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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1997
COMMISSION FILE NUMBER: 0-12862
DEP CORPORATION
<TABLE>
<S> <C>
A DELAWARE CORPORATION 95-2040819
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2101 EAST VIA ARADO, RANCHO DOMINGUEZ, CALIFORNIA 90220
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER: (310) 604-0777
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK ($.01 PAR VALUE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No _
At October 8, 1997 the number of shares of Common Stock of the registrant
issued and outstanding were 6,876,140. At October 8, 1997 the aggregate market
value of Common Stock held by non-affiliates of the registrant was approximately
$9,166,066.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement, which the
Registrant anticipates mailing in October 1997, are incorporated by reference in
Part III of the Report.
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PART I
ITEM 1. BUSINESS
GENERAL
DEP Corporation was reincorporated in Delaware in December 1987 after its
initial incorporation in California in 1956. Its executive offices are located
at 2101 East Via Arado, Rancho Dominguez, California and its telephone number is
(310) 604-0777.
DEP Corporation, together with its subsidiaries (collectively, the
"Company"), is engaged in developing, formulating, manufacturing, marketing and
distributing a wide range of trademarked personal care products. Trademarks of
the Company appear in this report in all capitalized letters. The following
table sets forth the principal brands of the Company:
L.A. LOOKS -- hair styling line
DEP -- hair styling line
THEORIE -- premium-priced, hair styling line
LILT -- home perms
AGREE -- shampoos & conditioners
HALSA -- shampoos & conditioners
NATURES FAMILY -- body and bath care line
PORCELANA -- skin fade cream
CUTICURA -- medicated, anti-bacterial soaps and powders
LE SYSTEME -- premium-priced, skin care line
TOPOL -- whitening toothpaste
LAVORIS -- mouthwash
Such products, together with the Company's other trademarked products, are
hereinafter collectively referred to as "Personal Care Products," which during
fiscal 1997 represented 95% of the Company's net sales. The Personal Care
Products are generally targeted toward distinct consumers and several of the
brands are among the market leaders in their respective categories. In the
United States, the Company is the leading marketer of hair styling gel and two
of its brands, L.A. LOOKS and DEP, are amongst the top ten hair styling lines.
Additionally, management believes its LILT and PORCELANA brands are the number
two brands in their respective niche categories.
The Personal Care Products are sold principally through mass merchandisers
(such as Wal-Mart and Kmart), food stores (such as Safeway and Smiths) and drug
stores (such as Rite-Aid and Walgreens). The Company's Personal Care Products
are also sold internationally, mostly through a network of distributors and
licensees, except that Canadian sales are conducted through a wholly-owned
subsidiary.
The Company's current strategy is to improve operating income by enhancing
sales and margins through internal brand development, cost containment programs
and efficient use of marketing resources. One of the Company's core strengths is
its ability to successfully develop and launch new trademarked products, such as
L.A. LOOKS. Building on this strength, late in fiscal 1997 the Company launched
two new, higher margin, product lines, LE SYSTEME and THEORIE. LE SYSTEME is a
premium priced, skin care line which offers the consumer the same high quality
formulations as well-known, department store skin care lines. THEORIE is a
premium priced, specialty hair care and styling line which offers the consumer
the same high quality formulations as well-known, professional salon products.
Both brands, LE SYSTEME, and THEORIE, will be sold at mass retail outlets.
The Company also engages in contract packaging and private label
activities, in which it manufactures a large variety of personal care products
for third parties. It is a highly competitive business and volume is subject to
fluctuation. These activities are hereinafter collectively referred to as
"Contract Packaging." Contract Packaging net sales, which increased 9% in fiscal
1997 over fiscal 1996, averaged 5% or less of consolidated net sales for the
Company's three most recent fiscal years. The Company intends to utilize its
excess production capacity for expansion of its Contract Packaging activities.
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On October 23, 1996, the Company's Second Amended Plan of Reorganization
(the "Plan of Reorganization") was confirmed by the United States Bankruptcy
Court for the District of Delaware (Case No. 96-480(HSB)) (the "Bankruptcy
Court") with an effective date of November 4, 1996 (the "Effective Date"). The
final decree closing the Company's chapter 11 case was entered on July 2, 1997.
None of the Company's foreign subsidiaries were part of the chapter 11 filing.
Among other things, the Plan of Reorganization provided that the Company
will repay approximately $62,000,000 in long-term secured indebtedness held by
the Company's senior lenders (the "Lender Group"), with interest at the prime
rate plus 2%, which indebtedness matures July 31, 2002. The Plan of
Reorganization further provided (i) for payment to the Lender Group of $150,000
in cash, on the Effective Date, to satisfy certain post-petition interest
claims; (ii) for the issuance to the Lender Group of 625,000 shares of Common
Stock; and (iii) for the satisfaction of unsecured creditor claims, plus 5%
interest, payable in monthly installments, commencing November 1996 and
continuing through March 15, 1998. Additionally, the Plan of Reorganization
required the Company to pledge to the Lender Group the net cash proceeds, as
defined, received by the Company in connection with the litigation between the
Company and S.C. Johnson & Son, Inc. and affiliates ("S.C. Johnson"). (See "Item
3 Legal Proceedings.")
The Company's operations continue to be affected by its August 1993
acquisition of AGREE and HALSA. The Company borrowed approximately $48 million
to acquire such brands and immediately thereafter sales significantly declined
and have continued to decline through July 31, 1997. As a result, the Company's
capital structure, including stockholders' equity, has been significantly,
negatively impacted. The Company continues to support the AGREE and HALSA brands
in an effort to stabilize their volume as such brands generate positive brand
contribution.
BUSINESS RESULTS
The following table sets forth the dollar volume and percentage of
consolidated net sales attributable to Personal Care Products and Contract
Packaging during the past three fiscal years:
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
----------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Personal Care Products:
Domestic.................................. $ 90,558 79% $ 95,182 80% $103,609 81%
International............................. 18,950 16 18,843 16 19,673 15
-------- --- -------- --- -------- ---
Total Personal Care Products(1)............. 109,508 95 114,025 96 123,282 96
Contract Packaging.......................... 5,526 5 5,063 4 4,407 4
-------- --- -------- --- -------- ---
Consolidated net sales...................... $115,034 100% $119,088 100% $127,689 100%
======== === ======== === ======== ===
</TABLE>
- ---------------
(1) For fiscal 1997, 1996 and 1995, the net sales of AGREE and HALSA declined by
$4.9 million, $4.5 million, and $8.7 million, respectively.
INTERNATIONAL
The Company's Personal Care Products are also marketed and sold
internationally in over 40 countries, including Canada, Japan, the United
Kingdom, Australia, Mexico, and China. General export sales and most of the
Personal Care Products sold in international markets are handled and
manufactured by the Company at its Rancho Dominguez facilities. The Company's
foreign operations are subject to risks inherent in transactions involving
foreign currencies and fluctuating exchange rates.
As of April 1997 the Company entered into a license arrangement with a
distributor in Australia. Accordingly, from April 1997 through July 31, 1997,
the Company recognized royalty income as a percentage of such distributor's net
sales. Prior to such time, the Company's products were sold in Australia through
an agent and the Company recognized the revenues and expenses from such sales.
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Effective February 1, 1996, the Company's Personal Care Products are sold
in Canada through a wholly-owned subsidiary and the Company recognizes the
revenues and expenses from such sales. Prior to February 1996, the DEP brand was
distributed by a licensee in Canada and the Company received royalty income as a
percentage of such licensee's net sales.
MARKETING
The Company markets most of its Personal Care Products as high quality
brands to value-conscious consumers. Its marketing strategies are defined on a
brand-by-brand basis to appeal to the particular consumers being targeted. As
part of this individualized, flexible approach, the Company works directly with
retailers in the United States and its network of international distributors to
implement promotional calendars tailored to the particular needs of each
retailer.
The Company schedules such promotions up to twelve months in advance. To
encourage retailer support for the Company's Personal Care Products, it utilizes
a variety of marketing techniques, including cooperative advertising, temporary
price reductions, promotional allowances, in-store displays, special promotional
events and free goods.
To encourage consumer trial and repeat sales at retail, the Company
utilizes various consumer marketing techniques. These include providing bonus
and trial sizes, coupons and packaging intended to heighten consumer recognition
and retail shelf presence. The Company also utilizes consumer media advertising,
principally print advertising, on selected brands of its Personal Care Products.
With the launch of THEORIE AND LE SYSTEME, the Company has expanded its
Personal Care Product lines to include the marketing of upscale products with
premium packaging and formulas. The margins on these brands will be higher than
the Company's current average.
The Company has created brand teams comprised of individuals who represent
a cross section of the Company's other departments, including research and
development, manufacturing, purchasing, planning, customer service and finance.
These brand teams work jointly on a product after its inception and are
responsible for the product's development, timely delivery, cost management and
growth. This structure is intended to enhance the Company's ability to meet the
consumer's need for high-quality products in an efficient, cost effective and
timely manner.
DISTRIBUTION AND CUSTOMERS
The Company's Personal Care Products are sold to mass merchandisers, food
stores, and drug stores resulting in the Company's Personal Care Products being
sold in more than 100,000 retail outlets in North America. The Company's sales
professionals directly manage the Company's key retail accounts and also are
responsible for overseeing the sales services of more than 40 independent broker
organizations which are paid on a commission basis. These independent broker
organizations assist the Company's sales professionals in selling the Personal
Care Products and carrying out trade promotions.
No customer other than Wal-Mart Stores, Inc. accounted for more than 10% of
the Company's total net sales in any of the last three years. During fiscal
years 1997, 1996 and 1995, Wal-Mart Stores, Inc. accounted for 17%, 17% and 16%,
respectively, of consolidated net sales. Although the Company believes it is
unlikely that it will lose all of such customer's business, the loss of such
customer's business could have a material adverse effect on the Company. None of
the Company's customers has any contractual obligation to make any purchase from
the Company.
Backlog orders for the Company's Personal Care Products are generally not
significant to its business, as the Company sells from its inventory and goods
are generally shipped promptly after receipt of orders. The Company typically
does not provide any extended payment terms to its retail customers.
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MANUFACTURING
During fiscal 1997, the Company's 180,000 sq. ft. facility in Rancho
Dominguez, California performed approximately 91% of the manufacturing and
packaging for Personal Care Products sold within the United States or exported,
with the remainder performed by contract manufacturers. (See "Item 2 Property.")
To monitor the quality of its products, the Company maintains a strict
internal quality control system supported by a modern, on-site analytical
chemistry and microbiology laboratory. Outside consultants are also employed
from time to time to monitor the effectiveness of the Company's manufacturing
operations. The Company maintains product liability insurance at levels which it
believes to be adequate.
Raw materials used by the Company are principally surfactants, fragrances,
chemicals and a wide variety of packaging materials and components such as
containers, closures, spray valves and labels, all of which are purchased from
outside sources. All principal raw materials and components used by the Company
to manufacture and package its Personal Care Products are generally available
from several domestic suppliers. Over the past five fiscal years, there has been
no substantial increase in the cost of such raw materials and components, taken
as a whole, and the Company does not anticipate any significant shortages of, or
difficulty in obtaining, such materials and components.
Industry practice permits retailers to return to manufacturers
non-defective merchandise which the retailers have been unable to sell. Over the
past five fiscal years, taken as a whole, the Company has experienced no
significant volume of returns of its products.
RESEARCH AND DEVELOPMENT
The Company engages in a continuous development program for new products
and improvements to its existing formulations for all of its Personal Care
Products. In addition to its Personal Care Products business, the Company
develops hundreds of personal care product formulas for its Contract Packaging
activities.
The Company's research and development staff works closely with the
Company's sales and marketing groups to keep current with changes in consumer
tastes and new product developments in the industry. The Company's on-site salon
permits the testing of new products and product improvements in conditions that
simulate those actually encountered by consumers. In management's view, the
Company's extensive research and development experience enhances its ability to
respond rapidly to market trends and introduce new products.
The Company's Scientific Advisory Board consists of industry experts in
dermatology, cosmetic science and oral health who assist the Company's research
and development staff with new product development concepts, as well as
assistance with governmental and regulatory matters. The Company also uses the
services of outside consultants, including privately funded research by major
universities, from time to time as it deems appropriate.
TRADEMARKS
The Company markets its products under a number of trademarks and trade
names that are registered in the United States and certain other countries. The
Company seeks to register its significant trademarks and names in foreign
countries when it enters them. The Company considers the L.A. LOOKS, DEP,
THEORIE, LILT, AGREE, HALSA, NATURES FAMILY, PORCELANA, CUTICURA, LE SYSTEME,
TOPOL, and LAVORIS trademarks among its most important assets. Formulas for
personal care products are typically not patentable.
COMPETITION
The market for personal care products is highly competitive and is
dominated by large multi-national corporations with greater financial and other
resources than the Company. These competitors include Procter & Gamble,
Unilever, L'Oreal, Colgate, and other multi-billion dollar corporations. The
Company competes with these other personal care product manufacturers with
respect to quality, packaging, marketing and price.
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Other factors affecting the personal care products industry are the
consolidation of retailers and increasingly competitive negotiations for access
to shelf space.
EMPLOYEES
At July 31, 1997, the Company employed approximately 300 full-time persons
in North America. The Company's employees are not covered by a collective
bargaining agreement. The Company has never experienced a work stoppage or
interruption due to a labor dispute and believes its labor relations to be good.
The Board of Directors recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control of the Company may
exist and that such possibility, and the uncertainty and questions that it may
raise among management, could result in the distraction or departure of
management personnel to the detriment of the Company and its stockholders. The
Board has decided to reinforce and encourage the continued attention and
dedication of members of the Company's management to their assigned duties
without distraction arising from the possibility of a change in control by
adopting the DEP Corporation Retention and Severance Plan (the "RSP") for the
Company, effective August 15, 1995.
The RSP provides severance benefits and/or retention bonuses to employees
of the Company to encourage them to remain in the employ of the Company. The RSP
consists of a Layoff and Recall Policy for Plant Employees, a Layoff and Recall
Policy for Office Employees, a Change in Control Severance Policy for Non-Exempt
Employees and a Change in Control Severance Policy for Exempt Employees. The RSP
is intended to be and is administered as an employee welfare benefit plan under
the Employee Retirement Income Security Act of 1974, as amended.
All full-time employees of the Company are eligible to participate under
the change in control severance policies. As provided by the RSP, the Company
has entered into individual Change in Control Executive Severance agreements
with each of its executives and certain other key employees. Additionally, the
Company has entered into individual Change of Control Retention Bonus Agreements
with certain of its executives. These agreements were approved by the
independent, non-management members of the Company's Board of Directors.
GOVERNMENT REGULATION
The Company's manufacturing and packaging operations are subject to a wide
range of federal, state and local regulations. These regulations include the
applicable cosmetic purity and labeling requirements prescribed by the federal
Food, Drug and Cosmetic Act, the applicable labeling provisions of the federal
Fair Packaging and Labeling Act, the discharge, handling and disposal of
hazardous waste regulations contained in applicable environmental laws, and the
plant and laboratory safety requirements of various applicable occupational
safety and health laws. The Company is also subject to federal regulations
concerning the content of its advertising, trade practices and certain other
matters. Present government regulation does not materially restrict or impede
the Company's operations.
ITEM 2. PROPERTY
The Company owns its headquarters in Rancho Dominguez, California, near Los
Angeles, which consist of approximately 180,000 square feet of manufacturing,
warehousing, research laboratory, test salon and administrative areas. The
Company principally maintains its finished goods in approximately 145,000 square
feet of leased warehouse space in Rancho Dominguez, as well as in public
warehouses situated in Tennessee, New Jersey, and Toronto, Canada. (See "Note 4
of the Notes to Consolidated Financial Statements.")
ITEM 3. LEGAL PROCEEDINGS
On April 1, 1996 the Company filed a voluntary petition (the "Chapter 11
Case") under chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware (Case No. 96-480(HSB)) (the
"Bankruptcy Court") for the purpose of implementing the financial restructuring
of its business. The Company's Second Amended Plan of Reorganization (the "Plan
of
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Reorganization") was approved by all impaired classes of claims and interests
under the Plan of Reorganization and, on October 23, 1996, the Plan of
Reorganization was confirmed by the Bankruptcy Court. The Plan of Reorganization
became effective on November 4, 1996, and on July 2, 1997 the final decree
closing the Chapter 11 Case was entered. (See "Item 1 Business.")
On March 2, 1994, the Company filed a complaint in the United States
District Court for the Central District of California ("District Court") against
S.C. Johnson alleging, among other things, that, in violation of its purchase
agreement with the Company, S.C. Johnson wrongfully altered its North American
marketing and sales practices prior to the closing of the sale of the AGREE AND
HALSA trademarks and related assets to the Company in August 1993.
On December 19, 1996, the Company and S.C. Johnson agreed to an
out-of-court settlement in regard to all pending litigation that arose in
connection with the Company's 1993 purchase of AGREE AND HALSA from S.C.
Johnson. The settlement involved the Company, its insurance carriers and S.C.
Johnson. Under the terms of such settlement the Company received net cash
proceeds from S.C. Johnson of $2,500,000, a $1,400,000 payment from the
Company's insurance carriers and forgiveness of approximately $1,400,000 owed to
S.C. Johnson for certain goods delivered following the AGREE AND HALSA
acquisition. The Company valued the total settlement, excluding related legal
costs, at $5,300,000. Under the Company's term loan agreement, $1,107,000 of the
settlement was paid to the Lender Group as a reduction of long-term debt.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE COMPANY
Information concerning the Company's executive officers as of July 31,
1997, based on data furnished by them, is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------- --- -----------------------------------------------------
<S> <C> <C>
Robert Berglass 59 Chairman of the Board; President; Director
Grant W. Johnson 53 Senior Vice President; Chief Financial Officer;
Director
Jerome P. Alpin 60 Senior Vice President and General Manager,
International Sales and Marketing
Judith R. Berglass 45 Senior Vice President, Corporate Secretary; Director
D. Lee Johnson 49 Vice President, Administration and Investor Relations
James W. Fink 58 Vice President, Operations
John G. Petersen 39 Vice President and Controller
</TABLE>
Robert Berglass has served as President of the Company since 1969 and has
been Chairman of the Board of Directors since 1971. Immediately prior to joining
the Company, he was a Vice President of Faberge, Inc. He has more than 39 years
of experience in the personal care products industry.
Grant W. Johnson is the Senior Vice President, Finance and Chief Financial
Officer and has been employed by the Company since 1985 and as a director since
1986. For approximately eight years preceding his joining the Company, he was
Vice President, Finance of Vidal Sassoon, Inc. Mr. Johnson, a certified public
accountant, also has seven years of experience with Deloitte & Touche LLP.
Jerome P. Alpin is the Senior Vice President and General Manager of
International Sales and Marketing and has been employed by the Company since
1982. From June 1982 through July 1993 he served as the Company's Senior Vice
President, Sales and Marketing. He has more than 30 years of experience in sales
and marketing of personal care products, including positions with Bristol-Meyers
Co., Faberge, Inc., and Revlon, Inc., prior to joining the Company.
Judith R. Berglass is a Senior Vice President and has been employed by the
Company since 1983. She has served as its Vice President, Corporate Development
since 1984, a director since 1985 and since 1986 has
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also served as Secretary. For the three years prior to joining the Company, she
was Vice President of CLF Associates, a management consulting firm. She is the
wife of the President.
D. Lee Johnson is the Vice President of Administration and Investor
Relations and has been employed by the Company since October 1994. Prior thereto
he was with Gibson, Dunn & Crutcher for four years where his last capacity was
Chief Financial Officer. Mr. Johnson, a certified public accountant, also has 18
years with The Dial Corporation, where he last served as Vice President Planning
and Development.
James W. Fink is the Vice President of Operations and has been employed by
the Company since 1990. From November 1995 through January 1997 he served as
Vice President of Material Management and was Director of Materials prior to
that. Prior to joining the Company in 1990, he was a consultant to the industry
and held domestic and international senior management and executive positions at
Revell, Inc. He has more than 25 years of materials management and operations
experience in the personal care products industry.
John G. Petersen is the Vice President and Controller and has been employed
by the Company since 1990. For approximately seven years preceding his joining
the Company, he held various managerial positions and last served as Corporate
Controller of L.H. Research, Inc. Mr. Petersen is a certified public accountant
with three years experience with Deloitte & Touche LLP.
All officers serve at the discretion of the Board of Directors.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since November 4, 1996, the Company's Common Stock has traded on the Nasdaq
SmallCap Market tier of the Nasdaq Stock Market under the symbol "DEPC." On
November 4, 1996, the Effective Date of the Plan of Reorganization (See "Item 1
Business"), the Company's Class A and Class B common stock was reclassified into
a single class of Common Stock. Prior to November 2, 1995, the Company's Class A
and Class B common stock traded on the Nasdaq National Market.
The following table sets forth the high and low closing sale prices, as
reported by Nasdaq, of the Company's Common Stock:
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
CLASS A
First Quarter..................................... 2 3/8 1 1/4 2 5/8 1 7/16
Second Quarter.................................... N/A N/A 1 9/16 1
Third Quarter..................................... N/A N/A 1 7/8 9/16
Fourth Quarter.................................... N/A N/A 2 1/4 7/8
CLASS B
First Quarter..................................... 2 3/8 1 1/4 2 5/8 1 1/2
Second Quarter.................................... N/A N/A 2 1/8 1
Third Quarter..................................... N/A N/A 1 15/16 1/2
Fourth Quarter.................................... N/A N/A 2 11/16
COMMON STOCK
First Quarter..................................... N/A N/A N/A N/A
Second Quarter.................................... 2 3/4 1 5/8 N/A N/A
Third Quarter..................................... 2 1 1/8 N/A N/A
Fourth Quarter.................................... 1 15/16 1 1/4 N/A N/A
</TABLE>
The closing sales price of Common Stock on October 8, 1997 was $2 per
share. On October 8, 1997, there were a total of 167 record holders of Common
Stock and more than 300 beneficial holders whose shares are held of record by
nominees.
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Since its formation the Company has not paid cash dividends on its Common
Stock and it does not currently anticipate paying such dividends. The Company's
current policy is to retain cash for the operation and expansion of the
Company's business. In addition, the Company's term loan agreement prohibits,
among other things, the payment of any dividend or other distribution of assets,
properties or cash in respect of any class of capital stock (See "Note 7 of the
Notes to Consolidated Financial Statements.")
In November 1996, 625,000 shares of the Company's Common Stock were issued
to the Company's Lender Group pursuant to the Company's Amended Plan of
Reorganization.
On March 1, 1997, U.S. Stock Transfer & Trust Company became the Company's
Registrar and Transfer Agent.
On August 25, 1997, the Nasdaq Stock Market announced revised requirements
for the continued listing of securities on the Nasdaq SmallCap Market. The
Company's Common Stock trades on the SmallCap Market and currently meets six of
the seven requirements for continued listing of its securities. However, the
Company does not currently meet the revised requirement to have one of the
following: (i) a minimum of $2 million of net tangible assets, (ii) a market
capitalization of its Common Stock of at least $35 million, or (iii) net income
of at least $500,000. The Company does not meet the net tangible assets
requirement due to the goodwill incurred as a result of acquisitions. Incurring
significant goodwill is typical in acquisitions within the consumer products
industry, and such goodwill is excluded from Nasdaq's net tangible asset
calculation. On October 8, 1997, the Company's market capitalization was
$13,752,280 and, therefore, does not currently meet the capitalization
requirement. Finally, the Company does not currently meet the net income
requirement because of its recent losses.
The revised listing requirements become effective February 23, 1998. If the
Company cannot meet the one remaining listing requirement, it may request a
hearing to determine whether an exemption will be granted. No assurance can be
given that the Company would be successful in obtaining an exemption from the
listing requirements. The Company expects that if it does not obtain such
exemption, its shares will be suspended or terminated from trading on the
SmallCap Market and moved to the OTC Bulletin Board until it can, once again,
meet the listing requirements. While the Company does not currently meet the net
income portion of such requirement, it was profitable in the fourth quarter of
the fiscal year ended July 31, 1997 and anticipates that it will earn sufficient
net income in order to meet the continued listing requirement for the fiscal
year ending July 31, 1998.
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ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales................................... $115,034 $119,088 $127,689 $138,331 $123,713
Gross profit................................ 70,164 74,066 80,194 87,646 78,666
Selling, general and administrative
expenses.................................. 63,760 70,986 78,728 88,525 74,388
Income (loss) from operations before
write-downs............................... 6,404 3,080 1,466 (879) 4,278
Write-down in assets........................ -- -- 25,166 -- 1,003
Income (loss) from operations............... 6,404 3,080 (23,700) (879) 3,275
Other expense, primarily interest........... 6,822 7,143 6,123 4,494 1,706
Reorganization items(1)..................... 20 3,895 -- -- --
Income (loss) before income taxes
(credits)................................. (438) (7,958) (29,823) (5,373) 1,569
Net income (loss)........................... (438) (7,958) (26,958) (3,583) 1,170
Net income (loss) per share................. $ (.07) $ (1.27) $ (4.32) $ (.57) $ .18
</TABLE>
<TABLE>
<CAPTION>
JULY 31,
-------------------------------------------------
1997 1996 1995 1994 1993
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital (deficiency)................... $25,780 $29,288 $(35,682) $ 20,416 $23,587
Total assets................................... 84,690 89,838 93,904 122,095 78,629
Long-term debt, net of current portion(2)...... 61,521 3,597 3,744 60,974 19,557
Stockholders' equity........................... 4,101 3,282 11,227 38,155 41,640
Shares outstanding............................. 6,876 6,251 6,245 6,231 6,223
</TABLE>
- ---------------
(1) Net reorganization expenses incurred as a result of the Chapter 11 Case.
(2) At July 31, 1996 and 1995 debt under its credit agreements was classified
within liabilities subject to compromise and current portion of long-term
debt, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Fiscal 1997 Compared to Fiscal 1996
Consolidated net sales for 1997 were $115,034,000 compared to $119,088,000
in 1996. The decrease related to lower unit volume of the Company's Personal
Care Products which accounted for 95% and 96% of the consolidated net sales for
1997 and 1996, respectively.
Net sales of Personal Care Products decreased 4%, primarily as a result of
continued lower worldwide sales of its AGREE and HALSA brands. In 1997,
aggregate net sales of AGREE and HALSA declined by 22% from the prior year to
$17,500,000. Personal Care Products net sales, excluding AGREE and HALSA,
increased slightly in 1997, compared to 1996, primarily due to a 9% increase in
the combined worldwide sales of L.A. LOOKS and DEP, partially offset by a
decrease in unit volume of the Company's other brands. Contract Packaging
increased 9% due to the Company's continuing efforts to utilize excess
manufacturing capacity.
Domestic net sales of Personal Care Products decreased 5%, primarily due to
the decline in sales of the AGREE, HALSA, and NATURES FAMILY brands. In 1997,
AGREE and HALSA domestic sales decreased 20% compared to the 1996 level.
9
<PAGE> 11
International net sales of Personal Care Products increased 1% principally
due to higher Canadian sales, partially offset by a 25% decrease in sales of
AGREE and HALSA. Effective February 1996, the Company began selling its DEP
brand in Canada through its wholly-owned subsidiary and, as a result, the
Company recognized a full year of revenues and expenses from such sales in
fiscal 1997. Prior to February 1996, the DEP brand was distributed by a licensee
in Canada and the Company received royalty income as a percentage of such
licensee's net sales.
Gross profits for 1997 were $70,164,000, or 61% of net sales, compared to
$74,066,000, or 62% of net sales, in the prior year. In dollar terms, the
decrease was the result of lower sales volume, while the decrease as a
percentage of net sales was primarily due to lower sales of AGREE and a higher
proportion of international and Contract Packaging sales. International and
Contract Packaging sales generate lower gross margins as a percentage of net
sales and incur lower selling expenses compared to the Company's other domestic
Personal Care Products.
Selling, general and administrative expenses ("SG&A") for 1997 decreased to
$63,760,000, or 55% of net sales, as compared to $70,986,000, or 60% of net
sales, in 1996. The decrease in SG&A as a percentage of net sales was primarily
the result of a reduction in coupon programs and lower administrative expenses
due to the Company's 1996 cost reduction program and lower amortization expense.
In dollar terms, SG&A decreased primarily due to the aforementioned items, as
well as lower variable expenses related to the decline in net sales. Fiscal 1997
SG&A also included a $250,000 net charge related to a recall of a test market
skin care line.
Amortization expense was lower in 1997 compared to 1996 due to the
settlement of the S.C. Johnson litigation, wherein $3,900,000 of such proceeds
offset intangible carrying value. Amortization expense in 1996 included
amortization of deferred debt issuance costs which were fully amortized within
such year.
Operating income in 1997 increased by $3,324,000 to $6,404,000, or 5.6% of
net sales, up from $3,080,000, or 2.6% of net sales in 1996. Such improvement
was the result of lower SG&A expense partially offset by lower gross profits.
Net interest expense decreased to $6,813,000 in 1997 from $7,120,000 in
1996 due to a lower average interest rate on borrowings and increased interest
income generated by higher cash balances throughout 1997.
Reorganization items related to the Chapter 11 Case amounted to $20,000 in
1997 compared to $3,895,000 in 1996. The lower expense in 1997 related to the
Company's emergence from Chapter 11 bankruptcy in November 1996.
Since the Company incurred a loss and has previously utilized all of its
income tax carryback benefits, there was no tax provision in either 1997 or
1996.
In 1997, the Company reported a net loss of $438,000, or $.07 per share,
compared to a net loss of $7,958,000, or $1.27 per share, in fiscal 1996. Fiscal
1997 results were positively impacted by lower SG&A and interest expense as
compared to 1996. Fiscal 1996 results included a $3,895,000, or $.62 per share,
charge for reorganization items.
Fiscal 1996 Compared to Fiscal 1995
Consolidated net sales for 1996 were $119,088,000 compared to $127,689,000
in 1995. Personal Care Products net sales accounted for 96% of the consolidated
net sales for 1996 and 1995.
Net sales of Personal Care Products decreased 8%, primarily as a result of
continued lower worldwide sales of AGREE and HALSA. From the date of the AGREE
and HALSA acquisition through July 31, 1996, annual worldwide net sales of AGREE
and HALSA have declined more than $40,000,000. Such decline was largely
responsible for the deterioration in the Company's financial condition that led
to the Company's filing of its Chapter 11 Case on April 1, 1996. Contract
Packaging net sales increased 15% due to increased efforts to utilize excess
manufacturing capacity.
