cash flows of the Company.
EFFECTS OF INFLATION. The Company attempts to minimize the effects of
inflation on sales and earnings by appropriately increasing selling prices and
pursuing ongoing cost control programs and productivity improvements. In 1998,
the effect of certain manufacturing and distribution cost increases were
minimized by decreased raw material costs. The effects of inflation were
minimized through increased manufacturing efficiencies and cost controls in 1997
and 1996.
LOOKING FORWARD. Lawter management believes that the Company's prospects
for growth of future sales and earnings are promising. While our markets
continue to be highly competitive and European and Asian markets are
experiencing difficulties, development of new markets, selective acquisitions,
continued emphasis on research and development, improved raw material sourcing
and cost effective utilization of our new production facilities, combined with
the present program of streamlining operations, will position the Company for
both medium and long-term gains in our strategic markets.
This Form 10-K Annual Report contains forward-looking statements which are
not historical facts. These statements involve risks and uncertainties that
could cause actual results to differ materially, including, but not limited to,
certain global and regional economic conditions and factors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Quantitative and qualitative disclosures about market risk are included in
this Form 10-K in Item 7 under the caption "Market Risk."
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data are included in this Form 10-K
Annual Report as indicated in Item 14.
OPERATING RESULTS BY QUARTERS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
<TABLE>
<CAPTION>
NET EARNINGS
------------------------
<S> <C> <C> <C> <C>
GROSS
NET SALES PROFIT AMOUNT PER SHARE
---------- ----------- --------- -------------
1997
March 31................................................... $ 50,140 $ 15,616 $ 5,938 $ .13
June 30.................................................... 50,657 16,034 7,566 .17
September 30............................................... 50,411 16,014 17,099(1) .37(1)
December 31................................................ 55,331 15,436 6,723 .15
---------- ----------- --------- ---
$ 206,539 $ 63,100 $ 37,326 $ .82
---------- ----------- --------- ---
---------- ----------- --------- ---
1998
March 31................................................... $ 52,755 $ 15,820 $ 6,391 $ .14
June 30.................................................... 51,597 15,930 4,775 .14
September 30............................................... 53,024 16,148 5,046 .15
December 31................................................ 55,467 17,035 5,253 .16
---------- ----------- --------- ---
$ 212,843 $ 64,933 $ 21,465 $ .59
---------- ----------- --------- ---
---------- ----------- --------- ---
</TABLE>
- ------------------------
(1) Includes a one-time gain from the sale of the Hach Company stock net of a
one-time charge for subsidiary closure charges. Excluding these items, the
net income in the third quarter would have been $6,815,000 or $.15 per
share.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes in or disagreements with independent auditors on
accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the Company's 1999 Proxy Statement under the heading
"Election Of Directors" (hereby incorporated by reference) and Item 4A
"Executive Officers of the Registrant" in Part I of this Form 10-K for this
information.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the Company's 1999 Proxy Statement under the heading
"Executive Compensation" (hereby incorporated by reference) for this
information.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the Company's 1999 Proxy Statement under the headings
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" (hereby incorporated by reference) for this information.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the Company's 1999 Proxy Statement under the headings
"Indebtedness of Management" and "Certain Relationships and Related
Transactions" (hereby incorporated by reference) for this information.
12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Consolidated Financial Statements--
<TABLE>
<CAPTION>
PAGE
NUMBER
-------------
<S> <C>
Balance Sheets as of December 31, 1998 and 1997......................................................... 15
Statements of Earnings for the years ended December 31, 1998, 1997 and 1996............................. 16
Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996........................... 17
Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996................. 18
Notes to the Consolidated Financial Statements for the years ended December 31, 1998, 1997 and 1996..... 19
Report of Independent Public Accountants................................................................ 28
</TABLE>
(a) 2. Financial Statement Schedules--
<TABLE>
<CAPTION>
PAGE
NUMBER
-------------
<S> <C>
Report of Independent Public Accountants on Schedule.................................................... 28
II Valuation and Qualifying Accounts.................................................................. 29
</TABLE>
All other schedules are not submitted because they are not applicable, not
required or the required information is included in the consolidated financial
statements or notes thereto.
(a) 3. Exhibits--
<TABLE>
<C> <S>
(3)(a) Certificate of Incorporation, as amended through April 27, 1993 (incorporated by
reference to Exhibit I of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993) (File No. 1-7558).
(b) Bylaws of the Company, as amended through November 9, 1995 (incorporated by
reference to Exhibit (3)(b) of the Company's Annual Report on Form 10-K for the
year ended December 31, 1995) (File No. 1-7558).
(4) Private Shelf Agreement between Lawter International, Inc. and The Prudential
Insurance Company of America (incorporated by reference to Exhibit 99.2 of the
Company's Form 8-K dated January 9, 1996) (File No. 1-7558).
(10)(a) Lawter International, Inc. 401-K Profit Sharing Plan.*
(b) Lawter International, Inc. Nonqualified Deferred Compensation Plan.*
(c) 1992 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit (10)(d)
of the Company's Annual Report on Form 10-K for the year ended December 31, 1992)
(File No. 1-7558).*
(d) The 1994 Amendment to the 1992 Non-Qualified Stock Option Plan (incorporated by
reference to Appendix A of the Company's Definitive Proxy Statement dated April 28,
1994) (File No. 1-7558).*
(e) The 1995 Amendment to the 1992 Non-Qualified Stock Option Plan(incorporated by
reference to Exhibit (10)(e) of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997) (File No. 1-7558).*
</TABLE>
13
<PAGE>
<TABLE>
<C> <S>
(f) The 1997 Amendment to the 1992 Non-Qualified Stock Option Plan(incorporated by
reference to Exhibit (10)(f) of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997) (File No. 1-7558).*
(g) 1995 Non-Qualified Stock Option Plan for Non-Employee Directors (incorporated by
reference to Appendix A of the Company's Definitive Proxy Statement dated April 24,
1995) (File No. 1-7558).*
(h) The 1997 Amendment to the 1995 Non-Qualified Stock Option Plan for Non-Employee
Directors(incorporated by reference to Exhibit (10)(h) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1997) (File No. 1-7558).*
(i) Employment Agreement, dated October 24, 1996, between the Company and John P.
O'Mahoney(incorporated by reference to Exhibit (10)(i) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996) (File No. 1-7558).*
(j) Employment Agreement, dated October 24, 1996, between the Company and Mark W.
Joslin(incorporated by reference to Exhibit (10)(j) of the Company's Annual Report
on Form 10-K for the year ended December 31, 1996) (File No. 1-7558).*
(k) Employment Agreement, dated August 3, 1998, between the Company and Jacob F.
Baarends.*
(l) Employment Agreement, dated October 29, 1998, between the Company and Nathan L.
Goodnow.*
(m) Settlement Agreement and Release, dated September 17, 1998, between the Company and
John P. Jilek.*
(n) Lawter International, Inc. Key Employee Investment Plan.*
(13) Those portions of the Lawter International, Inc. and Subsidiaries' 1998 Annual
Report to Stockholders which are incorporated by reference in this Form 10-K Annual
Report.
(21) Principal Subsidiaries of the Company.
(23) Consent of Independent Public Accountants (included in this Form 10-K on page 28).
(27) Financial Data Schedule for the year ended December 31, 1998.
</TABLE>
- ------------------------
* These documents constitute all of the management contracts, compensatory plans
or arrangements in which any director or executive officer participates.
(b) There were no reports on Form 8-K filed during the fourth quarter of
1998.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The foregoing undertaking is made in compliance with Form S-8, as amended as
of July 13, 1990, and shall be incorporated by this reference into each Form S-8
of the registrant, including Registration Statements Nos. 33-24859, 33-61506,
2-84421 and 333-67337.
14
<PAGE>
LAWTER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share figures)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1998 1997
----------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash (Note 1)............................................................................ $ 14,130 $ 8,052
Time Deposits, Interest Bearing (Note 1)................................................. 25,948 74,819
Accounts Receivable--less allowance for doubtful accounts of $593 in 1998 and $490 in
1997................................................................................... 42,398 44,170
Inventories (Note 1)..................................................................... 49,479 43,090
Prepaid Expenses......................................................................... 1,086 1,051
----------- ----------
Total Current Assets..................................................................... $ 133,041 $ 171,182
----------- ----------
Property, Plant and Equipment (Notes 1 and 7):
Land..................................................................................... $ 6,670 $ 6,982
Buildings................................................................................ 34,505 34,476
Machinery and Equipment.................................................................. 90,090 83,681
Construction in Progress................................................................. 3,338 2,312
----------- ----------
$ 134,603 $ 127,451
Less Accumulated Depreciation............................................................ 42,460 38,803
----------- ----------
Net Property, Plant and Equipment........................................................ $ 92,143 $ 88,648
Other Assets (Note 1).................................................................... 29,066 16,354
----------- ----------
Total.................................................................................... $ 254,250 $ 276,184
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable......................................................................... $ 13,577 $ 12,324
Accrued Expenses......................................................................... 13,557 13,805
Short-term Borrowings (Note 8)........................................................... 27,790 22,993
Income Taxes Payable..................................................................... 1,408 4,099
----------- ----------
Total Current Liabilities................................................................ $ 56,332 $ 53,221
----------- ----------
Long-term Obligations (Note 7)........................................................... 129,050 29,050
Deferred Income Taxes (Note 4)........................................................... 35,344 32,556
----------- ----------
Total Liabilities........................................................................ $ 220,726 $ 114,827
----------- ----------
Stockholders' Equity (Note 3):
Preferred Stock--no par value, authorized 500,000 shares; none issued.................... $ -- $ --
Common Stock--$1.00 par value, authorized 120,000,000 shares; issued 45,533,335 shares... 45,533 45,533
Additional Paid-in Capital............................................................... 15,950 16,747
Common Stock, held in Treasury, at cost--11,503,130 shares............................... (137,412) --
Retained Earnings (Note 1)............................................................... 115,906 109,070
Accumulated Other Comprehensive Income (Translation Adjustments)(Note 10)................ (6,295) (9,535)
Other.................................................................................... (158) (458)
----------- ----------
Total Stockholders' Equity............................................................... $ 33,524 $ 161,357
----------- ----------
Total.................................................................................... $ 254,250 $ 276,184
----------- ----------
----------- ----------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
15
<PAGE>
LAWTER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share figures)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net Sales.................................................................... $ 212,843 $ 206,539 $ 193,814
Cost of Products Sold........................................................ 147,910 143,439 133,381
---------- ---------- ----------
Gross Profit................................................................. $ 64,933 $ 63,100 $ 60,433
Selling, Administrative, Research & Distribution Expenses.................... 28,584 27,283 24,793
Subsidiary Closure Costs..................................................... -- 9,535 --
---------- ---------- ----------
Operating Income............................................................. $ 36,349 $ 26,282 $ 35,640
Investment Income............................................................ 2,536 5,646 7,941
Interest Expense............................................................. (8,219) (3,313) (3,027)
Sale of Affiliate (Note 6)................................................... -- 32,030 --
---------- ---------- ----------
Earnings Before Income Taxes................................................. $ 30,666 $ 60,645 $ 40,554
Provision for Income Taxes (Notes 1 and 4)................................... 9,201 23,319 11,779
---------- ---------- ----------
Net Earnings................................................................. $ 21,465 $ 37,326 $ 28,775
---------- ---------- ----------
---------- ---------- ----------
Net Earnings per Share (Note 1):............................................. $ .59 $ .82 $ .64
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
16
<PAGE>
LAWTER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Earnings................................................................. $ 21,465 $ 37,326 $ 28,775
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating
Activities--
Depreciation and Amortization.............................................. 6,233 5,832 5,499
Deferred Income Taxes...................................................... 3,088 (3,474) 433
Undistributed Equity Income................................................ -- (1,456) (2,583)
Deferred Exchange Gain (Loss).............................................. (810) 2,984 (1,327)
Purchase of Marketable Securities.......................................... -- -- (23,202)
Proceeds from Sales of Marketable Securities............................... -- 2,502 27,828
Net Gain from Marketable Securities........................................ -- (2) (605)
Gain on Sale of Business................................................... -- (738) --
Gain on Sale of Hach Company Common Stock.................................. -- (33,730) --
Write-off of Goodwill...................................................... -- 4,236 --
(Increase) Decrease in Current Assets--
Accounts Receivable........................................................ 2,711 858 (4,983)
Inventories................................................................ (4,451) 3,149 43
Prepaid Expenses........................................................... 1 787 220
Increase (Decrease) in Current Liabilities--
Accounts Payable........................................................... 964 (6,541) (1,663)
Accrued Expenses........................................................... (452) (3,651) (367)
Income Taxes Payable....................................................... (3,275) 2,710 (2,815)
----------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................... $ 25,474 $ 10,792 $ 25,253
----------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Expenditures for Property, Plant and Equipment, net........................ $ (6,788) $ (10,485) $ (25,925)
Purchase of Business, net of cash.......................................... (12,819) (9,219) (17,161)
Proceeds from the Sale of Business......................................... -- 4,856 --
Proceeds from Sale of Hach Company Common Stock............................ -- 59,987 --
Loans to Officers.......................................................... (23) (24) (478)
Repayment of Officers' Loans............................................... 323 43 47
----------- ---------- ----------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES......................... $ (19,307) $ 45,158 $ (43,517)
----------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Employee Stock Programs.................................................... $ 3,063 $ 2,220 $ 2,929
Repurchase of Common Stock................................................. (141,272) -- --
Principal Payments on Long-term Obligations................................ -- (50) (50)
Proceeds from Long-term Borrowings......................................... 100,000 -- 25,000
Payment of Short-term Borrowings........................................... (2,756) (11,182) (26,177)
Proceeds from Short-term Borrowings........................................ 6,120 -- 26,013
Cash Dividends Paid........................................................ (14,629) (18,173) (18,077)
----------- ---------- ----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES......................... $ (49,474) $ (27,185) $ 9,638
Effect of Exchange Rate Changes on Cash.................................... 514 (825) (123)
----------- ---------- ----------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS.................................. $ (42,793) $ 27,940 $ (8,749)
Cash and Equivalents, Beginning of Year.................................... 82,871 54,931 63,680
----------- ---------- ----------
Cash and Equivalents, End of Year.......................................... $ 40,078 $ 82,871 $ 54,931
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
17
<PAGE>
LAWTER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except per share figures)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON ADDITIONAL OTHER
STOCK $1 PAID-IN TREASURY RETAINED COMPREHENSIVE
PAR VALUE CAPITAL STOCK EARNINGS INCOME OTHER
----------- ----------- ----------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Years Ended December 31, 1996, 1997 and
1998
Balance, January 1, 1996................ $ 45,066 $ 11,864 $ -- $ 79,218 $ (2,914) $ (45)
Add (deduct):
Net Earnings.......................... -- -- -- 28,775 -- --
Cash Dividends Declared--$.40 per
share............................... -- -- -- (18,076) -- --
Exercise of Stock Options............. 283 2,847 -- -- -- --
Loans to Officers (Note 3) -- -- -- -- -- (431)
Unrealized Loss on Investments........ -- -- -- -- -- (60)
Foreign Currency Translation
Adjustments......................... -- -- -- -- (912) --
----------- ----------- ----------- ---------- ------- ---------
Balance, December 31, 1996.............. $ 45,349 $ 14,711 $ -- $ 89,917 $ (3,826) $ (536)
Add (deduct):
Net Earnings.......................... -- -- -- 37,326 -- --
Cash Dividends Declared--$.40 per
share............................... -- -- -- (18,173) -- --
Exercise of Stock Options............. 184 2,036 -- -- --
Loans to Officers (Note 3)............ -- -- -- -- -- 18
Unrealized Gain on Investments........ -- -- -- -- -- 60
Foreign Currency Translation
Adjustments......................... -- -- -- -- (5,709) --
----------- ----------- ----------- ---------- ------- ---------
Balance, December 31, 1997.............. $ 45,533 $ 16,747 $ -- $ 109,070 $ (9,535) $ (458)
Add (deduct):
Net Earnings.......................... -- -- -- 21,465 -- --
Cash Dividends Declared--$.40 per
share............................... -- -- -- (14,629) -- --
Key Employee Investment Plan.......... -- (797) 3,860 -- -- --
Loans to Officers (Note 3)............ -- -- -- -- -- 300
Repurchase of Common Stock............ -- -- (141,272) -- -- --
Foreign Currency Translation
Adjustments......................... -- -- -- -- 3,240 --
----------- ----------- ----------- ---------- ------- ---------
Balance, December 31, 1998.............. $ 45,533 $ 15,950 $ (137,412) $ 115,906 $ (6,295) $ (158)
----------- ----------- ----------- ---------- ------- ---------
----------- ----------- ----------- ---------- ------- ---------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
18
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--STATEMENT OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include all of its
wholly owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation. The equity method is used for any
investment where ownership is from 20% to 50%.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities of operations denominated in foreign currencies
are translated at the rates of exchange in effect at the close of the year.
Revenue and expense accounts are translated at the average exchange rates which
were in effect during the year. Translation gains and losses are reported as a
separate component of stockholders' equity and are not included in net earnings.
Foreign currency transaction gains and losses continue to be an element in
determining net earnings for the period. Foreign currency transaction gains
(losses), included in selling, administrative, research and distribution
expenses, were $(332,000) in 1998, $(321,000) in 1997 and $93,000 in 1996.
Revenues and expenses are also affected by fluctuations of currency rates from
year to year. The effect of these rate fluctuations in 1998 when compared to
1997 and 1997 when compared to 1996 resulted in an unfavorable impact on
operating results in addition to the transaction gains or losses reflected in
net earnings.
CONSOLIDATED STATEMENT OF CASH FLOWS
The Company considers time deposits, which are highly liquid with an
original maturity of three months or less, to be cash equivalents for purposes
of the consolidated statements of cash flows. The carrying amount of cash and
time deposits approximates fair market value. The Company paid interest of
$8,320,000 in 1998, $4,462,000 in 1997 and $3,778,000 in 1996.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share," which
requires companies to present basic earnings per share and diluted earnings per
share, instead of primary earnings per share and fully diluted earnings per
share that were previously required. The new standard is effective for all
periods ending after December 15, 1997. The new standard has no impact on the
Company's earnings per share.
Earnings per share of common stock are computed on the weighted average
shares outstanding during the respective years (36,554,000 in 1998, 45,431,000
shares in 1997 and 45,175,000 shares in 1996). Net earnings per share would not
be materially different from reported earnings per share if all outstanding
stock options were exercised.
INTANGIBLE ASSETS
The excess of cost over equity in net assets of acquisitions is being
amortized on a straight line basis over periods not exceeding 40 years. The
Company continually evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the related business
segment's undiscounted net income over the remaining life of the goodwill in
measuring whether the goodwill is recoverable.
19
<PAGE>
RESEARCH AND DEVELOPMENT
Research and development costs ($5,375,000 in 1998, $5,342,000 in 1997 and
$5,049,000 in 1996) are charged to expense as incurred.
INCOME TAXES
The Company provides U.S. income taxes on earnings of those foreign
subsidiaries which are intended to be remitted to the parent company.
Undistributed earnings reinvested indefinitely in foreign subsidiaries totaled
$27,937,000 at December 31, 1998. Income taxes paid during 1998, 1997 and 1996
amounted to $10,539,000, $23,295,000 and $13,595,000, respectively.
INVESTMENTS
During 1997 and 1996, all of Lawter's marketable securities were classified
as available-for-sale securities, which were reported at fair value. Unrealized
gains and losses were charged or credited to Stockholders' Equity. In 1997 and
1996, proceeds from the sales of these securities were $2,502,000 and
$7,333,000, respectively, the realized gain (loss) included in income was $2,000
and $(183,000), respectively and the unrealized gain (loss) charged to
Stockholders' Equity (net of the tax effect) was $60,000 and $(60,000),
respectively.
At December 31, 1995, all of Lawter's marketable securities were classified
as trading securities. Trading securities were reported at fair value, with
changes in fair value included in earnings. The net unrealized holding loss
included in income was $1,699,000 in 1996.
For the purpose of determining realized gains and losses, the cost of
securities sold was based upon specific identification.
INVENTORIES
The majority of the Company's domestic inventories are valued at last-in,
first-out (LIFO) cost which is not in excess of net realizable value. The
Company's other inventories aggregating $29,621,000 and $28,375,000 at December
31, 1998 and 1997, respectively, are valued at the lower of first-in, first-out
(FIFO) cost or market. The finished goods inventories include the cost of raw
materials and manufacturing labor and overhead. Inventories are summarized as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997
- -------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Raw Materials............................................................................... $ 26,694 $ 21,132
Finished Goods.............................................................................. 22,785 21,958
--------- ---------
$ 49,479 $ 43,090
--------- ---------
--------- ---------
</TABLE>
If the FIFO inventory valuation method had been used for all inventories,
they would have been $3,614,000 and $4,259,000 higher than reported at December
31, 1998 and 1997, respectively.
PROPERTY
Property, plant and equipment is stated at cost. Depreciation, computed
using the straight-line method for financial statement purposes, is provided
over the useful lives of the various classes of property, plant and equipment.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions. The reported amounts of assets and liabilities
20
<PAGE>
and disclosure of contingent assets and liabilities at the date of the financial
statements and the amount of revenues and expenses reported during the period
are affected by these assumptions and estimates. Actual results could differ
from these estimates.
STATEMENT OF EARNINGS PRESENTATION
Certain prior year amounts have been reclassified to conform with current
year presentation.
NOTE 2--RETIREMENT PLANS
The Company had in 1998, a contributory 401(k) profit sharing plan. In 1997
and 1996, the Company had contributory profit sharing plans and a
non-contributory money purchase pension plan. The majority of domestic and
Canadian employees are covered by one of these plans.
Company contributions to these plans charged to operations were $391,000 in
1998, $478,000 in 1997 and $494,000 in 1996 and are funded on a current basis.
There is no past service liability under these plans. The Company has no
material postretirement or postemployment benefit obligations.
NOTE 3--COMMON STOCK
SFAS No. 123, "Accounting for Stock-Based Compensation," permits either
recording the estimated value of stock-based compensation over the applicable
vesting period or continued application of APB Opinion No. 25 with disclosure on
a pro forma basis of information for the unrecorded cost and related effect on
earnings per share in the Notes to the Financial Statements. The Company applies
the standard on a pro forma basis. Had compensation costs for the Company's
stock option plans been determined based on the fair value at the grant dates
for awards consistent with the provisions of SFAS No. 123, the Company's net
earnings and earnings per share would have been adjusted to the pro forma
amounts indicated below.
