<PAGE>
As filed with the Securities and Exchange Commission on August 23, 1999.
Registration No. 333-80841
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
COMPUTER NETWORK TECHNOLOGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-1356476
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
605 North Highway 169, Suite 800
Minneapolis, Minnesota 55441
(612) 797-6000
(Address, including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Thomas G. Hudson,
Chairman, President and Chief Executive Officer
COMPUTER NETWORK TECHNOLOGY CORPORATION
605 North Highway 169, Suite 800
Minneapolis, Minnesota 55441
(612) 797-6000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copy to:
Morris M. Sherman, Esq.
Leonard, Street and Deinard Professional Association
150 South Fifth Street, Suite 2300
Minneapolis, Minnesota 55402
Approximate date of commencement of proposed sale to the public. From time to
time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Maximum
Titles Of Each Class of Proposed Maximum Aggregate Amount of
Securities To Be Amount To Be Offering Price Offering Registration
Registered(1) Registered(2) Per Security Price(2)(3) Fee
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Subordinated
Notes.................. (4) (4) (4)
Common Stock, $.01 par
value(5)............... (4) (4) (4)
Total................ $100,000,000 (4) $100,000,000(6) $27,800(7)(8)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The securities covered by this registration statement may be sold or
otherwise distributed separately or together. This registration statement
covers offers, sales and other distributions of the securities listed in
this table from time to time at prices to be determined.
(Footnotes continued on next page)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE>
(2) Convertible subordinated notes may be issued with original issue discount
such that the aggregate initial offering price will not exceed
$100,000,000, together with other securities issued hereunder.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(4) Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
(5) The convertible subordinated notes are also convertible into shares of
common stock. This registration statement also covers an indeterminate
number of shares of common stock to be issued upon conversion of the
convertible subordinated notes. This registration statement also includes
preferred share purchase rights issuable under the registrant's rights
agreement. See "Description of Common Stock--Shareholder Rights Plan" in
the prospectus that is a part of this registration statement.
(6) The aggregate maximum offering price of all securities issued hereunder
will not exceed $100,000,000. No separate consideration will be received
for shares of common stock issued upon conversion of the convertible
subordinated notes and therefore no additional registration fee is payable
under Rule 457(i).
(7) Calculated pursuant to Rule 457(o).
(8) On June 15, 1999 the registrant paid $24,198 in registration fees in
connection with the initial filing of this registration statement. On
August 20, 1999, the registrant paid $3,602 in connection with the filing
of this amendment.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 23, 1999
PROSPECTUS
$100,000,000
[LOGO]
Computer Network Technology Corporation
Common Stock and Convertible Subordinated Notes
------------
By this prospectus, we may offer, from time to time, in one or more series or
classes the following securities:
.shares of our common stock, and
.our notes, which are convertible subordinated notes.
The aggregate initial offering price of these "offered securities" that we
may issue will not exceed $100,000,000. If we issue convertible subordinated
notes at a discount from their original principal stated amount, then, for
purposes of calculating the aggregate initial offering price of the offered
securities, we will treat the initial offering price of the convertible
subordinated notes as the total original principal amount of the convertible
subordinated notes.
Our common stock is quoted on the Nasdaq National Market under the symbol
"CMNT." On August 20, 1999, the last reported sale price of our common stock
was $13.94 per share.
We may offer the offered securities in amounts, at prices and on terms
determined at the time of the offering. We will provide you with specific terms
of the applicable offered securities in supplements to this prospectus.
You should read this prospectus and any prospectus supplement carefully
before you decide to invest. This prospectus may not be used to consummate
sales of the offered securities unless it is accompanied by a prospectus
supplement describing the method and terms of the offering of those offered
securities.
See "Risk Factors" beginning on page 6 to read about risks that you should
consider before buying the offered securities.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the offered securities or determined if
this prospectus or any prospectus supplement is truthful and complete. It is
illegal for any person to tell you otherwise.
------------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Special Note Regarding Forward-Looking Statements.......................... 1
About This Prospectus...................................................... 2
Where You Can Find More Information........................................ 2
About Computer Network Technology Corporation.............................. 4
Ratio of Earnings to Fixed Charges......................................... 5
Use of Proceeds............................................................ 5
Risk Factors............................................................... 6
Plan of Distribution....................................................... 16
Description of the Notes................................................... 18
Description of Common Stock................................................ 31
Experts.................................................................... 33
</TABLE>
-------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement and other documents we have filed
with the Securities and Exchange Commission contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which may include statements about our:
. anticipated receipt of orders;
. business strategy;
. timing of and plans for the introduction or phase-out of products or
services;
. enhancements of existing products or services;
. plans for hiring additional personnel;
. entering into strategic partnerships; and
. other plans, objectives, expectations and intentions contained in this
prospectus or any prospectus supplement that are not historical facts.
When used in this prospectus and any prospectus supplement, the words "may,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"intend," "potential" or "continue" and similar expressions are generally
intended to identify forward-looking statements. Because these forward-looking
statements involve risks and uncertainties, actual results could differ
materially from those expressed or implied by these forward-looking statements
for a number of reasons, including those discussed under "Risk Factors" and
elsewhere in this prospectus and any prospectus supplement. We assume no
obligation to update any forward-looking statements. These statements are only
predictions. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.
1
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process under the Securities Act of 1933 (the
"Securities Act"). Under the shelf process, we may, from time to time, sell any
combination of the offered securities described in this prospectus in one or
more offerings up to a total dollar amount of $100,000,000.
This prospectus and any accompanying prospectus supplement do not contain all
of the information included in the registration statement. We have omitted
parts of the registration statement as permitted by the rules and regulations
of the SEC. For further information, we refer you to the registration statement
on Form S-3, including its exhibits. Statements contained in this prospectus
and any accompanying prospectus supplement about the provisions or contents of
any agreement or other document are not necessarily complete. If SEC rules and
regulations require that any agreement or document be filed as an exhibit to
the registration statement, you should refer to that agreement or document for
a complete description of these matters. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of each document.
This prospectus provides you with a general description of the offered
securities. Each time we sell offered securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change any
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with the additional information
described under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can inspect and copy the registration statement
as well as reports, proxy statements and other information we have filed with
the SEC at the public reference room maintained by the SEC at 450 Fifth Street,
NW, Washington, D.C. 20549. You can obtain copies from the public reference
room of the SEC at 450 Fifth Street, NW, Washington, D.C. 20549 upon payment of
various fees. You can call the SEC at 1-800-732-0330 for further information
about the public reference room. We are also required to file electronic
versions of these documents with the SEC, which may be accessed through the
SEC's World Wide Website at http://www.sec.gov. Our common stock is quoted on
the Nasdaq National Market System.
The SEC allows us to "incorporate by reference" certain of our publicly-filed
documents into this prospectus, which means that information included in these
documents is considered part of this prospectus. Information that we file with
the SEC with this prospectus or subsequent to the date of this prospectus will
automatically update and supersede this information. This prospectus does not
include all the information in the registration statement and documents
incorporated by reference. You should refer to the documents and to the
exhibits to the registration statement for a more complete understanding of the
matter involved. We hereby incorporate by reference the documents listed below
and any future filings made with the SEC prior to the termination of the
offering under sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 0-13994).
2. Our Proxy Statement dated April 1, 1999, filed in connection with our
May 13, 1999 Annual Meeting of Shareholders.
3. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999
and June 30, 1999 (File No. 0-13994).
2
<PAGE>
4. Our Current Report on Form 8-K, filed with the SEC on May 25, 1999 (File
No. 0-13994).
5. The description of our common stock included in a registration
statement filed on Form 8-A, including any amendments or reports filed
for the purpose of updating that description.
We will furnish without charge to you, on written or oral request, a copy of
any or all of the documents incorporated by reference. You should direct any
requests for documents to Sue Nelson, Investor Relations, Computer Network
Technology Corporation, 605 North Highway 169, Suite 800, Minneapolis,
Minnesota 55441, ph. (612) 696-6111, e-mail investor [email protected].
You should rely only on the information contained or incorporated by
reference in this prospectus or the applicable prospectus supplement. We have
not authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We will only sell the offered securities in states where the offer
or sale is permitted. You should assume that the information appearing in this
prospectus or the applicable prospectus supplement or incorporated by reference
is accurate only as of the date on the front of these documents. Our business
and financial condition may have changed since that date.
3
<PAGE>
ABOUT COMPUTER NETWORK TECHNOLOGY CORPORATION
We design, manufacture, market and support a wide range of computer hardware
and software products for business-critical, or important, storage networks. We
also design, manufacture, market and support products that integrate existing
computer applications. We operate as two separate divisions--the Network
Solutions Division and the Enterprise Integration Solutions Division. Our
Network Solutions Division sells storage area networking, or SAN, products and
our established channel networking products, which enable computers to transmit
data over unlimited distances. Our Enterprise Integration Solutions Division
develops and sells enterprise application integration, or EAI, software that
automates the integration of computer software applications, as well as our
traditional server gateways and tools, which enable multiple desktop computers
and mainframe terminals to communicate with one another. Both divisions offer
professional consulting and support services.
Our Network Solutions Division is a leading provider of hardware and software
products that enable our customers to build and manage SANs. A SAN is a high-
speed network within a business' existing computer network that allows the
business to manage and back-up its expanding storage needs with greater
efficiency and less disruption to its network operations. Customers can create
SANs within both local area networks, or LANs, which are networks confined to
limited geographical areas, and wide area networks, or WANs, which are networks
dispersed over long distances that communicate by third party telephone
systems. Our SAN products enable companies to cost effectively manage their
increasing storage requirements, flexibly add to and reconfigure their existing
SANs, provide faster access to greater amounts of data and protect their data
more efficiently. We market our SAN products directly and through strategic
partnerships with leading storage industry companies.
Our Enterprise Integration Solutions Division develops and markets our EAI
software products. EAI refers to the process of integrating existing networks
and applications, which are frequently based on mainframe platforms, with new
networks and applications, which are usually open systems, so that users can
easily access information on all of a business' disparate computer systems.
Mainframes are computer systems with high processing power that have
traditionally been used by large businesses for storing and processing large
amounts of data. Open systems are newer systems that are easy to scale, or
expand, and use hardware and software standards that are not proprietary to any
vendor. Our EAI products offer automated integration, without line-by-line
coding, that allows easy, real-time access to a business' entire database, no
matter what type of system any given data resides upon. Our solutions are
flexible and scalable in that they can accommodate a virtually unlimited number
of users into an integrated system.
Our EAI products are targeted primarily for customer relationship management,
or CRM, and electronic-commerce, or e-commerce, applications. CRM affords our
clients' customer service representatives easy, real-time access to all of the
organization's information about a given customer. E-commerce applications
enhance our clients' ability to sell products and conduct business over the
Internet. We market our EAI products directly and in conjunction with leading
industry partners.
----------------
As used in this prospectus, "CNT" means Computer Network Technology
Corporation. We are a Minnesota corporation. Our principal executive offices
are located at 605 North Highway 169, Suite 800, Minneapolis, Minnesota 55441,
and our telephone number is (612) 797-6000. Our World Wide Website is
http://www.cnt.com. Information contained in our website is specifically not
incorporated herein by reference or otherwise.
----------------
The CNT logo, CNT(R), UltraNet(R) and Channelink(R) are our registered
trademarks. FileSpeed(TM), Enterprise/Access(TM) and Enterprise/Connect(TM) are
also our trademarks. This prospectus contains other trademarks and trade names
owned by us or other entities. References in this prospectus to "common stock"
include the associated preferred share purchase right.
4
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to fixed
charges for the periods shown.
<TABLE>
<CAPTION>
Six
Months
Ended
Year Ended December 31, June 30,
------------------------ --------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........... -- 8.81 3.59 -- 7.82 9.29
</TABLE>
We had net losses for the years ended December 31, 1994 and 1997.
Consequently, our earnings were insufficient to cover fixed charges in those
years by approximately $1.8 million and $3.9 million, respectively.
The ratio of earnings to fixed charges is computed as earnings (loss) before
provision for income taxes and fixed charges. Fixed charges consist of interest
expense plus such portion of rental expense as is representative of the
interest factor.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we
anticipate that any net proceeds from the sale of offered securities will be
used to fund expansion of our business, including for:
. additional working capital;
. capital expenditures;
. repayment of debt;
. funding net losses;
. acquisitions; and
. general corporate purposes.
When we offer a particular series of offered securities, the prospectus
supplement relating to that offering will set forth the intended use of the net
proceeds received from that offering. Pending the application of the net
proceeds, we expect to invest the proceeds from the sale of offered securities
in short-term, interest-bearing instruments or other investment-grade debt
securities.
5
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus and any prospectus supplement before
purchasing any offered securities. Investing in the offered securities involves
a high degree of risk.
We expect our quarterly revenues and operating results to fluctuate for a
number of reasons, which could cause our stock price to fluctuate
Our quarterly revenues and operating results have varied significantly in the
past and are likely to vary significantly in the future due to a number of
factors, any of which may cause our stock price to fluctuate. The primary
factors that may affect our quarterly financial performance include the
following:
. fluctuations in demand for our products and services;
. the timing of customer orders, which are often grouped toward the end of
a quarter, particularly large orders from our significant customers and
whether any orders are cancelled;
. product mix among our SAN, channel networking, EAI and server gateway
and tools products;
. our traditionally long sales cycle, which can range from 90 days to 12
months or more;
. our ability to develop, introduce, ship and support new products and
product enhancements;
. the fact that our products are usually only part of an overall solution
that our customers may have problems implementing or obtaining the
required components or services from other vendors;
. the rate of adoption of SANs as an alternative to existing data storage
and management systems;
. the rate of adoption of EAI products and related solutions;
. announcements and new product introductions by our competitors and
deferrals of customer orders in anticipation of new products, services
or product enhancements introduced by us or our competitors;
. decreases over time in the prices at which we can sell our products;
. our ability to obtain sufficient supplies of components, including
limited sourced components, at reasonable prices, or at all;
. communication costs and the availability of communication lines;
. increases in the prices of the components we purchase;
. our ability to attain and maintain production volumes and quality levels
for our products; and
. increased expenses, particularly in connection with our strategy to
continue to expand our relationships with key strategic partners.
Accordingly, you should not rely on the results of any past periods as an
indication of our future performance. It is likely, in some future period, that
our operating results may be below expectations of public market analysts or
investors. If this occurs, the price of offered securites likely will drop.
Our success is dependent upon the development of demand for our SAN and EAI
products
We are dependent upon the success of our SAN and EAI businesses. Potential
customers who have invested substantial resources in their existing data
storage and management systems may be reluctant or slow to adopt a new
approach, like SANs. Moreover, potential EAI customers may decide to adopt
entirely new systems that eliminate the need for an EAI product. Our success in
generating net revenues in these areas will depend on, among other things, our
ability to:
. educate potential customers, strategic partners and end users about the
benefits of SAN, EAI and related technologies;
. maintain and enhance our relationships with leading strategic partners;
and
6
<PAGE>
. predict and base our products on standards that ultimately become
industry standards.
In addition, the continued growth of the market for SANs and related products
depends on the continued decrease in price of related services and components,
such as communication charges and switches. Any increase in the price of these
related services and components would likely cause this market to grow at a
reduced rate.
Finally, SANs are often implemented in connection with deployment of new
storage systems and servers. Accordingly, our future success is also
substantially dependent on the market for new storage systems and servers.
We have recently incurred losses and may not be able to maintain profitability
We experienced a loss of $2.3 million in 1997. We cannot be certain that we
will be able to sustain recent growth rates or that we will realize sufficient
revenues to maintain profitability. Also, we are depending on our SAN and EAI
products for a significant portion of future revenues, especially as revenues
from our channel networking and server gateways and tools products continue to
decline. Our SAN and EAI related revenues must increase more rapidly than our
revenues related to our channel networking and server gateways and tools
products decline. We expect to incur significant product development, sales and
marketing and administrative expenses in connection with the introduction of
new SAN and EAI products, and as a result, we will need to generate significant
revenue increases to achieve and maintain profitability. We may not be able to
sustain or increase profitability.
Our SAN and EAI businesses are difficult to predict because of our limited
operating experience in these markets
We have only recently expanded into the SAN and EAI markets. In addition, we
expect that a significant portion of our future revenues will be derived from
these businesses. This limited operating experience, combined with the evolving
nature of the markets in which we sell our SAN and EAI products, reduces our
ability to accurately forecast our quarterly and annual revenue. Further, we
plan our operating expenses based in part on these revenue projections. Because
most of our expenses are fixed in the short-term or incurred in advance of
anticipated revenue, we may not be able to decrease our expenses in a timely
manner to offset any unexpected shortfall in revenue.
If our relationships with strategic partners are unsuccessful or terminated,
our product revenues could decline
We market our products in connection with a few significant storage vendors,
including EMC, Hitachi Data Systems and IBM. In the six months ended June 30,
1999, sales of our SAN products to customers using EMC's disk mirroring systems
accounted for 25% of our product revenues. As a result, our success depends
substantially on our ability to manage and expand our relationships with EMC
and other storage vendors, to initiate relationships with new strategic
partners that will recommend our products and the success of our strategic
partners' products. In addition, we rely to a significant extent on the
continued recommendation of our products by our strategic partners. To the
extent that our strategic partners do not recommend our products, or to the
extent that they recommend products offered by our competitors, our business
will be harmed.
Additionally, we have only a limited number of sales people devoted to the
sale of our EAI products. We have chosen to rely on the efforts of our
strategic partners to assist us in these sales efforts. To the extent these
strategic partners are unable to sell these products, are unable to implement
systems using our products or recommend our competitor's products, our future
revenues could be substantially affected.
We may not be able to manage and expand our relationships with strategic
partners successfully, and they may not market our products successfully.
Moreover, our relationships with strategic partners are not in writing, have no
minimum purchase commitments and can be terminated or changed at any time. Our
failure to
7
<PAGE>
manage and expand our relationships with our significant strategic partners,
our failure to develop relationships with new strategic partners or the failure
of our strategic partners to market our products could substantially reduce our
net revenues and seriously harm our business.
We have limited product offerings and our existing products and new products
must achieve widespread market acceptance
We derive a substantial portion of our net revenues from a limited number of
SAN and EAI products. Specifically, for the six-month period ended June 30,
1999, we derived approximately 48% and 5% of our product revenues from our SAN
and EAI products, respectively. We expect that net revenues from these products
will account for a substantial and growing portion of our total net revenues
for the foreseeable future. Moreover, we expect net revenues from our channel
networking and server gateways and tools products to decline. As a result, for
the foreseeable future, we will continue to be subject to the risk of a
dramatic decrease in net revenues if demand for our newest products,
particularly our SAN products, decline. Therefore, widespread market acceptance
of these products is critical to our future success. These products have been
only recently introduced. Accordingly, the demand for, and market acceptance
of, these products is uncertain.
Factors that may affect the market acceptance of our SAN and EAI products,
some of which are beyond our control, include the following:
. growth of the SAN, EAI and related products markets;
. performance, quality, price and total cost of ownership of our SAN and
EAI products;
. availability, price, quality and performance of competing products and
technologies; and
. successful development of our relationships with new and existing
customers and strategic partners.
Our industries are subject to rapid technological change, and we must keep pace
with the changes to successfully compete
The markets for our products are characterized by rapidly changing
technology, evolving industry standards and the frequent introduction of new
products and enhancements. Our future success depends in large part on our
ability to enhance our existing products and to introduce new products on a
timely basis to meet changes in customer preferences and evolving industry
standards. We cannot be certain that we will be successful in developing,
manufacturing and marketing new products or product enhancements that respond
to such changes in a timely manner and achieve market acceptance. We also
cannot be certain that we will be able to develop the underlying core
technologies necessary to create new products and enhancements.
Additionally, changes in technology and consumer preferences could
potentially render our current products uncompetitive or obsolete. If we are
unable, for technological or other reasons, to develop new products or enhance
existing products in a timely manner in response to technological and market
changes, our business, results of operations and financial condition would be
harmed.
We are substantially dependent on the financial services, telecommunications
and information outsourcing industries.
During the six months ended June 30, 1999, approximately 18%, 16% and 7% of
our product revenues were derived from businesses in the financial services,
telecommunications and information outsourcing industries, respectively. In
addition, for the years ended December 31, 1997 and 1998, combined, 37% and 44%
of our product revenues were derived from businesses in these industries. The
erosion of our relationships with our customers in these industries, or the
erosion of demand for SAN and EAI products in these industries generally, would
harm our financial condition and operating results.
8
<PAGE>
We depend on a limited number of suppliers for key components
We depend upon a limited number of suppliers for several key components used
in the manufacture of our products. In the future, we may experience shortages
of, or difficulties in acquiring, these components. If we are unable to buy
these components, then we will not be able to manufacture our products on a
timely basis.
We use rolling forecasts based on anticipated product orders to determine our
component requirements. Lead times for materials and components that we order
vary significantly and depend on factors such as specific supplier
requirements, contract terms and current market demand for such components. As
a result, our component requirement forecasts may not be accurate. If we
overestimate our component requirements, then we may have excess inventory,
which would increase our costs. If we underestimate our component requirements,
then we may have inadequate inventory, which could interrupt our manufacturing
and delay delivery of our products to our customers. Either of these
occurrences would negatively impact our business and operating results.
The competition in our markets may lead to reduced sales of our products,
reduced profits or reduced market share
The markets for our products are competitive and are likely to become even
more competitive. Increased competition could result in pricing pressures,
reduced sales, reduced margins, reduced profits, reduced market share or the
failure of our products to achieve or maintain market acceptance. Our products
face competition from multiple sources, including the ability of some of our
customers to design solutions to the problems targeted by our products. Many of
our competitors and potential competitors have longer operating histories,
greater name recognition, access to larger customer bases or substantially
greater resources than we have. As a result, they may be able to respond more
quickly than we can to new or changing opportunities, technologies, standards
or customer requirements. For all of the foregoing reasons, we may not be able
to compete successfully against our current and future competitors.
We may engage in future acquisitions that dilute our shareholders and cause us
to incur debt or assume contingent liabilities
As part of our strategy, we expect to review opportunities to buy other
businesses or technologies that would complement our current products and
services, expand the breadth of our markets, enhance our technical
capabilities, or otherwise offer growth opportunities. In the event of any
future purchases, we could:
. spend significant amounts of cash;
. issue stock that would dilute our current shareholders' percentage
ownership;
. incur amortization expense related to goodwill and other intangible
assets; or
. incur debt or assume liabilities.
These purchases also involve numerous risks, including:
. problems combining the purchased operations, technologies, personnel or
products;
. unanticipated costs;
. diversion of management's attention from our core business;
. adverse effects on existing business relationships with suppliers,
customers or strategic partners;
. risks associated with entering markets in which we have no or limited
prior experience;
. potential loss of key employees of acquired or merged organizations; and
. the growth rates of any acquired company may be less than those
projected by analysts or anticipated by markets, which could have a
depressive effect on our stock price.
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We cannot assure you that we will be able to successfully integrate any
businesses, products, technologies or personnel related to organizations that
we might acquire or merge with in the future.
The notes will rank below our existing and future Senior Indebtedness and we
may be unable to repay our obligations under the notes
The notes will be unsecured and subordinated in right of payment to all of
our existing and future Senior Indebtedness, and the existing and future
liabilities of our subsidiaries. The notes are subordinate to our Senior
Indebtedness and we will make payments on the notes only after we have
satisfied all of our Senior Indebtedness upon the occurence of any of the
following events:
. our bankruptcy, liquidation or reorganization;
. upon default in the payment of principal or interest on Senior
Indebtedness; or
. in certain other events described in the indenture.
As a result, we may not have sufficient assets remaining to pay amounts on any
or all of the notes.
The notes and related indenture do not limit our ability to incur other
indebtedness and liabilities. We may have difficulty paying our obligations
under the notes if we incur additional indebtedness or liabilities. As of
June 30, 1999, our outstanding Senior Indebtedness was approximately $3.1
million, and our consolidated liabilities were approximately $34.1 million. We
anticipate that from time to time we may incur additional indebtedness,
including Senior Indebtedness, which could adversely affect our ability to pay
our obligations under the notes.
We may be unable to repurchase the notes
There is no sinking fund with respect to the notes, and at maturity the
entire outstanding principal amount of the notes will become due and payable by
us. If we experience a change in control, under certain circumstances a holder
of the notes may require that we repurchase all or a portion of its notes. At
maturity or if a Change of Control does occur, we might not have sufficient
funds or be able to arrange for additional financing to pay the repurchase
price for all the notes tendered to us or due at maturity. Future borrowing
arrangements or agreements relating to Senior Indebtedness to which we become a
party may contain restrictions on, or prohibitions against, our repurchase of
the notes. If the maturity date or a Change of Control occurs when we are
prohibited from repurchasing the notes, we could try to obtain the consent of
the lenders under those arrangements to purchase the notes or we could attempt
to refinance the borrowings that contain the restrictions. If we do not obtain
the necessary consents or refinance these borrowings, we will be unable to
repurchase the notes. In that case, our failure to repurchase any tendered
notes or notes due upon maturity would constitute an event of default under the
related indenture. This could, in turn, cause a default under the terms of our
then existing Senior Indebtedness. As a result, in these circumstances, the
subordination provisions of the indenture would, absent a waiver, prohibit any
repurchase of the notes until we pay in full the senior debt.
Undetected software or hardware errors could increase our costs and delay
product introduction
Networking products frequently contain undetected software or hardware errors
when first introduced or as new versions are released. Our products are complex
and errors may be found from time to time in our products, including new or
enhanced products. In addition, our products are combined with products from
other vendors. As a result, when problems occur, it may be difficult to
identify the source of the problem. These problems may cause us to incur
significant warranty and repair costs, divert the attention of our engineering
personnel from our product development efforts and cause significant customer
relations problems. Moreover, the occurrence of hardware and software errors,
whether caused by our or another vendor's products, could delay or prevent the
development of the markets in which we compete.
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The loss of key executive or experienced personnel or the inability to hire and
retain additional personnel with expertise in the SAN and EAI industries could
negatively impact sales and delay product introduction
We are dependent on Thomas G. Hudson, our Chairman, President and Chief
Executive Officer. In addition, we rely upon the continued contributions of our
key management, engineering and sales and marketing personnel, many of whom
would be difficult to replace quickly. We also believe that our success depends
to a significant extent on the ability of our management to operate
effectively, both individually and as a group. Many members of our management
team have only recently joined us. The loss of any one of our key employees
could adversely affect our sales or delay the development or marketing of
existing or future products.
We believe our future success will depend also in part upon our ability to
attract and retain highly skilled and qualified managerial, engineering, sales
and marketing, and finance and operations personnel. Competition for these
personnel is intense. In the past, we have experienced difficulty in hiring
qualified personnel with expertise in the SAN and EAI industries, and there can
be no assurance that we will be successful in attracting and retaining these
individuals in the future. The inability to attract or retain qualified
personnel in the future or delays in hiring required personnel, particularly
engineers and sales personnel, could delay the development and introduction of
and negatively impact our ability to sell our products. In addition, companies
in our industry whose employees accept positions with competitors frequently
claim that their competitors have engaged in unfair hiring practices. We cannot
assure you that we will not receive such claims in the future as we seek to
hire qualified personnel or that such claims will not result in costly
litigation. We could incur substantial costs in defending ourselves against
these claims, regardless of their merits.
We must continue to improve our operational systems and controls to manage
future growth
We plan to continue to expand our operations to pursue existing and potential
market opportunities. We expect that this growth will place a significant
demand on our management and our operational resources. In order to manage
growth effectively, we must implement and improve our operational systems,
procedures and controls and train our employee base. Accordingly, we cannot
assure you that:
. we will be able to effectively manage the expansion of our operations;
. our key employees will be able to work together effectively as a team to
successfully manage our growth;
. we will be able to hire, train and manage our employee base;
. we will be able to properly integrate our acquisitions;
. our systems, procedures or controls will be adequate to support our
operations; and
. our management will be able to achieve the rapid execution necessary to
fully exploit the market opportunity for our products and services.
Our inability to manage growth effectively could harm our business.
We plan to increase our international sales activities, which will subject us
to additional business risks
International markets accounted for approximately 34% of our revenues in
1998. We plan to expand our international sales activities, and therefore our
success will become increasingly dependent on our performance in international
markets. In fiscal 1999 and 2000, we intend to focus on expanding our
international sales activities in The Netherlands, Mexico and Brazil. Our
international sales growth in these and other countries will be limited if we
are unable to establish relationships with international distributors,
establish additional foreign operations, expand international sales channel
management, hire additional personnel and develop relationships with
international service providers. Even if we are able to successfully expand
international operations, we cannot be certain that we will be able to maintain
or increase international market demand for
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our products. Our international operations, including our sales activities in
the rest of Europe, China, The Netherlands, Mexico and Brazil, are subject to a
number of risks, including:
. supporting multiple languages;
. recruiting sales and technical support personnel with the skills to
support our products;
. increased complexity and costs of managing international operations;
. protectionist laws and business practices that favor local competition;
. dependence on local vendors;
. multiple, conflicting and changing governmental laws and regulations;
. longer sales cycles;
. difficulties in collecting accounts receivable, converting foreign
currency to dollars and remitting funds to the United States;
. difficulties enforcing our legal rights;
. reduced or limited protections of intellectual property rights; and
. political and economic instability.
None of our products include screen displays or user documentation in any
language other than the English language. Our future prospects in international
markets may require us to develop multiple language versions of our products
and support documentation. The lack of such documentation could cause
prospective customers to select other products. In addition, the development of
such products and documentation could be costly and time consuming.
Because a significant portion of our international revenues are denominated
in foreign currencies, primarily French francs, the euro and British pounds
sterling, an increase in the value of the U.S. dollar relative to these
currencies could make our products more expensive and thus less competitive in
foreign markets.
We have applied for and received a limited number of patents and we may be
unable to protect our intellectual property, which would negatively affect our
ability to compete
Historically, we have not pursued patents on all our intellectual property.
Traditionally, we have relied, and currently continue to rely, on a combination
of patent, copyright, trademark and trade secret laws and restrictions on
disclosure to protect our intellectual property rights. We also enter into
confidentiality or license agreements with substantially all our employees,
consultants and corporate partners, and control access to and distribution of
our software, documentation and other proprietary information. We have four
patents in process and have three existing patents. In addition, while we
intend to more vigorously pursue patent protection for our intellectual
property in the future, unauthorized parties may attempt to copy or otherwise
obtain and use our products or technology. Monitoring unauthorized use of our
products is difficult, and we cannot be certain that the steps we have taken
will prevent unauthorized use of our technology, particularly in foreign
countries where the laws may not protect our proprietary rights as fully as in
the United States or where legal authorities in foreign countries do not
vigorously enforce existing laws.
We have from time to time received, and may in the future receive,
communications from parties asserting patent rights against us that relate to
certain of our products. Although we believe that we possess all required
proprietary rights to the technology involved in our products and that our
products, trademarks and other intellectual property rights do not infringe
upon the proprietary rights of third parties, we cannot assure you that others
will not claim a proprietary interest in all or part of our technology or
assert claims of infringement. All such claims, regardless of their merits,
could expose us to costly litigation and could substantially harm our operating
results.
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A license expires on December 31, 1999
A license related to the sale of Channelink(R) and UltraNet(R) products that
use ESCON expires on December 31, 1999. ESCON is the enterprise serial
connection protocol and interface used on IBM mainframes. If we are unable to
renew this license, we may be prohibited from further use of the subject
technology and our operating results and financial condition would be harmed.
In 1998, Channelink(R) and UltraNet(R) represented approximately one-half of
our product revenues.
Others may bring infringement claims against us, which could be time-consuming
and expensive to defend
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. Although we are not
currently involved in any intellectual property litigation, we may be a party
to litigation in the future to protect our intellectual property or as a result
of an alleged infringement of others' intellectual property. These claims and
any resulting lawsuits could subject us to significant liability for damages
and invalidation of our proprietary rights. These lawsuits, regardless of their
success, would likely be time-consuming and expensive to resolve and would
divert management time and attention. Any potential intellectual property
litigation also could force us to do one or more of the following:
. stop selling, incorporating or using our products or services that use
the challenged intellectual property;
. obtain a license from the owner of the infringed intellectual property
right allowing us to sell or use the relevant technology, which license
may not be available on reasonable terms, or at all; and
. redesign those products or services that use such technology.
In addition to the related costs of the foregoing actions, if we are forced
to take any of these actions, we may be unable to manufacture and sell the
related products, which would reduce our revenues.
Our failure or the failure of our suppliers, strategic partners or customers to
be year 2000 compliant could harm our business
Failure of our products to recognize correctly date information when the year
changes to 2000 could result in significant decreases in market acceptance of
our products, increases in warranty claims and legal liability for defective
software. We have undertaken testing and will continue to test our products to
be sure that they are fully year 2000 compliant. Year 2000 preparations by our
strategic partners, suppliers and customers could also slow down purchases of
our products.
Our internal year 2000 compliance review is focused on reviewing our internal
computer information and security systems for year 2000 compliance and
developing and implementing remedial programs to resolve year 2000 issues in a
timely manner. Additionally, we are contacting our third party suppliers and
requesting their written assurances that their systems are year 2000 compliant.
If our suppliers, vendors, major distributors or partners fail to correct
their year 2000 problems, these failures could result in an interruption in, or
a failure of, our normal business activities or operations. If a year 2000
problem occurs, it may be difficult to determine which vendor's products have
caused the problem. These failures could interrupt our operations and damage
our relationships with our customers. Due to the general uncertainty inherent
in the year 2000 problem resulting from the readiness of third-party suppliers
and vendors, we are unable to determine at this time whether any year 2000
failures will harm us.
A worst case scenario relative to the year 2000 issue would be the discovery
of additional year 2000 deficiencies in our products that require significant
extra time and expense to correct. A critical year 2000 deficiency by a key
supplier, coupled with a failure to locate a suitable alternative source of
supply, could also have a material impact on our business.
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Our customers may delay product purchases until after January 1, 2000, which
would harm our sales
Our customers' purchasing plans could be affected by year 2000 issues if they
need to expend significant resources to fix their existing systems. In
addition, our sales could be materially impacted in 1999 and 2000 if customers
were to stop, or significantly reduce, procurement of new equipment for their
data centers and networks until after the start of the year 2000.
Our products must comply with evolving industry standards and government
regulations
The market for our products is characterized by the need to support industry
standards as they emerge, evolve and achieve acceptance. To remain competitive,
we must continue to introduce new products and product enhancements that meet
these industry standards. For example, all components of a SAN must utilize a
limited number of defined standards in order to work with existing computer
systems. Our products comprise only a part of the entire storage area network
and we depend on the companies that provide other components of the storage
area network, many of whom are significantly larger than we are, to support the
industry standards as they evolve. Also, our EAI products must provide
compatibility with major hardware and software platform standards in order to
be useful to our customers. The failure of these providers to support these
industry standards could adversely affect the market acceptance of our
products. In addition, in the United States, our products must comply with
various regulations and standards defined by the Federal Communications
Commission and Underwriters Laboratories. Internationally, products that we
develop will also be required to comply with standards established by
authorities in various countries. Failure to comply with existing or evolving
industry standards or to obtain timely domestic or foreign regulatory approvals
or certificates could materially harm our business.
Management can spend the proceeds of this offering in ways with which our
shareholders and noteholders may not agree
Our management can spend the net proceeds from this offering in ways with
which our shareholders and noteholders may not agree. We cannot assure you that
our investments and use of the net proceeds of this offering will yield
favorable returns or results.
Provisions in our charter documents, our shareholder rights plan, existing
agreements and Minnesota law could prevent or delay a takeover of our company
and may impact the likelihood of takeover offers that would be attractive to
our shareholders
Provisions of our articles of incorporation, bylaws, shareholder rights plan
and existing agreements may discourage, delay or prevent a merger or
acquisition that a shareholder may consider favorable. These provisions
include:
. authorizing the issuance of preferred stock without shareholder
approval;
. termination of contracts and license agreements in the event of a
takeover;
. limiting the persons who may call special meetings of shareholders; and
. preventing a takeover of us under our shareholder rights plan as a
result of the dilutive effect the issuance of securities under the plan
would have on acquiring parties.
Provisions of Minnesota law also may discourage, delay or prevent someone
from acquiring or merging with us. Further, some of our existing contracts may
give other parties the right to terminate the contract or take other action
that could harm our business as a result of a takeover.
There may be no public market for the notes
The notes will be a new issue of securities with no established trading
market. Although the underwriters for any offering of the notes may advise us
that they intend to make a market in the notes, they will have no obligation to
do so and may discontinue their market making at any time without notice. In
addition, their
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market making activity will be subject to limits imposed under the federal
securities laws. Accordingly, a market for the notes may not develop and, if it
does develop, it may not be maintained. Various factors could have a material
adverse effect on the trading price of the notes, including the failure of an
active market to develop and fluctuations in prevailing interest rates. In
addition, our operating results and prospects could from time to time fall
below the expectations of public market analysts and investors, which could
adversely affect public perception of our creditworthiness and therefore the
trading price of the notes.
The market price for our common stock has been volatile and could experience
extreme volatility in the future
The stock market in general, and the stock prices of technology-based
companies in particular, have experienced extreme volatility that has often
been unrelated to the performance of any specific public companies. The market
price of our common stock has fluctuated in the past and is likely to fluctuate
in the future. Any of the following factors, some of which are beyond our
control, could have a significant impact on the market price of our common
stock:
. actual or anticipated fluctuations in our operating results;
. differences between our financial or operating results and those
projected by our analysts;
. changes in market valuations of other technology companies;
. announcements by us or our competitors of significant technical
innovations, contracts, acquisitions, strategic partnerships, joint
ventures or capital commitments;
. general conditions in the financial services and telecommunications
industries, and among information outsourcers;
. losses of major customers;
. additions or departures of key personnel;
. sales of common stock in the future; and
. anticipated trends in the economy in general, such as increased interest
rates, and domestic and foreign political events, including war and
civil unrest.
We do not plan to pay cash dividends
We have never paid cash dividends and do not anticipate paying any cash
dividends in our foreseeable future. We intend to retain future earnings, if
any, to finance the growth and expansion of our business and for general
corporate purposes. Loan agreements and other contracts that we might enter
into in the future could prevent us from paying dividends.
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PLAN OF DISTRIBUTION
We may sell the offered securities:
. directly to purchasers;
. through dealers;
. through underwriters; or
. through a combination of any of these methods of sale.
We may effect the distribution of the offered securities from time to time in
one or more transactions either:
. at a fixed price or prices, which may be changed;
. at market prices prevailing at the time of sale;
. at prices related to such prevailing market prices; or
. at negotiated prices or competitive bid basis.
We may directly solicit offers to purchase offered securities. If an
underwriter is, or underwriters are, utilized in the sale, we will execute an
underwriting agreement with such underwriters at the time of sale to them and
the names of the underwriters will be set forth in the prospectus supplement,
which will be used by the underwriters to make resales of the offered
securities in respect of which this prospectus is delivered to the public. In
connection with the sale of offered securities, such underwriters may be deemed
to have received compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of offered
securities for whom they may act as agents. Underwriters may also sell offered
securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agents. Any
underwriting compensation paid by us to underwriters in connection with the
offering of offered securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers, will be set forth in the
applicable prospectus supplement.
Underwriters, dealers and other persons may be entitled, under agreements
that may be entered into with us, to indemnification by us against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which they may be required to make in
respect thereof. Underwriters may engage in transactions with, or perform
services for, us in the ordinary course of business.
Certain persons participating in an offering of offered securities may engage
in passive market making transactions in the common stock in accordance with
Rule 103 of Regulation M under the Securities Exchange Act of 1934. Rule 103
permits, upon the satisfaction of certain conditions, underwriting and selling
group members participating in a distribution that are also registered Nasdaq
market makers in the security being distributed, or a related security, to
engage in limited passive market making transactions during the period when
Regulation M would otherwise prohibit the activity. In general, a passive
market maker may not bid for or purchase a security at a price that exceeds the
highest independent bid for those securities by a person that is not
participating in the distribution and must identify its passive market making
bids on the Nasdaq electronic inter-dealer reporting system. In addition, the
net daily purchases made by a passive market maker generally may not exceed 30%
of the market maker's average daily trading volume in the security for the two
full consecutive calendar months, or any 60 consecutive days ending within 10
days, immediately preceding the date of filing of the registration statement of
which this prospectus is a part.
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To facilitate the offering of offered securities, certain persons
participating in the offering may engage in transactions that stabilize,
maintain, or otherwise affect the price of the securities. This may include
over-allotments or short sales of the offered securities, which involves the
sale by persons participating in the offering of more securities than we sold
to them. In these circumstances, these persons would cover the over-allotments
or short positions by making purchases in the open market of or by exercising
an over-allotment option. In addition, these persons may stabilize or maintain
the price of offered securities by bidding for or purchasing the offered
securities in the open market, or by imposing penalty bids, whereby selling
concessions allowed dealers participating in the offering may be reclaimed if
securities sold by them are repurchased in connection with stabilization
transactions. The effect of these transactions may be to stabilize or maintain
the market price of securities at a level above that which might otherwise
prevail in the open market. These transactions may be discontinued at any time.
The anticipated date of delivery of offered securities will be set forth in
the applicable prospectus supplement relating to each offer.
Other than in the United States, and except as may be set forth in a
prospectus supplement, no action has been taken by us or the underwriters that
would permit a public offering of the offered securities by this prospectus in
any jurisdiction which requires action for that purpose. The securities offered
by this prospectus may not be offered or sold, directly or indirectly, nor may
this prospectus or any other offering material or advertisements be distributed
or published in any jurisdiction, except under circumstances that will ensure
compliance with the applicable rules and regulations of the jurisdiction.
Persons holding this prospectus are advised to inform themselves about and to
observe any restrictions relating to this offering and the distribution of this
prospectus. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities offered by this prospectus in
any jurisdiction in which an offer or a solicitation is unlawful.
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DESCRIPTION OF THE NOTES
Each offering of notes will be issued under an indenture (the "Indenture") to
be entered into between us and a trustee (the "Trustee") chosen by us and
qualified to act under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). A supplemental indenture may also be entered into with the
Trustee prior to issuance of the notes which specifies certain terms of the
notes. A copy of the form of Indenture is filed as an exhibit to the
registration statement of which this prospectus is a part. The terms of the
Indenture are also governed by certain provisions contained in the Trust
Indenture Act of 1939. The descriptions under this heading related to the notes
are summaries of their anticipated provisions. The summaries are not complete
and are qualified in their entirety by reference to the actual Indenture, any
supplemental indenture, the notes and terms made a part of the Indenture under
the Trust Indenture Act. A form of the Indenture under which we may issue our
notes has been filed as an exhibit to the registration statement of which this
prospectus is a part. Whenever we refer in this prospectus or in the prospectus
supplement to certain provisions of the Indenture, any supplemental indenture
or the notes, or to defined terms, those sections or defined terms are
incorporated by reference herein. You should read the Indenture, any
supplemental indenture and the notes for provisions that may be important to
you. The form of the Indenture, any supplemental indenture and the notes may be
examined under the heading "Where You Can Find More Information".
The terms and conditions described under this heading are of terms and
conditions that apply generally to the notes. The particular terms of any
offering of notes will be summarized in the applicable prospectus supplement.
Those terms may differ from the terms set forth below. Except as set forth in
the applicable indenture or in any supplemental indenture and described in a
particular prospectus supplement, we may issue notes in one or more series and
with limitations as to aggregate principal amount as set forth in the
prospectus supplement.
General
The notes will be general unsecured subordinated obligations of ours and will
be convertible into our common stock as described below under "Conversion of
Notes." Unless other arrangements are made, interest will be paid by check
mailed to holders entitled thereto. Principal will be payable, and the notes
may be presented for conversion, registration of transfer and exchange, without
service charge, at the corporate trust office of the Trustee or at the option
of the holder of the note, at any other office or agency of ours maintained for
that purpose pursuant to the Indenture. Payments, transfers, exchanges and
conversions relating to beneficial interests in notes issued in book-entry form
will be subject to the procedures described under "Form, Denomination,
Transfer, Exchange and Book-Entry Procedures" and "Exchange of Book-Entry Notes
for Certificated Notes."
The Indenture will not contain any financial covenants or any restrictions on
the incurrence of debt by us or any of our subsidiaries.
Terms of Notes to be Included in the Prospectus Summary
The prospectus supplement relating to any series of notes that we may offer
will set forth the price or prices at which the notes will be offered, and will
contain the applicable specific terms of the notes of that series. These terms
may include:
. the title of the notes;
. the aggregate principal amount of the notes;
. the maturity date or dates of the Notes;
. the percentage of the principal amount at which notes will be issued,
and if other than the principal amount of those notes, the portion of
the principal amount payable upon declaration of acceleration of the
maturity of the notes;
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. the date or dates, or method of determining the date or dates, on which
the principal of the notes will be payable;
. the rate or rates at which the notes will bear interest;
. the rate or rates at which the notes may be converted into our common
stock;
. the date or dates, or the method for determining the date or dates, from
which interest will accrue, the dates on which interest will be payable,
the regular record dates for interest payment dates, or the method by
which record dates may be determined, the persons to whom interest will
be payable, and the basis on which interest is to be calculated if other
than a 360 day year;
. the period or periods within which, the price or prices at which and the
other terms and conditions upon which the notes may be redeemed, in
whole or part, at our option, if we have such option; and
. any other terms of the notes.
The notes may be offered and sold at a substantial discount below their
original stated principal amount and may be "original issue discount
securities." "Original issue discount securities" means that less than the
entire principal amount of the securities will be payable upon declaration of
acceleration of their maturity. Special United States federal income tax,
accounting and other considerations applicable to original issue discount
securities will be described in the applicable prospectus supplement.
Conversion of Notes
The holders of notes will be entitled, at any time through the close of
business on the business day immediately preceding the maturity date, subject
to prior redemption or repurchase, to convert any notes or portions thereof (in
denominations of $1,000 in principal amount or multiples thereof) into our
common stock at the conversion price set forth on the cover page of the
prospectus supplement, subject to adjustment as described below; provided that
in the case of notes called for redemption, conversion rights will expire
immediately prior to the close of business on the last business day before the
date fixed for redemption, unless we default in payment of the redemption
price. A note (or portion thereof) in respect of which a holder is exercising
its option to require repurchase upon a Change of Control may be converted only
if such holder withdraws its election to exercise such repurchase option in
accordance with the terms of the Indenture.
Except as described below, no adjustment will be made on conversion of any
notes for interest accrued thereon or for dividends paid on any common stock we
issue. Holders of notes at the close of business on a record date will be
entitled to receive the interest payable on such notes on the corresponding
interest payment
date. However, notes surrendered for conversion after the close of business on
a record date, and before the close of business on the day following the
corresponding interest payment date must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount so converted (unless such note is subject to redemption on a redemption
date between such record date and the corresponding interest payment date). The
interest payment with respect to a note called for redemption on a date during
the period from the close of business on or after any record date to the close
of business on the business day following the corresponding payment date will
be payable on the corresponding interest payment date to the registered holder
at the close of business on that record date (notwithstanding the conversion of
such note before the corresponding interest payment date) and a holder of notes
who elects to convert need not include funds equal to the interest paid. We are
not required to issue fractional shares of our common stock upon conversion of
notes and, in lieu thereof, we will pay a cash adjustment based upon the
closing price of our common stock on the last business day prior to the date of
conversion.
The conversion price is subject to adjustment (under formulae set forth in
the Indenture) upon the occurrence of certain events, including:
(1) The issuance of our common stock as a dividend or distribution on
our outstanding common stock;
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(2) The issuance to all holders of our common stock of certain rights,
options or warrants to purchase our common stock at less than the current
market price;
(3) Certain subdivisions, combinations and reclassifications of our
common stock;
(4) Distributions to all holders of our common stock of our capital
stock (other than our common stock) or evidences of our indebtedness or
assets (including securities, but excluding those dividends, rights,
options, warrants and distributions referred to in clauses (1) and (2)
above, dividends and distributions in connection with our liquidation,
dissolution or winding up and dividends and distributions paid exclusively
in cash);
(5) Distributions consisting exclusively of cash (excluding any cash
portion of distributions referred to in clause (4) above or in connection
with a consolidation, merger or sale of our assets as referred to in clause
(2) of the second paragraph below) to all holders of our common stock in an
aggregate amount that, together with (A) all such other all-cash
distributions made within the preceding 12 months in respect of which no
adjustment has been made and (B) any cash and the fair market value of
other consideration payable in respect of any tender offers by us or any of
our subsidiaries for our common stock concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds 20% of our
market capitalization (being the product of the then current market price
of our common stock times the number of shares of our then outstanding
common stock) on the record date for such distribution; and
(6) The purchase of our common stock pursuant to a tender offer made by
us or any of our subsidiaries that involves an aggregate consideration
that, together with (A) any cash and the fair market value of any other
consideration payable in any other tender offer by us or any of our
subsidiaries for our common stock expiring within the 12 months preceding
such tender offer in respect of which no adjustment has been made and (B)
the aggregate amount of any such all-cash distributions referred to in
clause (5) above to all holders of our common stock within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 20% of our market capitalization on the
expiration of such tender offer.
Except as stated above, the conversion price will not be adjusted for the
issuance of our common stock or any securities convertible into or exchangeable
for our common stock or carrying the right to purchase any of the foregoing. No
adjustment in the conversion price will be required unless such adjustment
would require a change of at least 1% in the conversion price then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment.
No adjustment will be made pursuant to clause (4) of the preceding paragraph
if we make proper provision for each holder of notes who converts a note to
receive, in addition to our common stock issuable upon such conversion, the
kind and amount of assets (including securities) if such holder had been a
holder of our common stock at the time of the distribution of such assets or
securities. Rights, options or warrants distributed by us to all holders of our
common stock that entitle the holders thereof to purchase shares of our capital
stock and that, until the occurrence of an event (a "Triggering Event"), (1)
are deemed to be transferred with the common stock; (2) are not exercisable;
and (3) are also issued in respect of future issuances of our common stock,
shall not be deemed to be distributed until the occurrence of the Triggering
Event.
In the case of (1) any reclassification or change of our common stock (other
than changes in par value or from par value to no par value or resulting from a
subdivision or a combination) or (2) a consolidation or merger involving us or
a sale or conveyance to another corporation or business entity of our property
and assets as an entirety or substantially as an entirety (determined on a
consolidated basis), in each case as a result of which holders of our common
stock shall be entitled to receive stock, other securities, other property or
assets (including cash) with respect to or in exchange for such common stock,
each note then outstanding will, without the consent of the holder of any note,
become convertible only into the kind and amount of shares of stock, other
securities or other property or assets that they would have owned or been
entitled to receive upon such reclassification, change, consolidation, merger,
sale or conveyance had such notes been converted into our
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common stock immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance, assuming that a holder of notes would not have
exercised any rights of election as to the stock, other securities or other
property or assets receivable in connection therewith and received per share
the kind and amount received per share by a plurality of non-electing
shareholders.
If a taxable distribution to holders of common stock (or other transaction)
results in any adjustment of the conversion price, the holders of notes may, in
certain circumstances, be deemed to have received a distribution subject to the
U.S. federal income tax as a dividend. In certain other circumstances, the
absence of such an adjustment may result in a taxable dividend to the holders
of our common stock. The material federal income tax consequences in those
circumstances will be set forth in the applicable prospectus supplement.
We may, from time to time and to the extent permitted by law, reduce the
conversion price by any amount for any period of at least 20 business days, in
which case we shall give at least 15 days' notice of such decrease, if the
Board of Directors has made a determination that such decrease would be in our
best interests, which determination shall be conclusive. We may, at our option,
make such reductions in the conversion price, in addition to those set forth
above, as we deem advisable to avoid or diminish any income tax to our
shareholders resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes. The
material federal income tax consequences in those circumstances will be set
forth in the applicable prospectus supplement.
Subordination
The payment of principal of, premium, if any, and interest on the notes,
including amounts payable on any redemption or repurchase, will, to the extent
set forth in the Indenture, be subordinated in the event of right of payment to
the prior payment in full of all Senior Indebtedness. Upon any distribution to
our creditors in our liquidation or dissolution or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding related to us or
our property, in an assignment for the benefit of creditors or any marshalling
of our assets and liabilities, the holders of Senior Indebtedness then
outstanding will first be entitled to receive payment in full of all amounts
due or to become due thereon before the holders of the notes will be entitled
to receive any payment in respect of the principal of, premium, if any, or
interest on the notes (except that holders of notes may receive securities that
are subordinated at least to the same extent as the notes to Senior
Indebtedness and any securities issued in exchange for Senior Indebtedness).
We also may not make any payment upon or in respect of the notes (except in
such subordinated securities) and may not acquire any notes for cash or
property (except in such subordinated securities) if (1) a default in the
payment of the principal of, premium, if any, or interest on, including a
default under any repurchase or redemption obligation with respect to, Senior
Indebtedness occurs and is
continuing beyond any applicable period of grace; or (2) any other default
occurs and is continuing with respect to Designated Senior Indebtedness, as
defined below, that permits holders of the Designated Senior Indebtedness as to
which such default relates to accelerate its maturity and the Trustee receives
a notice of such default (a "Payment Blockage Notice") from a holder of such
Designated Senior Indebtedness or other person permitted to give such notice
under the Indenture. Payments on the notes may and shall be resumed and we may
acquire notes (A) in the case of a payment default, upon the date on which such
default is cured or waived; or (B) in the case of a non-payment default, 179
days after the date on which the applicable Payment Blockage Notice is received
(or sooner, if such default is cured or waived), unless the maturity of any
Senior Indebtedness has been accelerated. No new period of payment blockage may
be commenced within 360 days after the receipt by the Trustee of any prior
Payment Blockage Notice. No non-payment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee shall be
the basis for a subsequent Payment Blockage Notice.
"Designated Senior Indebtedness" means our obligations under particular
Senior Indebtedness in which the instrument creating or evidencing the same or
the assumption or guarantee thereof, or related agreements or documents to
which we are a party, expressly provides that such indebtedness shall be
"Designated Senior
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Indebtedness" for purposes of the Indenture, provided that such instrument,
agreement or other document may place limitations and conditions on the right
of such Senior Indebtedness to exercise the rights of Designated Senior
Indebtedness.
"Senior Indebtedness" with respect to the notes means the principal of,
premium, if any, and interest on, and any fees, costs, expenses and any other
amounts (including indemnity payments) related to the following, whether
outstanding on the date of the Indenture or thereafter incurred or created:
(1) Our indebtedness, matured or unmatured, whether or not contingent,
for money borrowed evidenced by notes or other written obligations;
(2) Any interest rate contract, interest rate swap agreement or other
similar agreement or arrangement designed to protect us or any of our
subsidiaries against fluctuations in interest rates;
(3) Our indebtedness, matured or unmatured, whether or not contingent,
evidenced by notes, debentures, bonds or similar instruments or bankers
acceptances, letters of credit or similar facilities (or reimbursement
agreements in respect thereof);
(4) Our obligations as lessee under capitalized leases and under leases
of property made as part of any sale and leaseback transactions;
(5) Indebtedness of others of any of the kinds described in the
preceding clauses (1) through (4) assumed or guaranteed by us; and
(6) Renewals, extensions, modifications, amendments and refundings of,
and indebtedness and obligations of a successor person issued in exchange
for or in replacement of, indebtedness or obligations of the kinds
described in the preceding clauses (1) through (5), unless the agreement
pursuant to which any such indebtedness described in clauses (1) through
(5) is created, issued, assumed or guaranteed and expressly provides that
such indebtedness is not senior or superior in right of payment to the
notes;
provided, however, that the following shall not constitute Senior Indebtedness:
(A) Any of our indebtedness or obligations in respect of the notes;
(B) Any of our indebtedness to any of our subsidiaries or other
affiliates;
(C) Any of our indebtedness that is subordinated or junior in any
respect to any other indebtedness; and
(D) Any of our indebtedness incurred for the purchase of goods or
materials in the ordinary course of business.
If the Trustee (or paying agent if other than the Trustee) or any holder
receives any payment of principal of, premium, if any, or interest with respect
to the notes at a time when such payment is prohibited under the Indenture,
such payment shall be held in trust for the benefit of, and shall be paid over
and delivered to, the holders of Senior Indebtedness then outstanding or their
representative as their respective interests may appear. After all Senior
Indebtedness is paid in full and until the notes are paid in full, holders of
the notes shall be subrogated (equally and ratably with all other indebtedness
ranking equally with the notes) to the rights of holders of Senior Indebtedness
to receive distributions applicable to Senior Indebtedness to the extent that
distributions otherwise payable to the holders of the notes have been applied
to the payment of Senior Indebtedness.
At June 30, 1999, our Senior Indebtedness consisted of various capital lease
obligations aggregating approximately $2.1 million and the remaining $1.0
million installment due for our purchase of IntelliFrame.
In addition, the notes will be structurally subordinated to all indebtedness
and other liabilities, including trade accounts payable and lease obligations,
of our subsidiaries, as any right of ours to receive any assets of its
subsidiaries upon their liquidation or reorganization, and the consequent right
of holders of the notes to
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participate in those assets, will be effectively subordinated to the claims of
that subsidiary's creditors, including trade creditors, except to the extent
that we are recognized as a creditor of that subsidiary, in which case our
claims will still be subordinate to any security interest in the assets of such
subsidiary senior to that held by us.
No provision contained in the Indenture or the notes will affect our
obligation, which is absolute and unconditional, to pay, when due, principal
of, premium, if any, and interest on the notes. The subordination provisions of
the Indenture and the notes will not prevent the occurrence of any Default or
Event of Default under the Indenture or limit the rights of the Trustee or any
other holder, subject to the provisions described herein, to pursue any other
rights or remedies with respect to the notes.
The Indenture does not prohibit or limit the incurrence of any indebtedness
by us or our subsidiaries.
Provisional Redemption by Us
Unless otherwise set forth in the prospectus supplement, we may redeem the
notes, in whole or in part, at any time prior to a date designated in the
prospectus supplement, at a redemption price equal to $1,000 per $1,000
principal amount of notes to be redeemed plus accrued and unpaid interest, if
any, to the Redemption Date (the "Provisional Redemption Date") if the closing
price of the common stock shall have exceeded 150% of the conversion price then
in effect for at least 20 trading days within a period of 30 consecutive
trading days ending on the trading day prior to the date of mailing of the
notice of provisional redemption (the "Notice Date," which date shall be no
more than 60 nor less than 30 days prior to the Provisional Redemption Date).
Upon any Provisional Redemption, we will make an additional payment in cash
(the "Make-Whole Payment") with respect to the notes called for redemption to
holders on the Notice Date in an amount set forth in the prospectus supplement
(per $1,000 principal amount of notes), less the amount of any interest
actually paid on such note prior to the Notice Date. We will be obligated to
make the Make-Whole Payment on all notes called for provisional redemption,
including any notes converted after the Notice Date and prior to the
Provisional Redemption Date.
Optional Redemption by Us
At any time after the dates set forth in the prospectus supplement, we have
the option to redeem the notes on at least 30 but not more than 60 days'
notice, in whole at any time or in part from time to time, at the prices set
forth in the prospectus supplement.
If fewer than all the notes are to be redeemed, the Trustee will select the
notes to be redeemed in principal amounts of $1,000 or integral multiples
thereof by lot. If any note is to be redeemed in part only, a new note or notes
in principal amount equal to the unredeemed principal portion thereof will be
issued. If a portion of a holder's notes is selected for partial redemption and
such holder converts a portion of such notes, such converted portion shall be
deemed to be taken from the portion selected for redemption. No sinking fund is
provided for the notes.
Repurchase at Option of Holders upon a Change of Control
Unless otherwise set forth in the prospectus supplement, upon the occurrence
of a Change of Control, each holder of notes shall have the right to require us
to repurchase such holder's notes in whole or in part in integral multiples of
$1,000 at a purchase price in cash in an amount equal to 100% of the principal
amount thereof, together with accrued and unpaid interest to the date of
purchase, pursuant to an offer (the "Change of Control Offer") made in
accordance with the procedures described below and the other provisions in the
Indenture.
A "Change of Control" means an event or series of events in which:
. Any "person" or "group" (as such terms are used in sections 13(d) and
14(d) of the Exchange Act) acquires "beneficial ownership" (as
determined in accordance with Rule 13d-3 under the Exchange
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Act), directly or indirectly, of more than 50% of the combined voting
power of the then outstanding securities entitled to vote generally in
elections of our directors (the "Voting Stock") other than acquisitions
by us, our subsidiaries or our employee benefit plans; or
. We consolidate with or merge into any other corporation or business
entity (other than any merger which is effected solely to change our
jurisdiction of incorporation), or convey, transfer or lease all or
substantially all of our assets (determined on a consolidated basis) to
any person, or any other corporation or business entity merges with or
into us, and, in the case of any such transaction, our outstanding
common stock is changed or exchanged as a result, unless our
shareholders immediately before such transaction own, directly or
indirectly, more than 50% of the combined voting power of the
outstanding voting securities of the corporation or business entity
resulting from such transaction in substantially the same proportion as
their ownership of the Voting Stock immediately before such transaction;
provided that a Change in Control shall not be deemed to have occurred if
either:
. The closing price per share of the common stock for any five trading
days within the period of ten consecutive trading days during a period
set forth in the Indenture in connection with the Change of Control
shall equal or exceed 105% of the conversion price of the notes in
effect on each such trading day; or
. At least 90% of the consideration in the Change of Control transaction
consists of shares of common stock traded on a national securities
exchange or quoted on the Nasdaq National Market, and as a result of
such transaction, the notes become convertible solely into such common
stock.
Within 30 days following any Change of Control, unless we have given the
holders notice of our irrevocable intention to redeem all outstanding notes as
described under "Optional redemption by us," we shall send by first-class
mail, postage prepaid, to the Trustee and to each holder of notes, at such
holder's address appearing in the security register, a notice (the "Change of
Control Notice") stating, among other things, that a Change of Control has
occurred, the purchase price, the purchase date, which shall be a business day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed, and certain other procedures that a holder of notes must follow to
accept a Change of Control Offer or to withdraw such acceptance.
We will comply, to the extent applicable, with the requirements of Rule 13e-
4 under the Exchange Act and other securities laws or regulations in
connection with the repurchase of the notes as described above.
We may, to the extent permitted by applicable law, at any time purchase the
notes in the open market or by tender at any price or by private agreement.
Any note so purchased by us may, to the extent permitted by applicable law, be
reissued or resold or may, at our option, be surrendered to the trustee for
cancellation. Any notes surrendered as aforesaid may not be reissued or resold
and will be canceled promptly.
The foregoing provisions would not necessarily afford holders of the notes
protection in the event of a highly leveraged or other transaction involving
us that may adversely affect holders.
Our future indebtedness may contain prohibitions of certain events that
would constitute a Change of Control or require us to offer to repurchase such
indebtedness upon a Change of Control. Moreover, the exercise by the holders
of notes of their rights to require us to purchase the notes could cause a
default under such indebtedness, even if the Change of Control itself does
not, due to the financial effect of such purchase on us. Finally, our ability
to pay cash to holders of notes upon a purchase may be limited by our then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required purchases. Furthermore,
the Change of Control provisions may in certain circumstances make more
difficult or discourage a takeover of us and the removal of the incumbent
management.
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Certain Covenants
Merger, consolidation and sale of assets. Unless otherwise set forth in the
prospectus supplement, we shall not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all of our assets (determined on
a consolidated basis), whether in a single transaction or a series of related
transactions, to any person unless:
. Either we are the resulting, surviving or transferee person (the
"Successor Company") or the Successor Company is a corporation, limited
liability company, partnership or trust organized and existing under the
laws of the United States or any State thereof or the District of
Columbia, and the Successor Company (if not us) expressly assumes by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of our obligations under the Indenture
and the notes, including the conversion rights described above under
"Conversion of Notes;"
. Immediately after giving effect to such transaction, no Event of Default
has happened and is continuing; and
. We deliver to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture, if any, comply with the Indenture.
Events of Default and Remedies
Unless otherwise set forth in the prospectus supplement, an Event of Default
is defined in the Indenture as being:
. Default in payment of the principal of or premium, if any, on the notes
of the applicable series when due at maturity, upon redemption or
otherwise, including our failure to purchase the notes when required
upon a Change of Control (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture);
. Default for 30 days in payment of any installment of interest on the
notes (whether or not such payment shall be prohibited by the
subordination provisions of the Indenture) of the applicable series;
. Failure to provide a Change of Control Notice, whether or not such
notice or payment pursuant to a Change of Control Offer shall be
prohibited by the subordination provisions of the Indenture;
. Failure to perform any other covenant in the Indenture with respect to
the applicable series continuing for 90 days after written notice by the
Trustee or the holders of 25% in aggregate principal amount of the
notes; and
. Certain events involving the bankruptcy, insolvency or reorganization of
us.
The Indenture provides that the Trustee may withhold notice to the holders of
notes of any default (except in payment of principal, premium, if any, or
interest with respect to the notes) if the Trustee considers it in the interest
of the holders of notes to do so.
The Indenture provides that if any Event of Default shall have occurred and
be continuing, the Trustee or the holders of not less than 25% in principal
amount of the notes of any applicable series then outstanding may declare the
principal of and premium, if any, on the notes to be due and payable
immediately. At any time after a declaration of acceleration, but before a
judgement or decree based on acceleration has been obtained, the holders of a
majority in aggregate principal amount of the notes of any applicable series
may, under certain circumstances, rescind and annul such acceleration.
The holders of a majority in principal amount of the notes of any applicable
series then outstanding shall have the right to direct the time, method and
place of conducting any proceedings for any remedy available to the Trustee,
subject to certain limitations specified in the Indenture. The Indenture
provides that, subject to the duty of the Trustee following an Event of Default
to act with the required standard of care, the Trustee will not
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be under an obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of the notes,
unless the Trustee receives satisfactory indemnity against any associated loss,
liability or expense.
Satisfaction and Discharge; Defeasance
The Indenture and any supplemental indenture will cease to be of further
effect as to all outstanding notes of the applicable series except as to:
. Rights of registration of transfer and exchange and our right of
optional redemption;
. Substitution of apparently mutilated, defaced, destroyed, lost or stolen
notes;
. Rights of holders of notes to receive payments of principal of, premium,
if any, and interest on, the notes;
. Rights of holders of notes to convert to common stock;
. Rights, obligations and immunities of the Trustee under the Indenture;
and
. Rights of the holders of notes as beneficiaries of the Indenture with
respect to the property so deposited with the Trustee payable to all or
any of them;
if:
(A) We will have paid or caused to be paid the principal of, premium,
if any, and interest on the notes as and when the same will have become due
and payable;
(B) All outstanding notes (except lost, stolen or destroyed notes which
have been replaced or paid) have been delivered to the Trustee for
cancellation; or
(C) (i) the notes not previously delivered to the Trustee for
cancellation will have become due and payable or are by their terms to
become due and payable within one year or are to be called for redemption
under arrangements satisfactory to the Trustee upon delivery of notice and
(ii) we will have irrevocably deposited with the Trustee, as trust funds,
cash, in an amount sufficient to pay principal of and interest on the
outstanding notes, to maturity or redemption, as the case may be.
Such trust may only be established if such deposit will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument pursuant to which we are a party or by which the trust is bound, and
we have delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that all conditions related to such defeasance have been
complied with.
The Indenture will also cease to be in effect (except as described above) and
the indebtedness on all outstanding notes of the applicable series will be
discharged on the 123rd day after the irrevocable deposit by us with the
Trustee, in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of notes of the applicable series, of cash, U.S.
Government Obligations (as defined in the Indenture) or a combination thereof,
in an amount sufficient, with interest earnings thereon, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay the principal
of, premium, if any, and interest on the notes of the applicable series then
outstanding in accordance with the terms of the Indenture and the notes ("legal
defeasance"). Such legal defeasance may only be effected if:
. Such deposit will not result in a breach or violation of, or constitute
a default under, any agreement or instrument to which we are a party or
by which we are bound;
. We have delivered to the Trustee an opinion of counsel stating that (A)
we have received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either
case to the effect that, based thereon, the holders of the notes of the
applicable series will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit, defeasance and
discharge by
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us and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge had not occurred;
. We have delivered to the Trustee an opinion of counsel to the effect
that after the 123rd day following the deposit, the trust funds will not
constitute a preferential transfer under Section 547(b) of the United
States Bankrupcy Code; and
. We have delivered to the Trustee an Officers' Certificate and an opinion
of counsel stating that we have complied with all conditions related to
the defeasance.
We may also be released from our obligations under the covenants described
above under "Repurchase at Option of Holders upon a Change of Control" and
"Certain Covenants" with respect to the notes of the applicable series
outstanding on the 123rd day after the irrevocable deposit by us with the
Trustee, in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of notes of the applicable series, of cash,
U.S. Government Obligations or a combination thereof, in an amount sufficient,
with interest earnings thereon, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay the principal of, premium, if any, and
interest on the notes of the applicable series then outstanding in accordance
with the terms of the Indenture and such notes ("covenant defeasance"). Such
covenant defeasance may only be effected if:
. Such deposit will not result in a breach or violation of, or constitute
a default under, any agreement or instrument to which we are a party or
by which we are bound;
. We have delivered to the Trustee an Officers' Certificate and an opinion
of counsel to the effect that the holders of notes of the applicable
series will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and covenant defeasance by us and
will be subject to federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such deposit
and covenant defeasance had not occurred;
. We have delivered to the Trustee an opinion of counsel to the effect
that after the 123rd day following the deposit, the trust funds will not
constitute a preferential transfer under Section 547(b) of the United
States Bankrupcy Code; and
. We have delivered to the Trustee an Officers' Certificate and an opinion
of counsel stating that we have complied with all conditions related to
the covenant defeasance.
Following such covenant defeasance, we will no longer be required to comply
with the obligations described above under "Certain Covenants" and will have
no obligation to repurchase the notes of the applicable series pursuant to the
provisions described under "Change of Control."
Notwithstanding any satisfaction and discharge or defeasance of the
Indenture, our obligations described under "Conversion of Notes" will survive
to the extent provided in the Indenture until the notes cease to be
outstanding.
Form, Denomination, Transfer, Exchange and Book-Entry Procedures
Notes will be issued only in fully registered form, without interest
coupons, in minimum denominations of $1,000 and integral multiples in excess
thereof. Notes sold in any offering will be issued only against payment
therefor in immediately available funds.
The notes of each series initially will be represented by one or more notes
in registered, global form without interest coupons (each a "global note" and
collectively, the "global notes"). The global notes will be deposited upon
issuance with the Trustee as custodian for The Depository Trust Company
("DTC"), in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
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Transfer of beneficial interests in the global notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants,
which may change from time to time.
Except as set forth below, the global notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for
notes in certificated form except in the limited circumstances described below
under "--Exchange of Book-Entry notes for Certificated Notes."
Exchange of Book-Entry Notes for Certificated Notes
A beneficial interest in a global note may not be exchanged for a note in
certificated form unless (1) DTC (A) notifies us that DTC is unwilling or
unable to continue as depositary for the global note or (B) has ceased to be a
clearing agency registered under the Exchange Act and in either case we
thereupon fail to appoint a successor depository within 90 days; (2) we, at our
option, notify the Trustee in writing that we elect to cause the issuance of
our notes in certificated form; or (3) there shall have occurred and be
continuing an Event of
Default or any event that after notice or lapse of time or both would be an
Event of Default with respect to the notes. In all cases, certificated notes
delivered in exchange for any global note or beneficial interests therein will
be registered in the names, and issued in any approved denominations, requested
by or on behalf of DTC, in accordance with its customary procedures.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL NOTES. THE DESCRIPTION OF THE
OPERATIONS AND PROCEDURES OF DTC THAT FOLLOW ARE PROVIDED SOLELY AS A MATTER OF
CONVENIENCE. THESE OPERATIONS AND PROCEDURES ARE SOLELY WITHIN THE CONTROL OF
DTC AND ARE SUBJECT TO CHANGE BY IT FROM TIME TO TIME. WE TAKE NO
RESPONSIBILITY FOR THESE OPERATIONS AND PROCEDURES AND URGE INVESTORS TO
CONTACT DTC OR ITS PARTICIPANTS DIRECTLY TO DISCUSS THESE MATTERS.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants ("participants") and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical transfer and delivery of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. Certain of such participants, or their
representatives, together with other entities, own DTC. Indirect access to the
DTC system is available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
DTC has advised us that its current practice, upon the issuance of a global
note, is to credit, on its internal system, the respective principal amount of
the individual beneficial interests represented by such global note to the
accounts with DTC of the participants through which such interests are to be
held. Ownership of beneficial interest in the global note will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by DTC or its nominees, with respect to interests of participants,
and the records of participants and indirect participants, with respect to
interests of persons other than participants.
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE
INDENTURE AND THE NOTES. Except in the limited circumstances described above,
owners of beneficial interest in a global note will not be entitled to have any
portions of such global note registered in their names, will not receive or be
entitled to receive physical delivery of notes in definitive form and will not
be considered the owners or holders of the global notes, or any notes
represented thereby, under the Indenture
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<PAGE>
or the notes. Accordingly, each person owning a beneficial interest in the
global note must rely on the procedures of DTC and, if such person is not a
participant, those of the participant through which such person owns its
interest, in order to exercise any rights of a holder under the Indenture or
such note.
Investors may hold their interests in the global note directly through DTC,
if they are participants in such system, or indirectly through organizations
that are participants in such system. All interests in a global note will be
subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a global note to such persons may be limited
to that extent. Because DTC can act only on behalf of its participants, which
in turn act on behalf of indirect participants and certain banks, the ability
of a person having beneficial interests in a global note to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the
lack of a physical certificate evidencing such interests.
Cash payment of the principal of, interest on, or the redemption or
repurchase of the global note will be made to DTC or its nominee, as the case
may be, as the registered owner of the global note by wire transfer of
immediately available funds on each relevant payment date. Neither we, the
Trustee nor any of our respective agents will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a global note including any delay by DTC
or any participant or indirect participant in identifying the beneficial
ownership interests, and we and the Trustee may conclusively rely on, and shall
be protected in relying on, instructions from DTC for all purposes.
We expect that DTC or its nominee, upon receipt of any cash payment of
principal, interest or the redemption or repurchase price in respect of a
global note representing any notes held by it or its nominee, will immediately
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global note for
such notes as shown on the records of DTC or its nominee (adjusted as necessary
so that such payments are made with respect of whole notes only), unless DTC
has reason to believe that it will not receive payment on such payment date. We
also expect that payments by participants to owners of beneficial interests in
such global note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name." Such payments will
be the responsibility of such participants.
Redemption notices will be sent to DTC or its nominee. If less than all notes
are being redeemed, DTC's practice is to determine by lot the amount of the
holdings of each participant in such issue to be redeemed.
Neither DTC nor its nominee will consent or vote with respect to the notes.
Under its usual procedures, DTC mails an omnibus proxy to the issuer as soon as
possible after the record date. The omnibus proxy assigns DTC's, or its
nominee's, consenting or voting rights to those participants to whose accounts
the notes are credited on the record date identified in a listing attached to
the omnibus proxy.
Interests in the global notes will trade in DTC's Same-Day Funds Settlement
System, and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject to all cases to the rules and
procedures of DTC and its participants. Transfers between participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes, including the presentation of notes for exchange as described
below and the conversion of notes, only at the direction of one or more
participants to whose account with DTC interests in the global notes are
credited and only in respect of such portion of the aggregate principal amount
of the notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default, as defined above,
under the notes, DTC reserves the right to exchange the global notes for notes
in certificated form, and to distribute such notes to its participants.
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<PAGE>
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the global note among
participants, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time.
Neither we, the Trustee nor any of our respective agents will have any
responsibility for the performance by DTC, its participants or indirect
participants of their respective obligations under the rules and procedures
governing its operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in global notes.