10
<PAGE> 12
Domestic net sales of Personal Care Products decreased 8%, primarily as a
result of the continued decline of AGREE and HALSA sales. In 1996, net sales of
AGREE and HALSA decreased approximately 16%. In addition, domestic Personal Care
Products sales were adversely affected by a 1995 L.A. LOOKS promotion which was
not repeated in 1996, and lower domestic sales of the Company's other products.
International net sales of Personal Care Products decreased 4% principally
due to lower sales of AGREE in Australia and lower sales in China. The decrease
was offset, in part, by higher Canadian sales. Prior to February 1996, the DEP
brand was distributed by a licensee in Canada and the Company received royalty
payments based upon a percentage of such licensee's net sales. Effective
February 1, 1996, the Company began selling its DEP brand in Canada through its
wholly-owned subsidiary and, as a result, the Company recognized the revenues
and expenses from such sales.
Gross profits for 1996 were $74,066,000, or 62% of net sales, compared to
$80,194,000, or 63% of net sales, in the prior year. The decrease in dollar
terms was the result of lower sales volume, while the decrease as a percentage
of net sales was due to a higher proportion of international and Contract
Packaging sales.
SG&A for 1996 decreased to $70,986,000, or 60% of net sales, as compared to
$78,728,000, or 62% of net sales, in 1995. The decrease in SG&A as a percentage
of net sales was primarily the result of the Company's 1996 cost reduction
program initiated in January 1996 and the full year's effect of the 1995 cost
reduction program initiated in February 1995. The dollar decrease in SG&A
relates to the aforementioned cost reduction program and lower variable expenses
due to the decline in net sales.
Operating income (before reorganization items and the write-down of AGREE
and HALSA assets) rose to $3,080,000 as compared to $1,466,000 in 1995. Such
improvement was the result of lower SG&A expense.
Net interest expense increased to $7,120,000 in 1996 from $6,177,000 in
1995 as a result of higher interest rates and a higher average principal
balance. The Company's long-term debt increased due to the addition of deferred
interest pursuant to the Chapter 11 Case.
Reorganization items related to the Chapter 11 Case totaled $3,895,000
which included $2,638,000 of professional fees (of which $1,150,000 related to
the Lender Group's professional fees) and $1,372,000 for the write-off of
deferred debt issuance costs incurred under the previous bank facility,
partially offset by $115,000 of interest income earned from the deferral of
pre-petition liabilities.
Since the Company incurred a loss and has previously utilized all of its
income tax carryback benefits, there was no tax provision in 1996.
In 1996, the Company reported a net loss of $7,958,000, or $1.27 per share,
compared to a net loss of $26,958,000, or $4.32 per share, in the prior year.
Comparatively, the 1995 loss was the result of the after tax writedown in value
of AGREE and HALSA assets of $24,072,000 and higher SG&A expense, partially
offset by reorganization items of $3,895,000 and higher interest expense
incurred in 1996. The reorganization items in 1996 reduced earnings by $.62 per
share while the write-down in 1995 reduced earnings by $3.85 per share.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1997, the Company had cash and cash equivalents of $11,788,000.
The cash balance at July 31, 1997 was favorably impacted by the deferral of
approximately $2,900,000 in pre-petition liabilities owed to unsecured creditors
and $1 million related to deferred interest. Under the Plan of Reorganization
pre-petition unsecured creditor claims are payable, together with 5% interest,
in equal monthly installments through March 15, 1998, and the deferred interest
due the Lender Group through the Effective Date was added to the Credit
Facility's principal balance. Cash balances in 1997 were also favorably impacted
by approximately $1.7 million of net proceeds received (after expenses and
principal paid to the Lender Group) from the out-of-court settlement of
litigation between the Company and S.C. Johnson.
Changes in working capital during 1997 were significantly impacted by the
reclassification of the Chapter 11 Case's "liabilities subject to compromise"
used in the July 31, 1996 balance sheet compared to the typical classification
of liabilities at July 31, 1997. The Company emerged from bankruptcy effective
November 4, 1996; and therefore, liabilities are no longer classified under the
"liabilities subject to
11
<PAGE> 13
compromise" format. For the twelve month period ended July 31, 1997 working
capital was impacted by an increase in inventory and a decrease in accrued
expenses and accounts payable. The increase in inventory was the result of
preparing for the launch of two new product lines in July 1997. The decrease in
accrued expenses was primarily the result of the reduction of legal expenses
relating to the settlement of the Chapter 11 Case and the S.C. Johnson
litigation. The decrease in accounts payable, adjusted for the effect of the
reclassification of "liabilities subject to compromise," was due to the paydown
of pre-petition unsecured creditor claims and the forgiveness of approximately
$1,400,000 of indebtedness relating to the settlement of the S.C. Johnson
litigation. The decrease in accounts payable was partially offset by the benefit
of returning to pre-chapter 11 trade credit terms with an increased number of
suppliers.
Management believes that its cash and cash equivalents and cash flows from
operations will be sufficient to enable it to meet its obligations for the next
twelve months.
The Company has from time to time engaged in discussions with third parties
regarding the possible acquisition by one or more of such third parties of
discrete portions of the Company's assets, and it has received indications of
interest from time to time from third parties interested in acquiring all of the
Company's stock or assets. The discussions have been preliminary in nature and
no agreements regarding any such sale or sales have been reached, nor can any
assurance be given that any agreements will be reached.
FORWARD LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and Results
of Operations, the Chairman's Letter and other sections of this Annual Report
contain forward looking statements that are based on management's current
beliefs and assumptions about expectations, estimates, strategies and
projections for the Company. Words such as "expects," "seeks," "anticipates,"
"intends," "plans," "believes," "estimates," and variations of such words and
similar expressions are intended to identify such forward looking statements.
These statements are not guarantees of future performance and involve risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted
in such forward looking statements. The Company undertakes no obligation to
update publicly any forward looking statements whether as a result of new
information, future events or otherwise.
The risks, uncertainties and assumptions regarding forward looking
statements include, but are not limited to, product demand and market acceptance
risks; product development risks, such as delays or difficulties in developing,
producing and marketing new products or line extensions; the impact of
competitive products, pricing and advertising; constraints resulting from the
financial condition of the Company, including the degree to which the Company is
leveraged, debt service requirements and restrictions under bank loan
agreements; and other risks described in the Company's Securities and Exchange
Commission filings.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued SFAS No. 128, "Earnings
per Share," SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." SFAS No.
128 changes the computation, presentation and disclosure requirements for
earnings per share. (See "Note 2 of the Notes to Consolidated Financial
Statements.") SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components. SFAS No. 131 supersedes previous
reporting requirements for reporting on segments of a business enterprise. These
accounting standards are effective for periods beginning after December 15,
1997. The Company has not determined the impact, if any, of these new accounting
standards.
12
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORTS
Independent Auditors' report with respect to financial statements and
schedule.
FINANCIAL STATEMENTS
Consolidated Balance Sheets at July 31, 1997 and 1996
Consolidated Statements of Operations for Years Ended July 31, 1997, 1996
and 1995
Consolidated Statements of Stockholders' Equity for Years Ended July 31,
1997, 1996 and 1995
Consolidated Statements of Cash Flows for Years Ended July 31, 1997, 1996
and 1995
Notes to Consolidated Financial Statements
SCHEDULES
Schedule I is not provided because it is not required
Schedule II -- Valuation and Qualifying Accounts and Reserves
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information concerning directors called for by this item is
incorporated by reference in the Company's 1997 Proxy Statement which is to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days of the end of the fiscal year covered by this report.
Information concerning executive officers called for by this item appears in
Part I of this report. The information concerning late filings under Section
16(a) of the Securities and Exchange Act of 1934, as amended, is incorporated by
reference from the 1997 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Items 11, 12 and 13 is incorporated by
reference in the Company's 1997 Proxy Statement which is to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days of
the end of the fiscal year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, FINANCIAL SCHEDULES AND EXHIBITS
1. The financial statements listed in Item 8 above are incorporated herein
by this reference.
2. The financial schedule listed in Item 8 above is incorporated herein by
this reference.
13
<PAGE> 15
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER TITLE PAGE NUMBER
------ -------------------------------------------------------------------- -----------
<C> <S> <C>
2.1 Debtor's Second Amended Plan of Reorganization, dated as of August
23, 1996, as amended, pursuant to Chapter 11 filing on April 1,
1996(8).............................................................
3.1 Certificate of Incorporation(1).....................................
3.2 Certificate of Amendment to the Certificate of Incorporation(2).....
3.3 Certificate of Amendment to the Certificate of Incorporation(6).....
3.4 Certificate of Amendment to the Certificate of Incorporation(8).....
3.5 Bylaws, as amended, and restated August 27, 1997....................
10.1 Form of DEP Corporation Financial Benefit Plan as of September 1,
1997*...............................................................
10.2 1983 Stock Option Plan, as amended(3)*..............................
10.3 1988 Director and Officer Stock Option Plan, as amended(3)*.........
10.4 1992 Stock Option Plan(4)*..........................................
10.5 Stock Target Ownership Plan(5)*.....................................
10.6 Form of Fiscal Year 1997 Bonus Arrangement for Certain Executive
Officers*...........................................................
10.7 Lease Agreement relating to the Company's California warehouse(3)...
10.8 Form of Fiscal Year 1998 Bonus Arrangement for Certain Executive
Officers*...........................................................
10.9 Form of Officers and Directors Indemnification Agreement(6).........
10.10 DEP Corporation Retention and Severance Plan(7)*....................
10.11 Form of Change in Control Executive Severance Agreement(7)*.........
10.12 Form of Change in Control Executive Retention Bonus Agreement(7)*...
10.13 Term Loan Agreement, dated as of November 4, 1996, among the Company
as borrower, City National Bank, as co-agent and Foothill Capital
Corporation as agent, and others(8).................................
10.14 Release Agreement dated as of November 4, 1996 by and among the
Company and the Lenders named therein(8)............................
10.15 Performance Bonus Plan for the President and Chief Executive
Officer*............................................................
11 Computation of Earnings Per Share...................................
21.1 Subsidiaries(9).....................................................
23.1 Consent of Independent Auditors.....................................
27 Financial Data Schedule.............................................
</TABLE>
- ---------------
(1) Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended July 31, 1988.
(2) Incorporated by reference to Exhibit 4 to the Company's Current Report on
Form 8-K filed on December 15, 1992.
(3) Incorporated by reference to Exhibits 10.2, 10.3 and 10.7 to the Company's
Annual Report on Form 10-K for the year ended July 31, 1992.
(4) Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the year ended July 31, 1993.
(5) Incorporated by reference to Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended July 31, 1994.
14
<PAGE> 16
(6) Incorporated by reference to Exhibits 3.4 and 10.16 to the Company's Current
Report on Form 8-K filed on January 16, 1995.
(7) Incorporated by reference to Exhibits 10.18, 10.19 and 10.20 to the
Company's original Annual Report on Form 10-K and Form 10-K/A for the year
ended July 31, 1995 filed on October 30, 1995, and November 6, 1995,
respectively.
(8) Incorporated by reference to Exhibits 2.1, 3.1, 10.1 and 10.3 to the
Company's Current Report on Form 8-K filed on November 7, 1996.
(9) Incorporated by reference to Exhibit 21.1 to the Company's Annual Report on
Form 10-K for the year ended July 31, 1996.
* Management contract or compensatory plan.
(B) REPORTS ON FORM 8-K.
None.
15
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
DEP Corporation
Rancho Dominguez, California
We have audited the accompanying consolidated balance sheets of DEP
Corporation and subsidiaries as of July 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended July 31, 1997. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule listed in Item 8. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of DEP
Corporation and subsidiaries as of July 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended July 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
September 12, 1997
16
<PAGE> 18
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $11,788,000 $11,118,000
Accounts receivable, less allowance for doubtful accounts of
$341,000 in 1997 and $387,000 in 1996........................ 16,218,000 15,750,000
Inventories..................................................... 12,996,000 11,999,000
Other current assets............................................ 2,014,000 3,339,000
----------- -----------
Total current assets.................................... 43,016,000 42,206,000
Property and equipment, net....................................... 12,822,000 14,086,000
Intangibles, net.................................................. 27,181,000 32,651,000
Other assets...................................................... 1,671,000 895,000
----------- -----------
$84,690,000 $89,838,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Liabilities not subject to compromise:
Current portion of long-term debt............................... $ 1,853,000 $ 144,000
Accrued expenses................................................ 6,854,000 9,563,000
Accounts payable................................................ 8,529,000 3,211,000
----------- -----------
Total current liabilities............................... 17,236,000 12,918,000
Liabilities subject to compromise................................. -- 67,783,000
Long-term debt, net of current portion............................ 61,521,000 3,597,000
Other non-current liabilities..................................... 1,832,000 2,258,000
----------- -----------
Total liabilities....................................... 80,589,000 86,556,000
Commitments and contingencies (Notes 12 and 15)
Stockholders' equity:
Preferred stock, par value $.01; authorized 3,000,000 shares;
none outstanding............................................. -- --
Class A common stock, par value $.01; issued 3,232,559 at July
31, 1996..................................................... -- 32,000
Class B common stock, par value $.01; issued 3,249,581 at July
31, 1996..................................................... -- 32,000
Common Stock, par value $.01; authorized 15,000,000 shares;
issued 7,107,140 at July 31, 1997............................ 71,000 --
Additional paid-in capital...................................... 13,397,000 12,141,000
Retained deficit................................................ (8,181,000) (7,743,000)
Foreign currency translation adjustment......................... (181,000) (175,000)
----------- -----------
5,106,000 4,287,000
Less: treasury stock, at cost, 231,000 shares of Common Stock at
July 31, 1997 and 115,500 shares each of Class A and Class B
common stock at July 31, 1996................................ (1,005,000) (1,005,000)
----------- -----------
Total stockholders' equity.............................. 4,101,000 3,282,000
----------- -----------
$84,690,000 $89,838,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
17
<PAGE> 19
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
----------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales...................................... $115,034,000 $119,088,000 $127,689,000
Cost of sales.................................. 44,870,000 45,022,000 47,495,000
------------ ------------ ------------
Gross profit................................... 70,164,000 74,066,000 80,194,000
Selling, general and administrative expenses... 63,760,000 70,986,000 78,728,000
Write-down in value of assets.................. -- -- 25,166,000
------------ ------------ ------------
Income (loss) from operations.................. 6,404,000 3,080,000 (23,700,000)
Other expenses (income):
Interest expense, net........................ 6,813,000 7,120,000 6,177,000
Other........................................ 9,000 23,000 (54,000)
------------ ------------ ------------
6,822,000 7,143,000 6,123,000
------------ ------------ ------------
Loss before reorganization items and income tax
credits...................................... (418,000) (4,063,000) (29,823,000)
Reorganization items........................... 20,000 3,895,000 --
------------ ------------ ------------
Loss before income tax credits................. (438,000) (7,958,000) (29,823,000)
Income tax credits............................. -- -- (2,865,000)
------------ ------------ ------------
Net loss....................................... $ (438,000) $ (7,958,000) $(26,958,000)
============ ============ ============
Net loss per share............................. $ (.07) $ (1.27) $ (4.32)
============ ============ ============
Weighted average shares outstanding............ 6,701,916 6,250,368 6,244,106
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
18
<PAGE> 20
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
FOREIGN
CLASS A CLASS B ADDITIONAL RETAINED CURRENCY
COMMON COMMON COMMON PAID-IN EARNINGS/ TRANSLATION TREASURY STOCK,
STOCK STOCK STOCK CAPITAL (DEFICIT) ADJUSTMENT AT COST
-------- -------- ------- ----------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1994...... $ 32,000 $ 32,000 $ -- $12,137,000 $ 27,173,000 $(214,000) $(1,005,000)
Adjustment to stock
issuance.................... (11,000)
Net loss for the year......... (26,958,000)
Cumulative translation
adjustment.................. 41,000
-------- -------- ------- ----------- ----------- --------- -----------
Balance at July 31, 1995...... 32,000 32,000 -- 12,126,000 215,000 (173,000) (1,005,000)
Issuance of stock............. 15,000
Net loss for the year......... (7,958,000)
Cumulative translation
adjustment.................. (2,000)
-------- -------- ------- ----------- ----------- --------- -----------
Balance at July 31, 1996...... 32,000 32,000 -- 12,141,000 (7,743,000) (175,000) (1,005,000)
Issuance of stock............. 7,000 1,256,000
Reclassification.............. (32,000) (32,000) 64,000
Net loss for the year......... (438,000)
Cumulative translation
adjustment.................. (6,000)
-------- -------- ------- ----------- ----------- --------- -----------
Balance at July 31, 1997...... $ -- $ -- $71,000 $13,397,000 $ (8,181,000) $(181,000) $(1,005,000)
======== ======== ======= =========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
19
<PAGE> 21
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
--------------------------------------------
1997 1996 1995
----------- ----------- ------------
<S> <C> <C> <C>
Operating activities:
Net loss..................................................... $ (438,000) $(7,958,000) $(26,958,000)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.............................. 3,181,000 5,933,000 5,507,000
Write-down in value of assets.............................. -- -- 25,166,000
Provision for losses on accounts receivable................ 160,000 195,000 504,000
Deferred income taxes...................................... -- (70,000) (1,783,000)
Other...................................................... 71,000 9,000 90,000
Changes in operating assets and liabilities:
Accounts receivable........................................ (832,000) 2,867,000 (2,540,000)
Inventories................................................ (1,364,000) 1,072,000 894,000
Income taxes receivable.................................... -- 1,779,000 1,401,000
Other assets............................................... 1,063,000 (1,064,000) 1,331,000
Accrued expenses........................................... (617,000) 630,000 701,000
Accounts payable........................................... (2,304,000) 3,532,000 370,000
----------- ----------- -----------
Net cash provided by (used in) operating activities.......... (1,080,000) 6,925,000 4,683,000
----------- ----------- -----------
Investing activities:
Purchases of property and equipment........................ (722,000) (378,000) (716,000)
Acquisition of trademarks.................................. -- -- (200,000)
Proceeds from sale of trademarks........................... -- -- 435,000
Proceeds from litigation settlement........................ 3,900,000 -- --
Other...................................................... 13,000 (27,000) (112,000)
----------- ----------- -----------
Net cash provided by (used in) investing activities.......... 3,191,000 (405,000) (593,000)
----------- ----------- -----------
Financing activities:
Proceeds (reductions) from lines of credit and long-term
debt..................................................... (1,444,000) (26,000) 42,000
Other...................................................... -- 15,000 (487,000)
----------- ----------- -----------
Net cash used in financing activities........................ (1,444,000) (11,000) (445,000)
----------- ----------- -----------
Increase in cash and cash equivalents........................ 667,000 6,509,000 3,645,000
Effect of exchange rate changes on cash...................... 3,000 (2,000) 19,000
Cash and cash equivalents at beginning of year............... 11,118,000 4,611,000 947,000
----------- ----------- -----------
Cash and cash equivalents at end of year..................... $11,788,000 $11,118,000 $ 4,611,000
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest, net.............................................. $ 5,299,000 $ 4,816,000 $ 6,357,000
=========== =========== ===========
Income tax payments (refunds).............................. $ 6,000 $(1,960,000) $ (2,546,000)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
20
<PAGE> 22
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1997, 1996 AND 1995
NOTE 1. REORGANIZATION
On April 1, 1996 (the "Filing Date") the Company filed a voluntary petition
(the "Chapter 11 Case") under chapter 11 of the United States Bankruptcy Code.
From the Filing Date until the Effective Date (as defined below), the Company
operated its business as a debtor-in-possession subject to the jurisdiction of
the Bankruptcy Court. During such time, all claims against the Company in
existence prior to the Filing Date through the Effective Date were stayed and
were classified as "liabilities subject to compromise" in the consolidated
balance sheet.
At July 31, 1996 "liabilities subject to compromise" were comprised of the
following:
<TABLE>
<S> <C>
Secured liabilities payable to Lender Group..................... $57,792,000
Accrued interest payable to Lender Group........................ 2,210,000
Accounts payable to unsecured creditors......................... 7,719,000
Other accrued liabilities....................................... 62,000
-----------
$67,783,000
===========
</TABLE>
On October 23, 1996, the Company's Second Amended Plan of Reorganization
(the "Plan of Reorganization") was confirmed by the United States Bankruptcy
Court for the District of Delaware (Case No. 96-480(HSB)) (the "Bankruptcy
Court") with an effective date of November 4, 1996 (the "Effective Date"). On
July 2, 1997, the final decree closing the Chapter 11 Case was entered. None of
the Company's foreign subsidiaries were part of the chapter 11 filing.
At July 31, 1997, no amounts were subject to compromise as the Company
emerged from chapter 11.
Among other things, the Plan of Reorganization on the Effective Date
provided that the Company will repay approximately $62,000,000 in long-term
secured indebtedness held by the Company's senior lenders (the "Lender Group"),
with interest at the prime rate plus 2%, which indebtedness matures July 31,
2002. The Plan of Reorganization further provided (i) for payment to the Lender
Group of $150,000 in cash, on the Effective Date, to satisfy certain
post-petition interest for claims; (ii) for the issuance to the Lender Group of
625,000 shares of Common Stock; and (iii) for the satisfaction of unsecured
creditor claims, plus 5% interest, payable in monthly installments, commencing
November 1996 and continuing through March 15, 1998. Additionally, the Plan of
Reorganization required the Company to pledge to the Lender Group the net cash
proceeds, as defined, received by the Company in connection with the litigation
between the Company and S.C. Johnson & Son, Inc. and affiliates ("S.C.
Johnson"). (See "Note 15 of the Notes to Consolidated Financial Statements.")
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company
The Company develops, formulates, manufactures, markets and distributes a
wide range of trademarked Personal Care Products. The Company's Personal Care
Products are primarily sold by mass merchandisers, food stores and drug stores
in the United States and internationally in over 40 countries.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
21
<PAGE> 23
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
Foreign currency translation
All assets and liabilities in the balance sheets of foreign subsidiaries
whose functional currency is other than the United States dollar are translated
at year-end exchange rates and income statement amounts are translated at
average exchange rates prevailing during the year. Translation gains and losses
are not included in determining net income but are accumulated in a separate
component of stockholders' equity. Foreign currency transaction gains and losses
generally are included in determining net income.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out method.
Property and equipment
Property and equipment is stated at cost. Depreciation is provided by the
use of the straight-line method for financial accounting purposes, while
accelerated methods are used for income tax purposes.
Recognition of revenues and expenses
Revenues from the sale of the Company's products are recognized at the time
of shipment. Related promotional allowances granted to retailers are recognized
at the time of sale. Certain trade and consumer promotion costs included in
selling, general and administrative expenses in the consolidated statements of
operations are accrued monthly.
Intangible assets
Costs of acquisitions in excess of net tangible assets acquired are stated
at cost less accumulated amortization and consist primarily of goodwill,
trademarks, non-compete agreements and customer lists and are carried at cost
less accumulated amortization. The Company assesses the recoverability of these
intangible assets by determining whether the amortization of the balance over
their remaining life can be recovered through undiscounted future operating cash
flows of the acquired assets. Costs are amortized over the estimated useful
lives of the related assets (5 - 40 years). Amortization expense charged to
operations for fiscal years ended July 31, 1997, 1996 and 1995 was $1,148,000,
$1,510,000, and $2,430,000, respectively.
Since the acquisition of the AGREE and HALSA product lines in August 1993
from S.C. Johnson, there has been a significant decline in the sales volume and
profit contribution of such products. Accordingly, in 1995 the Company revised
its future forecasts which resulted in a significant reduction in projected
future cash flows of the product lines. The Company determined that its
projected results for AGREE and HALSA would not support the future amortization
of the remaining intangible assets related to AGREE and HALSA. The Company
engaged the services of an independent valuation consultant to assist the
Company in the determination of the fair market value of the AGREE and HALSA
intangible assets. Based on the results of the valuation, management concluded
that the fair value of the intangible assets of AGREE and HALSA was
approximately $12,500,000, and wrote-down the carrying value of such intangibles
in April 1995 by $24,718,000. Furthermore, in 1997 the Company adjusted the
carrying values by an additional $3,900,000 as a result of the settlement of the
S.C. Johnson litigation. (See "Note 15 of the Notes to Consolidated Financial
Statements.")
The Company continually reviews its intangibles to assess recoverability
from future operations using undiscounted operating cash flows. Impairments
would be recognized in operating results if permanent diminution in value
occurred.
22
<PAGE> 24
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
Research and development costs
Research and development costs relate primarily to the development of new
products and improvements to existing formulations and are expensed when
incurred. The expenses were $794,000, $661,000, and $750,000 for years ended
July 31, 1997, 1996 and 1995, respectively.
Net loss per share
Net loss per share amounts are computed based on the weighted average
number of shares outstanding plus the shares that would be outstanding assuming
exercise of stock options, when dilutive, which are considered Common Stock
equivalents. The number of shares that could be issued upon exercise of stock
options are reduced by the number of shares that could be purchased from the
proceeds using the average of the market price of the Company's Common Stock.
For the three year periods ended July 31, 1997 there were no dilutive stock
options.
In February 1997, Statements of Financial Accounting Standards (SFAS) No.
128 -- "Earnings per Share" was issued and is effective for the interim and
annual reporting periods ending after December 15, 1997. SFAS No. 128 will
require the presentation of Basic Earnings per Share and Diluted Earnings per
Share in the Company's Consolidated Statement of Operations. Basic Earnings per
Share represents income available to common stockholders divided by the weighted
average number of common shares outstanding for the period. Diluted Earnings per
Share is similar to the current calculation of fully diluted earnings per share.
SFAS No. 128 requires restatement of all prior period earnings per share data
presented, however, management believes the adoption of SFAS No. 128 will not
have an impact on the Company's financial position or results of operations.
Cash equivalents
Cash equivalents consist of highly liquid investments with a maturity of
three months or less when purchased.
Fair value of financial instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
other assets, accounts payable and accrued expenses approximate fair market
value due to the short maturity of these items.
Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the amount of any contingent assets or liabilities disclosed in
the financial statements. Actual results could differ from the estimates made.
Reclassifications
Certain reclassifications have been made to the 1996 and 1995 amounts to
conform to the 1997 presentation.
23
<PAGE> 25
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
NOTE 3. INVENTORIES
The components of inventories were:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Raw materials..................................... $ 5,470,000 $ 4,650,000
Finished goods.................................... 7,526,000 7,349,000
----------- -----------
$12,996,000 $11,999,000
=========== ===========
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land.............................................. $ 1,290,000 $ 1,290,000
Building and improvements......................... 7,911,000 7,911,000
Machinery and equipment........................... 13,807,000 13,696,000
Office furniture and equipment.................... 7,326,000 7,199,000
Construction in process........................... 39,000 157,000
Other............................................. 125,000 258,000
----------- -----------
30,498,000 30,511,000
Less accumulated depreciation..................... 17,676,000 16,425,000
----------- -----------
$12,822,000 $14,086,000
=========== ===========
</TABLE>
NOTE 5. INTANGIBLES
Intangibles consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Goodwill.......................................... $21,394,000 $23,365,000
Trademarks........................................ 13,548,000 16,595,000
Other............................................. 2,892,000 5,069,000
----------- -----------
37,834,000 45,029,000
Less accumulated amortization..................... 10,653,000 12,378,000
----------- -----------
$27,181,000 $32,651,000
=========== ===========
</TABLE>
The Company adjusted the carrying value of certain goodwill and trademarks
in connection with its settlement of the S.C. Johnson litigation. (See "Note 15
of the Notes to Consolidated Financial Statements.")
24
<PAGE> 26
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
NOTE 6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Advertising and promotional expenses................ $3,324,000 $3,928,000
Compensation related................................ 952,000 1,002,000
Freight............................................. 517,000 716,000
Professional fees................................... 124,000 1,987,000
Other............................................... 1,937,000 1,930,000
---------- ----------
$6,854,000 $9,563,000
========== ==========
</TABLE>
NOTE 7. LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Term loan.......................................... $59,772,000 $ --
Mortgages, 9 1/4%, due in monthly installments of
$36,635 including interest due through 2012,
collateralized by first trust deeds on land and
building......................................... 3,586,000 3,684,000
Other.............................................. 16,000 57,000
----------- ----------
63,374,000 3,741,000
Less current portion............................... 1,853,000 144,000
----------- ----------
$61,521,000 $3,597,000
=========== ==========
</TABLE>
The pre-petition principal and all of the deferred and unpaid interest owed
to the Lender Group at July 31, 1996 was classified as "liabilities subject to
compromise." At July 31, 1997, amounts owed the Lender Group were included in
long-term debt as the Company has emerged from chapter 11. (See "Note 1 of the
Notes to Consolidated Financial Statements.")
The Term Loan relates to a Term Loan Agreement that the Company entered
into on November 4, 1996 with the Lender Group in conjunction with the Plan of
Reorganization. The Term Loan provides that the Company will pay monthly
interest on outstanding balances at the prime rate plus two percent per annum,
maturing July 31, 2002. The Term Loan requires increasing quarterly principal
payments commencing in the amount of $100,000 on the Effective Date and
progressively increasing to $2,000,000 at June 30, 2002, with a balloon payment
of approximately $37,000,000 due July 31, 2002. Under the Term Loan the Company
is also obligated to pay the Lender Group an additional $81,250 per month for a
period of 12 months after the Effective Date, in satisfaction of the Lender
Group's professional fees and expenses incurred during the Chapter 11 Case. At
July 31, 1997 and 1996, the liability for such professional fees was classified
within the current portion of long-term debt and accrued expenses, respectively.
The Term Loan also contains various financial covenant requirements, including
minimum current and fixed charge coverage ratios, maximum capital expenditures
and leverage ratios. At July 31, 1997, the Company was in compliance with these
covenants. Substantially all of the Company's assets not pledged as collateral
on existing mortgages are pledged as collateral under the Term Loan.
In connection with the Term Loan Agreement, the Company issued 625,000
shares of its Common Stock for no cash consideration. The Company recorded these
shares at estimated fair value on the Effective Date and will amortize the
amount over the term of the loan as interest expense.
Interest expense, net of interest income, charged to operations for fiscal
years ended July 31, 1997, 1996 and 1995 was $6,813,000, $7,120,000, and
$6,177,000, respectively.