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- --------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Net earnings--as reported........................................................ $ 21,465 $ 37,326 $ 28,775
Net earnings--pro forma.......................................................... 21,037 37,054 28,292
Earnings per share--as reported.................................................. $ .59 $ .82 $ .64
Earnings per share--pro forma.................................................... .58 .82 .63
</TABLE>
The Company has two fixed stock option plans for officers, directors and
other key employees. Options may be granted at prices not less than the fair
market value at the date of grant. Options expire ten years from the date of
grant and are exercisable one year after the date of grant.
The fair value of each option granted is estimated on the grant date using
the Black-Scholes option-pricing model. The following weighted average
assumptions were made in estimating the fair value: dividend yield of 4.1%, 3.3%
and 3.6% in 1998, 1997 and 1996, respectively; expected volatility of 31.8% in
1998, 22.0% in 1997 and 18.1% in 1996; risk-free interest rate of 5.1% in 1998,
and 5.8% in 1997 and 1996; and expected lives of 5 years.
The Company issues common stock when stock options are exercised. At the
time of exercise, officers may borrow funds from the Company in order to
exercise their stock options. These loans bear interest at the Company's
effective rate to borrow and are repayable within eighteen months. The unpaid
portion of the options exercised, evidenced by a note, has been deducted from
Stockholders' Equity in the accompanying Consolidated Balance Sheets. The par
value of the shares issued is credited to the common stock account and the
excess of the purchase price over the par value is credited to additional
paid-in capital.
21
<PAGE>
A summary of the status and activity in the stock option plans is shown in
the tables below.
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES PRICE
---------- -----------
<S> <C> <C>
Outstanding January 1, 1996................................................................ 2,020,313 $ 11.85
Granted.................................................................................... 233,250 11.29
Exercised.................................................................................. (282,149) 10.38
Forfeited or Expired....................................................................... (160,864) 11.91
----------
Outstanding December 31, 1996.............................................................. 1,810,550 12.00
Granted.................................................................................... 205,000 11.86
Exercised.................................................................................. (184,800) 12.01
Forfeited or Expired....................................................................... (63,375) 12.10
----------
Outstanding December 31, 1997.............................................................. 1,767,375 11.97
Granted.................................................................................... 568,415 9.95
Exercised.................................................................................. -- --
Forfeited or Expired....................................................................... (109,325) 12.23
----------
Outstanding December 31, 1998.............................................................. 2,226,465 11.44
----------
Exercisable December 31, 1996.............................................................. 1,608,550 12.08
Exercisable December 31, 1997.............................................................. 1,568,500 11.71
Exercisable December 31, 1998.............................................................. 1,665,100 10.41
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ----------------- -----------------
<S> <C> <C> <C>
Price range at end of year............................... $7.63 to 14.38 $10.75 to 14.38 $11.00 to 14.38
Price range for exercised shares......................... N/A $11.25 to 13.25 $9.29 to 10.41
Options available for grant at end of year............... 378,735 843,825 992,950
Weighted average remaining contractual life at the end of
the year............................................... 7 Years 7 Years 8 Years
</TABLE>
NOTE 4--PROVISION FOR INCOME TAXES
The Company uses the asset and liability method to account for income taxes.
Pre-tax earnings were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- --------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
United States.................................................................... $ 17,087 $ 56,758 $ 25,483
Foreign.......................................................................... 13,579 3,887 15,071
--------- --------- ---------
$ 30,666 $ 60,645 $ 40,554
--------- --------- ---------
--------- --------- ---------
</TABLE>
22
<PAGE>
The provisions (benefits) for income taxes were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- --------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Currently payable:
United States:
Federal........................................................................ $ 3,819 $ 19,871 $ 8,667
State.......................................................................... 1,340 4,009 1,180
Foreign.......................................................................... 924 1,650 1,481
--------- --------- ---------
Total Current.................................................................... 6,083 25,530 11,328
--------- --------- ---------
Deferred:
Excess of tax over book depreciation............................................. 4,632 3,952 1,556
Undistributed earnings of the equity investment.................................. -- (6,148) 904
Undistributed earnings of foreign subsidiaries................................... (1,353) -- (2,560)
Other............................................................................ (161) (15) 551
--------- --------- ---------
Total Deferred................................................................... 3,118 (2,211) 451
--------- --------- ---------
$ 9,201 $ 23,319 $ 11,779
--------- --------- ---------
--------- --------- ---------
</TABLE>
Temporary differences that gave rise to the deferred tax liability at
December 31, 1998 were as follows:
<TABLE>
<S> <C>
(IN THOUSANDS)
- -----------------------------------------------------------------------------------
Undistributed earnings of foreign subsidiaries..................................... $ 24,618
Excess of tax over book depreciation............................................... 12,488
Other.............................................................................. (1,762)
---------
$ 35,344
---------
---------
</TABLE>
The Company's earnings from manufacturing operations in Waterford, Ireland
were tax exempt until 1990 and will have a 10% tax rate through 2010.
The total "Provision for Income Taxes" represents an effective tax rate of
30.0% for 1998, 38.5% for 1997 and 29.0% for 1996. The differences from the U.S.
statutory rate for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- --------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Computed tax provision at 35%.................................................... $ 10,733 $ 21,226 $ 14,194
Increase (decrease) in tax provision resulting from:
Waterford, Ireland operation..................................................... (1,727) (1,144) (1,884)
Inclusion of state & local income taxes (net of Federal income taxes)............ 871 2,606 787
Goodwill write off............................................................... -- 1,483 --
Foreign currency translation adjustment write off................................ -- 1,606 --
Other foreign operations......................................................... 139 (1,033) (710)
Other............................................................................ (815) (1,425) (608)
--------- --------- ---------
Provision for Income Taxes....................................................... $ 9,201 $ 23,319 $ 11,779
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 5--RESTRUCTURING CHARGES
In the fourth quarter of 1995, a new management team was formed. The new
management, taking into account a change in market conditions, developed a new
corporate strategy. Part of the decision making process included an evaluation
of the feasibility of continuing to utilize older manufacturing facilities. With
the anticipated completion of construction of the new ink vehicle and resin
facility in Belgium combined with the new ink vehicle and resin facility in the
U. S., the Company decided to implement a restructuring plan. This plan included
the decommissioning of older ink vehicle and resin plants. These restructuring
activities commenced in the fourth quarter of 1995 and were substantially
completed as of the end of 1997.
23
<PAGE>
NOTE 6--EQUITY INVESTMENTS
At December 31, 1996, the Company owned 3,157,223 shares, representing
approximately 28% of the outstanding shares, of the Common Stock of Hach Company
(Hach). During the third quarter of 1997, the Company sold its 28% share of Hach
for $59,987,000. This resulted in an after tax gain of $19,570,000 or $.43 per
share. The investment in Hach was accounted for under the equity method.
Hach is a leading international manufacturer of instruments and test kits
that analyze the chemical content and other properties of water and other
aqueous solutions. In addition, Hach sells analytical reagents which are used in
connection with the instruments and test kits.
NOTE 7--LONG-TERM OBLIGATIONS
Long-term obligations were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997
- ----------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Series 1993-LI IDB Bond................................................ $ 4,000 $ 4,000
Series 1978-A IDB Bond................................................. 50 50
---------- ---------
Net long-term bonds payable............................................ 4,050 4,050
Prudential Shelf Agreement............................................. 125,000 25,000
---------- ---------
Total long-term obligations............................................ $ 129,050 $ 29,050
---------- ---------
---------- ---------
</TABLE>
In December of 1995, the Company entered into a private shelf agreement with
Prudential Capital Group under which it may borrow up to $125,000,000. The shelf
agreement provides for promissory notes to mature no more than 15 years after
the original date of issuance, which was December 6, 1995. On January 5, 1996,
the Company borrowed $25,000,000 at an interest rate of 6.33%, with the
repayment of principal on January 6, 2003. On April 1, 1998, the Company
borrowed an additional $100,000,000 at an interest rate of 6.91%, with principal
to be repaid in five annual installments of $20,000,000 each beginning April 1,
2006, with a final maturity date of April 1, 2010. There are various covenants
related to this agreement. At December 31, 1998, the Company was in compliance
with these covenants.
During 1993, the Industrial Development Board of the Town of Moundville
(IDB) issued a $4,000,000, 6.75% Industrial Revenue Bond, Series 1993-LI to the
Company. Interest is payable semi-annually. Principal is due in six annual
installments of various amounts beginning December 1, 2006 with the final
payment due December 1, 2011. The Series 1978-A Industrial Revenue Bond was
originally issued in 1978 by the IDB for $1,000,000. Interest is payable
semi-annually at 7.25%. Remaining principal of $50,000 is payable on September
1, 2003.
In connection with the issuance of these Industrial Revenue Bonds by the
IDB, the Company entered into capital lease agreements with the IDB with future
minimum lease payments sufficient to amortize the principal and interest on each
series of the Industrial Revenue Bonds.
Costs capitalized under these leases were $8,500,000 as of December 31, 1998
and 1997. The capitalized costs are being depreciated over the estimated useful
lives of the individual assets.
24
<PAGE>
At December 31, 1998, the future lease payments under the capitalized leases
relating to the Industrial Revenue Bonds were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------
<S> <C>
1999.................................................................................................... $ 270
2000.................................................................................................... 270
2001.................................................................................................... 270
2002.................................................................................................... 270
2003.................................................................................................... 323
Later years............................................................................................. 5,536
---------
Total minimum lease payments............................................................................ 6,939
Less interest........................................................................................... (2,889)
---------
Present value of minimum lease payments................................................................. $ 4,050
---------
---------
</TABLE>
Operating leases are not significant.
NOTE 8--COMMITMENTS AND CONTINGENCIES
The Company has unsecured lines of credit for short term borrowings of
approximately $63,000,000 at December 31, 1998. During 1998, average borrowings
were $25,323,000 against these lines of credit and the weighted average interest
rate was 4.58%. In 1997, average borrowings were $32,318,000 and the weighted
average interest rate was 4.08%. In 1996, average borrowings were $36,370,000
and the weighted average interest rate was 4.48%. There are no significant
commitment fees or compensating balance requirements relating to these lines of
credit.
The Company from time to time is subject to claims brought on behalf of both
private persons and governmental agencies. Management and the Company's general
counsel are not aware of any claim where the disposition of such claim is
expected to have a material adverse effect upon the Company's consolidated
financial position.
On November 17, 1998, officers and other key employees purchased 349,972
shares of Lawter Common Stock through the Company's Key Employee Investment Plan
at the then market price of $8.75 per share. Under the terms and conditions of
the plan, the employees took out personal loans that are guaranteed by the
Company to purchase the stock, and must hold the stock for a period of three
years unless the employee separates from the Company or there is a change in
control of the Company.
NOTE 9--SEGMENT INFORMATION
In accordance with Statement of Financial Accounting Standards No. 131
"Segment Reporting," the Company has concluded that it operates primarily in one
segment, the specialty polymers segment, since all of its revenues are derived
from the manufacture and sale of its specialty polymers. Within this segment,
the Company has two main product lines, printing ink vehicles and slip
additives, and synthetic and hydrocarbon resins. These products are
manufactured, warehoused and sold using essentially the same systems, sales
force and distribution network.
Lawter's total business is broken down into three geographical areas: North
America, Europe and the Pac Rim. North America sales include sales to the United
States, Canada, Mexico, Central America and South America. European sales
include sales to Europe, the Mid East and Africa. Pac Rim sales include sales to
China, Japan, Singapore, Taiwan and other countries in the region. The Company
sells the majority of its products to both large and small ink companies. Lawter
is a major supplier of printing ink vehicles and resins for printing inks and,
therefore, sells substantial quantities to larger ink companies around the
world. One customer whose purchases are made for a wide variety of specialized
products at multiple
25
<PAGE>
locations through numerous companies in various countries approximated
twenty-three percent of sales in 1998, twenty-two percent of sales in 1997, and
nineteen percent of sales in 1996.
Transfers between geographic areas are not material. Corporate earnings
before tax is the net of the gain on the sale of the Hach Company common stock,
investment income, interest expense and corporate expenses. Identifiable assets
are those assets used exclusively in the operations of each geographic area.
Corporate assets are principally comprised of time deposits, and other assets.
The contribution of European operations to net earnings is greater than their
contribution to earnings before tax principally due to the Waterford, Ireland
operation discussed in Note 4.
Information about the Company's operations by geographic region for the
years ended December 31, 1998, 1997 and 1996 is shown in the table below.
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net Sales: (based on location of customer)
North America................................................................ $ 110,436 $ 101,389 $ 98,375
Europe....................................................................... 87,834 91,170 83,464
Pac Rim...................................................................... 14,573 13,980 11,975
---------- ---------- ----------
Total........................................................................ $ 212,843 $ 206,539 $ 193,814
---------- ---------- ----------
---------- ---------- ----------
Earnings Before Tax:
North America................................................................ $ 26,217 $ 25,754 $ 24,947
Europe....................................................................... 11,540 5,912 11,113
Pac Rim...................................................................... 1,205 1,340 1,368
Corporate.................................................................... (8,296) 27,639 3,126
---------- ---------- ----------
Total........................................................................ $ 30,666 $ 60,645 $ 40,554
---------- ---------- ----------
---------- ---------- ----------
Identifiable Assets:
North America................................................................ $ 76,530 $ 69,339 $ 72,418
Europe....................................................................... 99,448 98,842 116,320
Pac Rim...................................................................... 19,188 10,915 10,062
Corporate.................................................................... 59,084 97,088 94,323
---------- ---------- ----------
Total........................................................................ $ 254,250 $ 276,184 $ 293,123
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
NOTE 10--NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in an annual
financial statement that is displayed with the same prominence as other annual
financial statements. This Statement also requires that an enterprise classify
items of other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately from
retained earnings and paid-in capital in the equity section of a statement of
financial position. Unrealized translation adjustments is currently the only
type of other comprehensive income that the Company has.
26
<PAGE>
Unrealized foreign currency translation adjustments were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Unrealized Translation Adjustments arising in period................................. $ 3,942 $ (6,074) $ (839)
Tax Benefit (Expense)................................................................ (702) 365 (73)
--------- --------- ---------
Net of Tax Amount.................................................................... $ 3,240 $ (5,709) $ (912)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 132
"Employers' Disclosures about Pensions and Other Postretirement Benefits" in
1998. Note 2 addresses the disclosure requirements of this Statement.
The Company will adopt Statement of Financial Accounting Standards No.133
"Accounting for Derivative Instruments and Hedging Activities" in 1999. SFAS No.
133 will have no significant impact since no derivatives are in use at this
time.
In 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Start-up, Pre-operating and Organization Costs."
This statement requires start-up costs to be expensed as incurred versus the
current practice of capitalizing these costs. This statement will not have a
material impact on the Company and will be adopted in 1999.
27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Lawter International, Inc.:
We have audited the accompanying consolidated balance sheets of Lawter
International, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lawter
International, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
The schedule listed in the index on page 13 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audit of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic consolidated financial statements taken
as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
February 8, 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 8, 1999, included (or incorporated by
reference) in this Annual Report of Lawter International, Inc. and Subsidiaries
on Form 10-K for the year ended December 31, 1998, into the Company's previously
filed Registration Statements on Forms S-3 (File No. 33-24165), S-8 (File No.
33-24859), S-8 (File No. 33-61506), S-8 (File No. 2-84421) and S-8 (File No.
333-67337).
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 26, 1999
28
<PAGE>
LAWTER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
<TABLE>
<CAPTION>
ALLOWANCES FOR DOUBTFUL ACCOUNTS 1998 1997 1996
- ---------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year............................................................ $ 490 $ 743 $ 636
Additions (credited)/charged to earnings.............................................. 208 (102) 166
Additions/(deductions) for accounts written off, net of recoveries.................... (105) (151) (59)
--------- --------- ---------
Balance at end of year.................................................................. $ 593 $ 490 $ 743
--------- --------- ---------
--------- --------- ---------
</TABLE>
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LAWTER INTERNATIONAL, INC.
(Registrant)
/s/ JOHN P. O'MAHONEY
------------------------------------------
John P. O'Mahoney
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ MARK W. JOSLIN
------------------------------------------
Mark W. Joslin
Chief Financial Officer and Treasurer
(Principal Financial and
Accounting Officer)
Date: March 26, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ WILLIAM P. CLARK Director
- ------------------------------ March 26, 1999
William P. Clark
/s/ ARTHUR A. HARTMAN Director
- ------------------------------ March 26, 1999
Arthur A. Hartman
/s/ LEONARD P. JUDY Director
- ------------------------------ March 26, 1999
Leonard P. Judy
/s/ RICHARD D. NORDMAN Director
- ------------------------------ March 26, 1999
Richard D. Nordman
/s/ JOHN P. O'MAHONEY Director
- ------------------------------ March 26, 1999
John P. O'Mahoney
/s/ FRED G. STEINGRABER Director
- ------------------------------ March 26, 1999
Fred G. Steingraber
Registrant's 1998 Annual Report to Stockholders, some portions of which have
been incorporated by reference in this Form 10-K, has been sent to each
stockholder and was included with this report to the Securities and Exchange
Commission.
30
<PAGE>
8/1/93
EXHIBIT 10(a)
THE CORPORATEPLAN FOR RETIREMENT
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
<PAGE>
THE CORPORATE PLAN FOR RETIREMENT
PROFIT SHARING/401(K) PLAN
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
2
<PAGE>
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
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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
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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 Contribution), compensation
as defined in Section 5.03(e)(2).
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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 the
annual Compensation limit is the 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.
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(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
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leasing organization and providing (A) 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, (B) full and immediate
vesting, and (C) 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," (A) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code), (B) 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 (C) 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.
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If no officer has satisfied the compensation requirement of (C)
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;
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(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
contin-uous 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, shall 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
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the hours of service which would otherwise have been credited
to such individual but for such absence, or in any case in which
such hours cannot be determined, 8 hours of service per day of
such absence. For purposes of this paragraph, an absence from
work for maternity or paternity reasons means an absence (i) by
reason of the pregnancy of the individual, (ii) by reason of a
birth of a child of the individual, (iii) by reason of the
placement of a child with the individual in connection with the
adoption of such child by such individual, or (iv) 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 (a) in the computation
period in which the absence begins if the crediting is necessary
to prevent a break in service in that period, or (b) 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 (A) such services are
provided pursuant to an agreement between the recipient and any other
person (the "leasing organization"), (B) 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 (C) 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 ending on the
date designated by the Employer in Section 1.01(f).
(24) "Prototype Sponsor" means Fidelity Management and Research
Company or its successor.
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(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
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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 in service. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an absence
(A) by reason of the pregnancy of the individual, (B) by reason of the
birth of a child of the individual, (C) by reason of the placement of
a child with the individual in connection with the adoption of such
child by such individual, or (D) 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
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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
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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, (a) own the entire interest in
an unincorporated trade or business or (b) 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. 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.
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(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 of the
Code, 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
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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
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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 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) 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:
(1) "Actual Deferral Percentage" shall mean, for a specified group of
Participants for a Plan Year, the average of the ratios
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(calculated separately for each Participant in such group) of (A) the
amount of Employer contributions actually paid over to the Trust on
behalf of such Participant for the Plan Year to (B) the Participant's
Compensation for such Plan Year. Employer contributions on behalf of
any Participant shall include (i) 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 (ii)
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(b)(4) 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
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<PAGE>
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
distibution 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:
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<PAGE>
(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 a
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
17
<PAGE>
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.
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(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 non-deductible
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
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(B) The maximum Contribution Percentage Amounts permitted by the
ACP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in the 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 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 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 Non-elective 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
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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's 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:
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(1) 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; or
(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 and Excess
Compensation for the Plan Year bears to the sum of the
Compensation and Excess Compensation of all Participants for
the Plan Year. This allocation as a percentage of the sum of
each Participant's Compensation and 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
22
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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 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.
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(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 3, 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 8, 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
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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 EMPLOYEE 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 for 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.
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(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's 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 amounts 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.)
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(b)(1) 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)(1)(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
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<PAGE>
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), and
(B) the ratio of (i) the Annual Additions allocated to the Participant
as of such date under this Plan, and (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 a 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)(1) 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)(1) THROUGH (e)(11)--(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,
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(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
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415(b)(1)(A) and 415(d) of the Code or 140 percent of the Participant's
highest average Compensation for 3 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 that 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 and (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.
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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(l)(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 (A) $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 (B) 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)(A) 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)(B) 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(l)(1) of the Code.
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(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.
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(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 (a) rules applicable to the investments selected by the
Employer in Section 1.14(b) and (b) 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
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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 a 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 the sum of (a)
the vested percentage(s) of the value of the Matching and/or Fixed/Discretionary
Contributions to his Account, as
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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 (b) 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 again becomes 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
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Employee is deemed to receive a distribution pursuant to this Section 7.07, and
the Employee resumes employment before 5 consecutive 1-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 (1) an Employee who makes a rollover contribution in accordance with
Section 4.10 who has not satisfied the requirements of Section 3.01 or (2)
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
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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 (1) $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 (2) 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 a 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
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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 or
(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
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other loans to the Participant or Beneficiary would exceed the lesser of
(1) $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 (2) 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 of 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
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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,
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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
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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; however, 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
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$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 (1) the terms and conditions of the annuity contract
described herein, (2) the Participant's to make, and the effect of, an
election to waive application of this subsection, (3) the rights of the
Participant's spouse under subsection (d), and (4) the right to revoke and
the period of time necessary to revoke 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 Participant's 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
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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: (1) 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, (2) a reasonable period ending after the Employee becomes a
Participant, (3) a reasonable period ending after this Section 8.04 first
becomes applicable to the Participant in accordance with Section 8.04(a),
(4) 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 (2), (3) or (4),
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 (4) 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
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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 whichever subsection 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(p) of the Code.
(f) VESTED ACCOUNT BALANCE. For purposes of this Section, vested Account
shall include 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 Proposed Treasury Regulations, or any successor regulations of similar
import.