Modifications and Waivers of the Indenture
The Indenture contains provisions permitting us and the Trustee, with the
consent of the holders of not less than a majority in principal amount of the
notes of the applicable series at the time outstanding, to modify the Indenture
or any supplemental indenture or the rights of the holders of notes of the
applicable series, and to waive certain of our past defaults, except that
without the consent of the holder of each note so affected no such modification
shall:
. Extend the fixed maturity of any note;
. Reduce the rate or extend the time of payment of interest thereon;
. Reduce the principal amount thereof or premium, if any, thereon;
. Reduce any amount payable upon redemption thereof;
. Change our obligation to repurchase any note upon the happening of a
Change of Control;
. Impair or affect the right of a holder to institute suit for the payment
thereof;
. Change the currency in which the notes are payable;
. Modify the subordination provisions of the Indenture in a manner adverse
to the holders of notes; or
. Impair the right to convert the notes into common stock subject to the
terms set forth in the Indenture.
In addition, no modification shall reduce the foregoing percentage of notes
without the consent of the holders of all of the notes then outstanding.
The holders of a majority in aggregate principal amount of the outstanding
notes of the applicable series may waive compliance by us with certain
restrictive provisions of the Indenture and may also waive any past defaults
under the Indenture, except a default in the payment of principal, premium, if
any, or interest.
Compliance Certificates
The Indenture requires us to file annual Officer's Certificates with the
Trustee stating whether or not to the best knowledge of the officer executing
the certificate we are in compliance with the terms and conditions of the
Indenture. We must also notify the Trustee if we become aware of any default or
Event of Default.
Governing Law
The Indenture and the notes will be governed by and construed in accordance
with the laws of the State of New York.
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<PAGE>
DESCRIPTION OF COMMON STOCK
Our authorized capital stock currently consists of 100,000,000 shares of
common stock and 1,000,000 shares of preferred stock. Following is a summary of
the material provisions of our common stock, our preferred stock, our rights
plan, the anti-takeover provisions of the Minnesota Business Corporation Act,
our articles of incorporation and our bylaws.
Common Stock
As of July 23, 1999, there were 23,440,093 shares of common stock outstanding
held of record by approximately 1,000 shareholders of record. No shares of
preferred stock are outstanding.
Subject to preferences that may be applicable to any outstanding preferred
stock, the holders of outstanding shares of common stock are entitled to the
following rights:
. to receive dividends out of assets legally available therefor at such
times and in such amounts as our board of directors from time to time
may determine;
. one vote for each share held on all matters submitted to a vote of our
shareholders; and
. upon our liquidation, dissolution or winding-up, to share ratably in all
assets remaining after payment of liabilities and the liquidation or
redemption of any preferred stock.
Cumulative voting for the election of directors is not authorized by our
articles of incorporation, which means that the holders of a majority of the
outstanding shares of stock with voting rights can elect all of the directors
then standing for election. The common stock is not entitled to preemptive
rights and is not subject to conversion or redemption. The rights of holders of
common stock may be altered by the greater of the vote of holders of a majority
of shares of common stock present and entitled to vote at a meeting of
shareholders, and a vote at a meeting of shareholders of holders of a majority
of the minimum number of shares of common stock that would constitute a quorum.
A quorum consists of a majority of the shares issued and outstanding and
entitled to vote.
Preferred Stock
Our board of directors is authorized, without action by our shareholders, to
designate and issue preferred stock in one or more series. The board of
directors can designate the rights, preferences and privileges of the shares of
each series and any qualifications, limitations or restrictions thereon.
The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of our common stock. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes could, among other things, have the effect of
delaying, deferring or preventing a change in control. The issuance of
preferred stock with voting or conversion rights may adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others. We have no current plans to issue any shares of preferred
stock.
Shareholder Rights Plan
Out of the 1,000,000 authorized shares of preferred stock, on July 23, 1999
there were 35,000 shares of Series A Junior Participating Preferred Stock
reserved for issuance in connection with our shareholder rights plan set forth
in our Rights Agreement, dated July 24, 1998, with ChaseMellon Shareholder
Services, L.L.C. as rights agent.
In July 1998, the board of directors adopted the shareholder rights plan and
declared a dividend distribution of one preferred stock purchase right for each
share of common stock to shareholders of record on August 10, 1998. Each share
of common stock issued subsequent to such date, including the shares of common
stock issuable upon conversion of the notes, includes a corresponding preferred
stock purchase right. Each preferred stock purchase right entitles the
registered holder to purchase from us 1/1000th of a share of the
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series A preferred stock at a price of $50.00 per unit, subject to adjustment.
The rights become exercisable upon the earlier of:
. the close of business on the tenth day following a public announcement
that a person or group of affiliated or associated persons have acquired
beneficial ownership of 20% or more of the outstanding common shares; or
. the close of business of the tenth day following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer,
the consummation of which would result in the beneficial ownership by a
person or group of 20% or more of the outstanding common shares.
Upon exercise and payment of the then current purchase price for the right,
the right holder will have the right to receive common stock (or, in some
circumstances, cash, property or other securities of ours) having a value equal
to two times the purchase price. Upon the occurrence of certain other events,
each right holder shall have the right to receive, upon exercise and payment of
the then current purchase price, common stock of the other party to the
transaction having a value equal to two times the purchase price.
We are entitled to redeem the rights in whole, but not in part, at a price of
$0.01 per right, subject to adjustment, payable in cash or shares of our common
stock, at any time prior to the earlier of the expiration of the rights in July
2008 or ten days following the time that a party has acquired beneficial
ownership of 20% or more of the shares of common stock then outstanding. Any of
the provisions of the Rights Agreement governing the rights may be supplemented
or amended by us in our sole and absolute discretion. Such supplements or
amendments by us may be made without the approval of the rights holders.
The existence of the shareholder rights plan as well as the ability of the
board of directors to issue preferred stock and the anti-takeover provision of
Minnesota law described below may serve to discourage an acquisition of us or
stock purchases in furtherance of an acquisition.
Business Combinations and Control Share Acquisitions Under the Minnesota
Business Corporation Act
As a public corporation, we are governed by the provisions of sections
302A.671 and 302A.673 of the Minnesota Business Corporation Act. These anti-
takeover provisions could operate to deny shareholders the receipt of a premium
on their stock and may also have a depressive effect on the market price of our
stock. Section 302A.671 basically provides that the shares of a corporation
acquired in a "control share acquisition" have no voting rights unless voting
rights are approved by the shareholders in a prescribed manner. A "control
share acquisition" is generally defined as an acquisition of beneficial
ownership of shares that would, when added to all other shares beneficially
owned by the acquiring person, entitle the acquiring person to have voting
power of 20% or more in the election of directors. Section 302A.673 prohibits a
public corporation from engaging in a "business combination" with an
"interested shareholder" for a period of four years after the date of the
transaction in which the person became an interested shareholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions. An
"interested shareholder" is a person who is the beneficial owner of 10% or more
of a corporation's voting stock. Reference is made to the detailed terms of
sections 302A.671 and 302A.673 of the Minnesota Business Corporation Act.
Articles of Incorporation and Bylaws
Our articles of incorporation and bylaws could make completion of an offer to
acquire us more difficult. We believe that the benefits of increased protection
from unfriendly or unsolicited proposals to acquire or restructure us outweigh
the disadvantages of discouraging such proposals, including proposals that are
priced above the then current market value of our common stock, because, among
other things, negotiation of such proposals could result in an improvement of
their terms.
Our articles of incorporation authorize, without action by the shareholders,
the board of directors to designate and issue preferred stock in one or more
series. Our board of directors can also issue shares of a class
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or series to holders of shares of another class or series to effectuate share
dividends, splits or conversions of our outstanding shares. In addition, our
articles of incorporation grant the board of directors the authority to adopt,
amend or repeal all or any of the bylaws, by a majority of its members present
at a duly called meeting, subject to the power of the shareholders to change or
repeal the bylaws. In addition, our bylaws provide that meetings of our
shareholders may only be called by the board of directors, certain of our
officers and shareholders holding not less than 3% of all outstanding voting
shares.
The provisions of the shareholder rights plan, our articles of incorporation,
our bylaws and Minnesota law are intended to encourage potential acquirers to
negotiate with us and to allow our board of directors the opportunity to
consider alternative proposals in the interest of maximizing shareholder value.
Such provisions may also have the effect of discouraging acquisition proposals
or delaying or preventing a change in control, which may harm our stock price.
Transfer Agent
The transfer agent for our common stock is ChaseMellon Shareholder Services,
L.L.C., Overpeck Centre, 85 Challenger Road, Ridgefield Park, New Jersey 07660,
telephone number (800) 288-9541.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1998 and the
related consolidated statements of operations, shareholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 1998 included in our Annual Report on Form 10-K for
the year ended December 31, 1998, have been audited by KPMG LLP, independent
certified public accountants, as stated in their reports with respect thereto,
and are incorporated herein by reference in reliance upon the authority of said
firm as experts in auditing and accounting.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The table below sets forth the estimated expenses (except the SEC
registration fee and the NASD listing fee, which are actual expenses) in
connection with the offer and sale of the offered securities covered by this
registration statement. The following expenses are being paid by us.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee............................................... $ 27,800
Legal fees and expenses............................................ 200,000
Accounting fees and expenses....................................... 50,000
Nasdaq National Market listing fee................................. 17,500
Trustee fees....................................................... 8,000
Printing expenses.................................................. 50,000
Blue sky fees and expenses......................................... 5,000
Miscellaneous expenses............................................. 16,700
--------
Total............................................................ $375,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Unless prohibited in a corporation's articles or bylaws, Minnesota Statutes,
section 302A.521 requires indemnification of officers, directors, employees and
agents, under certain circumstances, against judgments, penalties, fines,
settlements and reasonable expenses (including attorney's fees and
disbursements) incurred by such person in connection with a threatened or
pending proceeding with respect to the acts or omissions of such person in his
official capacity. The general effect of Minnesota Statutes, section 302A.521
is to reimburse (or pay on behalf of) directors and officers of the Registrant
any personal liability that may be imposed for certain acts performed in their
capacity as directors and officers of the Registrant, except where such persons
have not acted in good faith.
As permitted by the Minnesota Business Corporation Act, the Articles of
Incorporation of Computer Network Technology Corporation eliminate the
liability of our directors for monetary damages arising from any breach of
fiduciary duties as a member of our board of directors (except as expressly
prohibited by Minnesota Statutes, section 302A.251, subd. 4).
The registrant's officer's and director's liability insurance provides for
indemnification of our officers and directors in certain circumstances.
Underwriters, dealers and other persons may be entitled, under agreements
that may be entered into with us, to indemnification by us against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which they may be required to make in
respect thereof.
II-1
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement between Computer Network Technology
Corporation and the Representatives.*
2.1 Agreement for Sale of Shares among Computer Network Technology
Corporation and each of Scott Opitz and Alexsandr Elkin dated December
3, 1998. (Incorporated by reference to Exhibit 2.1 to current report
on Form 8-K dated December 3, 1998.)
2.2 Asset Purchase Agreement by and between Computer Network Technology
Acquisition I Corporation, Computer Network Technology Corporation and
Apertus Technologies Inc. dated October 24, 1997. (Incorporated by
reference to Exhibit 2.1 to current report on Form 8-K dated October
24, 1997.)
4.1 Rights Agreement between Computer Network Technology Corporation and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent including
the form of Rights Certificate and the Summary of Rights to Purchase
Preferred Shares. (Incorporated by reference to Exhibit 1 to Form 8-A
dated July 29, 1998.)
4.2 Form of Indenture for Convertible Subordinated Notes.**
4.3 Form of Common Stock Certificate.**
5.1 Opinion of Leonard, Street and Deinard Professional Association
regarding the legality of the Offered Securities being registered.**
10A Lease Agreement dated November 30, 1990 by and between TOLD
Development Company, a general partnership, and Computer Network
Technology Corporation. (Incorporated by reference to Exhibit 10C to
Form S-2 Registration Statement No. 33-41985.)
10B Computer Network Technology Corporation 401(k) Salary Savings Plan
effective January 1, 1991.**
10C Subscription Agreements of Kanematsu Electronics Ltd. and Kanematsu
USA Inc. dated October 22, 1990. (Incorporated by reference to Exhibit
10G to Form S-2 Registration Statement No. 33-41985.)
10D Amended 1992 Employee Stock Purchase Plan. (Incorporated by reference
to Exhibit 99 to Form S-8 Registration Statement No. 333-59947.)
10E Amended 1992 Stock Award Plan. (Incorporated by reference to Exhibit
99 to Form S-8 Registration Statement No. 333-59949.)
10F Sublease Agreement by and between ITT Consumer Financial Corporation
and Computer Network Technology Corporation dated October 1, 1993.
(Incorporated by reference to Exhibit 10X to Annual Report on Form 10-
K for the year ended December 31, 1993.)
10G First Amendment to Sublease Agreement by and between ITT Consumer
Financial Corporation and Computer Network Technology Corporation
dated October 26, 1993. (Incorporated by reference to Exhibit 10Y to
Annual Report on Form 10-K for the year ended December 31, 1993.)
10H Amendment No. 1 to Sublease Agreement by and between ITT Consumer
Financial Corporation and Computer Network Technology Corporation
dated February 9, 1994. (Incorporated by reference to Exhibit 10CC to
Form 10Q for the quarterly period ended March 31, 1994.)
10I March 10, 1994 Incentive Stock Option Agreements. (Incorporated by
reference to Exhibit 28.2 to Form S-8 Registration Statement No. 33-
83266.)
10J March 10, 1994 Non-Qualified Stock Option Agreements. (Incorporated by
reference to Exhibit 28.3 to Form S-8 Registration Statement No. 33-
83266.)
10K Building Lease by and between Opus Northwest, L.L.C., and Computer
Network Technology Corporation. (Incorporated by reference to Exhibit
10A to Form 10Q for the quarterly period ended September 30, 1998.)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
10L Employment Agreement by and between Computer Network Technology
Corporation and Thomas G. Hudson as amended. (Incorporated by
reference to Exhibit 10Z to Form 10-Q for the quarterly period ended
June 30, 1996.)
10M Lease Agreement between Teachers Realty Corporation and Computer
Network Technology Corporation. (Incorporated by reference to Exhibit
10AA to Form 10-Q for the quarterly period ended June 30, 1996.)
10N Description of Success Sharing Bonus Plan (Incorporated by reference
to Exhibit 10Y to Form 10-K for the year ended December 31, 1997.)
10O Employment Agreement by and between Computer Network Technology
Corporation and Mark Knittel. (Incorporated by reference to Exhibit
10AA to Form 10-K for the year ended December 31, 1997.)
10P Executive Deferred Compensation Plan. (Incorporated by reference to
Exhibit 10P to Form 10-K for the year ended December 31, 1998.)
10Q 1999 Non-Qualified Stock Award Plan.***
10R-1 Form of Non-Qualified Stock Option Agreement dated May 13, 1999 for
certain officers.***
10R-2 Form of Non-Qualified Stock Option Agreement dated May 13, 1999 for a
certain officer.***
10S-1 Form of Incentive Stock Option Agreement dated May 13, 1999 for
certain officers.***
10S-2 Form of Incentive Stock Option Agreement dated May 13, 1999 for a
certain officer.***
10T Employment Agreement dated December 3, 1998 by and between Scott Opitz
and IntelliFrame Corporation. (Incorporated by reference to Exhibit
10.3 to Form 8-K dated December 3, 1998.)
10U Employment Agreement dated December 3, 1998 by and between Alexsandr
Elkin and IntelliFrame Corporation. (Incorporated by reference to
Exhibit 10.4 to Form 8-K dated December 3, 1998.)
10V Employment Agreement dated March 16, 1998 by and between Nick V. Ganio
and Computer Network Technology Corporation. (Incorporated by
reference to Exhibit 10Q to Form 10-K for the year ended December 31,
1998.)
10W 1997 Restricted Stock Plan. (Incorporated by reference to Exhibit 99
to Form S-8 Registration Statement No. 333-59951.)
12.1 Statement Regarding Computation of Ratios for the year ended December
31, 1998 and prior years.**
23.1 Consent of Leonard, Street and Deinard Professional Association
(included in Exhibit 5.1).**
23.2 Consent of KPMG LLP.**
24.1 Power of Attorney of Patrick W. Gross.***
24.2 Power of Attorney of Erwin A. Kelen.***
24.3 Power of Attorney of Lawrence Perlman.***
24.4 Power of Attorney of John A. Rollwagen.***
24.5 Certified copy of a resolution adopted by the Board of Directors
authorizing execution of the registration statement by power of
attorney.**
24.6 A power of attorney was also included on the signature page to
Amendment No. 1 to the Registration Statement executed by each of Mr.
Thomas G. Hudson, Mr. Gregory T. Barnum, and Mr. Jeffrey A. Bertelsen
on July 28, 1999.
25.1 Statement of Eligibility of Trustee.*
</TABLE>
- --------
* To be incorporated by reference in connection with the offering of the
applicable securities.
** Filed herewith.
*** Previously filed.
II-3
<PAGE>
Item 17. Undertakings.
Insofar as indemnification by the registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
person 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, 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 a director, officer or controlling person in
connection with the securities being registered hereunder, 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 express in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs 1(i) and 1(ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by
reference in this registration statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declare effective.
II-4
<PAGE>
(5) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(6) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(7) To file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations prescribed
by the Commission under Section 305(b)(2) of such act.
(8) The undersigned registrant hereby undertakes: (a) to use its best
efforts to distribute prior to the opening of bids, to prospective
bidders, underwriters and dealers, a reasonable number of prospectuses
which at that time meets the requirements of Section 10(a) of the Act,
and relating to securities offered at competitive bidding, as contained
in the registration statement, together with supplements thereto, and
(b) to file an amendment to the registration statement, or file
documents incorporated by reference into the registration statement, or
take other similar action, to reflect the results of bidding, the terms
of reoffering and related matters to the extent required by Form S-3,
not later than the first use authorized by the issuer after the opening
of bids, of a prospectus relating to securities offered by competitive
bidding, unless no further public offering of such securities by the
issuer and no reoffering of such securities by the purchaser is
proposed to be made.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis, State of Minnesota, on August 23, 1999.
Computer Network Technology
Corporation
/s/ Thomas G. Hudson
By: _________________________________
Thomas G. HudsonChairman,
President and Chief
Executive Officer
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Thomas G. Hudson Chairman of the
- ------------------------------------- Board, Chief August 23, 1999
Thomas G. Hudson Executive Officer
and Director
(Principal
Executive Officer)
/s/ Gregory T. Barnum Vice President of
- ------------------------------------- Finance, Chief August 23, 1999
Gregory T. Barnum Financial Officer
and Corporate
Secretary
(Principal
Financial Officer)
/s/ Jeffrey A. Bertelsen Corporate Controller
- ------------------------------------- and Treasurer August 23, 1999
Jeffrey A. Bertelsen (Principal
Accounting Officer)
/s/ * Director
- ------------------------------------- August 23, 1999
John A. Rollwagen
/s/ * Director
- ------------------------------------- August 23, 1999
Patrick W. Gross
/s/ * Director
- ------------------------------------- August 23, 1999
Erwin A. Kelen
/s/ * Director
- ------------------------------------- August 23, 1999
Lawrence Perlman
*By
/s/ Jeffrey A. Bertelsen
----------------------------------
attorney-in-fact
II-7
<PAGE>
EXHIBIT 4.2
================================================================================
COMPUTER NETWORK TECHNOLOGY CORPORATION
Issuer
AND
----------------------------------
Trustee
INDENTURE
Dated as of ______________
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
310(a)(1).................................................. 7.10
(a)(2).................................................. 7.10
(a)(3).................................................. N.A.
(a)(4).................................................. N.A.
(a)(5).................................................. 7.10
(b)..................................................... 7.9
(c)..................................................... N.A.
311(a)..................................................... 7.14
(b)..................................................... 7.14
(c)..................................................... N.A.
312(a)..................................................... 2.5(a); 5.1
(b)..................................................... 16.4
(c)..................................................... 16.4
313(a)..................................................... 7.2
(b)(1).................................................. N.A.
(b)(2).................................................. 7.2
(c)..................................................... 7.2
(d)..................................................... 7.2
314(a)..................................................... 4.8(a); 4.6
(b)..................................................... N.A.
(c)(1).................................................. 16.6
(c)(2).................................................. 16.6
(c)(3).................................................. N.A.
(d)..................................................... N.A.
(e)..................................................... 16.7
(f)..................................................... N.A.
315(a)..................................................... 7.1(b)
(b)..................................................... 6.8
(c)..................................................... 7.1(a)
(d)..................................................... 7.1(c)
(e)..................................................... 6.9
316(a)(last sentence)...................................... 8.4
(a)(1)(A)............................................... 6.7
(a)(1)(B)............................................... 6.7
(a)(2).................................................. N.A.
(b)..................................................... 6.4
(c)..................................................... 9.2
317(a)..................................................... 6.2
i
<PAGE>
(b)..................................................... 4.4
318(a)..................................................... 16.9; 16.10
N.A. means Not applicable.
..........................................................
* This Cross-Reference Table is not part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS..............................................................1
Section 1.1 Definitions................................................1
Section 1.2 Incorporation by Reference of Trust Indenture Act..........6
Section 1.3 Rules of Construction......................................7
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES....................................................7
Section 2.1 Designation, Amount and Issue of Notes.....................7
Section 2.2 Form of Notes..............................................7
Section 2.3 Date and Denomination of Notes; Payments of Interest.......8
Section 2.4 Execution of Notes........................................10
Section 2.5 Exchange and Registration of Transfer of Notes;
Depositary................................................10
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes................13
Section 2.7 Temporary Notes...........................................14
Section 2.8 Cancellation of Notes Paid, Etc...........................14
Section 2.9 CUSIP Numbers.............................................14
ARTICLE III
REDEMPTION AND REPURCHASE OF NOTES......................................15
Section 3.1 Right of Redemption.......................................15
Section 3.2 Notice of Redemption; Selection of Notes..................15
Section 3.3 Payment of Notes Called for Redemption....................17
Section 3.4 Conversion Arrangement on Call for Redemption.............17
Section 3.5 Repurchase of Notes Upon a Change of Control..............18
ARTICLE IV
PARTICULAR COVENANTS OF THE COMPANY.....................................20
Section 4.1 Payment of Principal, Premium and Interest................20
Section 4.2 Maintenance of Office or Agency...........................20
Section 4.3 Appointments to Fill Vacancies in Trustee's Office........21
Section 4.4 Provisions as to Paying Agent.............................21
Section 4.5 Corporate Existence.......................................22
Section 4.6 Commission and Other Reports..............................22
Section 4.7 Stay, Extension and Usury Laws............................22
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Page
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Section 4.8 Compliance Statement; Notice of Defaults..................23
Section 4.9 Taxes.....................................................23
ARTICLE V
NOTEHOLDERS'LISTS.......................................................23
Section 5.1 Noteholders'Lists.........................................23
ARTICLE VI
DEFAULTS AND REMEDIES...................................................24
Section 6.1 Events of Default.........................................24
Section 6.2 Payments of Notes on Default; Suit Therefor...............25
Section 6.3 Application of Monies Collected by Trustee................27
Section 6.4 Proceedings by Noteholder.................................28
Section 6.5 Proceedings by Trustee....................................28
Section 6.6 Remedies Cumulative and Continuing........................29
Section 6.7 Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders...................................29
Section 6.8 Notice of Defaults........................................29
Section 6.9 Undertaking to Pay Costs..................................29
ARTICLE VII
CONCERNING THE TRUSTEE..................................................30
Section 7.1 Duties and Responsibilities of Trustee....................30
Section 7.2 Reports by Trustee to Holders.............................31
Section 7.3 Reliance on Documents, Opinions, Etc......................31
Section 7.4 No Responsibility for Recitals, Etc.......................33
Section 7.5 Trustee, Paying Agents, Conversion Agents or Registrar
May Own Notes.............................................33
Section 7.6 Monies to Be Held in Trust................................33
Section 7.7 Compensation and Expenses of Trustee......................33
Section 7.8 Officers'Certificate as Evidence..........................33
Section 7.9 Conflicting Interests of Trustee..........................34
Section 7.10 Eligibility of Trustee....................................34
Section 7.11 Resignation or Removal of Trustee.........................34
Section 7.12 Acceptance by Successor Trustee...........................35
Section 7.13 Successor, by Merger, Etc.................................36
Section 7.14 Limitation on Rights of Trustee as Creditor...............36
iv
<PAGE>
Page
----
ARTICLE VIII
CONCERNING THE NOTEHOLDERS..............................................36
Section 8.1 Action by Noteholders.....................................36
Section 8.2 Proof of Execution by Noteholders.........................37
Section 8.3 Who Are Deemed Absolute Owners............................37
Section 8.4 Company-Owned Notes Disregarded...........................37
Section 8.5 Revocation of Consents, Future Holders Bound..............38
ARTICLE IX
NOTEHOLDERS'MEETINGS....................................................38
Section 9.1 Purposes for Which Meetings May be Called.................38
Section 9.2 Manner of Calling Meetings; Record Date...................38
Section 9.3 Call of Meeting by Company or Noteholders.................39
Section 9.4 Who May Attend and Vote at Meetings.......................39
Section 9.5 Manner of Voting at Meetings and Record To Be Kept........39
Section 9.6 Exercise of Rights of Trustee and Noteholders Not
To Be Hindered or Delayed.................................40
ARTICLE X
SUPPLEMENTAL INDENTURES.................................................40
Section 10.1 Supplemental Indentures Without Consent of Noteholders....40
Section 10.2 Supplemental Indentures With Consent of Noteholders.......42
Section 10.3 Effect of Supplemental Indentures.........................43
Section 10.4 Notation on Notes.........................................43
Section 10.5 Evidence of Compliance of Supplemental Indenture
To Be Furnished Trustee...................................43
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE......................................................43
Section 11.1 Company May Consolidate, Etc. on Certain Terms............43
Section 11.2 Successor Company To Be Substituted.......................44
Section 11.3 Opinion of Counsel To Be Given to Trustee.................44
v
<PAGE>
Page
----
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONIES........................................................44
Section 12.1 Legal Defeasance and Covenant Defeasance of the Notes.....44
Section 12.2 Termination of Obligations upon Cancellation of
the Notes.................................................46
Section 12.3 Survival of Certain Obligations...........................47
Section 12.4 Acknowledgment of Discharge by Trustee....................47
Section 12.5 Application of Trust Assets...............................47
Section 12.6 Repayment to the Company; Unclaimed Money.................47
Section 12.7 Reinstatement.............................................48
ARTICLE XIII
IMMUNITY OF INCORPORATORS, SHAREHOLDERS,
OFFICERS AND DIRECTORS..................................................48
Section 13.1 Indenture and Notes Solely Corporate Obligations..........48
ARTICLE XIV
CONVERSION OF NOTES.....................................................48
Section 14.1 Right to Convert..........................................48
Section 14.2 Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest
or Dividends..............................................49
Section 14.3 Cash Payments in Lieu of Fractional Shares................50
Section 14.4 Conversion Price..........................................51
Section 14.5 Adjustment of Conversion Price............................51
Section 14.6 Effect of Reclassification, Consolidation, Merger
or Sale...................................................58
Section 14.7 Taxes on Shares Issued....................................59
Section 14.8 Reservation of Shares; Shares to Be Fully Paid; Listing
of Common Stock..................59
Section 14.9 Responsibility of Trustee.................................60
Section 14.10 Notice to Holders Prior to Certain Actions................60
ARTICLE XV
SUBORDINATION............................................................61
Section 15.1 Agreement to Subordinate..................................61
Section 15.2 Certain Definitions.......................................61
Section 15.3 Liquidation; Dissolution; Bankruptcy......................62
Section 15.4 Default on Senior Indebtedness............................63
Section 15.5 When Distribution Must Be Paid Over.......................63
Section 15.6 Notice by Company.........................................64
vi
<PAGE>
Page
----
Section 15.7 Subrogation...............................................64
Section 15.8 Relative Rights...........................................64
Section 15.9 Subordination May Not Be Impaired by Company..............64
Section 15.10 Distribution or Notice to Representative..................65
Section 15.11 Rights of Trustee and Paying Agent........................65
Section 15.12 Authorization to Effect Subordination.....................66
Section 15.13 Conversions Not Deemed Payment............................66
Section 15.14 Amendments................................................66
ARTICLE XVI
MISCELLANEOUS PROVISIONS................................................66
Section 16.1 Provisions Binding on Company's Successors................66
Section 16.2 Official Acts by Successor Company........................66
Section 16.3 Addresses for Notices, Etc................................66
Section 16.4 Communications by Holders with Other Holders..............67
Section 16.5 Governing Law.............................................67
Section 16.6 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee...................................67
Section 16.7 Legal Holidays............................................68
Section 16.8 No Security Interest Created..............................68
Section 16.9 Trust Indenture Act.......................................68
Section 16.10 Trust Indenture Act Controls..............................68
Section 16.11 Benefits of Indenture.....................................68
Section 16.12 Table of Contents, Headings, Etc..........................68
Section 16.13 Authenticating Agent......................................68
Section 16.14 Execution in Counterparts.................................69
vii
<PAGE>
INDENTURE, dated as of _____________, ____, between COMPUTER NETWORK
TECHNOLOGY CORPORATION, a Minnesota corporation (the "Company"), and
_______________________, a ________ banking corporation with trust powers (the
"Trustee").
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issuance of its Convertible Subordinated Notes with the title set forth on
Schedule I (the "Notes"), in the aggregate amount set forth on Schedule I, and
to provide the terms and conditions upon which the Notes are to be
authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture;
NOW, THEREFORE, in consideration of the terms and conditions hereof and of
the purchase and acceptance of the Notes by the holders thereof, the Company
agrees with the Trustee for the equal and proportionate benefit of the
respective holders from time to time of the Notes (except as otherwise provided
below) as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1 (except as
otherwise expressly provided herein or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto,
shall have the respective meanings specified in this Section 1.1. The words
"herein," "hereof," "hereunder" and words of similar import refer to this
Indenture as a whole and not to any particular Article or Section.
Affiliate of any specified person shall mean any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purpose of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Board of Directors shall mean the Board of Directors of the Company or a
committee of such Board of Directors duly authorized to act for it hereunder.
Board Resolution shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
Business Day shall mean a day, other than a Saturday, a Sunday or a day on
which the banking institutions in the State and City of New York or in the State
of Minnesota are authorized or obligated by law or executive order to close or a
day that is declared a national, New York or Minnesota state holiday.
Capital Stock of any person shall mean any and all shares, interests,
participations or other equivalents (however designated) of such person's
corporate stock or any and all
<PAGE>
equivalent ownership interests in a person (other than a corporation) whether
now outstanding or issued after the date hereof.
Change of Control shall have the meaning specified in Section 3.5(d).
Change of Control Notice shall have the meaning specified in Section
3.5(b).
Change of Control Offer shall have the meaning specified in Section 3.5(a).
Change of Control Purchase Date shall have the meaning specified in Section
3.5(a).
Closing Price with respect to conversion of the Notes shall have the
meaning specified in Section 14.5(g).
Commission shall mean the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, the body performing
such duties at such time.
Common Stock shall mean any stock of any class of the Company that does not
have a preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company and that is not subject to redemption by the Company. Subject to the
provisions of Section 14.6, however, shares issuable on conversion of Notes
shall include only shares of the class designated as common stock of the Company
at the date of this Indenture or shares of any class or classes resulting from
any reclassification or reclassifications thereof and that do not have a
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and that are not subject to redemption by the Company; provided that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion that the total
number of shares of such class resulting from all such reclassification bears to
the total number of shares of all such classes resulting from all such
reclassifications.
Company shall mean Compute Network Technology Corporation, a Minnesota
corporation and, subject to the provisions of Article XI, shall include its
successors and assigns.
Conversion Price shall have the meaning specified in Section 14.4.
Corporate Trust Office of the Trustee, or other similar term, shall mean
the office of the Trustee at which at any particular time its corporate trust
business shall be principally administered, which office is, at the date as of
which this Indenture is dated, located at the address set forth on Schedule I.
Current Market Price with respect to conversion of the Notes shall have the
meaning specified in Section 14.5(g).
2
<PAGE>
Custodian shall mean the Trustee, as custodian with respect to the Notes in
global form, or any successor entity thereto.
Default shall mean any event that is, or after notice or passage of time,
or both, would be, an Event of Default.
Defaulted Interest shall have the meaning specified in Section 2.3.
Definitive Notes or in definitive form shall have the meanings specified in
Section 2.2, any reference to Notes "in definitive form" shall mean definitive
Notes, and any reference to securities "in definitive form" shall mean
definitive Notes or Common Stock as the context requires.
Depositary shall mean, with respect to the Notes issuable or issued in
whole or in part in global form, the person specified in Section 2.5(b) as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
Designated Senior Indebtedness shall have the meaning specified in Section
15.2.
Employee Benefit Plan shall mean any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, that the Company maintains, contributes to or has any obligation to
or liability for.
Event of Default shall mean any event specified in Sections 6.1(a) through
(f).
Exchange Act shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
Fair market value with respect to conversion of the Notes shall have the
meaning specified in Section 14.5(g).
Fiscal Year means the annual period adopted by the Company as its fiscal
year for financial reporting and other purposes. The current fiscal year of the
Company is the annual period ending on December 31.
Global Note shall mean any and all Notes in global form.
Indenture shall mean this instrument as originally executed or, if amended
or supplemented as herein provided, as so amended or supplemented.
Make-Whole Payment shall have the meaning specified in Section 3.1(a).
Nonpayment Default shall have the meaning specified in Section 15.4(b).
3
<PAGE>
Note or Notes shall mean any Note or Notes, as the case may be,
authenticated and delivered under this Indenture.
Noteholder or holder as applied to any Note, or other similar terms (but
excluding the term "beneficial holder"), shall mean any person in whose name at
the time a particular Note is registered on the Note registrar's books.
Note register shall have the meaning specified in Section 2.5(a).
Notice Date shall have the meaning specified in Section 3.1(a).
Officers' Certificate when used with respect to the Company, shall mean a
certificate signed by the Chief Executive Officer, the President, the Chief
Operating Officer or the Chief Financial Officer and any Treasurer or Secretary
or any Assistant Treasurer or Assistant Secretary of the Company, that is
delivered to the Trustee. Each such certificate shall include the statements
provided for in Section 16.6 if and to the extent required by the provisions of
such Section.
Opinion of Counsel shall mean an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company or other counsel
acceptable to the Trustee, that is delivered to the Trustee. Each such opinion
shall include the statements provided for in Section 16.6 if and to the extent
required by the provisions of such Section.
Outstanding with reference to Notes as of any particular time shall mean,
subject to the provisions of Section 8.4, all Notes authenticated and delivered
by the Trustee under this Indenture, except:
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for which monies in the necessary
amount shall have been deposited in trust with the Trustee for payment or
redemption; provided that if such Notes are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given pursuant
to Article III or provisions satisfactory to the Trustee shall have been
made for giving such notice;
(c) Notes paid pursuant to Section 2.6 hereof or Notes in lieu of or
in substitution for which other Notes shall have been authenticated and
delivered pursuant to the terms of Section 2.6, unless proof satisfactory
to the Trustee is presented that any such Notes are held by bona fide
holders in due course; and
(d) Notes converted into Common Stock pursuant to Article XIV and
Notes not deemed outstanding pursuant to Section 3.2.
Payment Blockage Notice shall have the meaning specified in Section
15.4(b).
Payment Default shall have the meaning specified in Section 15.4(a).
4
<PAGE>
Person shall mean an individual, a corporation, a limited liability
company, an association, a partnership, a joint venture, a joint stock company,
a trust, an unincorporated organization or a government or an agency or a
political subdivision thereof.
Predecessor Note of any particular Note shall mean every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for purposes of this definition, any Note authenticated
and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Note
shall be deemed to evidence the same debt as the lost, destroyed or stolen Note.
Provisional Redemption shall have the meaning specified in Section 3.1(a).
Provisional Redemption Date shall have the meaning specified in Section
3.1(a).
Record Date with respect to conversion of the Notes shall have the meaning
specified in Section 14.5(g).
Representative shall have the meaning specified in Section 15.2.
Responsible Officer shall mean, with respect to the Trustee, an officer of
the Trustee assigned and duly authorized by the Trustee to administer its
corporate trust matters at the Corporate Trust Office of the Trustee.
Securities Act shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
Senior Indebtedness shall have the meaning specified in Section 15.2.
Subsidiary of any specified person shall mean (i) a corporation a majority
of whose Capital Stock with voting power under ordinary circumstances to elect
directors is at the time directly or indirectly owned by such person or (ii) any
other person (other than a corporation) in which such person or such person and
a subsidiary or subsidiaries of such person or a subsidiary or subsidiaries of
such person directly or indirectly, at the date of determination thereof, has at
least majority ownership.
Successor Company shall have the meaning specified in Section 11.1.
Trading Day shall have the meaning specified in Section 14.5(g).
Trust Indenture Act shall mean the Trust Indenture Act of 1939, as amended,
as it was in force on the date of execution of this Indenture, except as
provided in Sections 10.3 and 14.6; provided that if the Trust Indenture Act of
1939 is amended after the date hereof, the term "Trust Indenture Act" shall
mean, to the extent required by such amendment, the Trust Indenture Act of 1939
as so amended.
5
<PAGE>
Trustee shall mean U.S. Bank Trust National Association, its successors and
any corporation resulting from or surviving any consolidation or merger to which
it or its successors may be a party and any successor trustee at the time
serving as successor trustee hereunder.
U.S. Government Obligations shall mean securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a person controlled or
supervised by, and acting as an agency or instrumentality of, the United States
of America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligation or a specific
payment of principal or interest on any such U.S. Government Obligation held by
such custodian for the account of the holder of such depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by such custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
Voting Stock of any person shall mean stock of the class or classes
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of such person (irrespective of whether or not at the time
stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).
The definitions of certain other terms are as specified in Section 12.1.
Section 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture Act,
the provision is incorporated by reference in, and made a part of, this
Indenture.
The following Trust Indenture Act terms used in this Indenture have the
following meanings:
indenture securities means the Notes;
indenture security holder means a Noteholder;
indenture to be qualified means this Indenture;
indenture trustee or institutional trustee means the Trustee; and
obligor on the Notes means the Company and any successor obligor under the
Trust Indenture Act.
6
<PAGE>
All other terms used in this Indenture that are defined by the Trust
Indenture Act, defined by a Trust Indenture Act reference to another statute or
defined by Commission rule under the Trust Indenture Act have the meanings so
assigned to them.
Section 1.3 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles;
(c) "or" is not exclusive;
(d) provisions apply to successive events and transactions; and
(e) words in the singular include the plural, and in the plural
include the singular.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes. The Notes shall have
the designation set forth on Schedule I. The Notes are not to exceed the
aggregate principal amount set forth on Schedule I upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and make available for delivery said Notes upon the written order
of the Company, signed by its (a) Chief Executive Officer, President, Chief
Operating Officer or Chief Financial Officer and (b) any Treasurer or Secretary
or any Assistant Secretary, without any further action by the Company hereunder.
Section 2.2 Form of Notes. (a) The Notes, including the form of Trustee's
certificate of authentication, shall be in the form annexed hereto as Exhibit A,
and any Notes represented by a global Note shall be in the form annexed hereto
as Exhibit B.
(b) Any global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of a global Note to reflect the amount of any increase or decrease
in the amount of outstanding Notes represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in such manner and
upon written instructions given by the holder of such Notes in accordance with
this Indenture. Payment of
7
<PAGE>
principal of and interest and premium, if any, on any global Note shall be made
in accordance with the provisions of Section 2.3.
(c) Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the Company
officers executing the same may approve (execution thereof to be conclusive
evidence of such approval) and as are not inconsistent with the provisions of
this Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Notes may be listed, or to conform to usage.
Every global Note authenticated and delivered hereunder shall bear a legend
in substantially the following form, in capital letters and bold-face type:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
If the Depositary is The Depository Trust Company, the global Note
authenticated and delivered hereunder shall also bear a legend in substantially
the following form, in capital letters and bold-face type:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO. , HAS AN INTEREST HEREIN.
The terms and provisions contained in the forms of Notes attached as
Exhibits A and B hereto shall constitute, and are hereby expressly made, a part
of this Indenture and to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of Interest. The Notes
shall be issuable in registered form without coupons in denominations of $1,000
principal amount and integral multiples thereof. Every Note shall be dated the
date of its authentication, shall bear interest from the dates set forth on
Schedule I and payable on the dates set forth on Schedule I
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("Interest Payment Date"), at the interest rate specified in the forms of Notes
attached as Exhibits A and B.
The person in whose name any Note (or its Predecessor Note) is registered
at the close of business on any record date with respect to any interest payment
date (including any Note that is converted after the record date and on or
before the interest payment date) shall be entitled to receive the interest
payable on such interest payment date notwithstanding the cancellation of such
Note upon any transfer, exchange or conversion subsequent to the record date and
prior to such interest payment date. Unless other arrangements are made,
interest will be paid by check mailed to the address of such person as it
appears on the Note register; provided that, with respect to any global Note or
any holder of Notes with an aggregate principal amount equal to or in excess of
$5,000,000, at the request (such request to include appropriate wire
instructions) of such holder in writing to the Trustee on or before the record
date preceding any interest payment date, interest on the global Note and such
holder's Notes, as applicable, shall be paid by wire transfer in immediately
available funds to an account in the continental United States and any such
request shall be deemed a continuing request unless and until revoked in
writing. The term "record date" with respect to any interest payment date shall
mean the dates specified as such on Schedule I.
None of the Company, the Trustee or any paying agent shall have any
responsibility or liability for any aspect of the records relating to or payment
made on account of beneficial ownership interests in the global Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Interest on the Notes shall be computed on the basis of a 360-day year
composed of twelve 30-day months.
Any interest on any Note that is payable but is not punctually paid or duly
provided for on any applicable Interest Payment Date (herein called "Defaulted
Interest") shall cease to be payable to the Noteholder on the relevant record
date by virtue of his having been such Noteholder; and such Defaulted Interest
shall be paid by the Company, at its election in each case, as provided in
clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to the
persons in whose names the Notes (or their respective Predecessor Notes) are
registered at the close of business on a special record date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
to be paid on each Note and the date of the payment (which shall be not less
than 25 days after the receipt by the Trustee of such notice, unless the Trustee
shall consent to an earlier date) and, at the same time, the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
persons entitled to such Defaulted Interest as in this clause provided.
Thereupon, the Trustee shall fix a special record date for the payment of such
Defaulted Interest, which shall be not more than 15 days and not less than 10
days prior to the date of the payment and not less than 10 days after the
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receipt by the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such special record date and, in the name and at
the expense of the Company, shall cause notice of the payment of such Defaulted
Interest and the special record date therefor to be mailed, first-class postage
prepaid, to each Noteholder at his address as it appears in the Note register,
not less than 10 days prior to such special record date. Notice of the proposed
payment of such Defaulted Interest and the special record date therefor having
been so mailed, such Defaulted Interest shall be paid to the persons in whose
names the Notes (or their respective Predecessor Notes) were registered at the
close of business on such special record date and shall no longer be payable
pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Section 2.4 Execution of Notes. The Notes shall be signed in the name and
on behalf of the Company by its Chief Executive Officer, President, Chief
Operating Officer or Chief Financial Officer and attested by the signature of
its Treasurer, Secretary or any of its Assistant Secretaries or Assistant
Treasurers (any of which signatures may be printed, engraved or otherwise
reproduced thereon, by facsimile or otherwise). Only such Notes as shall bear
thereon a certificate of authentication substantially in the form set forth on
the forms of Notes attached as Exhibits A and B hereto, manually executed by the
Trustee (or an authenticating agent appointed by the Trustee as provided by
Section 16.13), shall be entitled to the benefits of this Indenture or be valid
or obligatory for any purpose. Such certificate by the Trustee (or such an
authenticating agent) upon any Note executed by the Company shall be conclusive
evidence that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the benefits of this
Indenture.
In case any officer of the Company who shall have signed any of the Notes
shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes; Depositary.
(a) The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company designated pursuant to Section 4.2 being herein
sometimes collectively referred to as the "Note register") in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of Notes and of transfers of Notes. Such Note register shall be
in written form or in any form capable of being converted into written form
within a reasonable period of time. The Trustee is hereby appointed "Note
registrar" for the
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purpose of registering Notes and transfers of Notes as herein provided. The
Company may appoint one or more co-registrars.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denominations and of a like aggregate principal amount.
Notes may be exchanged for other Notes of any authorized denominations and
of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency. Whenever any Notes are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
make available for delivery, the Notes that the Noteholder making the exchange
is entitled to receive bearing certificate numbers not contemporaneously
outstanding.
All Notes presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company, the Trustee, the Note registrar
or any co-registrar) be duly endorsed, or be accompanied by a written instrument
of transfer in form satisfactory to the Company, executed by the Noteholder
thereof or his attorney duly authorized in writing.
No service charge shall be charged to the Noteholder for any exchange or
registration of transfer of Notes, but the Company may require payment of a sum
sufficient to cover any tax, assessments or other governmental charges that may
be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any co-registrar
shall be required to exchange or register a transfer of (i) any Notes for a
period of 15 days next preceding the mailing of a notice of redemption, (ii) any
Notes called for redemption or, if a portion of any Note is selected or called
for redemption, such portion thereof selected or called for redemption, (iii)
any Notes surrendered for conversion or, if a portion of any Note is surrendered
for conversion, such portion thereof surrendered for conversion or (iv) any
Notes surrendered for repurchase pursuant to Section 3.5 or, if a portion of any
Note is surrendered for repurchase pursuant to Section 3.5, such portion thereof
surrendered for repurchase pursuant to Section 3.5.
All Notes issued upon any transfer or exchange of Notes shall be the valid
obligations of the Company, evidencing the same debt and entitled to the same
benefits under this Indenture as the Notes surrendered upon such registration of
transfer or exchange.
(b) Each global Note authenticated under this Indenture shall be registered
in the name of the Depositary designated for such global Note or a nominee
thereof and delivered to such Depositary or a nominee thereof or custodian
therefor, and each such global Note shall constitute a single Note for all
purposes of this Indenture.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in this Section 2.5(b)), a global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another
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nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
The Depositary shall be a clearing agency registered under the Exchange
Act.
The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the global Notes. Initially, the global Notes shall
be issued to the Depositary, registered in the name of Cede & Co., as the
nominee of the Depositary, and deposited with the Trustee as Custodian for Cede
& Co.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under this Indenture) shall have responsibility for the
performance by the Depositary or its participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
If at any time the Depositary for the global Notes notifies the Company
that it is unwilling or unable to continue as Depositary for such Notes, the
Company may appoint a successor Depositary with respect to such Notes. If a
successor Depositary for the Notes is not appointed by the Company within 90
days after the Company receives such notice, the Company shall execute, and the
Trustee, upon receipt of an Officers' Certificate for the authentication and
delivery of Notes, shall authenticate and make available for delivery, Notes in
definitive form, in an aggregate principal amount equal to the principal amount
of the global Notes in exchange for such global Notes.
Definitive Notes issued in exchange for all or a part of a global Note
pursuant to this Section 2.5(b) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. Upon
execution and authentication, the Trustee shall make available for delivery such
definitive Notes to the persons in whose names such definitive Notes are so
registered.
At such time as all interests in global Notes have been redeemed,
converted, repurchased or canceled, such global Notes shall be, upon receipt
thereof, canceled by the Trustee in accordance with standing procedures and
instructions existing between the Depositary and the Custodian. At any time
prior to such cancellation, if any interest in a global Note is exchanged for
definitive Notes, redeemed, repurchased, converted, canceled or transferred to a
transferee who receives definitive Notes therefor or any definitive Note is
exchanged or transferred for part of a global Note, the principal amount of such
global Note shall, in accordance with the standing procedures and instructions
existing between the Depositary and the Custodian, be reduced or increased, as
the case may be, and an endorsement shall be made on such global Note by the
Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
The Company and the Trustee may for all purposes, including the making of
payments due on the Notes, deal with the Depositary as the authorized
representative of the Noteholders for the purposes of exercising the rights of
Noteholders hereunder. The rights of the owner of any beneficial interest in a
global Note shall be limited to those established by law and
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agreements between such owner and depository participants; provided that no such
agreement shall give any rights to any person against the Company or the Trustee
without the written consent of the parties so affected. Multiple requests and
directions from and votes of, the Depositary as holder of notes in book entry
form with respect to any particular matter shall not be deemed inconsistent to
the extent they do not represent an amount of notes in excess of those held in
the name of the Depositary or its nominee.
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In case any Note
shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request, the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and make available for
delivery a new Note bearing a number not contemporaneously outstanding in
exchange and substitution for the mutilated Note or in lieu of and in
substitution for the Note so destroyed, lost or stolen. The Company may charge
such applicant for the expenses of the Company in replacing a Note. In every
case the applicant for a substituted Note shall furnish to the Company, to the
Trustee and, if applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them harmless from any
loss, liability, cost or expense caused by or connected with such substitution,
and in every case of destruction, loss or theft, the applicant shall also
furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the destruction, loss or
theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note that has matured or is about to mature or has been
called for redemption or is about to be repurchased or converted into Common
Stock shall become mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Note, pay or authorize the payment of or convert
or authorize the conversion of the same (without surrender thereof, except in
the case of a mutilated Note), as the case may be, if the applicant for such
payment or conversion shall furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent such security or indemnity as may be
required by them to save each of them harmless from any loss, liability, cost or
expense caused by or connected with such substitution, and in case of
destruction, loss or theft, evidence satisfactory to the Company, the Trustee
and, if applicable, any paying agent or conversion agent of the destruction,
loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section 2.6
in lieu of any Note that is destroyed, lost or stolen shall constitute an
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Note shall be enforceable by anyone, and shall be entitled to all
the benefits of (but shall be subject to all the limitations set forth in) this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder. To the extent permitted by law, all Notes shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment or conversion of mutilated, destroyed,
lost or stolen Notes and shall preclude any and all other rights or
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remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7 Temporary Notes. Pending the preparation of definitive Notes,
the Company may execute and the Trustee or an authenticating agent appointed by
the Trustee shall, upon written request of the Company, authenticate and make
available for delivery temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination and shall be
substantially in the form of the definitive Notes but with such omissions,
insertions and variations as may be appropriate for temporary Notes, all as may
be determined by the Company. Every such temporary Note shall be executed by the
Company and authenticated by the Trustee or such authenticating agent upon the
same conditions and in substantially the same manner, and with the same effect,
as the definitive Notes. Without unreasonable delay the Company shall execute
and deliver to the Trustee or such authenticating agent definitive Notes (other
than in the case of Notes in global form) and thereupon any or all temporary
Notes (other than any such global Note) may be surrendered in exchange therefor,
at each office or agency maintained by the Company pursuant to Section 4.2 and
the Trustee or such authenticating agent shall authenticate and make available
for delivery in exchange for such temporary Notes an equal aggregate principal
amount of definitive Notes. Such exchange shall be made by the Company at its
own expense and without any charge therefor. Until so exchanged, the temporary
Notes shall in all respects be entitled to the same benefits and subject to the
same limitations under this Indenture as definitive Notes authenticated and
delivered hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered for the
purpose of payment, redemption, repurchase, conversion, exchange or registration
of transfer shall, if surrendered to the Company, any paying agent, any Note
registrar or any conversion agent, be surrendered to the Trustee and promptly
canceled by it or, if surrendered directly to the Trustee, shall be promptly
canceled by it and no Notes shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture. If required by the
Company, the Trustee shall return canceled Notes to the Company. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Notes unless
and until the same are delivered to the Trustee for cancellation.
Section 2.9 CUSIP Numbers. The Company in issuing the Notes may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee shall use CUSIP
numbers in notices of redemption as a convenience to holders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such numbers. The Company shall promptly notify the
Trustee of any change in the CUSIP numbers.
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ARTICLE III
REDEMPTION AND REPURCHASE OF NOTES
Section 3.1 Right of Redemption.
(a) Provisional Redemption by the Company. The Notes may be redeemed by the
Company (a "Provisional Redemption"), in whole or in part, at any time prior to
the date set forth on Schedule I ("Early Redemption Date"), upon notice as set
forth in Section 3.2 of this Indenture, at a redemption price equal to $1,000
per $1,000 principal amount of Notes to be redeemed plus accrued and unpaid
interest, if any, to the date of redemption (the "Provisional Redemption Date")
if the closing price of the Common Stock shall have exceeded 150% of the
Conversion Price then in effect for at least 20 Trading Days within a period of
30 consecutive Trading Days ending on the Trading Day prior to the date of
mailing of the notice of redemption pursuant to Section 3.2 (the "Notice Date").
Upon any such Provisional Redemption, the Company shall make an additional
payment in cash (the "Make-Whole Payment") with respect to the Notes called for
Provisional Redemption to holders on the Notice Date in an amount per $1,000
principal amount of the Notes set forth on Schedule I, less the amount of any
interest actually paid on such Notes prior to the Notice Date. The Company shall
make the Make-Whole Payment on all Notes called for Provisional Redemption,
including any Notes converted into Common Stock pursuant to the terms hereof
after the Notice Date and prior to the Provisional Redemption Date.
(b) Optional Redemption by the Company. At any time on or after the dates
set forth on Schedule I ("Optional Redemption Date"), the Notes may be redeemed
at the Company's option, upon notice as set forth in Section 3.2, in whole at
any time or in part from time to time, at the optional redemption prices
(expressed as percentages of the principal amount), together with accrued and
unpaid interest to the date fixed for redemption, if redeemed on or after the
dates set forth on Schedule I.
Section 3.2 Notice of Redemption; Selection of Notes. In case the Company
shall desire to exercise the right to redeem all or, as the case may be, any
part of the Notes pursuant to Section 3.1, it shall fix a date for redemption
and, in the case of any redemption pursuant to Section 3.1, it or, at its
request accompanied by the proposed form of notice of redemption (which must be
received by the Trustee at least ten days prior to the date the Trustee is
requested to give notice as described below, unless a shorter period is agreed
to by the Trustee), the Trustee in the name of and at the expense of the
Company, shall mail or cause to be mailed a notice of such redemption at least
30 and not more than 60 days prior to the date fixed for redemption to the
holders of Notes so to be redeemed as a whole or in part at their last addresses
as the same appear on the Note register; provided that if the Company shall give
such notice, it shall also give such notice, and notice of the Notes to be
redeemed, to the Trustee. Such mailing shall be by first class mail. The notice,
if mailed in the manner herein provided, shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice. In any case,
failure to give such notice by mail or any defect in the notice to the holder of
any Note designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Note.
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Each such notice of redemption shall specify (a) the Notes to be redeemed
(including CUSIP numbers), (b) the aggregate principal amount of Notes to be
redeemed, (c) the date fixed for redemption, (d) the redemption price at which
Notes are to be redeemed, (e) the place or places of payment, (f) that payment
shall be made upon presentation and surrender of such Notes, (g) that interest
accrued to the date fixed for redemption and any Make-Whole Payment shall be
paid as specified in said notice and (h) that on and after said date, interest
thereon or on the portion thereof to be redeemed shall cease to accrue. Such
notice shall also state the current Conversion Price and the date on which the
right to convert such Notes or portions thereof into Common Stock shall expire.
If fewer than all the Notes are to be redeemed, the notice of redemption shall
identify the Notes to be redeemed. In case any Note is to be redeemed in part
only, the notice of redemption shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion thereof shall be issued. Any such notice of
redemption must contain a specific statement by the Trustee that no
representation or warranty is being made as to the correctness of the CUSIP
number either as printed on the Notes or as contained in the notice of
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes.
On or prior to the Business Day prior to the redemption date specified in
the notice of redemption given as provided in this Section 3.2, the Company
shall deposit with the Trustee or with one or more paying agents (or, if the
Company is acting as its own paying agent, set aside, segregate and hold in
trust as provided in Section 4.4) an amount of money sufficient to redeem on the
redemption date all the Notes so called for redemption (other than those
theretofore surrendered for conversion into Common Stock) at the appropriate
redemption price, together with accrued and unpaid interest to the date fixed
for redemption and any Make-Whole Payment. If any Note called for redemption is
converted pursuant hereto, any money deposited with the Trustee or any paying
agent or so segregated and held in trust for the redemption of such Note shall
be paid to the Company upon its request or, if then held by the Company, shall
be discharged from such trust.
If fewer than all the Notes are to be redeemed, the Company shall give the
Trustee written notice in the form of an Officers' Certificate not fewer than 45
days (or such shorter period of time as may be acceptable to the Trustee) prior
to the redemption date as to the aggregate principal amount of Notes to be
redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed (in principal amounts of $1,000 or
integral multiples thereof), by lot. If any Note selected for partial redemption
is converted in part after such selection, the converted portion of such Note
shall be deemed (so far as may be) to be the portion to be selected for
redemption. The Notes (or portions thereof) so selected shall be deemed duly
selected for redemption for all purposes hereof, notwithstanding that any such
Note is converted as a whole or in part before the mailing of the notice of
redemption.
Upon any redemption of less than all the Notes, the Company and the Trustee
may treat as outstanding any Notes surrendered for conversion during the period
of 15 days next preceding the mailing of a notice of redemption and need not
treat as outstanding any Note authenticated
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and delivered during such period in exchange for the unconverted portion of any
Note converted in part during such period.
Section 3.3 Payment of Notes Called for Redemption. If notice of redemption
has been given as provided in Section 3.2, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest thereon accrued to the date fixed for redemption and any
Make-Whole Payment, and on and after said date (unless the Company shall default
in the payment of such Notes at the redemption price, together with interest
thereon accrued to said date and any Make-Whole Payment), interest on the Notes
or portion of Notes so called for redemption shall cease to accrue, and such
Notes shall cease after the close of business on the Business Day next preceding
the date fixed for redemption to be convertible into Common Stock and, except as
provided in Sections 7.6 and 12.4, to be entitled to any benefit or security
under this Indenture, and the holders thereof shall have no right in respect of
such Notes except the right to receive the redemption price thereof and unpaid
interest thereon to the date fixed for redemption and any Make-Whole Payment. On
presentation and surrender of such Notes at the place of payment specified in
the notice, the said Notes or the specified portions thereof shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption and any Make-Whole
Payment; provided that any semi-annual payment of interest becoming due on the
date fixed for redemption shall be payable to the holders of such Notes
registered as such on the relevant record date subject to the terms and
provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and premium, if any, shall, until paid or
duly provided for, bear interest from the date fixed for redemption at the rate
borne by the Note and such Note shall remain convertible into Common Stock until
the principal and premium, if any, shall have been paid or duly provided for.
Section 3.4 Conversion Arrangement on Call for Redemption. In connection
with any redemption of Notes, the Company may arrange for the purchase and
conversion of any Notes by an agreement with one or more investment bankers or
other purchasers to purchase such Notes by paying to the Trustee in trust for
the Noteholders, on or prior to the Business Day prior to the date fixed for
redemption, an amount not less than the applicable redemption price, together
with interest accrued to the date fixed for redemption and any Make-Whole
Payment, of such Notes. Notwithstanding anything to the contrary contained in
this Article III, the obligation of the Company to pay the redemption price of
such Notes, together with interest accrued to the date fixed for redemption and
any Make-Whole Payment, shall be deemed to be satisfied and discharged to the
extent such amount is so paid by such purchasers. If such an agreement is
entered into, a copy of which shall be filed with the Trustee prior to the date
fixed for
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redemption, any Notes not duly surrendered for conversion by the holders thereof
may, at the option of the Company, be deemed, to the fullest extent permitted by
law, acquired by such purchasers from such holders and (notwithstanding anything
to the contrary contained in Article XIV) surrendered by such purchasers for
conversion, all as of the time immediately prior to the close of business on the
date fixed for redemption (and the right to convert any such Notes shall be
deemed to have been extended through such time), subject to payment of the above
amount as aforesaid. At the direction of the Company, the Trustee shall hold and
dispose of any such amount paid to it in the same manner as it would monies
deposited with it by the Company for the redemption of Notes. Without the
Trustee's prior written consent, no arrangement between the Company and such
purchasers for the purchase and conversion of any Notes shall increase or
otherwise affect any of the powers, duties, responsibilities or obligations of
the Trustee as set forth in this Indenture, and the Company agrees to indemnify
the Trustee from, and hold it harmless against, any loss, liability or expense
arising out of or in connection with any such arrangement for the purchase and
conversion of any Notes between the Company and such purchasers including the
costs and expenses incurred by the Trustee in the defense of any claim or
liability arising out of or in connection with the exercise or performance of
any of its powers, duties, responsibilities or obligations under this Indenture.
Section 3.5 Repurchase of Notes Upon a Change of Control.
(a) If a Change of Control shall occur at any time, then each holder of
Notes shall have the right to require that the Company repurchase such holder's
Notes in whole or in part in integral multiples of $1,000 at a purchase price
(the "Change of Control Purchase Price") in cash equal to 100% of the principal
amount of such Notes, plus accrued and unpaid interest thereon, if any, to the
purchase date (the "Change of Control Purchase Date") pursuant to the offer
described in Section 3.5(b) (the "Change of Control Offer") and in accordance
with the other procedures set forth in this Indenture.
(b) Within 30 days following any Change of Control, the Company shall,
unless the Company shall have given each Noteholder notice of its irrevocable
intention to redeem all outstanding Notes as described in Section 3.1, notify
the Trustee thereof and give written notice (the "Change of Control Notice") of
such Change of Control to each holder of Notes, by first-class mail, postage
prepaid, at the Noteholder's address appearing in the Note register, stating,
among other things, (i) that a Change of Control has occurred, (ii) the Change
of Control Purchase Price, (iii) the Change of Control Purchase Date (which
shall be a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act), (iv) that any Note not tendered shall
continue to accrue interest and to have all of the benefits of this Indenture,
(v) that, unless the Company defaults in the payment of the Change of Control
Purchase Price, any Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Purchase Date,
(vi) that Noteholders electing to have any Notes purchased pursuant to a Change
of Control Offer shall be required to surrender the Notes, with the form
entitled "Option of Noteholder to Elect Purchase" on the reverse of the Notes
completed, to the Company at the address specified in the notice prior to the
close of business on the third Business Day preceding the Change of Control
Purchase Date, (vii) that Noteholders shall be entitled to withdraw their
election if the Company receives, not later than the close of business on the
second Business Day preceding the Change of Control Purchase
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Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Noteholder, the principal amount of Notes delivered for purchase, and a
statement that such Noteholder is withdrawing his election to have such Notes
purchased, and (viii) that Noteholders whose Notes are being purchased only in
part shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof.
The Company shall comply with the requirements of Rule 13e-4 and 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Change of Control.
(c) On or before the next Business Day prior to the Change of Control
Purchase Date, the Company shall deposit with the Trustee an amount equal to the
Change of Control Purchase Price in respect of all Notes or portions thereof to
be tendered on the Change of Control Purchase Date. On the Change of Control
Purchase Date, the Company shall, to the extent lawful, (i) accept for payment
Notes or portions thereof tendered pursuant to the Change of Control Offer, and
(ii) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
tendered to the Company. The Trustee shall promptly mail to each Noteholder of
Notes so accepted payment in an amount equal to the Change of Control Purchase
Price of such Notes, and the Trustee shall promptly authenticate and mail to
each Noteholder a new Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(d) The term "Change of Control" shall mean an event or series of events as
a result of which (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) acquires "beneficial ownership"
(as determined in accordance with Rule 13d-3 under the Exchange Act), directly
or indirectly, of shares representing more than 50% of the combined voting power
of the then outstanding Voting Stock, other than acquisitions by the Company,
the Company's subsidiaries or any Employee Benefit Plan or (ii) the Company
consolidates with or merges into any other person (other than a merger effected
solely for the purpose of changing the Company's jurisdiction of incorporation),
or conveys, transfers or leases all or substantially all of its assets
(determined on a consolidated basis) to any person, or any other person merges
into the Company, and, in the case of any such transaction, the outstanding
Common Stock of the Company is changed or exchanged as a result, unless the
shareholders of the Company immediately before such transaction own, directly or
indirectly, immediately following such transaction, greater than 50% of the
combined voting power of the outstanding voting securities of the person
resulting from such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction; provided that
a Change of Control shall not be deemed to have occurred if either (x) the
closing price per share of the Common Stock for any five Trading Days within the
period of 10 consecutive Trading Days ending immediately after the later of the
Change of Control or the public announcement of the Change of Control (in the
case of a Change of Control under clause (i) above) or ending immediately before
the Change of Control (in the case of a Change of Control
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under clause (ii) above) shall equal or exceed 105% of the Conversion Price of
the Notes in effect on each such Trading Day, or (y) at least 90% of the
consideration (determined as of the date on which the Change of Control is
triggered and excluding cash payments for fractional shares) in the transaction
or transactions constituting the Change of Control consists of shares of common
stock traded on a national securities exchange or quoted on the Nasdaq National
Market and as a result of such transaction or transactions the Notes become
convertible solely into such common stock.
ARTICLE IV
PARTICULAR COVENANTS OF THE COMPANY
Section 4.1 Payment of Principal, Premium and Interest. The Company shall
duly and punctually pay or cause to be paid the principal of and premium, if
any, and interest on each of the Notes at the places, at the respective times
and in the manner provided herein and in the Notes. Each installment of interest
on the Notes due on any semi-annual interest payment date shall be payable (a)
in respect to Notes held of record by the Depositary or its nominee in same day
funds and (b) in respect of holders other than the Depositary or its nominee by
mailing checks for the interest payable to or upon the written order of the
holders of Notes entitled thereto as they shall appear on the Note register;
provided that, with respect to any holder of Notes with an aggregate principal
amount equal to or in excess of $5,000,000, at the request (such request to
include appropriate wire instructions) of such holder in writing to the Trustee,
interest on such holder's Notes shall be paid by wire transfer in immediately
available funds to an account in the continental United States of America and
any such request shall be deemed a continuing request unless and until revoked
in writing. An installment of principal or interest shall be considered paid on
the date due if the Trustee or paying agent (other than the Company, a
subsidiary of the Company or any Affiliate of any of them) holds on that date
money designated for and sufficient to pay the installment of principal or
interest and is not prohibited from paying such money to the holders of the
Notes pursuant to the terms of this Indenture.
Section 4.2 Maintenance of Office or Agency. The Company may from time to
time designate one or more offices or agencies where the Notes may be
surrendered for registration of transfer or exchange or for presentation for
payment or for conversion or redemption and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of any such office or agency. If at any time the Company
shall fail to maintain any such office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
The Company hereby initially designates the Trustee as paying agent, Note
registrar and conversion agent and the Corporate Trust Office of the Trustee as
the office or agency of the Company for the purposes set forth in the first
paragraph of this Section 4.2.
So long as the Trustee is the Note registrar, the Trustee agrees to mail,
or cause to be mailed, the notices set forth in Section 7.11(a) and the third
paragraph of Section 7.12.
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Section 4.3 Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
shall appoint, in the manner provided in Section 7.11, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 4.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the Trustee, or
if the Trustee shall appoint such a paying agent, the Company or the Trustee, as
the case may be, shall cause such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section 4.4:
(i) that it shall hold all sums held by it as such agent for the
payment of the principal of, premium, if any, or interest on the Notes
(whether such sums have been paid to it by the Company or by any other
obligor on the Notes) in trust for the benefit of the holders of the Notes;
(ii) that it shall give the Trustee notice of any failure by the
Company (or by any other obligor on the Notes) to make any payment of the
principal of, premium, if any, or interest on the Notes when the same shall
be due and payable; and
(iii) that at any time during the continuance of an Event of Default,
upon request of the Trustee, it shall forthwith pay to the Trustee all sums
so held in trust.
The Company shall, before each due date of the principal of, premium, if
any, or interest on the Notes, deposit with the paying agent a sum sufficient to
pay such principal, premium, if any, or interest, and (unless such paying agent
is the Trustee) the Company shall promptly notify the Trustee of any failure to
take such action.
(b) If the Company shall act as its own paying agent, it shall, on or
before each due date of the principal of, premium, if any, or interest or any
Make-Whole Payment on the Notes, set aside, segregate and hold in trust for the
benefit of the holders of the Notes a sum sufficient to pay such principal,
premium, if any, or interest so becoming due and shall notify the Trustee of any
failure to take such action and of any failure by the Company (or any other
obligor under the Notes) to make any payment of the principal of, premium, if
any, or interest or any Make-Whole Payment on the Notes when the same shall
become due and payable.
(c) Anything in this Section 4.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 4.4, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.
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(d) Anything in this Section 4.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 4.4 is subject to
Sections 12.3 and 12.4.
Section 4.5 Corporate Existence. Subject to Article XI, the Company shall
do or cause to be done all things necessary to preserve and keep in full force
and effect (a) its corporate existence, and the corporate or other existence of
any subsidiary of the Company, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such subsidiary and (b) the rights (charter and statutory), licenses and
franchises of the Company and its subsidiaries; provided that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate or other existence of any of its subsidiaries if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its subsidiaries, taken as a
whole, and that the loss thereof is not materially adverse to the Noteholders.
Section 4.6 Commission and Other Reports. The Company shall deliver to the
Trustee and each Noteholder, within 10 days after it files the same with the
Commission, copies of all reports and information (or copies of such portions of
any of the foregoing as the Commission may by rules and regulations prescribe),
if any, that the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act; provided that in the case of annual
reports, information may be incorporated by reference and furnished to
Noteholders at the time and in the manner in which such information is required
to be furnished to the Company's common shareholders. The Company agrees to
continue to comply with the filing and reporting requirements of the Commission
as long as any of the Notes are outstanding; provided, that if the Company is
not subject to the filing and reporting requirements of the Commission at any
time, (a) the Company shall provide the Trustee and each Noteholder with the
reports and information (or copies of such portions of any of the foregoing as
the Commission may by rules and regulations prescribe) that are specified in
Section 13 or 15(d) of the Exchange Act as if the Company were subject to such
filing and reporting requirements, and (b) the Company shall provide copies of
such reports and information to any prospective holder of the Notes promptly
upon written request and payment of reasonable costs of duplication and
delivery. The record date to identify the Noteholders to whom such reports shall
be furnished shall be no longer than 60 days prior to the date on which such
reports are first mailed to the Noteholders on the Notes. The Company shall also
comply with the other provisions of the Trust Indenture Act Section 314(a).
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 4.7 Stay, Extension and Usury Laws. The Company (to the extent that
it may lawfully do so) shall not at any time insist upon, plead or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or
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that may affect the covenants or the performance of this Indenture; and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law has been enacted.
Section 4.8 Compliance Statement; Notice of Defaults.
(a) In accordance with the provisions of Trust Indenture Act, the Company
shall deliver to the Trustee within 120 days after the end of each Fiscal Year
of the Company an Officers' Certificate stating whether or not to the best
knowledge of the signers thereof the Company is in compliance (without regard to
periods of grace or notice requirements) with all conditions and covenants under
this Indenture, and if the Company shall not be in compliance, specifying such
non-compliance and the nature and status thereof of which such signer may have
knowledge. The Company agrees to promptly notify the Trustee of any change in
the Fiscal Year.
(b) The Company shall file with the Trustee written notice of the
occurrence of any default or Event of Default within ten days of its becoming
aware of any such default or Event of Default.
Section 4.9 Taxes. The Company shall pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, (a) all taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon the Company
or its subsidiaries or upon the income, profits or property of the Company or
any such subsidiary and (b) all lawful claims for labor, materials and supplies
that, if unpaid, might by law become a lien upon the property of the Company or
any such subsidiary; provided that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which disputed amounts adequate reserves have
been made.
ARTICLE V
NOTEHOLDERS' LISTS
Section 5.1 Noteholders' Lists. The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of holders of Notes and shall otherwise comply with Trust
Indenture Act Section 312(a). If the Trustee is not the Notes registrar, the
Company shall furnish or cause to be furnished to the Trustee on or before at
least seven Business Days preceding each interest payment date, redemption date,
purchase date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee reasonably may require of
the names and addresses of holders of Notes; and the Company shall otherwise
comply with Trust Indenture Act Section 312(a); provided however to the extent
there has been established a record date or special record date with respect to
such payment, any such list of holders shall be as of such record date or
special record date.
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ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default. In case one or more of the following Events
of Default (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment of the principal of or premium, if any, on
the Notes when due at maturity, upon redemption or otherwise, including
failure by the Company to purchase the Notes when required under Section
3.5 (whether or not such payment shall be prohibited by Article XV of this
Indenture); or
(b) default in the payment of any installment of interest on the Notes
as and when the same shall become due and payable (whether or not such
payment shall be prohibited by Article XV of this Indenture), and
continuance of such default for a period of 30 days; or
(c) failure to provide a Change of Control Notice (whether or not such
Notice or payment pursuant to Section 3.5 shall be prohibited by Article XV
of this Indenture); or
(d) failure on the part of the Company to duly observe or perform any
other covenant on the part of the Company in this Indenture (other than a
default in the performance or breach of a covenant that is specifically
dealt with elsewhere in this Section 6.1) that continues for a period of 90
days after the date on which written notice of such failure, requiring the
Company to remedy the same, shall have been given to the Company by the
Trustee, or to the Company and a Responsible Officer of the Trustee by the
holders of at least 25% in aggregate principal amount of the Notes at the
time outstanding (determined in accordance with Section 8.4); or
(e) the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it or shall make a general
assignment for the benefit of creditors or shall fail generally to pay its
debts as they become due; or
(f) an involuntary case or other proceeding shall be commenced against
the Company seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any
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substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 6.1(e) or (f)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding (determined
in accordance with Section 8.4), by notice in writing to the Company (and to the
Trustee if given by Noteholders), may declare the principal of and premium, if
any, on the Notes and the interest accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 6.1(e) or (f) occurs and is continuing, the principal of all the Notes
and the interest accrued thereon shall be immediately due and payable. The
foregoing provision is subject to the conditions that if, at any time after the
principal of the Notes shall have been so declared due and payable, and before
any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any, on any and all
Notes that shall have become due otherwise than by acceleration (with interest
on overdue installments of interest (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 7.7, and if any and all defaults
under this Indenture, other than the nonpayment of principal of, premium, if
any, and accrued interest on Notes that shall have become due by acceleration,
shall have been cured or waived pursuant to Section 6.7, then and in every such
case the holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereto. The Company shall notify a Responsible Officer of the
Trustee, promptly upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the holders of Notes and the Trustee shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Company, the holders of Notes and the Trustee shall continue as
though no such proceeding had been taken.
Section 6.2 Payments of Notes on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment of any
installment of interest upon any of the Notes as and when the same shall become
due and payable, and such default shall have continued for a period of 30 days,
or (b) in case default shall be made in the payment of the principal of or
premium, if any, on any of the Notes as and when the same shall have become due
and payable, whether at maturity of the Notes or in connection with any
redemption, by declaration or otherwise, then, upon demand of the Trustee, the
Company shall pay to the
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Trustee, for the benefit of the holders of the Notes, the whole amount that then
shall have become due and payable on all such Notes for principal of, premium,
if any, or interest, or both, as the case may be, with interest upon the overdue
principal of, premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law) upon the overdue installments of interest
at the rate borne by the Notes; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and premium, if any, and interest on the Notes to the
registered holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code or any other applicable law, or in case a receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of the
Company or such other obligor, the property of the Company or such other
obligor, or in the case of any other judicial proceedings relative to the
Company or such other obligor upon the Notes, or to the creditors or property of
the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand pursuant to the provisions of this Section 6.2, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal, premium, if any, and interest
owing and unpaid in respect of the Notes and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee and of the
Noteholders allowed in such judicial proceedings relative to the Company or any
other obligor on the Notes, its or their creditors, or its or their property and
to collect and receive any monies or other property payable or deliverable on
any such claims and to distribute the same after the deduction of any amounts
due the Trustee under Section 7.7; and any receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, custodian or similar official is
hereby authorized by each of the Noteholders to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Noteholders, to pay to the Trustee any amount due it
for reasonable compensation, expenses, advances and disbursements, including
counsel fees incurred by it up to the date of such distribution. To the extent
that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
that the holders of the Notes may
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be entitled to receive in such proceedings, whether in liquidation or under any
plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or adopt on behalf of any Noteholder any plan of
reorganization or arrangement affecting the Notes or the rights of any
Noteholder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Notes, may be enforced by the Trustee without the possession of any
of the Notes or the production thereof on any trial or other proceeding relative
thereto, and any such suit or proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings involving
the interpretation of any provision of this Indenture to which the Trustee shall
be a party), the Trustee shall be held to represent all the holders of the
Notes, and it shall not be necessary to make any holders of the Notes parties to
any such proceedings.