25
<PAGE> 27
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
Maturities of long-term debt for years ended July 31, are as follows:
<TABLE>
<S> <C>
1998...................................................... $ 1,853,000
1999...................................................... 3,623,000
2000...................................................... 5,385,000
2001...................................................... 6,898,000
2002...................................................... 42,711,000
Thereafter................................................ 2,904,000
-----------
$63,374,000
===========
</TABLE>
NOTE 8. REORGANIZATION ITEMS
Reorganization items consisted of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Professional fees.............................. $ 150,000 $1,488,000
Professional fees payable to Lender Group...... -- 1,150,000
Write-off of deferred debt issuance costs
related to Bank Facility..................... -- 1,372,000
Interest income................................ (130,000) (115,000)
--------- ---------
$ 20,000 $3,895,000
========= =========
</TABLE>
NOTE 9. INCOME TAXES
The summary of the income tax provision (credits) for federal and state
income taxes follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal........................... $ -- $ -- $(1,807,000)
State............................. -- -- 31,000
----------- ----------- -----------
-- -- (1,776,000)
Deferred:
Federal........................... -- -- (1,209,000)
State............................. -- -- 120,000
----------- ----------- -----------
-- -- (1,089,000)
----------- ----------- -----------
Income taxes (credits).............. $ -- $ -- $(2,865,000)
=========== =========== ===========
</TABLE>
26
<PAGE> 28
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
The following is a reconciliation of the statutory United States federal
income tax rate to the effective tax rate based upon loss before income tax
credits as reported in the consolidated financial statements:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
United States federal statutory tax rate............ (35.0)% (35.0)% (35.0)%
United States federal rate reduction................ 1.0 1.0 1.0
State taxes, net of federal income tax benefit...... 5.9 (2.0) (4.5)
Earnings of foreign sales corporation not taxable... -- -- (.5)
Intangibles amortization............................ 49.4 2.7 .7
Increase in valuation allowance..................... (32.3) 37.4 28.6
Other, net.......................................... 11.0 (4.1) .1
----- ----- -----
Effective tax rate.................................. --% --% (9.6)%
===== ===== =====
</TABLE>
The components of the deferred tax provision (credits) resulting from
temporary differences between the recognition of income for financial and tax
reporting purposes were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ----------- -----------
<S> <C> <C> <C>
Depreciation and amortization...... $ 906,000 $ 614,000 $(9,344,000)
Valuation allowance................ (228,000) 2,941,000 8,517,000
Charitable contributions........... (41,000) (47,000) (156,000)
Coupon redemption.................. 270,000 (113,000) 127,000
Deferred charges................... 142,000 (81,000) 351,000
Net operating loss, capital loss
and tax credit carryforwards..... (957,000) (3,006,000) (379,000)
Inventory valuation................ 28,000 115,000 113,000
Other, net......................... (120,000) (423,000) (318,000)
--------- ----------- -----------
$ -- $ -- $(1,089,000)
========= =========== ===========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at July 31,
1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable........................... $ 122,000 $ 89,000
Inventory..................................... 309,000 236,000
Intangibles................................... 8,790,000 8,810,000
Contribution carryforwards.................... 434,000 468,000
Net operating loss, capital loss and tax
credit carryforwards........................ 4,146,000 3,819,000
Accrued liabilities........................... (1,000) 353,000
----------- -----------
Total gross deferred tax assets............... 13,800,000 13,775,000
Valuation allowance........................... (11,230,000) (11,458,000)
----------- -----------
2,570,000 2,317,000
Deferred tax liabilities:
Property and equipment, net................... (2,570,000) (2,317,000)
----------- -----------
Net deferred tax assets....................... $ -- $ --
=========== ===========
</TABLE>
The Company had Federal net operating loss and tax credit carryforwards of
$8.8 million and $600,000, respectively, which expire between 1999 and 2012.
27
<PAGE> 29
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
NOTE 10. INCENTIVE PLANS
Stock option plans
The 1992 Stock Option Plan (the "1992 Plan") was adopted by the Board of
Directors in October 1992, and approved by the stockholders in December 1992.
The 1992 Plan, which expires in October 2002, provides for the grant of options
to purchase the Company's Common Stock to officers, directors, consultants and
other key employees. The maximum number of shares issuable under the 1992 Plan
will be the lesser of ten percent (10%) of the total number of shares of Common
Stock outstanding at the date of grant or 2,000,000 shares. The Company's 1983
Stock Option Plan (the "1983 Plan") has expired and no further options may be
issued under such plan.
As of July 31, 1997, there were 566,450 and 40,000 stock options
outstanding under the 1992 Plan and 1983 Plan, respectively. Substantially all
of the options outstanding are exercisable, in full, three years after the date
of grant.
A summary of activity in the Company's stock option plans is presented
below:
<TABLE>
<CAPTION>
SHARES PRICE
-------- -------------
<S> <C> <C>
Outstanding at July 31, 1994.................... 676,421 $2.75 - 12.38
Granted at fair value........................... 233,500 1.13 - 2.23
Canceled or expired............................. (73,191) 2.75 - 12.38
-------- -------------
Outstanding at July 31, 1995.................... 836,730 $1.13 - 12.38
Granted at fair value........................... 10,000 2.13
Canceled or expired............................. (340,580) 1.13 - 9.88
-------- -------------
Outstanding at July 31, 1996.................... 506,150 $1.13 - 12.38
Granted at fair value........................... 174,000 1.31 - 1.63
Cancelled or expired............................ (73,700) 1.12 - 12.38
-------- -------------
Outstanding at July 31, 1997.................... 606,450 $1.13 - 9.90
======== =============
</TABLE>
<TABLE>
<CAPTION>
1997 1996
-------- -------------
<S> <C> <C>
Exercisable..................................... 382,853 263,850
======== =============
Available to be granted......................... 121,164 173,964
======== =============
</TABLE>
At July 31, 1997 and 1996 the exercisable options were priced at ranges of
$1.63 to $9.90 and $2.23 to $12.38 per share, respectively.
Stock-based compensation disclosure
Effective August 1, 1996, the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based Compensation."
As permitted by the standard, the Company has elected to continue following the
guidance of Accounting Principles Board (APB) Opinion 25, "Accounting for Stock
Issued to Employees," for measurement and recognition of stock-based
transactions with employees. Accordingly, no compensation cost has been
recognized for the Company's option plans. If compensation costs for the
Company's stock option plans had been determined based on the fair value at the
grant date consistent with SFAS No. 123, the Company's net loss and net loss per
share for 1997 would have been $496,000 and $.07, compared to $438,000 and $.07,
respectively. There would have been no impact on fiscal 1996 results.
28
<PAGE> 30
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
The estimated weighted average fair value of options granted during 1997
was $1.46 per share as determined using the Black-Scholes valuation model
assuming an expected average risk-free interest rate of 5.5%, an expected life
of 4 years, and an expected weighted average volatility of .73%.
Management incentive plans
In January 1988, the stockholders approved the 1988 Directors and Officers
Stock Option Plan (the "1988 Plan") which allows directors and officers to elect
to receive stock options in lieu of compensation. Directors may elect to defer
all of their compensation whereas officers may defer a maximum of 15% of their
compensation. The number of shares subject to options is determined with
reference to the fair market value of the Company's Common Stock at least six
months after date of election to defer. The 1988 Plan expires January 1998. For
the fiscal years ended July 31, 1997 and 1996 there were no outstanding options
under the 1988 Plan.
In December 1993, stockholders approved the Stock Target Ownership Plan
(the "1993 Plan") under which the Company makes Common Stock performance awards
to certain employees in lieu of a percentage of their cash bonuses and may
provide other incentives to encourage participants to accumulate ownership of
the Company's Common Stock. The maximum number of shares issuable under the 1993
Plan is the lesser of ten percent (10%) of the total number of shares of Common
Stock outstanding at the date of grant or 2,000,000 shares. The 1993 Plan
expires October 2003. For the fiscal years ended July 31, 1997 and 1996 no
shares of Common Stock were issued under the 1993 Plan.
NOTE 11. RETIREMENT PLANS
The Company maintains a profit sharing plan which covers employees who are
twenty and one-half years of age or older and have completed six months of
employment. The Company's Board of Directors determines the amount of each
year's contribution, if any, to such plan. The Company made no contribution to
the plan for the years ended July 31, 1997, 1996 and 1995.
In June 1993, the Company's Board of Directors adopted a 401(k) plan which
became effective on August 1, 1993. The 401(k) plan covers substantially all
employees and gives employees the option to make contributions up to 15% of
their annual compensation, subject to certain statutory limitations, and permits
the Board, in its discretion, to determine the amount of any matching
contributions by the Company. The Company's contributions for the years ended
July 31, 1997, 1996, and 1995 were $55,000, $50,000, and $53,000, respectively.
In June 1997, the Company's Board of Directors approved the merger of the
profit sharing plan with the 401(k) plan effective September 1, 1997.
29
<PAGE> 31
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
NOTE 12. COMMITMENTS
At July 31, 1997, future minimum lease payments that have noncancelable
lease terms in excess of one year were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ----------
<S> <C> <C>
Years ending July 31,
1998.................................................. $43,000 $ 720,000
1999.................................................. 43,000 691,000
2000.................................................. -- 69,000
2001.................................................. -- 69,000
2002.................................................. -- 37,000
Thereafter............................................ -- --
------- ----------
Total minimum payments...................... $86,000 $1,586,000
======= ==========
</TABLE>
Rent expense for the years ended July 31, 1997, 1996 and 1995 was $983,000,
$945,000, and $919,000, respectively.
NOTE 13. RELATED-PARTY TRANSACTIONS
There were no related party transactions for the years ended July 31, 1997,
1996 and 1995.
NOTE 14. REPORTING BY GEOGRAPHICAL AREAS OF THE BUSINESS
The Company operates in two principal geographical areas: (l) United
States, excluding Puerto Rico, and (2) all other countries (including export
sales and royalties).
In computing income (loss) before taxes, certain administrative and general
expenses and other income and expense have been allocated to the geographical
areas based on their relative sales ratios, which varies from year to year.
Identifiable assets used jointly by the two areas have also been allocated to
the geographical areas based on relative sales ratios.
The following is a summary of information by area:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net sales:
United States................................. $ 96,084,000 $100,245,000
Foreign....................................... 18,950,000 18,843,000
------------ ------------
Total................................. $115,034,000 $119,088,000
============ ============
Income (loss) before income tax credits:
United States................................. $ (516,000) $ (6,984,000)
Foreign....................................... 78,000 (974,000)
------------ ------------
Total................................. $ (438,000) $ (7,958,000)
============ ============
Identifiable assets:
United States................................. $ 74,619,000 $ 74,642,000
Foreign....................................... 10,071,000 15,196,000
------------ ------------
Total................................. $ 84,690,000 $ 89,838,000
============ ============
</TABLE>
30
<PAGE> 32
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
During 1997, 1996 and 1995, sales to Wal-Mart Stores, Inc. were 17%, 17%
and 16%, respectively, of consolidated net sales. No other customer accounted
for more than 10% of consolidated net sales for the periods presented.
NOTE 15. LEGAL
On April 1, 1996 the Company filed a voluntary petition (the "Chapter 11
Case") under chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware (Case No. 96-480(HSB)) (the
"Bankruptcy Court") for the purpose of implementing the financial restructuring
of its business. The Company's Second Amended Plan of Reorganization (the "Plan
of Reorganization") was approved by all impaired classes of claims and interests
under the Plan of Reorganization and, on October 23, 1996, the Plan of
Reorganization was confirmed by the Bankruptcy Court. The Plan of Reorganization
became effective on November 4, 1996, and on July 2, 1997, the final decree
closing the Chapter 11 Case was entered. (See "Note 1 of the Notes to
Consolidated Financial Statements.")
On March 2, 1994, the Company filed a complaint in the United States
District Court for the Central District of California ("District Court") against
S.C. Johnson & Son, Inc. and affiliates ("S.C. Johnson") alleging, among other
things, that, in violation of its purchase agreement with the Company, S.C.
Johnson wrongfully altered its North American marketing and sales practices
prior to the closing of the sale of the AGREE and HALSA trademarks and related
assets to the Company in August 1993.
On December 19, 1996, the Company and S.C. Johnson agreed to an
out-of-court settlement in regard to all pending litigation that arose in
connection with the Company's 1993 purchase of AGREE and HALSA from S.C.
Johnson. The settlement involved the Company, its insurance carriers and S.C.
Johnson. Under the terms of such settlement the Company received net cash
proceeds from S.C. Johnson of $2,500,000, a $1,400,000 payment from the
Company's insurance carriers which was applied to certain 1997 related legal
costs, and forgiveness of approximately $1,400,000 owed to S.C. Johnson for
certain goods delivered following the AGREE and HALSA acquisition. The Company
valued the total settlement at $5,300,000. Under the Company's term loan
agreement, $1,107,000 of the net cash proceeds of the settlement, as defined,
were paid to the Lender Group as a reduction of long-term debt.
31
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DEP CORPORATION
By: /s/ ROBERT BERGLASS
------------------------------------
Robert Berglass, President
October 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------ -----------------
<C> <C> <S>
/s/ ROBERT BERGLASS Chairman of the Board and October 24, 1997
- --------------------------------------------- President (Principal Executive
Robert Berglass Officer)
/s/ GRANT W. JOHNSON Senior Vice President and October 24, 1997
- --------------------------------------------- Chief Financial Officer and
Grant W. Johnson Director (Principal Financial
and Accounting Officer)
/s/ JUDITH R. BERGLASS Senior Vice President and October 24, 1997
- --------------------------------------------- Corporate Secretary and
Judith R. Berglass Director
/s/ ALEXANDER L. KYMAN Director October 24, 1997
- ---------------------------------------------
Alexander L. Kyman
/s/ MICHAEL LEINER Director October 24, 1997
- ---------------------------------------------
Michael Leiner
/s/ PHILIP I. WILBER Director October 24, 1997
- ---------------------------------------------
Philip I. Wilber
</TABLE>
32
<PAGE> 34
DEP CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
COLUMN C
ADDITIONS
-----------------------------
COLUMN B (1) (2)
BALANCE AT CHARGED TO CHARGED TO COLUMN D COLUMN E
COLUMN A BEGINNING OF COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ----------------------------- ------------ ---------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Year End July 31, 1997
Allowance for doubtful
accounts................ $ 387,000 $ 160,000 $ 0 $ (206,000)* $ 341,000
Allowance for customer
chargebacks............. 1,626,000 (68,000)** 0 0 1,558,000
Inventory valuation........ 959,000 293,000 0 (346,000)*** 906,000
Year end July 31, 1996
Allowance for doubtful
accounts................ 478,000 92,000 0 (183,000)* 387,000
Allowance for customer
chargebacks............. 1,985,000 (359,000)** 0 0 1,626,000
Inventory valuation........ 931,000 250,000 0 (222,000)*** 959,000
Year end July 31, 1995
Allowance for doubtful
accounts................ 262,000 504,000 0 (288,000)* 478,000
Allowance for customer
chargebacks............. 1,765,000 220,000** 0 0 1,985,000
Inventory valuation........ 1,222,000 596,000 0 (887,000)*** 931,000
</TABLE>
- ---------------
* Amounts written off, net of recoveries.
** Net activity.
*** Amounts written off against reserve.
33
<PAGE> 1
EXHIBIT 3.5
BY-LAWS
OF
DEP CORPORATION
ARTICLE I
STOCKHOLDERS
SECTION 1.1. Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at the principal executive offices of the
Corporation, or any other place that may be designated from time to time by
resolution of the Board of Directors. The annual meeting of stockholders shall
be held on such date and at such time as is designated by resolution of the
Board of Directors. At such meeting, the stockholders shall elect a Board of
Directors, consider reports of the affairs of the Corporation and transact such
other business as may be properly brought before the meeting.
SECTION 1.2. Nominations of Directors.
1.2.1 Nominations of candidates for election as directors at any annual
meeting of stockholders may be made (i) by, or on behalf of, the Board of
Directors or (ii) by any stockholder entitled to vote at such annual meeting who
has complied with the provisions of this Section 1.2. Only persons nominated in
accordance with the procedures set forth in this Section 1.2 may be elected as
directors at an annual meeting.
1.2.2 Any nominations of directors by stockholders permitted to vote on the
election of directors shall be made pursuant to timely written notice to the
Secretary of the Corporation as set forth in Section 1.2.3.
1.2.3 (a) Subject to the provisions of subsection (c) hereof, to be timely,
a notice by a stockholder with respect to the annual meeting for any year shall
be received at the principal executive offices of the Corporation not later than
the close of business on a date determined by the President or the Secretary
from year to year in accordance with this Section 1.2.3 (the "Notice Date"). The
Notice Date for the annual meeting in any year shall not be less than 120
calendar days prior to the date in such year which corresponds to the date in
the previous calendar year on which the corporation's proxy statement for the
annual meeting held in such year was released to the stockholders.
(b) In each proxy statement released to the stockholders for an annual
meeting, the Corporation shall specify the Notice Date, calculated as above, for
the upcoming annual meeting.
<PAGE> 2
(c) If the Notice Date for any annual meeting has not been previously
specified in a proxy statement released to the stockholders, or if the date of
any annual meeting for which a Notice Date has been announced is subsequently
changed by more than 30 calendar days, the Corporation shall inform the
stockholders of the new Notice Date for the annual meeting in the manner set
forth in Section 1.5 or by public disclosure in a means reasonably calculated to
so inform them; provided, that such new Notice Date shall be not less than 10
days following the earlier of the day on which such notice was mailed or the day
on which such public disclosure was made.
1.2.4 As to each person whom the stockholder proposes to nominate for
election as a director, the stockholder's notice shall set forth: (a) the name,
age, business address and residence address of such person, as they appear on
the Corporation's books (b) the principal occupation or employment of such
person, (c) the class and number of shares of the Corporation's stock
beneficially owned by such person on the date of such stockholder notice and (d)
any other information relating to such person that would be required to be
disclosed pursuant to Regulation 13D-G under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in connection with the nominee's
acquisition of shares, and pursuant to Regulation 14A under the Exchange Act, in
connection with the solicitation of proxies with respect to nominees for
election as directors, regardless of whether such person is subject to the
provisions of such regulations. The information to be provided pursuant to this
Section 1.2.4 shall include, but not be limited to, information required to be
disclosed by Items 5(b) and 6 of Schedule A of Regulations 14A and information
which would be required to be filed on Schedule B of Regulation 14A with the
Securities and Exchange Commission.
1.2.5 At the request of a majority of the Board of Directors, any person
nominated by, or at the direction of, the Board of Directors for election as a
director at an annual meeting shall furnish to the Secretary of the Corporation
the information required to be set forth in a stockholder's notice of nomination
pertaining to a nominee.
1.2.6 The chairman of the annual meeting shall determine and state at the
annual meeting whether a nomination complied with the terms of this Section 1.2.
If the chairman determines that a nomination did not so comply with the terms of
this Section, he shall state this to the meeting and the defective nomination
shall be disregarded.
SECTION 1.3. New Business.
1.3.1 At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder.
2
<PAGE> 3
1.3.2 For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation in accordance with Section 1.2.3 and this
Section 1.3. A stockholder's notice to the Secretary shall set forth as to each
proposal the stockholder proposes to bring before the annual meeting (a) brief
description of the proposal and the reasons for presenting such proposal at the
annual meeting, (b) the name and address of the stockholder proposing such
business, as they appear on the Corporation's books, (c) the class and number of
stockholder on the date of such stockholder notice, and (d) any material
financial or other interest of the stockholder in such business.
1.3.3 The chairman of the annual meeting shall determine and state at the
annual meeting whether the stockholder proposal complied with the terms of this
Section 1.3. If the chairman determines that a stockholder proposal did not so
comply, he shall state this to the meeting and any such proposal shall not be
acted upon at the annual meeting.
1.3.4 This Section 1.3 shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports, no
new business shall be acted upon at such annual meeting unless it shall have
been properly brought before the meeting in accordance with the provisions of
this Section 1.3.
SECTION 1.4. Special Meetings. Special meetings for any purposes may be
called only by the Chairman of the Board, or the President or by the Secretary
at the request in writing of a majority of the Board of Directors. Such request
shall state the purposes of the proposed meeting, and the business transacted at
any such meeting shall be limited to the purposes set forth in the notice of
meeting.
SECTION 1.5. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purposes for which the meeting is called. Unless
otherwise provided by law, written notice of any meeting shall be given to each
stockholder entitled to vote at such meeting not less that 10 nor more than 60
days before the date of the meeting. If mailed, such notice shall be deemed to
be given when deposited in the mail, postage prepaid, directed to the
stockholder at his address on the records of the Corporation.
SECTION 1.6. Adjournments. Any annual or special meeting of stockholders may
adjourn from time to time to reconvene at the same or some other place. Notice
need not be given of any adjourned meeting if the time and place for reconvening
the meeting are announced at the original meeting. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
3
<PAGE> 4
SECTION 1.7. Quorum. Except where otherwise provided by law, the certificate
of incorporation or these by-laws, the presence in person or by proxy of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum at any stockholders' meeting. In the absence of a quorum,
the stockholders present may, by majority vote, adjourn the meeting from time to
time in the manner provided in Section 1.6 of these by-laws until a quorum shall
be present. If a majority of the shares entitled to vote in the election of
directors of another corporation is held, directly or indirectly, by the
Corporation, then shares of its own stock belonging to the Corporation shall
neither be entitled to vote nor shall be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of any corporation to vote
stock held by it in a fiduciary capacity, including but not limited to, its own
stock.
SECTION 1.8. Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
SECTION 1.9. Voting; Proxies.
1.9.1 Each stockholder entitled to vote at any meeting of stockholder shall
be entitled to one vote for each share of stock held by him which has voting
power upon the matter in question. Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for him
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable only if it so states and only if it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing either a duly executed proxy bearing a later date or a
written revocation of the proxy with the Secretary of the Corporation.
1.9.2 Voting at meetings of stockholders, including voting for the election
of directors, need not be by written ballot unless the chairman of the meeting
specifically directs the use of a written ballot.
1.9.3 At all meetings of stockholders for the election of directors, a
plurality of the votes cast shall be sufficient to elect directors. Unless
otherwise provided by law or by the certificate of incorporation or these
by-laws, all other elections and questions shall be decided by the vote of the
holders of a majority of the outstanding shares of stock entitled to vote
thereon present in person or by proxy at the meeting; provided that except as
otherwise required by law or by the certificate of incorporation, the Board of
Directors may require a larger vote upon any election or question.
4
<PAGE> 5
SECTION 1.10. Fixing Date for Determination of Stockholders of Record.
1.10.1 In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or those entitled to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors shall fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days prior to the date of
such meeting, nor more than 60 days prior to any other action.
1.10.2 If no record date is fixed the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be the close of business on the day prior to the day on which notice is given,
or, if notice is waived, at the close of business on the day prior to the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
SECTION 1.11 List of Stockholders Entitled to Vote. At least 10 days before
every meeting of stockholders, the Secretary shall prepare a complete
alphabetical list of the stockholders entitled to vote at the meeting, showing
the address of each stockholder and the number of shares registered in his name.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of a least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held and specified in the notice of the meeting or at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting and may be inspected by any stockholder who is
present. The stock ledger shall conclusively determine the stockholders entitled
to examine the stock ledger, the stockholder list or the books of the
Corporation, or entitled to vote in person or by proxy at any meeting of
stockholders.
SECTION 1.12. No Action by Consent of Stockholders. The stockholders of the
Corporation shall not be entitled to take action by written consent in lieu of
taking such action at an annual or special meeting of stockholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1. Number; Qualifications. The Board of Directors shall consist of
not less than 6 nor more than 13 directors. The exact number of directors shall
be fixed at 6 until changed by the affirmative vote of a majority of the Board
of Directors or by the affirmative vote of the holders of 75% of the
Corporation's shares entitled to vote in an election of directors, voting
together as one class. Directors need not be stockholders.
5
<PAGE> 6
SECTION 2.2. Election; Resignation; Removal; Vacancies.
2.2.1 The Board of Directors shall initially consist of the persons elected
by the incorporator, who shall determine the class to which each director is
elected. At the first annual meeting of stockholders and at each annual meeting
thereafter, the stockholders shall elect directors to replace those directors
whose terms then expire. Any director may resign at any time upon written notice
to the Corporation.
2.2.2 Stockholders may remove directors only for cause and only if a
majority of the shares then entitled to vote in an election of directors vote
for removal. Any vacancy occurring in the Board of Directors for any reason may
be filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum, or by a plurality of the votes
cast at a meeting of stockholders. Each director so elected shall hold office
until the expiration of the term of office of the director whom he has replaced.
SECTION 2.3. Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine, and if so
determined notices thereof need not be given.
SECTION 2.4. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the President, and Vice President, the Secretary, or by any
member of the Board of Directors. Reasonable notice of such meetings shall be
given not later than 24 hours before the meeting by the person or persons
calling the meeting.
SECTION 2.5. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board, may participate in a
meeting of such Board or committee by conference telephone or similar
communications equipment which permits all persons participating in the meeting
to hear each other. Participation in a meeting pursuant to this Section 2.5
shall constitute presence in person at such meeting.
SECTION 2.6. Quorum; Vote Required for Action. At all meetings of the Board
of Directors a majority of the whole Board shall constitute a quorum for the
transaction of business. Except in cases in which the certificate of
incorporation or these by-laws provide otherwise, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
6
<PAGE> 7
SECTION 2.8. Informal Action by Directors. Unless otherwise restricted by
the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent to such action in writing, and file
the writing or writings with the minutes of the Board or committee.
ARTICLE III
COMMITTEES
SECTION 3.1. Committees.
3.1.1 By resolution passed by a majority of the whole Board, the Board of
Directors may designate one or more committees, which shall each consist of one
or more directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee to replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member.
3.1.2 To the extent provided in the resolution of the Board of Directors,
any such committee shall have all the powers and authority of the Board of
Directors in the management of the business of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. However, no such committee shall have the power to adopt an
agreement of merger or consolidation, recommend to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommend to the stockholders a dissolution of the Corporation or
revocation of dissolution or amend the certificate of incorporation. Except to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors as provided in
Section 151(a) of the General Corporation Law, a committee may fix any of the
preferences or rights of the shares. In addition, unless a Board resolution
expressly so provides, no committee shall declare a dividend or authorize the
issuance of stock.
SECTION 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may adopt, repeal or amend
rules for the conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these by-laws.
7
<PAGE> 8
ARTICLE IV
OFFICERS
SECTION 4.1. Executive Officers; Election; Qualifications; Term of Office;
Resignation; Removal; Vacancies. The Board of Directors shall choose a President
and Secretary, and, if it so determines, a Chairman of the Board from among its
members. The Board of Directors may also choose one or more Vice Presidents, one
or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers.
Each such officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of stockholders following his election, and
until his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. The Board of Directors may remove any officer with or without cause
at any time, but such removal shall be without prejudice to the contractual
rights of such officer against the Corporation. Any number of offices may be
held by the same person. Any vacancy occurring in any office of the Corporation
by death, resignation, removal, dismissal or otherwise may be filled for the
unexpired portion of the term by the Board of Directors at any regular or
special meeting.
SECTION 4.2. Powers and Duties of Executive Officers. Subject to the control
of the Board of Directors, the officers of the Corporation shall have such
powers and duties in the management of the Corporation as may be prescribed by
the Board of Directors and, to the extent not so provided, as generally pertain
to their respective offices. The Board of Directors may require any officer,
agent or employee to give security for the faithful performance of his duties.
SECTION 4.3 President. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the general manager and chief executive
officer of the corporation and, subject to the control of the Board of
Directors, shall supervise, direct and control the business and affairs of the
Corporation. He shall preside at all meeting of the shareholders and, provided
the President is also a director, in the absence of the Chairman of the Board or
if there be none, the President shall preside at all meetings of the Board of
Directors. He shall have the general powers and duties usually vested in the
office of president of a corporation to manage the affairs of the Corporation in
the ordinary course of business and shall have such other powers and duties as
may be prescribed by the Board of Directors or the By-Laws. The president shall
have the authority to appoint any Vice Presidents, Chief Financial Officers,
Secretaries or other officers who are not executive officers of the Corporation
and no approval of the Board of Directors shall be necessary to ratify any such
appointments.
8
<PAGE> 9
ARTICLE V
INDEMNIFICATION
SECTION 5.1. Actions, Suits or Proceedings Other Than Those by or in the
Right of the Corporation. Subject to Section 5.3 of this Article V, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer, of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, against costs,
charges, expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, proceeding or appeal therefrom if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 5.2. Actions, Suits or Proceedings by or in the Right of the
Corporation. Subject to Section 5.3 of this Article V, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise or by
reason of any action alleged to have been taken or omitted in such capacity
against costs, charges and expenses (including attorneys' fees) actually and
reasonably incurred by him or on his behalf in connection with the defense or
settlement of such action or suit and any appeal therefrom if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite adjudication of liability but in view
of all the circumstances the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
9
<PAGE> 10
SECTION 5.3. Authorization of Indemnification.
5.3.1 Any indemnification under this Article V (unless ordered by a court)
shall be paid by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 5.1 or Section 5.2 of this Article V, as the case may be. Such
determination shall be made (i) by the Board of Directors, by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders.
5.3.2 In addition, to the extent that a director or officer, of the
Corporation has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit or proceeding described above, or in defense of any claim, issue or
matter therein, he shall be indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by him or on his
behalf in connection therewith, without the necessity of authorization in the
specific case.
SECTION 5.4. Advancement of Costs, Charges and Expenses.
5.4.1 Costs, charges and expenses (including attorneys' fees) incurred by a
person referred to in Section 5.1 or 5.2 of this Article V in defending a civil
or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding; provided,
however, that the payment of such costs, charges and expenses incurred by a
director or officer in his capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person while a
director or officer) in advance of the final disposition of such action, suit or
proceeding shall be made only upon receipt of an undertaking by or on behalf of
the director or officer to repay all amounts so advanced in the event that it
shall ultimately be determined that such director or officer is not entitled to
be indemnified by the Corporation as authorized in this Article V. Such costs,
charges and expenses incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the majority of the Board of Directors
deems appropriate.
5.4.2 The majority of the Board of Directors may, in the manner set forth
below, and upon approval of a director or officer, authorize the Corporation's
counsel to represent such person, in any action, suit or proceeding, whether or
not the Corporation is a party to such action, suit or proceeding.