(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 (1) the
applicable life expectancy under Section 8.01(b), or (2) 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
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using the applicable life expectancy under (1) 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
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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
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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 latest 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 1 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,
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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
(A) the calendar year in which the Participant attains age 70
1/2, or
(B) 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
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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 (1)
an officer of the Employer whose annual Compensation exceeds 50 percent of
the dollar limitation under Section 415(b)(1)(A) of the Code, (2) 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, (3) a
5-percent owner of the Employer, or (4) 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,
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(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.
(1) 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
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(A) who is not a Key Employee but who was a Key Employee in a prior
year, or (B) 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 a 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 (i)
the method, if any, that uniformly applies for accrual purposes under
all plans maintained by the Employer, or (ii) 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.
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(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 (1) the Participant failed to complete 1,000 Hours of Service or
any equivalent service requirement provided in the Adoption Agreement; or
(2) 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)).
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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 (1) the
aggregate accounts of all Key Employees under all defined contribution
plans of the Employer and (2) 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) CHANGES TO 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
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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 overridingplan 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
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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 (1) the date the amendment is adopted, (2) the date
the amendment becomes effective, or (3) 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 Prototype 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.
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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 Plan 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 (1) contributions by the Participant and
(2) 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
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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' Accounts 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 a 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
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attributable to the various contributions. The Trustee shall have no further
liabilities with respect to assets so transferred.
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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
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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 (a)
the order specifies distribution at that time and (b) if the present value of
the alternate payee's benefits under the Plan exceeds $3,500, and the order
requires, and the alternate payee consents to, a 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:
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(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;
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(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 (1) specific reasons for the denial, (2) specific
reference to pertinent Plan provisions, (3) 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 (4)
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 (1) file a written
request with the Administrator for a review of his denied claim and of
pertinent documents and (2) 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.
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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 ERlSA:
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(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
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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
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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.
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(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; however, 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, Beneficiaries, 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 with respect to 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
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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
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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.
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Contributions under the 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.
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8/1/93
ADDENDUM
TO
CORPORATEPLAN FOR RETIREMENT
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
RE: RETROACTIVE EFFECTIVE DATES
This Addendum is intended to clarify and set forth the effective dates of
certain provisions of the Plan with respect to the adopting Employer. This
Addendum applies only to the extent that the Employer has not amended the Plan
with respect to the applicable provisions of the Tax Reform Act of 1986 ("TRA
'86"). Unless otherwise specifically provided by the terms of the Plan, this
amendment and restatement is effective with respect to each change made to
satisfy the provisions of (i) TRA '86, (ii) any other change in the Code or
ERISA, or (iii) regulations, rulings, or other published guidance issued under
the Code, ERISA, or TRA '86, the first day of the first period (which may or may
not be the first day of a Plan year) with respect to which such change became
required because of such provision (including any day that became such as a
result of an election or waiver by an Employer or a waiver or exemption issued
under the Code, ERISA, or TRA `86), including, but not limited to, the
following:
(a) The following changes as required by TRA '86 are effective for Plan Years
beginning after December 31, 1986, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable exemption
or waiver:
(1) Changes in the definition of Employee in Section 2.01(a)(10) to
reflect changes in the safe harbor exclusion for Leased Employees;
(2) Changes in the definition of Highly Compensated Employee in Section
2.01(a)(16)
(3) Addition of the aggregate deferral limit under Section 402(g) of the
Code in Section 4.01(c);
(4) Changes to the Code Section 401(k) discrimination test in Section
4.02;
(5) Addition of the Code Section 401(m) discrimination test and
application of the Aggregate Limit in Section 4.04;
(6) Compliance with the Code Section 414(s) compensation definition
requirements in Sections 5.03 and 9.03;
(7) Changes in the Participant Loan provisions in Section 7.09; if
applicable, to reflect new dollar limitations, repayment requirements,
and restrictions applicable to Highly Compensated Employees under
Section 72(p) of the Code;
(8) Changes in the definition of Key Employee in Section 9.02(a); and
(9) Changes in the definition of Top-Heavy Ratio in Section 9.02(c)(3) to
provide for ratable accrual.
<PAGE>
(b) Changes in the 415 limitations in Section 5.03 as required by TRA '86 are
effective for limitation years beginning after December 31, 1986, unless a
delayed effective date applies because the Plan is collectively-bargained or
because of an applicable waiver or exemption; provided, however, that Annual
Additions shall not be recalculated to take into account all Employee
contributions for limitation years beginning before the effective date.
(c) The following changes as required by TRA '86 are effective for Plan years
beginning After December 31, 1987, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable waiver or
exemption:
(1) Changes required to provide that allocations shall not be decreased or
discontinued because of attainment of any age, if any; and
(2) Changes in the definition of Normal Retirement Age in Section 1.06(a),
if any, to reflect the five years of participation rule.
(d) The following changes as required by TRA '86 are effective for Plan Years
beginning after December 31, 1988, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable waiver or
exemption:
(1) Changes in the vesting schedule specified in Section 1.07, if
applicable;
(2) Changes in the permitted disparity rules in Section 4.06(b0(2), if
applicable; and
(3) Changes in the requirements for electing a former vesting schedule in
Section 10.03, if applicable.
Notwithstanding the foregoing and subject to applicable law, with respect to
Plan years beginning after December 31, 1986, and before the date of this
restatement of the Plan, the Employer may elect to operate the Plan in
accordance with any transitional rule published by the Internal Revenue Service
or a reasonable, good faith interpretation of TRA '86 and related applicable
law, in which event such transitional rule or good faith interpretation shall
prevail over the provisions in this restatement of the Plan with respect to such
Plan Year.
Each other change made under the Plan is effective as of the date specified in
Section 1.01(g) of the Adoption Agreement, unless otherwise specifically
provided by the terms of the Plan.
2
<PAGE>
CORPORATEPLAN FOR RETIREMENT-SM-
PROFIT SHARING/401(k) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
AMENDMENT ONE
SECTION 2.01(a)(7) "COMPENSATION" is amended to include:
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this
plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision. Notwithstanding
2.01(a)(7)(A), for purpose of Section 4.02 (Additional Limit on Deferral
Contributions) and Section 4.04 (Limit on Matching Contributions), the Employer
may use Compensation as defined in Section 5.03(e)(2) excluding 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 Section 125, 402(a)(8),
402(h) or 403(b) of the Code.
If compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
SECTION 8.01(d) "DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES" is
amended to include:
(5) If a distribution is one to which sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less than 30
days after the notice required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the administrator clearly informs the Participant that the Participant
has a right to a period of at least 30 days after receiving the notice
to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
3
<PAGE>
the Participant, after receiving the notice, affirmatively elects a
distribution.
4
<PAGE>
MODEL AMENDMENT TO
THE CORPORATEPLAN FOR RETIREMENT-SM-
PROFIT SHARING / 401 (k) PLAN
(DOCUMENT NO. 07)
This amendment is effective for plan years beginning after December 11,
1994.
Notwithstanding any provision of this plan to the contrary, to the extent
any optional form of benefit under this plan permits a distribution prior to
the employee's retirement, death, disability, or severance from employment,
and prior to plan termination, the optional form of benefit is not available
with respect to benefits attributable to assets (including the post-transfer
earnings thereon) and liabilities that are transferred, within the meaning of
Section 414 (1) of the Internal Revenue Code, to this plan from a money
purchase pension plan qualified under Section 401(a) of the Internal Revenue
Code (other than any portion of those assets and liabilities attributable to
voluntary employee contributions).
5
<PAGE>
CORPORATEPLAN FOR RETIREMENT-SM-
PROFIT SHARING/401(k) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
AMENDMENT TWO
Effective December 1, 1996, Section 2.01(a)(25) shall be amended to read as
follows:
(25) "Registered Investment Company" means any one or more corporations,
partnerships or trusts registered under the Investment Company Act of 1940.
THE CORPORATEPLAN FOR RETIREMENT-SM-
(PROFIT SHARING/401(K) PLAN)
A FIDELITY PROTOTYPE PLAN
NON-STANDARDIZED ADOPTION AGREEMENT 002
BASIC PLAN NO. 07
6
<PAGE>
ADOPTION AGREEMENT
ARTICLE 1
NON-STANDARDIZED PROFIT SHARING PLAN
1.01 PLAN INFORMATION
(a) NAME OF PLAN:
This is the LAWTER INTERNATIONAL 401(k) PROFIT SHARING PLAN AND TRUST
(the "Plan").
(b) TYPE OF PLAN:
(1) /x/ 401(k) and Profit Sharing
(2) / / Profit Sharing Only
(3) / / 401(k) Only
(c) NAME OF PLAN ADMINISTRATOR, IF NOT THE EMPLOYER:
Name:
----------------------------------------------
Address:
---------------------------------------------
Phone Number:
---------------------------------------------
The Plan Administrator is the agent for service of legal process
for the Plan.
(d) LIMITATION YEAR (check one):
(1) /X/ Calendar Year
(2) / / Plan Year
(3) / / Other:
(e) THREE DIGIT PLAN NUMBER: 001
(f) PLAN YEAR END (month/day):DECEMBER 31
(g) PLAN STATUS (check one):
(1) / / Effective Date of new Plan: ______________
(2) /X/ Amendment Effective Date: 1/1/98 . This is (check one):
(A) / / an amendment of The CORPORATEplan for Retirement-SM-
Adoption Agreement previously executed by the Employer; or
<PAGE>
(B) /X/ conversion from another plan document into The
CORPORATEplan for RetirementSM.
The original effective date of the Plan: 1/1/1962
The substantive provisions of the Plan shall apply prior to
the Effective Date to the extent required by the Tax Reform
Act of 1986 or other applicable laws.
1.02 EMPLOYER
(a) THE EMPLOYER IS: LAWTER INTERNATIONAL, INC.
Address: ONE TERRA WAY
8601 95TH STREET
KENOSHA, WI 53142
Contact's Name: MS. TINA LENNERTZ
Telephone Number: (414) 947-7300
(1) Employer's Tax Identification Number: 36-1370818
(2) Business form of Employer (check one):
<TABLE>
<S> <C>
(A) /X/ Corporation (D) / / Governmental
(B) / / Sole proprietor or partnership (E) / / Tax exempt organization
(C) / / Subchapter S Corporation (F) / / Rural Electric Cooperative
</TABLE>
(3) Employer's fiscal year end: 12/31
(4) Date business commenced: APRIL 1, 1940
2
<PAGE>
(b) THE TERM "EMPLOYER" INCLUDES THE FOLLOWING RELATED EMPLOYER(S) (as
defined in Section 2.01(a)(26)):
1.03 COVERAGE
(a) ALL EMPLOYEES WHO MEET THE CONDITIONS SPECIFIED BELOW WILL BE ELIGIBLE
TO PARTICIPATE IN THE Plan:
(1) SERVICE REQUIREMENT (check one):
(A) / / no service requirement.
(B) / / three consecutive months of service (no minimum number
Hours of Service can be required).
(C) / / six consecutive months of service (no minimum number
Hours of Service can be required).
(D) /X/ one Year of Service (1,000 Hours of Service is required
during the Eligibility Computation Period.)
(2) AGE REQUIREMENT (check one):
(A) / / no age requirement.
(B) /X/ must have attained age 21.0 (not to exceed 21).
3
<PAGE>
(3) THE CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE IN THE PLAN (check
one):
(A) / / includes all Employees of the Employer.
(B) /X/ includes all Employees of the Employer except for (check
the appropriate box(es)):
(i) /X/ Employees covered by a collective bargaining
agreement.
(ii) / / Highly Compensated Employees as defined in Code
Section 414(q).
(iii) /X/ Leased Employees as defined in Section
2.01(a)(18).
(iv) / / Nonresident aliens who do not receive any earned
income from the Employer which constitutes United
States source income.
(v) / / Other
NOTE: No exclusion in this section may create a discriminatory
class of employees. An Employer's Plan must still pass
the Internal Revenue Code coverage and participation
requirements if one or more of the above groups of
Employees have been excluded from the Plan.
(b) THE ENTRY DATE(S) SHALL BE (check one):
(1) / / the first day of each Plan Year (do not select if
Section 1.03 (a)(1)(D) is elected or if there is an age
requirement of greater than 20 1/2 in Section
1.03(a)(2)(B)).
(2) /X/ the first day of each Plan Year and the date six
months later.
(3) / / the first day of each Plan Year and the first day
of the fourth, seventh, and tenth months.
(4) / / the first day of each month.
4
<PAGE>
(c) DATE OF INITIAL PARTICIPATION - AN EMPLOYEE WILL BECOME A
PARTICIPANT UNLESS EXCLUDED BY SECTION 1.03(a)(3) ABOVE ON
THE ENTRY DATE IMMEDIATELY FOLLOWING THE DATE THE EMPLOYEE
COMPLETES THE SERVICE AND AGE REQUIREMENT(S) IN SECTION
1.03(a), IF ANY, EXCEPT (check one):
(1) / / No exceptions.
(2) /X/ Employees employed on the Effective Date in Section
1.01(g) will become Participants on that date.
(3) / / Employees who meet the age and service
requirement(s) of Section 1.03(a) on the Effective Date
in Section 1.01(g) will become Participants on that
date.
1.04 COMPENSATION
(a) FOR PURPOSES OF DETERMINING CONTRIBUTIONS UNDER THE PLAN, COMPENSATION
SHALL BE AS DEFINED IN SECTION 2.01(a)(7), BUT EXCLUDING (check the
appropriate box(es)):
(1) /X/ Overtime Pay.
(2) /X/ Bonuses.
(3) /X/ Commissions.
(4) /X/ The value of a qualified or a non-qualified stock option
granted to an Employee by the Employer to the extent such value
is includable in the Employee's taxable income.
NOTE: These exclusions shall not apply for purposes of the "Top Heavy"
requirements in Section 9.03 or for allocating Discretionary
Employer Contributions if an Integrated Formula is elected in
Section 1.05(a)(2).
(5) / / No exclusions.
5
<PAGE>
(b) COMPENSATION FOR THE FIRST YEAR OF PARTICIPATION
Contributions for the Plan Year in which an Employee first becomes a
Participant shall be determined based on the Employee's Compensation
(check one):
(1) / / For the entire Plan Year.
(2) /X/ For the portion of the Plan Year in which the Employee is
eligible to participate in the Plan.
1.05 CONTRIBUTIONS
(a) /X/ EMPLOYER CONTRIBUTIONS :
(1) /X/ FIXED FORMULA - NONINTEGRATED FORMULA (check (A) or (B)):
(A) /X/ FIXED PERCENTAGE EMPLOYER CONTRIBUTION:
For each Plan Year, the Employer will contribute for each
eligible Participant an amount equal to 3.00% (not to exceed
15%) of such Participant's Compensation.
(B) / / FIXED FLAT DOLLAR EMPLOYER CONTRIBUTION:
For each Plan Year, the Employer will contribute for each
eligible Participant an amount equal to $ ____ .
(2) /X/ DISCRETIONARY FORMULA
The Employer may decide each Plan Year whether to make a
discretionary Employer contribution on behalf of eligible
Participants in accordance with Section 4.06. Such
contributions shall be allocated to eligible Participants
based upon the following (check (A) or (B)):
(A) /X/ Nonintegrated Allocation Formula: In the ratio that each
eligible Participant's Compensation bears to the total
Compensation paid to all eligible Participants for the Plan
Year.
(B) / / Integrated Allocation Formula: In accordance with
Section 4.06.
NOTE: An Employer who maintains any other plan that provides for
Social Security Integration (permitted disparity) may not
elect (2)(B).
6
<PAGE>
(3) ELIGIBILITY REQUIREMENT(S)
A Participant shall be entitled to Employer Contributions for a
Plan Year under this Subsection (a) if the Participant satisfies
the following requirement(s) (Check the appropriate box(es) -
Options (B) and (C) may not be elected together):
(A) /X/ is employed by the Employer on the last day of the Plan
Year.
(B) / / earns at least 500 Hours of Service during the Plan
Year.
(C) /X/ earns at least 1,000 Hours of Service during the Plan
Year.
(D) / / no requirements.
NOTE: If option (A), (B) or (C) above is selected then Employer
contributions can only be FUNDED by the Employer AFTER Plan
Year end. Employer contributions funded during the Plan
Year shall not be subject to the eligibility requirements
of this Section 1.05(a)(3).
(b) |X| DEFERRAL CONTRIBUTIONS
(1) REGULAR CONTRIBUTIONS
The Employer shall make a Deferral Contribution in accordance
with Section 4.01 on behalf of each Participant who has an
executed salary reduction agreement in effect with the Employer
for the payroll period in question, not to exceed 15.00 % (NO
MORE THAN 15%) of Compensation for that period.
(A) A Participant may increase or decrease, on a prospective
basis, his salary reduction agreement percentage (check
one):
(i) / / As of the beginning of each payroll period.
(ii) / / As of the first day of each month.
(iii) /X/ As of the next Entry Date.
(iv) / / (Specify, but must be at least once per Plan Year)
(B) A Participant may revoke, on a prospective basis, a salary
reduction agreement at any time upon proper notice to the
Administrator but in such case may not file a new salary
reduction agreement until (check one):
(i) / / The first day of the next Plan Year.
(ii) /X/ Any subsequent Plan Entry Date.
(iii) / / (Specify, but must be at least once per Plan Year)
7
<PAGE>
(2) / / CATCH-UP CONTRIBUTIONS
The Employer may allow Participants upon proper notice and
approval to enter into a special salary reduction agreement to
make additional Deferral Contributions in an amount up to 100% of
their Compensation for the payroll period(s) in the final month
of the Plan Year.
(3) / / BONUS CONTRIBUTIONS
The Employer may allow Participants upon proper notice and
approval to enter into a special salary reduction agreement to
make Deferral Contributions in an amount up to 100% of any
Employer paid cash bonuses made for such Participants during the
Plan Year. The Compensation definition elected by the Employer in
Section 1.04(a) must include bonuses if bonus contributions are
permitted.
NOTE: A Participant's contributions under (2) and/or (3) may not
cause the Participant to exceed the percentage limit
specified by the Employer in (1) after the Plan Year. The
Employer has the right to restrict a Participant's right to
make Deferral Contributions if they will adversely affect
the Plan's ability to pass the actual deferral percentage
and/or the actual contribution percentage test.
(4) /X/ QUALIFIED DISCRETIONARY CONTRIBUTIONS
The Employer may contribute an amount which it designates as a
Qualified Discretionary Contribution to be included in the actual
deferral percentage or actual contribution percentage test.
Qualified Discretionary Contributions shall be allocated to
Non-highly Compensated Employees (check one):
(A) /X/ in the ratio which each such Participant's Compensation
for the Plan Year bears to the total of all such
Participants' Compensation for the Plan Year.
(B) / / as a flat dollar amount for each such Participant for
the Plan Year.
8
<PAGE>
(c) /X/ MATCHING CONTRIBUTIONS (only if Section 1.05(b) is checked)
(1) THE EMPLOYER SHALL MAKE A MATCHING CONTRIBUTION ON BEHALF OF EACH
PARTICIPANT IN AN AMOUNT EQUAL TO THE FOLLOWING PERCENTAGE OF A
PARTICIPANT'S DEFERRAL CONTRIBUTIONS DURING THE PLAN YEAR (check
one):
(A) /X/ 50%
(B) / / 100%
(C) / / ___%
(D) / / (Tiered Match)
___% of the first ______________% of the Participant's
Compensation contributed to the Plan,
___% of the next _______________% of the Participant's
Compensation contributed to the Plan,
___% of the next _______________% of the Participant's
Compensation contributed to the Plan.
NOTE: THE PERCENTAGES SPECIFIED ABOVE FOR MATCHING
CONTRIBUTIONS MAY NOT INCREASE AS THE PERCENTAGE OF
COMPENSATION CONTRIBUTED INCREASES.
(E) / / The percentage declared for the year, if any, by a Board
of Directors' Resolution (or by a Letter of Intent for a
Sole Proprietor or Partnership).
(2) / / THE EMPLOYER MAY AT PLAN YEAR END MAKE AN ADDITIONAL MATCHING
CONTRIBUTION EQUAL TO A PERCENTAGE DECLARED BY THE EMPLOYER,
THROUGH A BOARD OF DIRECTORS' RESOLUTION (OR BY A LETTER OF
INTENT FOR A SOLE PROPRIETOR OR PARTNERSHIP), OF THE DEFERRAL
CONTRIBUTIONS MADE BY EACH PARTICIPANT DURING THE PLAN YEAR (ONLY
IF AN OPTION IS CHECKED UNDER SECTION 1.05(C)(1)).
(3) /X/ MATCHING CONTRIBUTION LIMITS (check the appropriate box):
(A) |X| Deferral Contributions in excess of 6.0% of the
Participant's Compensation for the period in question shall
not be considered for Matching Contributions.
Note: If the Employer elects a percentage limit in (A) above
and requests the Trustee to account separately for
matched and unmatched Deferral Contributions, the
Matching Contributions allocated to each Participant
must be computed, and the percentage limit applied,
based upon each payroll period.
(B) / / Matching Contributions for each Participant for each
Plan Year shall be limited to $ .
(4) ELIGIBILITY REQUIREMENT(S)
A Participant who makes Deferral Contributions during the
Plan Year under Section 1.05(b) shall be entitled to
Matching Contributions for that Plan Year if the Participant
satisfies the following requirement(s) (Check the
appropriate box(es). Options (B) and (C) may not be elected
together):
(A) / / Is employed by the Employer on the last day of the
Plan Year.
9
<PAGE>
(B) / / Earns at least 500 Hours of Service during the Plan
Year.
(C) / / Earns at least 1,000 Hours of Service during the
Plan Year.
(D) / / Is not a Highly Compensated Employee for the Plan
Year.
(E) / / Is not a Partner of the Employer, if the Employer
is a Partnership.
(F) /X/ No requirements.
NOTE: If option (A), (B) or (C) above is selected then
Matching Contributions can only be FUNDED by the
Employer AFTER the Plan Year ends. Any Matching
Contribution funded before Plan Year end shall not be
subject to the eligibility requirements of this
Section 1.05(c)(4)). If option (A), (B), or (C) is
adopted during a Plan Year, such option shall not
become effective until the first day of the next
Plan Year.