Section 6.3 Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article VI shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
First: To the payment of all amounts due the Trustee under this
Indenture, including, without limitation Section 7.7;
Second: Subject to the provisions of Article XV, in case the principal
of the outstanding Notes shall not have become due and be unpaid, to the
payment of interest on the Notes in default in the order of the maturity of
the installments of such interest, with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue installments
of interest at the rate borne by the Notes, such payments to be made
ratably to the persons entitled thereto; and
Third: Subject to the provisions of Article XV, in case the principal
of the outstanding Notes shall have become due, by declaration or
otherwise, and be unpaid, to the payment of the whole amount then due and
unpaid upon the Notes for principal, premium, if any, and interest, with
interest on the overdue principal and premium, if any, and (to the extent
that such interest has been collected by the Trustee) upon overdue
installments of interest at the rate borne by the Notes; and in case such
monies shall be insufficient to pay in full the whole amounts so due and
unpaid upon the Notes, then to the payment of such principal of, premium,
if any, and interest without preference or priority of principal and
premium, if any, over interest, or of interest over principal and premium,
if any, or of any
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installment of interest over any other installment of interest, or of any
Note over any other Note, ratably to the aggregate of such principal and
premium, if any, and accrued and unpaid interest.
Section 6.4 Proceedings by Noteholder. No holder of any Note shall have any
right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, and no direction inconsistent
with such written request shall have been given to the Trustee pursuant to
Section 6.7; it being understood and intended, and being expressly covenanted by
the taker and holder of every Note with every other taker and holder and the
Trustee, that not one or more holders of Notes shall have any right in any
manner whatever by virtue of or by availing of any provision of this Indenture
to affect, disturb or prejudice the rights of any other holder of Notes, to
obtain or seek to obtain priority over or preference to any other such holder or
to enforce any right under this Indenture, except in the manner herein provided
and for the equal, ratable and common benefit of all holders of Notes (except as
otherwise provided herein). For the protection and enforcement of this Section
6.4, each and every Noteholder and the Trustee shall be entitled to such relief
as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of
any Note, the right of any holder of any Note to receive payment of the
principal of, premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder
except as otherwise set forth herein.
Anything in this Indenture or the Notes to the contrary notwithstanding,
the holder of any Note, without the consent of either the Trustee or the holder
of any other Note, in his own behalf and for his own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
Section 6.5 Proceedings by Trustee. In case of an Event of Default, the
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either by
suit in equity or by action at law or by proceeding in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
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Section 6.6 Remedies Cumulative and Continuing. Except as provided in
Section 2.6, all powers and remedies given by this Article VI to the Trustee or
to the Noteholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of such powers and remedies or of any other powers and
remedies available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Notes to exercise any right or
power accruing upon any default or Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such default or any acquiescence therein; and, subject to the
provisions of Section 6.4, every power and remedy given by this Article VI or by
law to the Trustee or to the Noteholders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by the Noteholders.
Section 6.7 Direction of Proceedings and Waiver of Defaults by Majority of
Noteholders. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding (determined in accordance with Section 8.4) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee; provided that (a) such direction shall not be in
conflict with any rule of law or with this Indenture, (b) the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent with such
direction and (c) such direction shall not in the estimation of the Trustee
involve it in personal liability. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding (determined in accordance
with Section 8.4) may on behalf of the holders of all of the Notes waive any
past default or Event of Default hereunder and its consequences or waive
compliance with the provisions of the Indenture except (i) a default in the
payment of interest or premium, if any, on, or the principal of, the Notes, (ii)
a failure by the Company to convert any Notes into Common Stock or (iii) a
default in respect of a covenant or provisions hereof that under Article X
cannot be modified or amended without the consent of the holders of all Notes
then outstanding. Whenever any default or Event of Default hereunder shall have
been waived as permitted by this Section 6.7, said default or Event of Default
shall for all purposes of the Notes and this Indenture be deemed to have been
cured and to be not continuing and the Company, the Trustee and the holders of
the Notes shall be restored to their former positions and rights hereunder; but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
Section 6.8 Notice of Defaults. The Trustee shall, within 90 days after the
occurrence of a default, mail to all Noteholders, as the names and addresses of
such holders appear upon the Note register, notice of all defaults known to a
Responsible Officer, unless such defaults shall have been cured or waived before
the giving of such notice; provided that, except in the case of default in the
payment of the principal of, premium, if any, or interest on any of the Notes,
the Trustee shall be protected in withholding such notice if and so long as a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determine that the withholding of such notice is in the interests of the
Noteholders.
Section 6.9 Undertaking to Pay Costs. All parties to this Indenture agree,
and each holder of any Note by his acceptance thereof shall be deemed to have
agreed, that any court may,
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in its discretion, require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken or omitted by it as Trustee, the filing by any party litigant in such suit
of an undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant;
provided that the provisions of this Section 6.9 shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Noteholder or group of
Noteholders holding in the aggregate more than 10% in principal amount of the
Notes at the time outstanding (determined in accordance with Section 8.4) or to
any suit instituted by any Noteholder for the enforcement of the payment of the
principal of, premium, if any, or interest on any Note on or after the due date
expressed in such Note or to any suit for the enforcement of the right to
convert any Note in accordance with the provisions of Article XIV.
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.1 Duties and Responsibilities of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; provided
that in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(i) this paragraph (c) does not limit the effect of paragraph (b) of
this Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by an officer or officers of the Trustee unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.7.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1.
(e) The Trustee may refuse to perform any duty or exercise any right or
power or expend or risk its own funds or otherwise incur any financial liability
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
Section 7.2 Reports by Trustee to Holders. Within 60 days after each
anniversary of the date set forth on Schedule I (the "Report Date") commencing
with the first Report Date following the date of this Indenture, the Trustee
shall, but only if required by the Trust Indenture Act, mail to each Noteholder
a brief report dated as of such May 15 that complies with Trust Indenture Act
Section 313(a). The Trustee also shall comply with Trust Indenture Act Sections
313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the Notes
become listed or delisted on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Noteholders shall be
mailed to the Company and, to the extent required by Section 4.6 hereof and of
the Trust Indenture Act Section 313(d), filed with the Commission and each stock
exchange, if any, on which the Notes are listed.
Section 7.3 Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 7.1:
(a) The Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, coupon or other paper or document
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed or
required by the Trust Indenture Act); and any resolution of the Board of
Directors may be evidenced to the Trustee by a copy thereof certified by
the Secretary or an Assistant Secretary of the Company;
(c) The Trustee may consult with counsel of its selection and any
advice or opinion of counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in
good faith and in accordance with such advice or opinion of counsel;
(d) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall
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not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed by it with due care hereunder; no Depositary,
Custodian or paying agent who is not the Trustee shall be deemed an agent
of the Trustee, and the Trustee (in its capacity as Trustee) shall not be
responsible for any act or omission by any such Depositary, Custodian or
paying agent;
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by the Indenture at the request or direction
of any of the holders pursuant to this Indenture unless such holders have
offered the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that would be incurred by it in compliance with
such request or direction.
(f) Subject to the provisions of Section 7.1(c), the Trustee shall not
be liable for any action it takes or omits to take in good faith that it
believes to be authorized or within its rights or powers;
(g) In connection with any request to transfer or exchange any Note,
the Trustee may request a direction (in the form of an Officers'
Certificate) from the Company and an Opinion of Counsel with respect to
compliance with any restrictions on transfer or exchange imposed by this
Indenture, the Securities Act, other applicable law or the rules and
regulations of any exchange on which the Notes or the Capital Stock may be
traded, and the Trustee may rely and shall be protected in acting upon such
direction and in accordance with such Officers' Certificate and Opinion of
Counsel;
(h) The Trustee may rely and shall be fully protected in acting upon
the determination and notice by the Company of the Conversion Price; and
(i) The Trustee shall not be deemed to have knowledge of any Event of
Default or other fact or event upon the occurrence of which it may be
required to take action hereunder unless one of its Responsible Officers
has actual knowledge thereof.
(j) The Trustee's privileges, protections and immunities from
liability and its rights to compensation and indemnification in connection
with the performance of its duties under this Indenture shall extend to the
Trustee when serving in the roles of paying agent, authenticating agent,
conversion agent and Note registrar, as well as to the Trustee's officers,
directors, employees and agents. Such privileges, protections, immunities
and rights to indemnification, together with the Trustee's right to
compensation, shall survive the Trustee's resignation or removal in any or
all of the capacities it may be serving hereunder and final payment of the
Notes.
(k) No recourse under or upon any obligation, covenant or agreement of
the Trustee in this Indenture or in any supplemental indenture shall be had
against any officer, director, employee or agent, as such, past, present or
future, of the Trustee or of any successor entity, either directly or
through the Trustee or any successor entity, whether by virtue of any
constitution, statute or rule of law, by the enforcement of any assessment
or penalty or otherwise, it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as
consideration for, the execution of this Indenture.
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Section 7.4 No Responsibility for Recitals, Etc. The recitals contained
herein and in the Notes (except in the Trustee's certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 7.5 Trustee, Paying Agents, Conversion Agents or Registrar May Own
Notes. The Trustee, any paying agent, any conversion agent or any Note
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 7.6 Monies to Be Held in Trust. Subject to the provisions of
Section 12.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed to in writing from time to time by the Company and the Trustee.
Section 7.7 Compensation and Expenses of Trustee. The Company shall pay to
the Trustee from time to time, and the Trustee shall be entitled to, such
compensation as the Company and the Trustee shall from time to time agree in
writing, for all services rendered by it hereunder in any capacity (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust), and the Company shall pay or reimburse the Trustee
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Indenture (including the reasonable fees and expenses of its counsel and of all
persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence or bad faith. The Company also shall
indemnify each of the Trustee or any predecessor Trustee in any capacity under
this Indenture and its respective agents and any authenticating agent and their
respective officers, directors, employees and agents for, and to hold them
harmless against, any and all loss, liability, damage, claim or expense,
including taxes (other than taxes based on the income of the Trustee) and
reasonable counsel fees and expenses incurred without negligence or bad faith on
the part of the Trustee or any such other indemnified parties, as the case may
be, and arising out of or in connection with the acceptance or administration of
this trust or in any other capacity hereunder, including the costs and expenses
of defending themselves against any claim of liability in the premises. The
obligations of the Company under this Section 7.7 to compensate or indemnify the
Trustee and to pay or reimburse the Trustee for expenses, disbursements and
advances shall be secured by a lien prior to that of the Notes upon all property
and funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the holders of particular Notes. The obligation of the
Company under this Section shall survive the satisfaction and discharge of this
Indenture.
Section 7.8 Officers' Certificate as Evidence. Except as otherwise provided
in Section 7.1, whenever in the administration of the provisions of this
Indenture the Trustee shall deem it
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necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
Officers' Certificate, in the absence of negligence or bad faith on the part of
the Trustee, shall be full warrant to the Trustee for any action taken or
omitted by it under the provisions of this Indenture upon the faith thereof.
Section 7.9 Conflicting Interests of Trustee. In the event that the Trust
Indenture Act is applicable hereto, and if the Trustee has or shall acquire a
conflicting interest within the meaning of Trust Indenture Act Section 310(b)
and there exists an Event of Default hereunder (exclusive of any period of grace
or requirement of notice), the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture.
Section 7.10 Eligibility of Trustee. There shall at all times be a Trustee
hereunder that shall be a person that satisfied the requirements of Trust
Indenture Act Section 310(a)(1) and Section 310(a)(5) and that has a combined
capital and surplus of at least $50,000,000 or be a part of a bank holding
company with a combined capital and surplus with at least $100,000,000 as set
forth in its most recent annual report of condition. If such person makes
available to the public reports of condition or audited financial statements at
least annually, then for the purposes of this Section 7.10, the combined capital
and surplus of such person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition or audited financial
statements. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article VII.
Section 7.11 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written notice of such
resignation to the Company; and the Company shall mail, or cause to be mailed,
notice thereof to the holders of Notes at their addresses as they shall appear
on the Note register. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with Section 7.9 after written
request therefor by the Company or by any Noteholder who has been a bona
fide holder of a Note or Notes for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 7.10 and shall fail to resign after written request
therefor by the Company or by any such Noteholder; or
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(iii) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee or any Noteholder who
has been a bona fide holder of a Note or Notes for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the Notes at
the time outstanding may at any time remove the Trustee and nominate a successor
trustee, which shall be deemed appointed as successor trustee unless within ten
days after notice to the Company of such nomination the Company objects thereto,
in which case the Trustee so removed or any Noteholder, upon the terms and
conditions and otherwise as provided in the next paragraph, may petition any
court of competent jurisdiction for an appointment of a successor trustee.
If no successor trustee shall have been so appointed and have accepted
appointment within 60 days after removal or the mailing of such notice of
resignation to the Noteholders, the Trustee resigning or being removed may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or, in the case of either resignation or removal, any Noteholder who
has been a bona fide holder of a Note or Notes for at least six months may, on
behalf of himself and all others similarly situated, petition any such court for
the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 7.11 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 7.12.
Section 7.12 Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 7.11 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon, the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but on the written request of the Company
or of the successor trustee, the Trustee ceasing to act shall, upon payment of
any amounts then due it pursuant to the provisions of Section 7.7, execute and
deliver an instrument transferring to such successor trustee all the rights and
powers of the Trustee so ceasing to act. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully
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and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien
upon all property and funds held or collected by such trustee as such, except
for funds held in trust for the benefit of holders of particular Notes, to
secure any amounts then due it pursuant to the provisions of Section 7.7.
No successor trustee shall accept appointment as provided in this Section
7.12 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 7.9 and eligible under the provisions
of Section 7.10.
Upon acceptance of appointment by a successor trustee as provided in this
Section 7.12, the Company shall mail or cause to be mailed notice of the
succession of such Trustee hereunder to the holders of Notes at their addresses
as they shall appear on the Note register. If the Company fails to mail such
notice within ten days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of the
Company.
Section 7.13 Successor, by Merger, Etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee, shall be the successor to
the Trustee hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided such corporation
shall be qualified under the provisions of Section 7.9 and eligible under the
provisions of Section 7.10.
Section 7.14 Limitation on Rights of Trustee as Creditor. If and when the
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Notes) and the Trust Indenture Act is applicable hereto, the Trustee shall
be subject to the provisions of Trust Indenture Act Section 311(a) or, if
applicable, Trust Indenture Act Section 311(b) regarding the collection of the
claims against the Company (or any such other obligor).
ARTICLE VIII
CONCERNING THE NOTEHOLDERS
Section 8.1 Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article IX or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than 15 days
prior to the date of commencement of solicitation of such action.
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Section 8.2 Proof of Execution by Noteholders. Subject to the provisions of
Sections 7.1, 7.2 and 9.5, proof of the execution of any instrument by a
Noteholder or by agent or proxy shall be sufficient if made in accordance with
such reasonable rules and regulations as may be prescribed by the Trustee or in
such manner as shall be satisfactory to the Trustee. The holding of Notes shall
be proved by the Note register or by a certificate of the Note registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 9.5.
Section 8.3 Who Are Deemed Absolute Owners. The Company, the Trustee, any
paying agent, any conversion agent and any Note registrar may deem the person in
whose name such Note shall be registered upon the books of the Company to be,
and may treat such person as, the absolute owner of such Note (whether or not
such Note shall be overdue and notwithstanding any notation of ownership or
other writing thereon) for the purpose of receiving payment of or on account of
the principal of, premium, if any, and interest on such Note, for conversion of
such Note and for all other purposes; and neither the Company nor the Trustee
nor any paying agent nor any conversion agent nor any Note registrar shall be
affected by any notice to the contrary. All such payments so made to any holder
for the time being, or upon order of such holder, shall be valid and, to the
extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for monies payable upon any such Note.
The Depositary shall be deemed to be the owner of any global Note for all
purposes, including receipt of notices to Noteholders and payment of principal
of, premium, if any, and interest on the Notes. None of the Company, the Trustee
(in its capacity as Trustee), any paying agent or the Note registrar (or
co-registrar) shall have any responsibility for any aspect of the records
relating to or payments made on account of beneficial interests of a global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests; provided that the foregoing shall not apply to
the Trustee or any other person acting in its capacity as Custodian.
Section 8.4 Company-Owned Notes Disregarded. In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes that
are owned by the Company or any other obligor on the Notes or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent, waiver or other
action, only Notes that a Responsible Officer actually knows are so owned shall
be so disregarded. Notes so owned that have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 8.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledger's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee. Upon request of
the Trustee,
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the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Notes, if any, known by the Company to be owned or
held by or for the account of any of the above described persons; and subject to
Section 7.1, the Trustee shall be entitled to accept such Officers' Certificate
as conclusive evidence of the facts therein set forth and of the fact that all
Notes not listed therein are outstanding for the purpose of any such
determination.
Section 8.5 Revocation of Consents, Future Holders Bound. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section 8.1, of
the taking of any action by the holders of the percentage in aggregate principal
amount of the Notes specified in this Indenture in connection with such action,
any holder of a Note that is shown by the evidence to be included in the Notes
the holders of which have consented to such action may, by filing written notice
with the Trustee at its Corporate Trust Office and upon proof of holding as
provided in Section 8.2, revoke such action so far as concerns such Note. Except
as aforesaid, any such action taken by the holder of any Note shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Note and of any Notes issued in exchange or substitution therefor,
irrespective of whether any notation in regard thereto is made upon such Note or
any Note issued in exchange or substitution therefor.
ARTICLE IX
NOTEHOLDERS' MEETINGS
Section 9.1 Purposes for Which Meetings May be Called. A meeting of
Noteholders may be called at any time and from time to time pursuant to the
provisions of this Article IX for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to
be taken by Noteholders pursuant to any of the provisions of Article VI;
(b) to remove the Trustee and appoint a successor trustee pursuant to
the provisions of Article VII;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 10.2; or
(d) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of the Notes under
any other provisions of this Indenture or under applicable law.
Section 9.2 Manner of Calling Meetings; Record Date. The Trustee may at any
time call a meeting of Noteholders to take any action specified in Section 9.1,
to be held at such time and at such place in the City of New York, State of New
York, as the Trustee shall determine. Notice of every meeting of the
Noteholders, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be mailed not less
than 30 nor more than 60 days prior to the date fixed for the meeting to such
Noteholders at their
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addresses as such addresses appear in the Note register. For the purpose of
determining Noteholders entitled to notice of any meeting of Noteholders, the
Trustee shall fix in advance a date as the record date for such determination,
such date to be a Business Day not more than ten days prior to the date of the
mailing of such notice as hereinabove provided. Only persons in whose name any
Note shall be registered in the Note register at the close of business on a
record date fixed by the Trustee as aforesaid, or by the Company or the
Noteholders as provided in Section 9.3, shall be entitled to notice of the
meeting of Noteholders with respect to which such record date was so fixed.
Section 9.3 Call of Meeting by Company or Noteholders. In case at any time
the Company, pursuant to a resolution of its Board of Directors or the holders
of at least 10% in aggregate principal amount of the Notes then outstanding
shall have requested the Trustee to call a meeting of Noteholders to take any
action authorized in Section 9.1 by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed notice of such meeting within 20 days after receipt of such request,
then the Company or the holders of Notes in the amount above specified, as the
case may be, may fix the record date with respect to, and determine the time and
the place for, such meeting and may call such meeting to take any action
authorized in Section 9.1, by mailing notice thereof as provided in Section 9.2.
The record date fixed as provided in the preceding sentence shall be set forth
in a written notice to the Trustee and shall be a Business Day not less than 15
nor more than 20 days after the date on which the original request is sent to
the Trustee.
Section 9.4 Who May Attend and Vote at Meetings. Only persons entitled to
receive notice of a meeting of Noteholders and their respective proxies duly
appointed by an instrument in writing shall be entitled to vote at such meeting.
The only persons who shall be entitled to be present or to speak at any meeting
of Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel. When a determination of
Noteholders entitled to vote at any meeting of Noteholders has been made as
provided in this Section 9.4, such determination shall apply to any adjournments
thereof.
Section 9.5 Manner of Voting at Meetings and Record To Be Kept. The vote
upon any resolution submitted to any meeting of Noteholders shall be by written
ballots on each of which shall be subscribed the signature of the Noteholder or
proxy casting such ballot and the identifying number or numbers of the Notes
held or represented in respect of which such ballot is cast. The chairman of the
meeting shall appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Noteholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 9.2. The record
shall show the identifying numbers of the Notes voting in favor of or against
any resolution. Each counterpart of such record shall be signed and verified by
the affidavits of the chairman and secretary of the meeting and one of the
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counterparts shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee.
Any counterpart record so signed and verified shall be conclusive evidence
of the matters therein stated and shall be the record referred to in clause (b)
of Section 8.1.
Section 9.6 Exercise of Rights of Trustee and Noteholders Not To Be
Hindered or Delayed. Nothing in this Article IX contained shall be deemed or
construed to authorize or permit, by reason of any call of a meeting of
Noteholders or any rights expressly or impliedly conferred hereunder to make
such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Noteholders under any of the
provisions of this Indenture or of the Notes.
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.1 Supplemental Indentures Without Consent of Noteholders. The
Company, when authorized by a Board Resolution, and the Trustee may from time to
time and at any time enter into an indenture or indentures supplemental hereto
for one or more of the following purposes:
(a) to make provision with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 14.6;
(b) subject to Article XV, to convey, transfer, assign, mortgage or
pledge to the Trustee, as security for the Notes, any property or assets;
(c) to evidence the succession of another person to the Company, or
successive successions, and the assumption by the Successor Company of the
covenants, agreements and obligations of the Company pursuant to Article
XI;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture; provided that in respect of any such additional
covenant, restriction or condition, such supplemental indenture may provide
for a particular period of grace after default (which period may be shorter
or longer than that allowed in the case of other defaults) or may provide
for an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes in
coupon form (including Notes registrable as to principal only) and to
provide for exchangeability of such Notes with the Notes issued hereunder
in fully registered form and to make all appropriate changes for such
purpose;
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(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture that may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture that shall not adversely
affect the interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this Indenture to
such extent necessary to effect the qualification of this Indenture under
the Trust Indenture Act (if applicable), or under any similar federal
statute hereafter enacted (if applicable).
In addition to the foregoing, prior to the issuance of any Notes hereunder,
the Company, when authorized by a Board Resolution, and the Trustee, may enter
into an indenture or indenture supplemental hereto, for the purposes of the
following:
(a) specifying the percentage of the principal amount at which notes
will be issued, and if other than the principal amount of those notes, the
portion of the principal amount payable upon declaration of acceleration of
the maturity of the notes;
(b) specifying the date or dates, or method of determining the date or
dates, on which the principal of the notes will be payable;
(c) specifying the rate or rates at which the notes will bear interest
and the method of computation of interest;
(d) specifying the rate or rates at which the notes may be converted
into our common stock;
(e) specifying the date or dates, or the method for determining the
date or dates, from which interest will accrue, the dates on which interest
will be payable, the regular record dates for interest payment dates; or
the method by which record dates may be determined, the persons to whom
interest will be payable, and the basis on which interest is to be
calculated if other than a 360-day year;
(f) specifying the period or periods within which, the price or prices
at which and the other terms and conditions upon which the notes may be
redeemed, in whole or part, at the option of the Company, if the Company is
to have such option;
(g) conforming the forms of Notes attached as Exhibits A and B hereto
to Notes authorized by a Board Resolution and set forth in a supplemental
indenture;
(h) provisions, if any, granting special rights to the Noteholders;
(i) specifying any deletions from, modifications of or additions to
the Events of Default, covenants of the Company, provisions related to
redemption or repurchase of the Notes set forth in Article III, provisions
related to consolidation, merger, sale, conveyance,
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transfer and lease set forth in Article XI, provisions related to
conversion of the notes set forth in Article XIV and additional provisions
relating to the subordination provisions in Article XV;
(j) any other terms or modifications to the Indenture necessary to
reflect the terms of the notes described in any prospectus supplement
pursuant to which the Notes are offered; and
(k) any other provision not inconsistent with the terms of the
Indenture.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
that affects the Trustee's own rights, duties, protections, privileges,
liabilities or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
10.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 10.2.
Section 10.2 Supplemental Indentures With Consent of Noteholders. With the
consent (evidenced as provided in Article VIII) of the holders of not less than
a majority in aggregate principal amount of the Notes at the time outstanding,
the Company, when authorized by a Board Resolution and the Trustee may from time
to time and at any time enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or any supplemental
indenture or of modifying in any manner the rights of the holders of the Notes;
provided that, without the consent of the holders of all Notes then outstanding,
no such supplemental indenture shall (a) extend the fixed maturity of any Note,
or reduce the rate or extend the time of payment of interest thereon, or reduce
the principal amount thereof or premium, if any, thereon or reduce any amount
payable on redemption thereof, alter the obligation of the Company to redeem the
Notes at the option of the holder upon the occurrence of a Change of Control or
impair or affect the right of any Noteholder to institute suit for the payment
thereof or make the principal thereof or interest or premium, if any, thereon
payable in any coin or currency other than that provided in the Notes, modify
the subordination provisions in a manner adverse to the holders of the Notes, or
impair the right to convert the Notes into Common Stock subject to the terms set
forth herein without the consent of the holder of each Note so affected or (b)
reduce the aforesaid percentage of Notes, the holders of which are required to
consent to any such supplemental indenture.
Upon the request of the Company, accompanied by a copy of a Board
Resolution certified by its Secretary or Assistant Secretary authorizing the
execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence of the consent of Noteholders as aforesaid, the Trustee
shall join with the Company in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own rights, duties,
protections, privileges, liability or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
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It shall not be necessary for the consent of the Noteholders under this
Section 10.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 10.3 Effect of Supplemental Indentures. Any supplemental indenture
executed pursuant to the provisions of this Article X shall comply with the
Trust Indenture Act, as then in effect, if such supplemental indenture is then
required to so comply. Upon the execution of any supplemental indenture pursuant
to the provisions of this Article X, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of
the Trustee, the Company and the holders of Notes shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 10.4 Notation on Notes. Notes authenticated and delivered after the
execution of any supplemental indenture pursuant to the provisions of this
Article X may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture, but they need not do so. If the
Company or the Trustee shall determine to add such a notation, new Notes so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this Indenture contained in any such
supplemental indenture may, at the Company's expense, be prepared and executed
by the Company, authenticated by the Trustee (or an authenticating agent duly
appointed by the Trustee pursuant to Section 16.13) and delivered in exchange
for the Notes then outstanding, upon surrender of such Notes then outstanding.
Section 10.5 Evidence of Compliance of Supplemental Indenture To Be
Furnished Trustee. The Trustee shall be furnished with and, subject to the
provisions of Sections 7.1 and 7.2, may rely upon an Officers' Certificate and
an Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant hereto complies with the requirements of this Article X.
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE
Section 11.1 Company May Consolidate, Etc. on Certain Terms. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all of its assets (determined on a consolidated basis),
whether in a single transaction or a series of related transactions, to any
person unless: (a) either the Company is the resulting, surviving or transferee
person (the "Successor Company") or the Successor Company is a person organized
and existing under the laws of the United States or any State thereof or the
District of Columbia, and the Successor Company (if not the Company) expressly
assumes by a supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under this
Indenture and the Notes, including the rights pursuant to Article XIV hereof,
(b) immediately after giving effect to such transaction, no Event of Default
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has happened and is continuing and (c) the Company delivers to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
Section 11.2 Successor Company To Be Substituted. In case of any such
consolidation, merger, sale, conveyance, transfer or lease and upon the
assumption by the Successor Company, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of, premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such Successor
Company shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party hereto. When a Surviving
Person duly assumes all the obligations of the Company pursuant to their
Indenture and the Notes, the predecessor shall be released from all such
obligations.
Section 11.3 Opinion of Counsel To Be Given to Trustee. The Trustee,
subject to Sections 7.1 and 7.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance, transfer or lease and any such assumption complies with the
provisions of this Article XI.
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONIES
Section 12.1 Legal Defeasance and Covenant Defeasance of the Notes.
(a) The Company may, at its option by Board Resolution, at any time, with
respect to the Notes, elect to have either paragraph (b) or paragraph (c) below
be applied to the outstanding Notes upon compliance with the conditions set
forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of the Sections of and matters under this
Indenture referred to in clauses (i) and (ii) below and to have satisfied all
its other obligations under such Notes and this Indenture insofar as such Notes
are concerned, except for the following, which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of holders of outstanding
Notes to receive solely from the trust fund described in paragraph (d) below and
as more fully set forth in such paragraph, payments in respect of the principal
of, premium, if any, and interest on such Notes when such payments are due and
(ii) obligations listed in Section 12.3.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Sections 3.5, 4.6 and 4.9
and Article XI with respect to the
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outstanding Notes on and after the date the conditions set forth in paragraph
(d) are satisfied (hereinafter, "covenant defeasance"), and the Notes shall
thereafter be deemed to be not "outstanding" for the purpose of any direction,
waiver, consent or declaration or act of Noteholders (and the consequences of
any thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document, and such omission to comply shall not constitute a
default or an Event of Default under Section 6.1, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Notes:
(i) The Company shall have irrevocably deposited in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in form
and substance satisfactory to the Trustee, cash or U.S. Government
Obligations maturing as to principal and interest at such times, or a
combination thereof, in such amounts as are sufficient, after giving
consideration of the reinvestment of such principal and interest and after
payment of all federal, state and local taxes or other charges or
assessments in respect thereof payable by the Trustee, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof (in form and substance reasonably
satisfactory to the Trustee) delivered to the Trustee, to pay the principal
of, premium, if any, and interest on the outstanding Notes on the dates on
which any such payments are due and payable in accordance with the terms of
this Indenture and of the Notes;
(ii) (A) No Event of Default shall have occurred or be continuing on
the date of such deposit, and (B) no default or Event of Default under
Section 6.1(e) or 6.1(f) shall occur on or before the 123rd day after the
date of such deposit;
(iii) Such deposit shall not result in a default under this Indenture
or a breach or violation of, or constitute a default under, any other
instrument or agreement to which the Company is a party or by which it or
its property is bound;
(iv) In the case of a legal defeasance under paragraph (b) above, the
Company has delivered to the Trustee an Opinion of Counsel stating that (A)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
holders of the Notes shall not recognize income, gain or loss for federal
income tax purposes as a result of
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such deposit, defeasance and discharge and shall be subject to federal
income tax on the same amounts and in the same manner and at the same times
as would have been the case if such deposit, defeasance and discharge had
not occurred; and, in the case of a covenant defeasance under paragraph (c)
above, the Company shall deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel, in form and substance reasonably satisfactory to
the Trustee, to the effect that holders of the Notes shall not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and defeasance and shall be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred;
(v) The Company shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that, after the passage of 123 days following the deposit, the
trust funds shall not constitute a preferential transfer under Section
547(b) of Title 11 of the U.S. Code; and
(vi) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
specified herein relating to the defeasance contemplated by this Section
12.1 have been complied with;
provided that no deposit under clause (i) shall be effective to terminate the
obligations of the Company under the Notes or this Indenture prior to the
passage of 123 days following such deposit.
Section 12.2 Termination of Obligations upon Cancellation of the Notes. In
addition to the Company's rights under Section 12.1, the Company may terminate
all of its obligations under this Indenture (subject to Section 12.3) when:
(a) (i) all Notes theretofore authenticated and delivered (other than Notes
that have been destroyed, lost or stolen and that have been replaced or paid as
provided in Section 2.6) have been delivered to the Trustee for cancellation,
and (ii) the Company has paid or caused to be paid all other sums payable
hereunder and under the Notes by the Company; or
(b) (i) the Notes not previously delivered to the Trustee for cancellation
shall have become due and payable or are by their terms to become due and
payable within one year or are to be called for redemption under arrangements
satisfactory to the Trustee upon delivery of notice, (ii) the Company shall have
irrevocably deposited with the Trustee, as trust funds, cash, in an amount
sufficient to pay principal of and interest on the outstanding Notes, to
maturity or redemption, as the case may be, (iii) such deposit shall not result
in a breach or violation of, or constitute a default under, any agreement or
instrument pursuant to which the Company is a party or by which it or its
property is bound and (iv) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions related
to such defeasance have been complied with.
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Section 12.3 Survival of Certain Obligations. Notwithstanding the
satisfaction and discharge of this Indenture and of the Notes referred to in
Section 12.1 or 12.2, the respective obligations of the Company and the Trustee
under Sections 2.3, 2.4, 2.5, 2.6, 3.1, 4.2, 5.1, 6.4, 6.9, 7.6, 7.7, 7.11,
12.5, 12.6, 12.7 and Article XIV shall survive until the Notes are no longer
Outstanding, and thereafter, the obligations of the Company and the Trustee
under Sections 6.9, 7.6, 7.7, 12.5, 12.6 and 12.7 shall survive. Nothing
contained in this Article XII shall abrogate any of the rights, obligations or
duties of the Trustee under this Indenture.
Section 12.4 Acknowledgment of Discharge by Trustee. Subject to Section
12.7, after (i) the conditions of Section 12.1 or 12.2 have been satisfied, (ii)
the Company has paid or caused to be paid all other sums payable hereunder by
the Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon written
request shall acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations specified in Section
12.3.
Section 12.5 Application of Trust Assets. The Trustee shall hold any cash
or U.S. Government Obligations deposited with it in the irrevocable trust
established pursuant to Section 12.1 or 12.2, as the case may be. The Trustee
shall apply the deposited cash or the U.S. Government Obligations, together with
earnings thereon in accordance with this Indenture and the terms of the
irrevocable trust agreement established pursuant to Section 12.1 or 12.2, as the
case may be, to the payment of principal of, premium, if any, and interest on
the Notes. The cash or U.S. Government Obligations so held in trust and
deposited with the Trustee in compliance with Section 12.1 or 12.2, as the case
may be, shall not be part of the trust estate under this Indenture, but shall
constitute a separate trust fund for the benefit of all holders entitled
thereto. Except as specifically provided herein, the Trustee shall not be
requested to invest any amounts held by it for the benefit of the holders or pay
interest on uninvested amounts to any holder.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 12.1 hereof or Section 12.2 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the holders of outstanding
Notes.
Section 12.6 Repayment to the Company; Unclaimed Money. Subject to
applicable laws governing escheat of such property, and upon termination of the
trust established pursuant to Section 12.1 hereof or 12.2 hereof, as the case
may be, the Trustee shall promptly pay to the Company upon written request any
excess cash or U.S. Government Obligations held by it. Additionally, if amounts
for the payment of principal, premium, if any, or interest remains unclaimed for
two years, the Trustee shall pay such amounts back to the Company forthwith.
Thereafter, all liability of the Trustee with respect to such amounts shall
cease. After payment to the Company, holders entitled to such payment must look
to the Company for such payment as general creditors unless an applicable
abandoned property law designates another person.
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Section 12.7 Reinstatement. If the Trustee is unable to apply any cash or
U.S. Government Obligations in accordance with Section 12.1 or 12.2 by reason of
any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
12.1 or 12.2 until such time as the Trustee is permitted to apply all such cash
or U.S. Government Obligations in accordance with Section 12.1 or 12.2, as the
case may be; provided that if the Company makes any payment of principal of,
premium, if any, or interest on any Notes following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the holders of
such Notes to receive such payment from the amounts held by the Trustee.
ARTICLE XIII
IMMUNITY OF INCORPORATORS, SHAREHOLDERS,
OFFICERS AND DIRECTORS
Section 13.1 Indenture and Notes Solely Corporate Obligations. No recourse
for the payment of the principal of, or premium, if any, or interest on any
Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, shareholder, officer or director, as such, past, present or
future, of the Company or of any successor entity, either directly or through
the Company or any successor entity, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issuance of the Notes.
ARTICLE XIV
CONVERSION OF NOTES
Section 14.1 Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, the holder of any Note shall have the right, at
the option of such holder, at any time through the close of business on the
Business Day immediately preceding the maturity date (except that, with respect
to any Note or portion of a Note that shall be called for redemption or
delivered for repurchase, such right shall terminate immediately prior to the
close of business on the last Business Day before the date fixed for redemption
of such Note or portion of a Note unless the Company shall default in payment
due upon redemption thereof) to convert the principal amount of any such Note,
or any portion of such principal amount that is $1,000 or an integral multiple
thereof, into that number of fully paid and nonassessable shares of Common Stock
(as such shares shall then be constituted) obtained by dividing the aggregate
principal amount of the Notes or portion thereof surrendered for conversion by
the Conversion Price in effect at such time rounded to the nearest 1/100,000th
of a share (with .0000005 being rolled upward), by surrender of the Note so to
be converted in whole or in part in the manner provided in Section 14.2. A
holder of Notes is not entitled to any rights of a holder of Common Stock
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until such holder has converted such holder's Notes to Common Stock and only to
the extent such Notes are deemed to have been converted to Common Stock under
this Article XIV.
Section 14.2 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends. In order to exercise the
conversion privilege with respect to any Note in definitive form, the holder of
any such Note to be converted in whole or in part shall surrender such Note,
duly endorsed, at an office or agency maintained by the Company pursuant to
Section 4.2, accompanied by the funds, if any, required by the penultimate
paragraph of this Section 14.2, and shall give written notice of conversion in
the form provided on the form of Note (or such other notice that is acceptable
to the Company) to the office or agency that the holder elects to convert such
Note or the portion thereof specified in said notice. Such notice shall also
state the name or names (with address) in which the certificate or certificates
for shares of Common Stock that shall be issuable on such conversion shall be
issued and shall be accompanied by transfer taxes, if required pursuant to
Section 14.7. Each such Note surrendered for conversion shall, unless the shares
issuable on conversion are to be issued in the name of the holder of such Note
as it appears on the Note register, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a global Note, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program and follow the other procedures set forth in such program.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such holder at the office or agency maintained by the Company for such purpose
pursuant to Section 4.2, a certificate or certificates for the number of full
shares issuable upon the conversion of such Note (or portion thereof) in
accordance with the provisions of this Article XIV and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 14.3. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial conversion,
and subject to Section 2.3, the Company shall execute and the Trustee shall
authenticate and make available for delivery to the holder of the Note so
surrendered, without charge to him, a new Note or Notes in authorized
denominations in an aggregate principal amount equal to the unconverted portion
of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such Note
(or portion thereof) on the date on which the requirements set forth above in
this Section 14.2 have been satisfied as to such Note (or portion thereof), and
the person in whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; provided that
any such surrender on any date when the stock transfer books of the Company
shall be closed shall constitute the person in whose name the certificates are
to be issued as the record holder
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thereof for all purposes on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion Price in effect
on the date upon which such Note shall have been surrendered.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date
through the opening of business on the next succeeding interest payment date
shall (unless such Note or portion thereof being converted shall have been
called for redemption on a date during the period from the close of business on
or after any record date to the close of business on the corresponding payment
date) be accompanied by payment, in funds acceptable to the Company, of an
amount equal to the interest otherwise payable on such interest payment date on
the principal amount being converted; provided that no such payment need be made
if there shall exist at the time of conversion an Event of Default under
subsection (a) or (b) of Section 6.1 hereof. An amount equal to such payment
shall be paid by the Company on such interest payment date to the holder of such
Note at the close of business on such record date; provided that if the Company
shall default in the payment of interest on such interest payment date, such
amount shall be paid to the person who made such required payment. The interest
payment with respect to a Note called for redemption on a date during the period
from the close of business on or after any record date to the close of business
on the Business Day following the corresponding payment date shall be payable on
the corresponding interest payment date to the registered Noteholder at the
close of business on that record date (notwithstanding the conversion of such
Note before the corresponding interest payment date) and a Noteholder who elects
to convert need not include funds equal to the interest paid. Except as provided
above in this Section 14.2, no adjustment shall be made for interest accrued on
any Note converted or for dividends on any shares issued upon the conversion of
such Note as provided in this Article XIV.
Upon the conversion of an interest in a global Note, the Trustee, or the
Custodian at the direction of the Trustee, shall make a notation on such global
Note as to the reduction in the principal amount represented thereby.
Section 14.3 Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of fully paid and
non-assessable shares of Common Stock issuable upon conversion of a Note shall
be determined by dividing the aggregate principal amount of the Note or portion
thereof surrendered for conversion by the Conversion Price in effect at such
time. The aggregate number of shares of Common Stock issuable upon conversion
shall be rounded to the nearest 1/100,000th of a share (with .0000005 being
rolled upward). If any fractional share of stock would be issuable upon the
conversion of any Note or Notes, the Company shall make an adjustment therefor
in cash at the current market value thereof. The current market value of a share
of Common Stock shall be determined by multiplying the fractional share by the
Closing Price on the Trading Day immediately preceding the date on which the
Notes (or specified portions thereof) are deemed to have been converted.
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Section 14.4 Conversion Price. The Conversion Price shall be as specified
in the forms of Notes (herein called the "Conversion Price") attached as
Exhibits A and B hereto, subject to adjustment as provided in this Article XIV.
Section 14.5 Adjustment of Conversion Price. The Conversion Price shall be
adjusted from time to time by the Company as follows:
(a) In case the Company shall (i) pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (ii)
subdivide or split its outstanding Common Stock into a greater number of
shares, (iii) combine its outstanding Common Stock into a smaller number of
shares or (iv) issue any shares of Capital Stock by reclassification of its
Common Stock, the Conversion Price in effect immediately prior thereto
shall be adjusted so that the Noteholder of any Notes thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other shares of Capital Stock of the Company that
such Noteholder would have owned or have been entitled to receive after the
occurrence of any of the events described above had such Notes been
surrendered for conversion immediately prior to the occurrence of such
event or the Record Date therefor, whichever is earlier. An adjustment made
pursuant to this subsection (a) shall become effective immediately after
the close of business on the Record Date for determination of shareholders
entitled to receive such dividend or distribution in the case of a dividend
or distribution (except as provided in Section 14.5(k)) and shall become
effective immediately after the close of business on the effective date in
the case of a subdivision, split, combination or reclassification. Any
shares of Common Stock issuable in payment of a dividend shall be deemed to
have been issued immediately prior to the close of business on the Record
Date for such dividend for purposes of calculating the number of
outstanding shares of Common Stock under Sections 14.5(b) and (c).
(b) In case the Company shall issue rights, options or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within 45 days after the date fixed for determination of
shareholders entitled to receive such rights, options or warrants) to
subscribe for or purchase shares of Common Stock at a price per share less
than the Current Market Price on the Record Date fixed for determination of
shareholders entitled to receive such rights, options or warrants, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect at the opening of
business on the day after the Record Date by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date plus the number of shares that the
aggregate offering price of the total number of shares so offered would
purchase at such Current Market Price, and the denominator of which shall
be the number of shares of Common Stock outstanding on the close of
business on the Record Date plus the total number of additional shares of
Common Stock so offered for subscription or purchase. Such adjustment shall
become effective immediately after the opening of business on the day
following the Record Date fixed for determination of shareholders entitled
to receive such rights, options or warrants. To the extent that shares of
Common Stock are not delivered after the expiration or termination of such
rights, options or warrants, the Conversion Price shall be readjusted to
the Conversion Price that would then be in effect had the adjustments made
upon the issuance of such rights, options or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights, options or warrants are not so
issued, the Conversion Price shall again be adjusted to be the Conversion
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Price that would then be in effect if such date fixed for the determination
of shareholders entitled to receive such rights, options or warrants had
not been fixed. In determining whether any rights, options or warrants
entitle the holders to subscribe for or purchase shares of Common Stock at
less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account all consideration received for such rights, options or warrants,
the value of such consideration, if other than cash, to be determined by
the Board of Directors.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of Capital Stock of the
Company (other than any dividends or distributions to which Section 14.5(a)
applies) or evidences of its indebtedness or assets (including securities,
but excluding any rights, options or warrants referred to in Section
14.5(b), and excluding any dividend or distribution (i) in connection with
the liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, (ii) exclusively in cash or (iii) referred to in
Section 14.5(a) (any of the foregoing hereinafter in this Section 14.5(d)
called the "Securities")), then, in each such case, the Conversion Price
shall be reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect immediately prior to the close
of business on the Record Date with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price on such
date less the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board
Resolution) on such date of the portion of the Securities so distributed
applicable to one share of Common Stock and the denominator shall be such
Current Market Price, such reduction to become effective immediately prior
to the opening of business on the day following the Record Date; provided
that in the event the then fair market value (as so determined) of the
portion of the Securities so distributed applicable to one share of Common
Stock is equal to or greater than the Current Market Price on the Record
Date, in lieu of the foregoing adjustment, adequate provision shall be made
so that each Noteholder shall have the right to receive upon conversion the
amount of Securities such holder would have received had such holder
converted each Note on such date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price that would then be in effect if such
dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 14.5(d) by reference to the actual or when issued trading market
for any securities comprising all or part of such distribution, it must in
doing so consider the prices in such market over the same period used in
computing the Current Market Price pursuant to Section 14.5(g) to the
extent possible.
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Notwithstanding the foregoing provisions of this Section 14.5(d), no
adjustment shall be made hereunder for any distribution of Securities if
the Company makes proper provision so that each Noteholder who converts a
Note (or any portion thereof) after the Record Date for determination of
shareholders entitled to receive such distribution shall be entitled to
receive upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion, the amount and kind of Securities that such
holder would have been entitled to receive if such holder had, immediately
prior to such Record Date, converted such Note into Common Stock; provided
that, with respect to any Securities that are convertible, exchangeable or
exercisable, the foregoing provision shall only apply to the extent (and so
long as) the Securities receivable upon conversion of such Note would be
convertible, exchangeable or exercisable, as applicable, without any loss
of rights or privileges for a period of at least 60 days following
conversion of such Note.
Rights, options or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's Capital Stock (either initially or under specified
circumstances), which rights, options or warrants, until the occurrence of
a specified event or events (the "Trigger Event") (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable and
(iii) are also issued in respect of future issuances of Common Stock, shall
not be deemed distributed for purposes of this Section 14.5(d) (and no
adjustment to the Conversion Price under this Section 14.5(d) shall be
required) until the occurrence of the earliest Trigger Event. In addition,
in the event of any distribution of rights, options or warrants, or any
Trigger Event with respect thereto, that shall have resulted in an
adjustment to the Conversion Price under this Section 14.5(d), (1) in the
case of any such rights, options or warrants that shall all have been
redeemed or repurchased without exercise by any holders thereof, the
Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the
case may be, as though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder of Common Stock with
respect to such rights, options or warrants (assuming such holder had
retained such rights, options or warrants), made to all holders of Common
Stock as of the date of such redemption or repurchase, and (2) in the case
of such rights, options or warrants all of which shall have expired or been
terminated without exercise by any holder thereof, the Conversion Price
shall be readjusted as if such issuance had not occurred.
For purposes of this Section 14.5(d) and Sections 14.5(a) and (b), any
dividend or distribution to which this Section 14.5(d) is applicable that
also includes shares of Common Stock, or rights, options or warrants to
subscribe for or purchase shares of Common Stock (or both), shall be deemed
instead to be (i) a dividend or distribution of the evidences of
indebtedness, assets or shares of Capital Stock other than such shares of
Common Stock or rights, options or warrants (and any Conversion Price
reduction required by this Section 14.5(d) with respect to such dividend or
distribution shall then be made) immediately followed by (ii) a dividend or
distribution of such shares of Common Stock or such rights, options or
warrants (and any further Conversion Price reduction required by Sections
14.5(a) and (b) with respect to such dividend or distribution shall then be
made) except (1) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of shareholders
entitled to receive such dividend or distribution" and "the date fixed for
such determination" within the meaning of Sections 14.5(a) and (b) and (2)
any shares of Common Stock included in such
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dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of
Section 14.5(a).
(e) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 14.6 applies or
as part of a distribution referred to in Section 14.5(d) for which an
adjustment to the Conversion Price is provided therein) in an aggregate
amount that, together with (i) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution,
and in respect of which no adjustment pursuant to this Section 14.5(e) has
been made, and (ii) the aggregate of any cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) of consideration payable in
respect of any tender offer, by the Company or any of its subsidiaries for
all or any portion of the Common Stock concluded within the 12 months
preceding the date of payment of such distribution, and in respect of which
no adjustment pursuant to Section 14.5(f) has been made, exceeds 20.0% of
the product of the Current Market Price (determined as provided in Section
14.5(g)) on the Record Date with respect to such distribution times the
number of shares of Common Stock outstanding on such date, then, and in
each such case, immediately after the close of business on such date,
unless the Company elects to reserve such cash for distribution to the
holders of the Notes upon the conversion of the Notes so that any such
holder converting Notes shall receive upon such conversion, in addition to
the shares of Common Stock to which such holder is entitled, the amount of
cash (without any adjustment for interest) that such holder would have
received if such holder had, immediately prior to the Record Date for such
distribution of cash, converted its Notes into Common Stock, the Conversion
Price shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close
of business on such date by a fraction (1) the numerator of which shall be
equal to the Current Market Price on the Record Date less an amount equal
to the quotient of (x) the excess of such combined amount over such 20.0%
and (y) the number of shares of Common Stock outstanding on the Record Date
and (2) the denominator of which shall be equal to the Current Market Price
on such date; provided that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or greater
than the Current Market Price of the Common Stock on the Record Date, in
lieu of the foregoing adjustment, adequate provision shall be made so that
each Noteholder shall have the right to receive upon conversion the amount
of cash (without interest) such holder would have received had such holder
converted each Note on the Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price that would then be in effect if such
dividend or distribution had not been declared.
(f) In case a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall expire and
such tender offer (as amended upon the expiration thereof) shall require
the payment to shareholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) that combined together with
(1) the aggregate of the cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution), as
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of the expiration of such tender offer, of consideration payable in respect
of any other tender offer, by the Company or any of its subsidiaries for
all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer, and in respect of which no
adjustment pursuant to this Section 14.5(f) has been made, and (ii) the
aggregate amount of any distributions to all holders of the Company's
Common Stock made exclusively in cash within 12 months preceding the
expiration of such tender offer, and in respect of which no adjustment
pursuant to Section 14.5(e) has been made, exceeds 20.0% of the product of
the Current Market Price as of the last time (the "Expiration Time")
tenders could have been made pursuant to such tender offer (as it may be
amended) times the number of shares of Common Stock outstanding (including
any tendered shares) on the Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day after the date of
the Expiration Time, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price
in effect immediately prior to the close of business on the date of the
Expiration Time by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time multiplied by the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (1) the fair market value (determined as aforesaid) of
the aggregate consideration payable to shareholders based on the acceptance
(up to any maximum specified in the terms of the tender offer) of all
shares validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (2) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on the Expiration Time and
the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the
Expiration Time. In the event that the Company is obligated to purchase
shares pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price that would then be in effect if such tender offer had
not been made.
(g) For purposes of this Section 14.5, the following terms shall have
the meaning indicated:
(i) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case
no such sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in each case on the New
York Stock Exchange, or, if such security is not listed or admitted to
trading on such Exchange, on the principal national security exchange
or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the
average of the closing bid and asked prices of such security on the
over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar generally
accepted reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors for that purpose, or a price
determined in good
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faith by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution.
(ii) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question; provided that
(1) if the "ex" date (as hereinafter defined) for any event (other
than the issuance or distribution or other event requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 14.5(a), (b), (c), (d), (e) or (f) occurs during
such ten consecutive Trading Days, the Closing Price for each Trading
Day prior to the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event, (2) if the "ex" date for any event (other than the
issuance, distribution or other event requiring such computation) that
requires an adjustment to the Conversion Price pursuant to Section
14.5(a), (b), (c), (d), (e) or (f) occurs on or after the "ex" date
for the issuance or distribution requiring such computation and prior
to the day in question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result
of such other event and (3) if the "ex" date for the issuance,
distribution or other event requiring such computation is prior to the
day in question, after taking into account any adjustment required
pursuant to clause (1) or (2) of this proviso, the Closing Price for
each Trading Day on or after such "ex" date shall be adjusted by
adding thereto the amount of any cash and the fair market value (as
determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 14.5(d) or (f),
whose determination shall be conclusive and described in a Board
Resolution) of the evidences of indebtedness, shares of Capital Stock
or assets being distributed applicable to one share of Common Stock as
of the close of business on the day before such "ex" date. For
purposes of any computation under Section 14.5(f), the Current Market
Price of the Common Stock on any date shall be deemed to be the
average of the daily Closing Prices per share of Common Stock for such
day and the next two succeeding Trading Days; provided that if the
"ex" date for any event (other than the tender or exchange offer
requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 14.5(a), (b), (c), (d), (e) or
(f) occurs on or after the Expiration Time for the tender or exchange
offer requiring such computation and prior to the day in question, the
Closing Price for each Trading Day on and after the "ex" date for such
other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is so
required to be adjusted as a result of such other event. For purposes
of this paragraph, the term "ex" date, (x) when used with respect to
any issuance or distribution, means the first date on which the Common
Stock trades regular way on the relevant exchange or in the relevant
market from which the Closing Price was obtained without the right to
receive such issuance or distribution, (y) when used with respect to
any subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades
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regular way on such exchange or in such market after the time at which
such subdivision or combination becomes effective and (z) when used
with respect to any tender or exchange offer means the first date on
which the Common Stock trades regular way on such exchange or in such
market after the expiration of such offer. Notwithstanding the
foregoing, whenever successive adjustments to the Conversion Price are
called for pursuant to this Section 14.5, such adjustments shall be
made to the Current Market Price as may be necessary or appropriate to
effectuate the intent of this Section 14.5 and to avoid unjust or
inequitable results as determined in good faith by the Board of
Directors.
(iii) "Fair market value" shall mean the amount that a willing
buyer would pay a willing seller in an arm's-length transaction.
(iv) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security)
is exchanged for or converted into any combination of cash, securities
or other property, the date fixed for determination of shareholders
entitled to receive such cash, securities or other property (whether
such date is fixed by the Board of Directors or by statute, contract
or otherwise).
(v) "Trading Day" shall mean (1) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or
another national security exchange, a day on which the New York Stock
Exchange or such other national security exchange is open for business
or (2) if the applicable security is quoted on the Nasdaq National
Market, a day on which trades may be made thereon or (3) if the
applicable security is not so listed, admitted for trading or quoted,
any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by
law or executive order to close.
(h) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 14.5(a), (b), (c), (d), (e) and (f),
as the Board of Directors considers to be advisable to avoid or diminish
any income tax to holders of Common Stock or rights to purchase Common
Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to time
may reduce the Conversion Price by any amount for any period of time if the
period is at least 20 Business Days, the reduction is irrevocable during
the period and the Board of Directors shall have made a determination that
such reduction would be in the best interests of the Company, which
determination shall be conclusive and described in a Board Resolution.
Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to the Trustee and all holders of record
of the Notes a notice of the reduction at least 15 days prior to the date
the reduced Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period it shall be in effect.
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(i) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided that any adjustments that by reason of this Section
14.5(i) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Article
XIV shall be made by the Company and shall be made to the nearest 1/100,000
(with 0.0000005 being rolled upward).
No adjustment need be made for a change in the par value, or to or
from no par value, of the Common Stock.
To the extent the Notes become convertible into cash, assets, property
or securities (other than Common Stock of the Company), no adjustment need
be made thereafter as to the cash, assets, property or such securities
(except as such securities may otherwise by their terms provide), and
interest shall not accrue on such cash.
(j) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other
than the Trustee an Officers' Certificate setting forth the Conversion
Price both before and after such adjustment and setting forth in reasonable
detail the facts upon which such adjustment is based. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion
Price and the date on which each adjustment becomes effective and shall
mail such notice of such adjustment of the Conversion Price to the holder
of each Note at his last address appearing on the Note register provided
for in Section 2.5, within 20 days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of any such
adjustment.
(k) In any case in which this Section 14.5 provides that an adjustment
shall become effective immediately after a Record Date for an event, the
Company may defer until the occurrence of such event (i) issuing to the
holder of any Note converted after such Record Date and before the
occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount in cash
in lieu of any fraction pursuant to Section 14.3.
Section 14.6 Effect of Reclassification, Consolidation, Merger or Sale. If
any of the following events occur, namely (a) any reclassification or change of
outstanding shares of Common Stock (other than a change in par value, or to or
from no par value, as a result of a subdivision or combination), (b) any
consolidation, merger or combination of the Company with another person as a
result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock or (c) any sale or conveyance of the properties
and assets of the Company as, or substantially as, an entirety (determined on a
consolidated basis) to any other person as a result of which holders of Common
Stock shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, then the
Company or the successor or purchasing person, as the case may be, shall execute
with the Trustee a supplemental indenture (which shall comply with the Trust
Indenture Act as in force at the date of execution of such supplemental
indenture if such supplemental indenture is then
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required to so comply) providing that each Note then outstanding shall, without
the consent of the holder thereof, be convertible only into the kind and amount
of shares of stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Notes) immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance, assuming such holder of Common Stock
did not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance (provided that,
if the kind or amount of securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
is not the same for each share of Common Stock in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purposes of this Section 14.6 the kind and amount of securities, cash or other
property receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such supplemental indenture shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article XIV.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5, within 20 days after execution
thereof. Failure to deliver such notice shall not affect the legality or
validity of such supplemental indenture.
The above provisions of this Section 14.6 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
Section 14.7 Taxes on Shares Issued. The issuance of stock certificates on
conversions of Notes shall be made without charge to the converting Noteholder
for any transfer or similar tax in respect of the issue thereof. The Company
shall not, however, be required to pay any tax that may be payable in respect of
any transfer involved in the issue and delivery of stock in any name other than
that of the holder of any Note converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
Section 14.8 Reservation of Shares; Shares to Be Fully Paid; Listing of
Common Stock. The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action that would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company shall take all corporate
action that may, in the opinion of its counsel, be
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necessary in order that the Company may validly and legally issue shares of such
Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock that may be issued
upon conversion of Notes shall, upon issuance, be fully paid and nonassessable
by the Company and free from all taxes, liens and charges with respect to the
issuance thereof.
The Company further covenants that it shall, if permitted by the rules of
the Nasdaq National Market and each securities exchange upon which the Common
Stock is listed or quoted, list and keep listed or have and keep quoted, so long
as the Common Stock shall be so listed or quoted on such market and exchange or
exchanges, all Common Stock issuable upon conversion of the Notes.
Section 14.9 Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine whether any facts exist that may require any
adjustment of the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, that may at any time
be issued or delivered upon the conversion of any Note; and the Trustee and any
other conversion agent make no representations with respect thereto. Subject to
the provisions of Section 7.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article XIV. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine whether a supplemental indenture under Section 14.6 needs to be
entered into or the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 14.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 14.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 7.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
Section 14.10 Notice to Holders Prior to Certain Actions. If:
(a) the Company makes any distribution or dividend that would require
an adjustment in the Conversion Price pursuant to Section 14.5; or
(b) the Company takes any action that would require a supplemental
indenture pursuant to Section 14.6; or
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(c) there shall occur the voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register, as promptly as
possible but in any event at least 15 days prior to the applicable date
hereinafter specified, a notice stating (i) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights, options or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution, rights,
options or warrants are to be determined or (ii) the date on which such
reclassification, change, consolidation, merger, sale, conveyance, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur
and the date as of which it is expected that holders of record of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, change, consolidation, merger,
sale, conveyance, transfer, dissolution, liquidation or winding-up. Neither the
failure to give such notice nor any defect therein shall affect the legality or
validity of the proceedings referenced in clauses (a) through (c) of this
Section 14.10.
ARTICLE XV
SUBORDINATION
Section 15.1 Agreement to Subordinate. The Company agrees, and each
Noteholder by accepting a Note agrees, that the indebtedness evidenced by the
Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article XV, to the prior payment in full of all Senior
Indebtedness and that the subordination is for the benefit of the holders of
Senior Indebtedness.
Section 15.2 Certain Definitions. For purposes of this Article XV, the
following terms shall have the meaning indicated:
(a) "Designated Senior Indebtedness" shall mean the Company's
obligations under Senior Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof, or related
agreements or instruments to which the Company is a party, expressly
provides that such indebtedness shall be "Designated Senior Indebtedness"
for purposes hereof, provided that such instrument, agreement or other
document may place limitations on the right of such Senior Indebtedness to
exercise the rights of Designated Senior Indebtedness.
(b) "Representative" shall mean the indenture trustee or other
trustee, agent or representative for the Designated Senior Indebtedness.
(c) "Senior Indebtedness" with respect to the Notes means the
principal of, premium, if any, and interest on, and any fees, costs,
expenses and any other amounts (including indemnity payments) related to
the following, whether outstanding on the date hereof or hereafter incurred
or created: (i) indebtedness, matured or unmatured, whether or not
contingent,
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of the Company for money borrowed evidenced by notes or other written
obligations, (ii) any interest rate contract, interest rate swap agreement
or other similar agreement or arrangement designed to protect the Company
or any of its subsidiaries against fluctuations in interest rates, (iii)
indebtedness, matured or unmatured, whether or not contingent, of the
Company evidenced by notes, debentures, bonds or similar instruments or
bankers acceptances, letters of credit or similar facilities (or
reimbursement agreements in respect thereof), (iv) obligations of the
Company as lessee under capitalized leases and under leases of property
made as part of any sale and leaseback transactions, (v) indebtedness of
others of any of the kinds described in the preceding clauses (i) through
(iv) assumed or guaranteed by the Company, (vi) renewals, extensions,
modifications, amendments, and refundings of, and indebtedness and
obligations of a successor person issued in exchange for or in replacement
of, indebtedness or obligations of the kinds described in the preceding
clauses (i) through (v), unless the agreement pursuant to which any such
indebtedness described in clauses (i) through (v) is created, issued,
assumed or guaranteed expressly provides that such indebtedness is not
senior or superior in right of payment to the Notes; provided that the
following shall not constitute Senior Indebtedness: (1) any indebtedness or
obligation of the Company in respect of the Notes, (2) any indebtedness of
the Company to any of its subsidiaries or other Affiliates; (3) any
indebtedness that is subordinated or junior in any respect to any other
indebtedness of the Company; and (4) any indebtedness incurred for the
purchase of goods or materials in the ordinary course of business.
For the purposes of this Indenture, Senior Indebtedness shall not be deemed
to have been paid in full until the holders of the Senior Indebtedness shall
have indefeasibly received payment in full in cash of all Senior Indebtedness;
provided that if any holder of Senior Indebtedness agrees to accept payment in
full of such Senior Indebtedness for consideration other than cash, such holder
shall be deemed to have indefeasibly received payment in full of such Senior
Indebtedness. The provisions of this Article XV shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any of the
Senior Indebtedness is rescinded or must otherwise be returned by any holder of
Senior Indebtedness upon the insolvency, bankruptcy or organization of the
Company or otherwise, all as though such payment had not been made.
A distribution may consist of cash, securities or other property, by
set-off or otherwise.
Section 15.3 Liquidation; Dissolution; Bankruptcy. Upon any distribution to
creditors of the Company in a liquidation or dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, in an assignment for the benefit of
creditors or any marshalling of the Company's assets and liabilities, (a)
holders of Senior Indebtedness shall be entitled to receive payment in full of
all amounts due or to become due thereon before Noteholders shall be entitled to
receive any payment with respect to the principal of, premium, if any, or
interest on the Notes (except that Noteholders may receive securities that are
subordinated to at least the same extent as the Notes to Senior Indebtedness and
any securities issued in exchange for Senior Indebtedness) and (b) until all
Senior Indebtedness (as provided in clause (a) above) is paid in full, any
distribution to which Noteholders would be entitled but for this Article shall
be made to holders of Senior Indebtedness (except that Noteholders may receive
securities that are subordinated to at least the same extent as the Notes to
Senior Indebtedness and any securities issued in exchange for Senior
Indebtedness), as their interests may appear.
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Section 15.4 Default on Senior Indebtedness. The Company may not make any
payment upon or in respect of the Notes (except in such subordinated securities)
and may not acquire from the Trustee or any Noteholder any Note for cash or
property (other than securities that are subordinated to at least the same
extent as the Note to Senior Indebtedness and any securities issued in exchange
for Senior Indebtedness) until all Senior Indebtedness has been paid in full if:
(a) a default in the payment of the principal of, premium, if any, or
interest on, including a default under any repurchase or redemption
obligation with respect to, Senior Indebtedness occurs and is continuing
beyond any applicable period of grace (a "Payment Default"); or
(b) a default, other than a Payment Default, on Designated Senior
Indebtedness occurs and is continuing that permits holders of the Senior
Indebtedness as to which such default relates to accelerate its maturity (a
"Nonpayment Default") and the Trustee receives a notice of the default (a
"Payment Blockage Notice") from the Representative. No Nonpayment Default
that existed or was continuing on the date of delivery of any such Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice. No new period of payment blockage may
be commenced within 360 days after the receipt by the Trustee of any prior
Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(i) in the case of a Payment Default, upon the date on which the
default is cured or waived, or
(ii) in the case of a Nonpayment Default, 179 days after the date
on which the applicable Payment Blockage Notice is received (or
sooner, if such default is cured or waived), unless the maturity of
such Senior Indebtedness has been accelerated,
if this Article XV otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 15.5 When Distribution Must Be Paid Over. Subject to the provisions
of Section 15.11, if the Trustee (or paying agent if other than the Trustee) or
any Noteholder receives any payment of principal of, premium, if any, or
interest with respect to the Notes at a time when such payment is prohibited by
Section 15.3 or 15.4 hereof, such payment shall be held by the Trustee (or
paying agent if other than the Trustee) or such Noteholder, in trust for the
benefit of, and immediately shall be paid over and delivered, upon written
request, to the holders of Senior Indebtedness as their interests may appear or
their Representative under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued, as their respective interests
may appear, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in full in
accordance
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with its terms, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform only such obligations on the part of the Trustee as are specifically
set forth in this Article XV, and no implied covenants or obligations with
respect to the holders of Senior Indebtedness shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness. The Trustee shall not be liable to any
such holders of Senior Indebtedness if the Trustee shall pay over or distribute
to or on behalf of Noteholders or the Company or any other person money or
assets to which any holders of Senior Indebtedness shall be entitled by virtue
of this Article XV.
Section 15.6 Notice by Company. The Company shall promptly notify the
Trustee and the paying agent of any facts known to the Company that would cause
a payment of any principal or interest with respect to the Notes to violate this
Article XV, but failure to give such notice shall not affect the subordination
of the Notes to the Senior Indebtedness as provided in this Article XV.
Section 15.7 Subrogation. After all Senior Indebtedness is paid in full and
until the Notes are paid in full, Noteholders shall be subrogated (equally and
ratably with all other Indebtedness pari passu with the Notes) to the rights of
holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the
Noteholders have been applied to the payment of Senior Indebtedness. A
distribution made under this Article XV to holders of Senior Indebtedness that
otherwise would have been made to Noteholders is not, as between the Company and
Noteholders, a payment by the Company on the Notes.
Section 15.8 Relative Rights. This Article XV defines the relative rights
of Noteholders and holders of Senior Indebtedness. Nothing in this Indenture
shall:
(a) impair, as between the Company and the Noteholders, the obligation
of the Company, which is absolute and unconditional, to pay principal of,
premium, if any, and interest on the Notes in accordance with their terms;
(b) affect the relative rights of Noteholders and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
(c) prevent the Trustee or any Noteholder from exercising its
available remedies upon a default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Noteholders.
If the Company fails because of this Article XV to pay principal of,
premium, if any, or interest on a Note on the due date, the failure is still a
default or Event of Default.
Section 15.9 Subordination May Not Be Impaired by Company. No right of any
holder of Senior Indebtedness to enforce the subordination of the indebtedness
evidenced by the Notes
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shall be impaired by any act or failure to act by the Company or any holder of
Notes or by the failure of the Company or any holder of Notes to comply with
this Indenture.
Section 15.10 Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article XV, the Trustee and the Noteholders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other person making any distribution to the Trustee or to the Noteholders for
the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
XV.
Section 15.11 Rights of Trustee and Paying Agent. Notwithstanding the
provisions of this Article XV or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment or distribution by the Trustee, and the
Trustee and the paying agent may continue to make payments on the Notes, unless
a Responsible Officer shall have received at the Corporate Trust Office of the
Trustee at least three Business Days prior to the date of such payment written
notice of facts that would cause the payment of any principal, premium, if any,
and interest with respect to the Notes to violate this Article XV. Only the
Company or a Representative may give the notice. Nothing in this Article XV
shall impair the claims of, or payments to, the Trustee under or pursuant to
this Indenture, including, without limitation, Section 7.7 hereof.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a person representing such person to be a holder of Senior
Indebtedness (or a trustee or agent on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness (or a trustee or
agent on behalf of any such holder). In the event that the Trustee determines in
good faith that further evidence is required with respect to the right of any
person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XV, the Trustee may request such person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such person, the extent to which such person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article XV, and if such
evidence is not furnished, the Trustee may defer any payment which it may be
required to make for the benefit of such person pursuant to the terms of this
Indenture pending judicial determination as to the rights of such person to
receive such payment.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
paying agent, any authenticating agent, any conversion agent, any Note registrar
and their successors may do the same with like rights.
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Section 15.12 Authorization to Effect Subordination. Each holder of a Note
by the holder's acceptance thereof authorizes and directs the Trustee on the
holder's behalf to take such action as may be necessary or appropriate to effect
subordination as provided in this Article XV and appoints the Trustee to act as
the holder's attorney-in-fact for any and all such purposes. Without limiting
the foregoing, each Representative is hereby irrevocably authorized and
empowered (in its own name or in the name of the Noteholders or the Trustee or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in Section 15.3 above and give
acquittance therefor and to file claims and proofs of claim and take such other
action as it may deem necessary or advisable for the exercise or enforcement of
any of the rights or interests of the holders or owners of the Senior
Indebtedness hereunder; provided that for purposes of this Section 15.12 holders
or owners of Senior Indebtedness may act only through such Representative.
Section 15.13 Conversions Not Deemed Payment. For the purposes of this
Article XV only, the issuance and delivery of Common Stock upon conversion of
the Notes in accordance with Article XIV shall not be deemed to constitute a
payment or distribution on account of the principal of or interest on the Notes
or on account of the purchase or other acquisition of Notes. Nothing contained
in this Article or elsewhere in this Indenture or in the Notes is intended to or
shall impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the holders, the right, which is absolute and unconditional, of
the holder of any Note to convert such Note in accordance with Article XIV.
Section 15.14 Amendments. The provisions of this Article XV shall not be
amended or modified without the written consent of the holders of Senior
Indebtedness.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Provisions Binding on Company's Successors. All the covenants,
stipulations, promises and agreements in this Indenture made by the Company
shall bind its successors and assigns whether so expressed or not.
Section 16.2 Official Acts by Successor Company. Any act or proceeding by
any provision of this Indenture authorized or required to be done or performed
by any board (including the Board of Directors), committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at the time be
the lawful sole successor of the Company.
Section 16.3 Addresses for Notices, Etc. Any notice or demand that by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes if given or served by being
sent by prepaid overnight delivery or being deposited postage prepaid by
registered or certified mail in a post office letter box addressed (until
another address is filed by the Company with the Trustee) to Computer Network
Technology Corporation, 605 North Highway 169, Suite 800, Minneapolis, Minnesota
55441, Attention: Chief Executive Officer with a copy to Leonard, Street and
Deinard Professional Association, 150 South Fifth Street,
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Suite 2300, Minneapolis, Minnesota 55402, Attention: Morris M. Sherman, Esq. Any
notice, direction, request or demand hereunder to or upon the Trustee shall be
deemed to have been sufficiently given or made, for all purposes, if given or
served by being sent by prepaid overnight delivery or being deposited postage
prepaid by registered or certified mail in a post office letter box addressed to
the Corporate Trust Office of the Trustee.
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to him
by first class mail, postage prepaid, at the address of such Noteholder as it
appears on the Note register and shall be sufficiently given to such Noteholder
if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any defect in
it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 16.4 Communications by Holders with Other Holders. Noteholders may
communicate pursuant to Trust Indenture Act Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Note registrar and any other person shall have the
protection of Trust Indenture Act Section 312(c).
Section 16.5 Governing Law. This Indenture and each Note shall be deemed to
be a contract made under the substantive laws of New York and for all purposes
shall be construed in accordance with the substantive laws of New York without
regard to conflicts of laws principles thereof.
Section 16.6 Evidence of Compliance with Conditions Precedent; Certificates
to Trustee. Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, including those
actions set forth in Trust Indenture Act Section 314(c), the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, and an Opinion of Counsel stating that, in the
Opinion of such Counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include: (a) a statement that the person making such
certificate or opinion has read such covenant or condition, (b) a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in such certificate or opinion is
based, (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with and (d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
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Section 16.7 Legal Holidays. In any case where any interest payment date,
date fixed for redemption, stated maturity or Change of Control Purchase Date of
any Note or the last date on which a Noteholder has the right to convert his
Notes shall not be a Business Day, then (notwithstanding any other provision of
this Indenture or of the Notes) payment of interest or principal (and premium,
if any) or conversion of the Notes need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the interest payment date, date fixed for redemption, Change of Control
Purchase Date, or at the stated maturity, or on such last day for conversion;
provided that no interest shall accrue for the period from and after such
interest payment date, date fixed for redemption, Change of Control Purchase
Date or stated maturity, as the case may be.
Section 16.8 No Security Interest Created. Nothing in this Indenture or in
the Notes, expressed or implied (other than the lien granted to the Trustee
pursuant to Section 7.7), shall be construed to constitute a security interest
under the Uniform Commercial Code or similar legislation, as now or hereafter
enacted and in effect, in any jurisdiction where property of the Company or its
subsidiaries is located.
Section 16.9 Trust Indenture Act. This Indenture is hereby made subject to,
and shall be governed by, the provisions of the Trust Indenture Act required to
be part of and to govern indentures qualified under the Trust Indenture Act.
Section 16.10 Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with the duties imposed by operation
of the Trust Indenture Act, the imposed duties, upon qualification of this
Indenture under the Trust Indenture Act, shall control.
Section 16.11 Benefits of Indenture. Nothing in this Indenture or in the
Notes, expressed or implied, shall give to any person, other than the parties
hereto, any paying agent, any authenticating agent, any conversion agent, any
Note registrar and their successors hereunder and the holders of Notes, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 16.12 Table of Contents, Headings, Etc. The table of contents and
the titles and headings of the articles and sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 16.13 Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication. Such
68
<PAGE>
authenticating agent shall at all times be a person eligible to serve as Trustee
hereunder pursuant to Section 7.10.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor company is otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the part of
the parties hereto or the authenticating agent or such successor company.
Any authenticating agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor authenticating agent (which may be the
Trustee), shall give written notice of such appointment to the Company and shall
mail notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from time to time
reasonable compensation for its services.
The provisions of Sections 7.3, 7.4, 7.5, 8.3 and this Section 16.13 shall
be applicable to any authenticating agent.
Section 16.14 Execution in Counterparts. This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
U.S. Bank Trust National Association hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed and attested, all as of the date first written above.