5.4.3 Notwithstanding the foregoing, no advance shall be made by the
Corporation if a determination is reasonably and promptly made by the Board by a
majority vote of a quorum of disinterested directors, or if such a quorum is not
obtainable or even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel, that based upon the facts known to the
Board or counsel at the time such determination is made, (a) the director or
officer, acted in bad faith or deliberately breached his duty to the Corporation
or its
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stockholders, and (b) as a result of such actions by the director or officer, it
is more likely than not that it will ultimately be determined that such director
or officer is not entitled to indemnification.
SECTION 5.5. Procedure for Indemnification. Any indemnification or
advancement of costs, charges and expenses under this Article V, shall be made
promptly, and in any event within 60 days, upon the written request of the
director or officer. The right to indemnification or advances as granted by this
Article V shall be enforceable by the director or officer in any court of
competent jurisdiction, if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within 60 days. Such person's costs,
charges and expenses incurred in connection with successfully establishing his
right to indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (or
other action brought to enforce a claim for the advancement of costs, charges
and expenses under Section 5.4 of this Article V where the required undertaking,
if any, has been received by the Corporation) that the claimant has not met the
standard of conduct set forth in Sections 5.1 or 5.2 of this Article V, but the
burden of proving such defense shall be on the Corporation. The failure of the
Corporation (including its Board of Directors, its independent legal counsel and
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct, shall not be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
SECTION 5.6. Good Faith Defined. For the purposes of any determination under
Section 5.1 and Section 5.2 of this Article V, a person shall be deemed to have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe his
conduct was unlawful, if his action is based on the records or books of account
of the Corporation or another enterprise, or on information supplied to him by
the officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the Corporation
or another enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Corporation or
another enterprise. The term "another enterprise" as used in this Section 5.6
shall mean any other corporation or any partnership, joint venture, trust or
other enterprise of which such person is or was serving at the request of the
Corporation as a director or officer. The provisions of this Section 5.6 shall
not be deemed to be exclusive or to limit in any way the circumstances in which
a person may be deemed to have met the applicable standard of conduct set forth
in Section 5.1 or Section 5.2 of this Article V, as the case may be.
SECTION 5.7. Settlement. If in any action, suit or proceeding, including any
appeal, within the scope of Section 5.1 or Section 5.2 of this Article V, the
person to be indemnified shall have unreasonably failed to enter into a
settlement thereof, then, notwithstanding any other provision hereof, the
indemnification obligation of the Corporation to such person in connection with
such action, suit or proceeding shall not exceed the total of the amount at
which settlement
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could have been made plus the costs, charges and expenses incurred by such
person prior to the time such settlement could reasonably have been effected.
SECTION 5.8. Non-Exclusivity; Continuation of Right to Indemnification.
5.8.1 The indemnification provided by, or granted pursuant to, the other
sections of this Article shall not be deemed exclusive of any other rights to
which any director or officer seeking indemnification may be entitled under any
common or statutory law, by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office or while employed by
or acting as agent for the Corporation, provided further that such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the estate, heirs, executors and
administrators of such person. All right to indemnification under this Article V
shall be deemed to be a contract between the Corporation and each director or
officer of the Corporation who serves or served in such capacity at any time
while this Article V is in effect. Any repeal or modification of this Article V
or any repeal or modification of relevant provisions of the Delaware General
Corporation Law or any other applicable laws shall not in any way diminish any
rights to indemnification of such director or officer or the obligation of the
Corporation arising hereunder. This Article V shall be binding upon any
successor corporation to this Corporation, whether by way of acquisition,
merger, consolidation or otherwise.
5.8.2 Any agreement for indemnification of or advancement of costs, charges
and expenses to any director or officer, may provide rights of indemnification
or advancement of expenses which are broader or otherwise different from those
set forth herein.
SECTION 5.9. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was or has agreed to become a director or
officer of the Corporation, or is or was serving or at the request of the
Corporation, has agreed to serve as a director or officer of another corporation
or other enterprise against any liability asserted against him and incurred by
him or on his behalf in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article V or under the Delaware
General Corporation Law; provided, however, that such insurance is available on
acceptable terms, which determination shall be made by a vote of a majority of
the Directors in their absolute discretion, which vote shall be final.
SECTION 5.10. Savings Clause. If this Article V or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation (i) shall nevertheless indemnify each director and officer of the
Corporation, and (ii) may nevertheless indemnify each employee and agent of the
Corporation, as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Corporation, to the full extent
permitted by any applicable portion
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of this Article V that shall not have been invalidated and to the full extent
permitted by applicable law.
SECTION 5.11. Definitions.
5.11.1 For purposes of this Article V, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power,
authority or obligation to indemnify its directors or officers, so that any
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he would have with
respect to such corporation if its separate existence had continued.
5.11.2 For purposes of this Article V references to "other enterprise" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
services as a director or officer, of the corporation which imposes duties on,
or involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the corporation" as
referred to in this Article V.
SECTION 5.12. Subsequent Amendment. No amendment or repeal of this Article V
shall affect or impair in any way the rights of any director or officer of the
Corporation to indemnification under the provisions hereof with respect to any
action, suit or proceeding arising out of, or relating to, any actions,
transactions or facts occurring prior to the final adoption of such amendment or
repeal.
SECTION 5.13. Subsequent Legislation. If the Delaware General Corporation
Law is amended to further expand the indemnification permitted to directors or
officers, of the Corporation, the Corporation shall indemnify such persons to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
13
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ARTICLE VI
STOCK
SECTION 6.1. Certificates. Every holder of stock shall be entitled to have a
certificate signed by or in the name of the Corporation by the Chairman or Vice
Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, certifying the number of shares
owned by him in the Corporation. Any or all of the signatures on the certificate
may be a facsimile. Even if any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent, or registrar before a
certificate is issued, the certificate may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
SECTION 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate previously issued by it and alleged to have been lost, stolen
or destroyed. The Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Fiscal Year. The fiscal year of the Corporation shall end on
July 31, unless otherwise determined by resolution of the Board of Directors.
SECTION 7.2. Seal. The corporate seal shall have the name of the Corporation
inscribed thereon and shall be in the form approved from time to time by the
Board of Directors.
SECTION 7.3. Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Any written waiver of notice signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the stockholders, directors, or members of
a committee of directors need be specified in any written waiver of notice.
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<PAGE> 15
SECTION 7.4. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely because
of such relationship or interest, or solely because the director or officer is
present at or participates in the meeting of the Board or committee which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative vote of a majority of
the disinterested directors, even though the disinterested directors be less
than a quorum; or (2) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation at the time it is authorized, approved
or ratified by the Board of Directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorized
the contract or transaction.
SECTION 7.5. Form of Records. Any stock ledger, books of account, minute
books, or other records maintained by the Corporation in the regular course of
its business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs, or any other information storage device, provided
that such records can be converted into clearly legible form within a reasonable
time. The Corporation shall convert any records so kept upon the request of any
person entitled to inspect them.
SECTION 7.6. Amendment of By-Laws. These by-laws may be altered, amended or
repealed, and new by-laws adopted, only by the affirmative vote of a majority of
the Board of Directors or by the affirmative vote of stockholders holding 75% of
the outstanding shares of stock entitled to vote in an election of directors,
voting together as one class.
SECTION 4.3 - 1/8/88
SECTION 1.1., ARTICLE I - 6/20/88
SECTION 1.2.3 added 12/31/91
SECTION 2.4., ARTICLE II AMENDED 11/15/94
SECTION 2.1., ARTICLE II AMENDED 11/15/95
SECTION 1.1., ARTICLE I AMENDED 8/27/97
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<PAGE> 1
EXHIBIT 10.1
The CORPORATEplan for Retirement
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
Exhibit 10.1
<PAGE> 2
THE CORPORATE PLAN FOR RETIREMENT
PROFIT SHARING/401(K) PLAN
<TABLE>
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ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Reemployment
3.03 - Cessation or Resumption of Participation Following a Change in
Status
3.04 - Participation by Owner-Employee; Controlled Businesses
3.05 - Omission of Eligible Employee
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Additional Limit on Deferral Contributions
4.03 - Matching Contributions
4.04 - Limit on Matching Contributions and Employee Contributions
4.05 - Special Rules
4.06 - Fixed/Discretionary Employer Contributions
4.07 - Time of Making Employer Contributions
4.08 - Return of Employer Contributions
4.09 - Employee Contributions
4.10 - Rollover Contributions
4.11 - Deductible Voluntary Employee Contributions
4.12 - Additional Rules for Paired Plans
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
5.02 - Valuation of Accounts
5.03 - Code Section 415 Limitations
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
6.03 - Participant Directions to Trustee
ARTICLE 7
</TABLE>
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<TABLE>
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RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Late Retirement
7.03 - Disability Retirement
7.04 - Death
7.05 - Other Termination of Employment
7.06 - Separate Account
7.07 - Forfeitures
7.08 - Adjustment for Investment Experience
7.09 - Participant Loans
7.10 - In-Service Withdrawals
7.11 - Prior Plan In-Service Distribution Rules
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Annuity Distributions
8.03 - Joint and Survivor Annuities/Preretirement Survivor Annuities
8.04 - Installment Distributions
8.05 - Immediate Distributions
8.06 - Determination of Method of Distribution
8.07 - Notice to Trustee
8.08 - Time of Distribution
8.09 - Whereabouts of Participants and Beneficiaries
ARTICLE 9
TOP-HEAVY PROVISIONS
9.01 - Application
9.02 - Definitions
9.03 - Minimum Contribution
9.04 - Adjustment to the Limitation on Contributions and Benefits
9.05 - Minimum Vesting
ARTICLE 10
AMENDMENT AND TERMINATION
10.01 - Amendment by Employer
10.02 - Amendment by Prototype Sponsor
10.03 - Amendments Affecting Vested and/or Accrued Benefits
10.04 - Retroactive Amendments
10.05 - Termination
10.06 - Distribution Upon Termination of the Plan
10.07 - Merger or Consolidation of Plan; Transfer of Plan Assets
ARTICLE 11
AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF FUNDS
TO OR FROM OTHER QUALIFIED PLANS
11.01 - Amendment and Continuation of Predecessor Plan
11.02 - Transfer of Funds from an Existing Plan
11.03 - Acceptance of Assets by Trustee
11.04 - Transfer of Assets from Trust
</TABLE>
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<TABLE>
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ARTICLE 12
MISCELLANEOUS
12.01 - Communication to Participants
12.02 - Limitation of Rights
12.03 - Nonalienability of Benefits and Qualified Domestic Relations
Orders
12.04 - Facility of Payment
12.05 - Information Between Employer and Trustee
12.06 - Effect of Failure to Qualify Under Code
12.07 - Notices
12.08 - Governing Law
ARTICLE 13
PLAN ADMINISTRATION
13.01 - Powers and Responsibilities of the Administrator
13.02 - Nondiscriminatory Exercise of Authority
13.03 - Claims and Review Procedures
13.04 - Named Fiduciary
13.05 - Costs of Administration
ARTICLE 14
TRUST AGREEMENT
14.01 - Acceptance of Trust Responsibilities
14.02 - Establishment of Trust Fund
14.03 - Exclusive Benefit
14.04 - Powers of Trustee
14.05 - Accounts
14.06 - Approving of Accounts
14.07 - Distribution from Trust Fund
14.08 - Transfer of Amounts from Qualified Plan
14.09 - Transfer of Assets from Trust
14.10 - Separate Trust or Fund for Existing Plan Assets
14.11 - Voting; Delivery of Information
14.12 - Compensation and Expenses of Trustee
14.13 - Reliance by Trustee on other Persons
14.14 - Indemnification by Employer
14.15 - Consultation by Trustee with Counsel
14.16 - Persons Dealing with the Trustee
14.17 - Resignation or Removal of Trustee
14.18 - Fiscal Year of the Trust
14.19 - Discharge of Duties by Fiduciaries
14.20 - Amendment
14.21 - Plan Termination
14.22 - Permitted Reversion of Funds to Employer
14.23 - Governing Law
</TABLE>
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ARTICLE 1. ADOPTION AGREEMENT.
ARTICLE 2. DEFINITIONS.
2.01. DEFINITIONS.
(a) Wherever used herein, the following terms have the meanings set forth
below, unless a different meaning is clearly required by the context:
(1) "Account" means an account established on the books of the Trust
for the purpose of recording contributions made on behalf of a
Participant and any income, expenses, gains or losses incurred thereon.
(2) "Administrator" means the Employer adopting this Plan, or other
person designated by the Employer in Section 1.01(c).
(3) "Adoption Agreement" means Article 1, under which the Employer
establishes and adopts, or amends, the Plan and Trust and designates
the optional provisions selected by the Employer, and the Trustee
accepts its responsibilities under Article 14. The provisions of the
Adoption Agreement shall be an integral part of the Plan.
(4) "Annuity Starting Date" means the first day of the first period for
which an amount is payable as an annuity or in any other form.
(5) "Beneficiary" means the person or persons entitled under Section
7.04 to receive benefits under the Plan upon the death of a
Participant, provided that for purposes of Section 7.04 such term shall
be applied in accordance with Section 401(a)(9) of the Code and the
regulations thereunder.
(6) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(7) "Compensation" shall mean
(A) for purposes of Article 4 (Contributions), compensation as
defined in Section 5.03(e)(2) excluding any items elected by the
Employer in Section 1.04(a), reimbursements or other expense
allowances, fringe benefits (cash and non-cash), moving expenses,
deferred compensation and welfare benefits, but including amounts
that are not includable in the gross income of the Participant
under a salary reduction agreement by reason of the application of
Sections 125, 402(a)(8), 402(h), or 403(b) of the Code; and
(B) for purposes of Section 2.01(a)(16) (Highly Compensated
Employees), Section 5.03 (Code Section 415 Limitations), and
Section 9.03 (Top-Heavy Plan Minimum Contribution), compensation
as defined in Section 5.03(e)(2).
<PAGE> 6
Compensation shall generally be based on the amount actually paid
to the Participant during the Plan Year or, for purposes of Article 4
if so elected by the Employer in Section 1.04(b), during that portion
of the Plan Year during which the Employee is eligible to participate.
Notwithstanding the preceding sentence, compensation for purposes of
Section 5.03 (Code Section 415 Limitations) shall be based on the
amount actually paid or made available to the Participant during the
Limitation Year. Compensation for the initial Plan Year for a new plan
shall be based upon eligible Participant Compensation, subject to
Section 1.04(b), from the Effective Date listed in Section 1.01(g)(1)
through the end of the first Plan Year.
In the case of any Self-Employed Individual, Compensation shall
mean the Individual's Earned Income.
For years beginning after December 31, 1988, the annual
Compensation of each Participant taken into account for determining all
benefits provided under the plan for any determination period shall not
exceed $200,000. This limitation shall be adjusted by the Secretary at
the same time and in the same manner as under Section 415(d) of the
Code, except that the dollar increase in effect on January 1 of any
calendar year is effective for years beginning in such calendar year
and the first adjustment to the $200,000 limitation is effected on
January 1, 1990. If a plan determines Compensation on a period of time
that contains fewer than 12 calendar months, then the annual
Compensation limit is the amount equal to the annual Compensation limit
for the calendar year in which the Compensation period begins
multiplied by the ratio obtained by dividing the number of full months
in the period by 12.
If Compensation for any prior determination period is taken into
account in determining an Employee's allocations or benefits for the
current determination period, the Compensation for such prior year is
subject to the applicable annual compensation limit in effect for that
prior year. For this purpose, for years beginning before January 1,
1990, the applicable annual compensation limit is $200,000.
In determining the Compensation of a Participant for purposes of
this limitation, the rules of Section 414(q)(6) of the Code shall
apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19 before the close of the
year. If the $200,000 limitation is exceeded as a result of the
application of these rules, then the limitation shall be prorated among
the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application
of this limitation.
(8) "Earned Income" means the net earnings of a Self-Employed
Individual derived from the trade or business with respect to which the
Plan is established and for which the personal
2
<PAGE> 7
services of such individual are a material income-providing factor,
excluding any items not included in gross income and the deductions
allocated to such items, except that for taxable years beginning after
December 31, 1989 net earnings shall be determined with regard to the
deduction allowed under Section 164(f) of the Code, to the extent
applicable to the Employer. Net earnings shall be reduced by
contributions of the Employer to any qualified plan, to the extent a
deduction is allowed to the Employer for such contributions under
Section 404 of the Code.
(9) "Eligibility Computation Period" means each 12-consecutive month
period beginning with the Employment Commencement Date and each
anniversary thereof or, in the case of an Employee who, before
completing the eligibility requirements set forth in Section
1.03(a)(1), incurs a break in service for participation purposes and
thereafter returns to the employ of the Employer or Related Employer,
each 12-consecutive month period beginning with the first day of
reemployment and each anniversary thereof.
A "break in service for participation purposes" shall mean an
Eligibility Computation Period during which the participant does not
complete more than 500 Hours of Service with the Employer.
(10) "Employee" means any employee of the Employer, any Self-Employed
Individual or Owner-Employee. The Employer must specify in Section
1.03(a)(3) any Employee or class of Employees not eligible to
participate in the Plan. If the Employer elects to exclude collective
bargaining employees, the exclusion applies to any employee of the
Employer included in a unit of employees covered by an agreement which
the Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and one or more employers unless the
collective bargaining agreement requires the employee to be included
within the Plan. The term "employee representatives" does not include
any organization more than half the members of which are owners,
officers, or executives of the Employer.
For purposes of the Plan, an individual shall be considered to
become an Employee on the date on which he first completes an Hour of
Service and he shall be considered to have ceased to be an Employee on
the date on which he last completes an Hour of Service. The term also
includes a Leased Employee, such that contributions or benefits
provided by the leasing organization which are attributable to services
performed for the Employer shall be treated as provided by the
Employer. Notwithstanding the above, a Leased Employee shall not be
considered an Employee if Leased Employees do not constitute more than
20 percent of the Employer's non-highly compensated work-force (taking
into account all Related Employers) and the Leased Employee is covered
by a money purchase pension plan maintained by the leasing organization
and providing (A) a nonintegrated employer contribution rate of at
least 10 percent of compensation, as defined for purposes of Section
415(c)(3) of the Code, but including amounts contributed pursuant to a
salary reduction
3
<PAGE> 8
agreement which are excludable from gross income under Section 125,
Section 402(a)(8), Section 402(h) or Section 403(b) of the Code, (B)
full and immediate vesting, and (C) immediate participation by each
employee of the leasing organization.
(11) "Employer" means the employer named in Section 1.02(a) and any
Related Employers required by this Section 2.01(a)(11). If Article 1 of
the Employer's Plan is the Standardized Adoption Agreement, the term
"Employer" includes all Related Employers. If Article 1 of the
Employer's Plan is the Non-standardized Adoption Agreement, the term
"Employer" includes those Related Employers designated in Section
1.02(b).
(12) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(13) "ERISA" means the Employee Retirement Income Security Act of 1974,
as from time to time amended.
(14) "Fidelity Fund" means any Registered Investment Company or Managed
Income Portfolio of the Fidelity Group Trust for Employee Benefit Plans
which is made available to plans utilizing the CORPORATEplan for
Retirement.
(15) "Fund Share" means the share, unit, or other evidence of ownership
in a Fidelity Fund.
(16) "Highly Compensated Employee" means both highly compensated active
Employees and highly compensated former Employees.
A highly compensated active Employee includes any Employee who
performs service for the Employer during the determination year and
who, during the "look-back year," (A) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code), (B) received compensation from the Employer in excess of
$50,000 (as adjusted pursuant to Section 415(d) of the Code) and was a
member of the top-paid group for such year, or (C) was an officer of
the Employer and received compensation during such year that is greater
than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term "Highly Compensated Employee" also
includes (i) Employees who are both described in the preceding sentence
if the term "determination year" is substituted for the term "look-back
year" and the Employee is one of the 100 Employees who received the
most compensation from the Employer during the determination year, and
(ii) Employees who are 5-percent owners at any time during the
look-back year or determination year.
If no officer has satisfied the compensation requirement of (C)
above during either a determination year or look-back year, the highest
paid officer for such year shall be treated as a highly compensated
Employee.
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<PAGE> 9
For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the twelve-month period immediately
preceding the determination year. The Employer may elect to make the
look-back year calculation for a determination on the basis of the
calendar year ending with or within the applicable determination year,
as prescribed by Section 414(q) of the Code and the regulations issued
thereunder.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active Employee for
either the separation year or any determination year ending on or after
the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5-percent owner who is an active or former
Employee or a highly compensated Employee who is one of the 10 most
highly compensated Employees ranked on the basis of compensation paid
by the Employer during such year, then the family member and the
5-percent owner or top-ten highly compensated Employee shall be
aggregated. In such case, the family member and 5-percent owner or
top-ten highly compensated Employee shall be treated as a single
Employee receiving compensation and plan contributions or benefits
equal to the sum of such compensation and contributions or benefits of
the family member and 5-percent owner or top-ten highly compensated
Employee. For purposes of this Section, family member includes the
spouse, lineal ascendants and descendants of the Employee or former
Employee and the spouses of such lineal ascendants and descendants.
The determination of who is a highly compensated Employee,
including the determinations of the number and identity of Employees in
the top-paid group, the top 100 Employees, the number of Employees
treated as officers, and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
(17) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, for the performance of duties for
the Employer or a Related Employer, each such hour to be credited
to the Employee for the Eligibility Computation Period in which
the duties were performed;
(B) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer or Related Employer
(including payments made or due from a trust fund or insurer to
which the Employer contributes or pays premiums) on account of a
period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) due to
vacation,
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<PAGE> 10
holiday, illness, incapacity, disability, layoff, jury duty,
military duty, or leave of absence, each such hour to be credited
to the Employee for the Eligibility Computation Period in which
such period of time occurs, subject to the following rules:
(i) No more than 501 Hours of Service shall be credited under
this paragraph (B) on account of any single continuous period
during which the Employee performs no duties;
(ii) Hours of Service shall not be credited under this
paragraph (B) for a payment which solely reimburses the
Employee for medically-related expenses, or which is made or
due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation, unemployment
compensation or disability insurance laws; and
(iii) If the period during which the Employee performs no
duties falls within two or more Eligibility Computation
Periods and if the payment made on account of such period is
not calculated on the basis of units of time, the Hours of
Service credited with respect to such period shall be
allocated between not more than the first two such Eligibility
Computation Periods on any reasonable basis consistently
applied with respect to similarly situated Employees; and
(C) Each hour not counted under paragraph (A) or (B) for which
back pay, irrespective of mitigation of damages, has been either
awarded or agreed to be paid by the Employer or a Related
Employer, shall be credited to the Employee for the Eligibility
Computation Period to which the award or agreement pertains rather
than the Eligibility Computation Period in which the award
agreement or payment is made.
For purposes of determining Hours of Service, Employees of the
Employer and of all Related Employers will be treated as employed
by a single employer. For purposes of paragraphs (B) and (C)
above, Hours of Service will be calculated in accordance with the
provisions of Section 2530.200b-2(b) of the Department of Labor
regulations, which are incorporated herein by reference.
Solely for purposes of determining whether a break in service
for participation purposes has occurred in a computation period,
an individual who is absent from work for maternity or paternity
reasons shall receive credit for the hours of service which would
otherwise have been credited to such individual but for such
absence, or in any case in which such hours cannot be determined,
8 hours of service per day of such absence. For purposes of this
paragraph, an absence from work for maternity or paternity reasons
means an absence (i) by reason of the pregnancy of the individual,
(ii) by reason of a birth of a child of the individual, (iii) by
reason of the placement of a child with
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<PAGE> 11
the individual in connection with the adoption of such child
by such individual, or (iv) for purposes of caring for such
child for a period beginning immediately following such birth
or placement. The hours of service credited under this
paragraph shall be credited (a) in the computation period in
which the absence begins if the crediting is necessary to
prevent a break in service in that period, or (b) in all other
cases, in the following computation period.
(18) "Leased Employee" means any individual who provides services to the
Employer or a Related Employer (the "recipient") but is not otherwise an
employee of the recipient if (A) such services are provided pursuant to an
agreement between the recipient and any other person (the "leasing
organization"), (B) such individual has performed services for the
recipient (or for the recipient and any related persons within the meaning
of Section 414(n)(6) of the Code) on a substantially full-time basis for
at least one year, and (C) such services are of a type historically
performed by employees in the business field of the recipient.
(19) "Normal Retirement Age" means the normal retirement age specified in
Section 1.06(a) of the Adoption Agreement. If the Employer enforces a
mandatory retirement age, the Normal Retirement Age is the lesser of that
mandatory age or the age specified in Section 1.06(a).
(20) "Owner-Employee" means, if the Employer is a sole proprietorship, the
individual who is the sole proprietor, or if the Employer is a
partnership, a partner who owns more than 10 percent of either the capital
interest or the profits interest of the partnership.
(21) "Participant" means any Employee who participates in the Plan in
accordance with Article 3 hereof.
(22) "Plan" means the plan established by the Employer in the form of the
prototype plan, as set forth herein as a new plan or as an amendment to an
existing plan, by executing the Adoption Agreement, together with any and
all amendments hereto.
(23) "Plan Year" means the 12-consecutive-month period ending on the date
designated by the Employer in Section 1.01(f).
(24) "Prototype Sponsor" means Fidelity Management and Research Company or
its successor.
(25) "Registered Investment Company" means any one or more corporations,
partnerships or trusts registered under the Investment Company Act of 1940
for which Fidelity Management and Research Company serves as investment
advisor.
(26) "Related Employer" means any employer other than the Employer named
in Section 1.02(a) if the Employer and such other employer are members of
a controlled group of corporations (as defined in Section 414(b) of the
Code) or an affiliated service group (as
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<PAGE> 12
defined in Section 414(m)), or are trades or businesses (whether or not
incorporated) which are under common control (as defined in Section
414(c)), or such other employer is required to be aggregated with the
Employer pursuant to regulations issued under Section 414(o).
(27) "Self-Employed Individual" means an individual who has Earned Income
for the taxable year from the Employer or who would have had Earned Income
but for the fact that the trade or business had no net profits for the
taxable year.
(28) "Trust" means the trust created by the Employer in accordance with
the provisions of Section 14.01.
(29) "Trust Agreement" means the agreement between the Employer and the
Trustee, as set forth in Article 14, under which the assets of the Plan
are held, administered, and managed.
(30) "Trust Fund" means the property held in Trust by the Trustee for the
Accounts of the Participants and their Beneficiaries.
(31) "Trustee" means the Fidelity Management Trust Company, or its
successor.
(32) "Year of Service for Participation" means, with respect to any
Employee, an Eligibility Computation Period during which the Employee has
been credited with at least 1,000 Hours of Service. If the Plan maintained
by the Employer is the plan of a predecessor employer, an Employee's Years
of Service for Participation shall include years of service with such
predecessor employer. In any case in which the Plan maintained by the
Employer is not the plan maintained by a predecessor employer, service for
such predecessor shall be treated as service for the Employer, to the
extent provided in Section 1.08.
(33) "Years of Service for Vesting" means, with respect to any Employee,
the number of whole years of his periods of service with the Employer or a
Related Employer (the elapsed time method to compute vesting service),
subject to any exclusions elected by the Employer in Section 1.07(b). An
Employee will receive credit for the aggregate of all time period(s)
commencing with the Employee's Employment Commencement Date and ending on
the date a break in service begins, unless any such years are excluded by
Section 1.07(b). An Employee will also receive credit for any period of
severance of less than 12 consecutive months. Fractional periods of a year
will be expressed in terms of days.
In the case of a Participant who has 5 consecutive 1-year breaks in
service, all years of service after such breaks in service will be
disregarded for the purpose of vesting the Employer-derived account
balance that accrued before such breaks, but both pre-break and post-break
service will count for the purposes of vesting the Employer-derived
account balance that accrues after such breaks. Both accounts will share
in the earnings and losses of the fund.
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<PAGE> 13
In the case of a Participant who does not have 5 consecutive 1-year
breaks in service, both the pre-break and post-break service will count in
vesting both the pre-break and post-break employer-derived account
balance.
A break in service is a period of severance of at least 12 consecutive
months. Period of severance is a continuous period of time during which
the Employee is not employed by the Employer. Such period begins on the
date the Employee retires, quits or is discharged, or if earlier, the
12-month anniversary of the date on which the Employee was otherwise first
absent from service.
In the case of an individual who is absent from work for maternity or
paternity reasons, the 12-consecutive month period beginning on the first
anniversary of the first date of such absence shall not constitute a break
in service. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence (A) by reason of the
pregnancy of the individual, (B) by reason of the birth of a child of the
individual, (C) by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or (D)
for purposes of caring for such child for a period beginning immediately
following such birth or placement.
If the Plan maintained by the Employer is the plan of a predecessor
employer, an Employee's Years of Service for Vesting shall include years
of service with such predecessor employer. In any case in which the Plan
maintained by the Employer is not the plan maintained by a predecessor
employer, service for such predecessor shall be treated as service for the
Employer to the extent provided in Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender but include the
feminine gender unless the context clearly indicates otherwise.
ARTICLE 3. PARTICIPATION.
3.01. DATE OF PARTICIPATION. All Employees in the eligible class (as defined in
Section 1.03(a)(3)) who are in the service of the Employer on the Effective Date
will become Participants on the date elected by the Employer in Section 1.03(c).
Any other Employee will become a Participant in the Plan as of the first Entry
Date on which he first satisfies the eligibility requirements set forth in
Section 1.03(a). In the event that an Employee who is not a member of an
eligible class (as defined in Section 1.03(a)(3)) becomes a member of an
eligible class, the individual shall participate immediately if such individual
had already satisfied the eligibility requirements and would have otherwise
previously become a Participant.
If an eligibility requirement other than one Year of Service is elected in
1.03(a)(1), an Employee may not be required to complete a minimum number of
Hours of Service before becoming a Participant. An otherwise eligible Employee
subject to a minimum months of service requirement
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<PAGE> 14
shall become a Participant on the first Entry Date following his completion of
the required number of consecutive months of employment measured from his
Employment Commencement Date to the coinciding date in the applicable following
month. For purposes of determining consecutive months of service, the Related
Employer and predecessor employer rules contained in Sections 2.01(a)(17) and
2.01(a)(32) shall apply.
3.02. RESUMPTION OF PARTICIPATION FOLLOWING REEMPLOYMENT. If a Participant
ceases to be an Employee and thereafter returns to the employ of the Employer he
will be treated as follows:
(a) he will again become a Participant on the first date on which he
completes an Hour of Service for the Employer following his reemployment
and is in the eligible class of Employees as defined in Section
1.03(a)(3), and
(b) any distribution which he is receiving under the Plan will cease
except as otherwise required under Section 8.08.