(d) /X/ EMPLOYEE AFTER-TAX CONTRIBUTIONS (check one):
(1) / / Future Contributions
Participants may make voluntary non-deductible Employee
Contributions pursuant to Section 4.09 of the Plan. This
option may only be elected if the Employer has elected to
permit Deferral Contributions under Section 1.05(b).
Matching Contributions by the Employer are not allowed on
any voluntary non-deductible Employee Contributions.
Withdrawals are limited to one per year unless Employee
Contributions were allowed under a previous plan document
which authorized more frequent withdrawals.
(2) /X/ Frozen Contributions
Participants may not make voluntary non-deductible Employee
Contributions, but the Employer does maintain frozen
Participant voluntary non-deductible Employee Contribution
Accounts.
10
<PAGE>
1.06 RETIREMENT AGE(S)
(a) THE NORMAL RETIREMENT AGE UNDER THE PLAN IS (check one):
(1) / / age 65.
(2) / / age ___ (specify between 55 and 64).
(3) / / later of the age ___ (can not exceed 65) or the fifth
anniversary of the Participant's Employment Commencement
Date.
(b) / / THE EARLY RETIREMENT AGE IS THE FIRST DAY OF THE MONTH AFTER THE
PARTICIPANT ATTAINS AGE _____ (SPECIFY 55 OR GREATER) AND COMPLETES
_____ YEARS OF SERVICE FOR VESTING.
(c) /X/ A PARTICIPANT IS ELIGIBLE FOR DISABILITY RETIREMENT IF HE/SHE
(check the appropriate box(es)):
(1) /X/ satisfies the requirements for benefits under the Employer's
Long-Term Disability Plan.
(2) / / satisfies the requirements for Social Security disability
benefits.
(3) / / is determined to be disabled by a physician approved by the
Employer.
11
<PAGE>
1.07 VESTING SCHEDULE
(a) THE PARTICIPANT'S VESTED PERCENTAGE IN EMPLOYER CONTRIBUTIONS (FIXED
OR DISCRETIONARY) ELECTED IN SECTION 1.05(a) AND/OR MATCHING
CONTRIBUTIONS ELECTED IN SECTION 1.05(c) SHALL BE BASED UPON THE
SCHEDULE(S) SELECTED BELOW, EXCEPT WITH RESPECT TO ANY PLAN YEAR
DURING WHICH THE PLAN IS TOP-HEAVY. THE SCHEDULE ELECTED IN SECTION
1.12(d) SHALL AUTOMATICALLY APPLY FOR A TOP-HEAVY PLAN YEAR AND ALL
PLAN YEARS THEREAFTER UNLESS THE EMPLOYER HAS ALREADY ELECTED A MORE
FAVORABLE VESTING SCHEDULE BELOW.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) EMPLOYER CONTRIBUTIONS (2) MATCHING CONTRIBUTIONS
(check one): (check one):
(A) / / N/A - No Employer Contributions (A) / / N/A - No Matching Contributions
(B) / / 100% Vesting immediately (B) /X/ 100% Vesting immediately
(C) / / 3 year cliff (see C below) (C) / / 3 year cliff (see C below)
(D) / / 5 year cliff (see D below) (D) / / 5 year cliff (see D below)
(E) / / 6 year graduated (see E below) (E) / / 6 year graduated (see E below)
(F) / / 7 year graduated (see F below) (F) / / 7 year graduated (see E below)
(G) /X/ OTHER VESTING (complete G1 below) (G) / / OTHER VESTING (COMPLETE G2 below)
</TABLE>
<TABLE>
<CAPTION>
Years of Vesting Schedule
Service for
Vesting C D E F G1 G2
<S> <C> <C> <C> <C> <C> <C>
0 0% 0% 0% 0% 0.00% 100.00%
1 0% 0% 0% 0% 10.00% 100.00%
2 0% 0% 20% 0% 20.00% 100.00%
3 100% 0% 40% 20% 30.00% 100.00%
4 100% 0% 60% 40% 40.00% 100.00%
5 100% 100% 80% 60% 60.00% 100.00%
6 100% 100% 100% 80% 80.00% 100.00%
7 100% 100% 100% 100% 00.00% 100.00%
</TABLE>
NOTE: A schedule elected under G1 or G2 above must be at least as
favorable as one of the schedules in C, D, E or F above.
(b) / / Years of Service for Vesting shall exclude:
(1) / / for new plans, service prior to the Effective Date as defined
in Section 1.01(g)(1).
(2) / / for existing plans converting from another plan document,
service prior to the original Effective Date as defined in
Section 1.01(g)(2).
12
<PAGE>
1.08 PREDECESSOR EMPLOYER SERVICE
/ / SERVICE FOR PURPOSES OF ELIGIBILITY IN SECTION 1.03(A)(1) AND
VESTING IN SECTION 1.07(A) OF THIS PLAN SHALL INCLUDE SERVICE
WITH THE FOLLOWING EMPLOYER(S):
1.09 PARTICIPANT LOANS
PARTICIPANT LOANS (check (a) or (b)):
(a) /X/ will be allowed in accordance with Section 7.09, subject to a
$1,000 minimum amount and will be granted (check (1) or (2)):
(1) /X/ for any purpose.
(2) / / for hardship withdrawal (as defined in Section 7.10) purposes
only.
(b) / / will not be allowed.
1.10 HARDSHIP WITHDRAWALS
Participant withdrawals for hardship prior to termination of employment
(check one):
(a) / / will be allowed in accordance with Section 7.10, subject to a
$1,000 minimum amount.
(b) /X/ will not be allowed.
13
<PAGE>
1.11 DISTRIBUTIONS
(a) SUBJECT TO ARTICLES 7 AND 8 AND (B) BELOW, DISTRIBUTIONS UNDER THE
PLAN WILL BE PAID (check the appropriate box(es)):
(1) /X/ as a lump sum.
(2) / / under a systematic withdrawal plan (installments).
(b) / / CHECK IF A PARTICIPANT WILL BE ENTITLED TO RECEIVE A DISTRIBUTION
OF ALL OR ANY PORTION OF THE FOLLOWING ACCOUNTS WITHOUT TERMINATING
EMPLOYMENT UPON ATTAINMENT OF AGE 59 1/2 (check one):
(1) / / Deferral Contribution Account
(2) / / All Accounts
(c) / / CHECK IF THE PLAN WAS CONVERTED (BY PLAN AMENDMENT) FROM ANOTHER
DEFINED CONTRIBUTION PLAN, AND THE BENEFITS WERE PAYABLE AS (check the
appropriate box(es)):
(1) / / a form of single or joint and survivor life annuity.
(2) / / an in-service withdrawal of vested Employer Contributions
maintained in a Participant's Account (check (A) and/or (B)):
(A) / / for at least (24 or more) months.
(B) / / after the Participant has at least 60 months of
participation.
(3) / / another distribution option that is a "protected benefit"
under Section 411(d)(6) of the Internal Revenue Code. Please
attach a separate page identifying the distribution option(s).
These additional forms of benefit may be provided for such plans under
Articles 7 or 8.
NOTE: Under Federal Law, distributions to Participants must generally
begin no later than April 1 following the year in which the
Participant attains age 70 1/2.
14
<PAGE>
1.12 TOP HEAVY STATUS
(a) THE PLAN SHALL BE SUBJECT TO THE TOP-HEAVY PLAN REQUIREMENTS OF
ARTICLE 9 (check one):
(1) / / for each Plan Year.
(2) /X/ for each Plan Year, if any, for which the Plan is Top-Heavy
as defined in Section 9.02.
(3) / / Not applicable. (This option is available for plans covering
only employees subject to a collective bargaining agreement and
there are no Employer or Matching Contributions elected in
Section 1.05.)
(b) IN DETERMINING TOP-HEAVY STATUS, IF NECESSARY, FOR AN EMPLOYER WITH AT
LEAST ONE DEFINED BENEFIT PLAN, THE FOLLOWING ASSUMPTIONS SHALL APPLY:
(1) Interest rate: 3.00% per annum
(2) Mortality table:
-----------
(3) / / Not Applicable.
(c) IN THE EVENT THAT THE PLAN IS TREATED AS TOP-HEAVY FOR A PLAN YEAR,
EACH NON-KEY EMPLOYEE SHALL RECEIVE AN EMPLOYER CONTRIBUTION OF AT
LEAST 3 (3, 4, 5, OR 7 1/2) % OF COMPENSATION FOR THE PLAN YEAR IN
ACCORDANCE WITH SECTION 9.03 (check one):
(1) /X/ under this Plan in any event.
(2) / / under this Plan only if the Participant is not entitled to
such contribution under another qualified plan of the Employer.
(3) / / Not applicable. (This option is available for plans covering
only employees subject to a collective bargaining agreement and
there are no Employer or Matching Contributions elected in
Section 1.05.)
NOTE: Such minimum Employer contribution may be less than the
percentage indicated in (c) above to the extent provided
in Section 9.03(a).
15
<PAGE>
(d) IN THE EVENT THAT THE PLAN IS TREATED AS TOP-HEAVY FOR A PLAN YEAR,
THE FOLLOWING VESTING SCHEDULE SHALL APPLY INSTEAD OF THE SCHEDULE(S)
ELECTED IN SECTION 1.07(a) FOR SUCH PLAN YEAR AND EACH PLAN YEAR
THEREAFTER (check one):
(1) / / 100% vested after _____ (not in excess of 3) years of service
for vesting.
<TABLE>
<CAPTION>
(2) /X/ YEARS OF SERVICE FOR VESTING VESTING PERCENTAGE MUST BE AT LEAST
<S> <C> <C>
0 0.00% 0%
-----
1 10.00% 0%
------
2 20.00% 20%
------
3 30.00% 40%
------
4 50.00% 60%
------
5 60.00% 80%
------
6 100.00% 100%
-------
</TABLE>
Note: If the schedule(s) elected in Section 1.07(a) is(are) more
favorable in all cases than the schedule elected in (d) above,
then the schedule(s) in Section 1.07(a) will continue to apply
even in Plan Years in which the Plan is Top-Heavy.
1.13 TWO OR MORE PLANS - Code Section 415 limitation on annual additions
If the Employer maintains or ever maintained another qualified plan in
which any Participant in this Plan is (or was) a participant or could
become a participant, the Employer must complete this section. The Employer
must also complete this section if it maintains a welfare benefit fund, as
defined in Section 419(e) of the Code, or an individual medical account, as
defined in Section 415(l)(2) of the Code, under which amounts are treated
as annual additions with respect to any Participant in this Plan.
(a) IF THE EMPLOYER MAINTAINS, OR MAINTAINED, ANY OTHER DEFINED
CONTRIBUTION PLAN WHICH IS NOT A MASTER OR PROTOTYPE PLAN, ANNUAL
ADDITIONS FOR ANY LIMITATION YEAR TO THIS PLAN WILL BE LIMITED (check
one):
(1) /X/ in accordance with Section 5.03 of this Plan.
(2) / / in accordance with another method set forth on an attached
separate sheet.
(3) / / Not Applicable.
16
<PAGE>
(b) IF THE EMPLOYER MAINTAINS, OR MAINTAINED, ANY DEFINED BENEFIT PLAN(S),
THE SUM OF THE DEFINED CONTRIBUTION FRACTION AND DEFINED BENEFIT
FRACTION FOR A LIMITATION YEAR MAY NOT EXCEED THE LIMITATION SPECIFIED
IN CODE SECTION 415(E), MODIFIED BY SECTION 416(H)(1) OF THE CODE.
THIS COMBINED PLAN LIMIT WILL BE MET AS FOLLOWS (check one):
(1) /X/ Annual Additions to this Plan are limited so that the sum of
the Defined Contribution Fraction and the Defined Benefit
Fraction does not exceed 1.0.
(2) / / another method of limiting Annual Additions or reducing
projected annual benefits is set forth on an attached schedule.
(3) / / Not Applicable.
1.14 ESTABLISHMENT OF TRUST AND INVESTMENT DECISIONS
(a) INVESTMENT DIRECTIONS
Participant Accounts will be invested (check one):
(1) / / in accordance with investment directions provided to the
Trustee by the Employer for allocating all Participant Accounts
among the options listed in (b) below.
(2) /X/ in accordance with investment directions provided to the
Trustee by each Participant for allocating his entire Account
among the options listed in (b) below.
(3) / / in accordance with investment directions provided to the
Trustee by each Participant for all contribution sources in a
Participant's Account except the following sources shall be
invested as directed by the Employer (check (A) and/or (B)):
(A) / / Fixed or Discretionary Employer Contributions
(B) / / Employer Matching Contributions
The Employer must direct the applicable sources among the same
investment options made available for Participant directed
sources listed in (b) below.
17
<PAGE>
(b) PLAN INVESTMENT OPTIONS
The Employer hereby establishes a Trust under the Plan in accordance
with the provisions of Article 14, and the Trustee signifies
acceptance of its duties under Article 14 by its signature below.
Participant Accounts under the Trust will be invested among the
Fidelity Funds listed below pursuant to Participant and/or Employer
directions.
<TABLE>
<CAPTION>
FUND NAME FUND NUMBER
<S> <C> <C>
1 Fidelity Growth & Income Portfolio 0027
2 Fidelity Intermediate Bond Fund 0032
3 Fidelity Low-Priced Stock Fund 0316
4 Fidelity Managed Income Portfolio 0632
5 Spartan(R)U.S. Equity Index Fund 0650
6 Janus Worldwide Fund OF1J
7 PBHG Growth Fund OFGF
8 Fidelity Retirement Money Market Portfolio 0630
</TABLE>
NOTE: An additional annual recordkeeping fee will be charged for each fund
in excess of seven funds.
To the extent that the Employer selects as an investment option the
Managed Income Portfolio of the Fidelity Group Trust for Employee
Benefit Plans (the "Group Trust"), the Employer hereby (A) agrees to
the terms of the Group Trust and adopts said terms as a part of this
Agreement and (B) acknowledges that it has received from the Trustee
a copy of the Group Trust, the Declaration of Separate Fund for the
Managed Income Portfolio of the Group Trust, and the Circular for
the Managed Income Portfolio.
NOTE: The method and frequency for change of investments will be determined
under the rules applicable to the selected funds or, if applicable,
the rules of the Employer adopted in accordance with Section 6.03.
Information will be provided regarding expenses, if any, for changes
in investment options.
18
<PAGE>
1.15 RELIANCE ON OPINION LETTER
An adopting Employer may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this Plan
is qualified under Section 401 of the Code. If the Employer wishes to
obtain reliance that his or her Plan(s) are qualified, application for a
determination letter should be made to the appropriate Key District
Director of the Internal Revenue Service. Failure to fill out the Adoption
Agreement properly may result in disqualification of the Plan.
This Adoption Agreement may be used only in conjunction with Fidelity
Prototype Plan Basic Plan Document No. 07. The Prototype Sponsor shall
inform the adopting Employer of any amendments made to the Plan or of the
discontinuance or abandonment of the prototype plan document.
1.16 PROTOTYPE INFORMATION:
Name of Prototype Sponsor: Fidelity Management & Research Co.
Address of Prototype Sponsor: 82 Devonshire Street
Boston, MA 02109
Questions regarding this prototype document may be directed to the
following telephone number: 1-(800) 343-9184.
19
<PAGE>
EXECUTION PAGE
(FIDELITY'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this ________day of _______________, 19_______.
Employer
-----------------------------------
By
-----------------------------------
Title
-----------------------------------
Employer
-----------------------------------
By
-----------------------------------
Title
-----------------------------------
Accepted by
Fidelity Management Trust Company, as Trustee
By Date
-------------------------------- ----------------------------------
Title
-----------------------------
20
<PAGE>
EXECUTION PAGE
(EMPLOYER'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this ________day of _______________, 19_______.
Employer
-----------------------------------
By
------------------------------------
Title
------------------------------------
Employer
------------------------------------
By
------------------------------------
Title
------------------------------------
Accepted by
Fidelity Management Trust Company, as Trustee
By Date
--------------------------------- -------------------------------
Title
-----------------------------
21
<PAGE>
Exhibit 10(b)
TRUST AGREEMENT
BETWEEN
--------------------------------------
[SPONSOR]
AND
FIDELITY MANAGEMENT TRUST COMPANY
[TRUSTEE]
DATED AS OF_______________________________, 199__
IMPORTANT NOTE
THIS TRUST AGREEMENT MAY ONLY BE USED IN CONJUNCTION WITH THE CORPORATEPLAN FOR
RETIREMENT SELECT PLAN ADOPTION AGREEMENT AND BASIC PLAN DOCUMENT. AN EMPLOYER
MAY NOT RELY SOLELY ON SAID DOCUMENTS TO ENSURE THAT THE PLAN IS "UNFUNDED AND
MAINTAINED PRIMARILY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION TO A
SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES" AND EXEMPT FROM
PARTS 2 THROUGH 4 OF TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974 WITH RESPECT TO THE EMPLOYER'S PARTICULAR SITUATION. FIDELITY MANAGEMENT
TRUST COMPANY, ITS AFFILIATES AND EMPLOYEES MAY NOT PROVIDE YOU WITH LEGAL
ADVICE IN CONNECTION WITH THE EXECUTION OF THIS DOCUMENT. THIS DOCUMENT SHOULD
BE REVIEWED BY YOUR ATTORNEY AND/OR ACCOUNTANT PRIOR TO EXECUTION.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
SECTION 1...........................................................................................1
1.Trust.....................................................................................1
(a) Establishment..................................................................1
(b) Grantor Trust..................................................................1
(c) Trust Assets...................................................................1
(d) Non-Assignment.................................................................1
SECTION 2...........................................................................................2
2. Payments to Sponsor......................................................................2
SECTION 3...........................................................................................2
3. Disbursements............................................................................2
(a) Directions from Administrator..................................................2
(b) Limitations....................................................................2
SECTION 4...........................................................................................2
4. Investment of Trust......................................................................2
(a) Selection of Investment Options................................................2
(b) Available Investment Options...................................................2
(c) Investment Direction...........................................................3
(d) Mutual Funds...................................................................3
(e) Trustee Powers.................................................................4
SECTION 5...........................................................................................5
5. Recordkeeping and Administrative Services to be Performed................................5
(a) General........................................................................5
(b) Accounts.......................................................................5
(c) Inspection and Audit...........................................................5
(d) Effect of Plan Amendment.......................................................5
(e) Returns, Reports and Information...............................................6
SECTION 6...........................................................................................6
6. Compensation and Expenses................................................................6
SECTION 7...........................................................................................6
7. Directions and Indemnification...........................................................6
(a) Identity of Administrator......................................................6
(b) Directions from Administrator..................................................6
(c) Directions from Sponsor........................................................6
(d) Indemnification................................................................7
(e) Survival.......................................................................7
SECTION 8...........................................................................................7
8. Resignation or Removal if Trustee........................................................7
(a) Resignation....................................................................7
(b) Removal........................................................................7
SECTION 9...........................................................................................7
9. Successor Trustee........................................................................7
(a) Appointment....................................................................7
(b) Acceptance.....................................................................7
(c) Corporate Action...............................................................8
SECTION 10..........................................................................................8
10. Termination.............................................................................8
SECTION 11..........................................................................................8
11. Resignation, Removal, and Termination Notices...........................................8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 12..........................................................................................8
12. Duration................................................................................8
SECTION 13..........................................................................................8
13. Insolvency of Sponsor...................................................................8
SECTION 14..........................................................................................9
14. Amendment or Modification...............................................................9
SECTION 15..........................................................................................10
15. General.................................................................................10
(a) Performance by Trustee, its Agents or Affiliates...............................10
(b) Entire Agreement...............................................................10
(c) Waiver.........................................................................10
(d) Successors and Assigns.........................................................10
(e) Partial Invalidity.............................................................10
(f) Section Headings...............................................................10
SECTION 16..........................................................................................11
16. Governing Law...........................................................................11
(a) Massachusetts Law Controls.....................................................11
(b) Trust Agreement Controls.......................................................11
</TABLE>
<PAGE>
TRUST AGREEMENT, dated as of the_______day of___________________,199___, between
______________________________a________________corporation, having an office
at_____________ _________________________(the "SPONSOR"), and FIDELITY
MANAGEMENT TRUST COMPANY, a Massachusetts trust company, having an office at 82
Devonshire Street, Boston, Massachusetts 02109 (the "TRUSTEE").
WITNESSETH:
WHEREAS, THE SPONSOR IS THE SPONSOR OF THE
____________________________________ (THE "PLAN"); AND
WHEREAS, THE SPONSOR WISHES TO ESTABLISH AN IRREVOCABLE TRUST AND TO
CONTRIBUTE TO THE TRUST ASSETS THAT SHALL BE HELD THEREIN, SUBJECT TO THE CLAIMS
OF SPONSOR'S CREDITORS IN THE EVENT OF SPONSOR'S INSOLVENCY, AS HEREIN DEFINED,
UNTIL PAID TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES IN SUCH MANNER AND AT
SUCH TIMES AS SPECIFIED IN THE PLAN; AND
WHEREAS, IT IS THE INTENTION OF THE SPONSOR THAT THIS TRUST SHALL
CONSTITUTE AN UNFUNDED ARRANGEMENT AND SHALL NOT AFFECT THE STATUS OF THE PLAN
AS AN UNFUNDED PLAN MAINTAINED FOR THE PURPOSE OF PROVIDING DEFERRED
COMPENSATION FOR A SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES
FOR PURPOSES OF TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
("ERISA"); AND
WHEREAS, IT IS THE INTENTION OF THE SPONSOR TO MAKE CONTRIBUTIONS TO
THE TRUST TO PROVIDE ITSELF WITH A SOURCE OF FUNDS TO ASSIST IT IN THE MEETING
OF ITS LIABILITIES UNDER THE PLAN; AND
WHEREAS, THE TRUSTEE IS WILLING TO HOLD AND INVEST THE AFORESAID ASSETS
IN TRUST AMONG SEVERAL INVESTMENT OPTIONS SELECTED BY THE SPONSOR; AND
WHEREAS, THE SPONSOR WISHES TO HAVE THE TRUSTEE PERFORM CERTAIN
MINISTERIAL RECORDKEEPING AND ADMINISTRATIVE FUNCTIONS UNDER THE PLAN; AND
WHEREAS, THE EMPLOYER OR SUCH OTHER INDIVIDUAL NAMED IN THE PLAN IS THE
ADMINISTRATOR OF THE PLAN; AND
WHEREAS, THE TRUSTEE IS WILLING TO PERFORM RECORDKEEPING AND
ADMINISTRATIVE SERVICES FOR THE PLAN IF THE SERVICES ARE PURELY MINISTERIAL IN
NATURE AND ARE PROVIDED WITHIN A FRAMEWORK OF PLAN PROVISIONS, GUIDELINES AND
INTERPRETATIONS CONVEYED IN WRITING TO THE TRUSTEE BY THE ADMINISTRATOR.