COMPUTER NETWORK TECHNOLOGY CORPORATION
By:
------------------------------------
Name:
Title:
Attest:
- ----------------------------------
69
<PAGE>
-------------------------------------
, as Trustee
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
70
<PAGE>
SCHEDULE I TO INDENTURE DATED ______________
Recital and Section 2.1 terms:
- ------------------------------
Title of Convertible Subordinated Notes:
Aggregate Principal Amount:
Definition Terms:
- -----------------
Address of Corporate Trust Office:
Section 2.3 terms:
- ------------------
Date from which interest first accrues:
Dates on which interest is payable ("Interest Payment Date"):
Record Date:
Section 3.1(a) terms:
- ---------------------
Early Redemption Date:
Make Whole Payment, per $1,000 principal amount of notes, less
interest:
Section 3.1(b) terms:
- ---------------------
Optional Redemption Date:
If Redeemed Redemption
or after Price
---------- ----------
---------- ----------
---------- ----------
Section 7.2 terms:
- ------------------
Report Date:
S-1
<PAGE>
EXHIBIT A - FORM OF DEFINITIVE NOTE
FACE OF NOTE
No. A-1 $__________________________
CUSIP No. [_______________]
COMPUTER NETWORK TECHNOLOGY CORPORATION
[Title of Note set forth in Schedule I]
COMPUTER NETWORK TECHNOLOGY CORPORATION, a corporation duly organized and
validly existing under the laws of the State of Minnesota (the "Company"), which
term includes any Successor Company under the Indenture referred to on the
reverse hereof, for value received hereby promises to pay to ___________
________________, or registered assigns, the principal sum of
______________________________________ Dollars on ____________, at the Corporate
Trust Office of the Trustee or at the option of the holder of this Note, at any
other office or agency of the Company maintained for that purpose pursuant to
the Indenture, in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts, and to pay interest, [semi-annually, or other method set forth on
Schedule I] on ____________ and ____________ [interest payment dates or terms
set forth on Schedule I] of each year, commencing _______________, on said
principal sum at said office or agency, in like coin or currency, at ____% per
annum from ______________ or ______________, as the case may be, next preceding
the date of this Note to which interest has been paid or duly provided for,
unless the date hereof is a date to which interest has been paid or duly
provided for, in which case from the date of this Note, or unless no interest
has been paid or duly provided for on the Notes, in which case from __________
[date from which interest accrues set forth in Schedule I], until payment of
said principal sum has been made or duly provided for; provided that if the
Company shall default in the payment of interest due on such _____________ or
___________, then this Note shall bear interest from the next preceding
____________ or ____________ to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for on such Note, from
__________. The interest so payable on any ____________ or __________ will be
paid to the person in whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on the record date, which shall be the
___________ or __________ [set forth Record Payment Date on Schedule I] (whether
or not a Business Day) next preceding such ____________ or ____________,
respectively; provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Interest shall be
paid by check mailed to the registered holder at the registered address of such
person unless other arrangements are made in accordance with the provisions of
the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, including, without limitation, provisions giving the holder of
this Note the right to convert this Note into Common Stock of the Company on the
terms and subject to the limitations referred to on the reverse hereof and as
more fully specified in the Indenture. Such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
A-1
<PAGE>
This Note shall be deemed to be a contract made under the laws of the State
of New York, and for all purposes shall be construed in accordance with and
governed by the laws of said State, without regard to conflicts of laws
principles thereof.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been manually signed by the
Trustee, or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
COMPUTER NETWORK TECHNOLOGY
CORPORATION
By:
----------------------------------
Name:
Title:
Attest:
- ----------------------------------
Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated:
This Note is one of the Notes described in the within-named Indenture.
__________________________, as Trustee
By:
-----------------------------------
Authorized Signatory
A-2
<PAGE>
[FORM OF REVERSE OF NOTE]
COMPUTER NETWORK TECHNOLOGY CORPORATION
[Title of Note Set Forth on Schedule I]
This Note is one of a duly authorized issue of Notes of the Company,
designated as its [title of Note set forth on Schedule I] (herein called the
"Notes"), limited to the aggregate principal amount of [Aggregate Principal
Amount set forth in Schedule I] (which may be increased to $___________ if the
underwriters' overallotment option issued in connection with the public offering
of the Notes is exercised in full) all issued or to be issued under and pursuant
to an Indenture dated as of ______________ (the "Indenture"), between the
Company and ______________________, as trustee (the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
complete description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the holders of the
Notes. Each Note is subject to, and qualified by, all such terms as set forth in
the Indenture certain of which are summarized hereon and each holder of a Note
is referred to the corresponding provisions of the Indenture for a complete
statement of such terms. To the extent that there is any inconsistency between
the summary provisions set forth in the Notes and the Indenture, the provisions
of the Indenture shall govern. Capitalized terms used but not defined in this
Note shall have the meanings ascribed to them in the Indenture.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest on all Notes may be declared, and upon said declaration shall become,
due and payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.
The payment of principal of, premium, if any, and interest on the Notes
will, to the extent set forth in the Indenture, be subordinated in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture). Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding related to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities, the holders of all Senior Indebtedness
will first be entitled to receive payments in full of all amounts due or to
become due thereon before the holders of the Notes will be entitled to receive
any payment in respect of the principal of, premium, if any, or interest on the
Notes (except that holders of Notes may receive securities that are subordinated
at least to the same extent as the Notes to Senior Indebtedness and any
securities issued in exchange for Senior Indebtedness).
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities) if (a) a default in the payment of the
principal of, premium, if any, or interest on Senior Indebtedness occurs and is
continuing beyond any applicable period of grace; or (b) any other default
occurs and is continuing with respect to Designated Senior Indebtedness that
permits holders of the Designated Senior Indebtedness as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Representative. Payments on the
Notes may and shall be resumed
A-3
<PAGE>
(i) in the case of a Payment Default, upon the date on which such default is
cured or waived; or (ii) in the case of a Nonpayment Default, 179 days after the
date on which the applicable Payment Blockage Notice is received, unless the
maturity of any Senior Indebtedness has been accelerated. No new period of
payment blockage may be commenced within 360 days after the receipt by the
Trustee of any prior Payment Blockage Notice. No Nonpayment Default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been cured or waived.
In the event that the Trustee (or paying agent if other than the Trustee)
or any holder of the Notes receives any payment of principal or interest with
respect to the Notes at a time when such payment is prohibited under the
Indenture, such payment shall be held in trust for the benefit of, and shall be
paid over and delivered to, the holders of Senior Indebtedness or their
representative as their respective interests may appear. After all Senior
Indebtedness is paid in full and until the Notes are paid in full, the holders
of the Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Notes have
been applied to the payment of Senior Indebtedness.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Notes; provided that no such supplemental indenture shall (i)
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption thereof, alter the
obligation of the Company to repurchase the Notes at the option of the holders
upon the occurrence of a Change of Control or impair or affect the right of any
Note holder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Notes, modify the subordination provisions in a
manner adverse to the holders of the Notes, or impair the right to convert the
Notes into Common Stock subject to the terms set forth in the Indenture without
the consent of the holder of each Note so affected; or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding. The Indenture also provides that, prior to any declaration
accelerating the maturity of the Notes, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of interest or
any premium on or the principal of any of the Notes, a failure by the Company to
convert any Notes into Common Stock of the Company or a default in respect of a
covenant or provision of the Indenture that under Article X thereof cannot be
modified or amended without the consent of the holders of all Notes then
outstanding. Any such consent or waiver by the holder of this Note (unless
revoked as provided in the Indenture) shall be conclusive and binding upon such
holder and upon all future holders
A-4
<PAGE>
and owners of this Note and any Notes that may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
composed of twelve 30-day months.
The Notes are issuable in registered form without coupons in denominations
of $1,000 principal amount and integral multiples thereof. At the Corporate
Trust Office of the Trustee, and in the manner and subject to the limitations
provided in the Indenture, without payment of any service charge but with
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration or exchange of Notes, Notes
may be exchanged for a like aggregate principal amount of Notes of other
authorized denominations.
No sinking fund is provided for the Notes.
The Notes are subject to Provisional Redemption by the Company, in whole or
in part, at any time prior to ____________ [set forth Early Redemption Date],
upon notice as set forth in Section 3.2 of the Indenture, at a redemption price
equal to $1,000 per $1,000 principal amount of Notes to be redeemed plus accrued
and unpaid interest, if any, to the Provisional Redemption Date if the closing
price of the Common Stock shall have exceeded 150% of the Conversion Price then
in effect for at least 20 Trading Days within a period of 30 consecutive Trading
Days ending on the Trading Day prior to the Notice Date. Upon any such
Provisional Redemption, the Company shall make a Make-Whole Payment with respect
to the Notes called for Provisional Redemption to holders on the Notice Date in
an amount equal to $______ [set forth Make Whole Payment] per $1,000 principal
amount of Notes, less the amount of any interest actually paid on such Notes
prior to the Notice Date. The Company shall make the Make-Whole Payment on all
Notes called for Provisional Redemption, including any Notes converted into
Common Stock pursuant to the terms of the Indenture after the Notice Date and
prior to the Provisional Redemption Date.
The Notes are also subject to redemption at the option of the Company at
any time on or after _______________ [set forth Optional Redemption Date], in
whole or in part, upon not less than 30 or more than 60 days' notice to the
holders of the Notes prior to the redemption date at the following optional
redemption prices (expressed as percentages of the principal amount), together
with accrued and unpaid interest to the date fixed for redemption, if redeemed
on or after:
A-5
<PAGE>
Date Redemption Price
---- ----------------
----------- ------%
----------- ------%
[set forth terms specified on Schedule I]
If a Change of Control (as defined in the Indenture) shall occur at any
time, then each holder of Notes shall have the right to require that the Company
repurchase such holder's Notes in whole or in part in integral multiples of
$1,000, at a purchase price in cash in an amount equal to 100% of the principal
amount of such Notes, plus accrued and unpaid interest, if any, to the
repurchase date pursuant to an offer to be made by the Company and in accordance
with the procedures set forth in the Indenture.
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time prior to the close of business on the Business
Day immediately preceding __________, or, as to all or any portion hereof called
for redemption, immediately prior to the close of business on the Business Day
immediately preceding the date fixed for redemption (unless the Company shall
default in payment due upon redemption thereof), to convert the principal hereof
or any portion of such principal that is $1,000 or an integral multiple thereof,
into that number of fully paid and non-assessable shares of Company's Common
Stock, as said shares shall be constituted at the date of conversion, obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $_____ or such Conversion Price as adjusted from time
to time as provided in the Indenture, which conversion shall be effected by
surrender of this Note, together with a conversion notice as provided in the
Indenture, to the Corporate Trust Office of the Trustee or at the option of the
holder of this Note, at any other office or agency of the Company maintained for
that purpose pursuant to the Indenture, and, unless the shares issuable on
conversion are to be issued in the same name as this Note, duly endorsed by, or
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the holder or by his duly authorized attorney. No adjustment in
respect of interest or dividends will be made upon any conversion; provided that
if this Note shall be surrendered for conversion during the period from the
close of business on any record date for the payment of interest through the
opening of business on the next succeeding interest payment date, this Note
(unless it or the portion being converted shall have been called for redemption
on a date during the period from the close of business on or after any record
date to the close of business on the business day following the corresponding
payment date) on a date during the period from the close of business on or after
any record date to the close of business on the business day following the
corresponding payment date must be accompanied by an amount, in funds acceptable
to the Company, equal to the interest payable on such interest payment date on
the principal amount being converted. The interest payment with respect to a
Note called for redemption will be payable on the corresponding interest payment
date to the registered holder of a Note at the close of business on that record
date (notwithstanding the conversion of such Note before the corresponding
interest payment date) and a Note holder who elects to convert need not include
funds equal to the interest paid. No fractional shares will be issued upon any
conversion, but an adjustment in cash will be made, as provided in the
Indenture, in respect of any fraction of a share that would otherwise be
issuable upon the surrender of any Note or Notes for conversion.
A-6
<PAGE>
Upon due presentment for registration of transfer of this Note at the
Corporate Trust Office of the Trustee or at the option of the holder of this
Note, at any other office or agency of the Company maintained for that purpose
pursuant to the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof, subject to the conditions and limitations provided in the Indenture,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Note registrar may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or interest
on this Note, or for any claim based hereon or otherwise in respect hereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
in the Indenture or any indenture supplemental thereto or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer or director, as such, past,
present or future, of the Company or of any Successor Company, either directly
or through the Company or any Successor Company, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
A-7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the Custodian
entireties ---------------------------
(Cust)
JT TEN - as joint tenants with right under
of survivorship and not as ---------------------------
tenants in common (Minor)
Uniform Gifts to
Minors Act
---------------------------
(State)
Additional abbreviations may also be used
though not in the above list.
A-8
<PAGE>
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: COMPUTER NETWORK TECHNOLOGY CORPORATION
The undersigned registered owner of this Note hereby irrevocably exercises
the option to convert this Note, or the portion hereof (which is $1,000
principal amount or an integral multiple thereof) below designated, into shares
of Common Stock of the Company in accordance with the terms of the Indenture
referred to in this Note, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Notes representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
check the appropriate box below and pay all transfer taxes payable with respect
thereto. Any amount required to be paid to the undersigned on account of
interest accompanies this Note.
Dated: __________________
_____________________________________
_____________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved signature guarantee medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or
Notes are to be delivered, other than to and in the name of the registered
holder.
_____________________________________
Signature Guarantee
Fill in for registration of shares if to be issued, and Notes if to be
delivered, other than to and in the name of the registered holder:
_____________________________________
(Name)
_____________________________________
(Street Address)
_____________________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all) $______________
_____________________________________
Social Security or other Taxpayer
Identification Number
A-9
<PAGE>
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: COMPUTER NETWORK TECHNOLOGY CORPORATION
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Computer Network Technology Corporation
(the "Company") as to the occurrence of a Change of Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 principal amount or
an integral multiple thereof) below designated, in accordance with the terms of
the Indenture referred to in this Note, together with accrued interest to such
date, to the registered holder hereof.
Dated: __________________
_____________________________________
_____________________________________
Signature(s)
_____________________________________
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid
(if less than all): $______________
A-10
<PAGE>
[FORM OF ASSIGNMENT]
For value received _____________________________ hereby sell(s), assign(s)
and transfer(s) unto _________________________ (Please insert social security or
other identifying number of assignee) the within Note, and hereby irrevocably
constitutes and appoints ________________________________ attorney to transfer
the said Note on the books of the Company, with full power of substitution in
the premises.
Dated:_______________________________
_____________________________________
_____________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan
associations and credit unions) with membership in an
approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.
_____________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect
payment upon a Change of Control or the assignment must correspond with
the name as written upon the face of the Note in every particular
without alteration or enlargement or any change whatever.
A-11
<PAGE>
EXHIBIT B - FORM OF GLOBAL NOTE
FACE OF NOTE
No. B-_ $__________________
CUSIP No. [_______]
COMPUTER NETWORK TECHNOLOGY CORPORATION
[Title of Note set forth on Schedule I]
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPUTER
NETWORK TECHNOLOGY CORPORATION (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OR
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF [CEDE & CO.] OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO [CEDE & CO.] OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, [CEDE & CO.], HAS AN INTEREST
HEREIN.
COMPUTER NETWORK TECHNOLOGY CORPORATION, a corporation duly organized and
validly existing under the laws of the State of Minnesota (the "Company"), which
term includes any Successor Company under the Indenture referred to on the
reverse hereof, for value received hereby promises to pay to [CEDE & CO.], or
registered assigns, the principal sum of ____________ MILLION DOLLARS
($___________) (subject to adjustment as set forth in the next paragraph hereof)
on _____________, at the Corporate Trust Office of the Trustee or at the option
of the holder of this Global Note, at any other office of agency or the Company
maintained for that purpose pursuant to the Indenture, in such coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and
B-1
<PAGE>
private debts, and to pay interest, _________ [semi-annually or other method set
forth on Schedule I] on __________ and ___________ [interest payment date or
terms set forth on Schedule I] of each year, commencing _____________, on said
principal sum at said office or agency, in like coin or currency, at ______% per
annum from _________ or __________, as the case may be, next preceding the date
of this Global Note to which interest has been paid or duly provided for, unless
the date hereof is a date to which interest has been paid or duly provided for,
in which case from the date of this Global Note, or unless no interest has been
paid or duly provided for on the Notes, in which case from ___________ [date
from which interest first accrues set forth on Schedule I], until payment of
said principal sum has been made or duly provided for; provided that if the
Company shall default in the payment of interest due on such ___________ or
___________, then this Global Note shall bear interest from the next preceding
___________ or __________, to which interest has been paid or duly provided for
or, if no interest has been paid or duly provided for on such Note, from
_________. The interest so payable on any ___________ or ___________ will be
paid to the person in whose name this Global Note (or one or more Predecessor
Notes) is registered at the close of business on the record date, which shall be
the __________ [set forth record payment date on Schedule I] or __________
(whether or not a Business Day) next preceding such __________ or _________,
respectively; provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Interest shall be
paid by wire transfer in immediately available funds to the account in the
continental United States designated by the holder of this Global Note in
accordance with the provisions of the Indenture.
The aggregate principal amount of this Global Note represented hereby may
from time to time be reduced or increased to reflect exchanges of a part of this
Global Note for definitive Notes or conversions, redemptions or repurchases of a
part of this Global Note or cancellations of a part of this Global Note or
transfers of interests in the definitive Notes in return for a part of this
Global Note or transfers of a part of this Global Note effected by delivery of
interests in definitive Notes, in each case, and in any such case, by means of
notations on the Schedule of Exchanges, Conversions, Redemptions, Repurchases,
Cancellations and Transfers on the last page hereof. Notwithstanding any
provision of this Global Note to the contrary, (i) exchanges or transfers of a
part of this Global Note for interests in the definitive Notes; (ii) exchanges
or transfers of interests in the definitive Notes in return for a part of this
Global Note; (iii) conversions, redemptions or repurchases of a part of this
Global Note; or (iv) cancellations of a part of this Global Note may be effected
without the surrendering of this Global Note; provided that appropriate
notations on the Schedule of Exchanges, Conversions, Redemptions, Repurchases,
Cancellations and Transfers are made by the Trustee, or the Custodian at the
direction of the Trustee, to reflect the appropriate reduction or increase, as
the case may be, in the aggregate principal amount of this Global Note resulting
therefrom or as a consequence thereof.
Reference is made to the further provisions of this Global Note set forth
on the reverse hereof, including, without limitation, provisions giving the
holder of this Global Note the right to convert this Global Note into Common
Stock of the Company on the terms and subject to the limitations referred to on
the reverse hereof and as more fully specified in the Indenture. Such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
B-2
<PAGE>
This Global Note shall be deemed to be a contract made under the laws of
the State of New York, and for all purposes shall be construed in accordance
with and governed by the laws of said State, without regard to conflicts of laws
principles thereof.
This Global Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Global Note to be duly
executed under its corporate seal.
COMPUTER NETWORK TECHNOLOGY
CORPORATION
By:
-----------------------------------
Name:
Title:
Attest:
- -------------------------------
Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated:
This Note is one of the Notes described in the within-named Indenture.
_________________________, as Trustee
By:
-----------------------------------
Authorized Signatory
B-3
<PAGE>
REVERSE OF GLOBAL NOTE
[Title of Note set forth on Schedule I]
This Global Note is one of a duly authorized issue of Notes of the Company,
designated as its [Title of Note Set Forth on Schedule I] (herein called the
"Notes"), in the aggregate principal amount of $___________, all issued or to be
issued under and pursuant to an Indenture dated as of ____________ (the
"Indenture"), between the Company and ______________________, as trustee (the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a complete description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Notes. Each Note is subject to, and qualified by, all such
terms as set forth in the Indenture certain of which are summarized hereon and
each holder of a Note is referred to the corresponding provisions of the
Indenture for a complete statement of such terms. To the extent that there is
any inconsistency between the summary provisions set forth in the Notes and the
Indenture, the provisions of the Indenture shall govern. Capitalized terms used
but not defined in this Note shall have the meanings ascribed to them in the
Indenture.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest on all Notes may be declared, and upon said declaration shall become,
due and payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.
The payment of principal of, premium, if any, and interest on the Notes
will, to the extent set forth in the Indenture, be subordinated in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture). Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding related to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities, the holders of all Senior Indebtedness
will first be entitled to receive payment in full of all amounts due or to
become due thereon before the holders of the Notes will be entitled to receive
any payment in respect of the principal of, premium, if any, or interest on the
Notes (except that holders of Notes may receive securities that are subordinated
at least to the same extent as the Notes to Senior Indebtedness and any
securities issued in exchange for Senior Indebtedness).
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities) if (a) a default in the payment of the
principal of, premium, if any, or interest on Senior Indebtedness occurs and is
continuing beyond any applicable period of grace; or (b) any other default
occurs and is continuing with respect to Designated Senior Indebtedness that
permits holders of the Designated Senior Indebtedness as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Representative. Payments on the
Notes may and shall be resumed (i) in the case of a Payment Default, upon the
date on which such default is cured or waived; or (ii) in the case of a
Nonpayment Default, 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any Senior Indebtedness has
been
B-4
<PAGE>
accelerated. No new period of payment blockage may be commenced within 360 days
after the receipt by the Trustee of any prior Payment Blockage Notice. No
Nonpayment Default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived.
In the event that the Trustee (or paying agent if other than the Trustee)
or any holder of the Notes receives any payment of principal or interest with
respect to the Notes at a time when such payment is prohibited under the
Indenture, such payment shall be held in trust for the benefit of, and shall be
paid over and delivered to, the holders of Senior Indebtedness or their
representative as their respective interests may appear. After all Senior
Indebtedness is paid in full and until the Notes are paid in full, the holders
of the Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Notes have
been applied to the payment of Senior Indebtedness.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Notes; provided that no such supplemental indenture shall: (i)
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption thereof, alter the
obligation of the Company to repurchase the Notes at the option of the holders
upon the occurrence of a Change of Control or impair or affect the right of any
Note holder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Notes, modify the subordination provisions in a
manner adverse to the holders of the Notes, or impair the right to convert the
Notes into Common Stock subject to the terms set forth in the Indenture without
the consent of the holder of each Note so affected; or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding. The Indenture also provides that, prior to any declaration
accelerating the maturity of the Notes, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of interest or
any premium on or the principal of any of the Notes, a failure by the Company to
convert any Notes into Common Stock of the Company or a default in respect of a
covenant or provision of the Indenture that under Article X thereof cannot be
modified or amended without the consent of the holders of all Notes then
outstanding. Any such consent or waiver by the holder of this Global Note
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such holder and upon all future holders and owners of this Global Note and
any Notes that may be issued in exchange or substitution hereof, irrespective of
whether or not any notation thereof is made upon this Global Note or such other
Notes.
B-5
<PAGE>
No reference herein to the Indenture and no provision of this Global Note
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Global Note at the place, at the respective times, at the rate
and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
composed of twelve 30-day months.
The Notes are issuable in registered form without coupons in denominations
of $1,000 principal amount and integral multiples thereof. At the Corporate
Trust Office of the Trustee and in the manner and subject to the limitations
provided in the Indenture, without payment of any service charge but with
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration or exchange of Notes, Notes
may be exchanged for a like aggregate principal amount of Notes of other
authorized denominations.
No sinking fund is provided for the Notes.
The Notes are subject to Provisional Redemption by the Company, in whole or
in part, at any time prior to __________ [set forth Early Redemption Date], upon
notice as set forth in Section 3.2 of the Indenture, at a redemption price equal
to $1,000 per $1,000 principal amount of Notes to be redeemed plus accrued and
unpaid interest, if any, to the Provisional Redemption Date if the closing price
of the Common Stock shall have exceeded 150% of the Conversion Price then in
effect for at least 20 Trading Days within a period of 30 consecutive Trading
Days ending on the Trading Day prior to the Notice Date. Upon any such
Provisional Redemption, the Company shall make a Make-Whole Payment with respect
to the Notes called for Provisional Redemption to holders on the Notice Date in
an amount equal to $______ [set forth Make Whole Payment] per $1,000 principal
amount of Notes, less the amount of any interest actually paid on such Notes
prior to the Notice Date. The Company shall make the Make-Whole Payment on all
Notes called for Provisional Redemption, including any Notes converted into
Common Stock pursuant to the terms of the Indenture after the Notice Date and
prior to the Provisional Redemption Date.
The Notes are also subject to redemption at the option of the Company at
any time on or after ______________ [set forth optional redemption date], in
whole or in part, upon not less than 30 or more than 60 days' notice to the
holders of the Notes prior to the redemption date at the following optional
redemption prices (expressed as percentages of the principal amount), together
with accrued and unpaid interest to the date fixed for redemption, if redeemed
on or after:
Date Redemption Price
---- ----------------
--------------- [------]%
--------------- [------]%
[set forth terms specified on Schedule I]
B-6
<PAGE>
If a Change of Control (as defined in the Indenture) shall occur at any
time, then each holder of Notes shall have the right to require that the Company
repurchase such holder's Notes in whole or in part in integral multiples of
$1,000, at a purchase price in cash in an amount equal to 100% of the principal
amount of such Notes, plus accrued and unpaid interest, if any, to the
repurchase date pursuant to an offer to be made by the Company and in accordance
with the procedures set forth in the Indenture.
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time prior to the close of business on the Business
Day immediately preceding __________, or, as to all or any portion hereof called
for redemption, immediately prior to the close of business on the Business Day
immediately preceding the date fixed for redemption (unless the Company shall
default in payment due upon redemption thereof), to convert the principal hereof
or any portion of such principal that is $1,000 or an integral multiple thereof,
into that number of fully paid and non-assessable shares of Company's Common
Stock, as said shares shall be constituted at the date of conversion, obtained
by dividing the principal amount of this Global Note or portion thereof to be
converted by the Conversion Price of $____ or such Conversion Price as adjusted
from time to time as provided in the Indenture, which conversion shall be
effected either by surrender of this Global Note, together with a conversion
notice as provided in the Indenture, to the Corporate Trust Office of the
Trustee or without surrendering of this Global Note, by appropriate notations on
the Schedule of Exchanges, Conversions, Redemptions, Repurchases, Cancellations
and Transfers made by the Trustee, or the Custodian at the direction of the
Trustee, to reflect the appropriate reduction in the aggregate principal amount
of this Global Note resulting therefrom. No adjustment in respect of interest or
dividends will be made upon any conversion; provided that if this Global Note
shall be surrendered for conversion during the period from the close of business
on any record date for the payment of interest and through the opening of
business on the next succeeding interest payment date, this Global Note (unless
it or the portion being converted shall have been called for redemption on a
date during the period from the close of business on or after any record date to
the close of business on the business day following the corresponding payment
date) on a date during the period from the close of business on or after any
record date to the close of business on the business day following the
corresponding payment date must be accompanied by an amount, in funds acceptable
to the Company, equal to the interest payable on such interest payment date on
the principal amount being converted. The interest payment with respect to a
Note called for redemption will be payable on the corresponding interest payment
date to the registered holder of such Note at the close of business on that
record date (notwithstanding the conversion of such Note before the
corresponding interest payment date) and a note holder who elects to convert
need not include funds equal to the interest paid. No fractional shares will be
issued upon any conversion, but an adjustment in cash will be made, as provided
in the Indenture, in respect of any fraction of a share that would otherwise be
issuable upon the surrender of any Note or Notes for conversion.
Upon due presentment for registration of transfer of this Global Note at
the Corporate Trust Office of the Trustee, or at the option of the holder of
this Global Note, at any other office or agency of the Company maintained for
that purpose pursuant to the Indenture, a new Global Note or Global Notes of
authorized denominations for an equal aggregate principal amount will
B-7
<PAGE>
be issued to the transferee in exchange thereof, subject to the conditions and
limitations provided in the Indenture, without charge except for any tax or
other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Note registrar may deem and treat the registered holder
hereof as the absolute owner of this Global Note (whether or not this Global
Note shall be overdue and notwithstanding any notation of ownership or other
writing hereon made by anyone other than the Company or any Note registrar), for
the purpose of receiving payment hereof, or on account hereof, for the
conversion hereof and for all other purposes, and neither the Company nor the
Trustee nor any other authenticating agent nor any paying agent nor any other
conversion agent nor any Note registrar shall be affected by any notice to the
contrary. All payments made to or upon the order of such registered holder
shall, to the extent of the sum or sums paid, satisfy and discharge liability
for monies payable on this Global Note.
No recourse for the payment of the principal of or any premium or interest
on this Global Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any Successor Company, either
directly or through the Company or any Successor Company, whether by virtue of
any constitution, statute or rule of law or by the enforcement of any assessment
or penalty or otherwise, all such liability being, by the acceptance hereof and
as part of the consideration for the issue hereof, expressly waived and
released.
B-8
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the Custodian
entireties ---------------------------
(Cust)
JT TEN - as joint tenants with right under
of survivorship and not as ---------------------------
tenants in common (Minor)
Uniform Gifts to
Minors Act
---------------------------
(State)
Additional abbreviations may also be used
though not in the above list.
B-9
<PAGE>
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: COMPUTER NETWORK TECHNOLOGY CORPORATION
The undersigned registered owner of this Global Note hereby irrevocably
exercises the option to convert this Global Note, or the portion hereof (which
is $1,000 principal amount or an integral multiple thereof) below designated,
into shares of Common Stock in accordance with the terms of the Indenture
referred to in this Global Note, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Notes representing any unconverted principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this Global
Note not converted are to be issued in the name of a person other than the
undersigned, the undersigned will check the appropriate box below and pay all
transfer taxes payable with respect thereto. Any amount required to be paid to
the undersigned on account of interest accompanies this Global Note.
Dated:_______________________
______________________________________
______________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan
associations and credit unions) with membership in an
approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15 if shares of
Common Stock are to be issued, or Notes are to be delivered,
other than to and in the name of the registered holder.
___________________________________
Signature Guarantee
Fill in for registration of shares
if to be issued, and Notes if to be
delivered, other than to and in the
name of the registered holder:
___________________________________
(Name)
___________________________________
(Street Address)
___________________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all) $_____________
___________________________________
B-10
<PAGE>
Social Security or other Taxpayer
Identification Number
B-11
<PAGE>
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: COMPUTER NETWORK TECHNOLOGY CORPORATION
The undersigned registered owner of this Global Note hereby irrevocably
acknowledges receipt of a notice from Computer Network Technology Corporation
(the "Company") as to the occurrence of a Change of Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Global Note, or the portion thereof (which is $1,000 principal
amount or an integral multiple thereof) below designated, in accordance with the
terms of the Indenture referred to in this Global Note, together with accrued
interest to such date, to the registered holder hereof.
Dated:_______________________
______________________________________
______________________________________
Signature(s)
______________________________________
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid
(if less than all): $_____________
B-12
<PAGE>
[FORM OF ASSIGNMENT]
For value received ________________ hereby sell(s), assign(s) and
transfer(s) unto __________ (please insert social security or other identifying
number of assignee) the within Note, and hereby irrevocably constitutes and
appoints _________________ attorney to transfer the said Note on the books of
the Company, with full power of substitution in the premises.
Dated:_______________________
______________________________________
______________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan
associations and credit unions) with membership in an
approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.
________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect
payment upon a Change of Control or the assignment must correspond with
the name as written upon the face of the Note in every particular
without alteration or enlargement or any change whatever.
B-13
<PAGE>
SCHEDULE OF EXCHANGES, CONVERSIONS, REDEMPTIONS, REPURCHASES,
CANCELLATIONS AND TRANSFERS
The initial principal amount of this Global Note is U.S. $__________. The
following additions to principal, redemptions, repurchases, exchanges of a part
of this Global Note or definitive Notes and conversions into Common Stock have
been made:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Principal Amount
Date of Addition Redeemed,
to Principal, Repurchased, Remaining Principal
Redemption, Principal Amount Exchanged for Amount
Repurchase, Added on Exchange Interest in Definitive Outstanding Notation Made by
Exchange or of Interest in Notes or Converted following such or on behalf of
Conversion Definitive Notes into Common Stock Transaction the Trustee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
======================================================================================================================
</TABLE>
B-14
<PAGE>
EXHIBIT 4.3
Form of Stock Certificate
[Face of Certificate]
COMMON STOCK COMMON STOCK
Number Shares
[CNT Logo]
Computer Network Technology
INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA
See reverse for certain definitions
CUSIP 204925 10 1
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 EACH OF THE
COMMON STOCK OF COMPUTER NETWORK TECHNOLOGY CORPORATION transferable on the
books of the Corporation by the holder hereof in person or by duly authorized
attorney on surrender of this certificate properly endorsed. This certificate is
not valid unless countersigned by the Transfer Agent and Registrar.
WITNESS the facsimile signature of the Corporation's duly authorized
officer.
Dated:
/s/ Gregory T. Barnum /s/ Thomas G. Hudson
GREGORY T. BARNUM THOMAS G. HUDSON
VICE PRESIDENT OF FINANCE, PRESIDENT, CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER AND SECRETARY AND CHAIRMAN OF THE BOARD
----------------------------------------
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
By
AUTHORIZED SIGNATURE
----------------------------------------
<PAGE>
[Reverse of Certificate]
This certificate also evidences and entitles the holder hereof to certain rights
as set forth in a Rights Agreement between Computer Network Technology
Corporation and ChaseMellon Shareholder Services, L.L.C. as Rights Agent, dated
as of July 24, 1998 (as amended from time to time, the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive office of Computer Network Technology
Corporation. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificate and will no longer be
evidenced by this certificate. Computer Network Technology Corporation will mail
to the holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefore. Under certain circumstances, as
set forth in the Rights Agreement, Rights issued to any Person who becomes an
Acquiring Peron (as defined the Rights Agreement) may become null and void.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
- -------------------------------------------------------------------------------
TEN COM - as tenants in common UNIF GIFT MIN ACT-__________ Custodian
(Cust)
_________ under uniform Gifts to Minors Act
(Minor)
______________________
(State)
- -------------------------------------------------------------------------------
TEN ENT - as tenants by the
entireties
- -------------------------------------------------------------------------------
J TEN - as joint tenants with
right of survivorship
and not as tenants in
common
- -------------------------------------------------------------------------------
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
_____________________________________________________ Shares of the capital
stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint ____________________________________________________
Attorney to transfer the said stock on the Books of the within-named Corporation
with full power of substitution in the premises.
Dated _______________________________________________
_______________________________________________
<PAGE>
[Reverse Continued]
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
SIGNATURE GUARANTEED
The Corporation is authorized to issue shares of two classes, Common Stock and
Preferred Stock. The Board of Directors has authority to create and authorize
the issuance of any number of series of Preferred Stock and to fix the relative
rights and preferences of any such series. The Corporation will furnish to any
shareholder, upon request and without charge, a full statement of the
designations, preferences, limitations, and relative rights of the shares of
each class or series authorized to be issued, so far as they have been
determined.
<PAGE>
EXHIBIT 5.1
[Letterhead of Leonard, Street and Deinard Professional Association]
August 23, 1999
Computer Network Technology Corporation
605 North Highway 169
Minneapolis, Minnesota 55441
Ladies and Gentlemen:
We have acted as counsel to Computer Network Technology Corporation (the
"Corporation"), a Minnesota corporation, in connection with the shelf
registration by the Corporation of $100,000,000 in maximum aggregate offering
price of (1) shares of the Corporation's common stock, par value $.01 per share
(the "Common Stock") and (2) the Corporation's convertible subordinated notes
(the "Notes"). The Common Stock and the Notes are the subject of Registration
Statement No. 333-80841 (the "Registration Statement") filed by the Corporation
on Form S-3 under the Securities Act of 1933, as amended (the "Act").
Capitalized terms used but not defined herein have the meanings set forth in the
Registration Statement.
In our capacity as counsel to you in connection with such Registration
Statement, we are familiar with the proceedings taken and proposed to be taken
by the Corporation in connection with the authorization and issuance of the
Common Stock and Notes. In addition, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion.
Based on the foregoing, it is our opinion that:
1. Upon (a) adoption of a resolution by the Board of Directors of the
Corporation (or a duly authorized committee) approving the issuance of the
Common Stock, (b) effectiveness of the Registration Statement and (c) receipt of
the consideration for the Common Stock in accordance with the Board of
Directors' (or a duly authorized committee's) resolutions the Common Stock will
be validly issued, fully paid and nonassessable under the Minnesota Business
Corporation Act.
2. Upon (a) adoption of a resolution by the Board of Directors of the
Corporation (or a duly authorized committee) approving the issuance of the
Notes, (b) effectiveness of the Registration Statement, (c) receipt of the
consideration for the Notes in accordance with the Board of Directors' (or a
duly authorized committee's) resolutions and (d) execution and delivery by the
Corporation of the Indenture and the Notes, the Indenture and the Notes will
constitute valid and binding obligations of the Corporation enforceable against
the Corporation in accordance with their terms, except to the extent that (i)
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and general principles of
<PAGE>
Computer Network Technology Corporation
August 23, 1999
Page 2
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforceability is considered in a proceeding at
law or in equity) and (ii) the waiver contained in Section 4.7 (Stay, Extension
and Usury Laws) of the Indenture may be deemed unenforceable.
3. Upon the occurrence of the events listed in clauses (a) through (d) in
the foregoing paragraph and upon the issuance and delivery of the Common Stock
upon conversion of the Notes in accordance with the terms of the Notes and the
Indenture, the Common Stock will be validly issued, fully paid and nonassessable
under the Minnesota Business Corporation Act.
To the extent that the obligations of the Corporation under the Indenture
may be dependent upon such maters, we assume for purposes of this opinion that
the Trustee is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture will
be duly authorized, executed and delivered by the Trustee and will constitute
the valid and binding obligation of the Trustee enforceable against the Trustee
in accordance with its terms; that the Trustee will be in compliance, with
respect to acting as a trustee under the Indenture, with all applicable laws and
regulations; and that the Trustee has the requisite organizational and legal
power and authority to perform its obligations under the Indenture.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this opinion letter and should not be quoted in whole
or in part or otherwise be referred to, nor filed with or furnished to any
governmental agency or other person or entity, without the express prior written
consent of this firm.
We are admitted to practice law in the State of Minnesota and the foregoing
opinions are limited to the laws of that state and the federal laws of the
United States of America.
We hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement. In giving this consent, we do not thereby admit that we
are an "expert" within the meaning of the Act.
Very truly yours,
LEONARD, STREET AND DEINARD
PROFESSIONAL ASSOCIATION
By /s/ Morris M. Sherman
---------------------------------
Morris M. Sherman
<PAGE>
EXHIBIT 10B
ADOPTION AGREEMENT #01
FOR USE WITH
DORSEY & WHITNEY
401(k) REGIONAL PROTOTYPE PLAN
BASIC PLAN DOCUMENT #1
- ---------------
ARTICLE I. PLAN ADOPTED
By execution of this Adoption Agreement, the Employer and the Trustee
agree that this Adoption Agreement and the related document entitled "Dorsey &
Whitney _ 401(k) Regional Prototype Plan Basic Plan Document #1" are adopted as
the formal written instrument under which the Employer will maintain a defined
contribution _ 401(k) profit sharing plan for the benefit of its eligible
employees. Unless specified otherwise, "_" references are to the Basic Plan
Document and terms with initial capital letters are defined in the Basic Plan
Document.
ARTICLE II. THE EMPLOYER
A. The Employer's name and address are:
Computer Network Technology Corporation
605 North Highway 169, Suite 800
Minneapolis, Minnesota 55441
Telephone: (612) 797-6000
[_ 1.1.13, _ 9.4]
B. The Employer is organized under the laws of the state of Minnesota as a
(check one):
X C corporation.
S corporation.
partnership.
proprietorship.
other (specify) .
[_ 1.1.13]
C. The Employer's principal trade or business with respect to which this
Plan is established is: design and develop high speed networking
equipment.
D. The Employer's annual accounting period (federal income tax year) ends:
December 31.
<PAGE>
[_ 1.1.4]
E. The Employer's federal taxpayer identification number is: 41-1356476.
F. The Employer designates the following person(s) as the Administrative
Committee.
Vice President of Human Resources
Director of Human Resources
Benefits Manager
[_ 1.1.2]
ARTICLE III. THE TRUSTEE
A. The name, address and phone number of the Trustee(s) to be used for
reporting and disclosure purposes is:
1. CG Trust Company
525 West Monroe Street, Suite 1900
Chicago, Illinois 60661-3629
(312) 648 - 2490
2.
( )
3.
( )
[_ 1.1.34]
B. Effective date of appointment of Trustee(s) listed in A above: July 1,
1993.
C. If one or more individuals are Trustees, the federal taxpayer
identification number assigned to the Trust is: .
2
<PAGE>
ARTICLE IV. HISTORY OF THE PLAN
A. The execution of this Adoption Agreement is intended to (check one):
create a new Plan (skip to item B).
X amend an existing Plan (complete the following).
1. The existing Plan which is being amended was (check
one):
maintained under this prototype or another
prototype also sponsored by Dorsey & Whitney
LLP.
maintained under some other prototype or
master plan.
X maintained under an individually designed
document.
[_ 1.1.27]
2. The name of the Plan under the earlier Plan document was: The
Computer Network Technology Corporation 401(k) Salary Savings
Plan
The original effective date of the Plan was: January 1, 1991.
The Trustee under the earlier Plan document was: CG Trust
Company
The date that the earlier Plan document was executed (or most
recently amended) was: April 9, 1998.
[_ 1.1.24]
3. Was the existing Plan a Profit Sharing Plan exempt from spouse
annuity rules as described in _ 7.3.5 of the Basic Plan
Document?
X Yes
No
[_ 7.3.5]
4. Will the existing Plan continue to hold nondeductible
voluntary contributions made under the existing Plan? (Further
contributions are not permitted.)
X Yes
3
<PAGE>
No
Not Applicable (skip to Item B)
[_ 3.8]
5. Will Participants be allowed to withdraw their nondeductible
voluntary contributions (and the earnings thereon) during
employment?
X Yes
No
[_ 7.8]
B. Upon the execution of this Adoption Agreement, the Plan name for
reporting and disclosure purposes will be: The Computer Network
Technology Corporation 401(k) Salary Savings Plan .
[_ 1.1.24]
C. The three digit Plan serial number ("PN") which will be used by the
Employer for reporting and disclosure purposes is: 001.
D. The Effective Date (the date upon which this Adoption Agreement is to
be effective) is: January 1, 1997.
[_ 1.1.10]
E. The last day of the Plan Year (the accounting year of the Plan) is:
December 31.
[_ 1.1.26]
F. Is this Plan a Profit Sharing Plan exempt from spouse annuity rules as
described in _ 7.3.5 of the Basic Plan Document? (If item A(3) above is
checked "No", this item must also be checked "No".)
X Yes
No
[_ 7.3.5]
ARTICLE V. ELIGIBILITY REQUIREMENTS
A. Age. The minimum age each employee must satisfy before becoming a
Participant is (check one and complete):
4
<PAGE>
No minimum age requirement.
X Minimum age 18 years (not greater than 21).
[_ 2.1]
B. Service. To become a Participant in the Plan each employee must
complete at least (check one):
No minimum service requirement (skip to item D).
One year of Eligibility Service (with at least 1,000
Hours of Service).
X One year of Eligibility Service (with at least 1,000
Hours of Service) or 1 months (less than 12) of
continuous service (without regard to Hours of
Service credited).
[_ 2.1, _ 1.1.11]
C. Computation Period. The computation period for Eligibility Service will
be (check one):
X The year beginning with the date the employee first
performs an Hour of Service and then Plan Years.
Successive years beginning on the date the employee
first performs an Hour of Service and annual
anniversaries of that date.
[_ 1.1.11]
D. Recognized Employment. Recognized Employment is all service in the
employment of the Employer except employees covered under collective
bargaining agreements (unless the agreement provides for the inclusion
of such employees), non-resident aliens, leased and similar employees
and the following classifications or categories specifically excluded:
Excluded
Salaried employees. Yes X No
Hourly employees. Yes X No
Owner employees Yes X No
(including Partners who own
more than a 10% interest).
Partners. Yes X No
5
<PAGE>
The following described groups, classifications or individual employees
are excluded:
Any employee who is not scheduled to work at least 1,000 hours in a
Plan Year unless such employee completes one year of Eligibility
Service (with at least 1,000 Hours of Service).
[_ 1.1.31]
E. Enrollment Date(s). The Enrollment Date(s) shall be (check one):
the first day of the Plan Year.
the first day of the Plan Year and the first day of
the 7th month of the Plan Year.
X the first day of the Plan Year and the first day of
the 4th, 7th and 10th months of the Plan Year.
the first day of the Plan Year and the first day of
the 2nd through the 12th months of the Plan Year.
[_ 1.1.14]
F. Valuation Date(s). The Valuation Date(s) shall be (check one): [See
Supplemental Adoption Agreement]
the Annual Valuation Date.
the Annual Valuation Date and the last day of the 6th
month of the Plan Year.
the Annual Valuation Date and the last day of the
3rd, 6th and 9th months of the Plan Year.
the Annual Valuation Date and the last day of the 1st
through the 11th months of the Plan Year.
[_ 1.1.35]
ARTICLE VI. RETIREMENT SAVINGS (_ 401(k)) CONTRIBUTIONS
A Participant may enter into a Retirement Savings Agreement with the Employer to
reduce his Recognized Compensation by any amount the Participant chooses between
1 % and 15 % of such Participant's Recognized Compensation.
[_ 3.2]
6
<PAGE>
ARTICLE VII. EMPLOYER CONTRIBUTIONS AND FORFEITURES
A. Required Matching Contributions. Will required matching contributions
be allowed?
X No
Yes in an amount equal to % of each Participant's
retirement savings _ 401(k) contribution, ignoring
retirement savings in excess of % of the
Participant's Recognized Compensation.
B. Discretionary Contributions. Will Employer discretionary contributions
be allowed? [See Addendum to Adoption Agreement]
No
Yes (check one or both):
Discretionary Matching Contributions. (check one)
Percentage Match. Employer discretionary matching
contributions will be allocated to the Employer Matching
Accounts of eligible Participants to match a percentage,
determined by the Employer, of each eligible Participant's
retirement savings _ 401(k) contributions for the Plan,
ignoring retirement savings contributions in excess of % of
the Participant's Recognized Compensation.
Collectively Bargained Match. Employer discretionary matching
contributions will be allocated to the Employer Matching
Accounts of eligible Participants pursuant to a collective
bargaining agreement covering said Participants.
Discretionary Profit Sharing. (check one)
Straight Percent of Pay. Employer discretionary
profit sharing contributions are not integrated with
Social Security contributions. Employer discretionary
profit sharing contributions will be allocated to the
Employer Profit Sharing Accounts of eligible
Participants (whether or not they are making
retirement savings 401(k) contributions) pursuant to
_ 3.4.5(a) of the Basic Plan Document.
Integrated with Social Security. Employer
discretionary profit sharing contributions are
integrated with Social Security contributions.
Employer discretionary profit sharing contributions
will be allocated to the Employer Profit Sharing
Accounts of eligible Participants (whether or not
they are making
7
<PAGE>
retirement savings 401(k) contributions) pursuant to
_ 3.4.5(b) of the Basic Plan Document.
The Integration Level will be equal to:
The Taxable Wage Base ("TWB")
$(a dollar amount not greater than the TWB)
Collectively Bargained. Employer contributions will
be allocated to the Employer Profit Sharing Accounts
of eligible Participants pursuant to a collective
bargaining agreement covering said Participants or
pursuant to the federal Davis Bacon Act or similar
federal, state or local prevailing wage legislation.
[_ 3.4.3 and _ 3.4.5]
C. Last Day Rule. Will Participants be required to be in employment on the
last day of a Plan Year to share in the Employer contribution (and
forfeited Suspense Accounts, if any) to be allocated for that Plan
Year?
Employer Required Employer Discretionary Employer Discretionary
Matching Contributions Matching Contribution Profit Sharing Contribution
Yes X Yes Yes
No No No
X Not Applicable Not Applicable X Not Applicable
[_ 3.5]
D. 1,000 Hour Rule. Will Participants be required to have at least 1,000
Hours of Service in a Plan Year to share in the Employer contribution
(and forfeited Suspense Accounts, if any) to be allocated for that Plan
Year?18/
Employer Required Employer Discretionary Employer Discretionary
Matching Contributions Matching Contribution Profit Sharing Contribution
Yes Yes Yes
No X No No
X Not Applicable Not Applicable X Not Applicable
[_ 3.5]
E. Recognized Compensation. A Participant's Recognized Compensation for
purposes of allocating the Employer contribution is generally total
cash pay for Recognized Employment while a Participant during the Plan
Year, excluding the following:
8
<PAGE>
No exclusions
Bonuses
Overtime
Holiday and Vacation Pay
Shift differential
Commissions in excess of $ .
X Other excluding any reimbursements related to moving
expenses; the Saturday Night Stay-over Program; and
any income related to the exercise of nonqualified
stock options, the sale of stock within one year of
receipt under the Employee Stock Purchase Plan, the
stock options receive pursuant to the Incentive Stock
Option Plan, or the vesting of stock options under
the Restricted Stock Option Plan.
[_ 1.1.30]
ARTICLE VIII. ROLLOVER CONTRIBUTIONS
A. Will Participants be allowed to make rollover contributions?
X Yes
No
[_ 3.7]
B. Will employees in Recognized Employment who are not yet Participants be
allowed to make rollover contributions?
X Yes
No
[_ 3.7]
ARTICLE IX. VESTING OF EMPLOYER MATCHING ACCOUNTS
AND EMPLOYER PROFIT SHARING ACCOUNT
9
<PAGE>
A. Employer Matching Account. Effective for Participants who perform one
or more Hours of Service on or after the Effective Date, each
Participant's Employer Matching Account shall become Vested as follows
(check one):
Not Applicable.
Full Vesting. Each Participant's Employer Matching
Account shall be fully (100%) Vested at all times.
X Graduated or Cliff Vesting. Each Participant's
Employer Matching Account shall be Vested as follows:
When the Participant Has The Vested Portion of the
Completed the Following Participant's Matching
Vesting Service Account Will Be:
Not Top Heavy Top Heavy
3 to 7 5 year cliff 2 to 6 3 year cliff
Less than 1 year 0 % (0%) (0%) (0%) (0%)
1 year 0 % (0%) (0%) (0%) (0%)
2 years 50 % (0%) (0%) (20%) (0%)
3 years 75 % (20%) (0%) (40%) (100%)
4 years 100 % (40%) (0%) (60%)
5 years % (60%) (100%) (80%)
6 years % (80%) (100%)
7 years or more 100 %
B. Employer Profit Sharing Account. Effective for Participants who perform
one or more Hours of Service on or after the Effective Date, each
Participant's Profit Sharing Account shall become Vested as follows
(check one):
X Not Applicable.
Full Vesting. Each Participant's Profit Sharing
Account shall be fully (100%) Vested at all times.
Graduated or Cliff Vesting. Each Participant's Profit
Sharing Account shall be Vested as follows:
When the Participant Has The Vested Portion of the
Completed the Following Participant's Matching
Vesting Service Account Will Be: 21/
Not Top Heavy Top Heavy 22/
3 to 7 5 year cliff 2 to 6 3 year cliff
Less than 1 year % (0%) (0%) (0%) (0%)
1 year % (0%) (0%) (0%) (0%)
2 years % (0%) (0%) (20%) (0%)
3 years % (20%) (0%) (40%) (100%)
10
<PAGE>
4 years % (40%) (0%) (60%)
5 years % (60%) (100%) (80%)
6 years % (80%) (100%)
7 years or more 100%
C. Full Vesting Events. Notwithstanding any of the foregoing, each
Participant's Employer Matching Account and Employer Profit Sharing
Account will be 100% Vested upon death, disability or attainment of 65
(must be 65 or earlier), while in the employment of the Employer.
[_ 5.1.1 and _ 5.1.2]
ARTICLE X. DISTRIBUTIONS
A. Distribution Date(s). The Distribution Date(s) for the Plan shall be
(check one): [See Supplemental Adoption Agreement]
the Annual Valuation Date.
the Annual Valuation Date and the last day of the 6th
month of the Plan Year.
the Annual Valuation Date and the last day of the
3rd, 6th, and 9th months of the Plan Year.
the Annual Valuation Date and the last day of the 1st
through 11th months of the Plan Year.
[_ 1.1.9]
B. Time of Distribution. Distribution will occur (check one):
X As of any Distribution Date specified in writing by the Participant or
Beneficiary which is coincident with or following both (a) a
Participant's Event of Maturity, and (b) the filing of any required
application for distribution.
As of any Distribution Date specified in writing by the Participant or
Beneficiary which is coincident with or following both (a) at least
months after the Participant's Event of Maturity or, if earlier, the
Distribution Date which is coincident with or following the
Participant's attainment of Normal Retirement Age, death or disability,
and (b) the filing of any required application for distribution.
Other or, if earlier, as of the Distribution Date which is coincident
with or following the Participant's attainment of Normal Retirement
Age, death or disability, and the filing of any required application
for distribution.26/
[_ 7.2]
11
<PAGE>
C. Form of Distribution. Participants will be allowed to receive
distributions in the following forms (check one or both):
X Lump Sum (check one):
X Lump Sum single payment as of the Distribution Date specified
by the Participant and allowed in item B above.
Lump Sum single payment as of the Distribution Date
specified by the Participant and allowed in item B
above, including, if the Participant requests after
the Participant's Event of Maturity, a partial
advance payment up to 50% of the Vested Total Account
determined as of the Distribution Date immediately
preceding the Participant's Event of Maturity.
Installments (check one or both):
Substantially equal installments payable monthly,
quarterly or annually over a period of years selected
by the Participant before the first payment is made,
but not to exceed the Participant's life expectancy
or the joint and last survivor life expectancy of the
Participant and the Participant's Beneficiary.
X Other - An installment payment in an amount equal to
any whole percentage (not to exceed 100%) of the
Participant's Total Account as elected at any time
and for any reason by a Participant who deferred
distribution of their Total Account after the
occurrence of an Event of Maturity.
Beneficiaries will be allowed to receive distributions in the following forms
(check one or both):
X Lump Sum (check one):
X Lump Sum single payment as of the Distribution Date
specified by the Beneficiary and allowed in item B
above.
Lump Sum single payment as of the Distribution Date
specified by the Beneficiary and allowed in item B
above, including, if the Beneficiary requests after
the Participant's death, a partial advance payment up
to 50% of the Participant's Vested Total Account
determined as of the Distribution Date immediately
preceding the Participant's death.
Installments (check one or both):
Substantially equal installments payable monthly,
quarterly or annually over a period of years selected
by the Beneficiary according to the rules provided in
_ 7.3 of the Basic Plan Document.
Other
12
<PAGE>
.
[_ 7.3]
D. In-service Distributions Hardship. Distributions during employment are
available to Participants for the following purposes (check either Yes
or No for each purpose):
Yes No
X Medical expenses described in _ 213(d) of the Internal Revenue
Code incurred by the Participant, the Participant's spouse or
any dependents of the Participant (as defined in _ 152 of the
Internal Revenue Code).
X The purchase (excluding mortgage payments) of a principal
residence of the Participant.32/
X Payment of tuition for the next semester or quarter of
post-secondary education for the Participant, the
Participant's spouse, children or dependents.32/
X The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.32/
[_ 7.9.1]
E. In-service Distributions Age 59-1/2. Will distributions during
employment after age 59-1/2 be allowed?
X Yes
No
[_ 7.9.2]
F. Source of Hardship Distributions and Age 59-1/2 Distributions.
In-service distributions will be allowed from the following Accounts
(check Yes, No, or Not Applicable for each Account):
Not
Yes No Applicable
X Retirement Savings Account
X Employer Profit Sharing Account
X Employer Matching Account
X Rollover Account
13
<PAGE>
X Transfer Account
X Nondeductible Voluntary Account
X Deductible Voluntary Account
[_ 7.9.1.5, _ 7.9.2.4]
ARTICLE XI. INVESTMENT OPTIONS
A. Life Insurance. Will Participants be permitted to direct the investment
of a part of their Accounts into Life Insurance contracts?
Yes
X No
[_ 10.11]
B. Commingled Investment Subfunds. Can Commingled Investment Subfunds be
created so that Participants can control the investment of their
Accounts?
X Yes
No
[_ 4.1.1]
C. Individually Directed Accounts. Can Individually Directed Subfunds be
created so that Participants can control the investment of their
Accounts?
Yes36/
X No
[_ 4.1.2]
D. Employer Direction. Except as provided in Section E of this Article XI,
will the Employer have the authority to direct the Trustee in the
investment of the Fund?
Yes
X No
If yes, enter name and title of the one individual who is authorized to
communicate such directions to the Trustee in writing: .
14
<PAGE>
[_ 10.12]
ARTICLE XII. LOANS
Will loans from the Plan be available to Participants and Beneficiaries (other
than Owner-Employees and Shareholder-Employees)?
No
X Yes (check one)
X Loans will be made for any purpose.
Loans will be made for the
following purposes:
[_ 7.10]
ARTICLE XIII. INTERNAL REVENUE CODE _ 415 LIMITATIONS
A. Does the Employer or any controlled group member now maintain or has
the Employer or any controlled group member ever maintained another
qualified plan in which any Participant in this Plan is (or was) a
participant or could possibly become a participant or does the Employer
or any controlled group member maintain a welfare benefit fund or an
individual medical account (as defined in Appendix A) under which
amounts are treated as annual additions with respect to any Participant
in this Plan?
X No (skip to item E)
Yes (complete the rest of this Article XIII)
[Appendix A]
B. Such other qualified plan was or is a (check one or more as
appropriate):
Regional prototype defined contribution plan (complete E
below)
Regional prototype defined benefit plan (complete D and E
below)
Individually designed defined contribution plan39/ (complete C
and E below)
15
<PAGE>
Individually designed defined benefit plan (complete D and E
below)
Welfare benefit fund (complete C and E below)
Individual medical account (complete C and E below)
C. To the extent that any Participant in this Plan is, may become or ever
has been a participant in another qualified defined contribution plan
maintained by the Employer or any controlled group member, other than a
regional prototype qualified defined contribution plan (check one):
The provisions of _ 3 of Appendix A will apply, as if the other plan was a
regional prototype plan.
The method under which the plans will limit total annual additions to the
maximum permissible amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion is set forth in an attachment to this
Adoption Agreement.
D. To the extent that any Participant is, may become or ever has been a
participant in another qualified defined benefit plan maintained by the
Employer or any controlled group member (check one):
In any limitation year, the annual additions credited to the
Participant under this Plan may not cause the sum of the defined
benefit plan fraction and the defined contribution plan fraction to
exceed 1.0. If the Employer contributions that would otherwise be
allocated to the Participant's Account under the Plan during such year
would cause the 1.0 limitation to be exceeded, the allocation will be
reduced so that the sum of the fractions equals 1.0. Any contributions
not allocated because of the preceding sentence will be allocated to
the remaining Participants in this plan under the allocation formula
under this Plan. If the 1.0 limitation is exceeded because of an excess
amount, such excess amount will be reduced in accordance with _ 2.4 of
Appendix A.
The method under which the plans involved will satisfy the 1.0
limitation in a manner that precludes Employer discretion is set forth
in an attachment to this Adoption Agreement.
E. The limitation year is the following 12-consecutive month period (check
one):
X the Plan Year
the calendar year
other
ARTICLE XIV. INTERNAL REVENUE CODE _ 416 LIMITATIONS
16
<PAGE>
A. Does any Employer adopting this Plan maintain another qualified plan in
which any Participant in this Plan is a participant or could possibly
become a participant?
X No (skip the rest of this Article XIV)
Yes (complete the rest of this Article XIV)
B. To avoid duplication of minimum benefits under _ 416 of the Internal
Revenue Code because of the required aggregation of multiple plans, the
"Dorsey & Whitney _ 401(k) Regional Prototype Plan Basic Plan Document
#1" is amended as follows:
[_ 9.1.1 and Appendix B]
C. For purposes of establishing the present value to compute the top heavy
ratio, any benefit under a defined benefit plan shall be discounted
only for mortality and interest based on the following:
Interest rate (check one): PBGC Interest Assumption as if Plan
terminated on valuation date.
Other .
Mortality table (check one): PBGC Mortality Assumption as if Plan
terminated on valuation date.
Other .
[Appendix B]
ARTICLE XV. HOURS OF SERVICE
For the purpose of determining One-Year Breaks in Service, Vesting Service,
Eligibility Service and minimum annual service requirement to share in the
Employer contribution made for a Plan Year, Hours of Service for employees for
whom the Employer is not required by state or federal "wage and hour" or other
laws to count hours worked shall be determined on the following basis (check
one):
On the basis of the actual recorded hours for which an employee is paid
or entitled to payment.
On the basis that, without regard to his actual recorded hours, an
employee shall be credited with 10 Hours of Service for a day if under
_ 1.1.18 such employee would be credited with at least 1 Hour of
Service during that day.
17
<PAGE>
On the basis that, without regard to his actual recorded hours, an
employee shall be credited with 45 Hours of Service for a calendar week
if under _ 1.1.18 such employee would be credited with at least 1 Hour
of Service during that calendar week.
On the basis that, without regard to his actual recorded hours, an
employee shall be credited with 95 Hours of Service for a semi-monthly
pay period if under _ 1.1.18 such employee would be credited with at
least 1 Hour of Service during that semi-monthly pay period.
X On the basis that, without regard to his actual recorded hours, an
employee shall be credited with 190 Hours of Service for a calendar
month if under _ 1.1.18 such employee would be credited with at least 1
Hour of Service during that calendar month.
[_ 1.1.18]
ARTICLE XVI. COLLECTIVE INVESTMENTS
Does the Trustee maintain any collective investment funds in which this Plan
will invest?
X No
Yes the Trustee's collective investment funds
incorporated by reference into this Plan Statement
are:
[_ 10.6(q)]
ARTICLE XVII. MISCELLANEOUS
The Prototype Sponsor is:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
(612) 340-2600
18
<PAGE>
This Adoption Agreement is not effective unless Dorsey & Whitney LLP has
consented, in writing, to its use. The Employer's Plan is intended to qualify
under Internal Revenue Code _ 401(a) and to be funded through a trust exempt
from federal income taxes under Internal Revenue Code _ 501(a). The Employer
understands that failure to properly complete or amend this Adoption Agreement
may result in disqualification of the Plan.
The Employer and the Trustee further agree that the duties and responsibilities
of the Employer, Dorsey & Whitney LLP and the Trustee as set out in the "Dorsey
& Whitney _ 401(k) Regional Prototype Plan Basic Plan Document #1" shall be
supplemented as follows:
Dorsey & Whitney LLP as the Prototype Sponsor will furnish the Employer
with a copy of the notification letter issued by the Internal Revenue Service
with respect to the form of the Prototype Documents. Dorsey & Whitney LLP will
notify the Employer annually, in writing, as to whether Dorsey & Whitney LLP
intends to continue to be the sponsor of the Prototype, whether any amendments
have been made to the Prototype Documents, and, if amendments have been made,
the requirements the Employer must satisfy in order to be entitled to reliance.
If Dorsey & Whitney LLP amends the Prototype Documents, a copy of the amendment
and subsequent notification letter issued by the Internal Revenue Service with
respect to the form of the amendment will be furnished to the Employer. If
Dorsey & Whitney LLP discontinues or abandons the Prototype Documents, Dorsey &
Whitney LLP will notify the Employer at the earliest possible date.
Although Dorsey & Whitney LLP is responsible for maintaining the
Prototype Documents, the Employer (and not the Trustee or Dorsey & Whitney LLP)
is responsible for compliance with all laws regarding the Plan, including the
filing of the Annual Report/Return (Form 5500) with the government; distributing
the Summary Plan Descriptions, Summary Annual Reports and Summary of Material
Modifications to Participants and Beneficiaries; furnishing the Trustee with all
information necessary for the Trustee to properly withhold federal income taxes
from distributions and process distributions; and filings in connection with any
Plan amendments or termination.
The Employer may NOT rely on a notification letter issued by the a district
office of the Internal Revenue Service to the Prototype Sponsor as evidence that
the Employer's Plan is qualified under _ 401 of the Internal Revenue Code. In
order to obtain reliance with respect to plan qualification, the Employer must
apply to the appropriate key district director of the Internal Revenue Service
for a determination letter.
IN WITNESS WHEREOF, this Adoption Agreement is hereby approved.
FOR THE EMPLOYER
Dated: ____________, 19___.
Greg Barnum - Chief Financial Officer
DORSEY & WHITNEY LLP CONSENTS TO
THE ADOPTION OF THIS AGREEMENT.
Dated: ____________, 19___.
By Its Robert Burns
19
<PAGE>
DORSEY & WHITNEY
ss. 401(k) REGIONAL PROTOTYPE PLAN
BASIC PLAN DOCUMENT #1
(C) Copyright 1991 Dorsey & Whitney
<PAGE>
DORSEY & WHITNEY
ss. 401(k) REGIONAL PROTOTYPE PLAN
BASIC PLAN DOCUMENT #1
TABLE OF CONTENTS
Page
SECTION 1. INTRODUCTION
1.1. Definitions
1.1.1. Accounts
(a) Total Account
(b) Retirement Savings Account
(c) Employer Matching Account
(d) Employer Profit Sharing
Account
(e) Rollover Account
(f) Nondeductible Voluntary
Account
(g) Deductible Voluntary Account
(h) Transfer Account
(i) Suspense Account
1.1.2. Administrative Committee
1.1.3. Affiliate
1.1.4. Annual Valuation Date
1.1.5. Beneficiary
1.1.6. Board of Directors
1.1.7. Code
1.1.8. Disability
1.1.9. Distribution Date
1.1.10. Effective Date
1.1.11. Eligibility Service
1.1.12. Employee (Special Definitions)
1.1.13. Employer
1.1.14. Enrollment Date
1.1.15. ERISA
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1.1.16. Event of Maturity
1.1.17. Fund
1.1.18. Hours of Service
1.1.19. Integration Level
1.1.20. Investment Manager
1.1.21. Normal Retirement Age
1.1.22. One-Year Break in Service
1.1.23. Participant
1.1.24. Plan
1.1.25. Plan Statement
1.1.26. Plan Year
1.1.27. Prior Plan Statement
1.1.28. Prototype Documents
1.1.29. Prototype Sponsor
1.1.30. Recognized Compensation
1.1.31. Recognized Employment
1.1.32. Retirement Savings Agreement
1.1.33. Subfund
1.1.34. Trustee
1.1.35. Valuation Date
1.1.36. Vested
1.1.37. Vesting Service
1.2. Rules Of Interpretation
1.3. Establishment Of New Plan
1.4. Amendment
1.5. Automatic Exclusion From Prototype Plan
1.6. Special Requirements
1.6.1. Discriminatory Benefits
1.6.2. Discriminatory Coverage
1.6.3. Control Defined
1.7. Transitional Rules
SECTION 2. ELIGIBILITY AND PARTICIPATION
2.1. Initial Entry Into Plan
2.2. Special Rule For Former Participants
2.3. Enrollment
2.4. Waiver Of Enrollment Procedures
2.5. Retirement Savings Agreement
2.6. Modifications Of Retirement Savings Agreement
2.6.1. Increase
2.6.2. Decrease
<PAGE>
2.6.3. Cancellation of Retirement Savings
Agreement
2.6.4. Termination Of Recognized Employment
2.6.5. Form Of Agreement
2.7. Section 401(k) Compliance
2.7.1. Special Definitions
2.7.2. Special Rules
2.7.3. The Tests
2.7.4. Remedial Action
SECTION 3. CONTRIBUTIONS AND ALLOCATION THEREOF
3.1. Employer Contributions --General
3.1.1. Source Of Employer Contributions
3.1.2. Limitation
3.1.3. Form of Payment
3.2. Retirement Savings Contributions
3.2.1. Amount
3.2.2. Allocation
3.3. Required Matching Contributions
3.3.1. Amount
3.3.2. Allocation
3.4. Discretionary Employer Contributions
3.4.1. General
3.4.2. Section 401(k) Curative Allocation
3.4.3. Discretionary Matching Contributions
3.4.4. Section 401(m) Curative Allocation
3.4.5. Discretionary Profit Sharing
Contributions
3.5. Eligible Participants
3.6. Make-Up Contributions For Omitted Participants
3.7. Rollover Contributions
3.7.1. Eligible Contributions
3.7.2. Specific Review
3.7.3. Allocation
3.8. Nondeductible Voluntary Contributions
3.9. Deductible Voluntary Contributions
3.10. Section 401(m) Compliance
3.10.1. Special Definitions
<PAGE>
3.10.2. Special Rules
3.10.3. The Tests
3.10.4. Remedial Action
3.11. Limitation On Allocations
3.12. Effect Of Disallowance Of Deduction Or Mistake Of Fact
SECTION 4. INVESTMENT AND ADJUSTMENT OF ACCOUNTS
4.1. Establishment Of Subfunds
4.1.1. Establishing Commingled Subfunds
4.1.2. Individual Subfunds
4.1.3. Operational Rules
4.1.4. Revising Subfunds
4.2. Valuation And Adjustment Of Accounts
4.2.1. Intermediate Distributions Adjustment
4.2.2. Investment Adjustment
4.2.3. Contribution Adjustment
4.2.4. Final Distributions Adjustment
4.3. Management And Investment Of Fund
SECTION 5. VESTING
5.1. Employer Matching Account And Employer Profit Sharing
Account
5.1.1. Progressive Vesting
5.1.2. Full Vesting
5.1.3. Special Rule For Partial Distributions
5.1.4. Effect Of Break On Vesting
+5.1.5. Pre-Effective Date Vesting
5.2. Optional Vesting Schedule
5.2.1. Election
5.2.2. Qualifying Participant
5.2.3. Procedure For Election
5.2.4. Conclusive Election
5.3. Other Accounts
SECTION 6. MATURITY
<PAGE>
6.1. Events Of Maturity
6.2. Disposition Of Nonvested Portion Of Account
6.2.1. Forfeiture Event
6.2.2. Rehire Before Forfeiture Event
6.2.3. Rehire After Forfeiture Event
6.2.4. Forfeitures
6.2.5. Restorations
SECTION 7. DISTRIBUTION
7.1. Application For Distribution
7.1.1. Application Required
7.1.2. Exception For Small Amounts
7.1.3. Exception For Required Distributions
7.1.4. Lost Distributees
7.2. Time Of Distribution
7.2.1. Earliest Beginning Date
7.2.2. Required Beginning Date
7.3. Forms Of Distribution
7.3.1. Forms Available
7.3.2. Substantially Equal
7.3.3. Life Expectancy
7.3.4. Presumptive Forms
7.3.5. Exempt Profit Sharing Plan
7.3.6. Effect Of Reemployment
7.3.7. TEFRAss. 242(b) Transitional Rules
7.4. Designation Of Beneficiaries
7.4.1. Right To Designate
7.4.2. Spousal Consent
7.4.3. Written Explanation Requirement For
Qualified Preretirement Survivor Annuity
7.4.4. Failure Of Designation
7.4.5. Disclaimers by Beneficiaries
7.4.6. Definitions
7.4.7. Special Rules
7.5. Death Prior To Full Distribution
7.6. Distribution In Cash
7.7. Facility Of Payment
<PAGE>
7.8. Withdrawals From Nondeductible Voluntary Account
7.8.1. When Available
7.8.2. Sequence of Accounts
7.8.3. Limitations
7.8.4. Coordination With Section 4.1
7.9. In-Service Distributions
7.9.1. Hardship Distributions
7.9.1.1.When Available
7.9.1.2.Purposes
7.9.1.3.Limitations
7.9.1.4.Coordination With Retirement
Savings Agreement
7.9.1.5.Sequence Of Accounts
7.9.1.6.Coordination With Section 4.1
7.9.2. Age 59-1/2 In-Service Distribution
7.9.2.1.When Available
7.9.2.2.Purposes
7.9.2.3.Limitations
7.9.2.4.Sequence of Accounts
7.9.2.5.Coordination with Section 4.1
7.10. Loans
7.10.1. Availability
7.10.2. Administration
7.10.3. Loan Terms
7.10.4. Collateral
7.10.5. Specific Loan Rules
7.10.6. Effect on Distributions
7.10.7. IRCss. 72(p) Reporting
7.10.8. Truth-in-Lending
7.11. Corrective Distributions
7.11.1. Excess Elective Deferrals ($7,000 Limit)
7.11.2. Excess Contributions (Section 401(k) Test)
<PAGE>
7.11.3. Distribution Of Excess Aggregate
Contributions (Section 401(m) Test)
7.11.4. Priority
7.11.5. Matching Contributions
SECTION 8. SPENDTHRIFT PROVISIONS
SECTION 9. AMENDMENT AND TERMINATION
9.1. Amendment
9.1.1. Amendment By Employer
9.1.2. Amendment By Prototype Sponsor
9.1.3. Limitation On Amendments
9.1.4. Resignation Of Prototype Sponsor
9.2. Discontinuance Of Contributions And Termination Of Plan
9.3. Merger or Spinoff of Plans
9.3.1. In General
9.3.2. Limitations
9.3.3. Beneficiary Designations
9.4. Adoption By Other Control Group Employers
9.4.1. Adoption With Consent
9.4.2. Procedure For Adoption
9.4.3. Effect Of Adoption
SECTION 10. CONCERNING THE TRUSTEE
10.1. Dealings With Trustee
10.1.1. No Duty To Inquire
10.1.2. Assumed Authority
10.2. Compensation Of Trustee
10.3. Resignation And Removal Of Trustee
10.3.1. Resignation, Removal And Appointment
10.3.2. Automatic Removal
10.3.3. Surviving Trustees
10.3.4. Successor Organizations
10.3.5. Co-Trustee Responsibility
10.3.6. Allocation of Responsibility
<PAGE>
10.3.7. Majority Decisions
10.4. Accountings By Trustee
10.4.1. Periodic Reports
10.4.2. Special Reports
10.5. Trustee's Power To Protect Itself On Account Of Taxes
10.6. Other Trust Powers
10.7. Investment Managers
10.7.1. Appointment And Qualifications
10.7.2. Removal
10.7.3. Relation To Other Fiduciaries
10.8. Fiduciary Principles
10.9. Prohibited Transactions
10.10. Indemnity
10.11. Investment In Insurance
10.11.1.Limitation On Payment Of Premiums
10.11.2.Miscellaneous Rules For Purchase Of Contract
10.11.3.Payment Of Expenses
10.11.4.Authority For Contract
10.11.5.Payment Of Contract Upon Death
10.11.6.Payment Of Contract --Not Upon Death
10.11.7.Value Of Contract
10.11.8.Interpretation
10.12. Employer Directed Investments
10.13. No Investment in Employer Real Property
10.14. No Investment in Employer Securities
SECTION 11. DETERMINATIONS--RULES AND REGULATIONS
11.1. Determinations
11.2. Rules And Regulations
11.3. Method Of Executing Instruments
11.3.1. Employer Or Administrative Committee
11.3.2. Trustee
11.4. Claims Procedure
11.4.1. Original Claim
<PAGE>
11.4.2. Claims Review Procedure
11.4.3. General Rules
11.5. Information Furnished By Participants
SECTION 12. OTHER ADMINISTRATIVE MATTERS
12.1. Employer
12.1.1. Officers
12.1.2. Delegation
12.1.3. Board Of Directors
12.2. Administrative Committee
12.2.2. Automatic Removal
12.2.3. Authority
12.2.4. Majority Decisions
12.3. Limitation On Authority
12.3.1. Fiduciaries Generally
12.3.2. Trustee
12.4. Conflict Of Interest
12.5. Dual Capacity
12.6. Administrator
12.7. Named Fiduciaries
12.8. Service Of Process
12.9. Residual Authority
12.10. Administrative Expenses
12.11. Annual Certification
SECTION 13. IN GENERAL
13.1. Disclaimers
13.1.1.Effect On Employment
13.1.2.Sole Source Of Benefits
13.1.3.Co-Fiduciary Matters
13.2. Reversion Of Fund Prohibited
13.3. Execution In Counterparts
13.4. Continuity
13.5. Contingent Top Heavy Plan Rules
APPENDIX A--SECTION 415 LIMITATIONS ON ALLOCATIONS A-1
APPENDIX B --CONTINGENT TOP HEAVY PLAN RULES B-1
APPENDIX C --QUALIFIED DOMESTIC RELATIONS ORDERS C-1
APPENDIX D --HIGHLY COMPENSATED EMPLOYEE D-1
APPENDIX E --TEFRAss. 242(B) TRANSITIONAL RULES E-1
<PAGE>
DORSEY & WHITNEY
ss. 401(k) REGIONAL PROTOTYPE PLAN
BASIC PLAN DOCUMENT #1
SECTION 1
INTRODUCTION
By execution of an Adoption Agreement that relates to this Basic Plan Document,
the Employer and the Trustee agree that the Adoption Agreement and this Basic
Plan Document are adopted as the formal written instrument under which the
Employer will maintain a defined contribution profit sharing plan for the
benefit of its eligible employees. Any apparent conflict between the Adoption
Agreement and this Basic Plan Document shall be resolved by reference to this
Basic Plan Document.
1.1. Definitions. When the following terms are used herein with initial capital
letters, they shall have the following meanings:
1.1.1. Accounts -- the following Accounts will be maintained under this Plan for
Participants:
(a) Total Account -- a Participant's entire interest in the Fund, including
the Participant's Retirement Savings Account, the Participant's
Employer Matching Account, the Participant's Employer Profit Sharing
Account, the Participant's Rollover Account, the Participant's
Nondeductible Voluntary Account, the Participant's Deductible Voluntary
Account, and the Participant's Transfer Account, if any (but excluding
the Participant's interest in a Suspense Account).