3.03. CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS. If
any Participant continues in the employ of the Employer or Related Employer but
ceases to be a member of an eligible class as defined in Section 1.03(a)(3), the
individual shall continue to be a Participant for most purposes until the entire
amount of his benefit is distributed; however, the individual shall not be
entitled to receive an allocation of contributions or forfeitures during the
period that he is not a member of the eligible class. Such Participant shall
continue to receive credit for service completed during the period for purposes
of determining his vested interest in his Accounts. In the event that the
individual subsequently again becomes a member of an eligible class of
Employees, the individual shall resume full participation immediately upon the
date of such change in status.
3.04. PARTICIPATION BY OWNER-EMPLOYEE; CONTROLLED BUSINESSES.
If the Plan provides contributions or benefits for one or more Owner-Employees
who control both the trade or business with respect to which the Plan is
established and one or more other trades or businesses, the Plan and any plan
established with respect to such other trades or businesses must, when looked at
as a single plan, satisfy Sections 401(a) and 401(d) of the Code with respect to
the employees of this and all such other trades or businesses. If the Plan
provides contributions or benefits for one or more Owner-Employees who control
one or more other trades or businesses, the Employees of each such other trade
or business must be included in a plan which satisfies Sections 401(a) and
401(d) of the Code and which provides contributions and benefits not less
favorable than provided for Owner-Employees under the Plan.
If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the Employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled.
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<PAGE> 15
For purposes of this Section, an Owner-Employee, or two or more
Owner-Employees, shall be considered to control a trade or business if such
Owner-Employee, or such Owner-Employees together, (a) own the entire interest in
an unincorporated trade or business or (b) in the case of a partnership, own
more than 50 percent of either the capital interest or the profits interest in
such partnership. For this purpose, an Owner-Employee, or two or more
Owner-Employees, shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership controlled by such
Owner-Employee or such Owner-Employees.
3.05. OMISSION OF ELIGIBLE EMPLOYEE. If any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution, if necessary, so that the
omitted Employee receives the total amount which the said Employee would have
received had he not been omitted. For purposes of this Section 3.05, the term
"contribution" shall not include Deferral Contributions and Matching
Contributions made pursuant to Sections 4.01 and 4.03, respectively.
ARTICLE 4. CONTRIBUTIONS.
4.01. DEFERRAL CONTRIBUTIONS.
(a) 4.01. If so provided by the Employer in Section 1.05(b), each
Participant may elect to execute a salary reduction agreement with the
Employer to reduce his Compensation by a specified percentage not
exceeding 15% per payroll period, subject to any exceptions elected by the
Employer in Section 1.05(b)(2) and 1.05(b)(3) and equal to a whole number
multiple of one (1) percent. Such agreement shall become effective on the
first day of the first payroll period for which the Employer can
reasonably process the request. The Employer shall make a Deferral
Contribution on behalf of the Participant corresponding to the amount of
said reduction, subject to the restrictions set forth below. Under no
circumstances may a salary reduction agreement be adopted retroactively.
(b) A Participant may elect to change or discontinue the percentage by
which his Compensation is reduced by notice to the Employer as provided in
Section 1.05(b)(1).
(c) No Participant shall be permitted to have Deferral Contributions made
under the Plan, or any other qualified plan maintained by the Employer,
during the taxable year, in excess of the dollar limitation contained in
Section 402(g) of the Code in effect at the beginning of such taxable
year.
A Participant may assign to the Plan any Excess Deferrals made during
the taxable year of the Participant by notifying the Plan Administrator on
or before March 15 following the taxable year of the amount of the Excess
Deferrals to be assigned to the Plan. A Participant is deemed to notify
the Administrator of any Excess
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Deferrals that arise by taking into account only those Deferral
Contributions made to the Plan and any other plan of the Employer.
Notwithstanding any other provision of the Plan, Excess Deferrals, plus
any income and minus any loss allocable thereto, shall be distributed
no later than April 15 to any Participant to whose Account Excess
Deferrals were so assigned for the preceding year and who claims Excess
Deferrals for such taxable year.
"Excess Deferrals" shall mean those Deferral Contributions that are
includable in a Participant's gross income under Section 402(g) of the
Code to the extent such Participant's Deferral Contributions for a taxable
year exceed the dollar limitation under such Code section. For purposes of
determining Excess Deferrals, the term "Deferral Contributions" shall
include the sum of all Employer Contributions made on behalf of such
Participant pursuant to an election to defer under any qualified CODA as
described in Section 401(k) of the Code, any simplified employee pension
cash or deferred arrangement as described in Section 402(h)(1)(B) of the
Code, any eligible deferred compensation plan under Section 457 of the
Code, any plan as described under Section 501(c)(18) of the Code, and any
Employer Contributions made on the behalf of a Participant for the
purchase of an annuity contract under Section 403(b) of the Code pursuant
to a salary reduction agreement. Deferral Contributions shall not include
any deferrals properly distributed as excess annual additions. Excess
Deferrals shall be treated as annual additions under the Plan, unless such
amounts are distributed no later than the first April 15 following the
close of the Participant's taxable year.
Excess Deferrals shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Deferrals is
(1) income or loss allocable to the Participant's Deferral Contributions
Account for the taxable year multiplied by a fraction, the numerator of
which is such Participant's Excess Deferrals for the year and the
denominator is the Participant's Account balance attributable to Deferral
Contributions without regard to any income or loss occurring during such
taxable year, or (2) such other amount determined under any reasonable
method, provided that such method is used consistently for all
Participants in calculating the distributions required under this Section
4.01(c) and Sections 4.02(d) and 4.04(d) for the Plan Year, and is used by
the Plan in allocating income or loss to Participants' Accounts. Income or
loss allocable to the period between the end of the Plan Year and the date
of distribution shall be disregarded in determining income or loss.
(d) In order for the Plan to comply with the requirements of Sections
401(k), 402(g) and 415 of the Code and the regulations promulgated
thereunder, at any time in a Plan Year the Administrator may reduce the
rate of Deferral Contributions to be made on behalf of any Participant, or
class of Participants, for the remainder of that Plan Year, or the
Administrator may require that all Deferral Contributions to be made on
behalf of a Participant be discontinued for the remainder of that Plan
Year. Upon the close of the Plan Year or such earlier date as the
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Administrator may determine, any reduction or discontinuance in Deferral
Contributions shall automatically cease until the Administrator again
determines that such a reduction or discontinuance of Deferral
Contributions is required.
4.02. ADDITIONAL LIMIT ON DEFERRAL CONTRIBUTIONS.
(a) The Actual Deferral Percentage (hereinafter "ADP") for Participants
who are Highly Compensated Employees for each Plan Year and the ADP for
participants who are Non-highly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
(1) The ADP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ADP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(2) The ADP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ADP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
2.0, provided that the ADP for Participants who are Highly Compensated
Employees does not exceed the ADP for Participants who are Non-highly
Compensated Employees by more than two (2) percentage points.
(b)The following special rules apply for the purposes of this Section:
(1) The ADP for any Participant who is a Highly Compensated Employee
for the Plan Year and who is eligible to have Deferral Contributions
(and Qualified Discretionary Contributions if treated as Deferral
Contributions for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Section 401(k) of
the Code that are maintained by the Employer, shall be determined as if
such Deferral Contributions (and, if applicable, such Qualified
Discretionary Contributions) were made under a single arrangement. If a
Highly Compensated Employee participates in two or more cash or
deferred arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same calendar year
shall be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(k) of the Code.
(2) In the event that this Plan satisfies the requirements of Sections
401(k), 401(a)(4), or 410(b) of the Code only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Sections of the Code only if aggregated with this
plan, then this Section shall be applied by determining the ADP of
Employees as if all such plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be aggregated in order to
satisfy section 401(k) of the Code only if they have the same Plan
Year.
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(3) For purposes of determining the ADP of a Participant who is a
5-percent owner or one of the ten most highly-paid Highly Compensated
Employees, the Deferral Contributions (and Qualified Discretionary
Contributions if treated as Deferral Contributions for purposes of the
ADP test) and Compensation of such Participant shall include the
Deferral Contributions (and, if applicable, Qualified Discretionary
Contributions) and Compensation for the Plan Year of Family Members (as
defined in Section 414(q)(6) of the Code). Family Members, with respect
to between the end of the Plan Year and the date of distribution shall
be disregarded in determining income or loss.
Excess Contributions shall be distributed from the Participant's
Qualified Discretionary Contribution account only to the extent that such
Excess Contributions exceed the balance in the Participant's Deferral
Contributions account.
(4) For purposes of determining the ADP test, Deferral Contributions
and Qualified Discretionary Contributions must be made before the last
day of the twelve-month period immediately following the Plan Year to
which contributions relate.
(5) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Discretionary
Contributions used in such test.
(6) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Actual Deferral Percentage" shall mean, for a specified group of
Participants for a Plan Year, the average of the ratios (calculated
separately for each Participant in such group) of (A) the amount of
Employer contributions actually paid over to the Trust on behalf of
such Participant for the Plan Year to (B) the Participant's
Compensation for such Plan Year. Employer contributions on behalf of
any Participant shall include (i) any Deferral Contributions made
pursuant to the Participant's deferral election, including Excess
Deferrals of Highly Compensated Employees, but excluding (a) Excess
Deferrals of Non-highly Compensated Employees that arise solely from
Deferral Contributions made under the Plan or plans of the Employer and
(b) Deferral Contributions that are taken into account in the
Contribution Percentage test (provided the ADP test is satisfied both
with and without exclusion of these Deferral Contributions) and (ii) at
the election of the Employer, Qualified Discretionary Contributions.
Matching Contributions, whether or not non-forfeitable when made, shall
not be considered as Employer Contributions for purposes of this
paragraph. For purposes of computing Actual Deferral Percentages, an
Employee
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who would be a Participant but for the failure to make Deferral
Contributions shall be treated as a Participant on whose behalf no
Deferral Contributions are made.
(2) "Excess Contributions" shall mean, with respect to any Plan Year,
the excess of
(a) The aggregate amount of Employer contributions actually taken
into account in computing the ADP of Highly Compensated Employees
for such Plan Year, over
(b) The maximum amount of such contributions permitted by the ADP
test (determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs, beginning with the
highest of such percentages).
(3) "Qualified Discretionary Contributions" shall mean contributions
made by the Employer as elected in Section 1.05(b)(4) and allocated to
Participant Accounts of Non-highly Compensated Employees that such
Participants may not elect to receive in cash until distributed from
the Plan, that are nonforfeitable when made, and that are distributable
only in accordance with the distribution provisions that are applicable
to Deferral Contributions. Participants shall not be required to
satisfy any hours of service or employment requirement in order to
receive an allocation of such contributions.
(d) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto, shall
be distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Excess Contributions were allocated
for the preceding Plan Year. If such excess amounts are distributed more
than 2 1/2 months after the last day of the Plan Year in which such excess
amounts arose, a ten- (10-) percent excise tax will be imposed on the
Employer maintaining the Plan with respect to such amounts. Such
distributions shall be made to Highly Compensated Employees on the basis
of the respective portions of the Excess Contributions attributable to
each of such employees. Excess Contributions of Participants who are
subject to the family member aggregation rules of Section 414(q)(6) of the
Code shall be allocated among the family members in proportion to the
Deferral Contributions (and amounts treated as Deferral Contributions) of
each family member that is combined to determine the combined ADP.
Excess Contributions shall be treated as annual additions under the Plan.
Excess Contributions shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Contributions
is (1) income or loss allocable to the Participant's Deferral Contribution
Account (and if applicable, the Qualified Discretionary Contribution
Account) for the Plan Year multiplied by a fraction, the numerator of
which is such Participant's Excess Contributions for the year and the
denominator is the Participant's
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Account balance attributable to Deferral Contributions without regard to
any income or loss occurring during such Plan Year, or (2) an amount
determined under any reasonable method, provided that such method is used
consistently for all Participants in calculating any distributions
required under Section 4.02(d) and Sections 4.01(c) and 4.04(d) for the
Plan Year, and is used by the Plan in allocating income or loss to the
Participants' Accounts. Income or loss allocable to the period between the
end of the Plan Year and the date of distribution shall be disregarded in
determining income or loss.
Excess Contributions shall be distributed from the Participant's Qualified
Discretionary Contribution Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Deferral
Contributions Account.
4.03 MATCHING CONTRIBUTIONS: If so provided by the Employer in Section 1.05(c),
the Employer shall make a Matching Contribution on behalf of each Participant
who had Deferral Contributions made on his behalf during the year and who meets
the requirement, if any, of Section 1.05(c)(4). The amount of the Matching
Contribution shall be determined in accordance with Section 1.05(c), subject to
the limitations set forth in Section 4.04 and Section 404 of the Code. Matching
Contributions will not be allowed to be made by the Employer on any voluntary
non-deductible Employee Contributions.
4.04 LIMIT ON MATCHING CONTRIBUTIONS AND EMPLOYEE CONTRIBUTIONS:
(a) The Average Contribution Percentage (hereinafter "ACP") for
Participants who are Highly Compensated Employees for each Plan Year and
the ACP for Participants who are Non-highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
(1) The ACP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ACP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(2) The ACP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ACP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
two (2), provided that the ACP for Participants who are Highly
Compensated Employees does not exceed the ACP for Participants who are
Non-highly Compensated Employees by more than two (2) percentage
points.
(b) The following special rules apply for purposes of this section:
(1) If one or more Highly Compensated Employees participate in both a
qualified cash or deferred arrangement described in Section 401(k) of
the Code (hereafter "CODA") and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and ACP of those
Highly Compensated Employees subject to
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either or both tests exceeds the Aggregate Limit, then the ACP of those
Highly Compensated Employees who also participate in a CODA will be
reduced (beginning with such Highly Compensated Employee whose ACP is
the highest) so that the limit is not exceeded. The amount by which
each Highly Compensated Employee's Contribution Percentage Amounts is
reduced shall be treated as an Excess Aggregate Contribution. The ADP
and ACP of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does
not occur if either the ADP or ACP of the Highly Compensated Employees
does not exceed 1.25 multiplied by the ADP and ACP of the Non-highly
Compensated Employees.
(2) For purposes of this section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible to
have Contribution Percentage Amounts allocated to his or her account
under two or more plans described in section 401(a) of the Code, or
arrangements described in section 401(k) of the Code that are
maintained by the Employer, shall be determined as if the total of such
Contribution Percentage Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year shall be
treated as a single arrangement. Notwithstanding the foregoing, certain
plans shall be treated as separate if mandatorily disaggregated under
regulations under Section 401(m) of the Code.
(3) In the event that this Plan satisfies the requirements of Sections
401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such sections of the Code only if aggregated with this
Plan, then this section shall be applied by determining the
Contribution Percentage of Employees as if all such plans were a single
plan. For plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they
have the same Plan Year.
(4) For purposes of determining the Contribution percentage of a
Participant who is a five-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution Percentage
Amounts and Compensation of such Participant shall include the
Contribution Percentage Amounts and Compensation for the Plan Year of
family members (as defined in Section 414(q)(6) of the Code). Family
members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the Contribution
Percentage both for Participants who are Non-highly Compensated
Employees and for Participants who are Highly Compensated Employees.
(5) For purposes of determining the Contribution Percentage test,
Employee Contributions made pursuant to Section 1.05(d)(1) are
considered to have been made in the Plan Year in which
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<PAGE> 22
contributed to the Trust. Matching Contributions and Qualified
Discretionary Contributions will be considered made for a Plan Year if
made no later than the end of the twelve-month period beginning on the
day after the close of the Plan Year.
(6) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Discretionary
Contributions used in such test.
(7) The determination and treatment of the Contribution Percentage of
any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Aggregate Limit" shall mean the greater of (A) or (B) where (A) is
the sum of (i) 125 percent of the greater of the ADP of the Non-highly
Compensated Employees for the Plan Year or the ACP of Non-highly
Compensated Employees under the Plan subject to Section 401(m) of the
Code for the Plan Year beginning with or within the Plan Year of the
CODA and (ii) the lesser of 200% or two plus the lesser of such ADP or
ACP and where (B) is the sum of (i) 125 percent of the lesser of the
ADP of the Non-highly Compensated Employees for the Plan Year or the
ACP of Non-highly Compensated Employees under the Plan subject to
Section 401(m) of the Code for the Plan Year beginning with or within
the Plan Year of the CODA and (ii) the lesser of 200% or two plus the
greater of such ADP or ACP.
(2) "Average Contribution Percentage" or "ACP" shall mean the average
of the Contribution Percentages of the Eligible Participants in a
group.
(3) "Contribution Percentage" shall mean the ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts to the
Participant's Compensation
for the Plan Year.
(4) "Contribution Percentage Amounts" shall mean the sum of the
Employee Contributions and Matching Contributions made under the plan
on behalf of the Participant for the Plan Year. Such Contribution
Percentage Amounts shall not include Matching Contributions that are
forfeited either to correct Excess Aggregate Contributions or because
the contributions to which they relate are Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions. If so elected by the
Employer in Section 1.05(b)(4), the Employer may include Qualified
Discretionary Contributions in the Contribution Percentage Amounts. The
Employer also may elect to use Deferral Contributions in the
Contribution Percentage Amounts so long as the ADP test is met before
the Deferral Contributions are used in the ACP test and continues to be
met following the exclusion of those Deferral Contributions that are
used to meet the ACP test.
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<PAGE> 23
(5) "Deferral Contribution" shall mean any contribution made at the
election of the Participant pursuant to a salary reduction agreement in
accordance with Section 4.01(a).
(6) "Eligible Participant" shall mean any Employee who is eligible to
make an Employee Contribution, or a Deferral Contribution (if the
Employer takes such contributions into account in the calculation of
the Contribution Percentage), or to receive a Matching Contribution.
(7) "Employee Contribution" shall mean any voluntary non-deductible
contribution made to the plan by or on behalf of a Participant that is
included in the Participant's gross income in the year in which made
and that is maintained in a separate Account to which earnings and
losses are allocated.
(8) "Matching Contribution" shall mean an Employer contribution made to
this or any other defined contribution plan on behalf of a Participant
on account of a Participant's Deferral Contribution.
(9) "Excess Aggregate Contributions" shall mean, with respect to any
Plan Year, the excess of
(A) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage
actually made on behalf of Highly Compensated Employees for such
Plan Year, over
(B) The maximum Contribution Percentage Amounts permitted by the
ACP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in the order of their Contribution
Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining Excess
Deferrals pursuant to Section 4.01 and then determining Excess
Contributions pursuant to Section 4.02.
(d) Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall
be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participants to whose Accounts such
Excess Aggregate Contributions were allocated for the preceding Plan Year.
Excess Aggregate Contributions of Participants who are subject to the
family member aggregation rules of Section 414(q)(6) of the Code shall be
allocated among the family members in proportion to the Employee and
Matching Contributions of each family member that is combined to determine
the combined ACP. If such Excess Aggregate Contributions are distributed
more than 2 1/2 months after the last day of the Plan Year in which such
excess amounts arose, a ten (10) percent excise tax will be imposed on the
employer maintaining the Plan with respect to those amounts. Excess
Aggregate Contributions shall be treated as annual additions under the
Plan.
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<PAGE> 24
Excess Aggregate Contributions shall be adjusted for any income or loss
up to the date of distribution. The income or loss allocable to Excess
Aggregate Contributions is (1) income or loss allocable to the
Participant's Employee Contribution Account, Matching Contribution Account
(if any, and if all amounts therein are not used in the ADP test) and if
applicable, Qualified Non-elective Contribution Account for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's
Excess Aggregate Contributions for the year and the denominator is the
Participant's Account balance(s) attributable to Contribution Percentage
Amounts without regard to income or loss occurring during such Plan Year,
or (2) such other amount determined under any reasonable method, provided
that such method is used consistently for all Participants in calculating
any distributions required under Section 4.04(d) and Sections 4.01(c) and
4.02(d) for the Plan Year, and is used by the Plan in allocating income or
loss to the Participants' Accounts. Income or loss allocable to the period
between the end of the Plan Year and the date of distribution shall be
disregarded in determining income or loss.
Forfeitures of Excess Aggregate Contributions shall be applied to
reduce Employer contributions; the forfeitures shall be held in the money
market fund, if any, listed in Section 1.14(b) pending such application.
Excess Aggregate Contributions shall be forfeited, if forfeitable, or
distributed on a prorata basis from the Participant's Employee
Contribution Account, Matching Contribution Account and if applicable, the
Participant's Deferral Contributions Account or Qualified Discretionary
Contribution Account or both.
4.05. SPECIAL RULES. Deferral Contributions and Qualified Discretionary
Contributions and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or beneficiary's or beneficiaries' election, earlier than upon
separation from service, death, or disability, except as otherwise provided in
Section 7.10, 7.11 or 10.06. Such amounts may also be distributed, but after
March 31, 1988, in the form of a lump sum only, upon
(a) Termination of the Plan without establishment of another
defined contribution plan, other than an employee stock ownership plan (as
defined in Section 4975(e) or Section 409 of the Code) or a simplified
employee pension plan as defined in Section 408(k) of the Code.
(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Section 409(d)(2)
of the Code) used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the disposition, but
only with respect to Employees who continue employment with the
corporation acquiring such assets.
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<PAGE> 25
(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of Section
409(d)(2) of the Code) if such corporation continues to maintain this
Plan, but only with respect to Employees who continue employment with such
subsidiary.
The Participant's accrued benefit derived from Deferral Contributions,
Qualified Discretionary Contributions and Employee Contributions (as defined in
Section 4.09) is nonforfeitable. Separate Accounts for Deferral Contributions,
Qualified Discretionary Contributions, Employee Contributions and Matching
Contributions will be maintained for each Participant. Each Account will be
credited with the applicable contributions and earnings thereon.
4.06. FIXED/DISCRETIONARY EMPLOYER CONTRIBUTIONS. If so provided by the Employer
in Sections 1.05(a)(1) or 1.05(a)(2), for the Plan Year in which the Plan is
adopted and for each Plan Year thereafter, the Employer will make Fixed or
Discretionary Employer contributions to the Trust in accordance with Section
1.05 to be allocated as follows:
(a) Fixed Employer contributions shall be allocated among eligible
Participants (as determined in accordance with Section 1.05(a)(3)) in the
manner specified in Section 1.05(a).
(b) Discretionary Employer contributions shall be allocated among
eligible Participants, as determined in accordance with Section
1.05(a)(3), as follows:
(1) If the Non-Integrated Formula is elected in Section
1.05(a)(2)(A), such contributions shall be allocated to
eligible Participants in the ratio that each Participant's
Compensation bears to the total Compensation paid to all
eligible Participants for the Plan Year; or
(2) If the Integrated Formula is elected in Section
1.05(a)(2)(B), such contributions shall be allocated in the
following steps:
(A) First, to each eligible Participant in the same
ratio that the sum of the Participant's Compensation
and Excess Compensation for the Plan Year bears to the
sum of the Compensation and Excess Compensation of all
Participants for the Plan Year. This allocation as a
percentage of the sum of each Participant's
Compensation and Excess Compensation shall not exceed
5.7%.
(B) Any remaining Discretionary Employer Contribution
shall be allocated to each eligible Participant in the
same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all
Participants for the Plan Year.
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For purposes of this Section, "Excess Compensation" means
Compensation in excess of the taxable wage base, as
determined under Section 230 of the Social Security Act, in
effect on the first day of the Plan Year. Further, this
Section 4.06(b)(2) shall be modified as provided in Section
9.03 for years in which the Plan is top heavy under Article
9.
4.07. TIME OF MAKING EMPLOYER CONTRIBUTIONS. The Employer will pay its
contribution for each Plan Year not later than the time prescribed by law for
filing the Employer's federal income tax return for the fiscal (or taxable) year
with or within which such Plan Year ends (including extensions thereof). The
Trustee will have no authority to inquire into the correctness of the amounts
contributed and paid over to the Trustee, to determine whether any contribution
is payable under this Article 4, or to enforce, by suit or otherwise, the
Employer's obligation, if any, to make a contribution to the Trustee.
4.08. RETURN OF EMPLOYER CONTRIBUTIONS. The Trustee shall, upon request by the
Employer, return to the Employer the amount (if any) determined under Section
14.22. Such amount shall be reduced by amounts attributable thereto which have
been credited to the Accounts of Participants who have since received
distributions from the Trust, except to the extent such amounts continue to be
credited to such Participants' Accounts at the time the amount is returned to
the Employer. Such amount shall also be reduced by the losses of the Trust
attributable thereto, if and to the extent such losses exceed the gains and
income attributable thereto, but will not be increased by the gains and income
of the Trust attributable thereto, if and to the extent such gains and income
exceed the losses attributable thereto. In no event will the return of a
contribution hereunder cause the balance of the individual Account of any
Participant to be reduced to less than the balance which would have been
credited to the Account had the mistaken amount not been contributed.
4.09. EMPLOYEE CONTRIBUTIONS. If the Employer elected to permit Deferral
Contributions in Section 1.05(b) and if so provided by the Employer in Section
1.05(d), each Participant may elect to make Employee Contributions to the Plan
in accordance with the rules and procedures established by the Employer and in
an amount not less than one percent (1%) and not greater than ten percent (10%)
of such Participant's Compensation for the Plan Year. Such contributions and all
Employee Contributions for Plan Years beginning after December 31, 1986, shall
be subject to the nondiscrimination requirements of Section 401(m) of the Code
as set forth in Section 4.04.
For purposes of this Plan, "Employee Contributions" shall mean any
voluntary non-deductible contribution made to a plan by or on behalf of a
Participant that is or was included in the Participant's gross income in the
year in which made and that is maintained under a separate account to which
applicable earnings and losses are allocated. Excess Contributions may not be
recharacterized as Employee Contributions.
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<PAGE> 27
Employee Contributions shall be paid over to the Trustee not later than
thirty (30) days following the end of the month in which the Participant makes
the contribution. A Participant shall have a fully vested 100% nonforfeitable
right to his Employee Contributions and the earnings or losses allocated
thereon. Distributions of Employee Contributions shall be made in accordance
with Section 7.10.
4.10. ROLLOVER CONTRIBUTIONS.
(a) Rollover of Eligible Rollover Distributions
(1) An Employee who is or was a distributee of an "eligible rollover
distribution"(as defined in Section 402(c)(4) of the Code and the
regulations issued thereunder) from a qualified plan may directly
transfer all or any portion of such distribution to the Trust or
transfer all or any portion of such distribution to the Trust within
sixty (60) days of payment. The transfer shall be made in the form of
cash or allowable Fund Shares only.
(2) The Employer may refuse to accept rollover contributions or
instruct the Trustee not to accept rollover contributions under the
Plan.
(b) Treatment of Rollover Amount.
(1) An account will be established for the transferring Employee under
Article 5, the rollover amount will be credited to the account and such
amount will be subject to the terms of the Plan, including Section
8.01, except as otherwise provided in this Section 4.10.
(2) The rollover account will at all times be fully vested in and
nonforfeitable by the Employee.
(c) Entry into Plan by Transferring Employee. Although an amount may be
transferred to the Trust Fund under this Section 4.10 by an Employee who
has not yet become a Participant in accordance with Article 3, and such
amount is subject to the terms of the Plan as described in paragraph (b)
above, the Employee will not become a Participant entitled to share in
Employer contributions until he has satisfied such requirements.
(d) Monitoring of Rollovers.
(1) The Administrator shall develop such procedures and require such
information from transferring Employees as it deems necessary to insure
that amounts transferred under this Section 4.10 meet the requirements
for tax-free rollovers established by such Section and by Section
402(c) of the Code. No such amount may be transferred until approved by
the Administrator.
(2) If a transfer made under this Section 4.10 is later determined by
the Administrator not to have met the requirements of this Section or
of the Code or Treasury regulations, the
23
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Trustee shall, within a reasonable time after such determination is
made, and on instructions from the Administrator, distribute to the
Employee the amounts then held in the Trust attributable to the
transferred amount.
4.11. DEDUCTIBLE VOLUNTARY EMPLOYEE CONTRIBUTIONS. The Administrator will not
accept deductible Employee Contributions which are made for a taxable year
beginning after December 31, 1986. Contributions made prior to that date will be
maintained in a separate Account which will be nonforfeitable at all times and
which will share in the gains and losses of the trust in the same manner as
described in Section 5.02. No part of the deductible voluntary contribution
Account will be used to purchase life insurance. Subject to Article 8, the
Participant may withdraw any part of the deductible voluntary contribution
Account upon request.
4.12. ADDITIONAL RULES FOR PAIRED PLANS. If the Employer has adopted a qualified
plan under Fidelity Basic Plan Document No. 09 which is to be considered as a
paired plan with this Plan, the elections in Section 1.03 must be identical to
the Employer's corresponding elections for the other plan. When the paired plans
are top-heavy or are deemed to be top-heavy as provided in Section 9.01, the
plan paired with this Plan will provide a minimum contribution to each non-key
Employee which is equal to 3 percent (or such other percent elected by the
Employer in Section 1.12(c)) of such Employee's Compensation. Notwithstanding
the preceding sentence, the minimum contribution shall be provided by this Plan
if contributions under the other plan paired with this Plan are frozen.
ARTICLE 5. PARTICIPANTS' ACCOUNTS.
5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
Account for each Participant which will reflect Employer and Employee
Contributions made on behalf of the Participant and earnings, expenses, gains
and losses attributable thereto, and investments made with amounts in the
Participant's Account. The Administrator will establish and maintain such other
accounts and records as it decides in its discretion to be reasonably required
or appropriate in order to discharge its duties under the Plan.
5.02. VALUATION OF ACCOUNTS. Participant Accounts will be valued at their fair
market value at least annually as of a date specified by the Administrator in
accordance with a method consistently followed and uniformly applied, and on
such date earnings, expenses, gains and losses on investments made with amounts
in each Participant's Account will be allocated to such Account. Participants
will be furnished statements of their Account values at least once each Plan
Year.
5.03. CODE SECTION 415 LIMITATIONS. Notwithstanding any other provisions of the
Plan:
Subsections (a)(1) through (a)(4)--(These subsections apply to Employers
who do not maintain any qualified plan, including a Welfare
24
<PAGE> 29
Benefit Fund, an Individual Medical Account, or a simplified employee pension in
addition to this Plan.)