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING PREMISES AND THE
MUTUAL COVENANTS AND AGREEMENTS SET FORTH BELOW, THE SPONSOR AND THE TRUSTEE
AGREE AS FOLLOWS:
<PAGE>
SECTION 1.
1.TRUST.
(a) ESTABLISHMENT.
The Sponsor hereby establishes a trust (hereinafter the "Trust"), with
the Trustee. The Trust shall consist of an initial contribution of
money or other property acceptable to the Trustee in its sole
discretion, made by the Sponsor or transferred from a previous trustee
under the Plan, such additional sums of money as shall from time to
time be delivered to the Trustee under the Plan, all investments made
therewith and proceeds thereof, and all earnings and profits thereon,
less the payments that are made by the Trustee as provided herein,
without distinction between principal and income. The Trustee hereby
accepts the Trust on the terms and conditions set forth in this
Agreement. In accepting this Trust, the Trustee shall be accountable
for the assets received by it, subject to the terms and conditions of
this Agreement.
(b) GRANTOR TRUST
The Trust is intended to be a grantor trust, of which the Sponsor is
the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended,
and shall be construed accordingly.
(c) TRUST ASSETS.
The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Sponsor and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their
beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created
under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against
the Sponsor. Any assets held by the Trust will be subject to the claims
of the Sponsor's general creditors under federal and state law in the
event of Insolvency, as defined in Section 13(a).
(d) NON-ASSIGNMENT.
Benefit payments to Plan participants and their beneficiaries funded
under this Trust may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered, or subjected to attachment,
garnishment, levy, execution, or other legal or equitable process.
<PAGE>
SECTION 2.
2. PAYMENTS TO SPONSOR.
Except as provided under Section 13, the Sponsor shall have no right to
retain or divert to others any of the Trust assets before all payment
of benefits have been made to the participants and their beneficiaries
pursuant to the terms of the Plan.
SECTION 3.
3. DISBURSEMENTS.
(a) DIRECTIONS FROM ADMINISTRATOR.
The Trustee shall disburse monies to the Sponsor for benefit payments
in the amounts that the Administrator directs from time to time in
writing. The Trustee shall have no responsibility to ascertain any
direction's compliance with the terms of the Plan or of any applicable
law. The Trustee shall not be responsible for making benefit payments
to participants under the Plan, nor shall the Trustee be responsible
for any Social Security or Federal, State or local income tax reporting
or withholding with respect to such Plan benefits.
(b) LIMITATIONS.
The Trustee shall not be required to make any disbursement in excess of
the net realizable value of the assets of the Trust at the time of the
disbursement. The Trustee shall not be required to make any
disbursement in cash unless the Administrator has provided a written
direction as to the assets to be converted to cash for the purpose of
making the disbursement.
SECTION 4.
4. INVESTMENT OF TRUST.
(a) SELECTION OF INVESTMENT OPTIONS.
The Trustee shall have no responsibility for the selection of
investment options under the Trust and shall not render investment
advice to any person in connection with the selection of such options.
(b) AVAILABLE INVESTMENT OPTIONS.
In accordance with Section 1.14 of the Plan, the Sponsor shall direct
the Trustee as to the investment options available under the Trust
provided, however, that the Trustee shall not be considered a fiduciary
with investment discretion. The Sponsor may add additional investment
options with the consent of the Trustee and upon amendment of the Plan.
<PAGE>
(c) INVESTMENT DIRECTION.
In order to provide for an accumulation of assets comparable to the
contractual liabilities accruing under the Plan, the Sponsor may direct
the Trustee in writing to invest the assets held in the Trust to
correspond to the hypothetical investments made for Participants under
the Plan. Such directions may be made by Plan participants by use of
the telephone exchange system maintained for such purposes by the
Trustee or its agent. In the event that the Trustee fails to receive a
proper direction from the Sponsor or from Participants, the assets in
question shall be invested in Fidelity Retirement Money Market Fund, or
such other fund designated by the Sponsor for this purpose, until the
Trustee receives a proper direction.
(d) MUTUAL FUNDS.
The Sponsor hereby acknowledges that it has received from the Trustee a
copy of the prospectus for each Mutual Fund selected by the Sponsor as
a Plan investment option. Trust investment in Mutual Funds shall be
subject to the following limitations:
(i) EXECUTION OF PURCHASES AND SALES.
Purchase and sales of Mutual Funds (other than for Exchanges) shall be
made on the date on which the Trustee receives from the Sponsor in good
order all information and documentation necessary to accurately effect
such purchases and sales (or in the case of a purchase, the subsequent
date on which the Trustee has received a wire transfer of funds
necessary to make such purchase). Exchanges of Mutual Funds shall be
made on the same business day that the Trustee receives a proper
direction if received before 4:00 p.m. eastern time; if the direction
is received after 4:00 p.m. eastern time, the exchange shall be made
the following day.
(ii) VOTING.
At the time of mailing of notice of each annual or special
stockholders' meeting of any Mutual Fund, the Trustee shall send a copy
of the notice and all proxy solicitation materials to each Plan
participant who has shares of the Mutual Fund credited to the
participant's account, together with a voting direction form for return
to the Trustee or its designee. The participant shall have the right to
direct the Trustee as to the manner in which the Trustee is to vote the
shares credited to the participant's accounts (both vested and
unvested). The Trustee shall vote the shares as directed by the
participant. The Trustee shall not vote shares for which it has
received no directions from the participant. During the participant
recordkeeping reconciliation ("transition") period, the Sponsor shall
have the right to direct the Trustee as to the manner in which the
Trustee is to vote the shares of the Mutual Funds in the Trust. With
respect to all rights other than the right to vote, the Trustee shall
follow the directions of the participant and if no such directions are
received, the directions of the Sponsor. The Trustee shall have no duty
to solicit directions from participants or the Sponsor.
<PAGE>
(e) TRUSTEE POWERS.
The Trustee shall have the following powers and authority:
(i) Subject to paragraphs (b),(c) and (d) of this
Section 4, to sell, exchange, convey, transfer, or otherwise dispose of
any property held in the Trust, by private contract or at public
auction. No person dealing with the Trustee shall be bound to see to
the application of the purchase money or other property delivered to
the Trustee or to inquire into the validity, expediency, or propriety
of any such sale or other disposition.
(ii) To cause any securities or other property held
as part of the Trust to be registered in the Trustee's own name, in the
name of one or more of its nominees, or in the Trustee's account with
the Depository Trust Company of New York and to hold any investments in
bearer form, but the books and records of the Trustee shall at all
times show that all such investments are part of the Trust.
(iii) To keep that portion of the Trust in cash or
cash balances as the Sponsor or Administrator may, from time to time,
deem to be in the best interest of the Trust..
(iv) To make, execute, acknowledge, and deliver any
and all documents of transfer or conveyance and to carry out the powers
herein granted.
(v) To settle, compromise, or submit to arbitration
any claims, debts, or damages due to or arising from the Trust; to
commence or defend suits or legal or administrative proceedings; to
represent the Trust in all suits and legal and administrative hearings;
and to pay all reasonable expenses arising from any such action, from
the Trust if not paid by the Sponsor.
(vi) To employ legal, accounting, clerical, and other
assistance as may be required in carrying out the provisions of this
Agreement and to pay their reasonable expenses and compensation from
the Trust if not paid by the Sponsor.
(vii) To do all other acts although not specifically
mentioned herein, as the Trustee may deem necessary to carry out any of
the foregoing powers and the purposes of the Trust.
Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power
that could give this trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of Section 301.7701-2
of the Procedure and Administrative Regulations promulgated pursuant to
the Internal Revenue Code.
<PAGE>
SECTION 5.
5. RECORDKEEPING AND ADMINISTRATIVE SERVICES TO BE PERFORMED
(a) GENERAL
The Trustee shall perform those recordkeeping and administrative
functions described in the CORPORATEplan for Retirement Select Plan
Service Agreement between the Trustee and the Sponsor ("Service
Agreement").
(b) ACCOUNTS.
The Trustee shall keep accurate accounts of all investments, receipts,
disbursements, and other transactions hereunder and shall report the
value of the assets held in the Trust as of the last day of each fiscal
quarter of the Plan and, if not on the last day of a fiscal quarter,
the date on which the Trustee resigns or is removed as provided in
Section 8 of this Agreement or is terminated as provided in Section 10
(the "Reporting Date"). Within thirty(30) days following each Reporting
Date or within sixty (60) days in the case of a Reporting date caused
by the resignation or removal of the Trustee, or the termination of
this Agreement, the Trustee shall file with the Administrator a written
account setting forth all investments, receipts, disbursements, and
other transactions effected by the Trustee between the Reporting Date
and the prior Reporting Date, and setting forth the value of the Trust
as of the Reporting date. Except as otherwise required under applicable
law, upon the expiration of six(6) months from the date of filing such
account with the Administrator, the Trustee shall have no liability or
further accountability to anyone with respect to the propriety of its
acts or transactions shown in such account, except with respect to such
acts or transactions as to which the Sponsor shall within such six(6)
month period file with the Trustee written objections.
(c) INSPECTION AND AUDIT
All records generated by the Trustee in accordance with paragraphs(a)
and (b) shall be open to inspection and audit, during the Trustee's
regular business hours prior to the termination of this Agreement, by
the Administrator or any person designated by the Administrator. Upon
the resignation or removal of the Trustee or the termination of this
Agreement, the Trustee shall provide to the Administrator, at no
expense to the Sponsor, in the format regularly provided to the
Administrator, a statement of each participant's accounts as of the
resignation, removal, or termination, and the Trustee shall provide to
the Administrator or the Plan's new recordkeeper such further records
as are reasonable, at the Sponsor's expense.
(d) EFFECT OF PLAN AMENDMENT
The Trustee's provision of the recordkeeping and administrative
services set forth in this Section 5 shall be conditioned on the
Sponsor delivering to the Trustee a copy of any amendment to the Plan
as soon as administratively feasible following the amendment's
adoption, and on the Administrator providing the Trustee on a timely
basis with all the information the Administrator deems necessary for
the Trustee to perform the recordkeeping and administrative services
and such other information as the Trustee may reasonably request.
<PAGE>
(e) RETURNS, REPORTS AND INFORMATION
The Administrator shall be responsible for the preparation and filing
of all returns, reports, and information required of the Trust or Plan
by law including but not limited to any annual fiduciary tax return.
The Trustee shall provide the Administrator with such information as
the Administrator may reasonably request to make these filings. The
Administrator shall also be responsible for making any disclosures to
participants required by law.
SECTION 6.
6. COMPENSATION AND EXPENSES.
As consideration for its services, the Trustee shall be entitled to the
fees computed and billed in accordance with the Service Agreement. All
expenses of the Trustee relating directly to the acquisition and
disposition of investments constituting part of the Trust, and all
taxes of any kind whatsoever that may be levied or assessed under
existing or future laws upon or in respect of the Trust or the income
thereof, shall be a charge against and paid from the appropriate Plan
participants' accounts
SECTION 7.
7. DIRECTIONS AND INDEMNIFICATION
(a) IDENTITY OF ADMINISTRATOR.
The Trustee shall be fully protected in relying on the fact that the
Administrator under the Plan is the individual or persons named as such
above or such other individuals or persons as the Sponsor may notify
the Trustee in writing.
(b) DIRECTIONS FROM ADMINISTRATOR.
Whenever the Administrator provides a direction to the Trustee, the
Trustee shall not be liable for any loss, or by reason of any breach,
arising from the direction if the direction is contained in a writing
(or is oral and immediately confirmed in written) signed by any
individual whose name and signature have been submitted (and not
withdrawn) in writing to the Trustee in the Service Agreement provided
the Trustee reasonably believes the signature of the individual to be
genuine. Such direction may be made via EDT in accordance with
procedures agreed to by the Administrator and the Trustee; provided,
however, that the Trustee shall be fully protected in relying on such
direction as if it were a direction made in writing by the
Administrator. The Trustee shall have no responsibility to ascertain
any direction's (i) accuracy, (ii) compliance with the terms of the
Plan or any applicable law, or (iii) effect for tax purposes or
otherwise.
(c) DIRECTIONS FROM SPONSOR
The Trustee shall not be liable for any loss which arises from the
Sponsor's exercise or non-exercise of rights under Section 4 over the
assets in a participant's account.
<PAGE>
(d) INDEMNIFICATION.
The Sponsor shall indemnify the Trustee against, and hold the Trustee
harmless from, any and all loss, damage, penalty, liability, cost, and
expense, including without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by, imposed upon, or asserted
against the Trustee by reason of any claim, regulatory proceeding or
litigation arising from any act done or omitted to be done by any
individual or person with respect to the Plan or Trust, excepting only
any and all loss, etc., to the extent or failure to properly discharge
its responsibilities under this Agreement or applicable law arising
solely from the Trustee's negligence or bad faith.
(e) SURVIVAL.
The provisions of this Section 7 shall survive the termination of this
Agreement.
SECTION 8.
8. RESIGNATION OR REMOVAL IF TRUSTEE.
(a) RESIGNATION.
The Trustee may resign at any time upon sixty (60) days' notice in
writing to the Sponsor, unless a shorter period of notice is agreed
upon by the Sponsor.
(b) REMOVAL.
The Sponsor may remove the Trustee at any time upon sixty(60) days'
notice in writing to the Trustee, unless a shorter period of notice is
agreed upon by the Trustee.
SECTION 9.
9. SUCCESSOR TRUSTEE.
(a) APPOINTMENT
If the office of Trustee becomes vacant for any reason, the Sponsor may
in writing appoint a successor trustee under this Agreement. The
successor trustee shall have all of the rights, powers, privileges,
obligations, duties, liabilities, and immunities granted to the Trustee
under this Agreement. The successor trustee and predecessor trustee
shall not be liable for the acts or omissions of the other with respect
to the Trust.
(b) ACCEPTANCE.
When the successor trustee accepts its appointment under this
Agreement, title to and possession of the Trust assets shall
immediately vest in the successor trustee without any further action on
the part of the predecessor trustee. The predecessor trustee shall
execute all instruments and do all acts that reasonably may be
necessary or reasonably may be requested in writing by the Sponsor or
the successor trustee to vest title to all Trust assets in the
successor trustee or to deliver all Trust assets to the successor
trustee.
<PAGE>
(c) CORPORATE ACTION.
Any successor of the Trustee or successor trustee, through sale or
transfer of the business or trust department of the Trustee or
successor trustee, or through reorganization, consolidation, or merger,
or any similar transaction, shall, upon consummation of the
transaction, become the successor trustee under the Agreement.
SECTION 10.
10. TERMINATION.
This Agreement may be terminated at any time by the Sponsor upon sixty
(60) days' notice in writing to the Trustee. On the date of the
termination of this Agreement, the Trustee shall forthwith transfer and
deliver to such individual or entity as the Sponsor shall designate,
all cash and assets then constituting the Trust. If, by the termination
date, the Sponsor has not notified the Trustee in writing as to whom
the assets and cash are to be transferred and delivered, the Trustee
may bring an appropriate action or proceeding for leave to deposit the
assets and cash in a court of competent jurisdiction. The Trustee shall
be reimbursed by the Sponsor for all costs and expenses of the action
or proceeding including, without limitation, reasonable attomeys' fees
and disbursements.
SECTION 11.
11. RESIGNATION, REMOVAL, AND TERMINATION NOTICES.
All notices of resignation, removal, or termination under this
Agreement must be in writing and mailed to the party to which the
notice is being given by certified or registered mail, return receipt
requested, to the Sponsor at the address designated in the Service
Agreement, and to the Trustee at the afore-mentioned address or to such
other addresses as the parties have notified each other of in the
foregoing manner.
SECTION 12.
12. DURATION.
This Trust shall continue in effect without limit as to time, subject,
however, to the provisions of this Agreement relating to amendment,
modification, and termination thereof.
SECTION 13.
13. INSOLVENCY OF SPONSOR
(a) Trustee shall cease disbursement of funds for payment of
benefits to Plan participants and their beneficiaries if the Sponsor is
Insolvent. Sponsor shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) Sponsor is unable to pay its debts as they
become due or (ii) Sponsor is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) All times during the continuance of this Trust, the
principal and income of the Trust shall be subject to claims of general
creditors of the Sponsor under federal and state Law as set forth
below.
(i) The Board of Directors and the Chief Executive
Officer of the Sponsor shall have the duty to inform Trustee in writing
of Sponsor's Insolvency. If a person claiming to be a creditor of the
Sponsor alleges in writing to trustee that Sponsor has become
Insolvent, Trustee shall determine whether Sponsor is
<PAGE>
Insolvent and pending such determination, Trustee shall discontinue
disbursements for payment of benefits to Plan participants or their
beneficiaries.
(ii) Unless Trustee has actual knowledge of Sponsor's
Insolvency, or has received notice from Sponsor or a person claiming to
be a creditor alleging that Company is Insolvent, Trustee shall have no
duty to inquire whether Sponsor is Insolvent. Trustee may in all events
rely on such evidence concerning Sponsor's solvency as may be furnished
to Trustee and that provides Trustee with a reasonable basis for making
a determination concerning Sponsor's solvency.
(iii) If any time Trustee has determined that Sponsor
is Insolvent, Trustee shall discontinue disbursements for payments to
Plan participants or their beneficiaries and shall hold the assets of
the Trust for the benefit of Sponsor's general creditors. Nothing in
this Trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of Sponsor with respect to benefits due under the Plan or
otherwise.
(iv) Trustee shall resume disbursement for the
payment of benefits to Plan participants or their beneficiaries in
accordance with Section 2 of this Trust Agreement only after Trustee
has determined that Sponsor is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to (a)
hereof and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all
payments due to Plan participants or their beneficiaries under the
terms of the Plan for the period of such discontinuance, less the
aggregate amount of any payments made to Plan participants or their
beneficiaries by Sponsor in lieu of the payments provided for hereunder
during any such period of discontinuance.
SECTION 14.
14. AMENDMENT OR MODIFICATION
This agreement may be amended or modified at any time and from time to
time only by an instrument executed by both the Sponsor and the
Trustee.
<PAGE>
SECTION 15.
15. GENERAL
(a) PERFORMANCE BY TRUSTEE, ITS AGENTS OR AFFILIATES
The sponsor acknowledges and authorizes that the services to be
provided under this Agreement shall be provided by the Trustee, its
agents or affiliates, including Fidelity Investments Institutional
Operations Company or its successor, and that certain of such services
may be provided pursuant to one or more other contractual agreements or
relationships.
(b) ENTIRE AGREEMENT.
This Agreement contains all of the terms agreed upon between the
parties with respect to the subject matter hereof.
(c) WAIVER
No waiver by either party of any failure or refuse all to comply with
an obligation hereunder shall be deemed a waiver of any other or
subsequent failure or refusal to so comply.
(d) SUCCESSORS AND ASSIGNS
The stipulations in this Agreement shall inure to the benefit of, and
shall bind, the successors and assigns of the respective parties.
(e) PARTIAL INVALIDITY.
If any term or provision of this Agreement or the application thereof
to any person or circumstances shall to any extent be invalid or
unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
(f) SECTION HEADINGS.
The headings of the various sections and subsections of this Agreement
have been inserted only for the purposes of convenience and are not
part of this Agreement and shall not be deemed in any manner to modify,
explain, expand or restrict any of the provisions of this Agreement.
<PAGE>
SECTION 16.
16. GOVERNING LAW.
(a) MASSACHUSETTS LAW CONTROLS.
This Agreement is being made in the Commonwealth of Massachusetts, and
the Trust shall be administered as a Massachusetts trust. The validity,
construction, effect and administration of this Agreement shall be
governed by and interpreted in accordance with the laws of the
Commonwealth of Massachusetts, except to the extent those laws are
superseded under Section 514 of ERISA.
(b) TRUST AGREEMENT CONTROLS.
The Trustee is not a party to the Plan, and in the event of any
conflict between the provisions of the Plan and the provisions of this
Agreement, the provisions of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
[SPONSOR]
Attest: By
------------------------------- -----------------------------------
[Title] [Title]
FIDELITY MANAGEMENT TRUST COMPANY
[TRUSTEE]
By
----------------------------------
[Title]
<PAGE>
CPR SELECT
THE CORPORATEPLAN FOR RETIREMENT SELECT PLAN
ADOPTION AGREEMENT
IMPORTANT NOTE
THIS DOCUMENT IS NOT AN IRS APPROVED PROTOTYPE PLAN. AN ADOPTING EMPLOYER MAY
NOT RELY SOLELY ON THIS PLAN TO ENSURE THAT THE PLAN IS "UNFUNDED AND MAINTAINED
PRIMARILY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION TO A SELECT GROUP
OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES" AND EXEMPT FROM PARTS 2 THROUGH 4
OF TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 WITH RESPECT
TO THE EMPLOYER'S PARTICULAR SITUATION. FIDELITY MANAGEMENT TRUST COMPANY, ITS
AFFILIATES AND EMPLOYEES MAY NOT PROVIDE YOU WITH LEGAL ADVICE IN CONNECTION
WITH THE EXECUTION OF THIS DOCUMENT. THIS DOCUMENT SHOULD BE REVIEWED BY YOUR
ATTORNEY AND/OR ACCOUNTANT PRIOR TO EXECUTION.
<PAGE>
ADOPTION AGREEMENT
ARTICLE 1
1.01 PLAN INFORMATION
(a) NAME OF PLAN:
This is the LAWTER INTERNATIONAL, INC. NON-QUALIFIED DEFERRED COMPENSATION
---------------------------------------------------------------
Plan (the "Plan").
(b) NAME OF PLAN ADMINISTRATOR, IF NOT THE EMPLOYER:
-------------------------------------------------------------
Address:
-----------------------------------------------------
Phone Number:
------------------------------------------------
The Plan Administrator is the agent for service of legal
process for the Plan.