(b) Retirement Savings Account -- the Account maintained for each
Participant to which are credited the Employer contributions made in
consideration of such Participant's earnings reductions pursuant to
Section 3.2 or Section 3.4.2 (or comparable provisions of the Prior
Plan Statement, if any) together with any increase or decrease thereon.
(c) Employer Matching Account -- the Account maintained for each
Participant to which are credited the Participant's allocable share of
the Employer contributions and the Participant's allocable share of
forfeited Suspense Accounts made pursuant to Section 3.3 or Section
3.4.3 or Section 3.4.4 (or
1
<PAGE>
comparable provisions of the Prior Plan Statement, if any), together
with any increase or decrease thereon.
(d) Employer Profit Sharing Account -- the Account maintained for each
Participant to which are credited the Participant's allocable share of
the Employer contributions and the Participant's allocable share of
forfeited Suspense Accounts made pursuant to Section 3.4.5 (or
comparable provisions of the Prior Plan Statement, if any), together
with any increase or decrease thereon.
(e) Rollover Account -- the Account maintained for each Participant to
which are credited the Participant's rollover contributions made
pursuant to Section 3.7 (or comparable provisions of the Prior Plan
Statement, if any), together with any increase or decrease thereon.
(f) Nondeductible Voluntary Account -- the Account maintained for each
Participant to which are credited the Participant's nondeductible
voluntary contributions made pursuant to a Prior Plan Statement, if
any, together with any increase or decrease thereon. (Further
nondeductible voluntary contributions are not allowed under this Plan
Statement.)
(g) Deductible Voluntary Account -- the Account maintained for each
Participant to which is credited the Participant's deductible voluntary
contributions made pursuant to a Prior Plan Statement, if any, together
with any increase or decrease thereon. (Further deductible voluntary
contributions are not allowed under this Plan Statement.)
(h) Transfer Account -- the Account maintained for each Participant to
which is credited the Participant's interest, if any, transferred from
another qualified plan by the trustee of such other plan pursuant to an
agreement made under Section 9.3 and not credited to any other Account
pursuant to such agreement (or another provision of this Plan
Statement), together with any increase or decrease thereon.
(i) Suspense Account -- the Account maintained for each Participant to
which is credited the portion of the Participant's Employer Matching
Account and the Participant's Employer Profit Sharing Account which is
not Vested in the Participant upon the occurrence of an Event of
Maturity (pending reemployment or forfeiture pursuant to Section 6.2),
together with any increase or decrease thereon.
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<PAGE>
1.1.2. Administrative Committee -- the person or committee appointed to make
administrative decisions and rules, to communicate on behalf of the Employer and
to take other actions specified in this Plan Statement and which is selected
pursuant to Section 12.2.
1.1.3. Affiliate -- a business entity which is under "common control" with the
Employer or which is a member of an "affiliated service group" that includes the
Employer, as those terms are defined in section 414(b), (c) and (m) of the Code.
A business entity which is a predecessor to the Employer shall be treated as an
Affiliate if the Employer maintains a plan of such predecessor business entity
or if, and to the extent that, such treatment is otherwise required by
regulations prescribed by the Secretary of the Treasury under section 414(a) of
the Code. A business entity shall also be treated as an Affiliate if, and to the
extent that, such treatment is required by regulations prescribed by said
Secretary under Section 414(o) of said Code. In addition to such required
treatment, the Employer may, in its discretion, designate as an Affiliate any
business entity which is not such a "common control," "affiliated service group"
or "predecessor" business entity but which is otherwise affiliated with the
Employer, subject to such nondiscriminatory limitations as the Employer may
impose.
1.1.4. Annual Valuation Date -- unless indicated otherwise in the Adoption
Agreement, the last day of the Employer's taxable year for federal income tax
purposes.
1.1.5. Beneficiary -- a person designated by a Participant (or automatically by
operation of this Plan Statement) to receive all or a part of the Participant's
Vested Total Account in the event of the Participant's death prior to full
distribution thereof. A person so designated shall not be considered a
Beneficiary until the death of the Participant.
1.1.6. Board of Directors -- the Board of Directors if the Employer is a
corporation, any general partner if the Employer is a partnership, or the
proprietor if the Employer is a sole proprietor. If the Employer is a
corporation, the Board of Directors shall also mean and refer to any properly
authorized Committee of the directors. If there is more than one Employer under
this Plan, the Board of Directors shall be the Board of Directors of the
Employer which is the Principal Employer of this Plan (as specified in Section
9.4).
1.1.7. Code - the Internal Revenue Code of 1986, including applicable
regulations for the specified section of the Code. Any references in the Plan
Statement to a section of the Code, including applicable regulations, shall be
considered also to mean and refer to any subsequent amendment or replacement of
that section or regulation.
3
<PAGE>
1.1.8. Disability -- a medically determinable physical or mental impairment
which is of such a nature that it (i) renders the individual incapable of
performing any substantial gainful employment, (ii) can be expected to be of
long-continued and indefinite duration or result in death, and (iii) is
evidenced by a determination to this effect by a doctor of medicine approved by
the Administrative Committee. The Administrative Committee shall determine the
date on which the Disability shall have occurred if such determination is
necessary. In lieu of such a certification, the Administrative Committee may
accept, as proof of Disability, the official written determination that the
individual will be eligible for disability benefits under the federal Social
Security Act as now enacted or hereinafter amended (when any waiting period
expires).
1.1.9. Distribution Date -- unless indicated otherwise in the Adoption
Agreement, the Annual Valuation Date. Distribution Dates shall determine the
frequency and timing of distributions from the Plan, including distributions
after an Event of Maturity and hardship distributions pursuant to Section 7.
1.1.10. Effective Date -- the date set forth in the Adoption Agreement as of
which this Plan Statement is effective; provided, however, certain provisions
(as specified in Section 1.7 and other Sections in this Plan Statement) shall be
applicable prior to that date for any Employer maintaining a Plan prior to the
first day of the Plan Year beginning after December 31, 1988.
1.1.11. Eligibility Service -- a measure of an employee's service with the
Employer and all Affiliates (stated as a number of years) which is equal to the
number of computation periods for which the employee is credited with one
thousand (1,000) or more Hours of Service; subject, however, to such of the
following rules as are applicable under the Adoption Agreement:
(a) Computation Periods. The computation periods for determining the
employee's Eligibility Service (and One-Year Breaks in Service as
applied to the Participant's Eligibility Service) shall be (i) unless
(ii) is indicated in the Adoption Agreement:
(i) the twelve (12) consecutive month period beginning with the
date the employee first performs an Hour of Service plus all
Plan Years beginning after the date the employee first
performs an Hour of Service (irrespective of any termination
of employment and subsequent reemployment), or
(ii) the twelve (12) consecutive month period beginning with the
date the employee first performs an Hour of Service plus all
twelve (12) consecutive month periods commencing on the annual
anniversaries of such date
4
<PAGE>
(irrespective of any termination of employment and subsequent
reemployment).
An employee who is credited with 1,000 Hours of Service in
both the initial eligibility period described in (i) above and
the first Plan Year commencing prior to the end of such
initial eligibility period shall be credited with two years of
Eligibility Service.
(b) Completion. A year of Eligibility Service shall be deemed completed
only as of the last day of the computation period (irrespective of the
date in such period that the employee completed one thousand Hours of
Service). (Fractional years of Eligibility Service shall not be
credited.)
(c) Pre-Effective Date Service. Eligibility Service shall be credited for
Hours of Service earned and computation periods completed before the
Effective Date as if the rules of this Plan Statement were then in
effect.
(d) Pre-Effective Date Breaks in Service. Eligibility Service cancelled
before the Effective Date by operation of the Plan's break in service
rules as they existed before the Effective Date shall continue to be
cancelled on and after the Effective Date.
(e) Post Effective Date Breaks in Service. Subject to Section 1.1.11(d), if
the employee has any break in service occurring before or after the
Effective Date, the Participant's service both before and after such
break in service shall be taken into account in computing the
Participant's Eligibility Service for the purpose of determining the
Participant's entitlement to become a Participant in this Plan.
1.1.12. Employee (Special Definitions) -- each individual who is, with respect
to the Employer, or an Affiliate, or both, a Common Law Employee (including a
Shareholder-Employee) or a Self-Employed Person (including an Owner-Employee) or
a Leased Employee, which shall be further defined as follows:
(a) Common Law Employee -- an individual who performs services as an
employee of the Employer or an Affiliate (including, without limiting
the generality of the foregoing, a Shareholder-Employee) but who is not
a Self-Employed Person with respect to the Employer.
(b) Shareholder-Employee -- an individual who owns, or is deemed with
attribution to own within the meaning of section 318(a)(1) of the Code,
more than five percent (5%) of the outstanding
5
<PAGE>
stock of the Employer on any one day of the taxable year of the
Employer with respect to which the Plan is established; provided,
however, that during any taxable year that the Employer is not an
electing small business corporation (S corporation) there shall be no
Shareholder-Employees. All Shareholder-Employees are Common Law
Employees.
(c) Self-Employed Person-- an individual who owns either a capital interest
or a profits interest in the Employer with respect to which the Plan is
maintained at a time when such Employer is either a partnership or a
proprietorship or an individual who has earned income from such
Employer (or would have had earned income if the Employer had net
profits). A proprietor shall be deemed to be an employee of a
proprietorship which is the Employer (and the Participant's service
with the Employer shall be deemed to be employment with the Employer)
and each partner shall be deemed to be an employee of a partnership
which is the Employer (and the Participant's service with the Employer
shall be deemed to be employment with the Employer).
(d) Owner-Employee -- an individual who is a Self-Employed Person and who
is either the proprietor of the Employer (when it is a proprietorship)
or a partner owning more than ten percent (10%) either of the capital
interests or profits interest of the Employer (when it is a
partnership). All Owner-Employees are Self-Employed Persons.
(e) Leased Employees -- an individual (other than an employee) who,
pursuant to an agreement with a leasing organization, has performed
services for the Employer, or for the Employer and related persons
(determined in accordance with Section 414(n)(6) of the Code) on a
substantially full-time basis for a period of at least one (1) year and
has performed services which are of a type historically performed by
employees of the Employer or an Affiliate. For services performed prior
to January 1, 1987, such an individual shall not be considered a Leased
Employee (with respect to the Employer or an Affiliate) if such
individual is covered by a money purchase pension plan which provides
for: (i) a nonintegrated Employer contribution rate of at least seven
and one-half percent (7-1/2%) of compensation; and (ii) immediate
participation; and (iii) full and immediate vesting. For services
performed after December 31, 1986, such an individual shall not be
considered a Leased Employee (with respect to the Employer or an
Affiliate) if such individual is
6
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covered by a money purchase pension plan which provides for: (i) a
nonintegrated Employer contribution rate of at least ten percent (10%)
of "section 415 compensation" as defined in Appendix A to this Plan
Statement, but including amounts contributed by the Employer pursuant
to a salary reduction agreement which are excludible from the
individual's gross income under section 125, section 402(a)(8), section
402(h) or section 403(b) of the Code; and (ii) immediate participation
(except for those individuals whose compensation from the leasing
organization in each plan year during the four-year period ending with
the plan year is less than one thousand dollars); and (iii) full and
immediate vesting; provided, however, that such an individual will be
considered a Leased Employee (with respect to the Employer or an
Affiliate) if Leased Employees constitute more than twenty percent
(20%) of the recipient's non-highly compensated work force as
determined in accordance with section 414(n)(5)(C)(ii) of the Code. An
individual shall also be treated as a Leased Employee of the Employer
or an Affiliate if, and to the extent that, such treatment is required
by regulations prescribed by the Secretary of the Treasury under
section 414(o) of the said Code. Contributions or benefits provided by
the leasing organization to a Leased Employee which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer.
1.1.13. Employer -- the business entity which establishes a Plan by executing
the Adoption Agreement and any business entity that adopts this Plan pursuant to
Section 9.4 and any successor thereof that adopts this Plan. If any such
business entity adopts this Plan, the business entity that executed the Adoption
Agreement (the "Principal Employer") retains the sole authority to amend the
Adoption Agreement, terminate the Plan, act as Plan Administrator and take other
actions as are described in Section 9.4. (A sole proprietor shall be treated as
the Participant's own Employer. A partnership shall be treated as the Employer
of each partner.)
1.1.14. Enrollment Date -- the dates (as indicated in the Adoption Agreement)
which shall be either:
(a) the first day of the Plan Year, or
(b) the first day of the Plan Year and the first day of the seventh
calendar month of the Plan Year, or
(c) the first day of the Plan Year and the first day of the fourth, seventh
and tenth calendar months of the Plan Year, or
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(d) the first day of the Plan Year and the first day of the second through
the twelfth calendar months of the Plan Year.
The Enrollment Date shall also include (i) the date upon which an individual who
had previously met the age and service requirements of Section 2.1 but who was
not then in Recognized Employment is transferred to Recognized Employment, (ii)
the date upon which an individual who had previously been a Participant is
reemployed in Recognized Employment, and (iii) such other dates as the
Administrative Committee may by uniform, nondiscriminatory rules establish from
time to time for the commencement of retirement savings under Section 2.5.
1.1.15. ERISA -- the Employee Retirement Income Security Act of 1974, including
applicable regulations for the specified section of ERISA. Any references in the
Plan Statement to a section of ERISA including applicable regulations shall be
considered also to mean and refer to any subsequent amendment or replacement of
that section or regulation.
1.1.16. Event of Maturity -- any of the occurrences described in Section 6 by
reason of which a Participant or Beneficiary may become entitled to a
distribution from the Plan.
1.1.17. Fund -- the assets of the Plan held by the Trustee from time to time,
including all contributions and the investments and reinvestments, earnings,
profits and losses thereon, whether invested under the general investment
authority of the Trustee or under the terms applicable to any investment Subfund
established pursuant to Section 4.1.
1.1.18. Hours of Service -- a measure of an employee's service with the Employer
and all Affiliates, determined for a given computation period and equal to the
number of hours credited to the employee according to the following rules:
(a) Paid Duty. An Hour of Service shall be credited for each hour for which
the employee is paid, or entitled to payment, for the performance of
duties for the Employer or an Affiliate. These hours shall be credited
to the employee for the computation period or periods in which the
duties are performed.
(b) Paid Nonduty. An Hour of Service shall be credited for each hour for
which the employee is paid, or entitled to payment, by the Employer or
an Affiliate on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability),
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layoff, jury duty, military duty or leave of absence; provided,
however, that:
(i) no more than five hundred one (501) Hours of Service shall be
credited on account of a single continuous period during which
the employee performs no duties (whether or not such period
occurs in a single computation period),
(ii) no Hours of Service shall be credited on account of payments
made under a plan maintained solely for the purpose of
complying with applicable worker's compensation, unemployment
compensation or disability insurance laws,
(iii) no Hours of Service shall be credited on account of payments
which solely reimburse the employee for medical or medically
related expenses incurred by the employee, and
(iv) payments shall be deemed made by or due from the Employer or
an Affiliate whether made directly or indirectly from a trust
fund or an insurer to which the Employer or an Affiliate
contributes or pays premiums.
These hours shall be credited to the employee for the computation
period for which payment is made or, if the payment is not computed by
reference to units of time, the hours shall be credited to the first
computation period in which the event, for which any part of the
payment is made, occurred.
(c) Back Pay. An Hour of Service shall be credited for each hour for which
back pay, irrespective of mitigation of damages, has been either
awarded or agreed to by the Employer or an Affiliate. The same Hours of
Service credited under paragraph (a) or (b) shall not be credited under
this paragraph (c). The crediting of Hours of Service under this
paragraph (c) for periods and payments described in paragraph (b) shall
be subject to all the limitations of that paragraph. These hours shall
be credited to the employee for the computation period or periods to
which the award or agreement pertains rather than the computation
period in which the award, agreement or payment is made.
(d) Unpaid Absences.
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(i) Leaves of Absence. If (and to the extent that) the
Administrative Committee so provides in rules of
nondiscriminatory application which are in writing and
approved by the Administrative Committee before the date upon
which they are effective, an assumed eight (8) hour day and
forty (40) hour week shall be credited during each unpaid
leave of absence authorized by the Employer or an Affiliate
for Plan purposes under such rules; provided, however, that if
the employee does not return to employment for any reason
other than death, Disability or attainment of Normal
Retirement Age at the expiration of the leave of absence, such
Hours of Service shall not be credited.
(ii) Military Leaves. If an employee returns to employment with the
Employer or an Affiliate within the time prescribed by law for
the retention of veteran's reemployment rights, an assumed
eight (8) hour day and forty (40) hour week shall be credited
during service in the Armed Forces of the United States if the
employee both entered such service and returned to employment
with the Employer or an Affiliate from such service under
circumstances entitling the Participant to reemployment rights
granted veterans under federal law.
(iii) Parenting Leaves. To the extent not otherwise credited and
solely for the purpose of determining whether a One-Year Break
in Service has occurred, Hours of Service shall be credited to
an employee for any period of absence from work beginning
after December 31, 1984, due to pregnancy of the employee, the
birth of a child of the employee, the placement of a child
with the employee in connection with the adoption of such
child by the employee, or for the purpose of caring for such
child for a period beginning immediately following such birth
or placement. The employee shall be credited with the number
of Hours of Service which otherwise would normally have been
credited to such employee but for such absence. If it is
impossible to determine the number of Hours of Service which
would otherwise normally have been so credited, the employee
shall be credited with eight (8) Hours of Service for each day
of such absence. In no event, however, shall the number of
Hours of Service credited for any such absence exceed five
hundred one (501)
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Hours of Service. Such Hours of Service shall be credited to
the computation period in which such absence from work begins
if crediting all or any portion of such Hours is necessary to
prevent the employee from incurring a One-Year Break in
Service in such computation period. If the crediting of such
Hours of Service is not necessary to prevent the occurrence of
a One-Year Break in Service in that computation period, such
Hours of Service shall be credited in the immediately
following computation period (even though no part of such
absence may have occurred in such subsequent computation
period). These Hours of Service shall not be credited until
the employee furnishes timely information which may reasonably
be required by the Administrative Committee to establish that
the absence from work is for a reason for which these Hours of
Service may be credited.
(e) Special Rules. For periods prior to the Plan Year beginning in 1976,
Hours of Service may be determined using whatever records are
reasonably accessible and by making whatever calculations are necessary
to determine the approximate number of Hours of Service completed
during such prior period. To the extent not inconsistent with other
provisions hereof, Department of Labor regulations 29 C.F.R.ss.
2530.200b-2(b) and (c) are hereby incorporated by reference herein. To
the extent required under section 414 of the Code, services of Leased
Employees, leased owners, leased managers, shared employees, shared
Leased Employees and other similar classifications by the Employer or
an Affiliate shall be taken into account as if such services were
performed as a Common Law Employee of the Employer for the purposes of
determining Eligibility Service, Vesting Service and One-Year Breaks in
Service as applied to Vesting Service.
(f) Equivalency for Exempt employees. Notwithstanding anything to the
contrary in the foregoing, the Hours of Service for any employee for
whom the Employer or an Affiliate is not otherwise required by state or
federal "wage and hour" or other law to count hours worked shall be
credited on the basis selected in the Adoption Agreement.
1.1.19. Integration Level -- a dollar amount which is equal to the maximum
annual dollar amount of earnings in effect on the first day of the Plan Year
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which may be considered to be wages for the purposes of computing Social
Security payroll taxes under section 3121(a)(1) of the Code, or if less, a
dollar amount specified in the Adoption Agreement.
1.1.20. Investment Manager -- that person other than the Trustee appointed
pursuant to Section 10.7 to manage all or a portion of the Fund or any Subfund.
1.1.21. Normal Retirement Age -- the date the Participant attains age sixty-five
(65).
1.1.22. One-Year Break in Service -- a Plan Year for which an employee is not
credited with more than five hundred (500) Hours of Service. (A One-Year Break
in Service shall be deemed to occur only on the last day of such Plan Year.)
1.1.23. Participant -- an employee of the Employer who becomes a Participant in
this Plan in accordance with the provisions of Section 2 or any comparable
provisions of the Prior Plan Statement. An employee who has become a Participant
shall be considered to continue as a Participant in the Plan until the date of
the Participant's death or, if earlier, the date when the Participant is no
longer employed in Recognized Employment and upon which the Participant no
longer has any Account under the Plan (that is, the Participant has both
received a distribution of all of the Participant's Vested Total Account, if
any, and the Participant's Suspense Account, if any, has been forfeited and
disposed of as provided in Section 6.2).
1.1.24. Plan -- the tax-qualified profit sharing plan of the Employer
established for the benefit of employees eligible to participate therein, as set
forth in the Prior Plan Statement, if any, and this Plan Statement. (As used
herein, "Plan" refers to the legal entity established by the Employer and not to
the instruments or documents pursuant to which the Plan is maintained. Those
instruments and documents are referred to herein as the "Prior Plan Statement"
and the "Plan Statement.") The Plan shall be referred to by the name indicated
in the Adoption Agreement.
1.1.25. Plan Statement -- the Prototype Documents as completed and adopted by
the Employer and pursuant to which this Plan is maintained on and after the
Effective Date.
1.1.26. Plan Year-- the twelve (12) consecutive month period ending on any
Annual Valuation Date.
1.1.27. Prior Plan Statement -- the written instrument or instruments or the
series of written instruments under which this Plan was established and
maintained from time to time prior to the Effective Date. (If this Plan was
first
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established by the Employer's adoption of this Plan Statement, there will have
been no Prior Plan Statement and all references thereto shall be disregarded.)
1.1.28. Prototype Documents -- the unexecuted form of the document entitled
"Dorsey & Whitney ss. 401(k) Regional Prototype Plan Basic Plan Document #1,"
including all Appendices thereto, and the unexecuted and uncompleted form of
Adoption Agreement #01 used in connection with it.
1.1.29. Prototype Sponsor -- Dorsey & Whitney, a Minnesota partnership including
professional corporations with principal offices in Minneapolis, Minnesota
engaged in the practice of law (which has submitted the Regional Prototype
Documents to the Chicago District Office of the Internal Revenue Service for a
notification letter as to the acceptability of the form of the Regional
Prototype Documents under the Code and has retained the right to amend as
provided in Section 9).
1.1.30. Recognized Compensation -- an amount determined for a Participant for a
Plan Year which is the Participant's "section 415 compensation" as defined in
Appendix A to this Statement minus any amounts or classifications of Earned
Income (as defined in Section 1.12.4 of Appendix A) or compensation excluded
under the Adoption Agreement; subject, however, to the following:
(a) Excluded Items. In determining a Participant's Recognized Compensation
there shall be excluded: (i) all expense reimbursements, moving expense
payments and other similar payments, and (ii) all noncash remuneration,
and (iii) third-party sick pay (including short and long term
disability insurance benefits), and (iv) all deferred compensation
(both when deferred and when received), and (v) income imputed from
insurance coverages and premiums or employee discounts and other
similar amounts, and (vi) the value of stock options and stock
appreciation rights (whether or not exercised) and other similar
amounts, and (vii) final payments on account of termination of
employment (i.e., severance payments) and settlement for accrued but
unused vacation and sick leave, and (viii) payment for vacation or sick
leave accrued but not taken, and (ix) all foreign service allowances,
station allowances, foreign tax equalization payments and other similar
payments, and (x) similar emoluments consistent with the foregoing.
(b) Included Items. Recognized Compensation shall be determined before any
reductions authorized by the Participant under a cafeteria plan under
section 125 of the Code or any qualified cash or deferred arrangement
under section 401(k) of the Code.
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(c) Pre-Participation Employment. Remuneration paid by the Employer
attributable to periods prior to the date the Participant became a
Participant in the Plan shall not be taken into account in determining
the Participant's Recognized Compensation.
(d) Non-Recognized Employment. Remuneration paid by the Employer for
employment that is not Recognized Employment shall not be taken into
account in determining a Participant's Recognized Compensation.
(e) Attribution to Periods. A Participant's Recognized Compensation shall
be considered attributable to the period in which it is actually paid
and not when earned or accrued.
(f) Excluded Periods. Amounts received after the Participant's termination
of employment shall not be taken into account in determining a
Participant's Recognized Compensation.
(g) Multiple Employers. If a Participant is employed by more than one
Employer in a Plan Year, a separate amount of Recognized Compensation
shall be determined for each Employer.
(h) Annual Maximum. Effective for Plan Years beginning after December 31,
1988, a Participant's Recognized Compensation for a Plan Year shall not
exceed Two Hundred Thousand Dollars ($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 effective on January 1, 1990. If a Plan
determines Recognized Compensation on a period of time that contains
fewer than 12 calendar months, then the annual compensation limit is an
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. In
determining a Participant's Recognized Compensation, the rules of
section 414(q)(6) of the Code apply, except that in applying such
rules, the term "family" shall include only the spouse of the
Participant and lineal descendants of the Participant who have not
attained age nineteen (19) years before the close of the Plan Year;
provided, however, that the rule in this
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<PAGE>
sentence shall not apply to the Seven Thousand Dollar ($7,000) limit
specified in Section 2.5. If Participants are aggregated as such family
members (and do not otherwise agree in writing), the Recognized
Compensation of each family member shall equal Two Hundred Thousand
Dollars ($200,000) (as so adjusted) multiplied by a fraction, the
numerator of which is such family member's Recognized Compensation
(before application of the $200,000 limit as adjusted) and the
denominator of which is the total Recognized Compensation (before
application of the $200,000 limit as adjusted) of all such family
members.
1.1.31. Recognized Employment -- all employment with the Employer, excluding,
however:
(a) employment in a unit of employees whose terms and conditions of
employment are subject to a collective bargaining agreement between the
Employer and employee representatives if there is evidence that
retirement benefits were the subject of good faith bargaining between
such employee representatives and Employer, unless such collective
bargaining agreement provides for the inclusion of those employees in
this Plan,
(b) employment by a nonresident alien who is not receiving any earned
income from the Employer which constitutes income from sources within
the United States unless such alien is formally designated by the
Administrative Committee as eligible for participation in this Plan,
(c) employment in a division or facility of the Employer which is not in
existence on the Effective Date (that is, was acquired, established,
founded or produced by liquidation or similar discontinuation of a
separate subsidiary after the Effective Date) unless and until the
Administrative Committee shall declare such employment to be Recognized
Employment,
(d) employment of a United States citizen outside the United States unless
and until the Administrative Committee shall declare such employment to
be Recognized Employment,
(e) services of a person not a Common Law Employee, a Shareholder-Employee,
Self-Employed Person or Owner-Employee of the Employer including,
without limiting the generality of the foregoing, services of a Leased
Employee, leased owner, leased manager, shared employee, shared Leased
Employee or other similar classification,
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(f) employment of a highly compensated employee (as defined in section
414(q) of the Code) to the extent agreed to in writing by the employee,
and
(g) employment described as excluded in the Adoption Agreement.
For the purposes of (i), an organization will not be considered to consist of
employee representatives if more than one-half (1/2) of its members are
employees who are owners, officers or executives of the Employer.
1.1.32. Retirement Savings Agreement -- the agreement which may be entered into
by a Participant as provided in Section 2.
1.1.33. Subfund -- a separate pool of assets of the Fund set aside for
investment purposes under Section 4.
1.1.34. Trustee -- the Trustee originally named in the Adoption Agreement and
its successor or successors in trust.
1.1.35. Valuation Date -- the Annual Valuation Date and each other date, if any,
specified in the Adoption Agreement.
1.1.36. Vested -- nonforfeitable, i.e., a claim obtained by a Participant or the
Participant's Beneficiary to that part of an immediate or deferred benefit
hereunder which arises from the Participant's service, which is unconditional
and which is legally enforceable against the Plan.
1.1.37. Vesting Service -- a measure of an employee's service with the Employer
and all Affiliates (stated as a number of years) which is equal to the number of
computation periods for which the employee is credited with one thousand (1,000)
or more Hours of Service; subject, however, to such of the following rules as
are applicable under the Adoption Agreement:
(a) Computation Periods. The computation periods for determining the
employee's Vesting Service (and One-Year Breaks in Service as applied
to the Participant's Vesting Service) shall be Plan Years.
(b) Completion. A year of Vesting Service shall be deemed completed as of
the date in the computation period that the employee completes one
thousand (1,000) Hours of Service. (Fractional years of Vesting Service
shall not be credited.)
(c) Pre-Effective Date Service. Vesting Service shall be credited for Hours
of Service earned and computation periods completed
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<PAGE>
prior to the Effective Date as if the rules of this Plan Statement were
then in effect.
(d) Breaks in Service -- Before Effective Date. Vesting Service cancelled
before the Effective Date by operation of the Plan's break in service
rules as they existed before the Effective Date shall continue to be
cancelled on and after the Effective Date.
(e) Vesting in Pre-Break Accounts. If the employee has any break in service
but does not have five (5) or more consecutive One-Year Breaks in
Service, the Participant's service both before and after such break in
service shall be taken into account in computing the Participant's
Vesting Service for the purpose of determining the Vested percentage of
that portion of the Participant's Employer Matching Account or Employer
Profit Sharing Account derived from Employer contributions allocated
with respect to the Participant's service before such break in service
and separately accounted for under Section 5.1.4. If the employee has
five (5) or more consecutive One-Year Breaks in Service, the
Participant's service after such One-Year Breaks in Service shall not
be counted as years of Vesting Service for the purpose of determining
the Vested percentage of that portion of the Participant's Employer
Matching Account or Employer Profit Sharing Account derived from
Employer contributions allocated with respect to the Participant's
service before such One-Year Breaks in Service and separately accounted
for under Section 5.1.4.
(f) Vesting in Post-Break Accounts. Subject to Section 1.1.37(d), if the
employee has any break in service occurring before or after the
Effective Date, the Participant's service both before and after such
break in service shall be taken into account in computing the
Participant's Vesting Service for the purpose of determining the Vested
percentage of that portion of the Participant's Employer Matching
Account or Employer Profit Sharing Account derived from Employer
Contributions allocated with respect to the Participant's service after
such break in service and separately accounted for under Section 5.1.4.
1.2. Rules Of Interpretation. An individual shall be considered to have attained
a given age on the individual's birthday for that age (and not on the day
before). The birthday of any individual born on a February 29 shall be deemed to
be February 28 in any year that is not a leap year. Notwithstanding any other
provision of this Plan Statement or any election or designation made under the
Plan, any individual who feloniously and intentionally kills a
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Participant or Beneficiary shall be deemed for all purposes of this Plan and all
elections and designations made under this Plan to have died before such
Participant or Beneficiary. A final judgment of conviction of felonious and
intentional killing is conclusive for the purposes of this section. In the
absence of a conviction of felonious and intentional killing, the Administrative
Committee shall determine whether the killing was felonious and intentional for
purposes of this section. Whenever appropriate, words used herein in the
singular may be read in the plural, or words used herein in the plural may be
read in the singular; the masculine may include the feminine; and the words
"hereof," "herein" or "hereunder" or other similar compounds of the word "here"
shall mean and refer to the entire Plan Statement and not to any particular
paragraph or section of this Plan Statement unless the context clearly indicates
to the contrary. The titles given to the various sections of this Plan Statement
are inserted for convenience of reference only and are not part of this Plan
Statement, and they shall not be considered in determining the purpose, meaning
or intent of any provision hereof. Any reference in this Plan Statement to a
statute or regulation shall be considered also to mean and refer to any
subsequent amendment or replacement of that statute or regulation. This
instrument has been drawn in conformity to the laws of the State of Minnesota
and shall, except to the extent that federal law is controlling, be construed
and enforced in accordance with the laws of that State.
1.3. Establishment Of New Plan. If the Employer's execution of the Adoption
Agreement is an establishment of a new Plan by the Employer, such approval and
adoption is conditioned upon the qualification of the Plan under the pertinent
provisions of the Code. If this Plan is found not to so qualify, the Employer
may, at its election, amend the Adoption Agreement, terminate the Plan in its
entirety, or both. If the denial of qualification was in response to an
application for advance determination on the establishment of a new Plan which
was made by the time prescribed by law for filing the Employer's tax return for
the taxable year in which the Plan is adopted (or effective, if later), the
Trustee may be directed by the Employer to return all contributions made under
this Plan to the Employer, adjusted for their pro rata share of earnings and
market gains or losses which accrued while they were held in the Fund. Such a
return of the contribution shall not be made, however, unless the return is made
within one (1) year after the date the initial qualification of the Plan is
denied.
1.4. Amendment. If the Employer's execution of the Adoption Agreement is an
amendment of a Prior Plan Statement, such execution shall not be considered to
be a termination of one plan and the establishment of another but, on the
contrary, shall be considered to be the express continuation of the Plan under
new documents.
1.5. Automatic Exclusion From Prototype Plan. If an Employer adopting these
Prototype Documents fails to obtain or fails to retain qualified status
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<PAGE>
under sections 401(a) and 501(a) of the Code, such Employer shall immediately
cease participation under these Prototype Documents and, when applicable, will
be deemed to maintain its Plan under an individually designed successor
retirement plan document.
1.6. Special Requirements.
1.6.1. Discriminatory Benefits. If this Plan provides contributions or benefits
for one or more Owner-Employees who control both the business with respect to
which this Plan is established and one or more other trades or businesses, this
Plan and any plan established for such other trades or businesses must, when
looked at as a single plan, satisfy sections 401(a) and (d) of the Code for the
employees of this and all other trades or businesses.
1.6.2. Discriminatory Coverage. If this Plan provides contributions or benefits
for one or more Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses must be included in
a plan which satisfies sections 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than provided for Owner-Employees
under this Plan.
If an individual is covered as an Owner-Employee under the plans of two (2) or
more trades or businesses which are not controlled and the individual controls a
trade or business, the contributions or benefits for the employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for the Owner-Employee under the most favorable plan of the trade
or business which is not controlled.
1.6.3. Control Defined. For purposes of this Section 1.6, an Owner-Employee, or
two or more Owner-Employees, will be considered to control a trade or business
if the Owner-Employee, or two or more 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 the partnership.
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 which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
1.7. Transitional Rules. Notwithstanding the general effective date set forth in
the Adoption Agreement, the following Sections of the Plan Statement
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are effective for the first Plan Year beginning on or after January 1, 1987,
2.5, 2.7, 3.4.2, 3.4.4, 3.10, 7.8, 7.9, 7.11, Appendix A, Appendix B, Appendix C
and Appendix D. Notwithstanding the general effective date set forth in the
Adoption Agreement, Section 7.10 is effective for all loans made on or after the
date the Adoption Agreement is executed. Loans made prior to the execution of
the Adoption Agreement will be made in accordance with the provisions of the
Prior Plan Statement.
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SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1. Initial Entry Into Plan. Each employee shall become a Participant on the
first Enrollment Date coincident with or next following the date that such
employee has both:
(a) satisfied the age requirement set forth in the Adoption Agreement, if any,
and
(b) satisfied the service requirement set forth in the Adoption Agreement, if
any,
if the employee is then employed in Recognized Employment. If the employee is
not then employed in Recognized Employment, the employee shall become a
Participant on the first date thereafter upon which the employee is employed in
Recognized Employment.
If this Plan Statement is adopted as an amendment of a Prior Plan Statement,
each employee who immediately before the Effective Date was a Participant in the
Plan and who continues in Recognized Employment on the Effective Date shall
continue as a Participant in this Plan.
2.2. Special Rule For Former Participants. A Participant whose employment with
the Employer terminates and who subsequently is reemployed by the Employer shall
immediately reenter the Plan as a Participant as of the date of the
Participant's return to Recognized Employment.
2.3. Enrollment. Each employee who is or will become a Participant as provided
in Section 2.1 or Section 2.2 may enroll for retirement savings by completing a
Retirement Savings Agreement and delivering it to the Administrative Committee
at least fifteen (15) days (or some other time period specified by the
Administrative Committee) prior to the Enrollment Date as of which the employee
desires to make it effective. If an employee does not enroll when first eligible
to do so, the Participant may enroll as of any subsequent Enrollment Date by
completing a Retirement Savings Agreement and delivering it to the
Administrative Committee at least fifteen (15) days (or some other time period
specified by the Administrative Committee) prior to that Enrollment Date.
2.4. Waiver Of Enrollment Procedures. The Administrative Committee shall have
the authority to adopt rules that modify and waive the enrollment procedures set
forth in this Section 2 during the period beginning on the
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Effective Date and ending twelve (12) months later, in order that an orderly
first enrollment might be completed. This authority to modify and waive the
enrollment procedures does not authorize the Administrative Committee to modify
the minimum service, age or job classification requirements for participation in
the Plan.
2.5. Retirement Savings Agreement. Subject to the following rules, the
Retirement Savings Agreement which each Participant may execute shall provide
for retirement savings through a reduction equal to not more or less than the
percentage specified in the Adoption Agreement of the amount of Recognized
Compensation which otherwise would be paid to the Participant by the Employer
each payday. Such retirement savings made under this Plan, or any other
qualified plan maintained by the Employer, however, shall not exceed Seven
Thousand Dollars ($7,000) for that Participant's taxable year. Such Seven
Thousand Dollar ($7,000) limit shall be adjusted for cost of living at the same
time and in the same manner as under section 415(d) of the Code. In the case of
a Participant who is a Self-Employed Person, the reduction in Recognized
Compensation shall be determined by multiplying such Participant's Recognized
Compensation (for the entire Plan Year) by the percentage elected by the
Participant and multiplying the resulting amount by the fraction of the Plan
Year that such election on the Retirement Savings Agreement is in effect. The
Administrative Committee may, from time to time under uniform, nondiscriminatory
rules, change the minimum and maximum allowable retirement savings (without
amending the Adoption Agreement). The reductions in Recognized Compensation
agreed to by the Participant shall be made by the Employer from the
Participant's remuneration each payday on or after the effective date of the
Retirement Savings Agreement for so long as the Retirement Savings Agreement
remains in effect.
2.6. Modifications Of Retirement Savings Agreement. The Retirement Savings
Agreement of a Participant may be modified as follows:
2.6.1. Increase. A Participant whose Retirement Savings Agreement does not
provide for the full, allowable reduction may, upon giving fifteen (15) days'
prior written notice to the Administrative Committee, amend the Participant's
Retirement Savings Agreement to increase the amount of reduction as of the first
payday on or after any subsequent Enrollment Date.
2.6.2. Decrease. A Participant whose Retirement Savings Agreement provides for
more than the minimum allowable reduction may, upon giving fifteen (15) days'
prior written notice to the Administrative Committee, amend the Participant's
Retirement Savings Agreement to decrease the amount of reduction as of the first
payday on or after any subsequent Enrollment Date.
2.6.3. Cancellation of Retirement Savings Agreement. A Participant who has a
Retirement Savings Agreement in effect may, upon giving fifteen (15) days' prior
written notice to the Administrative Committee, completely
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terminate the Retirement Savings Agreement beginning with the payroll period for
the payday designated by the Participant. Thereafter, such Participant may, upon
giving fifteen (15) days' prior written notice to the Administrative Committee,
enter into a new Retirement Savings Agreement effective as of the first payday
on or after any subsequent Enrollment Date if, on that Enrollment Date, the
Participant is in Recognized Employment.
2.6.4. Termination Of Recognized Employment. The Retirement Savings Agreement of
a Participant who ceases to be employed in Recognized Employment (and who
thereby ceases to have Recognized Compensation) shall be terminated
automatically as of the date the Participant ceased to be employed in Recognized
Employment. If such Participant returns to Recognized Employment, the
Participant may enter into a new Retirement Savings Agreement effective as of
the first payday on or after any Enrollment Date following the Participant's
return to Recognized Employment upon giving fifteen (15) days' prior written
notice to the Administrative Committee.
2.6.5. Form Of Agreement. The Administrative Committee shall specify the form of
the Retirement Savings Agreement, the form of any notices modifying the
Retirement Savings Agreement and all procedures for the delivery and acceptance
of forms and notices.
2.7. Section 401(k) Compliance.
2.7.1. Special Definitions. For purposes of this Section 2.7, the following
special definitions shall apply:
(a) "Eligible employee" means an individual who was entitled to enter into
a Retirement Savings Agreement for all or a part of the Plan Year
(whether or not the individual did so).
(b) "Highly compensated eligible employees" means those eligible employees
defined as highly compensated employees in Appendix D to this Plan
Statement.
(c) "Deferral percentage" means the ratio (calculated separately for each
eligible employee) of:
(i) the total amount, for the Plan Year, of Employer contributions
credited to the eligible employee's Retirement Savings Account
(excluding Employer contributions to the Retirement Savings
Account taken into account in determining the contribution
percentage in Section 3.10, provided the 401(k) test in this
Section 2.7 is satisfied both with and without exclusion of
such Employer contributions and
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<PAGE>
including excess elective deferrals under Section 7.11.1) and
if the Administrative Committee elects under such rules as the
Secretary of the Treasury may prescribe, all or a portion of
the amount, for the Plan Year of Employer contributions
credited to the eligible employee's Employer Matching Account
or Employer Profit Sharing Account, or both, to
(ii) the eligible employee's compensation, as defined below, for
such Plan Year.
For this purpose, Employer contributions will be considered made in the
Plan Year if they are allocated as of a date during such Plan Year and
are delivered to the Trustee within twelve (12) months after the end of
such Plan Year.
(d) "Compensation" means compensation for services performed for the
Employer defined as "ss. 415 compensation" in the Appendix A to this
Plan Statement. The Administrative Committee may elect to include as
compensation any amount which is contributed by the Employer pursuant
to a salary reduction agreement which is not includible in the gross
income of the eligible employee under sections 125, 402(a)(8), 402(h)
or 403(b) of the Code. Notwithstanding the definition of "ss. 415
compensation" in the Appendix A to this Plan Statement: (i)
compensation shall always be determined on a cash (and not on an
accrual) basis, (ii) there shall not be included in compensation
amounts received while the eligible employee is not a Participant until
required under such rules as the Secretary of the Treasury may
prescribe, and (iii) compensation shall be determined on a Plan Year
basis (which is not necessarily the same as the limitation year).
Effective for Plan Years beginning after December 31, 1988, an eligible
employee's compensation for a Plan Year shall not exceed Two Hundred
Thousand Dollars ($200,000), as adjusted under the Code for cost of
living increases.
(e) "Average deferral percentage" means, for a specified group of eligible
employees for the Plan Year, the average of the deferral percentages
for all eligible employees in such group.
2.7.2. Special Rules. For purposes of this Section 2.7, the following special
rules apply:
(a) Rounding. The deferral percentages of each eligible employee and
average deferral percentage for each group of eligible
24
<PAGE>
employees shall be calculated to the nearest one-hundredth of one
percent.
(b) Family Member. If a highly compensated eligible employee is subject to
the family aggregation rules of section 414(q)(6) of the Code because
such employee is either a five percent (5%) owner or one of the ten
(10) most highly compensated employees (as defined in Appendix D), the
combined deferral percentage for the family group (which is treated as
one highly compensated eligible employee) shall be the greater of:
(i) the deferral percentage determined by combining the amounts
described in Section 2.7.1(c) and by combining the
compensation described in Section 2.7.1(d) of all the eligible
family members who are highly compensated eligible employees
without regard to family aggregation, or
(ii) the deferral percentage determined by combining the amounts
described in Section 2.7.1(c) and by combining the
compensation described in Section 2.7.1(d) of all family
members who are eligible employees.
With respect to any highly compensated employee, "family" shall mean
the employee's spouse and lineal ascendants and descendants and the
spouses of such lineal ascendants and descendants. The family members
who are aggregated with respect to a highly compensated eligible
employee shall be disregarded as separate, eligible employees in
determining the average deferral percentage of highly compensated
eligible employees and the average deferral percentage of all other
eligible employees. Effective for Plan Years beginning after December
31, 1988, the Two Hundred Thousand Dollars ($200,000) limit specified
in Section 2.7.1(d), as adjusted under the Code for cost of living
increases, applies to the above deferral percentage determination
except that for purposes of that limit, the term "family" shall include
only the spouse of the eligible employee and lineal descendants of the
eligible employee who have not attained age nineteen (19) years before
the close of the Plan Year. If an eligible employee is required to be
aggregated as a member of more than one family group in the Plan, all
eligible employees who are members of those family groups that include
that eligible employee are aggregated as one family group.
25
<PAGE>
(c) Multiple Plans. In the case of a highly compensated eligible employee
who participates in any other plan of the Employer to which Employer
contributions are made on behalf of the highly compensated eligible
employee pursuant to a salary reduction agreement, all such Employer
contributions, and if used to determine the deferral percentage of
eligible employees, Employer contributions credited to the eligible
employee's Employer Matching Account or Employer Profit Sharing
Account, or both, must be aggregated for purposes of determining the
highly compensated eligible employee's deferral percentage. If 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 2.7 shall be
applied by determining the average deferral percentage of eligible
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.
(d) Permissive Aggregation. To the extent permitted under the Code, the
Committee may elect to aggregate the Plan with any other plan of the
Employer for purposes of determining whether the tests set forth in
this Section are satisfied for a Plan Year.
(e) Restructuring. To the extent permitted under the Code, the Committee
may elect to restructure the Plan (and any other plan of the Employer
with which the Plan may be aggregated under this Section) for purposes
of determining whether the tests set forth in this Section are
satisfied for a Plan Year.
2.7.3. The Tests. Notwithstanding the foregoing provisions, Retirement Savings
Agreements in effect for each Plan Year shall be limited and modified under
uniform and nondiscriminatory rules established by the Administrative Committee
and by the rules hereinafter provided in order that all such Retirement Savings
Agreements (in the aggregate) will satisfy at least one of the following two (2)
tests for that Plan Year:
Test 1: The average deferral percentage for the group of highly compensated
eligible employees is not more than the average deferral percentage of
all other eligible employees multiplied by one and twenty-five
hundredths (1.25).
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<PAGE>
Test 2: The excess of the average deferral percentage for the group of highly
compensated eligible employees over that of all other eligible
employees is not more than two (2) percentage points, and the average
deferral percentage for the group of highly compensated eligible
employees is not more than the average deferral percentage of all other
eligible employees multiplied by two (2).
2.7.4. Remedial Action. If the Administrative Committee determines that neither
of the tests will be satisfied (or may not be satisfied) for a Plan Year, then
during such Plan Year, the following actions may be taken so that one of the
tests will be satisfied for such Plan Year:
(a) The highly compensated eligible employees who have the highest
enrollment percentage under Section 2.5 shall be deemed for all
purposes of the Plan to have elected for that Plan Year a lower
enrollment percentage (and the amounts credited pursuant to Section
3.2, and the applicable amount, if any, credited pursuant to Section
3.3, shall be reduced accordingly).
(b) If neither of the tests is satisfied after such adjustment, the
enrollment percentage under Section 2.5 of the highly compensated
eligible employees who then have the highest enrollment percentage
(including any reduced under (a) above) shall be reduced to a lower
enrollment percentage (and the amounts credited pursuant to Section 3.2
and the applicable amount, if any, credited pursuant to Section 3.3
shall be reduced accordingly).
(c) If neither of the tests is satisfied after such adjustment, this method
of adjustment shall be repeated one or more additional times until one
of the tests is satisfied.
The Administrative Committee shall prescribe rules concerning such adjustments,
including the frequency of applying the tests and the commencement and
termination dates for any adjustments. The Administrative Committee shall
maintain records to demonstrate compliance with one of the two (2) tests
described in Section 2.7.3, including the extent to which Employer matching
contributions and Employer profit sharing contributions are used in determining
the deferral percentage. The determination and treatment of the deferral
percentage of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury. Any amounts required to be
distributed as provided above which are distributed more than 2-1/2 months after
the close of the Plan Year being tested, will result in a ten percent (10%)
penalty tax on the Employer as provided in section 4979 of the Code.
27
<PAGE>
SECTION 3
CONTRIBUTIONS AND ALLOCATION THEREOF
3.1. Employer Contributions -- General.
3.1.1. Source Of Employer Contributions. All Employer contributions to the Plan
may be made without regard to profits.
3.1.2. Limitation. The contribution of the Employer to the Plan for any year,
when considered in light of its contribution for that year to all other
tax-qualified plans it maintains, shall, in no event, exceed the maximum amount
deductible by it for federal income tax purposes as a contribution to a
tax-qualified profit sharing plan under section 404 of the Code. Each such
contribution to the Plan is conditioned upon its deductibility for such purpose.
3.1.3. Form of Payment. The appropriate contribution of the Employer to the
Plan, determined as herein provided, shall be paid to the Trustee in cash.
3.2. Retirement Savings Contributions.
3.2.1. Amount. Within the time required by regulations of the United States
Department of Labor, the Employer shall contribute to the Trustee for deposit in
the Fund the reduction in Recognized Compensation which was agreed to by each
Participant pursuant to a Retirement Savings Agreement.
3.2.2. Allocation. The portion of this contribution made with respect to each
Participant shall be credited to that Participant's Retirement Savings Account
as of the Valuation Date coincident with or immediately following the last day
of the calendar month for which the contribution is made.
3.3. Required Matching Contributions.
3.3.1. Amount. The Employer shall contribute to the Trustee for deposit in the
Fund and for crediting to the Participant's Employer Matching Account such
amounts, if any, as are required pursuant to the Adoption Agreement as Employer
contributions to match each Participant's reduction in Recognized Compensation
which was agreed to by the Participant pursuant to a Retirement Savings
Agreement; provided, however, that a reduction in Recognized Compensation above
a percentage of a Participant's Recognized Compensation specified in the
Adoption Agreement shall not be used in allocating such contribution. Such
contributions shall be made only for Participants who are eligible Participants
within the meaning of Section 3.5. Such contributions shall be delivered to the
Trustee for deposit in the Fund not later than the time prescribed by federal
law (including extensions) for filing
28
<PAGE>
the federal income tax return of the Employer for the taxable year in which the
Plan Year ends.
3.3.2. Allocation. The Employer required matching contribution (including
forfeited Suspense Accounts, if any, to be reallocated as of the date of the
contribution) which is made with respect to a Participant shall be credited to
that Participant's Employer Matching Account as of the Annual Valuation Date in
the Plan Year for which such contribution is made or, if earlier, the Valuation
Date coincident with or next following the date as of which such contribution is
received by the Trustee.
3.4. Discretionary Employer Contributions.
3.4.1. General. If the Adoption Agreement so provides, the Employer may (but
shall not be required to) make discretionary contributions from year to year
during the continuance of the Plan in such amounts as the Employer shall from
time to time determine. Such contributions shall be delivered to the Trustee for
deposit in the Fund not later than the time prescribed by federal law (including
extensions) for filing the federal income tax return of the Employer for the
taxable year in which the Plan Year ends.
The Employer's discretionary contribution for a Plan Year, including forfeited
Suspense Accounts, if any, to be included with that contribution or reallocated
as of the Annual Valuation Date of such Plan Year shall be allocated in the
following order.
3.4.2. Section 401(k) Curative Allocation. If, for any Plan Year, neither of the
section 401(k) tests set forth in Section 2 has been satisfied and a
distribution of "excess contributions" has not been made pursuant to Section 7,
then all or a portion of the Employer's discretionary contribution for that Plan
Year shall be allocated to meet one of such tests. Forfeited Suspense Accounts,
however, will not be included in this allocation. Only those Participants who
were not "highly compensated eligible employees" (as defined in Section 2.7) for
that Plan Year and for whom some contribution was made pursuant to Section 3.2
for such Plan Year shall share in such allocation. This allocation shall be made
first to the Participant with the least amount of compensation (as defined in
Section 2) and then, in ascending order of compensation (as defined in Section
2), to other Participants. The amount of the Employer discretionary contribution
to be so allocated shall be that amount required to cause the Plan to satisfy
either of the 401(k) tests set forth in Section 2.7 for the Plan Year; provided,
however, that in no case shall amounts be so allocated to cause a Participant's
deferral percentage (as defined in Section 2) to exceed twenty percent (20%).
The Employer discretionary contribution so allocated to a Participant shall be
credited to that Participant's Retirement Savings Account as of the Annual
Valuation Date in the Plan Year for which this Employer discretionary
contribution is made, or if earlier, the
29
<PAGE>
Valuation Date coincident with or next following the date as of which such
contribution is received by the Trustee.
3.4.3. Discretionary Matching Contributions. If the Adoption Agreement so
provides, any portion of the Employer's discretionary contribution not allocated
under Section 3.4.2 shall be allocated to the Employer Matching Accounts of
eligible Participants under Section 3.5; provided, however, that the Employer's
discretionary contribution to be so allocated shall be reduced by any amounts
necessary to make the section 401(m) curative allocation described in Section
3.4.4. The Employer's discretionary matching contribution, if any, for a Plan
Year shall be allocated to the Employer Matching Account of eligible
Participants under either the formula set forth in Section 3.4.3(a) or Section
3.4.3(b) as indicated in the Adoption Agreement.
(a) Straight Percent Matching Allocation. If the discretionary matching
contribution is adopted as a straight percent contribution, the
contribution, if any, made by the Employer for a given Plan Year shall
be allocated to the Employer Matching Accounts of eligible Participants
to match a percentage, determined by the Employer, of each eligible
Participant's reduction in Recognized Compensation which was agreed to
by the Participant pursuant to a Retirement Savings Agreement;
provided, however, that a reduction in Recognized Compensation above a
percentage of a Participant's Recognized Compensation specified in the
Adoption Agreement shall not be used in allocating such contribution.
(b) Collectively Bargained Matching Allocation. If the discretionary
matching contribution is adopted as a collectively bargained
contribution, the contribution, if any, made by the Employer for a
given Plan Year shall be allocated to the Employer Matching Accounts of
eligible Participants pursuant to a collective bargaining agreement
covering said Participants.
The amount so allocated to an eligible Participant pursuant to this Section
3.4.3, shall be credited to such Participant's Employer Matching Account as of
the Annual Valuation Date in the Plan Year for which such contribution is made,
or if earlier, the Valuation Date coincident with or next following the date as
of which such contribution is received by the Trustee.
3.4.4. Section 401(m) Curative Allocation. If, for any Plan Year, neither of the
section 401(m) tests set forth in Section 3 has been satisfied and a
distribution of "excess aggregate contributions" has not been made pursuant to
Section 7, then any remaining portion of the Employer discretionary contribution
for that Plan Year which has not been allocated under Section
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<PAGE>
3.4.2 above shall be allocated to meet one of such tests. Forfeited Suspense
Accounts, however, will not be included in this allocation. Only those
Participants who were not "highly compensated eligible employees" (as defined in
Section 3) for that Plan Year and who were eligible to receive an Employer
matching contribution pursuant to Section 3.3 or Section 3.4.3 shall share in
such allocation. The amount of the Employer discretionary contribution to be so
allocated shall be that amount required to cause the Plan to satisfy either of
the section 401(m) tests set forth in Section 3 for the Plan Year and shall be
allocated to all such eligible Participants. The Employer discretionary
contribution so allocated to a Participant shall be credited to that
Participant's Employer Matching Account as of the Annual Valuation Date in the
Plan Year for which this Employer discretionary contribution is made, or if
earlier, the Valuation Date coincident with or next following the date as of
which such contribution is received by the Trustee.
3.4.5. Discretionary Profit Sharing Contributions. If the Adoption Agreement so
provides, any portion of the Employer's discretionary contribution not allocated
under Section 3.4.2, Section 3.4.3 and Section 3.4.4 shall be allocated to the
Employer Profit Sharing Accounts of eligible Participants under Section 3.5. The
discretionary contribution for a Plan Year including forfeited Suspense
Accounts, if any, to be reallocated as of the Annual Valuation Date in such Plan
Year, shall be allocated to the Employer Profit Sharing Accounts of eligible
Participants under the formula set forth in Section 3.4.5(a), Section 3.4.5(b)
or Section 3.4.5(c) as indicated in the Adoption Agreement.
(a) Straight Percent of Pay Profit Sharing Allocation. If the discretionary
profit sharing contribution is adopted as a non-integrated straight
percent of pay profit sharing contribution, the contribution, if any,
made by the Employer for a given Plan Year shall be allocated to the
Employer Profit Sharing Accounts of eligible Participants in the ratio
which the Recognized Compensation of each such eligible Participant for
the Plan Year bears to the Recognized Compensation for such Plan Year
of all such eligible Participants.
(b) Integrated Profit Sharing Allocation. If the discretionary profit
sharing contribution is adopted as an integrated profit sharing
contribution, the contribution, if any, made by the Employer for a
given Plan Year shall be determined and allocated under the following
rules:
(i) Base Contribution Percentage. Subject to the rules in Section
3.4.5(b)(iii), the Employer shall determine a uniform base
contribution percentage for the Plan
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<PAGE>
Year and shall contribute to each eligible Participant's
Employer Profit Sharing Account an amount equal to that base
contribution percentage multiplied by each such eligible
Participant's Recognized Compensation up to the Integration
Level (as defined in the Adoption Agreement) for that Plan
Year.
(ii) Excess Contribution Percentage. Subject to the rules in
Section 3.4.5(b)(iii), the Employer shall determine a uniform
excess contribution percentage for the Plan Year and shall
contribute to each eligible Participant's Employer Profit
Sharing Account an amount equal to that excess contribution
percentage multiplied by each such eligible Participant's
Recognized Compensation in excess of the Integration Level (as
defined in the Adoption Agreement) for that Plan Year.
(iii) Rules. The uniform base contribution percentage and the
uniform excess contribution percentage for a Plan Year shall
be determined as follows:
o Two Times Rule. If the base contribution percentage
is equal to or less than the integration rate (as
determined in footnote 13 to the Adoption Agreement),
the excess contribution percentage shall be the
product of the base contribution percentage
multiplied by two (2).
o Integration Limitation. If the base contribution
percentage is greater than the integration rate (as
determined in footnote 13 to the Adoption Agreement),
the excess contribution percentage shall be equal to
the sum of the base contribution percentage plus the
integration rate.
(c) Collectively Bargained Profit Sharing Allocation. If the discretionary
profit sharing contribution is adopted as a collectively bargained
profit sharing contribution, the contribution, if any, made by the
Employer for a given Plan Year shall be allocated to the Employer
Profit Sharing Accounts of eligible Participants pursuant to a
collective bargaining agreement covering said Participants or pursuant
to the federal Davis Bacon Act or similar federal, state or local
prevailing wage legislation.
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<PAGE>
The Employer discretionary contribution so allocated to a Participant shall be
credited to such Participant's Employer Profit Sharing Account as of the Annual
Valuation Date in the Plan Year for which such contribution is made, or if
earlier, the Valuation Date coincident with or next following the date as of
which such contribution is received by the Trustee
3.5. Eligible Participants. A Participant shall be considered eligible to share
in the allocation of Employer matching or discretionary contributions for a Plan
Year pursuant to Section 3.3, Section 3.4.3 and Section 3.4.5, if any, and
forfeited Suspense Accounts to be reallocated with such contributions as of the
Annual Valuation Date in such Plan Year, if any, only if such Participant
satisfies all of the following requirements:
(a) Participant. The Participant was a Participant at some time during the
Plan Year.
(b) Compensation. The Participant has Recognized Compensation for such Plan
Year.
(c) Last Day Rule. If the Adoption Agreement so provides, the Participant
was an employee on the last day of the Plan Year (including, for this
purpose, individuals temporarily absent due to illness, vacation or
layoff and individuals inducted into the Armed Forces of the United
States during such Plan Year) or the Participant died, became Disabled
or retired at or after the Participant's Normal Retirement Age during
such Plan Year.
(d) 1,000 Hour Rule. If the Adoption Agreement so provides, the Participant
has one thousand (1,000) or more Hours of Service in the Plan Year, or
the Participant died, became Disabled or retired at or after the
Participant's Normal Retirement Age during such Plan Year.
No other Participant shall be considered an eligible Participant for such Plan
Year.
3.6. Make-Up Contributions For Omitted Participants. If, after the Employer's
annual contribution for a Plan Year has been made and allocated, it should
appear that, through oversight or a mistake of fact or law, a Participant (or an
employee who should have been considered a Participant) who should have been
entitled to share in such contribution, received no allocation or received an
allocation which was less than the Participant should have received, the
Employer may, at its election, and in lieu of reallocating such contribution,
make a special make-up contribution for the Account of such Participant in an
amount adequate to provide for the Participant the same
33
<PAGE>
addition to the Participant's Account for such Plan Year as the Participant
should have received.
3.7. Rollover Contributions.
3.7.1. Eligible Contributions. To the extent the Adoption Agreement permits it,
employees in Recognized Employment may contribute to this Plan, within such time
and in such form and manner as may be prescribed by the Administrative Committee
in accordance with those provisions of federal law relating to rollover
contributions, property (or the cash proceeds thereof) received by them in
qualifying distributions from certain types of qualified plans or trusts,
employee annuities, and so-called "rollover" individual retirement accounts or
annuities. The provisions of this Section shall be subject to such
nondiscriminatory conditions and limitations as the Administrative Committee may
prescribe from time to time for administrative convenience and to preserve the
tax-qualified status of the Plan.
3.7.2. Specific Review. The Administrative Committee shall have the right to
reject or return any such rollover contribution if, in its opinion, the
acceptance thereof might jeopardize the tax-qualified status of the Plan or
unduly complicate its administration, but the acceptance of any such rollover
contribution shall not be regarded as an opinion or guarantee on the part of the
Employer, the Trustee, the Administrative Committee or the Plan as to the tax
consequences which may result to the contributing employee thereby.
3.7.3. Allocation. All rollover contributions made by an employee to this Plan
shall be allocated to a Rollover Account established for such employee. The
amount so allocated to an employee shall be credited to the employee's Rollover
Account as of the Valuation Date coincident with or next following the date as
of which such contribution is received by the Trustee. If the Adoption Agreement
permits rollover contributions by employees in Recognized Employment who are not
yet Participants, any such employee making a rollover contribution shall be
considered a Participant solely with respect to the Participant's Rollover
Account (until the Participant becomes a Participant pursuant to Section 2).
3.8. Nondeductible Voluntary Contributions.
Nondeductible voluntary contributions shall not be accepted by the Plan. If
nondeductible voluntary contributions were accepted under the Prior Plan
Statement, such contributions will be held in the Voluntary Account and shall
continue to share in any trust earnings or losses and be distributed in
accordance with the provisions of Section 7. Nondeductible voluntary
contributions accepted under the Prior Plan Statement for Plan Years beginning
after December 31, 1986, and prior to Plan Years beginning after the
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<PAGE>
effective date of this Plan Statement shall be limited so as to comply with the
nondiscrimination test of section 401(m) of the Code.
3.9. Deductible Voluntary Contributions. Effective January 1, 1987, the Plan
shall not accept deductible voluntary contributions for a taxable year of the
Participant beginning after December 31, 1986. If deductible voluntary
contributions were accepted under the Prior Plan Statement prior to January 1,
1987, such contributions will be held in the Deductible Voluntary Account and
shall continue to share in any trust earnings or losses and be distributed in
accordance with the provisions of Section 7.
3.10. Section 401(m) Compliance.
3.10.1. Special Definitions. For purposes of this Section 3.10, the following
special definitions shall apply:
(a) "Eligible employee" means an individual who was entitled to enter into
a Retirement Savings Agreement for all or a part of the Plan Year
(whether or not the individual does so).
(b) "Highly compensated eligible employees" means those eligible employees
defined as highly compensated employees in Appendix D to this Plan
Statement.
(c) "Contribution percentage" means, the ratio (calculated separately for
each eligible employee) of:
(i) the total amount, for the Plan Year, of Employer matching
contributions (and forfeitures, if any) credited to the
eligible employee's Employer Matching Account (but if the
Administrative Committee elects to include the Employer
matching contributions in the section 401(k) test in Section
2, the Administrative Committee may elect, under such rules as
the Secretary of the Treasury may prescribe, to not include
the Employer matching contributions in this section 401(m)
test, and if the Administrative Committee elects, under such
rules as the Secretary of the Treasury may prescribe, all or a
portion of the amount, for the Plan Year, of Employer
contributions credited to the eligible employee's Retirement
Savings Account or Employer Profit Sharing Account, or both,
to
(ii) the eligible employee's compensation, as defined below, for
such Plan Year.
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<PAGE>
For this purpose, Employer contributions will be considered made in the
Plan Year if they are allocated as of a date during such Plan Year and
are delivered to the Trustee within twelve (12) months after the end of
such Plan Year.
(d) "Compensation" means compensation for services performed for the
Employer defined as "section 415 compensation" in the Appendix A to
this Plan Statement. The Administrative Committee may elect to include
as compensation any amount which is contributed by the Employer
pursuant to a salary reduction agreement which is not includible in the
gross income of an eligible employee under sections 125, 402(a)(8),
402(h) or 403(b) of the Code. Notwithstanding the definition of
"section 415 compensation" in the Appendix A to this Plan Statement:
(i) compensation shall always be determined on a cash (and not on an
accrual) basis, (ii) there shall not be included in compensation
amounts received while the eligible employee is not a Participant until
required under such rules as the Secretary of the Treasury may
prescribe, and (iii) compensation shall be determined on a Plan Year
basis (which is not necessarily the same as the limitation year).
Effective for Plan Years beginning after December 31, 1988, an eligible
employee's compensation for a Plan Year shall not exceed Two Hundred
Thousand Dollars ($200,000), as adjusted under the Code for cost of
living increases.
(e) "Average contribution percentage" means, for a specified group of
eligible employees for the Plan Year, the average of the contribution
percentage for all eligible employees in such group.
3.10.2. Special Rules. For purposes of this Section 3.10, the following special
rules apply:
(a) Rounding. The contribution percentages and average contribution
percentage for each group of eligible employees shall be calculated to
the nearest one-hundredth of one percent of the eligible employee's
compensation.
(b) Family Member. If a highly compensated eligible employee is subject to
the family aggregation rules of section 414(q)(6) of the Code because
such employee is either a five percent (5%) owner or one of the ten
(10) most highly compensated employees (as defined in Appendix D), the
combined contribution percentage for the family group (which is
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treated as one highly compensated eligible employee) shall be the
greater of:
(i) the contribution percentage determined by combining the
amounts described in Section 3.10.1(c) and by combining the
compensation described in Section 3.10.1(d) of all family
members who are highly compensated eligible employees without
regard to family aggregation, or
(ii) the contribution percentage determined by combining the amount
described in Section 3.10.1(c) and by combining the
compensation described in Section 3.10.1(d) of all family
members who are eligible employees.
With respect to any highly compensated eligible employee, "family"
shall mean the employee's spouse and lineal ascendants and descendants
and the spouses of such lineal ascendants and descendants. The family
members who are aggregated with respect to a highly compensated
eligible employee shall be disregarded as separate eligible employees
in determining the average contribution percentage of highly
compensated eligible employees and the average contribution percentage
of all other employees. Effective for Plan Years beginning after
December 31, 1988, the Two Hundred Thousand Dollar ($200,000) limit
specified in Section 3.10.1(d), as adjusted under the Code for cost of
living increases, applies to the above contribution percentage
determination except that for purposes of that limit, the term "family"
shall include only the spouse of the Participant and lineal descendants
of the Participant who have not attained age nineteen (19) years before
the close of that Plan Year. If an eligible employee is required to be
aggregated as a member of more than one family group in the Plan, all
eligible employees who are members of those family groups that include
that eligible employee are aggregated as one family group.
(c) Multiple Plans. In the case of a highly compensated eligible employee
who participates in any other plan of the Employer to which Employer
matching contributions are made on behalf of the highly compensated
eligible employee, all such Employer matching contributions, and if
used to determine the contribution percentage of eligible employees,
Employer contributions made pursuant to a salary reduction agreement or
Employer contributions credited to the eligible
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employee's Employer Profit Sharing Account, or both, must be aggregated
for purposes of determining the highly compensated eligible employee's
contribution percentage. In the event that this Plan satisfies the
requirements of section 401(m), 401(a)(4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more other plans
satisfy the requirements of such sections of the Code only if
aggregated with this Plan, then this Section 3.10 shall be applied by
determining the contribution percentage of eligible employees as if all
such plans were a single plan. For Plan Years beginning after December
31, 1989, plans must be aggregated in order to satisfy section 401(m)
of the Code only if they have the same Plan Year.
(d) Permissive Aggregation. To the extent permitted under the Code, the
Administrative Committee may elect to aggregate the Plan with any other
plan of the Employer for purposes of determining whether the tests set
forth in this Section are satisfied for a Plan Year.
(e) Restructuring. To the extent permitted under the Code, the
Administrative Committee may elect to restructure the Plan (and any
other plan of the Employer with which the Plan may be aggregated under
this Section) for purposes of determining whether the tests set forth
in this Section are satisfied for a Plan Year.
3.10.3. The Tests. Notwithstanding the foregoing provisions, Employer matching
contributions made for each Plan Year shall be limited and modified under rules
established by the Administrative Committee and by the rules hereinafter
provided in order that one of the following two (2) tests is satisfied for that
Plan Year:
Test 1: The average contribution percentage for the group of highly compensated
eligible employees is not more than the average contribution percentage
of all other eligible employees multiplied by one and twenty-five
hundredths (1.25).
Test 2: The excess of the average contribution percentage for the group of
highly compensated eligible employees over that of all other eligible
employees is not more than two (2) percentage points, and the average
contribution percentage for the group of highly compensated eligible
employees is not more than the average contribution percentage of all
other eligible employees multiplied by two (2).
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Effective for Plan Years beginning after December 31, 1988, and to the extent
prescribed under regulations issued by the Secretary of the Treasury, for an
Plan Year in which Test 2 is satisfied for the purposes of the section 401(k)
test in Section 2, this Plan must satisfy Test 1 for the purposes of the section
401(m) test in this Section 3, or the sum of the actual deferral percentage and
the average contribution percentage of the highly compensated employees does not
exceed the "aggregate limit" defined below. This additional test is not
necessary if neither the actual deferral percentage nor the average contribution
percentage of the highly compensated employees exceeds 1.25 multiplied by the
actual deferral percentage and average contribution percentage, respectively, of
the non-highly compensated employees. "Aggregate limit" shall mean the sum of
(i) 125 percent of the greater of the actual deferral percentage or the average
contribution percentage of non-highly compensated employees for the Plan Year,
and (ii) the lesser of 200% of or two plus the lesser of such actual deferral
percentage or average contribution percentage.
3.10.4. Remedial Action. If the Administrative Committee determines that neither
of the tests will be satisfied (or may not be satisfied) for a Plan Year, then
during such Plan Year, the following actions may be taken so that one of the
tests will be satisfied for such Plan Year:
(a) The Employer matching contributions for the highly compensated eligible
employees who have the highest contribution percentage shall be reduced
to the extent necessary to reduce their contribution percentage to the
next lower percentage.
(b) If neither of the tests is satisfied after such adjustment, the
Employer matching contributions for the highly compensated eligible
employees who then have the highest contribution percentage (including
those reduced under (a) above) shall be reduced to the extent necessary
to reduce their contribution percentage to the next lower percentage.
(c) If neither of the tests is satisfied after such adjustment, this method
of adjustment shall be repeated one or more additional times until one
of the tests is satisfied.
The Administrative Committee shall prescribe rules concerning such adjustments,
including the frequency of applying the tests and the commencement and
termination dates for any adjustments. The Administrative Committee shall
maintain records to demonstrate compliance with one of the two (2) tests
described in Section 3.10.3, including the extent to which other Employer
contributions are used in determining the contribution percentage. The
determination and treatment of the contribution percentage of any Participant
shall satisfy such other requirements as may be prescribed by
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the Secretary of the Treasury. Any amounts required to be distributed as
provided above which are distributed more than 2-1/2 months after the close of
the Plan Year being tested, will result in a ten percent (10%) penalty tax on
the Employer.
3.11. Limitation On Allocations. In no event shall any amount be allocated to
the Account of any Participant if, or to the extent, such amounts would exceed
the limitations set forth in the Appendix A to this Plan Statement.
3.12. Effect Of Disallowance Of Deduction Or Mistake Of Fact. All Employer
contributions to the Plan are conditioned on their qualification for deduction
for federal income tax purposes under section 404 of the Code. If the deduction
for federal income tax purposes under section 404 of the Code should be
disallowed, in whole or in part, for any Employer contribution to this Plan for
any year, or if any Employer contribution to this Plan is made by reason of a
mistake of fact, then there shall be calculated the excess of the amount
contributed over the amount that would have been contributed had there not
occurred a mistake in determining the deduction or a mistake of fact. The
Employer shall direct the Trustee to return such excess, adjusted for its pro
rata share of any net loss (but not any net gain) in the value of the Fund which
accrued while such excess was held therein, to the Employer within one (1) year
of the disallowance of the deduction or the mistaken payment of the
contribution, as the case may be. If the return of such amount would cause the
balance of any Account of any Participant to be reduced to less than the balance
which would have been in such Account had the mistaken amount not been
contributed, however, the amount to be returned to the Employer shall be limited
so as to avoid such reduction.
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SECTION 4
INVESTMENT AND ADJUSTMENT OF ACCOUNTS
4.1. Establishment Of Subfunds.
4.1.1. Establishing Commingled Subfunds. The Administrative Committee may (but
is not required to) direct the Trustee in writing to divide the Fund into two
(2) or more investment Subfunds, which shall serve as vehicles for the
investment of Participants' Accounts and which shall be managed either by the
Trustee or by one or more Investment Managers, as the Administrative Committee
shall determine. The Administrative Committee shall determine the general
investment characteristics and objectives of each investment Subfund. The
Trustee or Investment Manager, as the case may be, shall have complete
investment discretion over each investment Subfund assigned to it, subject only
to the general investment characteristics and objectives established for the
particular investment Subfund.
4.1.2. Individual Subfunds. The Administrative Committee may (but is not
required to) direct the Trustee in writing to establish investment Subfunds that
consist solely of all or a part of the assets of a single Participant's Total
Account, which assets the Participant controls by investment directives to the
Trustee and which may not be commingled with the assets of any other
Participant's Accounts. If any Participant is permitted to direct the Trustee
with regard to the investment of the Participant's individual investment
Subfund, then all Participants shall be permitted to direct the Trustee with
respect to their individual investment Subfunds. In no event, however, shall the
Participant be allowed to direct the investment of assets in such individual
investment Subfund in any work of art, rug or antique, metal or gem, stamp or
coin, alcoholic beverage or other similar tangible personal property if the
investment in such property shall have been prohibited by the Secretary of the
Treasury.
Notwithstanding anything apparently to the contrary in Section 10.6, each
Participant and each Beneficiary for whom an individually directed Subfund is
maintained shall be responsible for the exercise of any voting or similar rights
which exist with respect to assets in such individually directed Subfund. The
Trustee shall cooperate with Participants and Beneficiaries to permit them to
exercise such rights. The Trustee shall not independently exercise such rights.
Any Beneficiary of a deceased Participant with an individually directed Subfund
shall have the responsibility to direct investments for such Subfund until the
Beneficiary directs the Trustee otherwise in writing.
4.1.3. Operational Rules. In accordance with uniform rules, the Administrative
Committee shall determine the circumstances under which a
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particular investment Subfund may be elected, or shall be automatically
utilized, the minimum or maximum amount or percentage of an Account which may be
invested in a particular investment Subfund, the procedures for making or
changing investment elections, the extent (if any) to which Beneficiaries of
deceased Participants may make investment elections and the effect of a
Participant's or Beneficiary's failure to make an effective election with
respect to all or any portion of an Account.
4.1.4. Revising Subfunds. The Administrative Committee shall have the power,
from time to time, to dissolve investment Subfunds, to direct that additional
investment Subfunds be established, to change Investment Managers for any one or
more of the investment Subfunds, and, under uniform rules, to withdraw or limit
participation in a particular investment Subfund. In connection with the power
to commingle reserved to the Trustee under Section 10.6, the Administrative
Committee shall also have the power to direct the Trustee to consolidate any
separate investment Subfunds hereunder with any other separate investment
Subfunds having the same investment objectives which are established under any
other retirement plan trust fund of the Employer or any corporation affiliated
in ownership or management with the Employer of which the Trustee is trustee and
which are managed by the Trustee or the same Investment Manager.