(a)(1) If the Participant does not participate in, and has never
participated in any other qualified plan, Welfare Benefit Fund, Individual
Medical Account, or a simplified employee pension, as defined in section
408(k) of the Code, maintained by the Employer, which provides an annual
addition as defined in Section 5.03(e)(1), the amount of Annual Additions
to a Participant's Account for a Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation contained
in this Plan. If the Employer contribution that would otherwise be
contributed or allocated to the Participant's Account would cause the
Annual Additions for the Limitation Year to exceed the Maximum Permissible
Amount, the amount contributed or allocated will be reduced so that the
Annual Additions for the Limitation Year will equal the Maximum
Permissible Amount.
(a)(2) Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Maximum Permissible Amount may be determined on
the basis of a reasonable estimation of the Participant's compensation for
such Limitation Year, uniformly determined for all Participants similarly
situated. Any Employer contributions based on estimated annual
compensation shall be reduced by any Excess Amounts carried over from
prior years.
(a)(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation Year
shall be determined on the basis of the Participant's actual Compensation
for such Limitation Year.
(a)(4) If, pursuant to subsection (a)(3) or as a result of the allocation
of forfeitures or a reasonable error in determining the total Elective
Deferrals there is an Excess Amount with respect to a Participant for a
Limitation Year, such Excess Amount shall be disposed of as follows:
(A) Any nondeductible voluntary employee contributions ("employee
contributions") or Elective Deferrals, to the extent they would reduce the
Excess Amount, will be returned to the Participant. Any gains attributable
to returned employee contributions will also be returned or will be
treated as additional employee contributions for the Limitation Year in
which the employee contributions were made.
(B) If after the application of paragraph (A) an Excess amount still
exists and the Participant is in the service of the Employer which is
covered by the Plan at the end of the Limitation Year, then such Excess
Amount shall be reapplied to reduce future Employer contributions under
this Plan for the next Limitation Year (and for each succeeding year, as
necessary) for such Participant, so that in each such Year the sum of
actual Employer contributions plus the reapplied amount shall equal the
amount of Employer contributions which would otherwise be made to such
Participant's Account.
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<PAGE> 30
(C) If after the application of paragraph (A) an Excess Amount still
exists and the Participant is not in the service of the Employer which is
covered by the Plan at the end of a Limitation Year, then such Excess
Amount will be held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer contributions for all
remaining Participants in the next Limitation Year and each succeeding
Limitation Year if necessary.
(D) If a suspense account is in existence at any time during the
Limitation Year pursuant to this subsection, it will not participate in
the allocation of the Trust Fund's investment gains and losses. All
amounts in the suspense account must be allocated to the Accounts of
Participants before any Employer contribution may be made for the
Limitation Year. Except as provided in paragraph (A), Excess Amounts may
not be distributed to Participants or former Participants.
Subsections (b)(1) through (b)(6)--(These subsections apply to Employers
who, in addition to this Plan, maintain one or more plans, all of which are
qualified Master or Prototype defined contribution Plans, any Welfare Benefit
Fund, any Individual Medical Account, or any simplified employee pension.)
(b)(1) If, in addition to this Plan, the Participant is covered under any
other qualified defined contribution plans (all of which are qualified
Master or Prototype Plans), Welfare Benefit Funds, Individual Medical
Accounts, or simplified employee pension Plans, maintained by the
Employer, that provide an annual addition as defined in Section
5.03(e)(1), the amount of Annual Additions to a Participant's Account for
a Limitation Year shall not exceed the lesser of
(A) the Maximum Permissible Amount, reduced by the sum of any Annual
Additions to the Participant's accounts for the same Limitation Year under
such other qualified Master or Prototype defined contribution plans, and
Welfare Benefit Funds, Individual Medical Accounts, and simplified
employee pensions, or
(B) any other limitation contained in this Plan.
If the annual additions with respect to the Participant under other
qualified Master or Prototype defined contribution Plans, Welfare Benefit
Funds, Individual Medical Accounts, and simplified employee pensions
maintained by the Employer are less than the maximum permissible amount
and the Employer contribution that would otherwise be contributed or
allocated to the Participant's account under this plan would cause the
annual additions for the limitation year to exceed this limitation, the
amount contributed or allocated will be reduced so that the annual
additions under all such plans and funds for the limitation year will
equal the maximum permissible amount. If the annual additions with respect
to the Participant under such other qualified Master or Prototype defined
contribution Plans, Welfare Benefit Funds, Individual Medical
26
<PAGE> 31
Accounts, and simplified employee pensions in the aggregate are equal
to or greater than the maximum permissible amount, no amount will be
contributed or allocated to the Participant's account under this plan
for the limitation year.
(b)(2) Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the amounts referred to in (b)(1)(A) above may be
determined on the basis of a reasonable estimation of the Participant's
compensation for such Limitation Year, uniformly determined for all
Participants similarly situated. Any Employer contribution based on
estimated annual compensation shall be reduced by any Excess Amounts
carried over from prior years.
(b)(3) As soon as is administratively feasible after the end of the
Limitation Year, the amounts referred to in (b)(1)(A) shall be determined
on the basis of the Participant's actual Compensation for such Limitation
Year.
(b)(4) If a Participant's Annual Additions under this Plan and all such
other plans result in an Excess Amount, such Excess Amount shall be deemed
to consist of the Annual Additions last allocated, except that Annual
Additions attributable to a simplified employee pension will be deemed to
have been allocated first, followed by Annual Additions to a Welfare
Benefit Fund or Individual Medical Account regardless of the actual
allocation date.
(b)(5) If an Excess Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of another plan,
the Excess Amount attributed to this Plan will be the product of
(A) the total Excess Amount allocated as of such date (including any
amount which would have been allocated but for the limitations of
Section 415 of the Code), and
(B) the ratio of (i) the Annual Additions allocated to the
Participant as of such date under this Plan, and (ii) the Annual
Additions allocated as of such date under all qualified defined
contribution plans (determined without regard to the limitations of
Section 415 of the Code).
(b)(6) Any Excess Amounts attributed to this Plan shall be disposed of as
provided in subsection (a)(4).
Subsection (c)--(This subsection applies only to Employers who, in
addition to this Plan, maintain one or more qualified plans which are qualified
defined contribution plans other than Master or Prototype Plans.)
(c)If the Employer also maintains another plan which is a qualified
defined contribution plan other than a Master or Prototype Plan, Annual
Additions allocated under this Plan on behalf of any Participant shall be
limited in accordance with the provisions of (b)(1) through (b)(6), as
though the other plan were
27
<PAGE> 32
a Master or Prototype Plan, unless the Employer provides other
limitations in the Adoption Agreement.
Subsection (d)--(This subsection applies only to Employers who, in
addition to this Plan, maintain or at any time maintained a qualified defined
benefit plan.)
(d)If the Employer maintains, or at any time maintained, a qualified
defined benefit plan, the sum of any Participant's Defined Benefit
Fraction and Defined Contribution Fraction shall not exceed the combined
plan limitation of 1.0 in any Limitation Year. The combined plan
limitation will be met as provided by the Employer in the Adoption
Agreement.
Subsections (e)(1) through (e)(11)--(Definitions.)
(e)(1) "Annual Additions" means the sum of the following amounts credited
to a Participant for a Limitation Year:
(A) all Employer contributions,
(B) all Employee Contributions,
(C) all forfeitures,
(D) amounts allocated, after March 31, 1984, to an Individual Medical
Account which is part of a pension or annuity plan maintained by the
Employer are treated as Annual Additions to a defined contribution
plan. Also, amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a key employee, as defined in Section 419A(d)(3)
of the Code, under a Welfare Benefit Fund maintained by the Employer
are treated as Annual Additions to a defined contribution plan, and
(E) allocations under a simplified employee pension.
For purposes of this Section 5.03, amounts reapplied to reduce
Employer contributions under subsection (a)(4) shall also be included as
Annual Additions.
(e)(2) "Compensation" means wages as defined in Section 3401(a) of the
Code and all other payments of compensation to an employee by the employer
(in the course of the employer's trade or business) for which the employer
is required to furnish the employee a written statement under Sections
6041(d) and 6051(a)(3) of the Code. Compensation must be determined
without regard to any rules under Section 3401(a) of the Code that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2) of the Code.)
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For any Self-Employed Individual compensation will mean Earned Income.
For limitation years beginning after December 31, 1991, for purposes of
applying the limitations of this article, compensation for a limitation
year is the compensation actually paid or made available during such
limitation year.
(e)(3) "Defined Benefit Fraction" means a fraction, the numerator of which
is the sum of the Participant's annual benefits (adjusted to an
actuarially equivalent straight life annuity if such benefit is expressed
in a form other than a straight life annuity or qualified joint and
survivor annuity) under all the defined benefit plans (whether or not
terminated) maintained by the Employer, each such annual benefit computed
on the assumptions that the Participant will remain in employment until
the normal retirement age under each such plan (or the Participant's
current age, if later) and that all other factors used to determine
benefits under such plan will remain constant for all future Limitation
Years, and the denominator of which is the lesser of 125 percent of the
dollar limitation determined for the Limitation Year under Sections
415(b)(1)(A) and 415(d) of the Code or 140 percent of the Participant's
highest average Compensation for 3 consecutive calendar years of service
during which the Participant was active in each such plan, including any
adjustments under Section 415(b) of the Code. However, if the Participant
was a participant as of the first day of the first Limitation Year
beginning after December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on May 6, 1986 then the
denominator of the Defined Benefit Fraction shall not be less than 125
percent of the Participant's total accrued benefit as of the close of the
last Limitation Year beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986, under
all such defined benefit plans that met, individually and in the
aggregate, the requirements of Section 415 of the Code for all Limitation
Years beginning before January 1, 1987.
(e)(4) "Defined Contribution Fraction" means a fraction, the numerator of
which is the sum for the current and all prior Limitation Years of (A) all
Annual Additions (if any) to the Participant's accounts under each defined
contribution plan (whether or not terminated) maintained by the Employer
and (B) all Annual Additions attributable to the Participant's
nondeductible Employee Contributions to all defined benefit plans (whether
or not terminated) maintained by the Employer, and the Participant's
Annual Additions attributable to all Welfare Benefit Funds, Individual
Medical Accounts, and simplified employee pensions, maintained by the
Employer, and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior Limitation Years during which the
Participant was an Employee (regardless of whether the Employer maintained
a defined contribution plan in any such year).
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The maximum aggregate amount in any Limitation Year is the lesser of
125 percent of the dollar limitation in effect under Section 415(c)(1)(A)
of the Code for each such year or 35 percent of the Participant's
Compensation for each such year.
If the Participant was a participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which were in existence on
May 6, 1986, then the numerator of the Defined Contribution Fraction shall
be adjusted if the sum of this fraction and the Defined Benefit Fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment an amount equal to the product of (i) the excess of the sum of
the fractions over 1.0 and (ii) the denominator of this fraction will be
permanently subtracted from the numerator of this fraction. The adjustment
is calculated using the fractions as they would be computed as of the end
of the last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the plan made
after May 6, 1986, but using the Section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987.
The annual addition for any limitation year beginning before January
1, 1987 shall not be recomputed to treat all employee contributions as
annual additions.
(e)(5) "Employer" means the Employer and any Related Employer that adopts
this Plan. In the case of a group of employers which constitutes a
controlled group of corporations (as defined in Section 414(b) of the Code
as modified by Section 415(h)) or which constitutes trades or businesses
(whether or not incorporated) which are under common control (as defined
in Section 414(c) of the Code as modified by Section 415(h) of the Code)
or which constitutes an affiliated service group (as defined in Section
414(m)of the Code) and any other entity required to be aggregated with the
Employer pursuant to regulations issued under Section 414(o) of the Code,
all such employers shall be considered a single employer for purposes of
applying the limitations of this Section 5.03.
(e)(6) "Excess Amount" means the excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(e)(7) "Individual Medical Account" means an individual medical account as
defined in Section 415(l)(2) of the Code.
(e)(8) "Limitation Year" means the Plan Year. All qualified plans of the
Employer must use the same Limitation Year. If the Limitation Year is
amended to a different 12-consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the
amendment is made.
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(e)(9) "Master or Prototype Plan" means a plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(e)(10) "Maximum Permissible Amount" means for a Limitation Year with
respect to any Participant the lesser of (A) $30,000 or, if greater, 25
percent of the dollar limitation set forth in Section 415(b)(1) of the
Code, as in effect for the Limitation Year, or (B) 25 percent of the
Participant's Compensation for the Limitation Year. If a short Limitation
Year is created because of an amendment changing the Limitation Year to a
different 12-consecutive-month period, the Maximum Permissible Amount will
not exceed the limitation in (e)(10)(A) multiplied by a fraction whose
numerator is the number of months in the short Limitation Year and whose
denominator is 12.
The compensation limitation referred to in subsection (e)(10)(B)
shall not apply to any contribution for medical benefits within the
meaning of Section 401(h) or Section 419A(f)(2) of the Code after
separation from service which is otherwise treated as an Annual Addition
under Section 419A(d)(2) or Section 415(l)(1) of the Code.
(e)(11) "Welfare Benefit Fund" means a welfare benefit fund as defined in
Section 419(e) of the Code.
ARTICLE 6. INVESTMENT OF CONTRIBUTIONS.
6.01. MANNER OF INVESTMENT. All contributions made to the Accounts of
Participants shall be held for investment by the Trustee. The Accounts of
Participants shall be invested and reinvested only in eligible investments
selected by the Employer in Section 1.14(b), subject to Section 14.10.
6.02. INVESTMENT DECISIONS. Investments shall be directed by the Employer or by
each Participant or both, in accordance with the Employer's election in Section
1.14(a). Pursuant to Section 14.04, the Trustee shall have no discretion or
authority with respect to the investment of the Trust Fund.
(a) With respect to those Participant Accounts for which Employer
investment direction is elected, the Employer has the right to direct the
Trustee in writing with respect to the investment and reinvestment of
assets comprising the Trust Fund in the Fidelity Fund(s) designated in
Section 1.14(b) and as allowed by the Trustee.
(b)If Participant investment direction is elected, each Participant shall
direct the investment of his Account among the Fidelity Funds listed in
Section 1.14(b). The Participant shall file initial investment
instructions with the Administrator, on such form as the Administrator may
provide, selecting the Funds in which amounts credited to his Account will
be invested.
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(1) Except as provided in this Section 6.02, only authorized Plan
contacts and the Participant shall have access to a Participant's
Account. While any balance remains in the Account of a Participant
after his death, the Beneficiary of the Participant shall make
decisions as to the investment of the Account as though the Beneficiary
were the Participant. To the extent required by a qualified domestic
relations order as defined in Section 414(p) of the Code, an alternate
payee shall make investment decisions with respect to a Participant's
Account as though such alternate payee were the Participant.
(2) If the Trustee receives any contribution under the Plan as to which
investment instructions have not been provided, the Trustee shall
promptly notify the Administrator and the Administrator shall take
steps to elicit instructions from the Participant. The Trustee shall
credit any such contribution to the Participant's Account and such
amount shall be invested in the Fidelity Fund selected by the Employer
for such purposes or, absent Employer selection, in the most
conservative Fidelity Fund listed in Section 1.14(b), until investment
instructions have been received by the Trustee.
(c) All dividends, interest, gains and distributions of any nature
received in respect of Fund Shares shall be reinvested in additional
shares of that Fidelity Fund.
(d)Expenses attributable to the acquisition of investments shall be
charged to the Account of the Participant for which such investment is
made.
6.03. PARTICIPANT DIRECTIONS TO TRUSTEE. All Participant initial investment
instructions filed with the Administrator pursuant to the provisions of Section
6.02 shall be promptly transmitted by the Administrator to the Trustee. A
Participant shall transmit subsequent investment instructions directly to the
Trustee by means of the telephone exchange system maintained by the Trustee for
such purposes. The method and frequency for change of investments will be
determined under the (a) rules applicable to the investments selected by the
Employer in Section 1.14(b) and (b) the additional rules of the Employer, if
any, limiting the frequency of investment changes, which are included in a
separate written administrative procedure adopted by the Employer and accepted
by the Trustee. The Trustee shall have no duty to inquire into the investment
decisions of a Participant or to advise him regarding the purchase, retention or
sale of assets credited to his Account.
ARTICLE 7. RIGHT TO BENEFITS.
7.01. NORMAL OR EARLY RETIREMENT. Each Participant who attains his Normal
Retirement Age or, if so provided by the Employer in Section 1.06(b), Early
Retirement Age, will have a 100-percent nonforfeitable interest in his Account
regardless of any vesting schedule elected in
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Section 1.07. If a Participant retires upon the attainment of Normal or Early
Retirement Age, such retirement is referred to as a normal retirement. Upon his
normal retirement the balance of the Participant's Account, plus any amounts
thereafter credited to his Account, subject to the provisions of Section 7.08,
will be distributed to him in accordance with Article 8.
If a Participant separates from service before satisfying the age
requirements for early retirement, but has satisfied the service requirement,
the Participant will be entitled to elect an early retirement distribution upon
satisfaction of such age requirement.
7.02. LATE RETIREMENT. If a Participant continues in the service of the Employer
after attainment of Normal Retirement Age, he will continue to have a
100-percent nonforfeitable interest in his Account and will continue to
participate in the Plan until the date he establishes with the Employer for his
late retirement. Until he retires, he has a continuing election to receive all
or any portion of his Account. Upon the earlier of his late retirement or the
distribution date required under Section 8.08, the balance of his Account, plus
any amounts thereafter credited to his Account, subject to the provisions of
Section 7.08, will be distributed to him in accordance with Article 8 below.
7.03. DISABILITY RETIREMENT. If so provided by the Employer in Section 1.06(c),
a Participant who becomes disabled will have a 100-percent nonforfeitable
interest in his Account, the balance of which Account, plus any amounts
thereafter credited to his Account, subject to the provisions of Section 7.08,
will be distributed to him in accordance with Article 8 below. A Participant is
considered disabled if he cannot engage in any substantial, gainful activity
because of a medically determinable physical or mental impairment likely to
result in death or to be of a continuous period of not less than 12 months, and
terminates his employment with the Employer. Such termination of employment is
referred to as a disability retirement. Determinations with respect to
disability shall be made by the Administrator who may rely on the criteria set
forth in Section 1.06(c) as evidence that the Participant is disabled.
7.04. DEATH. Subject, if applicable, to Section 8.04, if a Participant dies
before the distribution of his Account has commenced, or before such
distribution has been completed, his Account shall become 100 percent vested and
his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, plus any amounts thereafter
credited to his Account, subject to the provisions of Section 7.08. Distribution
to the Beneficiary or Beneficiaries will be made in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change any
prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form. In the case of a married Participant, the
Participant's spouse shall be deemed to be the designated Beneficiary unless the
Participant's spouse
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has consented to another designation in the manner described in Section 8.03(d).
A copy of the death notice or other sufficient documentation must be filed
with and approved by the Administrator. If upon the death of the Participant
there is, in the opinion of the Administrator, no designated Beneficiary for
part or all of the Participant's Account, such amount will be paid to his
surviving spouse or, if none, to his estate (such spouse or estate shall be
deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies
after benefits to such Beneficiary have commenced, but before they have been
completed, and, in the opinion of the Administrator, no person has been
designated to receive such remaining benefits, then such benefits shall be paid
in a lump sum to the deceased Beneficiary's estate.
7.05. OTHER TERMINATION OF EMPLOYMENT. If a Participant terminates his
employment for any reason other than death or normal, late, or disability
retirement, he will be entitled to a termination benefit equal to the sum of (a)
the vested percentage(s) of the value of the Matching and/or Fixed/Discretionary
Contributions to his Account, as adjusted for income, expense, gain, or loss,
such percentage(s) determined in accordance with the vesting schedule(s)
selected by the Employer in Section 1.07, and (b) the value of the Deferral,
Employee, Qualified Discretionary and Rollover Contributions to his Account as
adjusted for income, expense, gain or loss. The amount payable under this
Section 7.05 will be subject to the provisions of Section 7.08 and will be
distributed in accordance with Article 8 below.
7.06. SEPARATE ACCOUNT. If a distribution from a Participant's Account has been
made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Employer contributions
allocated after such distribution. The balance of his Account immediately after
such distribution will be transferred to a separate account which will be
maintained for the purpose of determining his interest therein according to the
following provisions.
At any relevant time prior to a forfeiture of any portion thereof under
Section 7.07, a Participant's nonforfeitable interest in his Account held in a
separate account described in the preceding paragraph will be equal to P(AB +
(RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time
determined under Section 7.05; AB is the account balance of the separate account
at the relevant time; D is the amount of the distribution; and R is the ratio of
the account balance at the relevant time to the account balance after
distribution. Following a forfeiture of any portion of such separate account
under Section 7.07 below, any balance in the Participant's separate account will
remain fully vested and nonforfeitable.
7.07. FORFEITURES. If a Participant terminates his employment, any portion of
his Account (including any amounts credited after his termination of employment)
not payable to him under Section 7.05 will be forfeited by him upon the complete
distribution to him of the vested portion of his Account, if any, subject to the
possibility of
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reinstatement as described in the following paragraph. For purposes of this
paragraph, if the value of an Employee's vested Account balance is zero, the
Employee shall be deemed to have received a distribution of his vested interest
immediately following termination of employment. Such forfeitures will be
applied to reduce the contributions of the Employer next payable under the Plan
(or administrative expenses of the Plan); the forfeitures shall be held in a
money market fund pending such application.
If a Participant forfeits any portion of his Account under the preceding
paragraph but again becomes an Employee after such date, then the amount so
forfeited, without any adjustment for the earnings, expenses, or losses or gains
of the assets credited to his Account since the date forfeited, will be
recredited to his Account (or to a separate account as described in Section
7.06, if applicable) but only if he repays to the Plan before the earlier of
five years after the date of his reemployment or the date he incurs 5
consecutive 1-year breaks in service following the date of the distribution the
amount previously distributed to him, without interest, under Section 7.05. If
an Employee is deemed to receive a distribution pursuant to this Section 7.07,
and the Employee resumes employment before 5 consecutive 1-year breaks in
service, the Employee shall be deemed to have repaid such distribution on the
date of his reemployment. Upon such an actual or deemed repayment, the
provisions of the Plan (including Section 7.06) will thereafter apply as if no
forfeiture had occurred. The amount to be recredited pursuant to this paragraph
will be derived first from the forfeitures, if any, which as of the date of
recrediting have yet to be applied as provided in the preceding paragraph and,
to the extent such forfeitures are insufficient, from a special Employer
contribution to be made by the Employer.
If a Participant elects not to receive the nonforfeitable portion of his
Account following his termination of employment, the non-vested portion of his
Account shall be forfeited after the Participant has incurred five consecutive
1-year breaks in service as defined in Section 2.01(a)(33).
No forfeitures will occur solely as a result of a Participant's withdrawal
of Employee contributions.
7.08. ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this
Article 7 is not made in a single payment, the amount retained by the Trustee
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments in which such amount is
invested and any expenses properly charged under the Plan and Trust to such
amounts.
7.09. PARTICIPANT LOANS. If permitted under Section 1.09, the Administrator
shall allow Participants to apply for a loan from the Plan, subject to the
following:
(a)Loan Application. All Plan loans shall be administered by the
Administrator. Applications for loans shall be made to the Administrator
on forms available from the Administrator. Loans shall be made available
to all Participants on a reasonably
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equivalent basis. For this purpose, the term "Participant" means any
Participant or Beneficiary, including an alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the Code, who is
a party-in-interest (as determined under ERISA Section 3(14)) with respect
to the Plan except no loans will be made to (1) an Employee who makes a
rollover contribution in accordance with Section 4.10 who has not
satisfied the requirements of Section 3.01 or (2) a shareholder-employee
or Owner-Employee. For purposes of this requirement, a
shareholder-employee means an employee or officer of an electing small
business (Subchapter S) corporation who owns (or is considered as owning
within the meaning of Section 318(a)(1) of the Code), on any day during
the taxable year of such corporation, more than 5% of the outstanding
stock of the corporation.
A Participant with an existing loan may not apply for another loan
until the existing loan is paid in full and may not refinance an existing
loan or attain a second loan for the purpose of paying off the existing
loan. A Participant may not apply for more than one loan during each Plan
Year.
(b) Limitation of Loan Amount/Purpose of Loan. Loans shall not be made
available to Highly Compensated Employees in an amount greater than the
amount made available to other Employees. No loan to any Participant or
Beneficiary can be made to the extent that such loan when added to the
outstanding balance of all other loans to the Participant or Beneficiary
would exceed the lesser of (1) $50,000 reduced by the excess (if any) of
the highest outstanding balance of loans during the one-year period ending
on the day before the loan is made over the outstanding balance of loans
from the plan on the date the loan is made, or (2) one-half the present
value of the nonforfeitable Account of the Participant. For the purpose of
the above limitation, all loans from all plans of the Employer and Related
Employers are aggregated. A Participant may not request a loan for less
than $1,000. The Employer may provide that loans only be made from certain
contribution sources within Participant Account(s) by notifying the
Trustee in writing of the restricted source.
Loans may be made for any purpose or if elected by the Employer in
Section 1.09(a), on account of hardship only. A loan will be considered to
be made on account of hardship only if made on account of an immediate and
heavy financial need described in Section 7.10(b)(1).
(c) Terms of Loan. All loans shall bear a reasonable rate of interest as
determined by the Administrator based on the prevailing interest rates
charged by persons in the business of lending money for loans which would
be made under similar circumstances. The determination of a reasonable
rate of interest must be based on appropriate regional factors unless the
Plan is administered on a national basis in which case the Administrator
may establish a uniform reasonable rate of interest applicable to all
regions.
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<PAGE> 41
All loans shall by their terms require that repayment (principal
and interest) be amortized in level payments, not less than quarterly,
over a period not extending beyond five years from the date of the loan
unless such loan is for the purchase of a Participant's primary residence,
in which case the repayment period may not extend beyond ten years from
the date of the loan. A Participant may prepay the outstanding loan
balance prior to maturity without penalty.
(d) Security. Loans must be secured by the Participant's Accounts not to
exceed 50 percent of the Participant's vested Account. A Participant must
obtain the consent of his or her spouse, if any, to use a Participant
Account as security for the loan, if the provisions of Section 8.03 apply
to the Participant. Spousal consent shall be obtained no earlier than the
beginning of the 90-day period that ends on the date on which the loan is
to be so secured. The consent must be in writing, must acknowledge the
effect of the loan, and must be witnessed by a Plan representative or
notary public. Such consent shall thereafter be binding with respect to
the consenting spouse or any subsequent spouse with respect to that loan.
(e) Default. The Administrator shall treat a loan in default if
(1) any scheduled repayment remains unpaid more than 90 days or
(2) there is an outstanding principal balance existing on a loan
after the last scheduled repayment date.
Upon default or termination of employment, the entire outstanding
principal and accrued interest shall be immediately due and payable. If a
distributable event (as defined by the Code) has occurred, the
Administrator shall direct the Trustee to foreclose on the promissory note
and offset the Participant's vested Account by the outstanding balance of
the loan. If a distributable event has not occurred, the Administrator
shall direct the Trustee to foreclose on the promissory note and offset
the Participant's vested Account as soon as a distributable event occurs.
(f) Pre-existing loans. The provision in paragraph (a) of this Section
7.09 limiting a Participant to one outstanding loan shall not apply to
loans made before the Employer adopted this prototype plan document. A
Participant may not apply for a new loan until all outstanding loans made
before the Employer adopted this prototype plan have been paid in full.
The Trustee may accept any loans made before the Employer adopted this
prototype plan document except such loans which require the Trustee to
hold as security for the loan property other than the Participant's vested
Account.
As of the effective date of amendment of this Plan in Section
1.01(g)(2), the Trustee shall have the right to reamortize the outstanding
principal balance of any Participant loan that is delinquent. Such
reamortization shall be based upon the remaining
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life of the loan and the original maturity date may not be extended.
Notwithstanding any other provision of this Plan, the portion of the
Participant's vested Account used as a security interest held by the plan
by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the Account payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested
Account (determined without regard to the preceding sentence) is payable
to the surviving spouse, then the Account shall be adjusted by first
reducing the vested Account by the amount of the security used as
repayment of the loan, and then determining the benefit payable to the
surviving spouse.
No loan to any Participant or Beneficiary can be made to the extent
that such loan when added to the outstanding balance of all other loans to
the Participant or Beneficiary would exceed the lesser of (1) $50,000
reduced by the excess (if any) of the highest outstanding balance of loans
during the one-year period ending on the day before the loan is made over
the outstanding balance of loans from the plan on the date the loan is
made or (2) one-half the present value of the nonforfeitable Account of
the Participant. For the purpose of the above limitation, all loans from
all plans of the Employer and Related Employers are aggregated.
7.10. IN-SERVICE/HARDSHIP WITHDRAWALS. Subject to the provisions of Article 8, a
Participant shall not be permitted to withdraw any Employer or Employee
Contributions (and earnings thereon) prior to retirement or termination of
employment, except as follows:
(a) AGE 59 1/2. If permitted under Section 1.11(b), a Participant who has
attained the age of 59 1/2 is permitted to withdraw upon request all or any
portion of the Accounts specified by the Employer in 1.11(b).
(b) HARDSHIP. If permitted under Section 1.10, a Participant may apply to
the Administrator to withdraw some or all of his Deferral Contributions (and
earnings thereon accrued as of December 31, 1988) and, if applicable, Rollover
Contributions and such other amounts allowed by a predecessor plan, if such
withdrawal is made on account of a hardship. For purposes of this Section, a
distribution is made on account of hardship if made on account of an immediate
and heavy financial need of the Employee where such Employee lacks other
available resources. Determinations with respect to hardship shall be made by
the Administrator and shall be conclusive for purposes of the Plan, and shall be
based on the following special rules:
(1) The following are the only financial needs considered immediate and
heavy: expenses incurred or necessary for medical care (within the
meaning of Section 213(d) of the Code) of the Employee, the Employee's
spouse, children, or dependents; the purchase (excluding mortgage
payments) of a principal residence for the Employee; payment of tuition
and related educational fees
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for the next twelve (12) months of post-secondary education for the
Employee, the Employee's spouse, children or dependents; or the need
to prevent the eviction of the Employee from, or a foreclosure on
the mortgage of, the Employee's principal residence.