(c) THREE DIGIT PLAN NUMBER: 004
-------------------------------------
(d) PLAN YEAR END (month/day): 12/31
-----------------------------------
(e) PLAN STATUS (check one):
(1) / / Effective Date of new Plan: 1/1/98
-------------------
(2) / / Amendment Effective Date:
-------------------
The original effective date of the Plan:
--------
<PAGE>
1.02 EMPLOYER
(a) THE EMPLOYER IS: Lawter INTERNATIONAL, INC
Address: One Terra Way
8601 95th St.
Pleasant Prairie, WI 53158
Contact's Name: Mark Joslin
Telephone Number: 414-947-7300
(1) Employer's Tax Identification Number: 36-1370818
-----------
(2) Business form of Employer (check one):
(A) / x / Corporation
(B) / / Sole proprietor or partnership
(C) / / Subchapter S Corporation
(3) Employer's fiscal year end: 12/31
-----------------------
(b) THE TERM "EMPLOYER" INCLUDES THE FOLLOWING RELATED EMPLOYER(S)
(as defined in Section 2.01(a)(21)):
- ------------ -----------------------------------------------------------
- ------------ -----------------------------------------------------------
- ------------ -----------------------------------------------------------
- ------------ -----------------------------------------------------------
- ------------ -----------------------------------------------------------
2
<PAGE>
1.03 COVERAGE
(a) ONLY THOSE EMPLOYEES LISTED IN ATTACHMENT A WILL BE ELIGIBLE TO
PARTICIPATE IN THE PLAN.
(b) THE ENTRY DATE(S) SHALL BE (check one):
(1) / / the first day of each Plan Year.
(2) / / the first day of each Plan Year and the date six
months later.
(3) / / the first day of each Plan Year and the first
day of the fourth, seventh, and tenth months.
(4) /x / the first day of each month.
1.04 COMPENSATION
FOR PURPOSES OF DETERMINING CONTRIBUTIONS UNDER THE PLAN, COMPENSATION
SHALL BE AS DEFINED IN SECTION 2.01(a)(6), BUT EXCLUDING (check the
appropriate box(es)):
(a) / X / Overtime Pay.
(b) / / Bonuses.
(c) / / Commissions.
(d) / / The value of a qualified or a non-qualified stock
option granted to an Employee by the Employer to the
extent such value is includable in the Employee's
taxable income.
(e) / / No exclusions.
1.05 CONTRIBUTIONS
(a) DEFERRAL CONTRIBUTIONS THE EMPLOYER SHALL MAKE A
DEFERRAL CONTRIBUTION IN ACCORDANCE WITH SECTION 4.01 ON
BEHALF OF EACH PARTICIPANT WHO HAS AN EXECUTED SALARY
REDUCTION AGREEMENT IN EFFECT WITH THE EMPLOYER FOR THE PLAN
YEAR (OR PORTION OF THE PLAN YEAR) IN QUESTION, NOT TO EXCEED
_____50____% OF COMPENSATION FOR THAT PLAN YEAR.
3
<PAGE>
(b) / X / MATCHING CONTRIBUTIONS
(1) THE EMPLOYER SHALL MAKE A MATCHING CONTRIBUTION ON
BEHALF OF EACH PARTICIPANT IN AN AMOUNT EQUAL TO THE
FOLLOWING PERCENTAGE OF A PARTICIPANT'S DEFERRAL
CONTRIBUTIONS DURING THE PLAN YEAR (check one):
(A) / / 50%
(B) / / 100%
(C) / / %
----
(D) / / (Tiered Match) ___________% of the
first ________% of the Participant's
Compensation contributed to the Plan,
________% of the next __________% of the
Participant's Compensation contributed to the
Plan,
___________% of the next ___________% of the
Participant's Compensation contributed to the
Plan.
(E) / / The percentage declared for the year, if
any, by a Board of Directors' resolution.
(F) / / Other:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
(2) / / MATCHING CONTRIBUTION LIMITS (check the appropriate
box(es)):
(A) / / Deferral Contributions in excess
of ________% of the Participant's
Compensation for the period in
question shall not be considered for
Matching Contributions.
Note: If the Employer elects a percentage
limit in (A) above and requests the
Trustee to account separately for
matched and unmatched Deferral
Contributions, the Matching
Contributions allocated to each
Participant must be computed, and the
percentage limit applied, based upon
each period.
(B) / / Matching
Contributions for each Participant for each
Plan Year shall be limited to $___________.
(3) ELIGIBILITY REQUIREMENT(S) FOR MATCHING CONTRIBUTIONS
4
<PAGE>
A Participant who makes Deferral Contributions during
the Plan Year under Section 1.05(a) shall be entitled
to Matching Contributions for that Plan Year if the
Participant satisfies the following requirement(s)
(Check the appropriate box(es). Options (B) and (C)
may not be elected together):
(A) / / Is employed by the
Employer on the last day of the Plan Year.
(B) / / Earns at least 500 Hours
of Service during the Plan Year.
(C) / / Earns at least 1,000
Hours of Service during the Plan Year.
(D) / x / No requirements.
NOTE: If option (A), (B) or (C) above is
selected then Matching Contributions can
only be MADE by the Employer AFTER the
Plan Year ends. Any Matching Contribution
made before Plan Year end shall not be
subject to the eligibility requirements of
this Section 1.05(b)(3)).
1.06 DISTRIBUTION DATES
A Participant may elect to receive a distribution or commence
distributions from his Account pursuant to Section 8.02 upon
the following date(s) (check the appropriate box(es). If
Option (c) is elected, then options (a) and (b) may not be
elected):
(a) / / ATTAINMENT OF NORMAL RETIREMENT AGE. NORMAL
RETIREMENT AGE UNDER THE PLAN IS (check one):
(1) / / age 65.
(2) / / age ____ (specify from 55
through 64).
(3) /x / later of the age 35 (can
not exceed 65) or the
fifth anniversary of the
Participant's Commencement
Date.
(b) / / ATTAINMENT OF EARLY RETIREMENT AGE. EARLY
RETIREMENT AGE IS THE FIRST DAY OF THE MONTH AFTER THE
PARTICIPANT ATTAINS AGE ____ (SPECIFY 55 OR GREATER)
AND COMPLETES _______ YEARS OF SERVICE FOR VESTING.
(c) / x / TERMINATION OF EMPLOYMENT WITH THE EMPLOYER.
1.07 VESTING SCHEDULE
5
<PAGE>
(a) THE PARTICIPANT'S VESTED PERCENTAGE IN MATCHING CONTRIBUTIONS
ELECTED IN SECTION 1.05(b) SHALL BE BASED UPON THE SCHEDULE(S)
SELECTED BELOW.
(1) / / N/A - No Matching Contributions
(2) / / 100% Vesting immediately
(3) / / 3 year cliff (see C below)
(4) / / 5 year cliff (see D below)
(5) / / 6 year graduated (see E below)
(6) / / 7 year graduated (see F below)
(7) / X / G below
(8) / / Other (Attachment "B")
<TABLE>
<CAPTION>
YEARS OF VESTING SCHEDULE
SERVICE FOR
VESTING C D E F G
------------ ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
0 0% 0% 0% 0% 0
1 0% 0% 0% 0% 10
2 0% 0% 20% 0% 20
3 100% 0% 40% 20% 30
4 100% 0% 60% 40% 50
5 100% 100% 80% 60% 60
6 100% 100% 100% 80% 80
7 100% 100% 100% 100% 100%
</TABLE>
(b) / / YEARS OF SERVICE FOR VESTING SHALL EXCLUDE
(check one):
(1) / / for new plans, service prior to the Effective
Date as defined in Section 1.01(e)(1).
(2) / / for existing plans converting from another plan
document, service prior to the original Effective
Date as defined in Section 1.01(e)(2).
(c) / / A PARTICIPANT WILL FORFEIT HIS MATCHING CONTRIBUTIONS UPON
THE OCCURRENCE OF THE FOLLOWING EVENT (S):
------------------------
------------------------
------------------------
------------------------
(d) A PARTICIPANT WILL BE 100% VESTED IN HIS MATCHING
CONTRIBUTIONS UPON (CHECK THE APPROPRIATE BOX(ES), IF ANY):
6
<PAGE>
(1) / / Normal Retirement Age (as defined in
Section 1.06(a)).
(2) / / Early Retirement Age (as defined in Section
1.06(b)).
(3) / x / Death
1.08 PREDECESSOR EMPLOYER SERVICE
/ / SERVICE FOR PURPOSES OF VESTING IN SECTION
1.07(a) SHALL INCLUDE SERVICE WITH THE FOLLOWING EMPLOYER(S):
(a)
------------------------------------------------------------------
(b)
------------------------------------------------------------------
(c)
------------------------------------------------------------------
(d)
------------------------------------------------------------------
1.09 HARDSHIP WITHDRAWALS
PARTICIPANT WITHDRAWALS FOR HARDSHIP PRIOR TO TERMINATION OF EMPLOYMENT
(check one):
(a) / X / WILL BE ALLOWED IN ACCORDANCE WITH SECTION 7.07,
SUBJECT TO A $1000 MINIMUM AMOUNT. (MUST BE AT LEAST
$1,000)
(b) / / WILL NOT BE ALLOWED.
1.10 DISTRIBUTIONS
SUBJECT TO ARTICLES 7 AND 8, DISTRIBUTIONS UNDER THE PLAN WILL BE PAID
(check the appropriate box(es)):
(a) / X / AS A LUMP SUM.
(b) / / UNDER A SYSTEMATIC WITHDRAWAL PLAN (INSTALLMENTS) NOT
TO EXCEED 10 YEARS.
1.11 INVESTMENT DECISIONS
(a) INVESTMENT DIRECTIONS
Investments in which the Accounts of Participants shall be
treated as invested and reinvested shall be directed (check
one):
7
<PAGE>
(1) / / by the EMPLOYER among the options listed in (b)
below.
(2) / x / by each PARTICIPANT among the options listed in
(b) below.
(3) / / by each Participant with respect to Deferral
Contributions and by the Employer with
respect to Employer Matching Contributions. The
Employer must direct the Employer Matching
Contributions among the same investment options
made available for Participant directed sources
listed in (b) below.
(b) PLAN INVESTMENT OPTIONS
Participant Accounts will be treated as invested among the
Fidelity Funds listed below pursuant to Participant and/or
Employer directions.
<TABLE>
<CAPTION>
FUND NAME FUND NUMBER
--------- -----------
<S> <C>
(1) Growth & Income 027
(2) Intermediate Bond 032
(3) Low Priced Stock 316
(4) Worldwide 318
(5) Net Money Market 630
(6) US Equity Index 650
(7) Dividend Growth 330
(8) Europe 301
</TABLE>
NOTE: An additional annual recordkeeping fee will be charged for
each fund in excess of ten funds.
8
<PAGE>
NOTE: The method and frequency for change of investments will be
determined under the rules applicable to the selected
funds. Information will be provided regarding expenses,
if any, for changes in investment options.
1.12 RELIANCE ON PLAN
An adopting Employer may not rely solely on this Plan to ensure that
the Plan is "unfunded and maintained primarily for the purpose of
providing deferred compensation for a select group of management or
highly compensated employees" and exempt from Parts 2 through 4 of
Title I of the Employee Retirement Income Security Act of 1974 with
respect to the Employer's particular situation. This Agreement must be
reviewed by your attorney and/or accountant before it is executed.
This Adoption Agreement may be used only in conjunction with the
CORPORATEplan for Retirement Select Basic Plan Document.
9
<PAGE>
EXECUTION PAGE
(FIDELITY'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this ________day of _______________, 19_______.
Employer
- -------- -----------------------------------
By
- -------- -----------------------------------
Title
- -------- -----------------------------------
Employer
- -------- -----------------------------------
By
- -------- -----------------------------------
Title
- -------- -----------------------------------
10
<PAGE>
EXECUTION PAGE
(EMPLOYER'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this ________day of _______________, 19_______.
Employer
- -------- -----------------------------------
By
- -------- -----------------------------------
Title
- -------- -----------------------------------
Employer
- -------- -----------------------------------
By
- -------- -----------------------------------
Title
- -------- -----------------------------------
11
<PAGE>
ATTACHMENT A
PURSUANT TO SECTION 1.03(a), THE FOLLOWING ARE THE EMPLOYEES WHO ARE ELIGIBLE TO
PARTICIPATE IN THE PLAN:
EMPLOYER
-----------------------------------------------------
BY
-----------------------------------------------------
TITLE
-----------------------------------------------------
DATE
-----------------------------------------------------
NOTE: The Employer must revise Attachment A to add employees as they become
eligible or delete employees who are no longer eligible.
12
<PAGE>
Exhibit 10(k)
EMPLOYMENT AGREEMENT
This Agreement, dated as of August 3, 1998, between Lawter
International, Inc., a Delaware corporation (hereinafter referred to as the
"Company"), and Jack Baarends (hereinafter referred to as the "Employee").
RECITALS
The Employee has been employed by the Company and currently serves as
Vice President of Research and Development. Because of the Employee's extensive
experience and his familiarity with the affairs of the Company, the Company
wishes to assure that, in the event of a "Change of Control," as hereinafter
defined, it will continue to have the Employee available to perform duties
substantially similar to those currently being performed by him and to continue
to contribute to the Company's growth and success as he has in the past. The
Employee is willing to commit to continue in the performance of his services for
the Company upon the terms and conditions set forth herein.
COVENANTS
NOW, THEREFORE, in consideration of the mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees that, effective upon a "Change in
Control" and provided that Employee is still serving as an employee of the
Company at that time, it will continue to employ Employee as the Vice
President of Research and Development of the Company to perform the duties
described herein, and Employee hereby accepts such employment on the terms
and conditions stated herein. It is understood that prior to such "Change
in Control," this Agreement shall confer no rights of employment or other
benefits (or obligations) whatsoever upon Employee, and that Employee shall
remain subject to termination at will.
2. TERM OF EMPLOYMENT. Subject to provisions for termination set forth herein,
the term of Employee's employment hereunder shall commence on the date of a
"Change in Control" and shall extend until two years after the date of such
"Change in Control." For purposes of this Agreement a "Change in Control"
shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934; provided that,
without limitation, such a Change in Control shall be deemed to have
occurred if during any period of two consecutive years individuals who at
the beginning of such period constitute members of the board of directors
cease for any reason to constitute at least a majority thereof, unless the
nomination or election of each director who was not a director at the
beginning of the period was approved by
<PAGE>
a vote of a majority of the directors still in office at the time of such
nomination or election who were directors at the beginning of the period.
3. DUTIES OF EMPLOYEE. Employee shall be the Vice President of Research and
Development of the Company and shall perform such duties and
responsibilities for the Company as may be assigned to him by the Board of
Directors of the Company and which are not unreasonably inconsistent with
the duties currently being performed by the Employee. During the term of
his employment, Employee shall devote substantially all of his business
time, attention and energy, and his reasonable best efforts, to the
interests and business of the Company and to the performance of his duties
and responsibilities on behalf of the Company.
4. COMPENSATION. Throughout the term of Employee's employment hereunder, the
Company shall pay Employee, for services to be rendered by him hereunder, a
guaranteed minimum salary at an annual rate equal to that being paid on the
date the term of employment hereunder commences, less all applicable
federal and state income tax withholding, FICA taxes and other payroll
taxes. The guaranteed minimum salary shall be reviewed by the Company on a
yearly basis to ascertain if any upward adjustment in the annual rate is in
order, and if any increase is made, the new annual rate shall become the
guaranteed minimum salary under this Section 4. Such compensation shall be
payable semi-monthly.
5. WORKING FACILITIES AND FRINGE BENEFITS. The Employee shall be furnished
with office space, secretarial assistance and such other facilities and
services as are appropriate to his position and adequate for the
performance of his duties. The Company also shall provide to Employee
during the term of employment fringe benefits and perquisites at least
equal to those provided to Employee immediately prior to the date thereof,
and the Company shall not discriminate against Employee with respect to any
vacation or holiday plan, medical, hospital, life and disability insurance
programs, pension programs and other similar welfare benefit programs from
time to time made available to the Company's officers and key employees.
6. EXPENSES. The company shall pay or reimburse Employee for all reasonable
expenses actually incurred or paid by him in the performance of services
rendered by him pursuant to this Agreement. Such expenses shall be
supported by the documentary evidence required to substantiate them as
income tax deductions.
7. COVENANT RESTRICTING COMPETITION; NON-DISCLOSURE OF CONFIDENTIAL
INFORMATION.
(a) Employee acknowledges that his services are special and unique, and of
an unusual and extraordinary character which gives them peculiar
value, the loss of which cannot adequately be compensated in damages.
Therefore, Employee agrees that he will not, except with the written
consent of the Company, for a continuous period of eighteen (18)
months commencing immediately following termination of Employee's
employment hereunder, directly or indirectly engage or become
interested in, as a partner, director, officer, principal, agent or
2
<PAGE>
employee, any business which competes with products produced, marketed
or in development by the Company at the time of such termination.
(b) Employee acknowledges that in his employment he is or will be making
use of, acquiring or adding to, confidential information of the
Company, and is or will be familiar with the Company's business,
activities, employees, customers and suppliers. Therefore, in order to
protect the Company's confidential information and to protect other
employees who depend upon the Company for regular employment, Employee
agrees that, except in connection with his employment by the Company,
or with the consent of the Company, he will not during or after the
term of his employment hereunder in any way utilize any of said
confidential information and he will not copy, reproduce, or take with
him the original or any copies of said confidential information and
will not disclose any of said confidential information to anyone.
In the event of a breach of the covenants contained in this Section 7,
the Company shall be entitled to an injunction restraining such breach
in addition to any other remedies provided by law.
If any provision of this Section 7 is adjudged by a court to be
invalid or unenforceable, the same will in no way affect any other
provision of this Section 7 or any other part of this Agreement, the
application of such provision in any other circumstances or the
validity or enforceability of this Agreement. If any such provision,
or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties
agree that the court making such determination will have the power to
reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form such provision will
then be enforceable and will be enforced.
8. TERMINATION BY COMPANY.
(a) DISABILITY. The Company may terminate the active employment of the
Employee if, in the reasonable judgment of the Board of Directors of
the Company, he becomes unable to satisfactorily perform his duties
and responsibilities hereunder during the term of his employment
because of mental or physical disability. Upon such termination, the
Employee shall be relieved of all further obligations hereunder except
obligations pursuant to Section 7. In the event of such termination,
the Company shall continue to pay to the Employee, until the end of
the term of his employment hereunder, a salary at a rate equal to
three-quarters of the annual rate in effect on the date of such
termination (as set forth in Section 4). Notwithstanding the
foregoing, the amounts so payable shall be reduced by any amounts
payable to the Employee during the term of his employment hereunder
pursuant to any disability benefit or wage continuation plan of the
Company in effect.
(b) DEATH. In the event of the death of the Employee during the term, the
Company shall make, until the end of the term of employment hereunder,
payments at a rate
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<PAGE>
equal to one-half of the annual rate in effect on the date of death.
The payments to be made under this Section 8(b) shall not be reduced
by reason of any insurance proceeds payable directly to the Employee's
beneficiaries or estate pursuant to insurance carried or provided by
the Company, and shall be made to such beneficiary as the Employee may
designate for that purpose by written notice given to the Secretary of
the Company prior to this death, or if the Employee has not so
designated, then to the personal representative of his Estate.
(c) TERMINATION FOR CAUSE. In the event fraud, defalcation, or other
similar dishonesty of the Employee involving the operations, funds or
other assets of the Company is established, or Employee is convicted
of a crime involving moral turpitude, or Employee breaches the terms
of this Agreement in any material respect, then the Company may
terminate this Agreement upon giving written notice to the Employee
and thereafter, neither the Employee, his surviving spouse or his
estate shall be entitled to any further salary or compensation from
the Company pursuant to this Agreement, but the Employee's obligations
under Section 7 shall remain in effect. The parties agree that the
provisions of this Section 8(c) shall not be utilized in any manner by
the Company to avoid, negate or frustrate application of the
provisions of Section 9 of this Agreement.
9. TERMINATION BY EMPLOYEE.
(a) IF LOCATION OF OFFICE CHANGES. In the event that, at any time during
the term of employment, the Company, without Employee's consent,
changes the location of the Company's offices at which Employee works
to a city more than 150 miles from its present location, the Employee
may terminate his employment with the Company by giving to the
Secretary of the Company notice in writing within three months after
this right to termination arises.
(b) IF POSITION CHANGES. It is the intention of the parties that the
Employee will have the positions specified in Section 1 hereof during
the entire term of employment. In the event that, at any time during
the term hereunder, Employee, without his consent, does not hold such
positions with the Company and have the duties and responsibilities
that would normally be expected of an officer of the Company with
these positions (except by reason of termination under Section 8),
Employee may terminate his employment with the Company hereunder by
giving to the Secretary of the Company written notice of such
termination within three months after this right to terminate arises.
(c) LUMP SUM PAYMENT. In the event of termination pursuant to subsection
(a) or (b) of this Section 9, the Company shall pay to the Employee,
in a lump sum and within 30 days of such termination, an amount equal
to the aggregate balance (based on the annual rate in effect at the
time of such termination) which would have been payable to the
Employee during the remaining portion of the term hereunder had such
termination not occurred, including any benefits payable to Employee.
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<PAGE>
(d) REIMBURSEMENT. If a tax is imposed pursuant to Section 4999 of the
Internal Revenue Code, or successor provision of like import, upon
payments due under this Agreement or upon other payments to the
Employee by the Company, the Employee shall be paid an additional
amount calculated so as to provide the Employee, after he has paid the
tax (including any related interest and/or penalty) imposed by Section
4999 of the Code, with the same compensation he would have received
had not tax (including any related interest and/or penalty) been
imposed by Section 4999. For purposes of this subsection (d), the term
"Company" shall include any parent, subsidiary, affiliate, assignee,
or successor in interest of the company or of such assignee or
successor in interest.
10. ASSIGNMENT. This agreement is binding upon and shall be for the benefit of
the successors and assigns of the Company, including any corporation or any
other form of business organization with which the Company may merge or
consolidate, or to which it may transfer substantially all of its assets.
Employee shall not assign his interest in this Agreement or any part
thereof.