4.2. Valuation And Adjustment Of Accounts. The Trustee shall value each
investment Subfund as of each Valuation Date (which for purposes of this Section
4.2, shall include any Distribution Date which a distribution is to be made
pursuant to Section 7), which valuation shall reflect, as nearly as possible,
the then fair market value of the assets comprising such investment Subfund
(including income accumulations therein). In making such valuations the Trustee
may rely upon information supplied by any Investment Manager having investment
responsibility over the particular investment Subfund.
Unless the Administrative Committee adopts other accounting rules as of each
Valuation Date (the "current Valuation Date"), the value of each Account or
portion of an Account invested in a particular investment Subfund, including
Suspense Accounts, determined as of the last preceding Valuation Date (the
"initial Account value") shall be increased (or decreased) by the following
adjustments made in the following sequence:
4.2.1. Intermediate Distributions Adjustment. The initial Account value shall be
adjusted by the total amount:
(a) distributed in fact to (or with respect to) the Participant from such
Account, and
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(b) loaned to the Participant, whether the loan was made before or after
the date on which the initial Account value is determined, and
(c) transferred from such Account to another Account of that Participant
(or any other Participant) within this Plan (including amounts
transferred to other investment Subfunds) or to the trustee of another
plan pursuant to an arrangement contemplated under Section 9.3, and
(d) transferred into such Account from another Account of that Participant
(or any other Participant) within this Plan (including amounts
transferred from other investment Subfunds), or from the trustee of
another plan pursuant to an arrangement contemplated under Section 9.3,
and
(e) paid as expenses incurred by the Plan which were charged specifically
against that Account (as distinguished from being a general charge
against the assets of the Fund),
as of a date subsequent to the last preceding Valuation Date but prior to the
current Valuation Date.
4.2.2. Investment Adjustment. The initial Account value (as adjusted above)
shall be increased (or decreased) for its proportionate share of all the:
(a) realized and unrealized gains and losses on the assets of the Fund, and
(b) income earned by the Fund, and
(c) expenses incurred by the Plan and paid generally from the Fund (rather
than charged specifically against a particular Account),
as of a date subsequent to the last preceding Valuation Date but not later than
the current Valuation Date.
Contributions made in advance of the Valuation Date as of which they are
allocated to Participants' Accounts shall be held separately by the Trustee, and
the gains, losses and income on such contributions until such contributions are
allocated to Participants' Accounts, shall be treated as general earnings of the
Fund and allocated pursuant to this Section 4.2.
4.2.3. Contribution Adjustment. The initial Account value (as adjusted above)
shall be increased by the total amount allocated to such Account under Section 3
as of a date subsequent to the immediately preceding Valuation Date but not
later than the current Valuation Date.
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4.2.4. Final Distributions Adjustment. The initial Account value (as adjusted
above) shall be adjusted by the total amount:
(a) distributed in fact to (or with respect to) the Participant from such
Account, and
(b) transferred from such Account to another Account of that Participant
(or any other Participant) within this Plan (including amounts
transferred to other investment Subfunds), or to the trustee of another
plan pursuant to an arrangement contemplated under Section 9.3, and
(c) paid as expenses incurred by the Plan which were charged specifically
against that Account (as distinguished from being a general charge
against the assets of the Fund),
as of the current Valuation Date.
4.3. Management And Investment Of Fund. The Fund in the hands of the Trustee,
together with all additional contributions made thereto and together with all
net income thereof, shall be controlled, managed, invested, reinvested and
ultimately paid and distributed to Participants and Beneficiaries by the Trustee
with all the powers, rights and discretions generally possessed by trustees, and
with all the additional powers, rights and discretions conferred upon the
Trustee under the Plan Statement. Except to the extent that the Trustee is
subject to the authorized and properly given investment directions of an
Employer, Participant, Beneficiary or Investment Manager, and subject to the
directions of the Administrative Committee with respect to the payment of
benefits hereunder, the Trustee shall have the exclusive authority to manage and
control the assets of the Fund in its custody and shall not be subject to the
direction of any person in the discharge of its duties, nor shall its authority
be subject to delegation or modification except by formal amendment of the Plan
Statement.
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SECTION 5
VESTING
5.1. Employer Matching Account And Employer Profit Sharing Account.
5.1.1. Progressive Vesting. The Employer Matching Account and Employer Profit
Sharing Account of each Participant shall become Vested in the Participant in
accordance with the schedule set forth in the Adoption Agreement; provided,
however, that the Vested percentage of a Participant's Employer Matching Account
and Employer Profit Sharing Account determined as of the Effective Date (or the
date of the execution of the Adoption Agreement by the Employer, if later) shall
be not less than such Vested percentage computed under the Prior Plan Statement,
if any, as of that date.
5.1.2. Full Vesting. Notwithstanding the foregoing, the entire Employer Matching
Account and Employer Profit Sharing Account of each Participant shall be fully
Vested in the Participant upon the earliest occurrence of any of the following
events while in the employment of the Employer or an Affiliate:
(a) the Participant's death,
(b) the Participant's attainment of the Participant's Normal Retirement Age
(or any earlier age specified in the Adoption Agreement for full
Vesting),
(c) the occurrence of the Participant's Disability,
(d) a partial termination of the Plan which is effective as to the
Participant, or
(e) a complete termination of the Plan or a complete discontinuance of
Employer contributions hereto.
In addition, a Participant who is not in the employment of the Employer or an
Affiliate upon a complete termination of the Plan or a complete discontinuance
of Employer contributions hereto, shall be so fully Vested if, on the date of
such termination or discontinuance, such Participant has not had a "forfeiture
event" as described in Section 6.2.1.
5.1.3. Special Rule For Partial Distributions. If a distribution is made of less
than the entire Employer Matching Account or Employer Profit Sharing Account of
a Participant who is not then fully (100%) Vested, then until the Participant
becomes fully Vested in the Participant's Employer Matching Account or Employer
Profit Sharing Account or until the Participant incurs five
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(5) or more consecutive One-Year Breaks in Service, whichever first occurs, (i)
a separate account shall be established for the portion of the Employer Matching
Account or Employer Profit Sharing Account not so distributed and (ii) the
Participant's Vested interest in such account at any relevant time shall not be
less than an amount ("X") determined by the formula: X = P[B + (R x D)] - (R x
D). For the purpose of applying the formula, "P" is the Vested percentage at the
relevant time (determined pursuant to Section 5); "B" is the separate account
balance at the relevant time; "D" is the amount of the distribution; and "R" is
the ratio of the separate account balance at the relevant time to the Employer
Matching Account or Employer Profit Sharing Account balance immediately after
distribution.
5.1.4. Effect Of Break On Vesting. If a Participant who is not fully (100%)
Vested incurs five (5) or more consecutive One-Year Breaks in Service, returns
to Recognized Employment and is thereafter eligible for any additional
allocation of Employer contributions, the Participant's undistributed Employer
Matching Account or Employer Profit Sharing Account, if any, attributable to
Employer contributions allocated as of a date before such five (5) consecutive
One-Year Breaks in Service, and in which the Participant has a fully (100%)
Vested interest by reason of such prior service and the Participant's new
Employer Matching Account or Employer Profit Sharing Account shall be separately
maintained for vesting purposes until the Participant is fully (100%) Vested in
each such Account under the rules of Section 1.1.37 and this Section 5.
5.1.5. Pre-Effective Date Vesting. For any person who does not perform one (1)
Hour of Service on or after the Effective Date of the Adoption Agreement, the
Vesting provisions of the Prior Plan Statement shall continue to apply.
5.2. Optional Vesting Schedule.
5.2.1. Election. If an amendment of the Plan's vesting schedule should be
adopted or the Plan is amended in any way that directly or indirectly affects
the computation of the Participant's Vested percentage, a qualifying Participant
may elect to have the Vested portion of the Participant's Employer Matching
Account or Employer Profit Sharing Account determined under the vesting schedule
as it existed immediately before the adoption of such amendment. (In no event
shall an amendment of the Plan's vesting schedule reduce a Participant's Vested
percentage as of the date such amendment is adopted or, if later, the date such
amendment is effective.)
5.2.2. Qualifying Participant. A Participant in the Plan qualifies for the
election described in this Section 5.2 only if, as of the expiration of the
period described in Section 5.2.3, the Participant has five (5) or more years of
Vesting Service; provided, however, effective for Plan Years beginning after
December 31, 1988, a Participant who has one (1) or more Hours of Service in any
Plan
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Year beginning after December 31, 1988, qualifies for the election described in
this Section 5.2, only if, as of the expiration of the period described in
Section 5.2.3, the Participant has three (3) or more years of Vesting Service.
5.2.3. Procedure For Election. The election described in Section 5.2.1 shall be
effective only if it is executed in writing upon forms to be prepared by the
Administrative Committee and delivered to the Administrative Committee after the
date upon which the amendment is formally adopted and before the latest of:
(a) the date sixty (60) days after such formal adoption,
(b) the date sixty (60) days after the date such amendment becomes
effective, or
(c) the date sixty (60) days after the date the Participant is issued
written notice of the adoption of the amendment.
5.2.4. Conclusive Election. Failure to file an election will be deemed an
irrevocable waiver of the election. An election filed in accordance with this
provision will be irrevocable from the date it is filed.
5.3. Other Accounts. The Retirement Savings Account, Rollover Account,
Nondeductible Voluntary Account, Deductible Voluntary Account, and Transfer
Account of each Participant shall be fully (100%) Vested in the Participant at
all times. Each Account will be credited with applicable contributions,
forfeitures, earnings and losses as provided in Section 4.
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SECTION 6
MATURITY
6.1. Events Of Maturity. A Participant's Total Account shall mature and the
Vested portion shall become distributable in accordance with Section 7 upon the
earliest occurrence of any of the following events while in the employment of
the Employer or an Affiliate:
(a) the Participant's death,
(b) the Participant's separation from service, whether voluntary or
involuntary,
(c) the Participant's attainment of age seventy and one-half (70-1/2)
years,
(d) the crediting of any amounts to the Participant's Account after the
Participant's attainment of age seventy and one-half (70-1/2) years,
(e) the Participant's Disability,
(f) termination of the Plan without the establishment or maintenance of
another defined contribution plan (other than an employee stock
ownership plan as defined in section 4975(e)(7) of the Code),
(g) the disposition by the Employer (which is a corporation) to an
unrelated corporation of substantially all the assets (within the
meaning of section 409(d)(2) of the Code) used by the Employer in a
trade or business of the Employer, if such acquiring corporation
continues to maintain this Plan after the disposition, but only with
respect to employees who continue employment with the corporation
acquiring such assets and only if the purchase and sale agreement
specifically authorizes distribution of this Plan's assets in
connection with such disposition, or
(h) the disposition by the Employer (which is a corporation) to an
unrelated corporation of the Employer's interest in a subsidiary
(within the meaning of section 409(d)(3) of the Code), if such
acquiring corporation continues to maintain this Plan after the
disposition, but only with respect to employees who continue employment
with such subsidiary and only if the purchase and sale agreement
specifically
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authorizes distribution of this Plan's assets in connection with such
disposition;
provided, however, that a transfer from Recognized Employment to employment with
the Employer that is other than Recognized Employment or a transfer from the
employment of one Employer participating in the Plan to another such Employer or
to any Affiliate shall not constitute an Event of Maturity.
6.2. Disposition Of Nonvested Portion Of Account. Upon the occurrence of a
Participant's Event of Maturity, if any portion of the Participant's Employer
Matching Account or the Participant's Employer Profit Sharing Account is not
Vested, such portion shall be transferred to the Participant's Suspense Account
as of the Valuation Date coincident with or next following such Event of
Maturity. The portion thereof which was not Vested (and therefore became the
Participant's Suspense Account) shall be retained in the Suspense Account until
the earlier of the date the Participant is reemployed by the Employer or an
Affiliate or the date upon which occurs the Participant's first forfeiture
event.
6.2.1. Forfeiture Event. A forfeiture event shall occur with respect to a
Participant upon the earliest of:
(a) the occurrence after an Event of Maturity of five (5) consecutive
One-Year Breaks in Service,
(b) the distribution after an Event of Maturity, to (or with respect to) a
Participant of the entire Vested portion of the Total Account of the
Participant,
(c) the Event of Maturity of a Participant who has no Vested interest in
the Participant's Total Account, or
(d) the death of the Participant at a time and under circumstances which do
not entitle the Participant to be full (100%) Vested in the
Participant's Total Account.
6.2.2. Rehire Before Forfeiture Event. If such Participant is reemployed by the
Employer or an Affiliate before the forfeiture event following the Participant's
Event of Maturity, the portion of the Participant's Employer Matching Account or
the Participant's Employer Profit Sharing Account which was not Vested upon such
Event of Maturity (and therefore became the Participant's Suspense Account)
shall be transferred back to and held in the Participant's Employer Matching
Account or Employer Profit Sharing Account under the Plan as of the Valuation
Date coincident with or next following the reemployment date and it shall be
held there pending the occurrence of another Event of Maturity effective as to
the Participant, during which period of
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subsequent employment the Participant may earn a Vested interest in some or all
of such portion in accordance with the provisions of Section 5.
6.2.3. Rehire After Forfeiture Event. If such Participant is not reemployed by
the Employer or an Affiliate before the forfeiture event following the
Participant's Event of Maturity, the portion of the Participant's Employer
Matching Account or Employer Profit Sharing Account which was not Vested upon
such Event of Maturity (and therefore became the Participant's Suspense Account)
shall be forfeited as of the Annual Valuation Date coincident with or
immediately following the date of that forfeiture event as provided in Section
6.2.4.
6.2.4. Forfeitures. Forfeited Suspense Accounts shall be used first to restore
any forfeited Suspense Accounts for rehired Participants as required in Section
6.2.5 and, next, to restore any forfeited Vested Total Accounts as required in
Section 7.1.4, and any remaining portion shall be used to reduce Employer
matching contributions otherwise required under Section 3.3. To the extent the
forfeited Suspense Accounts are used to reduce Employer matching contributions,
they shall be added to the reduced Employer matching contribution, if any, to be
allocated, as of the Annual Valuation Date in the Plan Year in which the
Participant's forfeiture event occurred (or as of any succeeding date), to the
Employer Matching Accounts of those Participants employed by the same Employer
during the Plan Year, as provided in Section 3.3. Next, any remaining portion
shall then be added to the Employer discretionary contribution, if any, to be
allocated as of such Annual Valuation Date, to the Employer Matching Accounts
and Employer Profit Sharing Accounts of all Participants during the Plan Year,
as provided in Section 3.4. Any Suspense Accounts remaining at the termination
of the Plan shall be considered to be a discretionary contribution and shall be
allocated pursuant to Section 3.4.5 as if the Plan termination date were an
Annual Valuation Date.
6.2.5. Restorations. If a Participant:
(a) incurs an Event of Maturity at a time when the Participant was not
fully (100%) Vested in the Participant's Employer Matching Account or
Employer Profit Sharing Account, and
(b) the Participant's Suspense Account (which was established on account of
that Event of Maturity) has been forfeited and disposed of as provided
in Section 6.2.4, and
(c) the Participant becomes an employee of the Employer or an Affiliate
before the Participant has incurred five (5) consecutive One-Year
Breaks in Service following such Event of Maturity,
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then there shall be restored to the Participant's Employer Matching Account or
Employer Profit Sharing Account an amount equal to the amount which was
forfeited from the Participant's Suspense Account (without any adjustment for
income, gains or losses). This restoration shall occur as of the Annual
Valuation Date next following the Participant's return to employment with the
Employer or an Affiliate, and shall be conditioned upon the Participant's
remaining in employment with the Employer or Affiliate until that Annual
Valuation Date. The amount so restored shall be held in a separate sub-account
within the Participant's Employer Matching Account or Employer Profit Sharing
Account and shall become Vested in accordance with the rules of Section 5.1.3.
The amount necessary to make the restoration shall come first from Suspense
Accounts of Participants that are to be forfeited on the Annual Valuation Date
on which the restoration is to occur. If such Suspense Accounts are not adequate
for this purpose, the Employer shall make a contribution adequate to make the
restoration as of that Annual Valuation Date (in addition to any contributions
required to be made under Section 3). If the Participant is rehired by an
Affiliate that is not an Employer, the amount necessary to make the restoration
shall come first from Suspense Accounts of Participants of the Principal
Employer that are to be forfeited on the Annual Valuation Date on which the
restoration is to occur and, if such Suspense Accounts are not adequate for this
purpose, then the Principal Employer shall make a contribution adequate to make
the restoration as of that Annual Valuation Date (in addition to any
contributions made under Section 3).
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SECTION 7
DISTRIBUTION
7.1. Application For Distribution.
7.1.1. Application Required. No distribution shall be made from the Plan until
the Administrative Committee has received a written application for distribution
from the Participant or the Beneficiary entitled to receive distribution (the
"Distributee"). The Administrative Committee may prescribe rules regarding the
form of such application, the manner of filing such application and the
information required to be furnished in connection with such application.
All distributions required under the Plan shall be made in accordance with the
provisions of this Section 7 and the regulations under section 401(a)(9) of the
Code including the minimum distribution incidental benefit requirement of Treas.
Reg. 1.401(a)(9)-2 (proposed).
7.1.2. Exception For Small Amounts. A Vested Total Account (but not including
the Deductible Voluntary Account) which does not exceed Three Thousand Five
Hundred Dollars ($3,500) as of the Distribution Date coincident with or next
following an Event of Maturity effective as to a Participant and has never
exceeded Three Thousand Five Hundred Dollars ($3,500) at the time of any prior
distribution, shall be automatically distributed in a single lump sum as of the
Distribution Date without a written application for distribution. A Participant
who has no Vested interest in the Participant's Total Account as of the
Participant's Event of Maturity shall be deemed to have received an immediate
distribution of the Participant's entire interest in the Plan as of such Event
of Maturity.
7.1.3. Exception For Required Distributions. Any Vested Total Account for which
no application has been received on the required beginning date effective as to
a Distributee under Section 7.2.2 or, subject to Section 9.2, following a
termination of the Plan, shall be automatically distributed in a single lump sum
(if the Plan is not an exempt profit sharing plan, however, the Vested Total
Account shall be distributed pursuant to Section 7.3.4), without a written
application for distribution.
7.1.4. Lost Distributees. If distribution of any Vested Total Account is
required to be made without an application pursuant to Section 7.1.2 or Section
7.1.3 to a Distributee who cannot be found after a first class mailing to the
Distributee's last known address, then such Distributee's Vested Total Account
shall be forfeited and allocated pursuant to Section 3.2.8 (in the same manner
as forfeited Suspense Accounts) as of the Annual Valuation Date
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coincident with or immediately following the date as of which distribution was
required to be made to the Distributee. Provided, however, that if the
Distributee was not fully Vested, such forfeiture and allocation shall be made
as of the Annual Valuation Date on which the Distributee's non-Vested Total
Account is forfeited, if later.
If a Distributee's Vested Total Account is forfeited because the Distributee
cannot be found, such Vested Total Account shall be restored as of the Annual
Valuation Date following the filing of a written application by the Distributee.
The amount necessary to make the restoration shall first come from Suspense
Accounts to be forfeited on the Annual Valuation Date as of which the
restoration is to occur as provided in Section 6.2.5. If Suspense Accounts to be
forfeited as of that Annual Valuation Date are not adequate for this purpose,
the Employer shall make a contribution adequate to make the restoration as of
that Annual Valuation Date (in addition to any contributions required to be made
under Section 6.2.5 and Section 3).
If at Plan termination there is any Distributee with a Vested Total Account that
cannot be found after a first class mailing to the Distributee's last known
address, then such Distributee's Vested Total Account shall be forfeited
pursuant to Section 6.2.4 as if the Plan termination date were an Annual
Valuation Date.
7.2. Time Of Distribution. Upon the receipt of a proper application for
distribution from the Distributee after the occurrence of an Event of Maturity
effective as to a Participant, and after the Participant's Vested Total Account
has been determined and the right of the Distributee to receive a distribution
has been established, the Administrative Committee shall cause the Trustee to
make or commence distribution of such Vested Total Account as of (and as soon as
may be administratively feasible after) a Distribution Date (authorized in the
Adoption Agreement) specified by the Distributee which is not earlier than nor
later than the dates specified in Section 7.2.1 and Section 7.2.2.
7.2.1. Earliest Beginning Date. Distribution to a Distributee shall not be made
or commenced earlier than the Distribution Date (i) the Administrative Committee
receives any required application for distribution, and (ii) which is allowed in
the Adoption Agreement.
7.2.2. Required Beginning Date. Distribution shall be made or commenced as of
the Distribution Date immediately preceding the required beginning date
effective as to the Distributee. Actual distribution shall be made or commenced
as soon thereafter as is administratively feasible. In all events, however,
distribution shall be made or commenced not later than the required beginning
date.
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(a) Participant. If the Distributee is a Participant, the required
beginning date is the April 1 following the calendar year in which the
Participant attains age seventy and one-half (70-1/2) years.
(b) Beneficiary. If the Distributee is the Beneficiary of a Participant who
died on or after the April 1 following the calendar year in which the
Participant attained age seventy and one-half (70-1/2) years, the
required beginning date is the latest date that will allow
distributions to such Beneficiary to be made at a rate (considering
both time and amount) that is cumulatively at least as rapid as the
rate of distribution scheduled and commenced prior to the death of the
Participant.
(c) Beneficiary. If the Distributee is a Beneficiary of a Participant who
died before the April 1 following the calendar year in which the
Participant attained age seventy and one-half (70-1/2) years, the
required beginning date is December 31 of the calendar year in which
occurs the fifth (5th) anniversary of the Participant's death;
provided, however, that:
(i) if the Beneficiary is an individual who is not the surviving
spouse of the Participant and if in a written application,
timely filed, such Beneficiary requests that distributions be
made to such individual Beneficiary in substantially equal
annual amounts over a period of time not extending beyond the
life expectancy of such Beneficiary, distributions must
commence not later than (and the required beginning date is)
December 31 of the year following the year of the
Participant's death, or
(ii) if the Beneficiary is the surviving spouse of the Participant
and if in a written application, timely filed, such spouse
Beneficiary requests that distributions will be made to such
surviving spouse in substantially equal annual amounts over a
period of time not extending beyond the life expectancy of the
surviving spouse, distributions must commence not later than
(and the required beginning date is) the date specified in
paragraph (i) above or, if later, the December 31 of the
calendar year in which the Participant would have attained age
seventy and one-half (70-1/2) years.
A Beneficiary must elect the method of distribution no later than the earlier of
(i) December 1 of the calendar year in which distribution would be required to
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begin under this Section 7.2.2, or (ii) December 1 of the calendar year in which
occurs the fifth (5th) anniversary of the Participant's death. If a Beneficiary
makes no election, distribution of the Beneficiary's entire interest must be
completed by December 31 of the calendar year containing the fifth (5th)
anniversary of the Participant's death.
7.3. Forms Of Distribution.
7.3.1. Forms Available. At the direction of the Administrative Committee
(subject to Section 7.3.4), the Trustee shall make distribution of the
Participant's Vested Total Account to the Distributee in one of the following
ways as permitted in the Adoption Agreement and as designated by the Distributee
in writing:
(a) Lump Sum. If the Distributee is either a Participant or a Beneficiary,
in a single lump sum as described in the Adoption Agreement.
(b) Installments To Participant. If the Distributee is a Participant, in a
series of substantially equal installments payable monthly, quarterly
or annually over a period of years selected by the Participant before
the first payment which does not exceed the life expectancy of the
Participant or the joint and last survivor life expectancy of the
Participant and the Participant's Beneficiary; provided, however, that
the amount of such installments shall automatically be increased if the
series of substantially equal installments payable annually over the
life expectancy of the Participant or the joint and last survivor life
expectancy of the Participant and the Participant's Beneficiary
determined again as of the Participant's required beginning date
(pursuant to Section 7.2.2(a)) and based on the facts then in existence
is greater than the amount determined as of the first such installment
payment. For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the Beneficiary, then the method of
distribution selected must assure that at least fifty percent (50%) of
the Vested Total Account is paid within the life expectancy of the
Participant.
(c) Continued Installments to Beneficiary. If the Distributee is a
Beneficiary of a Participant who died on or after the April 1 following
the calendar year in which the Participant attained age seventy and
one-half (70-1/2) years, then in a series of substantially equal
installments payable monthly, quarterly or annually which provides
distribution to such Beneficiary at a rate (considering both time and
amount) which is
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cumulatively at least as rapid as the rate of distribution commenced
prior to the death of the Participant.
(d) Installments to Beneficiaries. If the Distributee is a Beneficiary of a
Participant who died before the April 1 following the calendar year in
which the Participant attained age seventy and one-half (70-1/2) years,
in a series of substantially equal installments, the last payment of
which shall be made not later than December 31 of the calendar year in
which occurs the fifth (5th) anniversary of the death of the
Participant; provided, however, that:
(i) if the Beneficiary is an individual who is not the surviving
spouse of the Participant and if distributions will commence
not later than December 31 of the calendar year following the
calendar year of the Participant's death and will be made to
such individual Beneficiary over a period of years not
extending beyond the life expectancy of such Beneficiary, in a
series of substantially equal monthly, quarterly or annual
installments, or
(ii) if the Beneficiary is the surviving spouse of the Participant
and if distributions will be made to such surviving spouse
over a period of years not extending beyond the life
expectancy of the surviving spouse, and will commence not
later than the date specified in paragraph (i) above or, if
later, the December 31 of the calendar year in which the
Participant would
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have attained age seventy and one-half (70-1/2) years, in a
series of substantially equal monthly, quarterly or annual
installments.
(e) Other Installments to Participants and Beneficiaries. If the
Distributee is either a Participant or a Beneficiary, in a series of
installments as specified in the Adoption Agreement or, if greater, the
minimum installments necessary to comply with section 401(a)(9) of the
Code and regulations thereunder (proposed or final), including the
minimum distribution incidental benefit requirements determined by
using the applicable divisor from the table set forth in Q&A-4 of
section 1.401(a)(9)-2 of the proposed regulations.
7.3.2. Substantially Equal. Distributions shall be considered to be
substantially equal if the distributions are determined in whichever of the
following manners is applicable:
(a) Term Certain Installments. If distributions are in the form of
installments payable over a fixed number of years, the amount of the
distribution required to be made for each calendar year (the
"distribution year") shall be determined by dividing the amount of the
Vested Total Account as of the last Valuation Date in the calendar year
immediately preceding the distribution year (such preceding calendar
year being the "valuation year") by the number of remaining years in
the fixed period. The amount of the Vested Total Account as of such
Valuation Date shall be increased by the amount of any contributions
and forfeitures allocated to the Vested Total Account during the
valuation year and after such Valuation Date (including contributions
and forfeitures, if any, made after the end of the valuation year which
are allocated as of dates in the valuation year). The amount of the
Vested Total Account shall be decreased by the amount of any
distributions made for the valuation year and after such Valuation
Date.
(b) Lifetime Installments. If distributions are in the form of installments
over the life expectancy of the recipient or the joint and last
survivor life expectancy of the Participant and the Participant's
Beneficiary, the amount of the distribution required to be made for
each calendar year (the "distribution year") shall be determined by
dividing the amount of the Vested Total Account as of the last
Valuation Date in the calendar year immediately preceding the
distribution year (such preceding calendar year being the "valuation
year") by
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the remaining life expectancy as of the distribution year. The amount
of the Vested Total Account as of the last Valuation Date in the
valuation year shall be increased by the amount of any contributions
and forfeitures allocated to the Vested Total Account during the
valuation year and after such Valuation Date (including contributions
and forfeitures, if any, made after the end of the valuation year which
are allocated as of dates in the valuation year). The amount of the
Vested Total Account shall be decreased by distributions made for the
valuation year and after such Valuation Date.
For purposes of Sections 7.3.2(a) and (b) above, if any portion of a minimum
distribution (made pursuant to proposed regulation 1.401(a)(9)) is made for the
first distribution year in the second distribution year on or before the
required beginning date, the amount of the minimum required distribution made in
the second distribution year shall be treated as if it had been made in the
immediately preceding distribution year.
7.3.3. Life Expectancy. Life expectancy shall be determined from the expected
return multiples located in Tables V and VI of Treasury Regulation 1.72-9
(except as provided in (b) below). Life expectancy shall be based upon attained
age on the individual's birthday in the calendar year for which life expectancy
is being determined and, in the absence of an election as provided below, shall
be reduced by one (1) year in each succeeding calendar year.
(a) Election to Recalculate Life Expectancy. A Participant may elect to
redetermine the Participant's life expectancy for each succeeding
calendar year that a distribution is required to be made. In the case
of a Participant who has designated the Participant's spouse as
Beneficiary, the Participant may elect to have life expectancy for the
Participant and the Participant's spouse, redetermined for each
succeeding calendar year that a distribution is required to be made.
The election must be made no later than the time of the first required
distribution. The election is irrevocable and must apply to all
subsequent years. The life expectancy of a nonspouse Beneficiary may
not be recalculated.
(b) Joint and Last Survivor. Joint and last survivor life expectancy shall
be determined for the Participant and the Participant's Beneficiary (in
the case of a nonspouse Beneficiary) in accordance with the rules of
section 401(a)(9) of the Code and the regulations thereunder,
including, if applicable, the table set forth in Q&A-4 of section
1.401(a)(9)-2 of the proposed regulations.
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(c) Minimum Distribution Incidental Benefit Requirement. In the case of a
Participant who has not designated the Participant's or her spouse as
Beneficiary, the life expectancy factor used to compute the amount of
the substantially equal payment during the Participant's lifetime shall
not be greater than the factor determined under Regulation
1.401(a)(9)-2 of the Code (the minimum distribution incidental benefit
requirement).
7.3.4. Presumptive Forms. The selection of a form of distribution shall be
subject, however, to the following rules:
(a) Required Lump Sum. As provided in Section 7.1.2, if the value of the
Participant's Vested Total Account (not including, however, the value
of the Participant's Deductible Voluntary Account) is not greater than
Three Thousand Five Hundred Dollars ($3,500) when distributed and has
never exceeded Three Thousand Five Hundred Dollars ($3,500) at the time
of any prior distribution, the distribution shall be made in a single
lump sum.
(b) QJ&SA Contract. A QJ&SA contract is a nontransferable immediate annuity
contract issued as an individual policy or under a master or group
contract which provides for a monthly annuity payable to and for the
lifetime of the Participant beginning as of the Distribution Date as of
which it is purchased with a survivor annuity payable monthly after the
death of the Participant to and for the lifetime of the surviving
spouse of the Participant (to whom the Participant was married on the
date as of which the first payment is due) in an amount equal to fifty
percent (50%) of the amount payable during the joint lives of the
Participant and the surviving spouse. The contract shall be a QJ&SA
contract only if it is issued on a premium basis which does not
discriminate on the basis of the sex of the Participant or the
surviving spouse. The contract shall comply with the requirements of
this Plan and section 401(a)(9) of the Code and the regulations
thereunder.
(c) Life Annuity Contract. A Life Annuity contract is a nontransferable
immediate annuity contract issued as an individual policy or under a
group or master contract which provides for a monthly annuity payable
to and for (i) the lifetime of an unmarried Participant beginning as of
the
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Distribution Date as of which it is purchased, or (ii) the lifetime of
the surviving spouse of a Participant beginning as of the Distribution
Date as of which it is purchased. The contract shall be a Life Annuity
contract only if it is issued on a premium basis which does not
discriminate on the basis of the sex of the Participant or the
surviving spouse. The contract shall comply with the requirements of
this Plan and section 401(a)(9) of the Code and the regulations
thereunder.
(d) Married Participant. In the case of any distribution which is to be
made:
(i) if this Plan is not an exempt profit sharing plan (as defined
in Section 7.3.5), and
(ii) when paragraph (a) above is not applicable, and
(iii) to a Participant who is married on the Distribution Date as of
which such distribution is to be made to the Participant, and
(iv) to a Participant who has not rejected distribution in the form
of a QJ&SA contract,
distribution shall be effected for such Participant by applying the
entire Vested Total Account to purchase and distribute to such
Participant a QJ&SA contract. A Participant may reject distribution in
the form of a QJ&SA contract by filing with the Administrative
Committee an affirmative written rejection of distribution in that form
not more than ninety (90) days before the Distribution Date as of which
the distribution is made. Such a rejection may be made or revoked at
any time and any number of times until the Distribution Date as of
which the distribution to the Participant is made A rejection shall not
be effective unless the Participant's spouse consents. To be valid, the
consent of the spouse must be in writing, must acknowledge the effect
of the distribution, must be witnessed by a notary public, must be
given during the ninety (90) day period before the Distribution Date as
of which the distribution is made and must relate to that specific
distribution. The consent of the spouse must be to a specific form of
distribution (other than the QJ&SA contract) which may not be changed
without further spousal consent unless the Participant elects a QJ&SA
contract, or alternatively, the consent of the spouse must expressly
permit the Participant to elect and to change the form of distribution
(other than the QJ&SA contract) without any requirement of further
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spousal consent. The consent of the spouse shall be irrevocable and
shall be effective only with respect to that spouse. No less than
thirty (30) days and no more than ninety (90) days prior to the date
distribution is to be made or commenced to the Participant, there shall
be furnished to the Participant a written explanation of the terms and
conditions of the QJ&SA contract, the Participant's right to reject,
and the effect of a rejection of distribution in the form of the QJ&SA
contract, the requirement for the consent of the Participant's spouse,
the right to revoke a prior rejection of distribution in the form of a
QJ&SA contract, and the right to make any number of further revocations
or rejections until the Distribution Date as of which the distribution
actually is made. Notwithstanding the consent requirement described
above, if the Participant establishes to the satisfaction of the
Administrative Committee that such written consent cannot be obtained
because there is no spouse, or the spouse cannot be located, a
Participant's rejection shall be deemed a valid rejection.
(e) Unmarried Participant. In the case of any distribution which is to be
made:
(i) if this Plan is not an exempt profit sharing plan (as defined
in Section 7.3.5), and
(ii) when paragraph (a) above is not applicable, and
(iii) to a Participant who is not married on the Distribution Date
as of which such distribution is to be made to the
Participant, and
(iv) to a Participant who has not rejected distribution in the form
of a Life Annuity contract,
distribution shall be effected for such Participant by applying the
entire Vested Total Account to purchase and distribute to such
Participant a Life Annuity contract. A Participant may reject
distribution in the form of a Life Annuity contract by filing with the
Administrative Committee an affirmative written rejection of
distribution in that form not more than ninety (90) days before the
Distribution Date as of which the distribution is made. Such a
rejection may be made or revoked at any time and any number of times
until the Distribution Date as of which the distribution to the
Participant is made. No less than thirty (30) days and no
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more than ninety (90) days prior to the date distribution is to be made
or commenced, there shall be furnished to the Participant a written
explanation of the terms and conditions of the Life Annuity contract,
the Participant's right to reject and the effect of a rejection of,
distribution in the form of the Life Annuity contract, the right to
revoke a prior rejection of distribution in the form of a Life Annuity
contract, and the right to make any number of further revocations or
rejections until the Distribution Date as of which distribution
actually is made.
(f) Surviving Spouse. In the case of a distribution which is made:
(i) if this Plan is not an exempt profit sharing plan (as defined
in Section 7.3.5), and
(ii) when paragraph (a) above is not applicable, and
(iii) to the surviving spouse of a deceased Participant, and
(iv) when such surviving spouse has not rejected distribution in
the form of a Life Annuity contract,
distribution shall be effected for such surviving spouse by applying
the entire Vested Total Account to purchase and distribute to such
surviving spouse a Life Annuity contract. A surviving spouse may reject
distribution in the form of a Life Annuity contract by filing with the
Administrative Committee an affirmative written rejection of
distribution in that form not more than ninety (90) days before the
Distribution Date as of which the distribution is made. Any number of
rejections and revocations of rejections may be made at any time until
the Distribution Date as of which the distributions are made or
commence to such surviving spouse. No less than thirty (30) days and no
more than ninety (90) days prior to the date distribution is to be made
or commenced to the surviving spouse, there shall be furnished to the
surviving spouse a written explanation of the terms and conditions of
the contract, the surviving spouse's right to reject, and the effect of
a rejection of distribution in the form of the Life Annuity contract,
the right to revoke a prior rejection of distribution in the form of
the Life Annuity contract, and the right to make any number of further
revocations or rejections until the Distribution Date as of which
distribution actually is made.
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(g) Advance Distribution. If the Adoption Agreement allows a partial
advance payment, the 90-day period referred to in Section 7.3.4(d), (e)
and (f) shall end on the date any such payment is actually made but
only with regard to such payment.
7.3.5. Exempt Profit Sharing Plan. This Plan is an exempt profit sharing plan if
the following conditions are satisfied:
(a) this Plan is adopted as a profit sharing plan, and
(b) no Participant under this Plan can elect to receive payments in the
form of a lifetime annuity, and
(c) this Plan is not a direct or indirect transferee of assets from a
defined benefit pension plan, money purchase pension plan or target
benefit money purchase pension plan, and
(d) this Plan is not a direct or indirect transferee from a stock bonus
plan or a profit sharing plan which was otherwise required to make
available to Participants with respect to whom assets and liabilities
were transferred distribution in the form of a lifetime annuity.
7.3.6. Effect Of Reemployment. If a Participant is reemployed by the Employer or
an Affiliate after distribution has been scheduled to be made to the Participant
but before the Participant attains Normal Retirement Age and before actual
distribution, distribution of the Participant's Vested Total Account, shall be
suspended and the Participant's Vested Total Account shall continue to be held
in the Fund until another Event of Maturity effective as to the Participant
shall occur after the Participant's reemployment. It is the general intent of
this Plan that no distribution shall be made while a Participant is employed by
the Employer or an Affiliate before the Participant's Normal Retirement Age.
7.3.7. TEFRA ss. 242(b) Transitional Rules. Notwithstanding the other provisions
of this Section 7, distributions to or with respect to each individual eligible
to make a designation (before January 1, 1984) of a method of distribution
pursuant to section 242(b) of the Tax Equity and Fiscal Responsibility Act of
1982 shall be made on and after the first day of the Plan Year beginning in 1984
in accordance with the provisions set forth in the Appendix E to this Plan
Statement; provided, however, that if the Plan is not an exempt profit sharing
plan, the QJ&SA contract or Life Annuity contract has been rejected as described
in Section 7.3.4.
7.4. Designation Of Beneficiaries.
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7.4.1. Right To Designate. Each Participant may designate, upon forms to be
furnished by and filed with the Administrative Committee, one or more primary
Beneficiaries or alternative Beneficiaries to receive all or a specified part of
the Participant's Vested Total Account in the event of the Participant's death
and may change or revoke any such designation from time to time. No such
designation, change or revocation shall be effective unless executed by the
Participant and accepted by the Administrative Committee during the
Participant's lifetime. If, however, the Plan is not an exempt profit sharing
plan and such designation of Beneficiary is made before the first day of the
Plan Year in which the Participant attains age thirty-five (35) years and the
Participant dies on or after that date while married, the beneficiary
designation is void.
7.4.2. Spousal Consent. Notwithstanding the foregoing, a designation will not be
valid for the purpose of paying benefits from the Plan to anyone other than a
surviving spouse of the Participant (if there is a surviving spouse) unless that
surviving spouse consents in writing to the designation of another person as
Beneficiary. To be valid, the consent of such spouse must be in writing, must
acknowledge the effect of the designation of the Beneficiary and must be
witnessed by a notary public. The consent of the spouse must be to the
designation of a specific named Beneficiary which may not be changed without
further spousal consent, or alternatively, the consent of the spouse must
expressly permit the Participant to make and to change the designation of
Beneficiaries without any requirement of further spousal consent. The consent of
the spouse to a nonspouse Beneficiary is a waiver of the spouse's rights to
benefits under the Plan. In a plan that is not an exempt profit sharing plan,
these benefits are sometimes known as a qualified preretirement survivor
annuity. The consent of the surviving spouse need not be given at the time the
designation is made. The consent of the surviving spouse need not be given
before the death of the Participant. The consent of the surviving spouse will be
required, however, before benefits can be paid to any person other than the
surviving spouse. The consent of a spouse shall be irrevocable and shall be
effective only with respect to that spouse.
7.4.3. Written Explanation Requirement For Qualified Preretirement Survivor
Annuity. If this Plan is not an exempt profit sharing plan as defined in Section
7.3.5, the Administrative Committee shall provide each Participant with a
written explanation of a qualified preretirement survivor annuity under one of
the following rules as determined by the Administrative Committee:
(a) General Annual Distribution. Each Participant will receive a written
explanation of the qualified preretirement survivor annuity once each
year.
(b) Specific Distribution. The Administrative Committee will provide each
Participant within the "applicable period" for such
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Participant a written explanation of the qualified preretirement
survivor annuity. The "applicable period" for a Participant is
whichever of the following periods ends last: (i) the period beginning
with the first day of the Plan Year in which the Participant attains
age 32 and ending with the close of the Plan Year preceding the Plan
Year in which the Participant attains age 35; (ii) a reasonable period
ending after the individual becomes a Participant; and (iii) a
reasonable period ending after this paragraph first applies to the
Participant. Notwithstanding the foregoing, the written explanation
must be provided within a reasonable period ending after separation
from service in the case of a Participant who separates from service
before attaining age 35. For purposes of applying (i) and (iii), a
reasonable period is the end of the two year period beginning one year
prior to the date the applicable event occurs, and ending one year
after that date. In the case of a Participant who separates from
service before the Plan Year in which age 35 is attained, written
explanation shall be provided within the two year period beginning one
year prior to separation and ending one year after separation. If such
a Participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
7.4.4. Failure Of Designation. If a Participant:
(a) fails to designate a Beneficiary,
(b) designates a Beneficiary and thereafter revokes such designation
without naming another Beneficiary, or
(c) designates one or more Beneficiaries and all such Beneficiaries so
designated fail to survive the Participant,
such Participant's Vested Total Account, or the part thereof as to which such
Participant's designation fails, as the case may be, shall be payable to the
first class of the following classes of automatic Beneficiaries with a member
surviving the Participant and (except in the case of the Participant's surviving
issue) in equal shares if there is more than one member in such class surviving
the Participant:
Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
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7.4.5. Disclaimers by Beneficiaries. A Beneficiary entitled to a distribution of
all or a portion of a deceased Participant's Vested Total Account may disclaim
the Participant's interest therein subject to the following requirements. To be
eligible to disclaim, a Beneficiary must be a natural person, must not have
received a distribution of all or any portion of a Vested Total Account at the
time such disclaimer is executed and delivered, and must have attained at least
age twenty-one (21) years as of the date of the Participant's death. Any
disclaimer must be in writing and must be executed personally by the Beneficiary
before a notary public. A disclaimer shall state that the Beneficiary's entire
interest in the undistributed Vested Total Account is disclaimed or shall
specify what portion thereof is disclaimed. To be effective, duplicate original
executed copies of the disclaimer must be both executed and actually delivered
to both the Administrative Committee and to the Trustee after the date of the
Participant's death but not later than one hundred eighty (180) days after the
date of the Participant's death. A disclaimer shall be irrevocable when
delivered to both the Administrative Committee and the Trustee. A disclaimer
shall be considered to be delivered to the Administrative Committee or the
Trustee only when actually received by the Administrative Committee or the
Trustee (and in the case of a corporate Trustee, shall be considered to be
delivered only when actually received by a trust officer familiar with the
affairs of the Plan). The Administrative Committee (and not the Trustee) shall
be the sole judge of the content, interpretation and validity of a purported
disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be
considered not to have survived the Participant as to the interest disclaimed. A
disclaimer by a Beneficiary shall not be considered to be a transfer of an
interest in violation of the provisions of Section 8 and shall not be considered
to be an assignment or alienation of benefits in violation of federal law
prohibiting the assignment or alienation of benefits under this Plan. No other
form of attempted disclaimer shall be recognized by either the Administrative
Committee or the Trustee.
7.4.6. Definitions. When used herein and, unless the Participant has otherwise
specified in the Participant's Beneficiary designation, when used in a
Beneficiary designation, "issue" means all persons who are lineal descendants of
the person whose issue are referred to, including legally adopted descendants
and their descendants but not including illegitimate descendants and their
descendants; "child" means an issue of the first generation; "per stirpes" means
in equal shares among living children of the person whose issue are referred to
and the issue (taken collectively) of each deceased child of such person, with
such issue taking by right of representation of such deceased child; and
"survive" and "surviving" mean living after the death of the Participant.
7.4.7. Special Rules. Unless the Participant has otherwise specified in the
Participant's Beneficiary designation, the following rules shall apply:
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(a) if there is not sufficient evidence that a Beneficiary was living after
the death of the Participant, it shall be deemed that the Beneficiary
was not living after the death of the Participant.
(b) The automatic Beneficiaries specified in Section 7.4.4 and the
Beneficiaries designated by the Participant shall become fixed as of
the Participant's death so that, if a Beneficiary survives the
Participant but dies before the receipt of all payments due such
Beneficiary hereunder, such remaining payments shall be payable to the
representative of such Beneficiary's estate.
(c) If the Participant designates as a Beneficiary the person who is the
Participant's spouse on the date of the designation, either by name or
by relationship, or both, the dissolution, annulment or other legal
termination of the marriage between the Participant and such person
shall automatically revoke such designation. (The foregoing shall not
prevent the Participant from designating a former spouse as a
Beneficiary on a form executed by the Participant and received by the
Administrative Committee after the date of the legal termination of the
marriage between the Participant and such former spouse, and during the
Participant's lifetime.)
(d) Any designation of a nonspouse Beneficiary by name that is accompanied
by a description of relationship to the Participant shall be given
effect without regard to whether the relationship to the Participant
exists either then or at the Participant's death.
(e) Any designation of a Beneficiary only by statement of relationship to
the Participant shall be effective only to designate the person or
persons standing in such relationship to the Participant at the
Participant's death.
A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of the Participant's legal residence. The
Administrative Committee (and not the Trustee) shall be the sole judge of the
content, interpretation and validity of a purported Beneficiary designation.
7.5. Death Prior To Full Distribution. If a Participant dies after the
Participant's Event of Maturity but before distribution of the Participant's
Vested Total Account has been made, the remainder of the Participant's
undistributed Vested Total Account shall be distributed in the same manner as
hereinbefore provided in the Event of Maturity by reason of death. If, at the
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death of the Participant, any payment to the Participant was due or otherwise
pending but not actually paid, the amount of such payment shall be included in
the Vested Total Account which is payable to the Beneficiary (and shall not be
paid to the Participant's estate).
7.6. Distribution In Cash. Subject to the requirements of Section 7.3 for a Plan
that is not an exempt profit sharing plan, distribution of a Participant's
Vested Total Account shall be made in cash. If, however, (i) the Vested Total
Account to be distributed consists in whole or in part of a Participant's unpaid
promissory note, the Trustee shall cause distribution of that portion of the
Vested Total Account to be made in the form of that unpaid promissory note, or
(ii) the Vested Total Account to be distributed consists in whole or in part of
a life insurance contract acquired pursuant to the Participant's direction under
Section 10.11, the Trustee shall cause distribution of that portion of the
Vested Total Account to be made in the form of the life insurance contract so
acquired, or (iii) the Vested Total Account to be distributed consists in whole
or in part of a Participant's individually directed Subfund established pursuant
to Section 4.1.2, the Trustee shall cause distribution of that portion of the
Vested Total Account to be made in the form of the assets held in the
individually directed Subfund.
7.7. Facility Of Payment. In case of the legal disability, including minority,
of a Participant or Beneficiary entitled to receive any distribution under the
Plan, payment shall be made, if the Administrative Committee shall be advised of
the existence of such condition:
(a) to the duly appointed guardian, conservator or other legal
representative of such Participant or Beneficiary, or
(b) to a person or institution entrusted with the care or maintenance of
the incompetent or disabled Participant or Beneficiary, provided such
person or institution has satisfied the Administrative Committee that
the payment will be used for the best interest and assist in the care
of such Participant or Beneficiary, and provided further, that no prior
claim for said payment has been made by a duly appointed guardian,
conservator or other legal representative of such Participant or
Beneficiary.
Any payment made in accordance with the foregoing provisions of this section
shall constitute a complete discharge of any liability or obligation of the
Employer, the Administrative Committee, the Trustee and the Fund therefor.
7.8. Withdrawals From Nondeductible Voluntary Account.
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7.8.1. When Available. If the Adoption Agreement so provides, a Participant
(whether or not then employed by the Employer) may make withdrawals from time to
time from the Participant's Nondeductible Voluntary Account (if any). To receive
such a withdrawal, the Participant must submit a written application specifying
the dollar amount to be withdrawn. Such withdrawal application shall be approved
by the Administrative Committee to be made as of the Distribution Date
coincident with or next following the approval of a completed application by the
Administrative Committee and shall be made in a lump sum cash payment as soon as
practicable after such Distribution Date.
7.8.2. Sequence of Accounts. The amount of such withdrawals by a Participant
shall be deemed to first come from the aggregate amount of voluntary
contributions theretofore made by the Participant and only thereafter from the
earnings or gains in, or attributable to, the Nondeductible Voluntary Account.
Notwithstanding the foregoing, any such withdrawal shall be deemed to have been
first taken from the Participant's nondeductible voluntary contributions made
prior to January 1, 1987, to the extent of the aggregate amount not previously
withdrawn. Thereafter, the withdrawal shall be deemed to have been taken from a
combination of (i) the Participant's nondeductible voluntary contributions made
after December 31, 1986, to the extent of the aggregate amount thereof not
previously withdrawn, and (ii) a portion of the earnings in the Nondeductible
Voluntary Account. The portion of each such withdrawal that is deemed to be
earnings will be in the same ratio as the total earnings of the Nondeductible
Voluntary Account bear to the total Nondeductible Voluntary Account.
7.8.3. Limitations. Notwithstanding the foregoing, no distribution shall be made
pursuant to this Section 7.8 unless this Plan is an exempt profit sharing plan
(as defined in Section 7.3.5) or the spouse of the Participant, if any, consents
in writing to the distribution. To be valid, the consent of such spouse must be
in writing, must acknowledge the effect of the withdrawal and must be witnessed
by a notary public. The consent of the spouse must be given within ninety (90)
days prior to the Distribution Date as of which the withdrawal is made and must
relate to that specific withdrawal. The consent given by one spouse shall be
effective only with respect to that spouse.
7.8.4. Coordination With Section 4.1. If the Nondeductible Voluntary Account is
invested in more than one (1) Subfund authorized and established under Section
4.1, the amount withdrawn shall be charged to each such Subfund in the same
proportions as the Account is invested in each Subfund.
7.9. In-Service Distributions.
7.9.1. Hardship Distributions.
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7.9.1.1. When Available. If the Adoption Agreement so provides, a
Participant (whether or not then employed by the Employer) may receive a
hardship distribution from the Vested portion of the Participant's Total Account
(unless the Adoption Agreement specifically prohibits hardship distributions
from a particular Account) if the Administrative Committee determines that such
hardship distribution is for one of the purposes described in Section 7.9.1.2
and the conditions in Section 7.9.1.3 and Section 7.9.1.4 have been fulfilled.
To receive such a distribution, the Participant must file an in-service
distribution application with the Administrative Committee. In the Participant's
application, the Participant shall specify the dollar amount to be distributed.
Such hardship distribution shall be approved by the Administrative Committee to
be made in a lump sum cash payment as soon as practicable after approval of a
completed application by the Administrative Committee.
7.9.1.2. Purposes. In-service hardship distributions under this Section
7.9.1 shall be approved by the Administrative Committee only if the Participant
establishes that the distribution is to be made for one of the following
purposes as permitted in the Adoption Agreement.
(a) medical expenses described in section 213(d) of the Code incurred by
the Participant, the Participant's spouse or any dependents of the
Participant (as defined in section 152 of the Code);
(b) the purchase (excluding mortgage payment) of a principal residence of
the Participant;
(c) payment of tuition for the next semester or quarter of post-secondary
education for the Participant, the Participant's spouse, children or
dependents; or
(d) the need to prevent the eviction of the Participant from the
Participant's principal residence or foreclosure on the mortgage of the
Participant's principal residence.
Such purposes shall be considered to be an immediate and heavy financial need of
the Participant.
7.9.1.3. Limitations. In no event, shall the cumulative amount of
hardship distributions withdrawn from a Participant's Retirement Savings Account
exceed the amount of contributions to that Account made pursuant to Section 3.2
(i.e., hardship distributions from that Account will not include any earnings on
such contributions or any curative allocations or earnings on curative
allocations made pursuant to Section 3.4.2). The amount of the hardship
distribution shall not exceed the amount of the Participant's immediate and
heavy financial need. In addition, a hardship distribution which includes a
portion of the Participant's Retirement Savings Account shall
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not be allowed unless the Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available under all
plans maintained by the Employer.
Notwithstanding the foregoing, no hardship distribution shall be made pursuant
to this Section 7.9.1 unless the Plan is an exempt profit sharing plan (as
defined in Section 7.3.5) or the spouse of the Participant, if any, consents in
writing to the distribution. To be valid, the consent of such spouse must be in
writing, must acknowledge the effect of the distribution and must be witnessed
by a notary public. The consent of the spouse must be given within ninety (90)
days prior to the Date as of which the distribution is made and must relate to
the specific distribution. The consent of the spouse shall be irrevocable and
shall be effective only with respect to that spouse.
7.9.1.4. Coordination With Retirement Savings Agreement. If the
hardship distribution is made from a Participant's Retirement Savings Account,
the Participant's Retirement Savings Agreement shall be cancelled for twelve
(12) months after receipt of a hardship distribution and shall not be
automatically reinstated. Thereafter, such Participant may, upon giving fifteen
(15) days' prior written notice to the Plan Administrator, enter into a new
Retirement Savings Agreement effective as of the payday on or after any
subsequent Enrollment Date following such twelve (12) month period, provided the
Participant is in Recognized Employment on that date. In addition, such a
Participant shall not be allowed to make retirement savings contributions for
the Participant's taxable year immediately following the taxable year of the
hardship distribution which exceeds the adjusted Seven Thousand Dollar ($7,000)
limit (as described in Section 2.5) for such next taxable year less the amount
of such Participant's retirement savings contributions for the taxable year of
the hardship distribution. The rules described in this Section 7.9.1.4 only
apply if the hardship distribution includes a portion of the Participant's
Retirement Savings Account.
7.9.1.5. Sequence Of Accounts. Each hardship distribution made pursuant
to this Section 7.9.1 shall first be taken from and charged to the Participant's
Accounts (if the Adoption Agreement permits distribution from such Account) in
the following sequence:
Nondeductible Voluntary Account
Rollover Account
Transfer Account
Employer Profit Sharing Account
Employer Matching Account
Deductible Voluntary Account
Retirement Savings Account
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Distributions from the Participant's Nondeductible Voluntary Account shall be
distributed in the sequence described in Section 7.8.
7.9.1.6. Coordination With Section 4.1. If a withdrawal is made from an
Account which is invested in more than one (1) Subfund authorized and
established under Section 4.1, the amount withdrawn shall be charged to each
such Subfund in the same proportions as the Account is invested in each Subfund.
7.9.2. Age 59-1/2 In-Service Distribution.
7.9.2.1. When Available. If the Adoption Agreement so provides, a
Participant may receive an age 59-1/2 in-service distribution of all or a part
of the Vested portion of the Participant's Total Account (unless the Adoption
Agreement specifically prohibits age 59-1/2 in-service distributions from a
particular account) if the Administrative Committee determines that such
in-service distribution is for the purpose described in Section 7.9.2.2 and the
conditions in Section 7.9.2.3 have been fulfilled. To receive such a
distribution, the Participant must file an in-service distribution application
with the Administrative Committee. In the application, the Participant shall
specify the dollar amount to be distributed. Such in-service distribution shall
be approved by the Administrative Committee to be made as of the Distribution
Date coincident with or next following the approval of a completed application
by the Administrative Committee and shall be made in a lump sum cash payment as
soon as administratively feasible after such Distribution Date.
7.9.2.2. Purposes. In-service distributions under Section 7.9.2 shall
be approved by the Administrative Committee only if it is established that the
in-service distribution is to be made after the Participant has attained age
fifty-nine and one-half (59-1/2) years.
7.9.2.3. Limitations. Unless and until a Participant shall have been a
Participant for five (5) full years, the Participant shall not be entitled to an
in-service distribution from the Participant's Employer Matching Account or
Employer Profit Sharing Account under this Section 7.9.2 which would reduce that
Employer Matching Account or Employer Profit Sharing Account below the amounts
credited as a result of the Employer contributions made during the most recent
two (2) consecutive Plan Years ending coincident with or immediately preceding
the Distribution Date as of which such distribution is made.
Notwithstanding the foregoing, no distribution shall be made pursuant to this
Section 7.9.2 unless the Plan is an exempt profit sharing plan (as defined in
Section 7.3.5) or the spouse of the Participant, if any, consents in writing to
the distribution. To be valid, the consent of the spouse must be in writing,
must acknowledge the effect of the distribution and must be witnessed by a
notary public. The consent of the spouse must be given within ninety (90) days
prior
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to the Distribution Date as of which the distribution is made and must relate to
the specific distribution. The consent of the spouse shall be irrevocable and
shall be effective only with respect to that spouse.
7.9.2.4. Sequence of Accounts. Each in-service distribution made
pursuant to this Section 7.9.2 shall first be taken from and charged to the
Participant's Accounts in the following sequence:
Nondeductible Voluntary Account
Rollover Account
Transfer Account
Employer Matching Account
Employer Profit Sharing Account
Deductible Voluntary Account
Retirement Savings Account
Distributions from the Participant's Nondeductible Voluntary Account shall be
distributed in the sequence described in Section 7.8.
7.9.2.5. Coordination with Section 4.1. If an in-service distribution
is made from an Account which is invested in more than one (1) Subfund
authorized and established under Section 4.1, the amount distributed shall be
charged to each Subfund in the same proportions as the Account is invested in
each Subfund.
7.10. Loans. Unless the Adoption Agreement precludes it, loans may be made to
Participants and Beneficiaries who are not Owner-employees or Shareholder
employees subject to the following rules, conditions and limitations:
7.10.1. Availability. Loans shall be made available to all Participants (without
regard to whether they are actively employed) and all Beneficiaries for the
purposes outlined in the Adoption Agreement and subject to the limitations and
conditions established under this Section on a reasonably equivalent basis and
shall not be made available to highly compensated employees (as defined in the
Appendix D to the Plan Statement) in an amount (expressed as a percentage of
Vested Total Account) greater than is made available to other employees. For
this purpose, a person shall be a Beneficiary only after the death of the
Participant with respect to whom the person is a Beneficiary. An alternate payee
shall be considered a Beneficiary for this purpose only after the domestic
relation order has been finally determined to be a Qualified Domestic Relations
Order as defined in the Appendix C to the Plan Statement.
Notwithstanding the foregoing, no loan shall be made pursuant to this Section
7.10 if this Plan is not an exempt profit sharing plan as defined in Section
7.3.5 unless the spouse of the Participant, if any, consents in writing to the
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loan. To be valid, the consent of such spouse must be in writing, must
acknowledge the effect of the loan and the use of the Account as security for
the loan and must be witnessed by a notary public. The consent of the spouse
must be given within ninety (90) days prior to the date the loan is made and
must relate to that specific loan. The consent given by the spouse to whom the
Participant was married at the time the loan was made shall be effective with
respect that spouse and each subsequent spouse of the Participant. A new consent
shall be required if the Account is used for renegotiation, extension, renewal
or other revision of the loan.
7.10.2. Administration. Loan requests shall be granted or denied solely on the
basis of this Section and the Adoption Agreement. There shall be no discretion
to grant or deny a loan request. Denials shall be processed under the claims
procedure rules of the Plan. Loans shall be approved (or denied) by the
Administrative Committee. The Administrative Committee shall be contacted for
this purpose at the address shown in the summary plan description. A copy of
these rules, loan application forms, specimen promissory notes, security
agreements and any other information that is available concerning loans shall be
made available at that address upon written request. Loans under this Plan and
any other Plan maintained by the Employer will be considered separate loans.
Therefore, separate loan application forms and promissory notes will need to be
completed for loans from this Plan or any other Plan. A loan will be made upon
completion of a loan application, the execution of a promissory note and
security agreement and the completing of such other forms and the furnishing of
such other information as may be required to comply with this Section. The
promissory note will be a negotiable instrument for purposes of a Trustee to
Trustee transfer of Plan assets.
7.10.3. Loan Terms. The total amount of such loans to any Participant or
Beneficiary shall not exceed the lesser of:
(a) fifty percent (50%) of the Vested amount of that Participant's or
Beneficiary's Total Account; or
(b) Fifty Thousand Dollars ($50,000);
provided, however, that the Fifty Thousand Dollar ($50,000) limitation shall be
reduced by the excess (if any) of: (i) the highest outstanding balance of loans
from the Plan to such person during the one-year period ending on the day before
the new loan is made, over (ii) the outstanding balance of all loans from the
Plan to such person on the day the new loan is made. For the purpose of the
above limitations, all loans and Vested benefits from all plans of the Employer
and any Affiliate of the Employer as defined under Section 1.1.3 (disregarding
the last sentence thereof) are aggregated.
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Any such loan must be repaid monthly in substantially level amounts, including
principal and interest, over the term of the loan. Any such loan shall provide
that it shall be repaid within a definite period of time to be specified by the
borrower in the loan application and the promissory note. That period shall not
exceed five (5) years unless such loan is used to acquire the principal
residence of the Participant and then it shall not exceed ten (10) years.
7.10.4. Collateral. Every loan made under these rules shall be secured by that
portion of the Participant's or Beneficiary's Account in the Plan which does not
exceed fifty percent (50%) of the sum total of the borrower's Vested Total
Account. This dollar amount shall be determined immediately after the
origination of the loan (and shall be reduced by the amount of any unpaid
principal and interest on any earlier loan which is similarly secured). This
security interest shall exist without regard to whether it is or is not
referenced in the loan documents. The Plan shall be permitted to realize on this
collateral (as hereinafter provided) by any means including (but not limited to)
offset. No other collateral shall be permitted or required.
7.10.5. Specific Loan Rules. Unless the Administrative Committee adopts other
loan rules in writing (which shall be considered part of the Plan document, the
following rules shall apply;
(a) Loan Amount. Loans will not be made in a principal amount less than One
Thousand Dollars ($1,000) nor in increments of less than One Hundred
Dollars ($100). (Even if the Administrative Committee adopts other loan
rules, a required minimum loan amount cannot exceed One Thousand
Dollars ($1,000).)
(b) Interest Rate. The interest rate on any loan shall be equal to the
prime rate (the base rate on corporate loans at large United States
money center commercial banks) as published for the last business day
of the calendar month preceding the calendar month in which the loan is
granted or renewed by The Wall Street Journal in its "Money Rates"
column or any comparable successor rate so published plus one percent
(1%).
(c) Accounting for the Loan. For the purpose of determining the extent to
which a Participant's Account is entitled to share in income, gains or
losses of the Fund under Section 4, the same shall be deemed to be
reduced by the unpaid balance of any outstanding loans to the borrower,
and the interest payments on such loans shall be credited to the
borrower's Total Account. If a loan is made to a person who has assets
in more than one Account, such loan shall be deemed to have been made
from the Accounts in the following sequence:
Rollover Account
Transfer Account
Employer Profit Sharing Account
Employer Matching Account
Nondeductible Voluntary Account
Retirement Savings Account
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Repayments of principal on loans and payments of interest shall be
apportioned among the Accounts from which the loan was made in
proportion to the amounts by which the Accounts were initially reduced
in order to make the loan. If a loan is made from an Account which is
invested in more than one Subfund authorized and established under
Section 4.1, the amount withdrawn in order to make the loan shall be
charged to each Subfund in the same proportions as the Account is
invested in each Subfund. All repayments of principal and interest
shall be reinvested in Subfunds in accordance with the borrower's
current investment election.
(d) Payroll Deduction. All Participants shall make payment of loans by
monthly or more frequently payroll deduction. The making of the loan
shall be considered an irrevocable authorization for payroll deduction.
To the extent that the available payroll amount is not sufficient to
satisfy the payment obligation, the Participant shall make monthly
payment by cash, personal check or equivalent negotiable instrument
delivered to the Trustee or to the Administrative Committee as agent
for the Trustee (at the address shown in the Plan's summary plan
description) by the due date for the payment. All payments by
Beneficiaries shall be made monthly by cash, personal check or
equivalent negotiable instrument delivered to the Trustee or to the
Administrative Committee as agent for the Trustee at the address shown
in the Plan's summary plan description by the due date for the payment.
(e) Default. The only event of default on a loan shall be nonpayment within
ten (10) days after the stated due date; provided, however, that a loan
that is not in default at the death of the borrower shall not be in
default earlier than ninety (90) days after the death of the borrower.
Payment shall be considered made for this purpose only when the cash,
personal check or other equivalent negotiable instrument is received in
fact by the Trustee or the Administrative Committee as agent for the
Trustee. Without limiting the generality of the foregoing, neither
death nor termination of employment shall be events of default. Default
on one (1) payment shall not accelerate the balance of the payments.
Upon default, all future payments shall be applied first to interest
(including interest on the defaulted principal and interest payment at
the loan's stated rate) and thereafter against principal. Therefore,
until the defaulted payment and subsequent interest on the defaulted
payment
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is made up in full, all subsequent payments will be in default (even if
timely made).
(f) Foreclosure. Upon the occurrence of an event of default, the Accounts
in the Plan given as security shall be foreclosed against (not to
exceed the fifty percent (50%) limit specified above) to satisfy all
amounts then in default (including subsequent interest on the amount in
default). In the case of a Participant, however, this foreclosure shall
not occur before the Participant's death or separation from service.
After such foreclosure, it shall not be possible to cure the default.
Such foreclosure shall be automatic. No notice shall be required prior
to foreclosure. No discretion shall be exercised in foreclosing.
Subject to the fifty percent (50%) limitation described above, such
foreclosure shall be accomplished by cancelling the obligation to pay
the amount in default and simultaneously cancelling the portion of the
Account (including subsequent interest on the amount in default)
represented by the amount in default (including the accrued subsequent
interest on the amount in default).
(g) Miscellaneous. Prepayment of principal and interest shall be allowed
only if the entire remaining balance due on the promissory note is paid
in full. Loans will be made only as of the last day of each month of
the Plan Year. No loan shall be made to any Participant or beneficiary
who has any loan which was in default at any time during the preceding
twelve (12) months.
(h) Fees and Charges. The loan shall be subject to any origination and
periodic maintenance fees charged by the Trustee and approved by the
Administrative Committee.
7.10.6. Effect on Distributions. If any distribution is to be made when
a loan is outstanding, the first asset distributed (after foreclosure to satisfy
any default) shall be the unpaid promissory note.
7.10.7. IRC ss. 72(p) Reporting. To the extent required by Code section
72(p), the Trustee shall report, from time to time, distributions of income in
connection with loans made under this Plan. The operation of those tax rules is
entirely independent of the rules of the Plan. It may be possible for loans not
in default under these rules to nevertheless require reports of distributable
income. Similarly, loans in default under these rules may not result in such
reports. This Plan shall make all disclosures required under
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federal truth-in-lending regulations (Regulation Z issued by the Board of
Governors of the Federal Reserve System).
7.10.8. Truth-in-Lending. This Plan shall make all disclosures required
under federal trust-in-lending regulations (Regulation Z issued by the Board of
Governors of the Federal Reserve System).
7.11. Corrective Distributions.
7.11.1. Excess Elective Deferrals ($7,000 Limit).
(a) In General. Notwithstanding any other provision of the Plan
Statement, a Participant's excess elective deferrals, plus any
income and minus any loss allocable thereto shall be
distributed to the Participant no later than the first April
15 following the close of the Participant's taxable year.
(b) Definitions. For purposes of this Section, "excess elective
deferrals" shall mean the amount of retirement savings
allocated to the Participant's Retirement Savings Account for
a Participant's taxable year and which the Participant
allocates to this Plan pursuant to the claim procedure
described below.
(c) Claims. The Participant's claim shall be in writing; shall be
submitted to the Administrative Committee not later than March
1 with respect to the immediately preceding taxable year;
shall specify the amount of the Participant's excess elective
deferrals for the preceding taxable year; and shall be
accompanied by the Participant's written statement that if
such amounts are not distributed, such excess elective
deferrals, when added to amounts deferred under other plans or
arrangements described in sections 401(k), 408(k), 403(b), 457
and 501(c)(18) of the Code, will exceed the limit imposed on
the Participant by section 402(g) of the Code for the taxable
year in which the deferral occurred.
(d) Determination Of Income Or Loss. The excess elective deferral
shall be adjusted for income or loss. The income or loss
allocable to excess elective deferrals shall be determined by
multiplying the income or loss allocable to the Participant's
retirement savings for the Plan Year ending within such
preceding taxable year by a fraction, the numerator of which
is the excess elective deferral on behalf of the Participant
for such preceding taxable year and the denominator of which
is the Participant's Retirement Savings
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Account balance attributable to retirement savings on the
Valuation Date coincident with or immediately before the last
day of such preceding taxable year without regard to any
income or loss occurring during such taxable year. The excess
elective deferral shall also be adjusted for income or loss
for the period between the Valuation Date coincident with or
immediately before the last day of such preceding taxable year
and the date of distribution. The income or loss allocable for
such period shall be equal to ten percent (10%) of the income
or loss allocable to the distributable excess elective
deferral for the applicable taxable year multiplied by the
number of whole calendar months that have elapsed since the
Valuation Date coincident with or immediately before the last
day of such taxable year, including the month of distribution
if distribution occurs after the fifteenth (15th) of such
month.
(e) Accounting for Excess Elective Deferrals. Excess elective
deferrals distributed under this Section 7.11.1 shall be
distributed from the Participant's Retirement Savings Account.
7.11.2. Excess Contributions (Section 401(k) Test).
(a) In General. Notwithstanding any other provision of the Plan
Statement, excess contributions for a Plan Year, plus any
income and minus any loss allocable thereto, shall be
distributed no later than the last day of the following Plan
Year, to Participants to whose accounts retirement savings,
and if used to determine the deferral percentage under Section
2, matching contributions or Employer discretionary
contributions, or both, were allocated. Such distributions
shall be made to highly compensated eligible employees (as
defined in Section 2) on the basis of the respective portions
of the excess contributions attributable to each of such
employees. Excess contributions shall be treated as annual
additions as defined in Section 1.1 of Appendix A to this Plan
Statement.
(b) Excess Contributions. For purposes of this Section, "excess
contributions" shall mean, with respect to any Plan Year, the
excess of:
(i) the aggregate amount of Employer contributions
actually taken into account in computing the average
deferral percentage (as defined in Section 2) of
highly
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compensated eligible employees (as defined in Section
2) for such Plan Year, over
(ii) the maximum amount of such contribution permitted by
the 401(k) test described in Section 2 (determined by
reducing contributions made on behalf of such highly
compensated eligible employees in order of the
deferral percentage, as defined in Section 2,
beginning with the highest of such percentages).
(c) Determination Of Income Or Loss. The excess contributions
shall be adjusted for income or loss. The income or loss
allocable to excess contributions shall be determined by
multiplying income or loss allocable to the Participant's
retirement savings, and if used to determine an eligible
employee's deferral percentage under Section 2, matching
contributions or Employer discretionary contributions, or
both, for the Plan Year by a fraction, the numerator of which
is the excess contribution on behalf of the Participant for
the preceding Plan Year and the denominator of which is the
sum of the Participant's account balances attributable to
retirement savings and such matching contributions or Employer
discretionary contributions, or both, on the last day of the
Plan Year, without regard to any income or loss occurring
during such Plan Year. The excess contributions shall also be
adjusted for income or loss for the period between the last
day of the Plan Year and the date of distribution. The income
or loss allocable for such period shall be equal to ten
percent (10%) of the income or loss allocable to the
distributable excess contributions for the applicable Plan
Year multiplied by the number of whole calendar months that
have elapsed since the end of the applicable Plan Year,
including the month of distribution if distribution occurs
after the fifteenth (15th) of such month.
(d) Accounting For Excess Contributions. Excess contributions
distributed under this Section 7.11.2 shall be treated as
distributions from the Participant's Retirement Savings
Account and Employer Matching Account (if applicable) in
proportion to the Participant's retirement savings and
matching contributions, if applicable, for the Plan Year.
Excess contributions shall be distributed from the
Participant's Employer Profit Sharing Account, if applicable,
only to the extent such excess contributions
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exceed the balance in the Participant's Retirement Savings
Account and Employer Matching Account, if applicable.
(e) Special Family Member Rule. If the deferral percentage of a
highly compensated eligible employee is determined under
Section 2.7.2(b)(ii), then the deferral percentage is reduced
as required under rules prescribed by the Secretary of the
Treasury, and the excess contributions for the family group
shall be allocated among the family members in proportion to
the retirement savings contributions of each family member
that are combined to determine the deferral percentage. If the
deferral percentage of a highly compensated eligible employee
is determined under Section 2.7.2(b)(i), then the deferral
percentage is reduced as required under rules prescribed by
the Secretary of the Treasury, in two steps. First, the
deferral percentage is reduced as required under rules
prescribed by the Secretary of the Treasury, but not below the
deferral percentage of the group of eligible family members
who are not highly compensated eligible employees without
regard to family aggregation. Excess contributions are
determined by taking into account the contributions of the
family members whose contributions were combined to determine
the deferral percentage under Section 2.7.2(b)(i), and shall
be allocated among such family members in proportion to each
such family member's retirement savings contributions. If
further reduction of the deferral percentage is required,
excess contributions resulting from this reduction are
determined by taking into account the contributions of all the
eligible family members and are allocated among such family
members in proportion to the retirement savings contributions
of each family member.
7.11.3. Distribution Of Excess Aggregate Contributions (Section 401(m)
Test).
(a) In General. Notwithstanding any other provision of the Plan
Statement, excess aggregate contributions, plus any income and
minus any loss allocable thereto, shall be distributed no
later than the last day of the following Plan Year to
Participants to whose accounts Employer matching
contributions, and if used to determine the contribution
percentage under Section 3.10.1(c), retirement savings
contributions or Employer discretionary contributions or both,
were allocated. Such distributions shall be made to highly
compensated eligible employees (as defined in Section
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3) on the basis of the respective portions of the excess
aggregate contributions attributable to each of such
employees.
(b) Excess Aggregate Contributions. For purposes of this Section,
"excess aggregate contributions" shall mean, with respect to
any Plan Year, the excess of:
(i) the aggregate amount of contributions taken into
account in computing the average contribution
percentage (as defined in Section 3) of highly
compensated eligible employees (as defined in Section
3) for such Plan Year, over
(ii) the maximum amount of such contributions permitted by
the 401(m) test described in Section 3 (determined by
reducing contributions made on behalf of highly
compensated eligible employees in order of the
contribution percentage, beginning with the highest
such percentage).
(c) Determination Of Income. The excess aggregate contributions
shall be adjusted for income or loss. The income or loss
allocable to excess aggregate contributions shall be
determined by multiplying the income or loss allocable to the
Employer matching contributions (to the extent used to
determine the eligible employee's contribution percentage
under Section 3), and if used to determine an eligible
employee's contribution percentage under Section 3, retirement
savings contributions or Employer discretionary contributions
or both, for the Plan Year by a fraction, the numerator of
which is the excess aggregate contributions on behalf of the
Participant for the preceding Plan Year and the denominator of
which is the sum of the account balances attributable to
Employer matching contributions and such retirement savings
contributions or Employer discretionary contributions, or
both, on the last day of the preceding Plan Year without
regard to any income or loss occurring during such Plan Year.
The excess aggregate contributions shall also be adjusted for
income or loss for the period between the last day of the Plan
Year and the date of distribution. The income or loss
allocable for such period shall be equal to ten percent (10%)
of the income or loss allocable to the distributable excess
aggregate contributions for the applicable Plan Year
multiplied by the number of whole calendar months that have
elapsed since the end of the
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applicable Plan Year including the month of distribution if
distribution occurs after the fifteenth (15th) of such month.
(d) Accounting For Excess Aggregate Contributions. Excess
aggregate contributions shall be distributed from the
Participant's Employer Matching Account (and, if applicable,
the Participant's Retirement Savings Account or Employer
Profit Sharing Account, or both) in proportion to the Employer
matching contributions, and if used to determine the
contribution percentage under Section 3, retirement savings
contributions or other Employer discretionary contributions,
or both, for the Plan Year.