(2) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than the
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by the
Employer;
(ii) The Employee suspends Deferral Contributions and Employee
Contributions to the Plan for the 12-month period following the
date of his hardship distribution. The suspension must also apply
to all elective contributions and Employee Contributions to all
other qualified plans and non-qualified plans maintained by the
Employer, other than any mandatory employer contribution portion of
a defined benefit plan, including stock option, stock purchase and
other similar plans, but not including health and welfare benefit
plans (other than the cash or deferred arrangement portion of a
cafeteria plan);
(iii) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts necessary to
pay any Federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution); and
(iv) The Employee agrees to limit Deferral Contributions (elective
contributions)to the Plan and any other qualified plan maintained
by the Employer for the Employee's taxable year immediately
following the taxable year of the hardship distribution to the
applicable limit under Section 402(g) of the Code for such taxable
year less the amount of such Employee's Deferral Contributions for
the taxable year of the hardship distribution.
(3) A Participant must obtain the consent of his or her spouse, if any,
to obtain a hardship withdrawal, if the provisions of Section 8.03
apply to the Participant.
(c) EMPLOYEE CONTRIBUTIONS. A Participant may elect to withdraw, in cash,
up to one hundred percent of the amount then credited to his Employee
Contribution Account. Such withdrawals shall be limited to one (1) per
Plan Year unless this prototype plan document is an amendment of a prior
plan document, in which case the rules and restrictions governing Employee
Contribution withdrawals, if any, are incorporated herein by reference.
7.11. PRIOR PLAN IN-SERVICE DISTRIBUTION RULES. If designated by the Employer in
Section 1.11(b), a Participant shall be entitled to withdraw
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at anytime prior to his termination of employment, subject to the provisions of
Article 8 and the prior plan, any vested Employer Contributions maintained in a
Participant's Account for the specified period of time.
ARTICLE 8. DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE.
8.01. DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES.
(a) Distributions from the Trust to a Participant or to the Beneficiary of
the Participant shall be made in a lump sum in cash or, if elected by the
Employer in Section 1.11, under a systematic withdrawal plan
(installment(s)) upon retirement, death, disability, or other termination
of employment, unless another form of distribution is required or
permitted in accordance with paragraph (d) of this Section 8.01 or
Sections 1.11(c), 8.02, 8.03, 8.04 or 11.02. A distribution may be made in
Fund Shares, at the election of the Participant, pursuant to the
qualifying rollover of such distribution to a Fidelity Investments
individual retirement account.
(b) Distributions under a systematic withdrawal plan must be made in
substantially equal annual, or more frequent, installments, in cash, over
a period certain which does not extend beyond the life expectancy of the
Participant or the joint life expectancies of the Participant and his
Beneficiary, or, if the Participant dies prior to the commencement of his
benefits the life expectancy of the Participant's Beneficiary, as further
described in Section 8.04.
(c) Notwithstanding the provisions of Section 8.01(b) above, if a
Participant's Account is, and at the time of any prior distribution(s)
was, $3,500 or less, the balance of such Account shall be distributed in a
lump sum as soon as practicable following retirement, disability, death or
other termination of employment.
(d) This paragraph (d) applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article 8, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover. The following definitions shall apply for purposes
of this paragraph (d):
(1) Eligible rollover distribution: An eligible rollover distribution
is any distribution of all or any portion of the balance to the credit
of the distributee, except that an eligible rollover distribution does
not include: any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
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lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of
ten years or more; any distribution to the extent such distribution
is required under Section 401(a)(9) of the Code; and the portion of
any distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
(2) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the Code,
an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However, in the case
of an eligible rollover distribution to a surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(3) Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined
in Section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(4) Direct rollover: A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributee.
8.02. ANNUITY DISTRIBUTIONS. If so provided in Section 1.11(c), a Participant
may elect distributions made in whole or in part in the form of an annuity
contract subject to the provisions of Section 8.03.
(a)An annuity contract distributed under the Plan must be purchased from
an insurance company and must be nontransferable. The terms of an annuity
contract shall comply with the requirements of the Plan and distributions
under such contract shall be made in accordance with Section 401(a)(9) of
the Code and the regulations thereunder.
(b)The payment period of an annuity contract distributed to the
Participant pursuant to this Section may be as long as the Participant
lives. If the annuity is payable to the Participant and his spouse or
designated Beneficiary, the payment period of an annuity contract may be
for as long as either the Participant or his spouse or designated
Beneficiary lives. Such an annuity may provide for an annuity certain
feature for a period not exceeding the life expectancy of the Participant.
If the annuity is payable to the Participant and his spouse such period
may not exceed the joint life and last survivor expectancy of the
Participant and his spouse, or, if the annuity is payable to the
Participant and a designated Beneficiary, the joint life and last survivor
expectancy of the Participant and such Beneficiary. If the Participant
dies
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prior to the commencement of his benefits, the payment period of an
annuity contract distributed to the Beneficiary of the Participant may be
as long as the Participant's Beneficiary lives, and may provide for an
annuity certain feature for a period not exceeding the life expectancy of
the Beneficiary. Any annuity contract distributed under the Plan must
provide for nonincreasing payments.
8.03. JOINT AND SURVIVOR ANNUITIES/PRERETIREMENT SURVIVOR ANNUITIES.
(a)Application. The provisions of this Section supersede any conflicting
provisions of the Plan; however, paragraph (b) of this Section shall not
apply if the Participant's Account does not exceed or at the time of any
prior distribution did not exceed $3,500. A Participant is described in
this Section only if (i) the Participant has elected distribution of his
Account in the form of an Annuity Contract in accordance with Section
8.02, or (ii) the Trustee has directly or indirectly received a transfer
of assets from another plan (including a predecessor plan) to which
Section 401(a)(11) of the Code applies with respect to such Participant.
(b) Retirement Annuity. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below, to the extent applicable to the Participant, within
the 90-day period preceding his Annuity Starting Date (which election may
be revoked, and if revoked, remade, at any time in such period), the
vested Account due any Participant to whom this subsection (b) applies
will be paid to him by the purchase and delivery to him of an annuity
contract described in Section 8.02 providing a life annuity only form of
benefit or, if the Participant is married as of his Annuity Starting Date,
providing an immediate annuity for the life of the Participant with a
survivor annuity for the life of the Participant's spouse (determined as
of the date of distribution of the contract) which is 50 percent of the
amount of the annuity which is payable during the joint lives of the
Participant and such spouse. The Participant may elect to receive
distribution of his benefits in the form of such annuity as of the
earliest date on which he could elect to receive retirement benefits under
the Plan. Within the period beginning 90 days prior to the Participant's
Annuity Starting Date and ending 30 days prior to such Date, the
Administrator will provide such Participant with a written explanation of
(1) the terms and conditions of the annuity contract described herein, (2)
the Participant's to make, and the effect of, an election to waive
application of this subsection, (3) the rights of the Participant's spouse
under subsection (d), and (4) the right to revoke and the period of time
necessary to revoke the election to waive application of this subsection.
(c) Annuity Death Benefit. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below at any time within the applicable election period
(which election may be revoked, and if revoked, remade, at any time in
such period), if a married Participant to whom this Section applies dies
before his Annuity
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Starting Date, then notwithstanding any designation of a Beneficiary to
the contrary, 50 percent of his vested Account will be applied to purchase
an annuity contract described in Section 8.02 providing an annuity for the
life of the Participant's surviving spouse, which contract will then be
promptly distributed to such spouse. In lieu of the purchase of such an
annuity contract, the spouse may elect in writing to receive distributions
under the Plan as if he or she had been designated by the Participant as
his Beneficiary with respect to 50 percent of his Account. For purposes of
this subsection, the applicable election period will commence on the first
day of the Plan Year in which the Participant attains age 35 and will end
on the date of the Participant's death, provided that in the case of a
Participant who terminates his employment the applicable election period
with respect to benefits accrued prior to the date of such termination
will in no event commence later than the date of his termination of
employment. A Participant may elect to waive the application of this
subsection prior to the Plan Year in which he attains age 35, provided
that any such waiver will cease to be effective as of the first day of the
Plan Year in which the Participant attains age 35.
The Administrator will provide a Participant to whom this subsection
applies with a written explanation with respect to the annuity death
benefit described in this subsection (c) comparable to that required under
subsection (b) above. Such explanation shall be furnished within whichever
of the following periods ends last: (1) the period beginning with the
first day of the Plan Year in which the Participant reaches age 32 and
ending with the end of the Plan Year preceding the Plan Year in which he
reaches age 35, (2) a reasonable period ending after the Employee becomes
a Participant, (3) a reasonable period ending after this Section 8.04
first becomes applicable to the Participant in accordance with Section
8.04(a), (4) in the case of a Participant who separates from service
before age 35, a reasonable period of time ending after separation from
service. For purposes of the preceding sentence, the two-year period
beginning one year prior to the date of the event described in clause (2),
(3) or (4), whichever is applicable, and ending one year after such date
shall be considered reasonable, provided, that in the case of a
Participant who separates from service under (4) above and subsequently
recommences employment with the Employer, the applicable period for such
Participant shall be redetermined in accordance with this subsection.
(d)Requirements of Elections. This subsection will be satisfied with
respect to a waiver or designation which is required to satisfy this
subsection if such waiver or designation is in writing and either
(1) the Participant's spouse consents thereto in writing, which consent
must acknowledge the effect of such waiver or designation and be
witnessed by a notary public or Plan representative, or
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(2) the Participant establishes to the satisfaction of the
Administrator that the consent of the Participant's spouse cannot be
obtained because there is no spouse, because the spouse cannot be
located, or because of such other circumstances as the Secretary of
Treasury may prescribe.
Any consent by a spouse, or establishment that the consent of a
spouse may not be obtained, will be effective only with respect to a
specific Beneficiary (including any class of Beneficiaries or any
contingent Beneficiaries) or form of benefits identified in the
Participant's waiver or designation, unless the consent of the spouse
expressly permits designations by the Participant without any
requirement of further consent by the spouse. A consent which permits
such designations by the Participant shall acknowledge that the spouse
has the right to limit consent to a specific Beneficiary and form of
benefits and that the spouse voluntarily elects to relinquish both such
rights. A consent by a spouse shall be irrevocable once made. Any such
consent, or establishment that such consent may not be obtained, will
be effective only with respect to such spouse. For purposes of
subsections (b) and (c) above, no consent of a spouse shall be valid
unless the notice required by whichever subsection is applicable has
been provided to the Participant.
(e) Former Spouse. For purposes of this Section 8.03, a former spouse of a
Participant will be treated as the spouse or surviving spouse of the
Participant, and a current spouse will not be so treated, to the extent
required under a qualified domestic relations order, as defined in Section
414(p) of the Code.
(f) Vested Account Balance. For purposes of this Section, vested Account
shall include the aggregate value of the Participant's vested Account
derived from Employer and Employee Contributions (including rollovers),
whether vested before or upon death. The provisions of this Section shall
apply to a Participant who is vested in amounts attributable to Employer
contributions, Employee Contributions, or both, upon death or at the time
of distribution.
8.04 INSTALLMENT DISTRIBUTIONS. This Section shall be interpreted and applied in
accordance with the regulations under Section 401(a)(9) of the Code, including
the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2
of the Proposed Treasury Regulations, or any successor regulations of similar
import.
(a) In General. If a Participant's benefit may be distributed in
accordance with Section 8.01(b), the amount to be distributed for each
calendar year for which a minimum distribution is required shall be at
least an amount equal to the quotient obtained by dividing the
Participant's interest in his Account by the life expectancy of the
Participant or Beneficiary or the joint life and last survivor expectancy
of the Participant and his Beneficiary, whichever is applicable. For
calendar years beginning before January 1, 1989, if a Participant's
Beneficiary is not his spouse, the method of distribution selected must
insure that at least 50 percent of the present value of the amount
available for
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distribution is paid within the life expectancy of the Participant. For
calendar years beginning after December 31, 1988, the amount to be
distributed for each calendar year shall not be less than an amount equal
to the quotient obtained by dividing the Participant's interest in his
Account by the lesser of (1) the applicable life expectancy under Section
8.01(b), or (2) if a Participant's Beneficiary is not his spouse, the
applicable divisor determined under Section 1.401(a)(9)-2, Q&A 4 of the
Proposed Treasury Regulations, or any successor regulations of similar
import. Distributions after the death of the Participant shall be made
using the applicable life expectancy under (1) above, without regard to
Section 1.401(a)(9)-2 of such regulations.
The minimum distribution required under this subsection (a) for the
calendar year immediately preceding the calendar year in which the
Participant's required beginning date, as determined under Section
8.08(b), occurs shall be made on or before the Participant's required
beginning date, as so determined. Minimum distributions for other calendar
years shall be made on or before the close of such calendar year.
(b) Additional Requirements for Distributions After Death of Participant.
(1) Distribution beginning before Death. If the Participant dies before
distribution of his benefits has begun, distributions shall be made in
accordance with the provisions of this paragraph. Distributions under
Section 8.01(a) shall be completed by the close of the calendar year in
which the fifth anniversary of the death of the Participant occurs.
Distributions under Section 8.01(b) shall commence, if the Beneficiary
is not the Participant's spouse, not later than the close of the
calendar year immediately following the calendar year in which the
death of the Participant occurs. Distributions under Section 8.01(b) to
a Beneficiary who is the Participant's surviving spouse shall commence
not later than the close of the calendar year in which the Participant
would have attained age 70 1/2 or, if later, the close of the calendar
year immediately following the calendar year in which the death of the
Participant occurs. In the event such spouse dies prior to the date
distribution to him or her commences, he or she will be treated for
purposes of this subsection (other than the preceding sentence) as if
he or she were the Participant. If the Participant has not designated a
Beneficiary, or the Participant or Beneficiary has not effectively
selected a method of distribution, distribution of the Participant's
benefit shall be completed by the close of the calendar year in which
the fifth anniversary of the death of the Participant occurs.
Any amount paid to a child of the Participant will be treated as if it
had been paid to the surviving spouse if the amount becomes payable to
the surviving spouse when the child reaches the age of majority.
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For purposes of this subsection (b)(1), the life expectancy of a
Beneficiary who is the Participant's surviving spouse shall be
recalculated annually unless the Participant's spouse irrevocably
elects otherwise prior to the time distributions are required to begin.
Life expectancy shall be computed in accordance with the provisions of
subsection (a) above.
(2) Distribution beginning after Death. If the Participant dies after
distribution of his benefits has begun, distributions to the
Participant's Beneficiary will be made at least as rapidly as under the
method of distribution being used as of the date of the Participant's
death.
For purposes of this Section 8.04(b), distribution of a
Participant's interest in his Account will be considered to begin as of
the Participant's required beginning date, as determined under Section
8.08(b). If distribution in the form of an annuity irrevocably commences
prior to such date, distribution will be considered to begin as of the
actual date distribution commences.
(c) Life Expectancy. For purposes of this Section, life expectancy shall
be recalculated annually in the case of the Participant or a Beneficiary
who is the Participant's spouse unless the Participant or Beneficiary
irrevocably elects otherwise prior to the time distributions are required
to begin. If not recalculated in accordance with the foregoing, life
expectancy shall be calculated using the attained age of the Participant
or Beneficiary, whichever is applicable, as of such individual's birth
date in the first year for which a minimum distribution is required
reduced by one for each elapsed calendar year since the date life
expectancy was first calculated. For purposes of this Section, life
expectancy and joint life and last survivor expectancy shall be computed
by use of the expected return multiples in Table V and VI of section
1.72-9 of the income tax Regulations.
A Participant's interest in his Account for purposes of this Section
8.04 shall be determined as of the last valuation date in the calendar
year immediately preceding the calendar year for which a minimum
distribution is required, increased by the amount of any contributions
allocated to, and decreased by any distributions from, such Account after
the valuation date. Any distribution for the first year for which a
minimum distribution is required made after the close of such year shall
be treated as if made prior to the close of such year.
8.05. IMMEDIATE DISTRIBUTIONS. If the Account distributable to a Participant
exceeds, or at the time of any prior distribution exceeded, $3,500, no
distribution will be made to the Participant before he reaches his Normal
Retirement Age (or age 62, if later), unless the written consent of the
Participant has been obtained. Such consent shall be made in writing within the
90-day period ending on the Participant's Annuity Starting Date. Within the
period beginning 90 days before the Participant's Annuity Starting Date and
ending 30 days before such Date, the Administrator will provide such Participant
with written notice comparable to the notice described in Section 8.03(b)
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containing a general description of the material features and an explanation of
the relative values of the optional forms of benefit available under the Plan
and informing the Participant of his right to defer receipt of the distribution
until his Normal Retirement Age (or age 62, if later).
The consent of the Participant's spouse must also be obtained if the
Participant is subject to the provisions of Section 8.03(a), unless the
distribution will be made in the form of the applicable retirement annuity
contract described in Section 8.03(b). A spouse's consent to early distribution,
if required, must satisfy the requirements of Section 8.03(d).
Neither the consent of the Participant nor the Participant's spouse shall
be required to the extent that a distribution is required to satisfy Section
401(a)(9) or Section 415 of the Code. In addition, upon termination of the Plan
if it does not offer an annuity option (purchased from a commercial provider)
and if the Employer or any Related Employer does not maintain another defined
contribution plan (other than an employee stock ownership plan as defined in
Code Section 4975(e)(7)) the Participant's Account will, without the
Participant's consent, be distributed to the Participant. However, if any
Related Employer maintains another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the Code) then
the Participant's Account will be transferred, without the Participant's
consent, to the other plan if the Participant does not consent to an immediate
distribution.
8.06. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine
the method of distribution of benefits to himself and may determine the method
of distribution to his Beneficiary. Such determination will be made prior to the
time benefits become payable under the Plan. If the Participant does not
determine the method of distribution to his Beneficiary or if the Participant
permits his Beneficiary to override his determination, the Beneficiary, in the
event of the Participant's death, will determine the method of distribution of
benefits to himself as if he were the Participant. A determination by the
Beneficiary must be made no later than the close of the calendar year in which
distribution would be required to begin under Section 8.04(b) or, if earlier,
the close of the calendar year in which the fifth anniversary of the death of
the Participant occurs.
8.07. NOTICE TO TRUSTEE. The Administrator will notify the Trustee in writing
whenever any Participant or Beneficiary is entitled to receive benefits under
the Plan. The Administrator's notice shall indicate the form of benefits that
such Participant or Beneficiary shall receive and (in the case of distributions
to a Participant) the name of any designated Beneficiary or Beneficiaries.
8.08. TIME OF DISTRIBUTION. In no event will distribution to a Participant be
made latest than the earlier of the dates described in (a) and (b) below:
(a) Absent the consent of the Participant (and his spouse, if
appropriate), the 60th day after the close of the Plan Year in
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which occurs the later of the date on which the Participant attains age
65, the date on which the Participant ceases to be employed by the
Employer, or the 10th anniversary of the year in which the Participant
commenced participation in the Plan; and
(b) April 1 of the calendar year first following the calendar year in
which the Participant attains age 70 1/2 or, in the case of a Participant
who had attained age 70 1/2 before January 1, 1988, the required beginning
date determined in accordance with (1) or (2) below:
(1) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year
following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
(2) The required beginning date of a Participant who is a 5-percent
owner during any year beginning after December 31, 1979, is the first
day of April following the later of
(A) the calendar year in which the Participant attains age 70
1/2, or
(B) the earlier of the calendar year with or within which ends
the Plan Year in which the Participant becomes a 5-percent
owner, or the calendar year in which the Participant retires.
Notwithstanding the foregoing, in the case of a Participant who attained
age 70 1/2 during 1988 and who had not retired prior to January 1, 1989, the
required beginning date described in this paragraph shall be April 1, 1990.
Notwithstanding (a) above, the failure of a Participant (and spouse) to
consent to a distribution while a benefit is immediately distributable, within
the meaning of Section 8.05, shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy (a) above.
Once distributions have begun to a 5-percent owner under (b) above, they
must continue to be distributed, even if the Participant ceases to be a
5-percent owner in a subsequent year.
For purposes of (b) above, a Participant is treated as a 5-percent owner
if such Participant is a 5-percent owner as defined in Section 416(i) of the
Code (determined in accordance with Section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year ending with or within
the calendar year in which such owner attains age 66 1/2 or any subsequent Plan
Year.
The Administrator shall notify the Trustee in writing whenever a
distribution is necessary in order to comply with the minimum distribution rules
set forth in this Section.
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8.09. WHEREABOUTS OF PARTICIPANTS AND BENEFICIARIES. The Administrator will at
all times be responsible for determining the whereabouts of each Participant or
Beneficiary who may be entitled to benefits under the Plan and will at all times
be responsible for instructing the Trustee in writing as to the current address
of each such Participant or Beneficiary. The Trustee will be entitled to rely on
the latest written statement received from the Administrator as to such
addresses. The Trustee will be under no duty to make any distributions under the
Plan unless and until it has received written instructions from the
Administrator satisfactory to the Trustee containing the name and address of the
distributee, the time when the distribution is to occur, and the form which the
distribution will take. Notwithstanding the foregoing, if the Trustee attempts
to make a distribution in accordance with the Administrator's instructions but
is unable to make such distribution because the whereabouts of the distributee
is unknown, the Trustee will notify the Administrator of such situation and
thereafter the Trustee will be under no duty to make any further distributions
to such distributee until it receives further written instructions from the
Administrator. If a benefit is forfeited because the Administrator determines
that the Participant or Beneficiary cannot be found, such benefit will be
reinstated by the Sponsor if a claim is filed by the Participant or Beneficiary
with the Administrator and the Administrator confirms the claim to the Sponsor.
ARTICLE 9. TOP-HEAVY PROVISIONS.
9.01 APPLICATION. If the Plan is or becomes a Top-Heavy Plan in any Plan Year or
is automatically deemed to be Top-Heavy in accordance with the Employer's
election in Section 1.12(a)(1) of the Adoption Agreement, the provisions of this
Article 9 shall supersede any conflicting provision in the Plan.
9.02 DEFINITIONS. For purposes of this Article 9, the following terms have the
meanings set forth below:
(a) Key Employee. Any Employee or former Employee (and the Beneficiary of
any such Employee) who at any time during the determination period was (1)
an officer of the Employer whose annual Compensation exceeds 50 percent of
the dollar limitation under Section 415(b)(1)(A) of the Code, (2) an owner
(or considered an owner under Section 318 of the Code) of one of the ten
largest interests in the Employer if such individual's annual Compensation
exceeds the dollar limitation under Section 415(c)(1)(A) of the Code, (3)
a 5-percent owner of the Employer, or (4) a 1-percent owner of the
Employer who has annual Compensation of more than $150,000. For purposes
of this paragraph, the determination period is the Plan Year containing
the Determination Date and the four preceding Plan Years. The
determination of who is a Key Employee shall be made in accordance with
Section 416(i)(1) of the Code and the regulations thereunder. Annual
Compensation means compensation as defined in Section 5.03(e)(2), but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the employee's gross income
under Section 125, Section 402(a)(8), and Section 403(b) of the Code.
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(b) Top-Heavy Plan. The Plan is a Top-Heavy Plan if any of the
following conditions exists:
(1) the Top-Heavy Ratio for the Plan exceeds 60 percent and the Plan
is not part of any Required Aggregation Group or Permissive
Aggregation Group,
(2) the Plan is a part of a Required Aggregation Group but not part of
a Permissive Aggregation Group and the Top-Heavy Ratio for the
Required Aggregation Group exceeds 60 percent, or
(3) the Plan is a part of a Required Aggregation Group and a
Permissive Aggregation Group and the Top-Heavy Ratio for both Groups
exceeds 60 percent.
(c) Top-Heavy Ratio.
(1) With respect to this Plan, or with respect to any Required
Aggregation Group or Permissive Aggregation Group that consists solely
of defined contribution plans (including any simplified employee
pension plans) and the Employer has not maintained any defined benefit
plan which during the 5-year period ending on the determination
date(s) has or has had accrued benefits, the Top-Heavy Ratio is a
fraction, the numerator of which is the sum of the account balances of
all Key Employees under the plans as of the Determination Date
(including any part of any account balance distributed in the 5-year
period ending on the Determination Date), and the denominator of which
is the sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the Determination
Date) of all participants under the plans as of the Determination
Date. Both the numerator and denominator of the Top-Heavy Ratio shall
be increased, to the extent required by Section 416 of the Code, to
reflect any contribution which is due but unpaid as of the
Determination Date.
(2) With respect to any Required Aggregation Group or Permissive
Aggregation Group that includes one or more defined benefit plans
which, during the 5-year period ending on the Determination Date, has
covered or could cover a Participant in this Plan, the Top-Heavy Ratio
is a fraction, the numerator of which is the sum of the account
balances under the defined contribution plans for all Key Employees
and the present value of accrued benefits under the defined benefit
plans for all Key Employees, and the denominator of which is the sum
of the account balances under the defined contribution plans for all
participants and the present value of accrued benefits under the
defined benefit plans for all participants. Both the numerator and
denominator of the Top-Heavy Ratio shall be increased for any
distribution of an account balance or an accrued benefit made in the
5-year period ending on the Determination Date and any contribution
due but unpaid as of the Determination Date.
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(3) For purposes of (1) and (2) above, the value of Accounts and the
present value of accrued benefits will be determined as of the most
recent Valuation Date that falls within or ends with the 12-month
period ending on the Determination Date, except as provided in Section
416 of the Code and the regulations thereunder for the first and second
plan years of a defined benefit plan. The Account and accrued benefits
of a Participant (A) who is not a Key Employee but who was a Key
Employee in a prior year, or (B) who has not been credited with at
least one Hour of Service with the Employer at any time during the
5-year period ending on the Determination Date, will be disregarded.
The calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account, shall
be made in accordance with Section 416 of the Code and the regulations
thereunder. Deductible employee contributions shall not be taken into
account for purposes of computing the Top-Heavy Ratio. When aggregating
plans, the value of Accounts and accrued benefits shall be calculated
with reference to the Determination Dates that fall within the same
calendar year.
For purposes of determining if the Plan, or any other plan included
in a Required Aggregation Group of which this Plan is a part, is a
Top-Heavy Plan, the accrued benefit in a defined benefit plan of an
Employee other than a Key Employee shall be determined under (i) the
method, if any, that uniformly applies for accrual purposes under all
plans maintained by the Employer, or (ii) if there is no such method,
as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional accrual rate of Section
411(b)(1)(C) of the Code.
(d) Permissive Aggregation Group. The Required Aggregation Group plus any
other qualified plans of the Employer or a Related Employer which, when
considered as a group with the Required Aggregation Group, would continue
to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
(e) Required Aggregation Group.
(1) Each qualified plan of the Employer or Related Employer in which at
least one Key Employee participates, or has participated at any time
during the determination period (regardless of whether the plan has
terminated), and
(2) any other qualified plan of the Employer or Related Employer which
enables a plan described in (1) above to meet the requirements of
Sections 401(a)(4) or 410 of the Code.
(f) Determination Date. For any Plan Year of the Plan subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first
Plan Year of the Plan, the last day of that Plan Year.
(g) Valuation Date. The Determination Date.
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(h) Present Value. Present value shall be based only on the interest
rate and mortality table specified in the Adoption Agreement.
9.03. MINIMUM CONTRIBUTION.
(a) Except as otherwise provided in (b) and (c) below, the
Fixed/Discretionary Contributions made on behalf of any Participant who
is not a Key Employee shall not be less than the lesser of 3 percent (or
such other percent elected by the Employer in Section 1.12(c)) of such
Participant's Compensation or, in the case where the Employer has no
defined benefit plan which designates this Plan to satisfy Section 401
of the Code, the largest percentage of Employer contributions, as a
percentage of the first $200,000 of the Key Employee's Compensation,
made on behalf of any Key Employee for that year. If the Employer
selected the Integrated Formula in Section 1.05(a)(2), the minimum
contribution shall be determined under paragraph (e) of this Section
9.03. Further, the minimum contribution under this Section 9.03 shall be
made even though, under other Plan provisions, the Participant would not
otherwise be entitled to receive a contribution, or would have received
a lesser contribution for the year, because (1) the Participant failed
to complete 1,000 Hours of Service or any equivalent service requirement
provided in the Adoption Agreement; or (2) the Participant's
Compensation was less than a stated amount.
(b) The provisions of (a) above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(c) The Employer contributions for the Plan Year made on behalf of each
Participant who is not a Key Employee and who is a participant in a
defined benefit plan maintained by the Employer shall not be less than 5
percent of such Participant's Compensation, unless the Employer has
provided in Section 1.12(c) that the minimum contribution requirement
will be met in the other plan or plans of the Employer.
(d) The minimum contribution required under (a) above (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not
be forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
(e) If the Employer elected an Integrated Formula in Section
1.05(a)(2), the allocation steps in Section 4.06(b)(2) shall be preceded
by the following steps:
(1) The Discretionary Employer Contributions will be allocated
to each eligible Participant (as determined under this Section 9.03)
in the ratio that the Participant's Compensation bears to all
Participants' Compensation, but not in excess of 3%(or such other
percent elected by the Employer in Section 1.12(c).
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(2) Any Discretionary Employer Contributions remaining after
(e)(1) above will be allocated to each eligible Participant in the
ratio that the Participant's Excess Compensation for the Plan Year
bears to the Excess Compensation of all eligible Participants, but
not in excess of 3%(or such other percent elected by the Employer in
Section 1.12(c)).
9.04. ADJUSTMENT TO THE LIMITATION ON CONTRIBUTIONS AND BENEFITS. If this Plan
is in Top-Heavy status, the number 100 shall be substituted for the number 125
in subsections (e)(3) and (e)(4) of Section 5.03. However, this substitution
shall not take effect with respect to this Plan in any Plan Year in which the
following requirements are satisfied:
(a) The Employer contributions for such Plan Year made on behalf of
each Participant who is not a Key Employee and who is a participant in a
defined benefit plan maintained by the Employer is not less than 7 1/2
percent of such Participant's Compensation.
(b) The sum of the present value as of the Determination Date of (1)
the aggregate accounts of all Key Employees under all defined
contribution plans of the Employer and (2) the cumulative accrued
benefits of all Key Employees under all defined benefit plans of the
Employer does not exceed 90 percent of the same amounts determined for
all Participants under all plans of the Employer that are Top-Heavy
Plans, excluding Accounts and accrued benefits for Employees who
formerly were but are no longer Key Employees.
The substitutions of the number 100 for 125 shall not take effect in
any Limitation Year with respect to any Participant for whom no benefits
are accrued or contributions made for such Year.