11. CONSENT OF THE COMPANY. Any act, request, approval, consent or opinion of
the Company under this Agreement must be in writing and may be authorized,
given or expressed only be resolution of the Board of Directors of the
Company, or by such other person as the Board of Directors of the Company
may designate.
12. NOTICES. Any notice required hereunder to be given shall be in writing and
if:
(a) by the Company to Employee shall be directed to him at his address set
forth below, or to such other address as he shall have furnished in
writing to the Company; or
(b) by Employee to the Company shall be directed to Lawter International,
Inc., 8601 - 95th Street, Pleasant Prairie, Wisconsin 53158, Attn:
Secretary, or to such designee or other address as the Board of
Directors shall name and have furnished in writing to Employee.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin applicable to contracts
made and to be performed therein.
14. ENFORCEMENT EXPENSES AND ARBITRATION. The Company agrees to reimburse the
Employee for all costs and expenses incurred by him (including the
reasonable fees of his counsel) in successfully enforcing any of his rights
under this Agreement or any claim arising out of the breach thereof. In
addition, the parties acknowledge the relative economic power of the
Company versus the Employee, and the ability of the Company to resist the
conclusion of litigation should the Employee institute legal proceedings to
enforce this Agreement or to recover damages for the breach thereof. In
recognition of this, any controversy or claim arising out of or relating to
this Agreement, including any dispute over or interpretation of the
occurrence of a "Change in Control," as previously defined, shall be
settled by arbitration in
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accordance with the Commercial Arbitration Rules of the American
Arbitration Association, at the sole election of the Employee; provided,
however, that an action by the Company to enforce its rights under Section
7 hereof shall be excluded from the arbitration provisions of this Section
14. Any such election by Employee shall be made by written notice given to
the Company any time after such controversy or claim arises, and in the
event Employee is served with process relating to any court proceeding
concerning any such claim or controversy commenced by the company, such
election, to be effective, shall be made by written notice within 15 days
of the time Employee is served with such process. Commencement of court
proceedings by Employee shall be deemed an election not to arbitrate. In
the event the Company commences court proceedings (other than an action by
the Company solely to enforce its rights under Section 7 hereof) and is
given notice of the election to arbitrate by the Employee within the time
period set forth above, the Company agrees to promptly dismiss such court
proceedings and submit to arbitration. In the event of such arbitration,
judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
LAWTER INTERNATIONAL, INC.
By: /s/ John P. O'Mahoney
Title:
--------------------------
/s/ Jack Baarends
--------------------------------
Jack Baarends
--------------------------------
Address
--------------------------------
7
<PAGE>
Exhibit 10(l)
EMPLOYMENT AGREEMENT
This Agreement, dated as of October 29, 1998, between Lawter
International, Inc., a Delaware corporation (hereinafter referred to as the
"Company"), and Nathan Goodnow (hereinafter referred to as the "Employee").
RECITALS
The Employee has been employed by the Company and currently serves as
Vice President of Operations. Because of the Employee's extensive experience and
his familiarity with the affairs of the Company, the Company wishes to assure
that, in the event of a "Change of Control," as hereinafter defined, it will
continue to have the Employee available to perform duties substantially similar
to those currently being performed by him and to continue to contribute to the
Company's growth and success as he has in the past. The Employee is willing to
commit to continue in the performance of his services for the Company upon the
terms and conditions set forth herein.
COVENANTS
NOW, THEREFORE, in consideration of the mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees that, effective upon a "Change in
Control" and provided that Employee is still serving as an employee of the
Company at that time, it will continue to employ Employee as the Vice
President of Operations of the Company to perform the duties described
herein, and Employee hereby accepts such employment on the terms and
conditions stated herein. It is understood that prior to such "Change in
Control," this Agreement shall confer no rights of employment or other
benefits (or obligations) whatsoever upon Employee, and that Employee shall
remain subject to termination at will.
2. TERM OF EMPLOYMENT. Subject to provisions for termination set forth herein,
the term of Employee's employment hereunder shall commence on the date of a
"Change in Control" and shall extend until two years after the date of such
"Change in Control." For purposes of this Agreement a "Change in Control"
shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934; provided that,
without limitation, such a Change in Control shall be deemed to have
occurred if during any period of two consecutive years individuals who at
the beginning of such period constitute members of the board of directors
cease for any reason to constitute at least a majority thereof, unless the
nomination or election of each director who was not a director at the
beginning of the period was approved by a
<PAGE>
vote of a majority of the directors still in office at the time of such
nomination or election who were directors at the beginning of the period.
3. DUTIES OF EMPLOYEE. Employee shall be the Vice President of Operations of
the Company and shall perform such duties and responsibilities for the
Company as may be assigned to him by the Board of Directors of the Company
and which are not unreasonably inconsistent with the duties currently being
performed by the Employee. During the term of his employment, Employee
shall devote substantially all of his business time, attention and energy,
and his reasonable best efforts, to the interests and business of the
Company and to the performance of his duties and responsibilities on behalf
of the Company.
4. COMPENSATION. Throughout the term of Employee's employment hereunder, the
Company shall pay Employee, for services to be rendered by him hereunder, a
guaranteed minimum salary at an annual rate equal to that being paid on the
date the term of employment hereunder commences, less all applicable
federal and state income tax withholding, FICA taxes and other payroll
taxes. The guaranteed minimum salary shall be reviewed by the Company on a
yearly basis to ascertain if any upward adjustment in the annual rate is in
order, and if any increase is made, the new annual rate shall become the
guaranteed minimum salary under this Section 4. Such compensation shall be
payable semi-monthly.
5. WORKING FACILITIES AND FRINGE BENEFITS. The Employee shall be furnished
with office space, secretarial assistance and such other facilities and
services as are appropriate to his position and adequate for the
performance of his duties. The Company also shall provide to Employee
during the term of employment fringe benefits and perquisites at least
equal to those provided to Employee immediately prior to the date thereof,
and the Company shall not discriminate against Employee with respect to any
vacation or holiday plan, medical, hospital, life and disability insurance
programs, pension programs and other similar welfare benefit programs from
time to time made available to the Company's officers and key employees.
6. EXPENSES. The company shall pay or reimburse Employee for all reasonable
expenses actually incurred or paid by him in the performance of services
rendered by him pursuant to this Agreement. Such expenses shall be
supported by the documentary evidence required to substantiate them as
income tax deductions.
7. COVENANT RESTRICTING COMPETITION; NON-DISCLOSURE OF CONFIDENTIAL
INFORMATION.
(a) Employee acknowledges that his services are special and unique, and of
an unusual and extraordinary character which gives them peculiar
value, the loss of which cannot adequately be compensated in damages.
Therefore, Employee agrees that he will not, except with the written
consent of the Company, for a continuous period of eighteen (18)
months commencing immediately following termination of Employee's
employment hereunder, directly or indirectly engage or become
interested in, as a partner, director, officer, principal, agent or
2
<PAGE>
employee, any business which competes with products produced, marketed
or in development by the Company at the time of such termination.
(b) Employee acknowledges that in his employment he is or will be making
use of, acquiring or adding to, confidential information of the
Company, and is or will be familiar with the Company's business,
activities, employees, customers and suppliers. Therefore, in order to
protect the Company's confidential information and to protect other
employees who depend upon the Company for regular employment, Employee
agrees that, except in connection with his employment by the Company,
or with the consent of the Company, he will not during or after the
term of his employment hereunder in any way utilize any of said
confidential information and he will not copy, reproduce, or take with
him the original or any copies of said confidential information and
will not disclose any of said confidential information to anyone.
In the event of a breach of the covenants contained in this Section 7,
the Company shall be entitled to an injunction restraining such breach
in addition to any other remedies provided by law.
If any provision of this Section 7 is adjudged by a court to be invalid
or unenforceable, the same will in no way affect any other provision of
this Section 7 or any other part of this Agreement, the application of
such provision in any other circumstances or the validity or
enforceability of this Agreement. If any such provision, or any part
thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court
making such determination will have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or
phrases, and in its reduced form such provision will then be
enforceable and will be enforced.
8. TERMINATION BY COMPANY.
(a) DISABILITY. The Company may terminate the active employment of the
Employee if, in the reasonable judgment of the Board of Directors of
the Company, he becomes unable to satisfactorily perform his duties
and responsibilities hereunder during the term of his employment
because of mental or physical disability. Upon such termination, the
Employee shall be relieved of all further obligations hereunder except
obligations pursuant to Section 7. In the event of such termination,
the Company shall continue to pay to the Employee, until the end of
the term of his employment hereunder, a salary at a rate equal to
three-quarters of the annual rate in effect on the date of such
termination (as set forth in Section 4). Notwithstanding the
foregoing, the amounts so payable shall be reduced by any amounts
payable to the Employee during the term of his employment hereunder
pursuant to any disability benefit or wage continuation plan of the
Company in effect.
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<PAGE>
(b) DEATH. In the event of the death of the Employee during the term, the
Company shall make, until the end of the term of employment hereunder,
payments at a rate equal to one-half of the annual rate in effect on
the date of death. The payments to be made under this Section 8(b)
shall not be reduced by reason of any insurance proceeds payable
directly to the Employee's beneficiaries or estate pursuant to
insurance carried or provided by the Company, and shall be made to such
beneficiary as the Employee may designate for that purpose by written
notice given to the Secretary of the Company prior to this death, or if
the Employee has not so designated, then to the personal representative
of his Estate.
(c) TERMINATION FOR CAUSE. In the event fraud, defalcation, or other
similar dishonesty of the Employee involving the operations, funds or
other assets of the Company is established, or Employee is convicted
of a crime involving moral turpitude, or Employee breaches the terms
of this Agreement in any material respect, then the Company may
terminate this Agreement upon giving written notice to the Employee
and thereafter, neither the Employee, his surviving spouse or his
estate shall be entitled to any further salary or compensation from
the Company pursuant to this Agreement, but the Employee's obligations
under Section 7 shall remain in effect. The parties agree that the
provisions of this Section 8(c) shall not be utilized in any manner by
the Company to avoid, negate or frustrate application of the
provisions of Section 9 of this Agreement.
9. TERMINATION BY EMPLOYEE.
(a) IF LOCATION OF OFFICE CHANGES. In the event that, at any time during
the term of employment, the Company, without Employee's consent,
changes the location of the Company's offices at which Employee works
to a city more than 150 miles from its present location, the Employee
may terminate his employment with the Company by giving to the
Secretary of the Company notice in writing within three months after
this right to termination arises.
(b) IF POSITION CHANGES. It is the intention of the parties that the
Employee will have the positions specified in Section 1 hereof during
the entire term of employment. In the event that, at any time during
the term hereunder, Employee, without his consent, does not hold such
positions with the Company and have the duties and responsibilities
that would normally be expected of an officer of the Company with these
positions (except by reason of termination under Section 8), Employee
may terminate his employment with the Company hereunder by giving to
the Secretary of the Company written notice of such termination within
three months after this right to terminate arises.
(c) LUMP SUM PAYMENT. In the event of termination pursuant to subsection
(a) or (b) of this Section 9, the Company shall pay to the Employee, in
a lump sum and within 30 days of such termination, an amount equal to
the aggregate balance (based on the annual rate in effect at the time
of such termination) which would have been payable to the Employee
during the remaining portion of the term
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<PAGE>
hereunder had such termination not occurred, including any benefits
payable to Employee.
(d) REIMBURSEMENT. If a tax is imposed pursuant to Section 4999 of the
Internal Revenue Code, or successor provision of like import, upon
payments due under this Agreement or upon other payments to the
Employee by the Company, the Employee shall be paid an additional
amount calculated so as to provide the Employee, after he has paid the
tax (including any related interest and/or penalty) imposed by Section
4999 of the Code, with the same compensation he would have received had
not tax (including any related interest and/or penalty) been imposed by
Section 4999. For purposes of this subsection (d), the term "Company"
shall include any parent, subsidiary, affiliate, assignee, or successor
in interest of the company or of such assignee or successor in
interest.
10. ASSIGNMENT. This agreement is binding upon and shall be for the benefit of
the successors and assigns of the Company, including any corporation or any
other form of business organization with which the Company may merge or
consolidate, or to which it may transfer substantially all of its assets.
Employee shall not assign his interest in this Agreement or any part
thereof.
11. CONSENT OF THE COMPANY. Any act, request, approval, consent or opinion of
the Company under this Agreement must be in writing and may be authorized,
given or expressed only be resolution of the Board of Directors of the
Company, or by such other person as the Board of Directors of the Company
may designate.
12. NOTICES. Any notice required hereunder to be given shall be in writing and
if:
(a) by the Company to Employee shall be directed to him at his address set
forth below, or to such other address as he shall have furnished in
writing to the Company; or
(b) by Employee to the Company shall be directed to Lawter International,
Inc., 8601 - 95th Street, Pleasant Prairie, Wisconsin 53158, Attn:
Secretary, or to such designee or other address as the Board of
Directors shall name and have furnished in writing to Employee.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin applicable to contracts
made and to be performed therein.
14. ENFORCEMENT EXPENSES AND ARBITRATION. The Company agrees to reimburse the
Employee for all costs and expenses incurred by him (including the
reasonable fees of his counsel) in successfully enforcing any of his rights
under this Agreement or any claim arising out of the breach thereof. In
addition, the parties acknowledge the relative economic power of the
Company versus the Employee, and the ability of the Company to resist the
conclusion of litigation should the Employee institute legal
5
<PAGE>
proceedings to enforce this Agreement or to recover damages for the breach
thereof. In recognition of this, any controversy or claim arising out of or
relating to this Agreement, including any dispute over or interpretation of
the occurrence of a "Change in Control," as previously defined, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, at the sole election of the
Employee; provided, however, that an action by the Company to enforce its
rights under Section 7 hereof shall be excluded from the arbitration
provisions of this Section 14. Any such election by Employee shall be made
by written notice given to the Company any time after such controversy or
claim arises, and in the event Employee is served with process relating to
any court proceeding concerning any such claim or controversy commenced by
the company, such election, to be effective, shall be made by written
notice within 15 days of the time Employee is served with such process.
Commencement of court proceedings by Employee shall be deemed an election
not to arbitrate. In the event the Company commences court proceedings
(other than an action by the Company solely to enforce its rights under
Section 7 hereof) and is given notice of the election to arbitrate by the
Employee within the time period set forth above, the Company agrees to
promptly dismiss such court proceedings and submit to arbitration. In the
event of such arbitration, judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
LAWTER INTERNATIONAL, INC.
By: /s/ John P. O'Mahoney
Title:
--------------------------
/s/ Nathan Goodnow
------------------------------
Nathan Goodnow
------------------------------
Address
------------------------------
7
<PAGE>
Exhibit 10(m)
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement"), has been entered
into on the 17th day of September, 1998 by and between Lawter International,
Inc., its affiliates, subsidiaries, divisions, and related companies
("Employer") and John J. Jilek ("Employee").
BY SIGNING THIS AGREEMENT, EMPLOYEE HEREBY ACKNOWLEDGES THAT:
(I) HE HAS BEEN GIVEN AT LEAST FORTY-FIVE (45) DAYS TO REVIEW THIS
AGREEMENT;
(II) HE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING
THIS AGREEMENT;
(III) HE HAS CAREFULLY READ AND FULLY UNDERSTANDS THE EFFECTS OF THIS
AGREEMENT;
(IV) HE HAS CAREFULLY CONSIDERED OTHER ALTERNATIVES TO ENTERING INTO
THIS AGREEMENT;
(V) HE HAS FREELY AND VOLUNTARILY SIGNED AND DELIVERED THIS
AGREEMENT; AND,
(VI) HIS EMPLOYMENT WITH EMPLOYER IS BEING TERMINATED AND HE IS
RESIGNING AS PRESIDENT, CHIEF OPERATING OFFICER AND AS A MEMBER
OF THE BOARD OF DIRECTORS OF EMPLOYER.
In consideration of the mutual promises and benefits contained herein,
the sufficiency of which is hereby acknowledged, Employer and Employee hereby
agree as follows:
1. RELEASE BY EMPLOYEE. In consideration of the promises of Employer
under this Agreement, Employee hereby unconditionally releases and forever
discharges Employer, Employer's parent, affiliates and subsidiaries, and their
respective divisions, successors, assigns, stockholders, and partners, and their
past or present directors, officers, agents, attorneys, and employees, both
individually and in their official capacities (separately a "Released Person",
collectively "Released Persons"), from each and every action, charge, claim,
right, liability or demand of any kind or nature, known or unknown, the Employee
had or now has against Employer or any other Released Person, including but not
limited to any and all actions, charges, claims, rights, liabilities or demands
which have arisen or may arise in connection with the terms and conditions of
his employment with Employer (including, but not limited to, compensation,
benefits, training, placement, promotions, and vacation arrangements), and his
entering into, and the circumstances surrounding, the negotiation, signing, and
delivery of this Agreement. Without limiting the generality of the foregoing,
specifically included in this release and discharge are each and every action,
charge, claim, right, liability or demand of any kind or nature, known or
unknown, Employee had or now has, arising under any law, constitution, rule,
regulation, statute, or common law theory, whether in tort, contract (including
any employment contract whether written or not), equity, or otherwise, the Civil
Rights Act of 1964, the Age Discrimination in
<PAGE>
Employment Act of 1967 (as amended), the Rehabilitation Act of 1973 (as
amended), the Employee Retirement Income Security Act of 1974 (as amended), the
Fair Labor Standards Act (as amended), the Older Workers Benefit Protection Act,
the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family
and Medical Leave Act, Illinois and Wisconsin laws regarding discrimination,
similar federal, state and local laws, and any and all matters arising under
federal, state or local employment discrimination laws, rules, or regulations,
and under any other federal, state, or local laws, rules, regulations, or
ordinances, or any common law actions, claims, rights, liabilities, demands or
theories of recovery, including any claims for attorneys' fees. Any action,
charge, claim, right, liability, demand or other legal proceeding released and
discharged under this Paragraph 1 is hereinafter referred to as a "Claim".
Employee further agrees that he will not instigate, advise or
encourage any other person, group of persons, or any entity to file suit against
Employer or any other Released Person and represents and warrants that he has
not filed any legal or administrative action of any kind against Employer or any
other Released Person. Employee also agrees that he will not hereafter assist or
become associated with any interest adverse to Employer or any other Released
Person with respect to any matter which is related to Employee's work with
Employer.
2. ASSIGNMENT OF CLAIMS. Employee represents and warrants that he has
not assigned or transferred, in whole or in part, any claim, right, demand or
cause of action which he may now have or may have had or claims to have, of
whatever kind or nature, against Employer or any other Released Person, to any
person, firm, corporation, or other entity, in any manner, including but not
limited to assignment or transfer by subrogation or by operation of law.
3. AGREEMENT NOT TO SUE. In consideration of the promises of Employer
under this Agreement, Employee hereby agrees never to institute, directly or
indirectly, any action or proceeding of any kind against Employer or any other
Released Person to enforce a Claim except for an action or proceeding to enforce
this Agreement.
4. AGREEMENT TO REIMBURSE, INDEMNIFY AND HOLD HARMLESS. In
consideration of the promises of Employer under this Agreement, Employee hereby
agrees that if Employee files a Claim or if a Claim is filed on behalf of
Employee, except for a Claim relating to an alleged breach of this Agreement,
Employee shall reimburse, indemnify and hold harmless Employer and each other
Released Person for any and all losses, claims, damages, obligations, penalties,
actions, judgments, suits, costs, attorneys' fees, expenses, disbursements, and
liabilities arising from such Claim or in connection with such Claim.
In consideration of the promises of Employee under this
Agreement, Employer hereby agrees that it shall indemnify Employee to the extent
permitted by its Articles of Incorporation, its By-Laws and Delaware Law and
shall provide any coverage available under its insurance policies, with respect
to any actions of Employee prior to 5:00 p.m. (C.D.T.), September 8, 1998.
5. AGREEMENT AS COMPLETE DEFENSE. In consideration of the promises of
Employer under this Agreement, Employee hereby agrees that if Employee files a
Claim or a Claim is filed
2
<PAGE>
on Employee's behalf, this Agreement shall constitute a complete defense to such
Claim unless such Claim constitutes an alleged breach of this Agreement.
6. CONFIDENTIALITY AND NONDISPARAGEMENT. In consideration of the
promises of each party under this Agreement, Employer and Employee agree that
the terms, conditions, and existence of this Agreement shall remain confidential
and shall not be disclosed by any party to third persons, unless required by
law, with the exception of Employer's and Employee's respective attorneys,
accountants, financial advisors, and tax preparers, and Employee's spouse, who
shall be advised of the necessity to maintain confidentiality.
Employer and Employee agree that the reputation of the
Employer and Employee are valuable business assets. Employee agrees that he will
not make any negative comments or take any actions which disparage Employer or
any Released Persons or which may damage Employer or any Released Person in any
business relationships. Employer agrees that it will not make any negative
statements about, or take any action which disparages Employee or which may
damage him in any business relationship.
7. REVOCATION PERIOD. EMPLOYER HEREBY AGREES THAT EMPLOYEE HAS UNTIL
SEVEN (7) DAYS FOLLOWING THE EXECUTION OF THIS AGREEMENT TO REVOKE THIS
AGREEMENT IN WHICH CASE ITS TERMS SHALL BECOME INEFFECTIVE AND UNENFORCEABLE.
8. EMPLOYMENT ARRANGEMENT. The employment arrangement between Employee
and Employer will terminate as of 5:00 p.m. (C.D.T.), September 8, 1998.
Employee also agrees to resign, effective as of 5:00 p.m. (C.D.T.), September 8,
1998, as President, Chief Operating Officer and as a member of the Board of
Directors of the Employer. Employee understands and acknowledges that pursuant
to said employment and positions as an officer and/or director he is entitled to
receive the following:
(a) Accrued vacation time through September 30, 1998.
(b) Salary, less payroll deductions, through September 30, 1998.
(c) Severance pay of two (2) days for each year of Employee's
employment with Employer, less payroll deductions. It is agreed
that Employee is entitled to thirty-four (34) business days of
severance pay.
(d) Reimbursement for expenses incurred prior to September 8, 1998
consistent with Employer's policies.