(e) Special Family Member Rule. If the contribution percentage of
a highly compensated eligible employee is determined under
Section 3.10.2(b)(ii), then the contribution percentage is
reduced as required under rules prescribed by the Secretary of
the Treasury, and the excess aggregate contributions for the
family group shall be allocated among the family members in
proportion to the Employer matching contributions of each
family member that are combined to determine the contribution
percentage. If the contribution percentage of a highly
compensated eligible employee is determined under Section
3.10.2(b)(i), then the contribution percentage is reduced as
required under rules prescribed by the Secretary of the
Treasury in two steps. First, the contribution percentage is
reduced as required under rules prescribed by the Secretary of
the Treasury, but not below the contribution percentage of the
group of eligible family members who are not highly
compensated eligible employees without regard to family
aggregation. Excess aggregate contributions are determined by
taking into account the contributions of the family members
whose contributions were combined to determine the
contribution percentage under Section 3.10.2(b)(i), and shall
be allocated among such family members in proportion to each
such family member's matching contributions. If further
reduction of the contribution percentage is required, excess
aggregate contributions resulting from this reduction are
determined by taking into account the contributions of all the
eligible family members and are allocated among such family
members in proportion to the Employer matching contributions
of each family member.
7.11.4. Priority. The determination of the excess aggregate
contributions shall be made after first determining the excess elective
deferrals,
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and then determining the excess contributions. The amount of excess
contributions shall be reduced by excess deferrals previously distributed to
such Participant for the Participant's taxable year ending with or within such
Plan Year.
7.11.5. Matching Contributions. If excess elective deferrals, excess
contributions or retirement savings contributions treated as excess aggregate
contributions are distributed pursuant to this Section 7.11, applicable matching
contributions under Section 3.3 shall not be distributed except as required by
Section 7.11.2 or 7.11.3.
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SECTION 8
SPENDTHRIFT PROVISIONS
No Participant or Beneficiary shall have any transmissible interest in any
Account nor shall any Participant or Beneficiary have any power to anticipate,
alienate, dispose of, pledge or encumber the same while in the possession or
control of the Trustee, nor shall the Trustee, the Administrative Committee or
the Employer recognize any assignment thereof, either in whole or in part, nor
shall any Account herein be subject to attachment, garnishment, execution
following judgment or other legal process while in the possession or control of
the Trustee.
The power to designate Beneficiaries to receive the Vested Total Account of a
Participant in the event of the Participant's death shall not permit or be
construed to permit such power or right to be exercised by the Participant so as
thereby to anticipate, pledge, mortgage or encumber the Participant's Account or
any part thereof, and any attempt of a Participant so to exercise said power in
violation of this provision shall be of no force and effect and shall be
disregarded by the Trustee, the Administrative Committee and the Employer.
This section shall not prevent the Trustee, the Administrative Committee or the
Employer from exercising, in their discretion, any of the applicable powers and
options granted to them upon the occurrence of an Event of Maturity, as such
powers may be conferred upon them by any applicable provision hereof, nor
prevent the Plan from foreclosing on the lien granted to secure any and all
loans made to the Participant as a Participant from the Fund. (In the event of a
default on a Participant loan, foreclosure on the promissory note and the
attachment of the security interest in the Account will not occur until an Event
of Maturity occurs with respect to such Participant.) This section does not
prevent the Administrative Committee or Trustee from observing the forms of a
qualified domestic relations order as provided in the Appendix C to this Plan
Statement.
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SECTION 9
AMENDMENT AND TERMINATION
9.1. Amendment.
9.1.1. Amendment By Employer. The Principal Employer reserves the right
to amend the designations and elections made by it under the Adoption Agreement
from time to time by making and delivering a new Adoption Agreement to the
Trustee, to add overriding language in the Adoption Agreement when such language
is necessary to satisfy the requirements of section 415 of the Code or to avoid
duplication of minimum benefits under section 416 of the Code because of the
required aggregation of multiple plans, which amendment shall become effective
only if expressly accepted in writing by the Trustee, and to 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 individually
designed. The Principal Employer that amends the Plan for any other reason will
no longer participate in the Prototype Documents and will be considered to have
an individually designed plan. The Principal Employer further reserves the right
to amend its plan in its entirety by the adoption of another master, prototype
or individually designed successor retirement plan document in place of this
Plan Statement, and by entering into such agreement with the Trustee or with a
successor trustee, or other successor funding medium selected by the Principal
Employer, as may be required for the purpose of carrying such successor
retirement plan document into effect. The Principal Employer may not amend the
Prototype Documents (as distinguished from amending its elections in the
Adoption Agreement). If the Principal Employer should take action to:
(a) amend this Plan Statement by the adoption of another document
in lieu of this Plan Statement, or
(b) attempt to amend the Prototype Documents, or
(c) attempt to complete the Adoption Agreement in a manner not
permitted by the Adoption Agreement, or
(d) affirmatively refuse to consent to an amendment effected by
the Prototype Sponsor under Section 9.1.2,
such action shall not be considered a termination of the Plan adopted or
continued under this Plan Statement. Rather, upon the occurrence of such action,
the Principal Employer and any adopting Employer shall no longer be
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considered to be maintaining a Plan under the Prototype Documents but under an
individually designed document.
9.1.2. Amendment By Prototype Sponsor. The Principal Employer has
delegated to the Prototype Sponsor the right to amend this Plan Statement
(either as to its form or the elections specified in the Adoption Agreement).
Although it is intended that this power of amendment will be used principally to
assure compliance with applicable provisions of ERISA and the Code as they may
be now or hereafter amended, this power of amendment may be exercised for any
purpose deemed appropriate by the Prototype Sponsor. Any such amendment shall be
effective only upon notice in writing to the Principal Employer. The Principal
Employer shall be deemed to have consented to such amendment unless prior to the
expiration of thirty (30) days after notice is sent to the Principal Employer,
the Principal Employer exercises its reserved power of amendment by adopting a
successor retirement plan and funding medium, as provided in Section 9.1.
9.1.3. Limitation On Amendments. No amendment shall be effective to
reduce or divest the Account of any Participant, unless the same shall have been
adopted with the consent of the Secretary of Labor pursuant to the provisions of
ERISA, or in order to comply with the provisions of the Code and the regulations
and rulings thereunder affecting the tax-qualified status of the Prototype
Documents. No amendment shall eliminate an optional form of distribution with
respect to benefits attributable to service before the amendment was adopted,
unless such amendment is adopted pursuant to regulations issued by the Secretary
of the Treasury.
9.1.4. Resignation Of Prototype Sponsor. By giving the Principal
Employer thirty (30) days' written notice of its intention to do so, the
Prototype Sponsor may withdraw its consent to the Principal Employer's use of
the Prototype Documents. Upon the occurrence of such action, the Principal
Employer shall no longer be considered to be maintaining a Plan under these
Prototype Documents but rather under an individually designed document.
Notwithstanding the foregoing, the Prototype Sponsor and the Principal Employer
and any adopting Employer may terminate any lawyer-client relationship between
them (as opposed to use of the Prototype Document) at any time.
9.2. Discontinuance Of Contributions And Termination Of Plan. The Principal
Employer also reserves the right to reduce, suspend or discontinue its
contributions to this Plan and to terminate the Plan herein embodied in its
entirety.
Notwithstanding Section 7, upon termination of the Plan, distribution of each
Participant's Vested Total Account shall be payable in a lump sum without the
Participant's consent, subject to the following:
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(a) If the Plan is not an exempt profit sharing plan (as defined
in Section 7.3.5), then such distribution shall be made (i) by
purchase of a QJ&SA contract (as defined in Section 7.3.4(b))
if the Participant is married on the distribution date (unless
the Participant and spouse consent to a lump sum
distribution), or (ii) by purchase of a Life Annuity contract
(as defined in Section 7.3.4(c)) if the Participant is not
married on the distribution date (unless the Participant
consents to a lump sum distribution).
(b) If the Plan is an exempt profit sharing plan (as defined in
Section 7.3.5), and if the Employer or any member of a
controlled group including the Employer under sections 414(b)
or 414(c) of the Code maintains a defined contribution plan
qualified under section 401(a) of the Code (other than an
employee stock ownership plan defined in section 4975(e)(7) of
the Code), then, subject to Section 9.3, each Participant's
Vested Total Account shall be transferred to such plan (unless
the Participant consents to a lump sum distribution).
9.3. Merger or Spinoff of Plans.
9.3.1. In General. The Principal Employer may cause all or a part of
this Plan to be merged with all or a part of any other plan and may cause all or
a part of the assets and liabilities to be transferred from this Plan to another
plan. In the case of merger or consolidation of this Plan with, or transfer of
assets and liabilities of this Plan to, any other plan, each Participant shall
(if such other plan were then terminated) receive a benefit immediately after
the merger, consolidation or transfer which is not less than the benefit the
Participant would have been entitled to receive immediately before the merger,
consolidation or transfer (if this Plan had then terminated). If the Principal
Employer agrees to a transfer of assets and liabilities to or from another plan,
the agreement under which such transfer is concluded shall specify the Accounts
to which the transferred amounts are to be credited.
9.3.2. Limitations. In no event shall assets be transferred from any
other plan to this Plan unless this Plan complies (or has been amended to
comply) with the optional form of benefit requirements of section
411(d)(6)(B)(ii) of the Code or, where applicable, the distribution rules of
section 401(k) of the Code and any other in-service distribution restrictions
applicable to such transferred assets. In no event shall assets be transferred
from this Plan to any other plan unless such other plan complies (or has been
amended to comply) with the optional form of benefit requirements of section
411(d)(6)(B)(ii)
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of the Code and any in-service distribution restrictions applicable to such
transferred assets.
9.3.3. Beneficiary Designations. If assets and liabilities are
transferred from another plan to this Plan, Beneficiary designations made under
that plan shall become void on the date as of which such transfer is made and
the Beneficiary designation rules of this Plan Statement shall apply beginning
on that date.
9.4. Adoption By Other Control Group Employers.
9.4.1. Adoption With Consent. The Employer executing the Adoption
Agreement (the "Principal Employer") may consent to the adoption of this Plan by
any business entity that is aggregated with the Principal Employer under section
414(b), (c), (o) or (m) of the Code (subject to such conditions as the Principal
Employer may impose).
9.4.2. Procedure For Adoption. Any such adopting business entity shall
initiate its adoption of this Plan by delivery of a certified copy of the action
of its directors (if a corporation), general partner (if a partnership) or
proprietor (if a sole proprietorship), adopting this Plan Statement to the
Principal Employer. Upon the consent by the principal Employer of the adoption
by the adopting business entity, and the delivery to the Trustee of written
evidence of the Principal Employer's consent, the adoption of this Plan by the
adopting business entity shall be effective as of the date specified by the
Principal Employer.
9.4.3. Effect Of Adoption. Upon the adoption of this Plan by an
adopting business entity as heretofore provided, the adopting business entity
shall be an Employer hereunder in all respects. Each adopting business entity,
as a condition of continued participation in this Plan, delegates to the
Principal Employer the sole power and authority:
(a) to determine any Employer contributions to the Plan which
contributions must be the same for each Employer,
(b) to terminate the Plan (except that each adopting business
entity shall have the power to terminate this Plan as applied
to it); to amend the Adoption Agreement (except that each
adopting business entity shall have the power to amend the
Adoption Agreement as applied to it by establishing a
successor plan to which assets and liabilities may be
transferred as provided in Section 9.3),
(c) to appoint, remove and accept the resignation of a Trustee; to
appoint or remove the Administrative Committee; to
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appoint or remove an Investment Manager; to act as the plan
administrator,
(d) to direct the Trustee to return an Employer contribution if
the Plan does not initially qualify within one year, or was
made by mistake or which is not deductible,
(e) to consent to the adoption of this Plan by affiliated
Employers; to establish conditions and limitations upon such
adoption of this Plan by affiliated Employers; to designate
any business as an Affiliate, and
(f) to cause this Plan to be merged with another plan and to
transfer assets and liabilities between this Plan and another.
Each reference herein to the Employer shall include the Principal Employer and
all adopting business entities unless the context clearly requires otherwise.
Employment with the Principal Employer and all adopting business entities shall
be credited with each other and all Affiliates of any of them for the purposes
of determining Eligibility Service, Vesting Service, One-Year Breaks in Service
and the minimum annual service requirement for allocation of contributions and
forfeited Suspense Accounts. Contributions of the Principal Employer and each
adopting business entity shall be allocated only among those persons who were
their employees during the Plan Year with respect to which the contribution is
made.
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SECTION 10
CONCERNING THE TRUSTEE
10.1. Dealings With Trustee.
10.1.1. No Duty To Inquire. No person, firm or corporation dealing with
the Trustee shall be required to take cognizance of the provisions of this Plan
Statement or be required to make inquiry as to the authority of the Trustee to
do any act which the Trustee shall do hereunder. No person, firm or corporation
dealing with the Trustee shall be required to see either to the administration
of the Plan or Fund or to the faithful performance by the Trustee of its duties
hereunder (except to the extent otherwise provided by ERISA). Any such person,
firm or corporation shall be entitled to assume conclusively that the Trustee is
properly authorized to do any act which it shall do hereunder. Any such person,
firm or corporation shall be under no liability to anyone whomsoever for any act
done hereunder pursuant to the written direction of the Trustee.
10.1.2. Assumed Authority. Any such person, firm or corporation may
conclusively assume that the Trustee has full power and authority to receive and
receipt for any money or property becoming due and payable to the Trustee. No
such person shall be bound to inquire as to the disposition or application of
any money or property paid to the Trustee or paid in accordance with the written
directions of the Trustee.
10.2. Compensation Of Trustee. If a corporate Trustee shall be acting hereunder,
the corporate Trustee shall be entitled to receive compensation for its services
as Trustee hereunder as may be agreed upon from time to time by the Principal
Employer and the Trustee. Any individual Trustee who already receives full-time
pay from the Employer shall receive no compensation for services hereunder.
Other individual Trustees shall likewise serve without compensation unless they
shall otherwise specifically agree with the Principal Employer to the contrary.
In any event, however, the Trustee (whether corporate or individual Trustees be
acting) shall be entitled to receive reimbursement for reasonable expenses,
fees, costs and other charges incurred by it or payable by it on account of the
administration of the Plan and the Fund to the extent approved by the Principal
Employer. Such items of expense and compensation shall be payable out of the
Fund in a fair and equitable manner as determined by the Trustee, except to the
extent that the Employer, in its discretion, directly pays the Trustee.
10.3. Resignation And Removal Of Trustee.
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10.3.1. Resignation, Removal And Appointment. The Trustee (or in the
event two or more co-trustees are acting, any such co-trustee) may resign by
giving the Principal Employer thirty (30) days' written notice of its intention
so to do. The Principal Employer may agree in writing to a lesser period of
notice. The notice period shall begin on the date such notice is mailed. The
Principal Employer may remove any Trustee or successor Trustee hereunder by
giving such Trustee (or any co-trustee) thirty (30) days' written notice of
removal by certified mail. The Principal Employer shall have the power to
appoint one or more individual or corporate Trustees, or both, as additional or
successor Trustees. Such appointments shall not be effective until a written
acceptance of trusteeship is filed with the then acting Trustee.
10.3.2. Automatic Removal. If any individual who is a Trustee is a
director, officer or employee when appointed as a Trustee, then such individual
shall be automatically removed as a Trustee at the earliest time such individual
ceases to be a director, officer or employee. This removal shall occur
automatically and without any requirement for action by the Principal Employer
or any notice to the individual so removed.
10.3.3. Surviving Trustees. When any person or corporation appointed,
qualified and serving as a Trustee hereunder shall cease to be a Trustee of the
Fund, the remaining Trustee or Trustees then serving hereunder, or the successor
Trustee or Trustees appointed hereunder, as the case may be, shall thereupon be
and become vested with full title and right to possession of all assets and
records of the Plan and Fund in the possession or control of such prior Trustee,
and the prior Trustee shall forthwith account for and deliver the same to such
remaining or successor Trustee or Trustees.
10.3.4. Successor Organizations. By designating a corporate Trustee,
original or successor, hereunder, there is included in such designation and as a
part thereof any other corporation possessing trust powers and authorized by law
to accept the Plan and Fund into which or with which the designated corporate
Trustee, original or successor, shall be converted, consolidated or merged, and
the corporation into which or with which any corporate Trustee hereunder shall
be so converted, consolidated or merged shall continue to be the corporate
Trustee of the Plan and Fund.
10.3.5. Co-Trustee Responsibility. No Trustee shall be or become liable
for any act or omission of a co-trustee serving hereunder with the Participant
or it (except to the extent that liability is imposed under ERISA) or of a prior
Trustee hereunder, it being the purpose and intent that each Trustee shall be
liable only for the Participant's or its own acts or omissions during the
Participant's or its term of service as Trustee hereunder.
10.3.6. Allocation of Responsibility. If there shall at any time be two
(2) or more co-trustees serving hereunder, such Trustees, in addition to all
other powers and authorities vested in them by law or conferred upon them by any
provision of this Plan Statement, shall have power to allocate and reallocate
from time to time to any one or more of their number specific responsibilities,
obligations or duties and may delegate and redelegate from time to time to any
one or more of their number the exercise of any right, power or discretion
vested in the Trustees by law or conferred upon them by
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any provision of this Plan Statement, and any person, firm or corporation
dealing with the co-trustees with respect to the Plan or the Fund may assume
conclusively that any action taken or instrument executed by any one of such
co-trustees is the action of all the co-trustees serving hereunder, and that
authority for the doing of such act or the execution of such instrument has been
conferred upon and delegated to the Trustee doing such act or executing such
instrument. If any responsibility, obligation, duty, right, power or discretion
vested in the Trustee is allocated or delegated to one or more co-trustees, the
remaining co-trustees shall not be or become liable for an act or omission by
the co-trustees to whom a right, power or discretion was delegated while such
co-trustees were acting pursuant to such delegation.
10.3.7. Majority Decisions. If there shall at any time be three (3) or
more co-trustees serving hereunder who are qualified to perform a particular
act, the same may be performed, on behalf of all, by a majority of those
qualified, with or without the concurrence of the minority. No person who failed
to join or concur in such act shall be held liable for the consequences thereof,
except to the extent that liability is imposed under ERISA.
10.4. Accountings By Trustee.
10.4.1. Periodic Reports. The Trustee shall render to the Employer and
to the Administrative Committee an account and report as soon as practicable
after the Annual Valuation Date in each year (and as soon as may be practicable
after each other Valuation Date) showing all transactions affecting the
administration of the Plan and the Fund, including, but not necessarily limited
to, such information concerning the Plan and the Fund and the administration
thereof by the Trustee as shall be requested in writing by the Employer.
10.4.2. Special Reports. The Trustee shall also render such further
reports from time to time as may be requested by the Employer and shall submit
its final report and account to the Employer when it shall cease to be Trustee
hereunder, whether by resignation or other cause.
10.5. Trustee's Power To Protect Itself On Account Of Taxes. The Trustee, as a
condition to the making of distribution of a Participant's Vested Total Account
during the Participant's lifetime, may require the Participant, or in the event
of the Participant's death may require the person or persons entitled to receive
the Participant's Vested Total Account in such event, to furnish the Trustee
with proof of payment of all income, inheritance, estate,
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transfer, legacy and/or succession taxes and all other taxes of any different
type or kind that may be imposed under or by virtue of any state or federal
statute or law upon the payment, transfer, descent or distribution of such
Vested Total Account and for the payment of which the Trustee may, in its
judgment, be directly or indirectly liable. In lieu of the foregoing, the
Trustee may deduct, withhold and transmit to the proper taxing authorities any
such tax which it may be permitted or required to deduct and withhold and the
Vested Total Account to be distributed in such case shall be correspondingly
reduced.
10.6. Other Trust Powers. Except to the extent that the Trustee is subject to
the authorized and properly given investment directions of a Participant,
Beneficiary or Investment Manager (and in extension, but not in limitation, of
the rights, powers and discretions conferred upon the Trustee herein), the
Trustee shall have and may exercise from time to time in the administration of
the Plan and the Fund, for the purpose of distribution after the termination
thereof, and for the purpose of distribution of Vested Total Accounts, without
order or license of any court, any one or more or all of the following rights,
powers and discretions:
(a) To invest and reinvest any investment Subfunds established
pursuant to Section 4.1 in accordance with the investment
characteristics and objectives determined therefor and to
invest and reinvest the assets of the Fund in any securities
or properties in which an individual could invest the
Participant's own funds and which it deems for the best
interest of the Fund, without limitation by any statute, rule
of law or regulation of any governmental body prescribing or
limiting the investment of trust assets by corporate or
individual trustees, in or to certain kinds, types or classes
of investments or prescribing or limiting the portion of the
Fund which may be invested in any one property or kind, type
or class of investment. Specifically and without limiting the
generality of the foregoing, the Trustee may invest and
reinvest principal and accumulated income of the Fund in any
real or personal property; preferred or common stocks of any
kind or class of any corporation, including but not limited to
investment and small business investment companies of all
types; voting trust certificates; interests in investment
trusts; shares of mutual funds; interests in any limited or
general partnership or other business enterprise, however
organized and for whatever purpose; group or individual
annuity contracts (which may involve investment in the
issuer's general account or any of its separate accounts);
interests in common or collective trusts, variable interest
notes or any other type of collective fund maintained
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by a bank or similar institution (whether or not the Trustee
hereunder); bonds, notes and debentures, secured or unsecured;
mortgages, leases or other interests in real or personal
property; interests in mineral, gas, oil or timber properties
or other wasting assets; options; commodity or financial
futures contracts; foreign currency; interest-bearing
certificates, accounts or similar interest-bearing instruments
in a bank or similar financial institution, including the
Trustee or an Affiliate of the Trustee, provided such
certificates, accounts or instruments bear a reasonable rate
of interest; insurance contracts on the life of any "keyman"
or shareholder of the Employer; or conditional sales
contracts. The Plan may not acquire or hold any securities
issued by an Employer or real estate leased to an Employer.
Investment of the entire Fund in common stocks shall be deemed
appropriate at any phase of the economic business cycle, but
it is not, however, the purpose hereof to direct that the Fund
shall be invested either entirely or to any extent whatsoever
in such common stocks. Prior to maturity and distribution of
the Vested Total Accounts of Participants, the Trustee shall
commingle the Accounts of Participants and former Participants
in each investment Subfund and invest, reinvest, control and
manage each of the same as a common trust fund.
(b) To sell, exchange or otherwise dispose of any asset of
whatsoever character at any time held by the Trustee in trust
hereunder.
(c) To segregate any part or portion of the Fund for the purpose
of administration or distribution thereof and, in its sole
discretion, to hold the Fund uninvested whenever and for so
long as, in the Trustee's discretion, the same is likely to be
required for the payment in cash of Accounts normally expected
to mature in the near future, or whenever, and for as long as,
market conditions are uncertain, or for any other reason
which, in the Trustee's discretion, requires such action or
makes such action advisable.
(d) In connection with the Trustee's power to hold uninvested
reasonable amounts of cash whenever it is deemed advisable to
do so, to deposit the same, with or without interest, in the
commercial or savings departments of any corporate Trustee
serving hereunder or of any other bank, trust company or other
financial institution.
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(e) To register any investment held in the Fund in the name of the
Trustee, without trust designation, or in the name of a
nominee or nominees, and to hold any investment in bearer
form, but the records of the Trustee shall at all times show
that all such investments are part of the Fund, and the
Trustee shall be as responsible for any act or default of any
such nominee as for its own.
(f) To retain and employ such attorneys, agents and servants as
may be necessary or desirable, in the opinion of the Trustee,
in the administration of the Fund, and to pay them such
reasonable compensation for their services as may be agreed
upon as an expense of administration of the Fund, including
power to employ and retain counsel upon any matter of doubt as
to the meaning of or interpretation to be placed upon this
Plan Statement or any provisions thereof with reference to any
question arising in the administration of the Fund or
pertaining to the rights and liabilities of the Trustee
hereunder. The Trustee, in any such event, may act in reliance
upon the advice, opinions, records, statements and
computations of any attorneys and agents and on the records,
statements and computations of any servants so selected by it
in good faith and shall be released and exonerated of and from
all liability to anyone in so doing (except to the extent that
liability is imposed under ERISA).
(g) To institute, prosecute and maintain, or to defend, any
proceeding at law or in equity concerning the Plan or Fund or
the assets thereof or any claims thereto, or the interests of
Participants and Beneficiaries hereunder at the sole cost and
expense of the Fund or at the sole cost and expense of the
Total Account of the Participant that may be concerned therein
or that may be affected thereby as, in the Trustee's opinion,
shall be fair and equitable in each case, and to compromise,
settle and adjust all claims and liabilities asserted by or
against the Plan or Fund or asserted by or against the
Trustee, on such terms as the Trustee, in each such case,
shall deem reasonable and proper. The Trustee shall be under
no duty or obligation to institute, prosecute, maintain or
defend any suit, action or other legal proceeding unless it
shall be indemnified to its satisfaction against all expenses
and liabilities which it may sustain or anticipate by reason
thereof.
(h) To institute, participate and join in any plan of
reorganization, readjustment, merger or consolidation with
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respect to the issuer of any securities held by the Trustee
hereunder, and to use any other means of protecting and
dealing with any of the assets of the Fund which it believes
reasonably necessary or proper and, in general, to exercise
each and every other power or right with respect to each asset
or investment held by it hereunder as individuals generally
have and enjoy with respect to their own assets and
investment, including power to vote upon any securities or
other assets having voting power which it may hold from time
to time, and to give proxies with respect thereto, with or
without power of substitution or revocation, and to deposit
assets or investments with any protective Committee, or with
trustees or depositories designated by any such Committee or
by any such trustees or any court. Notwithstanding the
foregoing, an Investment Manager shall have any or all of such
powers and rights with respect to Plan assets for which it has
investment responsibility but only if (and only to the extent
that) such powers and rights are expressly given to such
Investment Manager in a written agreement signed by it and
acknowledged in writing by the Trustee. In all other cases,
such powers and rights shall be exercised solely by the
Trustee. Furthermore, neither the Trustee nor the Investment
Manager, as the case may be, shall vote or take similar
actions with respect to any security in which it may have an
interest, direct or indirect. In such case, the Trustee or
Investment Manager shall notify the Principal Employer and the
Principal Employer shall direct the Trustee of the Investment
Manager with respect to such voting or similar action.
(i) In any matter of doubt affecting the meaning, purpose or
intent of any provision of this Plan Statement which directly
affects its duties, to determine such meaning, purpose or
intent; and the determination of the Trustee in any such
respect shall be binding and conclusive upon all persons
interested or who may become interested in the Plan or the
Fund.
(j) To require, as a condition to distribution of any Vested Total
Account, proof of identity or of authority of the person
entitled to receive the same, including power to require
reasonable indemnification on that account as a condition
precedent to its obligation to make distribution hereunder.
(k) To collect, receive, receipt and give quittance for all
payments that may be or become due and payable on
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account of any asset in trust hereunder which has not, by act
of the Trustee taken pursuant thereto, been made payable to
others; and payment thereof by the company issuing the same,
or by the party obligated thereon, as the case may be, when
made to the Trustee hereunder or to any person or persons
designated by the Trustee, shall acquit, release and discharge
such company or obligated party from any and all liability on
account thereof.
(l) To determine from time to time, as required for the purpose of
distribution or for the purpose of allocating trust income or
for any other purpose of the Plan, the then value of the Fund
and the Accounts in the Fund, the Trustee, in each such case,
using and employing for that purpose the fair market value of
each of the assets constituting the Fund. Each such
determination so made by the Trustee in good faith shall be
binding and conclusive upon all persons interested or becoming
interested in the Plan or the Fund.
(m) To receive and retain contributions made in a form other than
cash in the form in which the same are received until such
time as the Trustee, in its sole discretion, deems it
advisable to sell or otherwise dispose of such assets.
(n) To commingle, for investment purposes, the assets of the Fund
with the assets of any other qualified retirement plan trust
fund of the Employer, provided that the records of the Trustee
shall reflect the relative interests of the separate trusts in
such commingled fund.
(o) To grant an option or options for the sale or other
disposition of a trust asset, including the issuance of
options for purchase of common stock held by the Trust in
return for the receipt of a premium from the optionee (it
being expressly intended that said options may be in such form
and terms as to permit their being freely traded on an option
exchange) and including the repurchase of any such option
granted, or in lieu thereof, the repurchase of an option
identical in terms to the one issued.
(p) To have and to exercise such other and additional powers as
may be advisable or proper in its opinion for the effective
and economical administration of the Fund.
(q) If so provided in the Adoption Agreement, one (1) or more
declarations of trust executed by the Trustee (or by banks or
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trust companies affiliated in ownership with the Trustee)
shall be incorporated by reference into this Agreement and not
withstanding any other provision of the Agreement to the
contrary, the Trustee may cause all or any part of the Fund,
without limitation as to amount, to be commingled with the
money of trusts created by others by causing such money to be
invested as a part of any or all of the funds created by said
declarations of trust and the Fund so added to any of said
funds shall be subject to all of the provisions of said
declarations of trust as the same may be amended from time to
time.
10.7. Investment Managers.
10.7.1. Appointment And Qualifications. The Principal Employer shall
have the power to appoint from time to time one or more Investment Managers to
direct the Trustee in the investment of, or to assume complete investment
responsibility over, all or any portion of the Fund. An Investment Manager may
be any person or firm (a) which is either (1) registered as an investment
adviser under the Investment Advisers Act of 1940, (2) a bank, or (3) an
insurance company which is qualified to perform the services of an Investment
Manager under the laws of more than one state; and (b) which acknowledges in
writing that it is a fiduciary with respect to the Plan because it has been
appointed as an Investment Manager with respect to the Plan. The conditions
prescribed in the preceding sentence shall apply to the issuer of any group
annuity contract hereunder only if, and to the extent that, such issuer would
otherwise be considered a "fiduciary" with respect to the Plan, within the
meaning of ERISA.
10.7.2. Removal. The Principal Employer may remove any such Investment
Manager and shall have the power to appoint a successor or successors from time
to time in succession to any Investment Manager who shall be removed, shall
resign or shall otherwise cease to serve hereunder. The Principal Employer shall
furnish the Trustee with such written evidence as the Trustee may require of the
appointment, removal and scope of the authority of the Investment Manager.
10.7.3. Relation To Other Fiduciaries. The Trustee shall comply with
all investment directions given to the Trustee with respect to the designated
portion of the Fund, and the Trustee shall be released and exonerated of and
from all liability for or on account of any action taken or not taken by it
pursuant to the directions of such Investment Manager, except to the extent that
liability is imposed under ERISA. Neither the Employer, nor any officer,
director or employee thereof, nor any member of the Administrative Committee
shall be liable for the acts or omissions of the Trustee or of any Investment
Manager appointed hereunder. The fees and expenses of any
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Investment Manager, as agreed upon from time to time between the Investment
Manager and the Employer, shall be charged to and paid from the Fund in a fair
and equitable manner, except to the extent that the Employer, in its discretion,
may pay such directly to the Investment Manager.
10.8. Fiduciary Principles. The Trustee and each other fiduciary hereunder, in
the exercise of each and every power or discretion vested in them by the
provisions of this Plan Statement shall (subject to the provisions of ERISA)
discharge their duties with respect to the Plan solely in the interest of the
Participants and Beneficiaries and:
(a) for the exclusive purpose of:
(i) providing benefits to Participants and Beneficiaries,
and
(ii) defraying reasonable expenses of administering the
Plan,
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like
aims,
(c) by diversifying the investments of the Plan so as to minimize
the risk of large losses, unless under the circumstances it is
clearly prudent not to do so, and
(d) in accordance with the documents and instruments governing the
Plan, insofar as they are consistent with the provisions of
ERISA.
Notwithstanding anything in this Plan Statement to the contrary, any provision
hereof which purports to relieve a fiduciary from responsibility or liability
for any responsibility, obligation or duty under Part 4 of Subtitle B of Title I
of ERISA shall, to the extent the same is inconsistent with said Part 4, be
deemed void.
10.9. Prohibited Transactions. Except as may be permitted by law, no Trustee or
other fiduciary hereunder shall permit the Plan to engage, directly or
indirectly, in any of the following transactions with a person who is a
"disqualified person" (as defined in section 4975 of the Code) or a "party in
interest" (as defined in section 3(14) of ERISA):
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(a) sale, exchange or leasing of any property between the Plan and
such person,
(b) lending of money or other extension of credit between the Plan
and such person,
(c) furnishing of goods, services or facilities between the Plan
and such person,
(d) transfer to, or use by or for the benefit of, such person of
the income or assets of the Plan,
(e) act by such person who is a fiduciary hereunder whereby the
Participant deals with the income or assets of the Plan in the
Participant's own interest or for the Participant's own
account, or
(f) receipt of any consideration for the Participant's own
personal account by such person who is a fiduciary from any
party dealing with the Plan in connection with a transaction
involving the income or assets of the Plan.
10.10. Indemnity. The Trustee, and directors, officers and employees of the
Employer shall, except as prohibited by law, be indemnified and held harmless by
the Employer from any and all liabilities, costs and expenses (including legal
fees), to the extent not covered by liability insurance, arising out of any
action taken by such Trustee or individuals as Trustee, fiduciary or in any
other capacity with respect to this Plan, whether imposed under ERISA or
otherwise unless such liability arises from the proven gross negligence, the bad
faith or, if such Trustee or individuals have reasonable cause to believe their
conduct was unlawful, the criminal misconduct of such Trustee, director, officer
or employee. This indemnification shall continue as to a Trustee, director,
officer or employee after such Trustee or individual ceases to be a Trustee,
director, officer or employee.
10.11. Investment In Insurance. If the Employer shall so designate in the
Adoption Agreement, a Participant may, with the consent of the Administrative
Committee and subject to such conditions as the Administrative Committee may
impose, elect to have a portion of the Participant's Vested Total Account
(excluding any Deductible Voluntary Account) invested in life insurance
contracts issued by any insurance company licensed to do business in the State
of where the Trustee has its principal place of business (any such insurance
contract held for a Participant hereunder being herein referred to as a
"contract").
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10.11.1. Limitation On Payment Of Premiums. The aggregate premiums paid
on contracts for the Participant from the Participant's Total Account (excluding
any Deductible Voluntary Account) must at all times be less than fifty percent
(50%), in the case of ordinary life insurance (ordinary life insurance contracts
are contracts with both nondecreasing death benefits and nonincreasing premiums)
or other higher premium type of permanent life insurance, or twenty-five percent
(25%), in the case of term or universal life insurance or all other life
insurance contracts which are not considered ordinary life, of the Employer
contributions allocated to a Participant's Employer Matching Account, Employer
Profit Sharing Account and Retirement Savings Account; provided further, that
the aggregate premiums paid on term, universal life insurance contracts or all
other life insurance contracts which are not considered ordinary life, together
with one-half (1/2) of the aggregate premiums paid on ordinary life insurance or
other higher premium type of permanent life insurance must at all times be less
than twenty-five percent (25%) of the aggregate of Employer contributions
allocated to the Participant's Employer Matching Account, Employer Profit
Sharing Account and Retirement Savings Account).
If the Vested portion of the Participant's Employer Matching Account, Employer
Profit Sharing Account and Retirement Savings Account is insufficient within the
limitations herein contained to pay any premium on a contract when the same
becomes due, the Trustee shall, unless the Participant directs the Trustee to
use the Participant's Voluntary Account, Rollover Account or Transfer Account
for this purpose, cause such contract to be rewritten for its then paid-up
value, if any, and retain the same for the Participant, in which event no
further premium payments shall thereafter be made thereon. All dividends on a
contract shall be used to reduce premiums.
10.11.2. Miscellaneous Rules For Purchase Of Contract. The Participant
shall take such physical examinations and furnish such information as may be
necessary to procure a contract. To the extent possible, all contracts shall
have a uniform premium due date. The Trustee shall be the owner of all
contracts, with full power to execute all insurance applications and to exercise
all available options, and shall be the death beneficiary thereunder.
10.11.3. Payment Of Expenses. Any charge or expense of the Trustee in
handling a Participant's contract shall be paid from that Participant's Total
Account (excluding any Deductible Voluntary Account); provided, that the
Employer may, in its discretion, directly pay such charge or expense.
10.11.4. Authority For Contract. Any insurance company issuing
contracts may deal with the Trustee alone and without the consent of any
Participant or Beneficiary and shall not be required to examine the provisions
of this Plan Statement or any amendment thereto, nor shall it be responsible
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for the failure of the Trustee to perform its duties, nor shall it be obliged to
see to the application or disposition of any money paid by it to the Trustee,
and any such payment shall fully discharge such insurance company for the amount
so paid.
10.11.5. Payment Of Contract Upon Death. Upon the death of the
Participant, the proceeds of the contracts held for the Participant hereunder
shall be deemed a death benefit under this Plan and shall be added to the Vested
Total Account and distributed to the Participant's Beneficiary or Beneficiaries
in the manner prescribed in Section 7.
10.11.6. Payment Of Contract -- Not Upon Death. Upon the occurrence of
an Event of Maturity other than the death of the Participant, the Trustee shall,
as directed by the Administrative Committee, either: (i) surrender the contracts
held for the Participant hereunder for cash and distribute the proceeds in the
manner described in Section 7, (ii) distribute the contracts to the Participant
(provided, however, that the optional modes of settlement under any such
contract shall be limited to those available under this Plan), or (iii) convert
the contracts into an annuity contract or contracts of the type described in
Section 7.3 and distribute the same to the Participant, or (iv) any combination
of the foregoing. In no event, however, shall any such contract be distributed
in a manner which is inconsistent with the requirements in Section 7.3.
10.11.7. Value Of Contract. For the purpose of determining the value of
a contract hereunder, such contract shall be valued at the greater of the
premiums theretofore paid thereon or its then cash value, but such contract
shall not be considered a part of the Fund for the purpose of allocating income,
market gains and losses of the Fund in accordance with Section 4.
10.11.8. Interpretation. If any provision of any contract is
inconsistent with any provision of the Plan Statement, the provision of the Plan
Statement shall control.
10.12. Employer Directed Investments. If so indicated in the Adoption Agreement,
the Trustee shall be subject in the management and control of the Fund to the
directions (to the extent not inconsistent with law) of the person or
Administrative Committee identified in the Adoption Agreement or certified to
the Trustee by an officer of the Employer. The Trustee in acting pursuant to and
in reliance on such directions shall be fully and completely indemnified and
held harmless by the Employer from any liability, loss or expense (including
legal fees) arising out of its actions so directed notwithstanding that such
directions, and the Trustee's conduct pursuant thereto, may constitute a breach
of fiduciary obligations to the Plan, the Participants and Beneficiaries.
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10.13. No Investment in Employer Real Property. Notwithstanding any other
provision of this Plan Statement, the Plan may not acquire or hold any "Employer
real property" as that term is defined in section 407(d) of ERISA.
10.14. No Investment in Employer Securities. Notwithstanding any other provision
of this Plan Statement, the Plan may not acquire or hold any "Employer security"
as that term is defined in section 407(d) of ERISA.
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SECTION 11
DETERMINATIONS -- RULES AND REGULATIONS
11.1. Determinations. The Administrative Committee shall make such
determinations as may be required from time to time in the administration of
this Plan. The Administrative Committee shall have the sole authority and
responsibility to interpret and construe the Plan Statement and to determine all
factual and legal questions under the Plan, including but not limited to, the
entitlement of employees, Participants and Beneficiaries and the amounts of
their respective interests. The Trustee and other interested parties may act and
rely upon all information reported to them hereunder and need not inquire into
the accuracy thereof, nor be charged with any notice to the contrary.
11.2. Rules And Regulations. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the Administrative Committee.
11.3. Method Of Executing Instruments.
11.3.1. Employer Or Administrative Committee. Information to be
supplied or written notices to be made or consents to be given by the Employer
or the Administrative Committee pursuant to any provision of this Plan Statement
may be signed in the name of the Employer by any officer thereof who has been
authorized to make such certification or to give such notices or consents or by
the Administrative Committee.
11.3.2. Trustee. Any instrument or written notice required, necessary
or advisable to be made or given by the Trustee may be signed by any Trustee, if
all Trustees serving hereunder are individuals, or by any authorized officer or
employee of the Trustee, if a corporate Trustee shall be acting hereunder as
sole Trustee, or by any such officer or employee of the corporate Trustee or by
an individual Trustee acting hereunder, if corporate and individual Trustees
shall be serving as co-trustees hereunder.
11.4. Claims Procedure. The Administrative Committee shall establish procedures
for the resolution of disputes and disposition of claims arising under this
Plan. An application for a distribution under Section 7 shall be considered as a
claim for the purposes of this Section 11.4. Until modified by the
Administrative Committee, this claims procedure is as described below.
11.4.1. Original Claim. Any employee, former employee or Beneficiary of
such employee or former employee may, if the Participant so desires, file with
the Administrative Committee a written claim for benefits under this Plan.
Within ninety (90) days after the filing of such a claim, the
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Administrative Committee shall notify the claimant in writing whether the
Participant's claim is upheld or denied in whole or in part or shall furnish the
claimant a written notice describing specific special circumstances requiring a
specified amount of additional time (but not more than one hundred eighty days
from the date the claim was filed) to reach a decision on the claim. If the
claim is denied in whole or in part, the Administrative Committee shall state in
writing:
(a) the specific reasons for the denial,
(b) the specific references to the pertinent provisions of the
Plan Statement on which the denial is based,
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary,
and
(d) an explanation of the claims review procedure set forth in
this Section.
11.4.2. Claims Review Procedure. Within sixty (60) days after receipt
of notice that the Participant's claim has been denied in whole or in part, the
claimant may file with the Administrative Committee a written request for a
review and may, in conjunction therewith, submit written issues and comments.
Within sixty (60) days after the filing of such a request for review, the
Administrative Committee shall notify the claimant in writing whether, upon
review, the claim was upheld or denied in whole or in part or shall furnish the
claimant a written notice describing specific special circumstances requiring a
specified amount of additional time (but not more than one hundred twenty days
from the date the request for review was filed) to reach a decision on the
request for review.
11.4.3. General Rules.
(a) No inquiry or question shall be deemed to be a claim or a
request for a review of a denied claim unless made in
accordance with the claims procedure. The Administrative
Committee may require that any claim for benefits and any
request for a review of a denied claim be filed on forms to be
furnished by the Administrative Committee upon request.
(b) All decisions on claims and on requests for a review of denied
claims shall be made by the Administrative Committee.
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(c) The Administrative Committee may, in its discretion, hold one
or more hearings on a claim or a request for a review of a
denied claim.
(d) Claimants may be represented by a lawyer or other
representative (at their own expense), but the Administrative
Committee reserves the right to require the claimant to
furnish written authorization. A claimant's representative
shall be entitled to copies of all notices given to the
claimant.
(e) The decision of the Administrative Committee on a claim and on
a request for a review of a denied claim shall be served on
the claimant in writing. If a decision or notice is not
received by a claimant within the time specified, the claim or
request for a review of a denied claim shall be deemed to have
been denied.
(f) Prior to filing a claim or a request for a review of a denied
claim, the claimant or the Participant's representative shall
have a reasonable opportunity to review a copy of the Plan
Statement and all other pertinent documents in the possession
of the Employer, the Administrative Committee and the Trustee.
11.5. Information Furnished By Participants. Neither the Employer nor the
Administrative Committee nor the Trustee shall be liable or responsible for any
error in the computation of the Account of a Participant resulting from any
misstatement of fact made by the Participant, directly or indirectly, to the
Employer, the Administrative Committee or the Trustee and used by them in
determining the Participant's Account. Neither the Employer nor the
Administrative Committee nor the Trustee shall be obligated or required to
increase the Account of such Participant which, on discovery of the
misstatement, is found to be understated as a result of such misstatement of the
Participant. However, the Account of any Participant which is overstated by
reason of any such misstatement shall be reduced to the amount appropriate for
the Participant in view of the truth. Any refund received upon reduction of an
Account so made shall be used to reduce the next succeeding contribution of the
Employer to the Plan.
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SECTION 12
OTHER ADMINISTRATIVE MATTERS
12.1. Employer.
12.1.1. Officers. Except as hereinafter provided, functions generally
assigned to the Employer shall be discharged by its officers or delegated and
allocated as provided herein.
12.1.2. Delegation. Except as hereinafter provided, the Board of
Directors of the Principal Employer may delegate or redelegate and allocate and
reallocate to one or more persons or to an Administrative Committee of persons
jointly or severally, and whether or not such persons are directors, officers or
employees, such fiduciary and other functions assigned to it or to the Employer
hereunder as it may from time to time deem advisable.
12.1.3. Board Of Directors. The Board of Directors of the Principal
Employer shall have the exclusive authority, which authority may not be
delegated, to act for the Employer:
(a) to adopt the Plan, to terminate the Plan, and
(b) to appoint or remove a Trustee, to appoint or remove an
Investment Manager, to appoint or remove the Administrative
Committee.
12.2. Administrative Committee.
12.2.1. Appointment and Removal. The Administrative Committee shall
consist of such members as may be determined and appointed from time to time by
the Principal Employer and they shall serve at the pleasure of the Principal
Employer. Members of the Administrative Committee shall serve without
compensation, but their reasonable expenses shall be an expense of the
administration of the Fund and shall be paid by the Trustee from and out of the
Fund except to the extent the Employer, in its discretion, directly pays such
expenses.
12.2.2. Automatic Removal. If any individual who is a member of the
Administrative Committee is a director, officer or employee when appointed as a
member of the Administrative Committee, then such individual shall be
automatically removed as a member of the Administrative Committee at the
earliest time such individual ceases to be a director, officer or employee. This
removal shall occur automatically and without any requirement for action by the
Principal Employer or any notice to the individual so removed.
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12.2.3. Authority. The Administrative Committee may elect such officers
as the Administrative Committee may decide upon. The Administrative Committee
shall:
(a) establish rules for the functioning of the Administrative
Committee, including the times and places for holding
meetings, the notices to be given in respect of such meetings
and the number of members who shall constitute a quorum for
the transaction of business,
(b) organize and delegate to such of its members as it shall
select authority to execute or authenticate rules, advisory
opinions or instructions, and other instruments adopted or
authorized by the Administrative Committee; adopt such bylaws
or regulations as it deems desirable for the conduct of its
affairs; appoint a secretary, who need not be a member of the
Administrative Committee, to keep its records and otherwise
assist the Administrative Committee in the performance of its
duties,
(c) keep a record of all its proceedings and acts and keep all
books of account, records and other data as may be necessary
for the proper administration of the Plan; notify the Trustee
and the Employer of any action taken by the Administrative
Committee and, when required, notify any other interested
person or persons,
(d) determine from the records of the Employer the compensation,
service records, status and other facts regarding Participants
and other employees,
(e) cause to be compiled at least annually, from the records of
the Administrative Committee and the reports and accountings
of the Trustee, a report and accounting of the status of the
Plan and the Accounts of the Participants, and make it
available to each Participant who shall have the right to
examine that part or portion of such report and accounting (or
a true and correct copy of such part) which sets forth the
Participant's benefits and the Participant's ratable interest
in the Fund,
(f) prescribe forms to be used for applications for participation,
distributions, withdrawals, notifications, etc., as may be
required in the administration of the Plan,
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(g) set up such rules, applicable to all Participants similarly
situated, as are deemed necessary to carry out the terms of
the Plan Statement,
(h) perform all other acts reasonably necessary for administering
the Plan including collecting data for and performing the
tests described in Section 2 and 3, carrying out the
provisions of the Plan Statement and performing the duties
imposed on it by the Employer,
(i) interpret and construe the Plan Statement,
(j) resolve questions of eligibility and status under the Plan,
and the rights of employees, Participants and Beneficiaries
and the amounts of their interests,
(k) resolve all questions of administration of the Plan not
specifically referred to in this section, and
(l) delegate or redelegate to one or more persons, jointly or
severally, and whether or not such persons are members of a
Administrative Committee, such functions assigned to the
Administrative Committee hereunder as it may from time to time
deem advisable.
12.2.4. Majority Decisions. If the Administrative Committee is a
Committee and not a person, there shall at any time be three (3) or more members
serving hereunder who are qualified to perform a particular act, the same may be
performed, on behalf of all, by a majority of those qualified, with or without
the concurrence of the minority. No person who failed to join or concur in such
act shall be held liable for the consequences thereof, except to the extent that
liability is imposed under ERISA.
If the Employer does not designate an Administrative Committee, the President
(or other chief executive officer) of the Employer shall be the Administrative
Committee.
12.3. Limitation On Authority.
12.3.1. Fiduciaries Generally. No action taken by any fiduciary, if
authority to take such action has been delegated or redelegated to it hereunder,
shall be the responsibility of any other fiduciary except as may be required by
the provisions of ERISA. Except to the extent imposed by ERISA, no fiduciary
shall have the duty to question whether any other fiduciary is fulfilling all of
the responsibility imposed upon such other fiduciary by the Plan Statement or by
ERISA.
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12.3.2. Trustee. The responsibilities and obligations of the Trustee
shall be strictly limited to those set forth in this Plan Statement. The Trustee
shall have no authority or duty to determine or enforce payment of any Employer
contribution under this Plan or to determine the existence, nature or extent of
any individual's rights in the Fund or under the Plan or question any
determination made by the Principal Employer or the Administrative Committee
regarding the same. Nor shall the Trustee be responsible in any way for the
manner in which the Employer, Principal Employer or Administrative Committee
carries out its responsibilities under this Plan Statement or, more generally,
under the Plan. The Trustee shall give the Principal Employer notice of (and
tender to the Principal Employer) the prosecution or defense of any litigation
involving the Plan, the Fund or other fiduciaries of the Plan.
12.4. Conflict Of Interest. If any Trustee, any Administrative Committee, any
member of the Board of Directors or any officer or employee of the Employer to
whom authority has been delegated or redelegated hereunder shall also be a
Participant in this Plan, the Participant shall have no authority as such
Trustee, member, officer or employee with respect to any matter specially
affecting the Participant's individual interest hereunder (as distinguished from
the interests of all Participants and Beneficiaries or a broad class of
Participants and Beneficiaries), all such authority being reserved exclusively
to the other Trustees, members, officers or employees, as the case may be, to
the exclusion of such Participant, and such Participant shall act only in the
Participant's individual capacity in connection with any such matter.
12.5. Dual Capacity. Individuals, firms, corporations or partnerships identified
herein or delegated or allocated authority or responsibility hereunder may serve
in more than one fiduciary capacity.
12.6. Administrator. The Principal Employer shall be the administrator for
purposes of section 3(16)(A) of ERISA.
12.7. Named Fiduciaries. The Trustee, the Employer, the officers and Board of
Directors of the Principal Employer and the Administrative Committee shall be
named fiduciaries for the purpose of section 402(a) of ERISA.
12.8. Service Of Process. In the absence of any designation to the contrary by
the Employer, the President of the Principal Employer is designated as the
appropriate and exclusive agent for the receipt of service of process directed
to the Plan in any legal proceeding, including arbitration, involving the Plan.
12.9. Residual Authority. In the event the Employer, Administrative Committee,
Board of Directors, or other person designated as having the authority to act or
a duty to act on any matter hereunder, is prevented by death, dissolution,
incapacity or other similar cause from acting hereunder and
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there is no other person then empowered to act on such matter, the Trustee shall
be empowered to act in its place.
12.10. Administrative Expenses. The reasonable expenses of administering the
Plan shall be payable out of the Fund except to the extent that the Employer, in
its discretion, directly pays the expenses.
12.11. Annual Certification. As of each Annual Valuation Date during the
continuance of the Plan, the Administrative Committee shall certify in writing
the names of all Participants who are entitled to participate in the Employer
contribution for the Plan Year ending on that date and all other facts that may
be required to properly administer the provisions of this Plan.
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SECTION 13
IN GENERAL
13.1. Disclaimers.
13.1.1. Effect On Employment. Neither the terms of this Plan Statement
nor the benefits hereunder nor the continuance thereof shall be a term of the
employment of any employee, and the Employer shall not be obliged to continue
this Plan. The terms of this Plan Statement shall not give any employee the
right to be retained in the employment of the Employer.
13.1.2. Sole Source Of Benefits. Neither the Trustee nor the
Administrative Committee nor the Employer or any of its officers or members of
its Board of Directors in any way guarantee the Fund against loss or
depreciation, nor do they guarantee the payment of any benefit or amount which
may become due and payable hereunder to any Participant or to any Beneficiary or
to any creditor of a Participant, a Beneficiary or the Trustee. Each
Participant, Beneficiary or other person entitled at any time to payments
hereunder shall look solely to the assets of the Fund for such payments or to
the Vested Total Account distributed to any Participant or Beneficiary, as the
case may be, for such payments. In each case where a Vested Total Account shall
have been distributed to a former Participant or a Beneficiary or to the person
or any one of a group of persons entitled jointly to the receipt thereof and
which purports to cover in full the benefit hereunder, such former Participant
or Beneficiary, or such person or persons, as the case may be, shall have no
further right or interest in the other assets of the Fund.
13.1.3. Co-Fiduciary Matters. Neither the Employer nor any of its
officers or members of its Board of Directors nor the Administrative Committee
shall in any manner be liable to any Participant, Beneficiary or other person
for any act or omission of the Trustee (except to the extent that liability is
imposed under ERISA). Neither the Trustee nor the Administrative Committee nor
the Employer or any of its officers or members of its Board of Directors shall
be under any liability or responsibility (except to the extent that liability is
imposed under ERISA) for failure to effect any of the objectives or purposes of
this Plan by reason of loss or fluctuation in the value of Fund or for the form,
genuineness, validity, sufficiency or effect of any Fund asset at any time held
hereunder, or for the failure of any person, firm or corporation indebted to the
Fund to pay such indebtedness as and when the same shall become due or for any
delay occasioned by reason of any applicable law, order or regulation or by
reason of any restriction or provision contained in any security or other asset
held by the Fund. Except as is otherwise provided in ERISA, the Employer, its
officers and the members of its Board of Directors, the Trustee, the
Administrative Committee and other fiduciaries shall not be liable for an act or
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omission of another person with regard to a fiduciary responsibility that has
been allocated to or delegated to such other person pursuant to the terms of
this Plan Statement or pursuant to procedures set forth in this Plan Statement.
13.2. Reversion Of Fund Prohibited. The Fund from time to time hereunder shall
at all times be a trust fund separate and apart from the assets of the Employer,
and no part thereof shall be or become available to the Employer or to creditors
of the Employer under any circumstances other than those specified in Section
1.3, Section 3.12, Section 11.5 and Appendix A hereof. It shall be impossible
for any part of the corpus or income of the Fund to be used for, or diverted to,
purposes other than for the exclusive benefit of Participants and Beneficiaries
(except as provided in Section 1.3, Section 3.12, Section 11.5 and Appendix A).
13.3. Execution In Counterparts. This Plan Statement may be executed in any
number of counterparts, each of which, without production of the others, shall
be deemed to be an original.
13.4. Continuity. If this Plan Statement is adopted as an amendment of a Prior
Plan Statement, the tenure and membership of the any Administrative Committee
previously appointed, the rules of administration adopted and the Beneficiary
designations in effect under the Prior Plan Statement immediately before the
Effective Date shall, to the extent not inconsistent with this Plan Statement,
continue in full force and effect until altered as provided herein.
13.5. Contingent Top Heavy Plan Rules. The rules set forth in the Appendix B to
this Plan Statement (concerning additional provisions that apply if the Plan
becomes top heavy) are incorporated herein.
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APPENDIX A
SECTION 415 LIMITATIONS ON ALLOCATIONS
SECTION 1
INTRODUCTION
Terms defined in the Plan Statement shall have the same meanings when
used in this Appendix. In addition, when used in this Appendix, the following
terms shall have the following meanings:
1.1. Annual Addition. Annual addition means, with respect to any Participant for
a limitation year, the sum of:
(i) all employer contributions (including employer
contributions of the Participant's earnings
reductions under section 401(k), section 403(b) and
section 408(k) of the Code) allocable as of a date
during such limitation year to the Participant under
all defined contribution plans;
(ii) all forfeitures allocable as of a date during such
limitation year to the Participant under all defined
contribution plans;
(iii) all Participant contributions made as of a date
during such limitation year to all defined
contribution plans;
(iv) all amounts allocated after March 31, 1984 to an
individual medical account as defined in section
415(l)(2) of the Code, which is part of a pension or
annuity plan maintained by the employer;
(v) all 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 as defined in section 419(e) of the
Code, maintained by the employer; and
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(vi) all amounts allocable as of a date during such
limitation year to the Participant under Section 2.4,
Section 3.6, Section 4 or Section 5 of this Appendix.
1.1.1. Specific Inclusions. With regard to a plan which contains a
qualified cash or deferred arrangement or matching contributions or employee
contributions, excess deferrals and excess contributions and excess aggregate
contributions (whether or not distributed during or after the limitation year)
shall be considered annual additions in the year contributed.
1.1.2. Specific Exclusions. The annual addition shall not, however,
include any portion of a Participant's rollover contributions or any additions
to accounts attributable to a plan merger or a transfer of plan assets or
liabilities or any other amounts excludable under law.
1.1.3. ESOP Rule. In the case of an employee stock ownership plan
within the meaning of section 4975(e)(7) of the Code, annual additions shall not
include any dividends or gains on sale of employer securities held by the
employee stock ownership plan (regardless of whether such dividends or gains are
(i) on securities which are allocated to Participants' accounts or (ii) on
securities which are not allocated to Participants' accounts which, in the case
of dividends used to pay principal on an employee stock ownership plan loan,
result in employer securities being allocated to Participants' accounts or, in
the case of a sale, result in sale proceeds being allocated to Participants'
accounts). In the case of an employee stock ownership plan under which no more
than one-third (1/3rd) of the employer contributions for a limitation year which
are deductible under section 404(a)(9) of the Code are allocated to highly
compensated employees (as defined in section 414(q) of the Code), annual
additions shall not include forfeitures of employer securities under the
employee stock ownership plan if such securities were acquired with the proceeds
of an exempt loan or employer contributions to the employee stock ownership plan
which are deductible by the employer under section 404(a)(9)(B) of the Code and
charged against the Participant's account (i.e., interest payments).
1.2. Controlled Group Member. Controlled group member means the Employer and
each member of a controlled group of corporations (as defined in section 414(b)
and as modified by Code section 415(h) of the Code), all commonly controlled
trades or businesses (as defined in section 414(c) and as modified by Code
section 415(h) of the Code) and affiliated service groups (as defined in section
414(m) of the Code) of which the Employer is a part and other organizations
required to be aggregated for this purpose under section 414(o) of the Code.
1.3. Defined Benefit and Defined Contribution Plans. Defined benefit plan and
defined contribution plan have the meanings assigned to those terms
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by section 415(k)(1) of the Code. Whenever reference is made to defined benefit
plans and defined contribution plans in this Appendix, it shall include all such
plans maintained by the Employer and all controlled group members.
1.4. Defined Benefit Fraction.
1.4.1. General Rule. Defined benefit fraction means a fraction the
numerator of which is the sum of the Participant's projected annual benefits
under all defined benefit plans (whether or not terminated) maintained by the
Employer determined as of the close of the limitation year, and the denominator
of which is the lesser of:
(i) one hundred twenty-five percent (125%) of the dollar
limitation in effect under section 415(b) of the Code
as of the close of such limitation year (i.e., 125%
of $90,000 as adjusted for cost of living,
commencement dates, length of service and other
factors), or
(ii) one hundred forty percent (140%) of the dollar amount
which may be taken into account under section 415(b)
of the Code with respect to such Participant as of
the close of such limitation year (i.e., 140% of the
Participant's highest average compensation as
adjusted for cost of living, length of service and
other factors).
1.4.2. Transition Rule. Notwithstanding the above, 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 which were in
existence on May 6, 1986, the denominator of this fraction will not be less than
one hundred twenty-five percent (125%) of the sum of the annual benefits under
such plans which the Participant had accrued 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. The preceding sentence
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code section 415 for all limitation years
beginning before January 1, 1987.
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1.5. Defined Contribution Fraction.
1.5.1. General Rule. Defined contribution fraction means a fraction,
the numerator of which is the sum of the Participant's annual additions under
all defined contribution plans (whether or not terminated) (including employer
contributions which are allocated to a separate account established for the
purpose of providing medical benefits or life insurance benefits with respect to
a key employee (as defined in Appendix B) under a welfare benefit fund or
individual medical account and also including the annual additions attributable
to the Participant's nondeductible employee contributions to all defined benefit
plans (whether or not terminated)) as of the close of the limitation year and
for all prior limitation years, and the denominator of which is the sum of the
amounts determined under paragraph (i) or (ii) below, whichever is the lesser,
for such limitation year and for each prior limitation year in which the
Participant had any service with the employer (regardless of whether that or any
other defined contribution plan was in existence during those years or continues
in existence):
(i) one hundred twenty-five percent (125%) of the dollar
limitation in effect under section 415(c)(l)(A) of
the Code for such limitation year determined without
regard to section 415(c)(6) of the Code (i.e., 125%
of $30,000 as adjusted for cost of living), or
(ii) one hundred forty percent (140%) of the dollar amount
which may be taken into account under section
415(c)(l)(B) of the Code with respect to such
individual under the Plan for such limitation year
(i.e., 140% of 25% of the Participant's ss. 415
compensation for such limitation year).
1.5.2. TEFRA Transition Rule. The Employer may elect that the amount
taken into account for each Participant for all limitation years ending before
January 1, 1983 under Section 1.5.1(i) and Section 1.5.1(ii) shall be determined
pursuant to the special transition rule provided in section 415(e)(6) of the
Code.
1.5.3. Employee Contributions. Notwithstanding the definition of
"annual additions," for the purpose of determining the defined contribution
fraction in limitation years beginning before January 1, 1987, employee
contributions shall not be taken into account to the extent that they were not
required to be taken into account under section 415 of the Code prior to the Tax
Reform Act of 1986.
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1.5.4. Annual Denominator. The amounts to be determined under Section
1.5.1(i) and Section 1.5.1(ii) for the limitation year and for all prior
limitation years in which the Participant had any service with the employer
shall be determined separately for each such limitation year on the basis of
which amount is the lesser for each such limitation year.
1.5.5. Relevant Law. For all limitation years ending before January 1,
1976, the dollar limitation under section 415(c)(1)(A) of the Code is
Twenty-five Thousand Dollars ($25,000). For limitation years ending after
December 31, 1975 and before January 1, 1990, the amount shall be:
For limitation years The section 415(c)(1)(A)
ending during: dollar amount is:
-------------------- ------------------------
1976 $ 26,825
1977 $ 28,175
1978 $ 30,050
1979 $ 32,700
1980 $ 36,875
1981 $ 41,500
1982 $ 45,475
1983 - 1989 $ 30,000
1.5.6. Relief Rule. If the Participant was a participant as of the end
of the first day of the first limitation year beginning after December 31, 1986,
in one or more defined contribution plans which were in existence on May 6,
1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed one (1.0) under
the terms of this Plan Statement. Under the adjustment, an amount equal to the
product of the excess of the sum of the fractions over one (10), times 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 limitations applicable to the
first limitation year beginning on or after January 1, 1987.
1.6. Highest Average Compensation. Highest average compensation means the
average section 415 compensation for the three (3) consecutive years of service
with the controlled group members that produce the highest average. A year of
service with the controlled group members is the Plan Year.
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1.7. Individual Medical Account. Individual medical account means an account, as
defined in section 415(l)(2) of the Code, maintained by the Employer or a
controlled group member which provides an annual addition.
1.8. Limitation Year. The limitation year shall be the Plan Year, unless the
Adoption Agreement specifies a different limitation year.
1.9. Maximum Permissible Addition.
1.9.1. General Rule. The maximum permissible addition (to defined
contribution plans) for any one (1) limitation year shall be the lesser of:
(i) Thirty Thousand Dollars ($30,000), or if greater,
one-fourth (1/4) of the defined benefit limitation
set forth in section 415(b)(1) of the Code as in
effect for the limitation year, or
(ii) Twenty-five percent (25%) of the Participant's
section 415 compensation for such limitation year.
The compensation limitation referred to in Section 1.9.1(ii) shall not apply to
any contribution for medical benefits (within the meaning of section 401(h) or
section 419A(f)(2) of the Code) which is otherwise treated as an annual addition
under section 415(l)(1) or section 419A(d)(2) of the Code.
1.9.2. ESOP Rule. For limitation years beginning before July 13, 1989,
in the case of an employee stock ownership plan within the meaning of section
4975(e)(7) of the Code under which no more than one third (1/3rd) of the
employer contributions for a limitation year are allocated to highly compensated
employees (as defined in section 414(q) of the Code), the dollar limitation in
Section 1.9.1(i) (after adjustment for cost of living) shall be increased to be
equal to the sum of:
(i) the dollar limitation in Section 1.9.1(i) (after
adjustment for cost of living), and
(ii) the lesser of the dollar limitation in Section
1.9.1(i) (after adjustment for cost of living) or the
amount of employer securities contributed or
purchased with cash contributed to the employee stock
ownership plan.
1.9.3. Medical Benefits. The dollar limitation in 1.9.1(i) (after
adjustment for cost of living) shall be reduced by the amount of employer
contributions which are allocated to a separate account established for the
purpose of providing medical benefits or life insurance benefits with respect to
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a key employee (as defined in Appendix B) under a welfare benefit fund or an
individual medical account.
1.9.4. Short 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 amount described in
Section 1.9.1(i) multiplied by the following fraction:
Number of months in the short limitation year
---------------------------------------------
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1.10. Projected Annual Benefit. Projected annual benefit means the annual
annuity benefit payable to the Participant at normal retirement age (as defined
in the defined benefit plan) adjusted to an actuarially equivalent straight life
annuity form (or, if it would be a lesser amount, to any actuarially equivalent
qualified joint and survivor annuity form that is available under the defined
benefit plan) assuming that:
(i) the Participant continues employment and
participation under the defined benefit plan until
normal retirement age (as defined in the defined
benefit plan) or, if later, until the Participant's
current age, and
(ii) the Participant's section 415 compensation and all
other factors used to determine benefits under the
defined benefit plan remain unchanged for all future
limitation years.
1.11. Regional Prototype Plan. A plan, the form of which is the subject of a
favorable notification letter from the Internal Revenue Service.
1.12. Section 415 Compensation. Notwithstanding the definition of compensation
used in the Plan Statement, section 415 compensation shall mean, with respect to
any limitation year, compensation as defined in section 415(c)(3) of the Code,
and shall include, with respect to any limitation year, the Participant's wages,
salaries, fees for professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with any employer maintaining any
defined contribution plan or defined benefit plan to the extent that the amounts
are includable in gross income (including, but not limited to, commissions paid
salespersons, compensation for services on the basis of percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances).
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1.12.1. Cash vs. Accrual Basis. Section 415 compensation shall be
determined on a cash basis.
1.12.2. Specific Inclusions. Section 415 compensation includes: (i)
earned income from sources outside the United States, as defined in section
911(b) of the Code, whether or not excludable from gross income under section
911 of the Code or deductible under section 913 of the Code; (ii) amounts
described in sections 104(a)(3), 105(a) and 105(h) of the Code, but only to the
extent that these amounts are includable in the gross income of the Participant;
(iii) amounts paid or reimbursed by the employer for moving expenses incurred by
the Participant, but only to the extent that these amounts are not deductible by
the Participant under section 217 of the Code; (iv) the value of a nonqualified
stock option granted to a Participant by the employer, but only to the extent
that the value of the option is includable in the gross income of the
Participant for the taxable year in which it was granted; (v) the amount
includable in the gross income of the Participant upon making the election
described in section 83(b) of the Code; (vi) the amounts received by the
Participant pursuant to an unfunded nonqualified plan or contract providing for
deferred compensation when such amounts are includable in the gross income of
the Participant; and (vii) in the case of a Participant who is an employee
within in meaning of section 401(c)(1) of the Code and the regulations
thereunder, the Participant's earned income as described in section 401(c)(2) of
the Code and the regulations thereunder.
1.12.3. Specific Exclusions. Section 415 compensation does not include:
(i) contributions made by the employer to a plan of deferred compensation to the
extent that, before application of Code section 415 limitations to that plan,
the contributions are not includable in the gross income of the Participant for
the taxable year in which contributed; (ii) amounts contributed by the employer
pursuant to a salary reduction agreement which are excludable from the
Participant's gross income under sections 125, 402(a)(8) or 402(h) of the Code;
(iii) contributions made by an employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in section
403(b) of the Code (whether or not the contributions are excludable from the
gross income of the Participant); (iv) distributions from a plan of deferred
compensation (other than an unfunded, nonqualified plan), regardless of whether
such amounts are includable in the gross income of the Participant when
distributed; (v) amounts realized from the exercise of a stock option not
intended to be an incentive stock option within the meaning of section 422(A) of
the Code, or when restricted stock (or property) held by a Participant either
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture within the meaning of section 83 of the Code; (vi) amounts realized
from the sale, exchange or other disposition of stock acquired under an
incentive stock option within the meaning of section 422A of the Code; and (vii)
other amounts which receive special tax benefits, such as premiums for group
term life insurance
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(but only to the extent that the premiums are not includable in the gross income
of the Participant).
1.12.4. Earned Income. Section 415 compensation for a Self-Employed
Person shall be such Self-Employed Person's earned income. Earned income is a
Self-Employed Person's net earnings from self-employment in the trade or
business indicated in the Adoption Agreement as the trade or business of the
employer with regard to which this Plan is established (but only if such trade
or business is one in which personal services of the Self-Employed Person is a
material income-producing factor) for a Plan Year during which the Self-Employed
Person is a Participant, reduced by the amount of the employer contributions
made under the terms of this Plan for Common Law Employees. Earned income shall
include gains (other than any gain which is treated as gain from the sale or
exchange of a capital asset for the purpose of determining the self-employed
individual's federal income tax) and net earnings derived from the sale or other
disposition of, the transfer of any interest in, or the licensing of the use of
property (other than good will) by an individual whose personal efforts created
such property. Earned Income shall be determined without regard to items not
included in gross income and the deductions allocable to such items. Net
earnings are reduced by contributions made by the employer to a qualified plan
to the extent deductible under section 404 of the Code. Net earnings shall be
determined with regard to the deduction allowed to the Self-Employed Person by
section 164(f) of the Code for taxable years beginning after December 31, 1989.
1.13. Welfare Benefit Fund. Welfare benefit fund means a fund as defined in
section 419(e) of the Code which provides post-retirement medical benefits
allocated to separate accounts for key employees as defined in section
419A(d)(3).
SECTION 2
THIS PLAN ALONE
This Section 2 applies only if the Participant does not participate in
and has never participated in another qualified plan or a welfare benefit fund
or an individual medical account maintained by any controlled group member.
2.1. General Rule. The amount of annual additions which may be credited to the
Participant's Account under this Plan for any limitation year will not exceed
the maximum permissible amount. 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
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that the annual additions for the limitation year will equal the maximum
permissible amount.
2.2. Estimation. Prior to determining the Participant's actual total
compensation for the limitation year, the Employer may determine the maximum
permissible amount for a Participant on the basis of a reasonable estimation of
the Participant's total compensation for the limitation year, uniformly
determined for all Participants similarly situated.
2.3. Final Determination. As soon as is administratively feasible after the end
of the limitation year, the maximum permissible amount for the limitation year
will be determined by the Employer on the basis of the Participant's actual
total compensation for the limitation year.
2.4. Remedial Action. If pursuant to Section 2.3 of this Appendix or as a result
of the allocation of forfeitures there is an excess amount, the excess will be
disposed of as follows:
(a) Any nondeductible voluntary employee contributions made by the
Participant for the limitation year which cause such excess to
occur (adjusted for their proportionate share of gains but not
losses while held in the Plan), to the extent they would
reduce the excess amount, will be returned to the Participant.
(b) If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan at
the end of the limitation year, the excess amount in the
Participant's Account will be used to reduce Employer
contributions (including any reallocation of forfeited
suspense accounts) for the next limitation year ("second
limitation year") (and each succeeding limitation year as
necessary) for that Participant if that Participant is covered
by the Plan at the end of the second limitation year (or
succeeding limitation years).
(c) If after the application of paragraph (a) an excess amount
still exists, and the Participant is not covered by the Plan
at the end of the limitation year, the excess amount must be
held unallocated in an "excess account" for the second
limitation year (or succeeding limitation years). The excess
account will be applied to reduce future Employer
contributions (including any forfeited Suspense Accounts) for
all remaining Participants in the second limitation year and
each succeeding limitation year, if necessary.
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(d) If an excess account is in existence at any time during the
limitation year pursuant to this Section 2, it will not
participate in the allocation of the Fund's investment gains
and losses. Also, all amounts in the excess account must be
credited to Participant's Accounts before any Employer or
employee contributions may be made to the Plan for that
limitation year. Excess amounts may not be distributed to
Participants or former Participants. If the Plan should be
terminated prior to the date any such temporarily held,
unallocated excess can be allocated to the Account of
Participants, the date of termination shall be deemed to be an
Annual Valuation Date for the purpose of allocating such
excess and, if any portion of such excess cannot be allocated
as of such deemed Annual Valuation Date by reason of the
limitations of this Appendix, such remaining excess shall be
returned to the Employer.
SECTION 3
THIS PLAN AND ANOTHER REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN
This Section 3 applies only if, in addition to this Plan, the
Participant is covered under another qualified regional prototype defined
contribution plan, a welfare benefit fund or an individual medical account
maintained by any controlled group member.
3.1. General Rule. The annual additions which may be credited to a Participant's
Account under this Plan for any limitation year will not exceed the maximum
permissible amount reduced by the annual additions credited to a Participant's
account under the other plans and welfare benefit funds for the same limitation
year. If the annual additions with respect to the Participant under other
defined contribution plans and welfare benefit funds maintained by any
controlled group member 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 defined contribution
plans and welfare benefit funds 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.
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3.2. Estimation. Prior to determining the Participant's actual total
compensation for the limitation year, the Employer may determine the maximum
permissible amount for a Participant on the basis of a reasonable estimation of
the Participant's compensation for the limitation year, uniformly determined for
all Participants similarly situated.
3.3. Final Determination. As soon as is administratively feasible after the end
of the limitation year, the maximum permissible amount for the limitation year
will be determined by the Employer on the basis of the Participant's actual
total compensation for the limitation year.
3.4. Priority. If, pursuant to Section 3.3 of this Appendix or as a result of
the allocation of forfeitures, a Participant's annual additions under this Plan
and such other plans would result in an excess amount for a limitation year and
the allocations to accounts under such plans are made as of more than one (1)
date during the limitation year, the excess amount will be deemed to consist of
the annual additions last allocated during the limitation year, except that the
annual additions attributable to a welfare benefit fund or individual medial
account will be deemed to have been allocated first regardless of the actual
allocation date.
3.5. Apportionment. 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, multiplied
by
(b) the ratio of (i) the annual additions allocated to the
Participant for the limitation year as of such date under this
Plan to (ii) the total annual additions allocated to the
Participant for the limitation year as of such date under this
Plan and all the other qualified regional prototype defined
contribution plans.
3.6. Remedial Action. Any excess amount attributed to this Plan will be disposed
in the manner described in Section 2.4 of this Appendix.
SECTION 4
THIS PLAN AND A NON-PROTOTYPE
DEFINED CONTRIBUTION PLAN
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If the Participant is covered under another qualified defined
contribution plan maintained by any controlled group member which is not a
qualified regional prototype plan, annual additions which may be credited to the
Participant's Account under this Plan for any limitation year will be limited in
accordance with Section 3.1 through 3.6 of this Appendix A as though the other
plan was a qualified regional prototype defined contribution plan unless the
Employer provides other limitations in the Adoption Agreement.
SECTION 5
THIS PLAN AND A DEFINED BENEFIT PLAN
If any controlled group member maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant in this Plan, the sum of
a Participant's defined benefit plan fraction and defined contribution plan
fraction will not exceed one (1.0) at the close of any limitation year. The
annual additions which may be credited to the Participant's Account under this
Plan for any limitation year will be limited in accordance with the Adoption
Agreement.