Except as provided for in Paragraph 10, all other employee welfare or pension
benefits, as defined by ERISA, and all other employee benefit plans, programs,
arrangements, practices or policies, including but not limited to the accrual of
vacation benefits, previously provided to Employee by Employer, or provided by
Employer to employees similar situated to Employee, shall cease with respect to
Employee as of 5:00 p.m. (C.D.T.), September 8, 1998.
3
<PAGE>
9. PROFIT SHARING RETIREMENT PLAN AND TRUST (PSRP+T) . Employee
understands that with respect to the determination of his benefits under the
PSRP+T, his official termination date is September 30, 1998, and that any
amounts paid to Employee after that date do not constitute "compensation" as
defined by the PSRP+T.
10. SEVERANCE BENEFITS TO EMPLOYEE. In consideration of the promises of
Employee under this Agreement, if Employee has not revoked this Agreement at the
end of the Revocation Period provided for in Paragraph 7, Employer hereby agrees
to provide Employee severance benefits as detailed below. Employee understands
and agrees that such severance benefits are in addition to anything of value to
which Employee is already entitled and that Employer has no legal obligation,
other than pursuant to this Agreement, to provide these benefits.
(a) Payment of severance, less payroll deductions, at Employee's
present salary level, during the period from October 1, 1998
through March 31, 2000.
(b) Payment of the cost of COBRA coverage during the period from
October 1, 1998 through September 30, 1999 at the latest, but
Employer's obligation to pay the cost of COBRA will expire at any
time that Employee is eligible to receive health insurance
through future employment.
(c) Rights under Non-Qualified Stock Option Agreements granted prior
to September 8, 1998 will be extended to September 30, 2000. The
options will stay in effect until September 30, 2000 and vest
according to the terms contained therein.
(d) Payment of amount not to exceed Fifteen Thousand Dollars
($15,000.00) for outplacement services. Employee may select an
outplacement firm and will tender an invoice (not to exceed
$15,000.00) for services to Employer. The Employer will pay said
invoice within fifteen (15) days after its receipt.
(e) All employment references shall be directed to John O'Mahoney who
will provide a favorable reference provided that Employee is not
in violation of any term and/or provision contained in this
Agreement.
Except as provided in this Paragraph 10, Employee shall receive no other
benefits from Employer during the period from October 1, 1998 through March 31,
2000.
11. CONTINUED COOPERATION. Employee agrees that during the period from
September 8, 1998 to March 31, 2000 while Employee is receiving any payments
pursuant to Paragraph 10 hereof (the "cooperation period"), he will make himself
available, at mutually convenient times, to and cooperate with Employer in all
areas with respect to which he has knowledge by reason of the fact that he was a
director, officer, employee, and/or agent of Employer. Employee also agrees that
during the cooperation period he will cooperate with Employer concerning any
threatened, pending, or partially or fully completed litigation, or related
proceedings, whether civil, criminal, administrative, or investigatory, against
Employer,
4
<PAGE>
or initiated by Employer, with respect to which he possesses information and
knowledge by reason of the fact that he was a director, officer, employee and/or
agent of Employer. Unless Employer and Employee mutually agree to longer periods
of time, Employee's obligation to make himself available to Employer is limited
to two and one-half (2 1/2) days per month or a total of thirty (30) days.
Employee will be reimbursed for any expenses which are preapproved by an officer
of Employer and which are incurred while performing his obligations under this
Paragraph 11.
12. COBRA ENTITLEMENT. Employee will be entitled to COBRA coverage as
of October 1, 1998.
13. PROMISSORY NOTE. Employer and Employee agree that as of August 31,
1998 Employee is indebted to Employer pursuant to the terms of Employee's
Promissory Note dated August 15, 1996 in the amount of Three Hundred Eighteen
Thousand Seven Hundred Thirty-Four Dollars and Sixty-One Cents ($318,734.61).
Employee agrees that he will execute a Promissory Note and a Pledge Agreement in
the forms attached hereto as Exhibits A and B and tender the Promissory Note and
Pledge Agreement to Employer when he executes this Agreement. Employer agrees
that after receipt of the executed Promissory Note and after the expiration of
the revocation period provided for in Paragraph 7, it will cancel the Promissory
Note dated August 15, 1996.
14. COSTS AND ATTORNEYS' FEES. Employer and Employee agree that each
shall bear its own costs and attorneys' fees in connection with entering into
this Agreement and the circumstances underlying this Agreement.
15. FUTURE EMPLOYMENT. In consideration of the promises of Employer
under this Agreement, Employee agrees that he will not now or at any time in the
future take any action to be involuntarily reinstated or retained as an employee
with Employer or any other Released Person and that he will not now or at any
time in the future knowingly apply for employment with Employer or any
affiliate, except as requested by Employer or any affiliate. Provided, however,
that this Paragraph 15 does not prohibit Employee from working with former
employees of Employer in a non-competitive business, as defined in paragraph 24
below.
16. NO ADDITIONAL CLAIMS. Employee understands and agrees that he has
no additional claims against Employer as a result of his employment with
Employer other than those specified in Paragraph 8.
17. DISCLAIMER OF LIABILITY. Employee understands and agrees that this
Agreement does not constitute and shall not be construed as an admission of
liability or wrongdoing by Employer or any other Released Person with respect to
any claims asserted by Employee, and that Employer and the other Released
Persons expressly deny that they collectively have, or that any one or more of
them has, done anything wrong or unlawful regarding Employee.
18. MATERIALITY OF ALL CONDITIONS AND OBLIGATIONS. Employee understands
and agrees that all of the conditions of this Agreement applicable to him and
all of his obligations under this
5
<PAGE>
Agreement are material and that the non-occurrence of any such condition or the
breach of any such obligation by Employee shall result in Employer being
entitled to terminate its obligations under this Agreement and assert any and
all rights it may have in law or equity.
19. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Illinois to the extent state law is
applicable.
20. RECOVERY OF PAYMENTS. Employee understands and agrees that if he
breaches any of his obligations under this Agreement, Employer shall be entitled
to recover any payments made pursuant to this Agreement and shall also have the
right to exercise all other rights it might have in law or in equity.
21. BINDING EFFECT. This Agreement shall be binding upon Employee's
heirs, administrators, executors, successors and assigns and upon Employer's
successors and assigns.
22. CONFIDENTIAL INFORMATION. In consideration of the promises of
Employer under this Agreement, Employee agrees to preserve at all times as
confidential all Confidential Information, including trade secrets, of Employer
that has been obtained by Employee. The term "Confidential Information" means
information and data not generally known outside the Company (unless it is made
known outside the Company as a result of a breach by Employee or others of any
of the obligations imposed by this Agreement or a similar agreement or legal
duty) concerning the Company's business and technical information, including
without limitation the Company's sales, sales volume, sales methods, sales
proposals, identity of customers and prospective customers, identity of key
personnel in the employ of customers and prospective customers, the Company's
computer programs, system documentation, the Company's manuals, formulae,
processes, methods, ideas, improvements, inventions, price lists, pricing
methods, discounts, financial and marketing data, customer and prospective
customer proposals, business plans and strategies, or other confidential or
proprietary information belonging to the Company or relating to the Company's
affairs. Employee will not, at any time, without advance written authority from
Employer, use for his own benefit or purposes, or disclose to others, any of
Employer's Confidential Information or any copies or notes made from any item
embodying Employer's Confidential Information. Neither this Paragraph 22 nor any
other Paragraph of this Agreement should be construed to in any way limit
Employee's obligations under the Employee Confidentiality Agreement he executed
prior to September 8, 1998.
23. INVENTIONS. All inventions related to the present or planned
business of Employer, which were conceived or reduced to practice by Employee,
either alone or with others, during the period of his employment with Employer,
whether or not done during his regular working hours, are the property of
Employer. The provisions of this Paragraph 23 shall not apply to an invention
for which no equipment, supplies, facilities or trade secret information of
Employer was used and which was developed entirely on Employee's own time,
unless the invention relates to the business of Employer or to Employee's actual
or demonstrably anticipated research or development, or unless the invention
results from any work performed by Employee for Employer. Neither this Paragraph
23 nor any other Paragraph of this Agreement should be
6
<PAGE>
construed to in any way limit Employee's obligations under the Employee
Confidentiality Agreement he executed prior to September 8, 1998.
24. NON-COMPETE. As partial consideration for the severance payable
hereunder, Employee agrees that during the one year period following September
8, 1998 he will not directly or indirectly, either for his own account or for
the benefit of any person or entity, engage in competitive activities with the
Employer. Competitive activities with the Employer shall include, but not be
limited to, being a director, officer, stockholder, agent, representative,
consultant, officer or employee of a partnership, sole proprietor, corporation
or any other entity engaged in the manufacture and/or sale of any products which
are manufactured and/or sold by Employer at the time of this Agreement.
Employee acknowledges and agrees that in the event that he
breaches or violates the restrictions contained in this Paragraph 24, he shall
forfeit any remaining payments under Paragraph 10 and the right granted in
Paragraph 10(c) shall terminate and he shall return all payments already made to
him pursuant to Paragraph 10 above.
25. NO RELIANCE ON OUTSIDE PROMISES. Employee acknowledges that he has
not relied upon any promises made by Employer or by any other Released Person,
other than those specifically contained herein, as an inducement to execute this
Agreement.
26. COMPUTER ACCESS. Employee agrees to give Employer, by 5:00 p.m.
(C.D.T.), September 8, 1998, access to the password for the computer in his
office and all programs relating to that computer. Employee further agrees to
cooperate with Employer in retrieving financial data and other corporate data
from the computer in his office.
27. COMPANY PROPERTY. Employee agrees to return to Employer, by 5:00
p.m. (C.D.T.), September 8, 1998, all of Employer's property in his possession
including, by way of example but not by way of limitation, his Company credit
card(s), Company telephone charge card, security ID, plant key, and Company
computer.
28. ENFORCEABILITY. If any term or provision, or any part of any term
or provision, of this Agreement other than Paragraph 24 is held unenforceable,
it shall be severed as narrowly as possible and the remaining terms and
provisions shall be enforced in accordance with the tenor of this Agreement. If
the Non-Compete provision contained in Paragraph 24 is found to be void or
unenforceable, then the obligation to pay severance under Paragraph 10 shall be
void and unenforceable.
29. COMPLETE AGREEMENT. Except as otherwise provided herein, this
Agreement contains the entire understanding between Employee and Employer and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
30. MODIFICATION OF AGREEMENT. Except as herein provided, this
Agreement may only be modified or amended by a written instrument signed by
Employee and an authorized representative of Employer.
7
<PAGE>
31. EFFECTIVE DATE. This Agreement shall become effective after it has
been executed by Employee and an authorized representative of Employer.
JOHN J. JILEK
EMPLOYEE EMPLOYER
By: /s/ John P. Jilek By: /s/ John P. O'Mahoney
-------------------- ---------------------
John P. O'Mahoney
Title: Chief Executive Officer
Lawter International, Inc.
Date: 9/17/98 Date: 9/17/98
------- -------
WITNESS:
Name:
-----------------------------------------
Address: 303 W. Madison, Chicago, IL
8
<PAGE>
Exhibit 10(n)
LAWTER INTERNATIONAL, INC.
KEY EMPLOYEE INVESTMENT PLAN
1. PURPOSE
The Key Employee Investment Plan ("Plan"), of Lawter International, Inc.
("Lawter"), is adopted to facilitate the immediate purchase, by key
employees of Lawter and its subsidiaries (collectively, the "Company"), of
Lawter's common stock, $1.00 par value, ("Common Stock"). This plan is in
keeping with the overall compensation philosophy and guiding principles
adopted by the Compensation Committee at its February 18, 1997 meeting. The
purchases facilitated by the Plan are intended to achieve the following
specific purposes:
a) More closely align key employees' financial rewards with the financial
rewards realized by all other holders of the Common Stock.;
b) Increase key employees' motivation to manage the Company as owners;
and
c) Increase the ownership of Common Stock among key employees of the
Company.
2. ELIGIBILITY
To be eligible to participate in the Plan, the individual ("Eligible
Employee") must have been listed on the schedule of eligible participants
approved by the Lawter Compensation Committee ("Compensation Committee") at
its meeting held on October 29, 1998.
3. PARTICIPATION
To become a Plan Participant ("Participant"), an Eligible Employee must
satisfy the following requirements:
a) Submit a completed, signed and irrevocable agreement to purchase all
of the shares the Participant has elected to purchase;
b) Complete and sign all necessary agreements and other documents
relating to the loan described in Section 4 below (provided that this
subsection 3(b) shall not apply to any Participant who does not
utilize a loan to acquire shares); and
c) Satisfy all other conditions of participation specified in the Plan.
The agreements and other documents specified in subsection 3(a), (b)
and (c) must be in such forms and must be submitted at such times and
to such Company officers as specified by the Compensation Committee or
its designee(s). No Eligible Employee is required to participate in the
Plan.
<PAGE>
4. PAYMENT FOR SHARES
The share price for each share of stock issued shall be determined by
resolution of the Compensation Committee. Each Participant must deliver in
cash 100% of the aggregate share price of the shares ("Purchased Shares"),
within three business days of enrollment in the plan. The Purchased Shares
will be not issued to the Participant until Lawter has received such
payment. The payment must be made at the time, place and manner specified
by the Compensation Committee or its designee(s).
Lawter has arranged the opportunity for each Participant to obtain an
unsecured loan through Bank of America ("Bank") to fund the purchase of the
Purchased Shares. Participants are not required to obtain such a loan. Each
Participant obtaining such a loan must sign a letter of direction which
directs all loan proceeds to be paid directly to Lawter in payment of the
Purchased Shares. Each Participant is responsible for satisfying all of the
lending requirements specified by the Bank to qualify for the loan. Each
Participant is fully obligated to repay to the Bank all principal,
interest, and any early payment fees on the loan when due and payable.
5. REGISTRATION OF SHARES
The Purchased Shares will be registered in the name of the Participant and
certificated. Each certificate will bear a legend referring to this Plan
and the agreements between the Participant and Lawter relating to the
Purchased Shares. The certificates for the Purchased Shares will be held in
the Office of the Corporate Secretary at Lawter until all restrictions on
the Purchased Shares have lapsed. Each Participant must deliver to the
Office of the Corporate Secretary at Lawter a stock power endorsed in blank
with respect to the Purchased Shares.
6. STOCKHOLDER RIGHTS
The Purchased Shares will be drawn from Treasury Shares. During the period
in which the Purchased Shares are subject to restrictions on transfer, each
Participant will have all of the rights of a stockholder with respect to
the Purchased Shares, including the right to vote the shares and the right
to receive all dividends paid on the shares. To the extent required by the
loan agreements and documents identified in subsection 3(b), Lawter will be
irrevocably directed to deliver all such dividends directly to Bank of
America for payment of loan interest. To the extent that dividends received
do not cover interest owed, the shortfall will be deducted from the
Participant's payroll account and paid directly to the Bank by the Company.
7. SALE OF PURCHASED SHARES
Each Participant is permitted to sell all or any portion of the Purchased
Shares, subject to the following restrictions;
a) Except in the event of death or disability, termination of employment
as described in Sections 10 or 11, or a Change in Control (as defined
in Paragraph 8), no Participant may sell any portion of the Purchased
Shares before the third anniversary of the enrollment date;
b) No Participant may sell any portion of the Purchased Shares unless all
principal, interest and any early payment fees due on the loan
contemplated by Section 4 of this Plan have previously been paid or
all proceeds of the sale are simultaneously applied first to the
payment of all such principal, interest and early payment fees; and
2
<PAGE>
c) The Compensation Committee has the right to impose restrictions on the
timing, amount and form of the sale of the Purchased Shares with
respect to any Participant to the extent it determines that such
restrictions are in the best interest of Lawter. Each Participant must
notify the office of the Corporate Secretary at Lawter of his or her
intention to sell the Purchased Shares before such a sale is
implemented. Lawter may elect to allow the Participant to sell the
Purchased Shares in the open market, Lawter may repurchase the shares,
or Lawter may take other actions as it deems appropriate. If Lawter
repurchases the Purchased Shares, the purchase price will be the
closing price of a share of Common Stock on the New York Stock
Exchange Composite Reporting Tape on the date the Participant chooses
to sell.
8. CHANGE OF CONTROL
The term "Change of Control" shall mean a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Securities Exchange Act of
1934. In the event of a Change of Control the Participant may thereafter
sell all or any portion of the Purchased Shares, subject only to the
conditions specified in subsections 7(b) and 7(c).
9. DEATH OR DISABILITY
If a Participant's employment with the Company terminates because of the
Participant's death or disability, the Participant (or the Participant's
representative in the case of death) may sell all or any portion of the
Purchased Shares subject to the conditions specified in subsection 7(b) and
7(c). Upon the death of a Participant, his or her loan may become due and
payable ninety days (90) after the Participant's death.
10. EMPLOYMENT TERMINATION BY TRANSACTION
If a Participant's employment with the Company terminates because of an
acquisition, divestiture, merger, spin-off or similar transaction
("Transaction"), the Participant may sell all or any portion of the
Purchased Shares, subject to the conditions specified in subsection 7(b)
and (c).
11. OTHER EMPLOYMENT TERMINATION
If a Participant's employment with the Company terminates for any reason
other than (i) death or disability or (ii) pursuant to a Transaction or a
Change in Control, the Participant may sell all or any portion of the
Purchased Shares, subject to the conditions specified in Subsections 7(b)
and 7 (c).
12. PREPAYMENT PENALTIES
If a Participant voluntarily terminates employment with the Company, any
prepayment penalties charged by the Bank for early repayment of the loan
will be the responsibility of the terminating employee. If termination
occurs for any other reason, any prepayment penalty will be paid by the
Company.
3
<PAGE>
13. LOAN GUARANTEE
Lawter will guarantee repayment to Bank of America of 100% of all
principal, interest, early payment fees and other obligations of each
Participant under such Participant's loan described in Section 4. The
Lawter loan guarantee is a condition to the loan arrangement Lawter has
made with Bank of America. The terms and conditions of the guarantee are as
agreed by Lawter and Bank of America. Each Participant is fully obligated
to repay Bank of America all principal, interest, and other amounts on the
loan when due and payable. Lawter may take all action relating to the
Participant and her or his assets, which the Compensation Committee deems
reasonable and necessary, to obtain full reimbursement for amounts Lawter
pays to Bank of America under its guarantee related to the Participant's
loan.
14. AMENDMENT
The Compensation Committee may amend the Plan at any time; provided,
however, that no amendment shall adversely affect any outstanding right of
any Participant in the plan without that Participant's consent, and if any
law, agreement or exchange on which Common Stock of Lawter is traded
requires stockholder approval for an amendment to become effective, no such
amendment shall become effective unless approved by vote of Lawter's
stockholders.
4
<PAGE>
Exhibit 13
About Lawter International, Inc.
Our Company
As the world's leading supplier of specialty polymers to the graphic arts
industry, Lawter International defines the standard for innovation, quality and
service. Founded in 1940, Lawter has grown to an international corporation with
more than 600 employees in 10 countries, working as a team to develop,
manufacture and market products that are continually exceeding expectations for
performance.
Our Markets
Lawter produces printing ink vehicles, resins and slip additives, as well as
additives for coatings and adhesives. Printing ink vehicles are fluid and gelled
compositions that allow lithographic and letterpress printing inks to apply
color and coatings to paper, plastic, metal and other surfaces. They influence
critical production issues such as print quality, gloss, drying speed, adhesion,
rub resistance and press speed. Lawter synthetic and hydrocarbon resins are used
in the production of adhesives, liquid printing inks and printing ink vehicles,
rubber compounds and paints and coatings to improve durability, chemical
resistance, appearance, adhesion and drying speed.
Our Products
Lawter products are sold worldwide to ink manufacturers and other customers
involved in developing specialty inks, paints, coatings and adhesives. These are
growth markets, driven by rising demand for everyday products such as newspapers
and printed publications, packaging and wrapping. The market for inks is
expected to grow by more than 20 percent worldwide over the next five years.
Our Strategic Advantage
Traditionally, Lawter has delivered superior products at competitive prices.
Over the past few years, the company has invested more than $100 million in
state-of-the-art research and development and manufacturing facilities in
America, Europe and Asia, supporting a strategic growth plan for the future.
Today, with proprietary technologies, modern facilities, a global presence and a
progressive corporate culture, Lawter is in a unique position to develop
stronger customer relationships and expand into new markets.
<PAGE>
Exhibit 21
Principal Subsidiaries of the Company (Jurisdiction of Incorporation)
Lawter International FSC, Limited (Jamaica)
Kingston, Jamaica
Lawter International (Kallo) N.V. (Belgium)
Kallo, Belgium
Lawter International (Canada) Co. (Canada)
Rexdale, Ontario, Canada
Lawter International Fujian Nanping PRC Limited (Peoples Republic of China)
Peoples Republic of China
Dazhou, China
Lawter International, Ltd. (Tianjin)P.R.C. (Peoples Republic of China)
Tanggu, Peoples Republic of China
Lawter International, GmbH (Germany)
Frechen, Germany
Lawter International, Limited (Great Britain)
Bicester, Oxon, England
Lawter International, B.V. (Netherlands)
Waterford, Ireland
Lawter Antilles, N.V. (Netherlands Antilles)
Curacao, Netherlands Antilles
Lawter International Products
Pte. Ltd. (Singapore)
Jurong Town, Singapore
Lawter International Luxembourg S.a.r.l. (Luxembourg)
Luxembourg
Lawter International Malta Limited (Malta)
Valetta, Malta
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated February 8, 1999, included (or
incorporated by reference) in this Annual Report of Lawter International,
Inc. and Subsidiaries on Form 10-K for the year ended December 31, 1998, into
the Company's previously filed Registration Statements on Forms S-3 (File No.
33-24165), S-8 (File No. 33-24859), S-8 (File No. 33-61506), S-8 (File No.
2-84421) and S-8 (File No. 333-67337).
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 26, 1999
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 40,078
<SECURITIES> 0
<RECEIVABLES> 42,398
<ALLOWANCES> 0
<INVENTORY> 49,479
<CURRENT-ASSETS> 133,041
<PP&E> 134,603
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<COMMON> 45,533
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<TOTAL-LIABILITY-AND-EQUITY> 254,250
<SALES> 212,843
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<CGS> 147,910
<TOTAL-COSTS> 147,910
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 8,219
<INCOME-PRETAX> 30,666
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