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APPENDIX B
CONTINGENT TOP HEAVY PLAN RULES
Notwithstanding any of the foregoing provisions of the Plan Statement,
if, after applying the special definitions set forth in Section 1 of this
Appendix, this Plan is determined under Section 2 of this Appendix to be a Top
Heavy Plan for a Plan Year, then the special rules set forth in Section 3 of
this Appendix shall apply. For so long as this Plan is not determined to be a
Top Heavy Plan, the special rules in Section 3 of this Appendix shall be
inapplicable to this Plan.
SECTION 1
SPECIAL DEFINITIONS
Terms defined in the Plan Statement shall have the same meanings when used in
this Appendix. In addition, when used in this Appendix, the following terms
shall have the following meanings:
1.1. Aggregated Employers -- the Employer and each other corporation,
partnership or proprietorship which is a "predecessor" to the Employer, or is
under "common control" with the Employer, or is a member of an "affiliated
service group" that includes the Employer, as those terms are defined in section
414(b), (c), (m) or (o) of the Code.
1.2. Aggregation Group -- a grouping of this Plan and:
(a) if any Participant in the Plan is a key employee, each other
qualified pension, profit sharing or stock bonus plan of the
Aggregated Employers in which a key employee is a Participant
(and for this purpose, a key employee shall be considered a
Participant only during periods when the Participant is
actually accruing benefits and not during periods when the
Participant has preserved accrued benefits attributable to
periods of participation when the Participant was not a key
employee); and
(b) each other qualified pension, profit sharing or stock bonus
plan of the Aggregated Employers which is required to be taken
into account for this Plan or any plan described in paragraph
(a) above to satisfy the qualification requirements under
section 410 or section 401(a)(4) of the Code; and
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(c) each other qualified pension, profit sharing or stock bonus
plan of the Aggregated Employers which is not included in
paragraph (a) or (b) above, but which the Employer elects to
include in the Aggregation Group and which, when included,
would not cause the Aggregation Group to fail to satisfy the
qualification requirements under section 410 or section
401(a)(4) of the Code.
1.3. Compensation -- unless the context clearly requires otherwise and
notwithstanding any other definition in this Plan Statement, compensation means
section 415 of the Code compensation as defined in Section 1.12 of Appendix A
(as limited to Two Hundred Thousand Dollars adjusted annually as provided in
section 401(a)(17) of the Code).
1.4. Determination Date -- for the first (1st) plan year of a plan, the last day
of such first (1st) plan year, and for each subsequent plan year, the last day
of the immediately preceding plan year.
1.5. Five Percent Owner -- for each Aggregated Employer that is a corporation,
any person who owns (or is considered to own within the meaning of the
Shareholder Attribution Rules) more than five percent (5%) of the value of the
outstanding stock of the corporation or stock possessing more than five percent
(5%) of the total combined voting power of the corporation, and, for each
Aggregated Employer that is not a corporation, any person who owns more than
five percent (5%) of the capital interest or the profits interest in such
Aggregated Employer. For the purposes of determining ownership percentages, each
corporation, partnership and proprietorship otherwise required to be aggregated
shall be viewed as a separate entity.
1.6. Key Employee -- each Participant (whether or not then an employee) who at
any time during a plan year (or any of the four preceding plan years) is:
(a) an officer of any Aggregated Employer (excluding persons who
have the title of an officer but not the authority and
including persons who have the authority of an officer but not
the title) having an annual compensation from all Aggregated
Employers for any such plan year in excess of fifty percent
(50%) of the amount in effect under section 415(b)(1)(A) of
the Code for any such plan year, or
(b) one (l) of the ten (10) employees (not necessarily
Participants) owning (or considered to own within the meaning
of the Shareholder Attribution Rules) both more than one-half
of one percent (1/2%) ownership interest in value and the
largest percentage ownership interests in value of any of the
Aggregated Employers (which are owned by employees) and
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who has an annual compensation from all the Aggregated
Employers in excess of the limitation in effect under section
415(c)(1)(A) of the Code for any such plan year, or
(c) a Five Percent Owner, or
(d) a One Percent Owner having an annual compensation from the
Aggregated Employers of more than One Hundred Fifty Thousand
Dollars ($150,000);
provided, however, that no more than fifty (50) employees (or, if lesser, the
greater of three of all the Aggregated Employers' employees or ten percent of
all the Aggregated Employers' employees) shall be treated as officers. For the
purposes of determining ownership percentages, each corporation, partnership and
proprietorship otherwise required to be aggregated shall be viewed as a separate
entity. For purposes of paragraph (b) above, if two (2) employees have the same
interest in any of the Aggregated Employers, the employee having the greatest
annual compensation from that Aggregated Employer shall be treated as having a
larger interest. For the purpose of determining Compensation, however, all
Compensation received from all Aggregated Employers shall be taken into account.
The term "key employee" shall include the beneficiaries of a deceased key
employee. Annual compensation means ss. 415 compensation as defined in Section
1.12 of Appendix A but including amounts contributed by the Employer pursuant to
a salary reduction agreement which are excludible from the Participant's gross
income under section 125, section 402(a)(8), section 402(h) or Section 403(b) of
the Code. Notwithstanding this Section 1.6, the determination of who is a key
employee will be made in accordance with section 416(i)(1) of the Code and the
regulations thereunder.
1.7. One Percent Owner -- for each Aggregated Employer that is a corporation,
any person who owns (or is considered to own within the meaning of the
Shareholder Attribution Rules) more than one percent (l%) of the value of the
outstanding stock of the corporation or stock possessing more than one percent
(l%) of the total combined voting power of the corporation, and, for each
Aggregated Employer that is not a corporation, any person who owns more than one
percent (l%) of the capital or the profits interest in such Aggregated Employer.
For the purposes of determining ownership percentages, each corporation,
partnership and proprietorship otherwise required to be aggregated shall be
viewed as a separate entity.
1.8. Shareholder Attribution Rules -- the rules of section 318 of the Code,
(except that subparagraph (C) of section 318(a)(2) of the Code shall be applied
by substituting "5 percent" for "50 percent") or, if the Employer is not a
corporation, the rules determining ownership in such Employer which shall be set
forth in regulations prescribed by the Secretary of the Treasury.
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1.9. Top Heavy Aggregation Group -- any Aggregation Group for which, as of the
Determination Date, the sum of:
(i) the present value of the cumulative accrued benefits
for key employees under all defined benefit plans
included in such Aggregation Group; and
(ii) the aggregate of the accounts of key employees under
all defined contribution plans included in such
Aggregation Group,
exceed sixty percent (60%) of a similar sum determined for all employees. In
applying the foregoing, the following rules shall be observed:
(a) For the purpose of determining the present value of the
cumulative accrued benefit for any employee under a defined
benefit plan, or the amount of the account of any employee
under a defined contribution plan, such present value or
amount shall be increased by the aggregate distributions made
with respect to such employee under the plan during the five
(5) year period ending on the Determination Date.
(b) Any rollover contribution (or similar transfer) initiated by
the employee, made from a plan maintained by one Employer to a
plan maintained by another Employer and made after December
31, 1983 to a plan shall not be taken into account with
respect to the transferee plan for the purpose of determining
whether such transferee plan is a Top Heavy Plan (or whether
any Aggregation Group which includes such plan is a Top Heavy
Aggregation Group). Any rollover contribution (or similar
transfer) not described in the preceding sentence shall be
taken into account with respect to the transferee plan for the
purpose of determining whether such transferee plan is a Top
Heavy Plan (or whether any Aggregation Group which includes
such plan is a Top Heavy Aggregation Group).
(c) If any individual is not a key employee with respect to a plan
for any plan year, but such individual was a key employee with
respect to a plan for any prior plan year, the cumulative
accrued benefit of such employee and the account of such
employee shall not be taken into account.
(d) The determination of whether a plan is a Top Heavy Plan shall
be made once for each plan year of the plan as of the
Determination Date for that plan year.
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(e) In determining the present value of the cumulative accrued
benefits of employees under a defined benefit plan, the
determination shall be made as of the actuarial valuation date
last occurring during the twelve (12) months preceding the
Determination Date and shall be determined on the assumption
that the employees terminated employment on the valuation 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. When aggregating plans, the value of
account balances and accrued benefits shall be calculated with
reference to the Determination Dates that fall within the same
calendar year. The accrued benefit of any employee (other than
a key employee) shall be determined under the method which is
used for accrual purposes for all plans of the Employer or if
there is no method which is used for accrual purposes under
all plans of the Employer, as if such benefit accrued not more
rapidly than the slowest accrual rate permitted under Code
section 411(b)(1)(C). Unless otherwise specified in the
Adoption Agreement, in determining this present value, the
mortality and interest assumptions shall be those which would
be used by the Pension Benefit Guaranty Corporation in valuing
the defined benefit plan if it terminated on such valuation
date. The accrued benefit to be valued shall be the benefit
expressed as a single life annuity.
(f) In determining the accounts of employees under a defined
contribution plan, the account values determined as of the
most recent asset valuation occurring within the twelve (12)
month period ending on the Determination Date shall be used.
In addition, amounts required to be contributed under either
the minimum funding standards or the plan's contribution
formula shall be included in determining the account. In the
first year of the plan, contributions made or to be made as of
the Determination Date shall be included even if such
contributions are not required. When aggregating plans, the
value of account balances and accrued benefits shall be
calculated with reference to the Determination Dates that fall
within the same calendar year.
(g) If any individual has not performed any services for any
Employer maintaining the plan at any time during the five (5)
year period ending on the Determination Date, any accrued
benefit of the individual under a defined benefit plan and the
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account of the individual under a defined contribution plan
shall not be taken into account.
(h) For this purpose, a terminated plan shall be treated like any
other plan and must be aggregated with other plans of the
Employer if it was maintained within the last five (5) years
ending on the determination date for the plan year in question
and would, but for the fact that it terminated, be part of the
Aggregation Group for such plan year.
(i) Deductible employee contributions shall not be taken into
account for the purpose of determining the present value of
the cumulative accrued benefit for any employee under a
defined benefit plan, or the amount of the account of any
employee under a defined contribution plan (including any
simplified employee pension plan).
1.10. Top Heavy Plan -- a qualified plan under which (as of the Determination
Date):
(i) if the plan is a defined benefit plan, the present
value of the cumulative accrued benefits for key
employees exceeds sixty percent (60%) of the present
value of the cumulative accrued benefits for all
employees; and
(ii) if the plan is a defined contribution plan (including
any simplified employee pension plan), the aggregate
of the accounts of key employees exceeds sixty
percent (60%) of the aggregate of all of the accounts
of all employees.
In applying the foregoing, the following rules shall be observed:
(a) Each plan of an Employer required to be included in an
Aggregation Group shall be a Top Heavy Plan if such
Aggregation Group is a Top Heavy Aggregation Group.
(b) For the purpose of determining the present value of the
cumulative accrued benefit for any employee under a defined
benefit plan, or the amount of the account of any employee
under a defined contribution plan (including any simplified
employee pension plan), such present value or amount shall be
increased by the aggregate distributions made with respect to
such employee under the plan during the five (5) year period
ending on the Determination Date.
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(c) Any rollover contribution (or similar transfer) initiated by
the employee, made from a plan maintained by one Employer to a
plan maintained by another Employer and made after December
31, 1983 to a plan shall not be taken into account with
respect to the transferee plan for the purpose of determining
whether such transferee plan is a Top Heavy Plan (or whether
any Aggregation Group which includes such plan is a Top Heavy
Aggregation Group). Any rollover contribution (or similar
transfer) not described in the preceding sentence shall be
taken into account with respect to the transferee plan for the
purpose of determining whether such transferee plan is a Top
Heavy Plan (or whether any Aggregation Group which includes
such plan is a Top Heavy Aggregation Group).
(d) If any individual is not a key employee with respect to a plan
for any plan year, but such individual was a key employee with
respect to the plan for any prior plan year, the cumulative
accrued benefit of such employee and the account of such
employee shall not be taken into account.
(e) The determination of whether a plan is a Top Heavy Plan shall
be made once for each plan year of the plan as of the
Determination Date for that plan year.
(f) In determining the present value of the cumulative accrued
benefits of employees under a defined benefit plan, the
determination shall be made as of the actuarial valuation date
last occurring during the twelve (12) months preceding the
Determination Date and shall be determined on the assumption
that the employees terminated employment on the valuation 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. When aggregating plans, the value of
account balances and accrued benefits shall be calculated with
reference to the Determination Dates that fall within the same
calendar year. The accrued benefit of any employee (other than
a key employee) shall be determined under the method which is
used for accrual purposes for all plans of the Employer or if
there is no method which is used for accrual purposes under
all plans of the Employer, as if such benefit accrued not more
rapidly than the slowest accrual rate permitted under Code
section 411(b)(1)(C). Unless otherwise specified in the
Adoption Agreement, in determining this present value, the
mortality and interest assumptions shall be those which would
be
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used by the Pension Benefit Guaranty Corporation in valuing
the defined benefit plan if it terminated on such valuation
date. The accrued benefit to be valued shall be the benefit
expressed as a single life annuity.
(g) In determining the accounts of employees under a defined
contribution plan, the account values determined as of the
most recent asset valuation occurring within the twelve (12)
month period ending on the Determination Date shall be used.
In addition, amounts required to be contributed under either
the minimum funding standards or the plan's contribution
formula shall be included in determining the account. In the
first year of the plan, contributions made or to be made as of
the Determination Date shall be included even if such
contributions are not required. When aggregating plans, the
value of account balances and accrued benefits shall be
calculated with reference to the Determination Dates that fall
within the same calendar year.
(h) If any individual has not performed any services for any
Employer maintaining the plan at any time during the five (5)
year period ending on the Determination Date, any accrued
benefit of the individual under a defined benefit plan and the
account of the individual under a defined contribution plan
shall not be taken into account.
(i) For this purpose, a terminated plan shall be treated like any
other plan and must be aggregated with other plans of the
Employer if it was maintained within the last five (5) years
ending on the determination date for the plan year in question
and would, but for the fact that it terminated, be part of the
Aggregation Group for such plan year.
(j) Deductible employee contributions shall not be taken into
account for the purpose of determining the present value of
the cumulative accrued benefit for any employee under a
defined benefit plan, or the amount of that account of any
employee under a defined contribution plan (including any
simplified employee pension plan).
SECTION 2
DETERMINATION OF TOP HEAVINESS
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Once each Plan Year, as of the Determination Date for that Plan Year, the
administrator of this Plan shall determine if this Plan is a Top Heavy Plan.
SECTION 3
CONTINGENT PROVISIONS
3.1. When Applicable. If this Plan is determined to be a Top Heavy Plan for any
Plan Year, the following provisions shall apply for that Plan Year (and, to the
extent hereinafter specified, for subsequent Plan Years), notwithstanding any
provisions to the contrary in the Plan Statement.
3.2. Vesting Requirement.
3.2.1. General Rule. During any Plan Year that the Plan is determined
to be a Top Heavy Plan, then all accounts of all Participants in a defined
contribution plan that is a Top Heavy Plan and the accrued benefits of all
Participants in a defined benefit plan that is a Top Heavy Plan shall be vested
and nonforfeitable in accordance with the following schedule if, and to the
extent, that it is more favorable than other provisions of the Plan Statement:
If the Participant Has The Participant's
Completed the Following Vested Percentage
Years of Vesting Service: Shall Be:
----------------------------------------------------
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
3.2.2. Subsequent Year. In each subsequent Plan Year that the Plan is
determined not to be a Top Heavy Plan, the other nonforfeitability provisions of
the Plan Statement (and not this section) shall apply in determining the vested
and nonforfeitable rights of Participants who do not have five (5) or more years
of Vesting Service (three (3) or more years of Vesting Service for Participants
who have one (1) or more Hours of Service in any Plan Year beginning after
December 31, 1988) as of the beginning of such subsequent Plan Year; provided,
however, that they shall not be applied in a manner which would reduce the
vested and nonforfeitable percentage of any Participant. The accounts and
accrued benefits of all other Participants shall
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be vested and nonforfeitable in accordance with the more favorable of the
schedule in Section 3.2.1 above or other provisions of the Plan Statement.
3.3. Defined Contribution Plan Minimum Benefit Requirement.
3.3.1. General Rule. If this Plan is a defined contribution plan, then
for any Plan Year that this Plan is determined to be a Top Heavy Plan, the
Employer shall make a contribution for allocation to the account of each
employee who is a Participant for that Plan Year and who is not a key employee
in an amount (when combined with other Employer contributions and forfeited
accounts allocated to the Participant's account) which is at least equal to
three percent (3%) of such Participant's compensation. This contribution shall
be made for each Participant who has not separated from service with the
Employer at the end of the Plan Year (including for this purpose any Participant
who is then on temporary layoff or authorized leave of absence or who, during
such Plan Year, was inducted into the Armed Forces of the United States from
employment with the Employer) including, for this purpose, each employee of the
Employer who would have been a Participant if the Participant had:
(a) completed one thousand (1,000) Hours of Service (or the
equivalent) during the Plan Year, and
(b) made any mandatory contributions to the Plan, and
(c) earned compensation in excess of the stated amount required
for participation in the Plan.
The provision in this Section 3.3.1 shall not apply to any Participant to the
extent the Participant is covered under any other plan or plans of the Employer
and the Employer has provided in Article XIV of the Adoption Agreement that the
minimum allocation or benefit requirement applicable to top-heavy plans will be
met in the other plan or plans.
3.3.2. Special Rule. Subject to the following rules, the percentage
referred to in Section 3.3.1 of this Appendix shall not exceed the percentage at
which contributions are made (or required to be made) under this Plan for the
Plan Year for that key employee for whom that percentage is the highest for the
Plan Year.
(a) The percentage referred to above shall be determined by
dividing the Employer contributions for such key employee for
such Plan Year by so much of the Participant's compensation
for such Plan Year as does not exceed Two Hundred Thousand
Dollars ($200,000).
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(b) For the purposes of this Section 3.3, all defined contribution
plans required to be included in an Aggregation Group shall be
treated as one (l) plan.
(c) The exception contained in this Section 3.3.2 shall not apply
to (be available to) this Plan if this Plan is required to be
included in an Aggregation Group if including this Plan in an
Aggregation Group enables a defined benefit plan to satisfy
the qualification requirement of section 410 or section
401(a)(4) of the Code.
3.3.3. Salary Reduction and Matching Contributions. For the purpose of
this Section 3.3, all Employer contributions attributable to a salary reduction
or similar arrangement shall be taken into account both for the purpose of
determining the minimum percentage contribution required to be made for a
particular Plan Year for a Participant who is not a key employee and for the
purpose of determining whether that minimum contribution requirement has been
satisfied. Effective for Plan Years beginning after December 31, 1988, for the
purpose of this Section 3.3, all Employer contributions attributable to a salary
reduction or similar arrangement and all Employer matching contributions shall
be taken into account for the purpose of determining the minimum percentage
contribution required to be made for a particular Plan Year for a Participant
who is not a key employee but not for the purpose of determining whether that
minimum contribution requirement has been satisfied.
3.4. Priorities Among Plans. In applying the minimum benefit provisions of this
Appendix in any Plan Year that this Plan is determined to be a Top Heavy Plan,
the following rules shall apply:
(a) If an employee participates only in this Plan, the employee
shall receive the minimum benefit applicable to this Plan.
(b) If an employee participates in both a defined benefit plan and
a defined contribution plan and only one (l) of such plans is
a Top Heavy Plan for the Plan Year, the employee shall receive
the minimum benefit applicable to the plan which is a Top
Heavy Plan.
(c) If an employee participates in both a defined contribution
plan and a defined benefit plan and both are Top Heavy Plans,
then the employee, for that Plan Year, shall receive the
defined benefit plan minimum benefit unless for that Plan Year
the employee has received Employer contributions and
forfeitures allocated to the Participant's account in the
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defined contribution plan in an amount which is at least equal
to five percent (5%) of the Participant's compensation.
(d) If an employee participates in this Plan, and other defined
contribution plans that are Top Heavy, the minimum benefit
shall be made in the plan according to chronological order as
determined by the effective date of each plan (using the
original effective date of the plan) beginning with the most
recently established plan. Any contribution required under
this Section 3.4 for this Plan is reduced by any contribution
made to any other plan sponsored by the Employer.
3.5. Annual Compensation Limit. The Compensation of each employee taken into
account under this Plan in any Plan Year shall not exceed Two Hundred Thousand
Dollars ($200,000). This Two Hundred Thousand Dollar ($200,000) amount shall be
subject to annual adjustments by the Secretary of the Treasury as provided in
section 415(d) of the Code.
3.6. Annual Contribution Limits.
3.6.1. General Rule. Notwithstanding anything apparently to the
contrary in Appendix A to the Plan Statement, for any Plan Year that this Plan
is a Top Heavy Plan, the defined benefit fraction and defined contribution
fraction of Appendix A to the Plan Statement pertaining to limits under section
415 of the Code, shall be determined by substituting one hundred percent (100%)
for one hundred twenty-five percent (125%).
3.6.2. Special Rule. Section 3.6.l of this Appendix shall not apply to
any Top Heavy Plan if such Top Heavy Plan satisfies the following requirements:
(a) Minimum Benefit Requirement. The Top Heavy Plan (and any plan
required to be included in an Aggregation Group with such
plan) satisfies the requirements of section 416(c)(1)(B) of
the Code is applied by substituting three percent (3%) for two
percent (2%) and by increasing (but by no more than ten
percentage points) twenty percent (20%) by one percentage
point for each year for which the plan was taken into account
under this Section 3.6. Section 3.3.1 of this Appendix shall
be applied by substituting "four percent (4%)" for "three
percent (3%)." Section 3.4(c) of this Appendix shall be
applied by substituting "seven and one-half percent (7-1/2%)"
for "five percent (5%)."
(b) Ninety Percent Rule. A Top Heavy Plan would not be a Top Heavy
Plan if "ninety percent (90%)" were substituted for
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"sixty percent (60%)" each place that it appears in the
definitions of Top Heavy Plan and Top Heavy Aggregation Group.
3.6.3. Transition Rule. If, but for this Section 3.6.3, Section 3.6.l
of this Appendix would begin to apply with respect to this Plan because it is a
Top Heavy Plan, the application of Section 3.6.1 of this Appendix shall be
suspended with respect to any individual so long as there are no:
(a) Employer contributions, forfeitures or voluntary nondeductible
contributions allocated to such individual (if this Plan is a
defined contribution plan), or
(b) accruals for such individual (if this Plan is a defined
benefit plan).
3.6.4. Coordinating Change. If this Plan is a Top Heavy Plan for any
Plan Year, then for purposes of the Appendix A to the Plan Statement, section
415(e)(6)(i) of the Code shall be applied by substituting "Forty-one Thousand
Five Hundred Dollars ($41,500)" for "Fifty-one Thousand Eight Hundred
Seventy-five Dollars ($51,875)."
3.7. Bargaining Units. The requirements of Section 3.2 through Section 3.5 of
this Appendix shall not apply with respect to any employee 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 (1) or
more Employers.
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APPENDIX C
QUALIFIED DOMESTIC RELATIONS ORDERS
SECTION 1
GENERAL MATTERS
Terms defined in the Plan Statement shall have the same meanings when used in
this Appendix.
1.1. General Rule. The Plan shall not honor the creation, assignment or
recognition of any right to any benefit payable with respect to a Participant
pursuant to a domestic relations order unless that domestic relations order is a
qualified domestic relations order.
1.2. Alternate Payee Defined. The only persons eligible to be considered
alternate payees with respect to a Participant shall be that Participant's
spouse, former spouse, child or other dependent.
1.3. DRO Defined. A domestic relations order is any judgment, decree or order
(including an approval of a property settlement agreement) which relates to the
provision of child support, alimony payments, or marital property rights to a
spouse, former spouse, child or other dependent of a Participant and which is
made pursuant to a state domestic relations law (including a community property
law).
1.4. QDRO Defined. A qualified domestic relations order is a domestic relations
order which creates or recognizes the existence of an alternate payee's right to
(or assigns to an alternate payee the right to) receive all or a portion of the
Account of a Participant under the Plan and which satisfies all of the following
requirements.
1.4.1. Names and Addresses. The order must clearly specify the name and
the last known mailing address, if any, of the Participant and the name and
mailing address of each alternate payee covered by the order.
1.4.2. Amount. The order must clearly specify the amount or percentage
of the Participant's Account to be paid by the Plan to each such alternate payee
or the manner in which such amount or percentage is to be determined.
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1.4.3. Payment Method. The order must clearly specify the number of
payments or period to which the order applies.
1.4.4. Plan Identity. The order must clearly specify that it applies to
this Plan.
1.4.5. Settlement Options. Except as provided in Section 1.4.8 of this
Appendix, the order may not require the Plan to provide any type or form of
benefits or any option not otherwise provided under the Plan.
1.4.6. Increased Benefits. The order may not require the Plan to
provide increased benefits.
1.4.7. Prior Awards. The order may not require the payment of benefits
to an alternate payee which are required to be paid to another alternate payee
under another order previously determined to be a qualified domestic relations
order.
1.4.8. Exceptions. Notwithstanding Section 1.4.5 of this Appendix:
(a) The order may require payment of benefits be made to an
alternate payee before the Participant has separated from
service:
(i) If the order requires payment as of a date that is on
or after the date on which the Participant attains
(or would have attained) the earliest payment date
described in Section 1.4.10 of this Appendix, or
(ii) If the order requires (A) that payment of benefits be
made to an alternate payee in a single lump sum as
soon as is administratively feasible after the order
is determined to be a qualified domestic relations
order, and (B) does not contain any of the provisions
described in Section 1.4.9 of this Appendix, and (C)
provides that the payment of such single lump sum
fully and permanently discharges all obligations of
the Plan to the alternate payee.
(b) The order may require that payment of benefits be made to an
alternate payee as if the Participant had retired on the date
on which payment is to begin under such order (but taking into
account only the present value of benefits actually accrued).
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(c) The order may require payment of benefits to be made to an
alternate payee in any form in which benefits may be paid
under the plan to the Participant (other than in the form of a
joint and survivor annuity with respect to the alternate payee
and the Participant's subsequent spouse).
1.4.9. Deemed Spouse. Notwithstanding the foregoing:
(a) The order may provide that the former spouse of a Participant
shall be treated as a surviving spouse of such Participant for
the purposes of Section 7 of the Plan Statement (and that any
subsequent or prior spouse of the Participant shall not be
treated as a spouse of the Participant for such purposes), and
(b) The order may provide that, if the former spouse has been
married to the Participant for at least one (1) year at any
time, the surviving former spouse shall be deemed to have been
married to the Participant for the one (1) year period ending
on the date of the Participant's death.
1.4.10. Payment Date Defined. For the purpose of Section 1.4.8 of this
Appendix, the earliest payment date means the earlier of:
(a) The date on which the Participant is entitled to a
distribution under the Plan, or
(b) The later of (i) the date the Participant attains age fifty
(50) years, or (ii) the earliest date on which the Participant
could begin receiving benefits under the plan if the
Participant separated from service.
SECTION 2
PROCEDURES
2.1. Actions Pending Review. During any period when the issue of whether a
domestic relations order is a qualified domestic relations order is being
determined by the Administrative Committee, the Administrative Committee shall
cause the Plan to separately account for the amounts which would be payable to
the alternate payee during such period if the order were determined to be a
qualified domestic relations order.
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2.2. Reviewing DRO's. Upon the receipt of a domestic relations order, the
Administrative Committee shall determine whether such order is a qualified
domestic relations order.
2.2.1. Receipt. A domestic relations order shall be considered to have
been received only when the Administrative Committee shall have received a copy
of a domestic relations order which is complete in all respects and is
originally signed, certified or otherwise officially authenticated.
2.2.2. Notice to Parties. Upon receipt of a domestic relations order,
the Administrative Committee shall notify the Participant and all persons
claiming to be alternate payees and all prior alternate payees with respect to
the Participant that such domestic relations order has been received. The
Administrative Committee shall include with such notice a copy of this Appendix.
2.2.3. Comment Period. The Participant and all persons claiming to be
alternate payees and all prior alternate payees with respect to the Participant
shall be afforded a comment period of thirty (30) days from the date such notice
is mailed by the Administrative Committee in which to make comments or
objections to the Administrative Committee concerning whether the domestic
relations order is a qualified domestic relations order. By the unanimous
written consent of the Participant and all persons claiming to be alternate
payees and all prior alternate payees with respect to the Participant, the
thirty (30) day comment period may be shortened.
2.2.4. Initial Determination. Within a reasonable period of time after
the termination of the comment period, the Administrative Committee shall give
written notice to the Participant and all persons claiming to be alternate
payees and all prior alternate payees with respect to the Participant of its
decision that the domestic relations order is or is not a qualified domestic
relations order. If the Administrative Committee determines that the order is
not a qualified domestic relations order or if the Administrative Committee
determines that the written objections of any party to the order being found a
qualified domestic relations order are not valid, the Administrative Committee
shall include in its written notice:
(i) the specific reasons for its decision,
(ii) the specific reference to the pertinent provisions of
this Plan Statement upon which its decision is based,
(iii) a description of additional material or information,
if any, which would cause the Administrative
Committee to reach a different conclusion, and
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(iv) an explanation of the procedures for reviewing the
initial determination of the Administrative
Committee.
2.2.5. Appeal Period. The Participant and all persons claiming to be
alternate payees and all prior alternate payees with respect to the Participant
shall be afforded an appeal period of sixty (60) days from the date such an
initial determination and explanation is mailed in which to make comments or
objections concerning whether the original determination of the Administrative
Committee is correct. By the unanimous written consent of the Participant and
all persons claiming to be alternate payees and all prior alternate payees with
respect to the Participant, the sixty (60) day appeal period may be shortened.
2.2.6. Final Determination. In all events, the final determination of
the Administrative Committee shall be made not later than eighteen (18) months
after the date on which first payment would be required to be made under the
domestic relations order if it were a qualified domestic relations order. The
final determination shall be communicated in writing to the Participant and all
persons claiming to be alternate payees and all prior alternate payees with
respect to the Participant.
2.3. Final Disposition. If the domestic relations order is finally determined to
be a qualified domestic relations order and all comment and appeal periods have
expired, the Plan shall pay all amounts required to be paid pursuant to the
domestic relations order to the alternate payee entitled thereto. If the
domestic relations order is finally determined not to be a qualified domestic
relations order and all comment and appeal periods have expired, benefits under
the Plan shall be paid to the person or persons who would have been entitled to
such amounts if there had been no domestic relations order.
2.4. Orders Being Sought. If the Administrative Committee has notice that a
domestic relations order is being or may be sought but has not received the
order, the Administrative Committee shall not (in the absence of a written
request from the Participant) delay payment of benefits to a Participant or
beneficiary which otherwise would be due. If the Administrative Committee has
determined that a domestic relations order is not a qualified domestic relations
order and all comment and appeal periods have expired, the Administrative
Committee shall not (in the absence of a written request from the Participant)
delay payment of benefits to a Participant or beneficiary which otherwise would
be due even if the Administrative Committee has notice that the party claiming
to be an alternate payee or the Participant or both are attempting to rectify
any deficiencies in the domestic relations order.
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SECTION 3
PROCESSING OF AWARD
3.1. General Rules. If a benefit is awarded to an alternate payee pursuant to an
order which has been finally determined to be a qualified domestic relations
order, the following rules shall apply.
3.1.1. Source of Award. If a Participant shall have a Vested interest
in more than one Account under the Plan, the benefit awarded to an alternate
payee shall be withdrawn from the Participant's Accounts in proportion to the
Participant's Vested interest in each of them.
3.1.2. Effect on Account. For all purposes of the Plan, the
Participant's Account (and all benefits payable under the Plan which are derived
in whole or in part by reference to the Participant's Account) shall be
permanently diminished by the portion of the Participant's Account which is
awarded to the alternate payee. The benefit awarded to an alternate payee shall
be considered to have been a distribution from the Participant's Account for the
limited purpose of applying the rules of Section 5.1.3 of the Plan Statement.
3.1.3. After Death. After the death of an alternate payee, all amounts
awarded to the alternate payee which have not been distributed to the alternate
payee and which continue to be payable shall be paid in a single lump sum
distribution to the personal representative of the alternate payee's estate as
soon as administratively feasible unless the qualified domestic relations order
clearly provides otherwise. The Participant's beneficiary designation shall not
be effective to dispose of any portion of the benefit awarded to an alternate
payee unless the qualified domestic relations order clearly provides otherwise.
3.1.4. In-Service Benefits. The in-service distribution and the loan
provisions of Section 7 of this Plan Statement shall not be applicable to the
benefit awarded to an alternate payee.
3.2. Segregated Account. If the Administrative Committee determines that it
would facilitate the administration or the distribution of the benefit awarded
to the alternate payee or if the qualified domestic relations order so requires,
the benefit awarded to the alternate payee shall be established on the books and
records of the Plan as a separate account belonging to the alternate payee.
3.3. Former Alternate Payees. If an alternate payee has received all benefits to
which the alternate payee is entitled under a qualified domestic relations
order, the alternate payee will not at any time thereafter be deemed to be an
alternate payee or prior alternate payee for any substantive or procedural
purpose of this Plan.
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APPENDIX D
HIGHLY COMPENSATED EMPLOYEE
SECTION 1
GENERAL RULE
1.1. Highly Compensated Employee. A "highly compensated employee" is any
employee who, during the "determination year" or the "look-back year":
(i) was at any time a five percent (5%) owner;
(ii) received compensation from the Employer in excess of
Seventy-Five Thousand Dollars ($75,000);
(iii) received compensation from the Employer in excess of
Fifty Thousand Dollars ($50,000) and was in the
top-paid group of employees for such year; or
(iv) was at any time an officer and received compensation
greater than 50 percent (50%) of the amount in effect
under section 415(b)(1)(A) of the Code for such year.
The group of employees (including former employees) who are highly compensated
employees consists of both highly compensated active employees and highly
compensated former employees.
1.2. Determination Year. The determination year is the current Plan Year (that
is, the Plan Year for which the determination of which employees are highly
compensated employees is being made).
1.3. Look-back Year. The look-back year is the twelve-month period immediately
preceding the determination year (generally, the preceding Plan Year). The
Employer does not elect to make the look-back year calculation on the basis of
the calendar year ending with or within the determination year.
1.4. Special Rule For Determination Year. An employee not described in Section
1.1 (ii), (iii) or (iv) for the look-back year shall not be treated as described
in Section 1.1 (ii), (iii) or (iv) for the determination year unless such
employee is a member of the group consisting of the one hundred (100) employees
paid the greatest compensation during the determination year. If there is no
difference in compensation between the 100th employee and the
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101st employee, then those employees receiving the same compensation as the
100th employee shall be ranked in descending order of seniority, with the
employee with the greatest seniority being ranked first.
1.5. Highly Compensated Active Employee. A highly compensated active employee is
any highly compensated employee who performs services for the Employer during
the determination year.
1.6. Highly Compensated Former Employee. A highly compensated former employee is
any former employee who had a "separation year" (as defined in Section 2.9)
prior to the determination year and was a highly compensated active employee for
either (1) such employee's separation year or (2) any determination year ending
on or after the employee's 55th birthday. An employee who performs no services
for the Employer during a determination year is treated as a former employee.
SECTION 2
SPECIAL RULES & DEFINITIONS
2.1. Incorporated Definitions. Terms defined in the Plan Statement shall have
the same meanings when used in this Appendix.
2.2. Five Percent Owner. An employee shall be treated as a five percent (5%)
owner for any determination year or look-back year if at any time during such
year such employee was a five percent (5%) owner (as defined in the Appendix B
to this Plan Statement) of the Employer.
2.3. Top-Paid Group. An employee is in the top-paid group of employees for any
determination year or look-back year if such employee is in the group consisting
of the top twenty percent (20%) of the employees when ranked on the basis of
compensation paid during such year, excluding those employees described in
Section 2.10. For purposes of the preceding sentence, the top twenty percent
(20%) shall be determined by disregarding fractional numbers (i.e., the top 20%
of 118 employees shall be the top 23 employees). employees who perform no
services for the Employer during the year are not included in determining the
top-paid group of employees for that year.
2.4. Special Rules For Officers.
2.4.1. Not More Than 50 Officers. For purposes of Section 1.1(iv) of
this Appendix, no more than fifty (50) employees (or, if lesser, the greater of
three employees or ten percent of the employees) shall be treated as officers.
If the actual number of officers exceeds this limit, then the officers who will
be
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considered as includible officers under Section 1.1(iv) are those who receive
the greatest compensation from the Employer during the determination year or the
look-back year.
2.4.2. At Least 1 Officer. If for any determination year or look-back
year no officer of the Employer is described in Section 1.1(iv) of this
Appendix, the highest paid officer of the Employer for such year shall be
treated as described in such Section 1.1(iv). This is true whether or not such
employee is also a highly compensated employee on any other basis.
2.5. Former Employees Excluded For Certain Purposes. Former employees are not
included in the top-paid group, the group consisting of the one hundred (100)
employees paid the greatest compensation or the group of includible officers for
purposes of determining who are highly compensated active employees. In
addition, former employees are not counted as employees for purposes of
determining the number of employees in the top-paid group.
2.6. Employees Described In Several Groups. An employee who is a highly
compensated active employee for a determination year by reason of being
described in one group under Section 1.1 for either the determination year or
the look-back year, shall not be disregarded in determining whether another
employee is a highly compensated active employee by reason of being described in
another group under Section 1.1.
2.7. Certain Family Members.
2.7.1. In General. If any individual is a member of the family of a
five percent (5%) owner or of a highly compensated employee in the group
consisting of the ten (10) highly compensated employees paid the greatest
compensation during the determination year or the look-back year, then:
(i) such individual shall not be considered a separate
employee; and
(ii) any compensation paid to such individual (and any
applicable contribution or benefit on behalf of such
individual) shall be treated as if it were paid to
(or on behalf of) the five percent (5%) owner or
highly compensated employee.
Family members are subject to this aggregation rule whether or not they may be
excluded under Section 2.10 for purposes of determining the top-paid group and
whether or not they are highly compensated employees when considered separately.
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2.7.2. Family. For purposes of Section 2.7.1 of this Appendix, the term
"family" means, with respect to any employee, such employee's spouse and lineal
ascendants or descendants and the spouses of such lineal ascendants or
descendants.
2.7.3. Priority. The determination of which employees are highly
compensated employees and which highly compensated employees are among the ten
highly compensated employees paid the greatest compensation during the
determination year or the look-back year shall be made prior to the application
of the family aggregation rules. Similarly, the determination of the number and
identity of employees in the top-paid group for a determination year or a
look-back year and the identity of the group of employees consisting of the 100
employees paid the greatest compensation for a determination year shall be made
prior to the application of the family aggregation rules. The family aggregation
rules apply separately to the determination year and the look-back year.
2.7.4. Change in Family Relationship. An individual is a family member
with respect to an employee or former employee if such individual is a family
member on any day during the determination year or the look-back year, even
though such relationship changes during such year as a result of death or
divorce.
2.8. Compensation. For purposes of this Appendix the term "compensation" means
"ss. 415 compensation" as defined in Appendix A to this Plan Statement but
including amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludible from the Participant's gross income under section
125, section 402(a)(8), section 402(h) or section 403(b) of the Code.
Compensation for any employee who performed services for only part of a year is
not annualized for purposes of determining such employee's compensation for the
determination year or the look-back year.
2.9. Separation Year. Generally the "separation year" is the determination year
during which the employee separates from service with the Employer. An employee
who performs no services for the Employer during a determination year will be
treated as having separated from service in the year in which that employee last
performed services for the Employer.
2.9.1. Deemed Separation. Solely for the purpose of determining whether
an employee is a highly compensated former employee after the employee actually
separates from service, an employee may be deemed to have separated from service
during a determination year in which the employee actually performs some
services for the Employer. An employee will be deemed to have a separation year
if, in a determination year prior to the employee's attaining the age of 55, the
employee receives compensation in an amount less than 50% of the employee's
average annual compensation for the three
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consecutive calendar years preceding such determination year during which the
employee received the greatest amount of compensation from the Employer (or the
total period of the employee's service with the Employer, if less). This deemed
separation from service may occur without regard to whether the reduction in
compensation occurs on account of the employee's leave of absence from service
with the Employer.
2.9.2. Deemed Resumption. An employee who is treated as having a deemed
separation year by reason of Section 2.9.1 will not be treated as a highly
compensated former employee after such employee actually separates from service
with the Employer if, after such deemed separation year, and before the year of
actual separation, such employee's compensation from the Employer for a
particular determination year increased significantly so that such employee is
treated as having a deemed resumption of employment. In order for a deemed
resumption of employment to occur, there must be an increase in compensation
from the Employer to the extent that such compensation would not result in a
deemed separation year under Section 2.9.1 using the same three-year period
taken into account for purposes of that Section.
2.10. Excluded Employees.
2.10.1. General Exclusions. For purposes of determining the number of
employees in the top-paid group for a determination year or a look-back year
under Section 2.3 of this Appendix, the following employees shall be excluded:
(i) employees who have not completed six (6) months of
service by the end of the year;
(ii) employees who normally work less than seventeen and
one-half (17-1/2) hours per week;
(iii) employees who normally work during less than six (6)
months during the year; and (iv) employees who have
not attained age twenty-one (21) by the end of the
year.
For purposes of computing months of service, an employee's service in the
immediately preceding year is added to service in the current year to determine
whether an employee is excluded in the current year.
2.10.2. Employees Covered By Collective Bargaining Agreements. In
general, employees who are included in a unit of employees covered by a
collective bargaining agreement are included in determining the number of
employees in the top-paid group. However, if ninety percent (90%)
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or more of all employees are covered under collective bargaining agreements and
this Plan covers only employees who are not covered under such agreements, then
the employees who are covered under such collective bargaining agreements shall
not be counted in determining the number of employees who will be included in
the top-paid group. In addition, the employees covered by such agreements will
not be included in the top-paid group.
2.10.3. Minimum Hour Rule. An employee who works at least 17-1/2 hours
a week for 50% or more of the total weeks worked by such employee during a
determination year or look-back year is deemed to normally work more than 17-1/2
hours a week. An employee who works less than 17-1/2 hours a week for fifty
percent (50%) or more of the total weeks worked by such employee during a
determination year or look-back year is deemed to normally work less than 17-1/2
hours a week. The foregoing determinations may be made separately with respect
to each employee or on the basis of groups of employees who fall within
particular job categories as established by the Employer on a reasonable basis.
In general, eighty percent (80%) of the positions within a particular job
category must be filled by employees who normally work less than 17-1/2 hours a
week before any employees may be excluded under this rule on the basis of their
membership in that job category. Alternatively, an Employer may exclude
employees who are members of a particular job category if the median number of
hours credited to employees in that category during a determination year or
look-back year is 500 or less.
2.10.4. Minimum Period of Time Rule. The determination of whether an
employee normally works during less than six months in any determination year or
look-back year is made on the basis of the facts and circumstances of the
Employer as evidenced by the Employer's customary experience in the years
preceding such year. An employee who works on one day during a month is deemed
to have worked during that month.
2.10.5. Nonresident Aliens. Employees who are nonresident aliens and
who receive no earned income (within the meaning of section 911(d)(2) of the
Code) from the Employer which constitutes income from sources within the United
States (within the meaning of section 861(a)(3) of the Code) are excluded for
all purposes of this Appendix.
2.11. Adjustments to Dollar Amounts. The dollar amounts described in Section 1.1
(ii) and (iii) shall be adjusted for cost-of-living increases as provided by
regulations or other rulings by the Secretary of the Treasury. The applicable
dollar amount for a particular determination year shall be the dollar amount for
the calendar year in which the determination year begins. For determination
years beginning before January 1, 1987, the dollar amounts in Section 1.1 (ii)
and (iii) shall be $75,000 and $50,000 respectively.
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2.12. Election to Include Leased Employees. The term "employee" shall include
all Leased Employees of the Employer, whether or not such Leased Employees are
covered by a "safe-harbor plan" as described in Section 414(n)(5) of the Code.
2.13. Aggregation. Subsections (b), (c), (m), (n), and (o) of section 414 of the
Code shall be applied before the application of the rules in this Appendix.
2.14. Election of Special Rule For Employees Who Separated From Service Before
January 1, 1987. For purposes of determining who is a highly compensated former
employee for this Plan and for all plans of the Employer with respect to all
situations for which Section 414(q) of the Code is applicable to the Employer, a
former employee who separated from service prior to January 1, 1987, shall be
considered a highly compensated former employee if, during the employee's
separation year (or the year preceding such separation year) or during any year
ending on or after such employee's 55th birthday (or the last year ending before
such employee's 55th birthday), the employee was a five percent (5%) owner of
the Employer at any time during such year, or the employee received compensation
in excess of $50,000 during such year. This determination may be made on the
basis of the calendar year, the Plan Year or any other twelve month period
selected by the Employer and applied on a reasonable and consistent basis.
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APPENDIX E
TEFRA ss. 242(B) TRANSITIONAL RULES
Section 1. In General. Prior to January 1, 1984, each individual who was either:
(a) an actively employed Participant having an Account (or a
contribution accrued to an Account) as of December 31, 1983,
(b) a Participant not actively employed but having an Account (or
a contribution accrued to an Account) as of December 31, 1983,
or
(c) a Beneficiary of a deceased Participant having an Account (or
a contribution accrued to an Account) as of December 31, 1983
was given the opportunity to make a designation (before January 1, 1984) of a
method of distribution pursuant to ss. 242(b) of the Tax Equity and Fiscal
Responsibility Act of 1982 (hereinafter a "ss. 242(b) designation"). Some of
those individuals elected to make a ss. 242(b) designation and some did not. The
distribution rules set forth in this Appendix shall, notwithstanding any
provisions of Section 7 of the Plan Statement to the contrary, determine the
distributions made with respect to all individuals entitled to make a ss. 242(b)
designation, provided that if the Plan is not an exempt profit sharing plan, the
QJ&SA contract or Life Annuity contract has been rejected as described in
Section 7 of the Plan Statement. Distributions made with respect to individuals
not entitled to make a ss. 242(b) designation shall be governed solely by
Section 7 of the Plan Statement.
Section 2. No Designation. In the case of distributions to an individual where
no ss. 242(b) designation was made, distributions after December 31, 1983 shall
be made as follows:
(a) If such individual is a Participant whose benefits were in pay
status on December 31, 1983, and the method of distribution in
effect for such Participant was consistent with the provisions
of the Plan Statement at the time such distribution commenced,
then distribution shall continue to be made to such
Participant in accordance with the method of distribution in
effect on December 31, 1983,
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notwithstanding that distribution could not have commenced
under such method after December 31, 1983.
(b) If such individual is a Beneficiary whose benefits were in pay
status on December 31, 1983, and the method of distribution in
effect for such Beneficiary was consistent with the provisions
of the Plan Statement at the time such distribution commenced,
then distribution shall continue to be made to such
Beneficiary in accordance with the method of distribution in
effect on December 31, 1983, notwithstanding that distribution
could not have commenced under such method after December 31,
1983.
(c) If such individual is a Participant or a Beneficiary whose
benefits were not in pay status on December 31, 1983,
distribution shall be made in accordance with Section 7 of the
Plan Statement and, to the extent distribution cannot then be
made upon terms which are consistent with the provisions of
Section 7 of the Plan Statement, distribution shall be made as
soon as practicable after December 31, 1983 in a single lump
sum.
(d) For the purpose of the foregoing, benefits shall be considered
to have been in pay status on December 31, 1983 if
distribution had commenced on or prior to that date and was
being made under a written instrument which fixed the person
to whom such benefits were payable, the time or times at which
distributions would be made and the amount (or formula
pursuant to which the amount would be determined) of each
distribution and was not subject to variation at the
discretion of the Participant or the Administrative Committee
unless such variation would cause the acceleration of
distributions.
(e) Examples of circumstances in which distribution could not be
made upon terms consistent with the provisions of Section 7 of
the Plan Statement (and therefore would have to be made in a
single lump sum) include, but are not be limited to,
distribution to a Participant who was a key employee in a top
heavy plan and who had attained age seventy and one-half
(70-1/2) years before 1984, distribution to a Beneficiary who
was not the surviving spouse of the Participant if the
Participant died prior to 1979, and distribution to a
Beneficiary who is the surviving spouse of a Participant who
dies after December 31, 1983 at a time when distributions were
being made to such Participant for a
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term certain which extended beyond the life expectancy of such
Participant and surviving spouse.
Section 3. Designation Made. In the case of distributions to an individual where
a ss. 242(b) designation was made before January 1, 1984, the Administrative
Committee shall honor such ss. 242(b) designation in making distributions
hereunder to all individuals identified in such ss. 242(b) designation. For this
purpose:
(a) A ss. 242(b) designation shall, to the extent necessary, be
deemed to incorporate by reference either the written
beneficiary designation filed by the Participant prior to or
coincident with the filing of a ss. 242(b) designation or, if
no such written beneficiary designation has been filed, the
automatic sequence of Beneficiaries provided under the Plan
document in effect on December 31, 1983.
(b) An individual who made ass. 242(b) designation shall have the
right to revoke any ss. 242(b) designation filed by the
Participant at any time by a written instrument delivered to
the Employer. Upon such revocation, distribution shall be made
in accordance with the provisions of Section 7 of the Plan
Statement. To the extent that distribution cannot then be made
upon terms consistent with the provisions of Section 7 of the
Plan Statement, distribution shall be made, as soon as
practicable after such revocation, in a single lump sum.
(c) A Beneficiary entitled to distribution under this Plan shall
have the right to revoke thess. 242(b) designation insofar as
it applies to such Beneficiary. Upon such revocation,
distribution shall be made in accordance with the provisions
of Section 7 of the Plan Statement. To the extent that
distribution cannot then be made upon terms which are
consistent with the provisions of Section 7 of the Plan
Statement, distribution shall be made, as soon as practicable
after such revocation, in a single lump sum.
(d) If a Participant shall have filed ass. 242(b) designation and
shall subsequently file (or amend) a written beneficiary
designation under the Plan, thess. 242(b) designation shall
not be deemed to be revoked and the relevant measuring life or
lives for purposes of thess. 242(b) designation shall continue
to be determined as described in paragraph (a) above, without
regard to any subsequent filing (or amendment) of a written
beneficiary designation or any subsequent amendment of the
automatic sequence of Beneficiaries under the Plan Statement.
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ADDENDUM TO
ADOPTION AGREEMENT #01
For The
COMPUTER NETWORK TECHNOLOGY CORPORATION
401(k) SALARY SAVINGS PLAN
1. Article VII, Item B of Adoption Agreement #01 For Use With Dorsey & Whitney
ss. 401(k) Regional Prototype Basic Plan Document #1. (Discretionary Matching
Contribution) shall be amended in its entirety to read as follows.
B. Discretionary Contributions. Will Employer discretionary contributions be
allowed?
_____ No
__X__ Yes (check one or both):/15/
__X__ Discretionary Matching Contributions. (check one)
__X__ Percentage Match. Employer discretionary matching
contributions will be allocated to the Employer
Matching Accounts of eligible Participants to match a
percentage, determined by the Employer, of each
eligible Participant's retirement savings ss. 401(k)
contributions for the Plan Year, but not to exceed a
dollar amount determined by the Employer for such
Plan Year.
2. Article XI of Adoption Agreement #01 for the Dorsey & Whitney ss. 401(k)
Regional Prototype Plan Basic Plan Document #1 shall be amended to include the
following section:
E. Employer Securities. Will the Trustee be subject to the directions of the
Administrative Committee to purchase qualifying employer securities?
__X__ Yes
_____ No
If yes, the maximum percentage of the Fund which may be invested in
qualifying employer securities is:
_100_ percent.
[ss.ss.10.6(a), 10.12]
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3. NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS. Section 3.8 of the Dorsey & Whitney
ss. 401(k) Regional Prototype Plan Basic Plan Document #1 shall be amended in
its entirety to read as follows:
3.8. Nondeductible Voluntary Contributions . Effective January 1, 1999,
nondeductible voluntary contributions shall not be accepted by the Plan. Prior
to January 1, 1999, the Plan will accept nondeductible voluntary contributions
made in accordance with this Section 3.8. All such contributions held in the
Voluntary Account shall continue to share in any trust earnings or losses and be
distributed in accordance with the provisions of Section 7. Contributions under
this Section 3 shall be limited so as to comply with the nondiscrimination test
of section 401(m) of the Code.
3.8.1. Contingent Provision . The provisions of this Section 3.8
shall be subject to such conditions and limitations as the Committee may
prescribe from time to time for administrative convenience and to preserve the
tax-qualified status of the Plan.
3.8.2. Method of Contribution . Each Participant may make
nondeductible voluntary contributions to the Plan for any Plan Year prior to
January 1, 1999. A Participant electing to make nondeductible voluntary
contributions may do so at such times and subject to such limitations as the
Administrative Committee may prescribe under rules. All such contributions for a
given Plan Year must be made not later than the thirtieth (30th) day after the
end of that Plan Year.
3.8.3. Payment to Trustee . The nondeductible voluntary contributions
made by a Participant to the Plan shall be collected by the Employer by such
means as the Administrative Committee shall specify. The Employer shall remit
such nondeductible voluntary contributions to the Trustee within the time
required by regulations of the United States Department of Labor.
3.8.4. Allocation . The Participant's nondeductible contributions
shall be allocated to the Participant's Voluntary Account and, for the purposes
of Section 4, shall be credited as soon as practicable after it is received by
the Trustee.
3.8.5. 401(m) Compliance. For purposes of determining an eligible
employee's contribution percentage pursuant to Section 3.10.1(c), an eligible
employee's nondeductible voluntary contributions for the Plan Year shall be
added to an eligible employee's Employer matching contributions for the Plan
Year. Nondeductible voluntary contributions under this Section 3 shall be
limited so as to comply with the nondiscrimination test of section 401(m) of the
Code.
4. EMPLOYER SECURITIES. Section 4.1.3 of the Dorsey & Whitney ss. 401(k)
Regional Prototype Plan Basic Plan Document #1 shall be amended in its entirety
to read as follows:
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4.1.3. Operational Rules. In accordance with uniform rules, the
Administrative Committee shall determine the circumstances under which a
particular investment Subfund may be elected, or shall be automatically
utilized, the minimum or maximum amount or percentage of an Account which may be
invested in a particular investment Subfund, the procedures for making or
changing investment elections and the effect of a Participant's or Beneficiary's
failure to make an effective election with respect to all or any portion of an
Account. If the Administrative Committee directs the Trustee to create a Subfund
to be invested in Employer securities, then, unless otherwise agreed to in
writing by the Administrative Committee and the Trustee, the following rules
shall apply:
(a) The Principal Employer will make cash contributions to the
Plan and the Trustee on behalf of the Plan will purchase
shares of common stock of the Principal Employer on the
open market or from another available source based upon
the direction of the Named Fiduciary or Participant
elections.
(b) Dividends paid on shares of Employer stock held in the
Subfund will be retained in the Subfund and invested in
Employer stock. Dividends will not be passed through to
Participants.
(c) The Subfund will be available for in-service distributions
and Participant loans. Distributions to Participants will
be in cash.
(d) If voting of all shareholder issues and tender offers will
be passed through to the Participants, all voting will be
confidential. Additionally, shares that are not voted or
tendered by Participants will be voted or tendered, as
applicable, by the Trustee in the same proportion as
shares that are voted or tendered by Participants, and the
Principal Employer shall disclose this methodology to
Participants.
5. ERISA SECTION 404(c) COMPLIANCE. Section 4.1.5 of the Dorsey & Whitney ss.
401(k) Regional Prototype Plan Basic Plan Document #1 shall be amended in its
entirety to read as follows:
4.1.5. ERISA Section 404(c) Compliance. If so permitted by the
Adoption Agreement, the Administrative Committee shall establish investment
subfunds and operational rules which are intended to satisfy section 404(c) of
the Employee Retirement Income Security Act of 1974 and the regulations
thereunder. Such investment subfunds shall permit Participants and Beneficiaries
the opportunity to choose from at least three investment alternatives, each of
which is diversified, each of which present materially different risk and return
characteristics, and which, in the aggregate, enable Participants and
Beneficiaries to achieve a portfolio with appropriate risk and return
characteristics consistent with minimizing risk through diversification. Such
operational rules shall provide the following, and shall otherwise comply with
section 404(c) of the Employee Retirement Income Security Act of 1974 and the
regulations and rules promulgated thereunder from time to time:
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<PAGE>
(a) Participants and Beneficiaries may give investment
instructions to the Trustee at least once every three
months;
(b) the Trustee must follow the investment instructions of
Participants and Beneficiaries that comply with the Plan's
operational rules, provided that the Trustee may in any
event decline to follow any investment instructions that:
(i) would result in a prohibited transaction
described in section 406 of the Employee
Retirement Income Security Act of 1974 or
section 4975 of the Internal Revenue Code;
(ii) would result in the acquisition of an asset
that might generate income which is taxable to
the Plan;
(iii) would not be in accordance with the documents
and instruments governing the Plan insofar as
they are consistent with Title I of the
Employee Retirement Income Security Act of
1974;
(iv) would cause a fiduciary to maintain indicia of
ownership of any assets of the Plan outside of
the jurisdiction of the district courts of the
United States other than as permitted by
section 404(b) of the Employee Retirement
Income Security Act of 1974 and Department of
Labor regulation section 2050.404b-1;
(v) would jeopardize the Plan's tax status under
the Internal Revenue Code;
(vi) could result in a loss in excess of a
Participant's or Beneficiary's Account balance;
(vii) would result in the acquisition or sale of any
Employer real property or any Employer security
unless such Employer security acquisition
satisfies the conditions of section 408(e) of
the Employee Retirement Income Security Act of
1974 and Department of Labor regulation section
2550.404c-1.
(c) Participants and Beneficiaries shall be periodically
informed of transaction fees and expenses (e.g.,
commissions, sales loads, deferred sales charges,
redemption or exchange fees) that affect their Accounts
and are related to their Plan investment decisions;
(d) with respect to any Subfund consisting of Employer
securities and intended to satisfy the requirements of
section 404(c) of the Employee Retirement Income Security
Act of 1974, (i) Participants and Beneficiaries shall be
entitled to all voting, tender and other rights
appurtenant to the ownership of such securities, (ii)
procedures shall be established to ensure
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<PAGE>
the confidential exercise of such rights, except to the
extent necessary to comply with federal and state laws not
preempted by the Employee Retirement Income Security Act
of 1974, and (iii) the Trustee shall ensure the
sufficiency of and compliance with such confidentiality
procedures.
6. OTHER TRUSTEE POWERS. Subsection (a) of Section 10.6 of the Dorsey & Whitney
ss. 401(k) Regional Prototype Plan Basic Plan Document #1 shall be amended in
its entirety to read as follows:
(a) To invest and reinvest any investment Subfunds established
pursuant to Section 4.1 in accordance with the investment
characteristics and objectives determined therefor and to
invest and reinvest the assets of the Fund in any
securities or properties in which an individual could
invest the Participant's own funds and which it deems for
the best interest of the Fund, without limitation by any
statute, rule of law or regulation of any governmental
body prescribing or limiting the investment of trust
assets by corporate or individual trustees, in or to
certain kinds, types or classes of investments or
prescribing or limiting the portion of the Fund which may
be invested in any one property or kind, type or class of
investment. Specifically and without limiting the
generality of the foregoing, the Trustee may invest and
reinvest principal and accumulated income of the Fund in
any real or personal property; preferred or common stocks
of any kind or class of any corporation, including but not
limited to investment and small business investment
companies of all types; voting trust certificates;
interests in investment trusts; interests in any limited
or general partnership or other business enterprise,
however organized and for whatever purpose; group or
individual annuity contracts (which may involve investment
in the issuer's general account or any of its separate
accounts); interests in common or collective trusts,
variable interest notes or any other type of collective
fund maintained by a bank or similar institution (whether
or not the Trustee hereunder); shares of any registered
investment company (mutual fund), provided, however, if
the Trustee or any of its affiliates acts as investment
advisor or other service provider for such mutual fund,
then the Employer (or other fiduciary independent of the
Trustee) must first acknowledge that it has received the
current prospectus for the mutual fund and a detailed
written disclosure of the investment advisory and other
fees charged or to be paid by the Plan or the mutual fund
and the Employer (or such other fiduciary) must approve
the investment advisory fee and other fees paid by the
Plan directly or through the mutual fund and the
investment of Plan assets in the mutual funds; any
interest-bearing certificates, accounts or similar
interest-bearing instruments in a bank or similar
financial institution, including the Trustee or an
affiliate of the Trustee, provided such certificates,
accounts or instruments bear a reasonable rate of
interest; bonds, notes and debentures, secured or
unsecured; mortgages, leases or other interests in real or
personal property; interests in mineral, gas, oil or
timber properties or
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<PAGE>
other wasting assets; options; commodity or financial
futures contracts; foreign currency; insurance contracts
on the life of any "keyman" or shareholder of the
Employer; or conditional sales contracts. The Plan may not
acquire or hold any securities issued by an Employer or
real estate leased to an Employer except that the Trustee
acting pursuant to the express written directions of the
Employer as provided in Section 10.12 may acquire and hold
Employer securities which are "qualifying employer
securities" (within the meaning of section 407(d)(5) of
the Employee Retirement Income Security Act of 1974) and
Employer real property which is "qualifying employer real
property" (within the meaning of section 407(d)(4) of the
aforesaid Act); and, provided further, that the Plan may
acquire any such Employer securities or Employer real
property only if immediately after such acquisition the
aggregate fair market value of Employer securities and
Employer real property held by the Plan does not exceed
the percentage indicated in the Adoption Agreement of the
fair market value of the assets of the Plan. Investment of
the entire Fund in common stocks shall be deemed
appropriate at any phase of the economic business cycle,
but it is not, however, the purpose hereof to direct that
the Fund shall be invested either entirely or to any
extent whatsoever in such common stocks. Prior to maturity
and distribution of the Vested Total Accounts of
Participants, the Trustee shall commingle the Accounts of
Participants and former Participants in each investment
Subfund and invest, reinvest, control and manage each of
the investment subfunds as a single fund.
7. INVESTMENT IN EMPLOYER SECURITIES. Section 10.14 of the Dorsey & Whitney ss.
401(k) Regional Prototype Plan Basic Plan Document #1 shall be deleted without
replacement.
IN WITNESS WHEREOF, this Addendum is hereby approved.
Dated: _______________, 1998 FOR THE PRINCIPAL EMPLOYER
By Greg Barnum
Its Chief Financial Officer
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<PAGE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL ADOPTION AGREEMENT
FOR USE WITH
DORSEY & WHITNEY
ss. 401(k) REGIONAL PROTOTYPE
BASIC PLAN DOCUMENT #1
- --------------------------------------------------------------------------------
By execution of this Supplemental Adoption Agreement, the Employer and
the Trustee agree that previously executed Adoption Agreement #01 to the Dorsey
& Whitney ss. 401(k) Regional Prototype Basic Plan Document #1 is modified as
follows:
Employer's Name and Address. Computer Network Technology Corporation
605 North Highway 169, Suite 800
Minneapolis, Minnesota 55441
Name of the Plan. The Computer Network Technology Corporation 401(k) Salary
Savings Plan
Three Digit ID Number. 001
Effective Date. The date upon which this Supplemental Adoption Agreement is to
be effective is: January 1, 1997.
(ARTICLE V. F.)
F. Valuation Date(s). The Valuation Date(s) shall be (check only one):
_____ the Annual Valuation Date.
_____ the Annual Valuation Date and the last day of the 6th month of
the Plan Year.
_____ the Annual Valuation Date and the last day of the 3rd, 6th and
9th months of the Plan Year.
_____ the Annual Valuation Date and the last day of the 1st through the
11th months of the Plan Year.
__X__ the Annual Valuation Date and each business day of the Plan Year.
[ss. 1.1.35]
Execution of this Supplemental Adoption Agreement does not require the Employer
to file for an updated IRS determination letter.
IN WITNESS WHEREOF, this Supplemental Adoption Agreement is hereby
approved.
Dated: _______________, 1998. FOR THE EMPLOYER
Greg Barnum Chief
-----------------
(Signature and official capacity)
DORSEY & WHITNEY LLP consents to the adoption of this Supplemental Adoption
Agreement.
Dated: _______________, 1998. By Its Robert Burns
The Computer Network Technology Corporation
401(k) Salary Savings Plan
Plan Loan Rules (January 1, 1997)
---------------------------------
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<PAGE>
Effective as of January 1, 1997, the loans made under Section 7.10 of the Basic
Plan Document shall be subject to the following rules, conditions and
limitations:
1. Availability. Loans shall be made available to all Participants who
are actively employed and all other Participants and all Beneficiaries who are
parties in interest (as defined in Section 3(14) of ERISA) subject to
limitations and conditions established under this Section on a reasonably
equivalent basis and shall not be made available to Highly Compensated Employees
in an amount (expressed as a percentage of the Vested Total Account) greater
than is made available to other employees. An Alternate Payee shall be
considered a Beneficiary for this purpose only after the domestic relation order
has been finally determined to be a qualified domestic relations order as
defined in Appendix C to the Plan Statement.
2. Administration. Loan requests shall be granted or denied solely on
the basis of this Section. There shall be no discretion to grant or deny a loan
request. Denials shall be processed under the claims procedure rules of the
Plan. Loans shall be approved (or denied) by the Committee. The Committee shall
be contacted for this purpose at the address shown in the summary plan
description. A copy of these rules, loan application forms, specimen promissory
notes and any other information that is available concerning loans shall be made
available at that address upon request. Loans under this Plan and any other plan
maintained by the Employer and all Affiliates will be considered separate loans.
Therefore, separate loan application forms and promissory notes will need to be
completed for loans from this Plan or any other plan. A loan will be made upon
completion of a loan application, the execution of a promissory note and the
completing of such other forms and the furnishing of such other information as
may be required to comply with this Section. The promissory note will be a
negotiable instrument. The Trustee will not, however, sell any note.
3. Loan Terms. The total amount of such loans to any borrower shall not
exceed the lesser of:
(a) Fifty percent (50%) of the Vested amount of that borrower's
Total Account, or
(b) Fifty Thousand Dollars ($50,000);
provided, however, that the Fifty Thousand Dollar ($50,000) limitation shall be
reduced by the excess (if any) of: (i) the highest outstanding balance of loans
from the Plan (and all other plans of the Employer and all Affiliates) to such
person during the one-year period ending on the day before the new loan is made,
over (ii) the outstanding balance of all loans from the Plan (and all other
plans of the Employer and all Affiliates) to such person on the day the new loan
is made.
Except for any permitted suspension of payments during a leave of
absence, any such loan must be repaid at least monthly in substantially level
amounts, including principal and interest, over the term of the loan. Any such
loan shall provide that it shall be repaid within a definite period of time to
be specified by the borrower in the loan application and the promissory
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<PAGE>
note. That period shall not exceed five (5) years unless such loan is to a
Participant and is used to acquire a principal residence for the Participant and
then it shall not exceed ten (10) years.
4. Collateral. Every loan made under these rules shall be secured by
that portion of the borrower's Total Account which does not exceed fifty percent
(50%) of the sum total of the borrower's Vested Total Account. This dollar
amount shall be determined immediately after the origination of the loan (and
shall be reduced by the amount of any unpaid principal and interest on any
earlier loan which is similarly secured). This security interest shall exist
without regard to whether it is or is not referenced in the loan documents. The
Plan shall be permitted to realize on this collateral (as hereinafter provided)
by any means including (but not limited to) offset. No other collateral shall be
permitted or required.
5. Loan Rules. The following rules shall apply:
(a) Loan Amount. Loans will not be made in a principal amount less
than One Thousand Dollars ($1,000).
(b) Interest Rate. The interest rate on any loan shall be equal to
the prime rate (the base rate on corporate loans at large
United States money center commercial banks) as published for
the last business day of the calendar month preceding the
calendar month in which the loan is granted by The Wall Street
Journal in its Money Rates column or any comparable successor
rate so published plus one percent (1%). If the prime rate is
published as a range of rates, the highest prime rate in the
range shall be used.
(c) Accounting for Loan. For the purpose of determining the extent
to which a Total Account is entitled to share in income, gains
or losses of the Fund under Section 4, the same shall be
deemed to be reduced by the unpaid balance of any outstanding
loans to the borrower, and the interest payments on such loans
shall be credited to the borrower's Total Account. If a loan
is made to a person who has assets in more than one Account
(i.e., source of contributions), such loan shall be deemed to
have been made from the Accounts in the following sequence:
Retirement Savings Account
Vested Employer Matching Account
Transfer Account
Rollover Account
Repayments of principal on loans and payments of interest
shall be apportioned among the Accounts (i.e., sources of
contributions) from which the loan was made in proportion to
the amounts by which the Accounts were initially reduced in
order to make the loan. If a loan is made from an Account
(i.e., source of contributions) which is invested in
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<PAGE>
more than one Subfund authorized and established under Section
4.1, the amount withdrawn in order to make the loan shall be
charged to each Subfund in the same proportions as the Account
is invested in each Subfund. All repayments of principal and
interest shall be reinvested in the same manner as
contributions under the borrower's investment election in
effect at the time the repayment is received.
(d) Payments. All Participants who are actively employed by the
Employer shall make payment of loans by monthly or more
frequent payroll deduction. The making of the loan shall be
considered an irrevocable authorization for payroll deduction.
To the extent that the available payroll amount is not
sufficient to satisfy the payment obligation, the Participant
shall make monthly payment by cash, personal check or
equivalent negotiable instrument delivered to the Trustee or
to the Committee as agent for the Trustee (at the address
shown in the Plan's summary plan description) by the due date
for the payment. All payments by Beneficiaries, and all
payments made by Participants on loans made prior to July 1,
1998 who are not actively employed, shall be made monthly by
cash, personal check or equivalent negotiable instrument
delivered to the Trustee or to the Committee as agent for the
Trustee at the address shown in the Plan's summary plan
description by the due date for the payment.
(e) Prepayments. Prepayment of principal and interest shall be
allowed only if the entire remaining balance due on the
promissory note is paid in full.
(f) Separation from Service. For loans made on or after July 1,
1998, the entire outstanding principal and unpaid interest
shall be due and payable on the date which is thirty (30) days
after the Participant's separation from service with the
Employer.
(g) Death of the Borrower. The death of the borrower shall
terminate the loan. The unpaid principal and interest due and
owing on the date of the borrower's death shall be offset
against the Participant's Total Account. No payments shall be
permitted after the borrower's death. The tax consequences of
the offset shall be reported to the borrower's estate and not
to the Participant's Beneficiary.
(h) Event of Default. Subject to subsection (i) below, nonpayment
within ninety (90) days after the stated due date shall be an
event of default. Payment shall be considered made for this
purpose only when the cash, personal check or other equivalent
negotiable instrument is received in fact by the Trustee or
the Committee as agent for the Trustee. Upon the occurrence of
an event of default, the Vested Accounts in the Plan given as
security shall be offset by the amount of the loan then in
default (including, to the extent required under the Code,
interest on the amount in
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<PAGE>
default from the time of the default until the time of the
offset). In the case of a Participant who is actively
employed, however, this offset shall be deferred until an
Event of Maturity as to such Participant, but, in the interim,
it shall not be possible to cure the default. Such offset
shall be automatic. No notice shall be required prior to
offset.
(i) Suspension of Payments During Leave of Absence. If the
Participant is on an authorized leave of absence as determined
by the Committee, and the Participant's wages during the leave
are less than the amount of the loan payment, then loan
payments may be suspended upon the written request of the
Participant to the Committee for a period of up to one (1)
year; provided, however, that the participant's death even
while payments are suspended shall nevertheless terminate the
loan as provided in subsection (g). Upon the Participant's
return to active employment with the Employer or an Affiliate,
the Participant shall resume making payments on the loan by
monthly or more frequent payroll deduction. The Trustee shall
reamortize the then outstanding principal and interest into
equal periodic payments payable over the remaining term of the
loan; provided, however, that the interest rate used in the
reamortization is the same as in the loan note and the final
payment on the loan is due by the original maturity date of
the loan. Any such reamortization shall not be considered a
new loan or a rewriting or extension of the existing loan.
(j) Miscellaneous. Loans will be made as of the next
administratively feasible Valuation Date after which all the
required documentation has been provided. No loan shall be
made to any Participant or Beneficiary who has any loan which
is currently in default or any loan which was in default at
any time during the preceding twelve (12) months. Effective
July 1, 1998, no Participant or Beneficiary shall be permitted
to borrow if such person has a loan then outstanding.
(k) Fees. The loan shall be subject to any origination and
periodic maintenance fees charged by the Trustee and approved
by the Committee.
6. Effect on Distributions. If any distribution is to be made after an
Event of Maturity when a loan is outstanding, the first asset distributed (after
offset to satisfy any default) shall be the unpaid promissory note.
7. Reporting and Disclosure. To the extent required by section 72(p) of
the Code, the Trustee shall report, from time to time, distributions of income
in connection with loans made under this Plan. The operation of those tax rules
is entirely independent of the rules of the Plan. It may be possible for loans
not in default under these rules to nevertheless require reports of
distributable income. Similarly, loans in default under these rules may not
result in such reports.
8. Truth in Lending. This Plan shall make all disclosures required
under federal truth-in-lending regulations (Regulation Z issued by the Board of
Governors of the Federal Reserve System).
E-14
<PAGE>
EXHIBIT 12.1
Computer Network Technology
Ratio of Earnings To Fixed Charges
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999
----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before tax $(1,789) $ 6,534 $2,024 $(3,893) $7,639 $1,995 $6,792
Plus fixed charges:
Interest expense including amortization
of debt issuance costs 125 60 46 57 79 51 102
Assumed interest element included in
rent expense (1) 784 777 734 922 1,041 509 717
------- ------- ------ ------- ------ ------ ------
909 837 780 979 1,120 560 819
------- ------- ------ ------- ------ ------ ------
Adjusted earnings (loss) (880) 7,371 2,804 (2,914) 8,759 2,555 7,611
Fixed charges 909 837 780 979 1,120 560 819
------- ------- ------ ------- ------ ------ ------
Ratio of earnings to fixed charges 8.80 3.59 7.82 4.56 9.29
======= ====== ====== ====== ======
In the fiscal years ended December 31, 1994 and 1997, earnings were inadequate to cover fixed charges by $1.8 million and
$3.9 million respectively.
(1) Total rent expense for the period divided by three. This is the portion of rental expense which the company believes
to be representative of interest.
Rent expense $ 2,351 $ 2,332 $2,202 $ 2,765 $3,122 $1,528 $ 2,151
Interest portion - 33% $ 784 $ 777 $ 734 $ 922 $1,041 $ 509 $ 717
Deficiency of earnings available to
cover fixed charges $(1,789) $(3,893)
======= =======
</TABLE>
<PAGE>
Exhibit 23.2
Independent Auditors' Consent
-----------------------------
The Board of Directors of
Computer Network Technology Corporation:
We consent to the use of our reports incorporated by reference and to the
reference to our firm under the heading "Experts" in the prospectus in this S-3
Registration Statement.
/s/ KPMG LLP
Minneapolis, Minnesota
August 23, 1999
23.2-1
<PAGE>
EXHIBIT 24.5
CERTIFICATE
OF THE
SECRETARY
OF
COMPUTER NETWORK TECHNOLOGY CORPORATION
The undersigned, Secretary of Computer Network Technology Corporation,
a Minnesota corporation (the "Corporation"), hereby certifies the following
resolution was duly adopted by the Board of Directors of the Corporation:
FURTHER RESOLVED, that each officer and director of the
Corporation who may be required to execute any Registration Statement
with the Commission with respect to the Notes and Shares issuable upon
conversion thereof (whether on behalf of the Corporation or as an
officer or director thereof or otherwise) be, and hereby is, authorized
to execute and deliver a power of attorney appointing Thomas G. Hudson,
Gregory T. Barnum or Jeffrey A. Bertelsen, his or her true and lawful
attorneys and agents to execute in his or her name, place and stead (in
any such capacity) such Registration Statement or such document and any
and all amendments (including post-effective amendments) or supplements
thereto, and all instruments necessary or appropriate in connection
therewith, and to file the same with the Commission, each of said
attorneys and agents to have full power and authority to do and perform
in the name and on behalf of each of such directors and officers, and
any of them, every act whatsoever necessary or advisable to be done by
any such officer or director pursuant to these resolutions;
COMPUTER NETWORK TECHNOLOGY
CORPORATION
By /s/ Gregory T. Barnum
------------------------
Gregory T. Barnum
Secretary