9.05. MINIMUM VESTING. For any Plan Year in which the Plan is a Top-Heavy Plan
and all Plan Years thereafter, the Top-Heavy vesting schedule elected in Section
1.12(d) will automatically apply to the Plan. The Top-Heavy vesting schedule
applies to all benefits within the meaning of Section 411(a)(7) of the Code
except those attributable to Employee Contributions or those already subject to
a vesting schedule which vests at least as rapidly in all cases as the schedule
elected in Section 1.12(d), including benefits accrued before the Plan becomes a
Top-Heavy Plan. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as a Top-Heavy Plan changes
for any Plan Year. However, this Section 9.05 does not apply to the Account of
any Employee who does not have an Hour of Service after the Plan has initially
become a Top-Heavy Plan and such Employee's Account attributable to Employer
Contributions will be determined without regard to this Section 9.05.
ARTICLE 10. AMENDMENT AND TERMINATION.
10.01 AMENDMENT BY EMPLOYER. The Employer reserves the authority, subject to the
provisions of Article 1 and Section 10.03, to amend the Plan:
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(a) Changes to Elections Contained in the Adoption Agreement. By filing
with the Trustee an amended Adoption Agreement, executed by the Employer
only, on which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on
the effective date of such amended Adoption Agreement except that
retroactive changes to a previous election or elections pursuant to the
regulations issued under Section 401(a)(4) of the Code shall be
permitted. Any such change notwithstanding, no Participant's Account
shall be reduced by such change below the amount to which the
Participant would have been entitled if he had voluntarily left the
employ of the Employer immediately prior to the date of the change. The
Employer may from time to time make any amendment to the Plan that may
be necessary to satisfy Sections 415 or 416 of the Code because of the
required aggregation of multiple plans by completing overridingplan
language in the Adoption Agreement. The Employer may also add certain
model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as an individually designed plan; or
(b) Other Changes. By amending any provision of the Plan for any reason
other than those specified in (a) above. However, upon making such
amendment, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, the Employer may no longer participate in
this prototype plan arrangement and will be deemed to have an
individually designed plan. Following such amendment, the Trustee may
transfer the assets of the Trust to the trust forming part of such newly
adopted plan upon receipt of sufficient evidence (such as a
determination letter or opinion letter from the Internal Revenue Service
or an opinion of counsel satisfactory to the Trustee) that such trust
will be a qualified trust under the Code.
10.02. AMENDMENT BY PROTOTYPE SPONSOR. The Prototype Sponsor may in its
discretion amend the Plan or the Adoption Agreement at any time, subject to the
provisions of Article 1 and Section 10.03, and provided that the Prototype
Sponsor mails a copy of such amendment to the Employer at its last known address
as shown on the books of the Prototype Sponsor.
10.03. AMENDMENTS AFFECTING VESTED AND/OR ACCRUED BENEFITS.
(a) Except as permitted by Section 10.04, no amendment to the Plan shall
be effective to the extent that it has the effect of decreasing a
Participant's Account or eliminating an optional form of benefit with
respect to benefits attributable to service before the amendment.
Furthermore, if the vesting schedule of the Plan is amended, the
nonforfeitable interest of a Participant in his Account, determined as
of the later of the date the amendment is adopted or the date it becomes
effective, will not be less than the Participant's nonforfeitable
interest in his Account determined without regard to such amendment.
(b) If the Plan's vesting schedule is amended, including any amendment
resulting from a change to or from Top-Heavy Plan status,
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or the Plan is amended in any way that directly or indirectly affects the
computation of a Participant's nonforfeitable interest in his Account,
each Participant with at least three (3) Years of Service for Vesting with
the Employer may elect, within a reasonable period after the adoption of
the amendment, to have the nonforfeitable percentage of his Account
computed under the Plan without regard to such amendment. The
Participant's election may be made within 60 days from the latest of (1)
the date the amendment is adopted, (2) the date the amendment becomes
effective, or (3) the date the Participant is issued written notice of the
amendment by the Employer or the Administrator.
10.04. RETROACTIVE AMENDMENTS. An amendment made by the Prototype Sponsor in
accordance with Section 10.02 may be made effective on a date prior to the first
day of the Plan Year in which it is adopted if such amendment is necessary or
appropriate to enable the Plan and Trust to satisfy the applicable requirements
of the Code or to conform the Plan to any change in federal law, or to any
regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 10.01.
10.05. TERMINATION. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate the
Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.
10.06. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination or partial
termination of the Plan or complete discontinuance of contributions thereunder,
each Participant (including a terminated Participant with respect to amounts not
previously forfeited by him) who is affected by such termination or partial
termination or discontinuance will have a fully vested interest in his Account,
and, subject to Section 4.05 and Article 8, the Trustee will distribute to each
Participant or other person entitled to distribution the balance of the
Participant's Account in a single lump sum payment. In the absence of such
instructions, the Trustee will notify the Administrator of such situation and
the Trustee will be under no duty to make any distributions under the Plan until
it receives written instructions from the Administrator. Upon the completion of
such distributions, the Trust will terminate, the Trustee will be relieved from
all liability under the Trust, and no Participant or other person will have any
claims thereunder, except as required by applicable law.
10.07. MERGER OR CONSOLIDATION OF PLAN; TRANSFER OF PLAN ASSETS. In case of any
merger or consolidation of the Plan with, or transfer of assets and liabilities
of the Plan to, any other plan, provision must be made so that each Participant
would, if the Plan then terminated, receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately before the merger,
consolidation or transfer if the Plan had then terminated.
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ARTICLE 11. AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF
FUNDS TO OR FROM OTHER QUALIFIED PLANS.
11.01. AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN. In the event the Employer
has previously established a plan (the "predecessor plan") which is a defined
contribution plan under the Code and which on the date of adoption of the Plan
meets the applicable requirements of section 401(a) of the Code, the Employer
may, in accordance with the provisions of the predecessor plan, amend and
continue the predecessor plan in the form of the Plan and become the Employer
hereunder, subject to the following:
(a) Subject to the provisions of the Plan, each individual who was a
Participant or former Participant in the predecessor plan immediately
prior to the effective date of such amendment and continuation will become
a Participant or former Participant in the Plan;
(b) No election may be made under the vesting provisions of the Adoption
Agreement if such election would reduce the benefits of a Participant
under the Plan to less than the benefits to which he would have been
entitled if he voluntarily separated from the service of the Employer
immediately prior to such amendment and continuation;
(c) No amendment to the Plan shall decrease a Participant's accrued
benefit or eliminate an optional form of benefit and if the amendment of
the predecessor plan in the form of the Plan results in a change in the
method of crediting service for vesting purposes between the general
method set forth in Section 2530.200b-2 of the Department of Labor
Regulations and the elapsed-time method in Section 2.01(a)(33) of the
Plan, each Participant with respect to whom the method of crediting
vesting service is changed shall be treated in the manner set forth by the
provisions of Section 1.410(a)-7(f)(1) of the Treasury Regulations which
are incorporated herein by reference;
(d) The amounts standing to the credit of a Participant's Account
immediately prior to such amendment and continuation which represent the
amounts properly attributable to (1) contributions by the Participant and
(2) contributions by the Employer and forfeitures will constitute the
opening balance of his Account or Accounts under the Plan;
(e) Amounts being paid to a former Participant or to a Beneficiary in
accordance with the provisions of the predecessor plan will continue to be
paid in accordance with such provisions;
(f) Any election and waiver of the qualified pre-retirement annuity in
effect after August 23, 1984, under the predecessor plan immediately
before such amendment and continuation will be deemed a valid election and
waiver of Beneficiary under Section 8.04 if such designation satisfies the
requirements of Section 8.04(d), unless
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and until the Participant revokes such election and waiver under the Plan;
and
(g) Unless the Employer and the Trustee agree otherwise, all assets of the
predecessor trust will be deemed to be assets of the Trust as of the
effective date of such amendment. Such assets will be invested by the
Trustee as soon as reasonably practicable pursuant to Article 6. The
Employer agrees to assist the Trustee in any way requested by the Trustee
in order to facilitate the transfer of assets from the predecessor trust
to the Trust Fund.
11.02. TRANSFER OF FUNDS FROM AN EXISTING PLAN. The Employer may from time to
time direct the Trustee, in accordance with such rules as the Trustee may
establish, to accept cash, allowable Fund Shares or participant loan promissory
notes transferred for the benefit of Participants from a trust forming part of
another qualified plan under the Code, provided such plan is a defined
contribution plan. Such transferred assets will become assets of the Trust as of
the date they are received by the Trustee. Such transferred assets will be
credited to Participants' Accounts in accordance with their respective interests
immediately upon receipt by the Trustee. A Participant's interest under the Plan
in transferred assets which were fully vested and nonforfeitable under the
transferring plan will be fully vested and nonforfeitable at all times. Such
transferred assets will be invested by the Trustee in accordance with the
provisions of paragraph (g) of Section 11.01 as if such assets were transferred
from a predecessor plan. No transfer of assets in accordance with this Section
may cause a loss of an accrued or optional form of benefit protected by Section
411(d)(6) of the Code.
11.03. ACCEPTANCE OF ASSETS BY TRUSTEE. The Trustee will not accept assets which
are not either in a medium proper for investment under the Plan, as set forth in
Section 1.14(b), or in cash. Such assets shall be accompanied by written
instructions showing separately the respective contributions by the prior
employer and by the Employee, and identifying the assets attributable to such
contributions. The Trustee shall establish such accounts as may be necessary or
appropriate to reflect such contributions under the Plan. The Trustee shall hold
such assets for investment in accordance with the provisions of Article 6, and
shall in accordance with the written instructions of the Employer make
appropriate credits to the Accounts of the Participants for whose benefit assets
have been transferred.
11.04. TRANSFER OF ASSETS FROM TRUST. The Employer may direct the Trustee to
transfer all or a specified portion of the Trust assets to any other plan or
plans maintained by the Employer or the employer or employers of a former
Participant or Participants, provided that the Trustee has received evidence
satisfactory to it that such other plan meets all applicable requirements of the
Code. The assets so transferred shall be accompanied by written instructions
from the Employer naming the persons for whose benefit such assets have been
transferred, showing separately the respective contributions by the Employer and
by each Participant, if any, and identifying the assets attributable to the
various contributions. The Trustee shall have no further liabilities with
respect to assets so transferred.
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ARTICLE 12. MISCELLANEOUS.
12.01. COMMUNICATION TO PARTICIPANTS. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.
12.02. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby. It is a
condition of the Plan, and each Participant expressly agrees by his
participation herein, that each Participant will look solely to the assets held
in the Trust for the payment of any benefit to which he is entitled under the
Plan.
12.03. NONALIENABILITY OF BENEFITS AND QUALIFIED DOMESTIC RELATIONS ORDERS. The
benefits provided hereunder will not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind, either voluntarily or
involuntarily, and any attempt to cause such benefits to be so subjected will
not be recognized, except to such extent as may be required by law. The
preceding sentence shall also apply to the creation, assignment, or recognition
of a right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined by the Plan
Administrator to be a qualified domestic relations order, as defined in Section
414(p) of the Code, or any domestic relations order entered before January 1,
1985. The Administrator must establish reasonable procedures to determine the
qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Administrator will promptly notify the Participant and any
alternate payee named in the order, in writing, of the receipt of the order and
the Plan's procedures for determining the qualified status of the order. Within
a reasonable period of time after receiving the domestic relations order, the
Administrator must determine the qualified status of the order and must notify
the Participant and each alternate payee, in writing, of its determination. The
Administrator must provide notice under this paragraph by mailing to the
individual's address specified in the domestic relations order, or in a manner
consistent with the Department of Labor regulations.
If any portion of the Participant's Account is payable during the period
the Administrator is making its determination of the qualified status of the
domestic relations order, the Administrator must make a separate accounting of
the amounts payable. If the Administrator determines the order is a qualified
domestic relations order within 18 months of the date amounts first are payable
following receipt of the order, the Administrator will direct the Trustee to
distribute the payable amounts in accordance with the order. If the
Administrator does not make his determination of the qualified status of the
order within the 18-month determination period, the Administrator will direct
the Trustee to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and will apply the order
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prospectively if the Administrator later determines the order is a qualified
domestic relations order.
A domestic relations order will not fail to be deemed a qualified domestic
relations order merely because it requires the distribution or segregation of
all or part of a Participant's Account with respect to an alternate payee prior
to the Participant's earliest retirement age (as defined in Section 414(p) of
the Code) under the Plan. A distribution to an alternate payee prior to the
Participant's attainment of the earliest retirement age is available only if (a)
the order specifies distribution at that time and (b) if the present value of
the alternate payee's benefits under the Plan exceeds $3,500, and the order
requires, and the alternate payee consents to, a distribution occurring prior to
the Participant's attainment of earliest retirement age.
12.04. FACILITY OF PAYMENT. In the event the Administrator determines, on the
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may direct the Trustee to disburse such payments
to a person or institution designated by a court which has jurisdiction over
such recipient or a person or institution otherwise having the legal authority
under state law for the care and control of such recipient. The receipt by such
person or institution of any such payments shall be complete acquittance
therefore, and any such payment to the extent thereof, shall discharge the
liability of the Trust for the payment of benefits hereunder to such recipient.
12.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to furnish
the Trustee, and the Trustee agrees to furnish the Employer, with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code and any regulations issued or
forms adopted by the Treasury Department thereunder or under the provisions of
ERISA and any regulations issued or forms adopted by the Labor Department
thereunder.
12.06. EFFECT OF FAILURE TO QUALIFY UNDER CODE. Notwithstanding any other
provision contained herein, if the Employer fails to obtain or retain approval
of the Plan by the Internal Revenue Service as a qualified Plan under the Code,
the Employer may no longer participate in this prototype Plan arrangement and
will be deemed to have an individually designed plan.
12.07. NOTICES. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mails, first-class postage prepaid and registered or certified:
(a)If to the Employer or Administrator, to it at the address set forth in
the Adoption Agreement, to the attention of the person specified to
receive notice in the Adoption Agreement;
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(b)If to the Trustee, to it at the address set forth in the Adoption
Agreement;
or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.
12.08. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the Commonwealth of Massachusetts.
ARTICLE 13. PLAN ADMINISTRATION.
13.01. POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator has
the full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the requirements of ERISA. The Administrator's
powers and responsibilities include, but are not limited to, the following:
(a)To make and enforce such rules and regulations as it deems necessary or
proper for the efficient administration of the Plan;
(b)To interpret the Plan, its interpretation thereof in good faith to be
final and conclusive on all persons claiming benefits under the Plan;
(c)To decide all questions concerning the Plan and the eligibility of any
person to participate in the Plan;
(d)To administer the claims and review procedures specified in Section
13.03;
(e)To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the
provisions of the Plan;
(f)To determine the person or persons to whom such benefits will be paid;
(g)To authorize the payment of benefits and provide for the distribution
of Code Section 402(f) notices;
(h)To comply with the reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA;
(i)To appoint such agents, counsel, accountants, and consultants as may be
required to assist in administering the Plan;
(j)By written instrument, to allocate and delegate its fiduciary
responsibilities in accordance with Section 405 of ERISA including the
formation of an Administrative Committee to administer the Plan;
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(k)To provide bonding coverage as required under Section 412 of ERISA.
13.02. NONDISCRIMINATORY EXERCISE OF AUTHORITY. Whenever, in the administration
of the Plan, any discretionary action by the Administrator is required, the
Administrator shall exercise its authority in a nondiscriminatory manner so that
all persons similarly situated will receive substantially the same treatment.
13.03. CLAIMS AND REVIEW PROCEDURES.
(a)Claims Procedure. If any person believes he is being denied any rights
or benefits under the Plan, such person may file a claim in writing with
the Administrator. If any such claim is wholly or partially denied, the
Administrator will notify such person of its decision in writing. Such
notification will contain (1) specific reasons for the denial, (2)
specific reference to pertinent Plan provisions, (3) a description of any
additional material or information necessary for such person to perfect
such claim and an explanation of why such material or information is
necessary, and (4) information as to the steps to be taken if the person
wishes to submit a request for review. Such notification will be given
within 90 days after the claim is received by the Administrator (or within
180 days, if special circumstances require an extension of time for
processing the claim, and if written notice of such extension and
circumstances is given to such person within the initial 90-day period).
If such notification is not given within such period, the claim will be
considered denied as of the last day of such period and such person may
request a review of his claim.
(b)Review Procedure. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60
days after the date on which such denial is considered to have occurred),
such person (or his duly authorized representative) may (1) file a written
request with the Administrator for a review of his denied claim and of
pertinent documents and (2) submit written issues and comments to the
Administrator. The Administrator will notify such person of its decision
in writing. Such notification will be written in a manner calculated to be
understood by such person and will contain specific reasons for the
decision as well as specific references to pertinent Plan provisions. The
decision on review will be made within 60 days after the request for
review is received by the Administrator (or within 120 days, if special
circumstances require an extension of time for processing the request,
such as an election by the Administrator to hold a hearing, and if written
notice of such extension and circumstances is given to such person within
the initial 60-day period). If the decision on review is not made within
such period, the claim will be considered denied.
13.04. NAMED FIDUCIARY. The Administrator is a "named fiduciary" for purposes of
Section 402(a)(1) of ERISA and has the powers and responsibilities with respect
to the management and operation of the Plan described herein.
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13.05. COSTS OF ADMINISTRATION. Unless some or all are paid by the Employer, all
reasonable costs and expenses (including legal, accounting, and employee
communication fees) incurred by the Administrator and the Trustee in
administering the Plan and Trust will be paid first from the forfeitures (if
any) resulting under Section 7.07, then from the remaining Trust Fund. All such
costs and expenses paid from the Trust Fund will, unless allocable to the
Accounts of particular Participants, be charged against the Accounts of all
Participants on a prorata basis or in such other reasonable manner as may be
directed by the Employer.
ARTICLE 14. TRUST AGREEMENT.
14.01. ACCEPTANCE OF TRUST RESPONSIBILITIES. By executing the Adoption
Agreement, the Employer establishes a trust to hold the assets of the Plan. By
executing the Adoption Agreement, the Trustee agrees to accept the rights,
duties and responsibilities set forth in this Article 14.
14.02. ESTABLISHMENT OF TRUST FUND. A trust is hereby established under the Plan
and the Trustee will open and maintain a trust account for the Plan and, as part
thereof, Participants' Accounts for such individuals as the Employer shall from
time to time give written notice to the Trustee are Participants in the Plan.
The Trustee will accept and hold in the Trust Fund such contributions on behalf
of Participants as it may receive from time to time from the Employer. The Trust
Fund shall be fully invested and reinvested in accordance with the applicable
provisions of the Plan in Fund Shares or as otherwise provided in Section 14.10.
14.03. EXCLUSIVE BENEFIT. The Trustee shall hold the assets of the Trust Fund
for the exclusive purpose of providing benefits to Participants and
Beneficiaries and defraying the reasonable expenses of administering the Plan.
No assets of the Plan shall revert to the Employer except as specifically
permitted by the terms of the Plan.
14.04. POWERS OF TRUSTEE. The Trustee shall have no discretion or authority with
respect to the investment of the Trust Fund but shall act solely as a directed
trustee of the funds contributed to it. In addition to and not in limitation of
such powers as the Trustee has by law or under any other provisions of the Plan,
the Trustee will have the following powers, each of which the Trustee exercises
solely as directed Trustee in accordance with the written direction of the
Employer except to the extent a Plan asset is subject to Participant direction
of investment and provided that no such power shall be exercised in any manner
inconsistent with the provisions of ERlSA:
(a) to deal with all or any part of the Trust Fund and to invest all or a
part of the Trust Fund in investments available under the Plan, without regard
to the law of any state regarding proper investment;
(b) to retain uninvested such cash as it may deem necessary or advisable,
without liability for interest thereon, for the administration of the Trust;
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(c) to sell, convert, redeem, exchange, or otherwise dispose of all or any
part of the assets constituting the Trust Fund;
(d) to enforce by suit or otherwise, or to waive, its rights on behalf of
the Trust, and to defend claims asserted against it or the Trust, provided that
the Trustee is indemnified to its satisfaction against liability and expenses;
(e) to employ such agents and counsel as may be reasonably necessary in
collecting, managing, administering, investing, distributing and protecting the
Trust Fund or the assets thereof and to pay them reasonable compensation;
(f) to compromise, adjust and settle any and all claims against or in
favor of it or the Trust;
(g) to oppose, or participate in and consent to the reorganization,
merger, consolidation, or readjustment of the finances of any enterprise, to pay
assessments and expenses in connection therewith, and to deposit securities
under deposit agreements;
(h) to apply for or purchase annuity contracts in accordance with Section
8.02;
(i) to hold securities unregistered, or to register them in its own name
or in the name of nominees;
(j) to appoint custodians to hold investments within the jurisdiction of
the district courts of the United States and to deposit securities with stock
clearing corporations or depositories or similar organizations;
(k) to make, execute, acknowledge and deliver any and all instruments that
it deems necessary or appropriate to carry out the powers herein granted; and
(l) generally to exercise any of the powers of an owner with respect to
all or any part of the Trust Fund.
The Employer specifically acknowledges and authorizes that affiliates
of the Trustee may act as its agent in the performance of ministerial,
nonfiduciary duties under the Trust. The expenses and compensation of such agent
shall be paid by the Trustee.
The Trustee shall provide the Employer with reasonable notice of any
claim filed against the Plan or Trust or with regard to any related matter, or
of any claim filed by the Trustee on behalf of the Plan or Trust or with regard
to any related matter.
14.05. ACCOUNTS. The Trustee will keep full accounts of all receipts and
disbursements and other transactions hereunder. Within 60 days after the close
of each Plan Year, within 60 days after termination of the Trust, and at such
other times as may be appropriate, the Trustee will determine the then net fair
market value of the Trust Fund as of
63
<PAGE> 68
the close of the Plan Year, as of the termination of the Trust, or as of
such other time, whichever is applicable, and will render to the Employer and
Administrator an account of its administration of the Trust during the period
since the last such accounting, including all allocations made by it during such
period.
14.06. APPROVING OF ACCOUNTS. To the extent permitted by law, the written
approval of any account by the Employer or Administrator will be final and
binding, as to all matters and transactions stated or shown therein, upon the
Employer, Administrator, Participants and all persons who then are or thereafter
become interested in the Trust. The failure of the Employer or Administrator to
notify the Trustee within six (6) months after the receipt of any account of its
objection to the account will, to the extent permitted by law, be the equivalent
of written approval. If the Employer or Administrator files any objections
within such six (6) month period with respect to any matters or transactions
stated or shown in the account, and the Employer or Administrator and the
Trustee cannot amicably settle the question raised by such objections, the
Trustee will have the right to have such questions settled by judicial
proceedings. Nothing herein contained will be construed so as to deprive the
Trustee of the right to have judicial settlement of its accounts. In any
proceeding for a judicial settlement of any account or for instructions, the
only necessary parties will be the Trustee, the Employer and the Administrator.
14.07. DISTRIBUTION FROM TRUST FUND. The Trustee shall make such distribution
from the Trust Fund as the Employer or Administrator may in writing direct, as
provided by the terms of the Plan, upon certification by the Employer or
Administrator that the same is for the exclusive benefit of Participants or
their Beneficiaries, or for the payment of expenses of administering the Plan.
14.08. TRANSFER OF AMOUNTS FROM QUALIFIED PLAN. If the Plan provides that
amounts may be transferred to the Plan from another qualified plan or trust
under Section 401(a) of the Code, such transfer shall be made in accordance with
the provisions of the Plan and with such rules as may be established by the
Trustee. The Trustee will only accept assets which are in a medium proper for
investment under this agreement or in cash. Such amounts shall be accompanied by
written instructions showing separately the respective contributions by the
prior employer and the transferring Employee, and identifying the assets
attributable to such contributions. The Trustee shall hold such assets for
investment in accordance with the provisions of this agreement.
14.09. TRANSFER OF ASSETS FROM TRUST. Subject to the provisions of the Plan, the
Employer may direct the Trustee to transfer all or a specified portion of the
Trust assets to any other plan or plans maintained by the Employer or the
employer or employers of a former Participant or Participants, provided that the
Trustee has received evidence satisfactory to it that such other plan meets all
applicable requirements of the Code. The assets so transferred shall be
accompanied by written instructions from the Employer naming the persons for
whose benefit such assets have been transferred, showing separately the
respective contributions by the Employer and by each Participant, if any, and
identifying the assets attributable to the various
64
<PAGE> 69
contributions. The Trustee shall have no further liabilities with respect to
assets so transferred.
14.10. SEPARATE TRUST OR FUND FOR EXISTING PLAN ASSETS. With the consent of the
Trustee, the Employer may maintain a trust or fund (including a group annuity
contract) under this prototype plan document separate from the Trust Fund for
Plan assets purchased prior to the adoption of this prototype plan document
which are not Fidelity Funds listed in Section 1.14(b). The Trustee shall have
no authority and no responsibility for the Plan assets held in such separate
trust or fund. The duties and responsibilities of the trustee of a separate
trust shall be provided by a separate trust agreement, between the Employer and
the trustee.
Notwithstanding the preceding paragraph, the Trustee or an affiliate of
the Trustee may agree in writing to provide ministerial recordkeeping services
for guaranteed investment contracts held in the separate trust or fund. The
guaranteed investment contract(s) shall be valued as directed by the Employer or
the Trustee of the separate trust.
The trustee of the separate trust (hereafter referred to as "trustee")
will be the owner of any insurance contract purchased prior to the adoption of
this prototype plan document. The insurance contract(s) must provide that
proceeds will be payable to the trustee; however the trustee shall be required
to pay over all proceeds of the contract(s) to the Participant's designated
Beneficiary in accordance with the distribution provisions of this plan. A
Participant's spouse will be the designated Beneficiary of the proceeds in all
circumstances unless a qualified election has been made in accordance with
Article 8. Under no circumstances shall the trust retain any part of the
proceeds. In the event of any conflict between the terms of this plan and the
terms of any insurance contract purchased hereunder, the plan provisions shall
control.
Any life insurance contracts held in the Trust Fund or in the separate
trust are subject to the following limits:
(a) Ordinary life - For purposes of these incidental insurance provisions,
ordinary life insurance contracts are contracts with both nondecreasing
death benefits and nonincreasing premiums. If such contracts are held,
less than 1/2 of the aggregate employer contributions allocated to any
Participant will be used to pay the premiums attributable to them.
(b) Term and universal life - No more than 1/4 of the aggregate employer
contributions allocated to any participant will be used to pay the
premiums on term life insurance contracts, universal life insurance
contracts, and all other life insurance contracts which are not ordinary
life.
(c) Combination - The sum of 1/2 of the ordinary life insurance premiums
and all other life insurance premiums will not exceed 1/4 of the aggregate
employer contributions allocated to any Participant.
65
<PAGE> 70
14.11. VOTING; DELIVERY OF INFORMATION. The Trustee shall deliver, or cause to
be executed and delivered, to the Employer or Plan Administrator all notices,
prospectuses, financial statements, proxies and proxy soliciting materials
received by the Trustee relating to securities held by the Trust or, if
applicable, deliver these materials to the appropriate Participant or the
Beneficiary of a deceased Participant. The Trustee shall not vote any securities
held by the Trust except in accordance with the written instructions of the
Employer, Participant or the Beneficiary of the Participant, if the Participant
is deceased; however, the Trustee may, in the absence of instructions, vote
"present" for the sole purpose of allowing such shares to be counted for
establishment of a quorum at a shareholders' meeting. The Trustee shall have no
duty to solicit instructions from Participants, Beneficiaries, or the Employer.
14.12. COMPENSATION AND EXPENSES OF TRUSTEE. The Trustee's fee for performing
its duties hereunder will be such reasonable amounts as the Trustee may from
time to time specify by written agreement with the Employer. Such fee, any taxes
of any kind which may be levied or assessed upon or with respect to the Trust
Fund, and any and all expenses, including without limitation legal fees and
expenses of administrative and judicial proceedings, reasonably incurred by the
Trustee in connection with its duties and responsibilities hereunder will,
unless some or all have been paid by said Employer, be paid first from
forfeitures resulting under Section 7.07, then from the remaining Trust Fund and
will, unless allocable to the Accounts of particular Participants, be charged
against the respective Accounts of all Participants, in such reasonable manner
as the Trustee may determine.
14.13. RELIANCE BY TRUSTEE ON OTHER PERSONS. The Trustee may rely upon and act
upon any writing from any person authorized by the Employer or Administrator to
give instructions concerning the Plan and may conclusively rely upon and be
protected in acting upon any written order from the Employer or Administrator or
upon any other notice, request, consent, certificate, or other instructions or
paper reasonably believed by it to have been executed by a duly authorized
person, so long as it acts in good faith in taking or omitting to take any such
action. The Trustee need not inquire as to the basis in fact of any statement in
writing received from the Employer or Administrator.
The Trustee will be entitled to rely on the latest certificate it has
received from the Employer or Administrator as to any person or persons
authorized to act for the Employer or Administrator hereunder and to sign on
behalf of the Employer or Administrator any directions or instructions, until it
receives from the Employer or Administrator written notice that such authority
has been revoked.
Notwithstanding any provision contained herein, the Trustee will be under
no duty to take any action with respect to any Participant's Account (other than
as specified herein) unless and until the Employer or Administrator furnishes
the Trustee with written instructions on a form acceptable to the Trustee, and
the Trustee agrees thereto in writing. The Trustee will not be liable for any
action taken pursuant to the Employer's or Administrator's written instructions
(nor for the
66
<PAGE> 71
collection of contributions under the Plan, nor the purpose or propriety of any
distribution made thereunder).
14.14. INDEMNIFICATION BY EMPLOYER. The Employer shall indemnify and save
harmless the Trustee from and against any and all liability to which the Trustee
may be subjected by reason of any act or conduct (except willful misconduct or
negligence) in its capacity as Trustee, including all expenses reasonably
incurred in its defense.
14.15. CONSULTATION BY TRUSTEE WITH COUNSEL. The Trustee may consult with legal
counsel (who may be but need not be counsel for the Employer or the
Administrator) concerning any question which may arise with respect to its
rights and duties under the Plan and Trust, and the opinion of such counsel
will, to the extent permitted by law, be full and complete protection in respect
of any action taken or omitted by the Trustee hereunder in good faith and in
accordance with the opinion of such counsel.
14.16. PERSONS DEALING WITH THE TRUSTEE. No person dealing with the Trustee will
be bound to see to the application of any money or property paid or delivered to
the Trustee or to inquire into the validity or propriety of any transactions.
14.17. RESIGNATION OR REMOVAL OF TRUSTEE. The Trustee may resign at any time by
written notice to the Employer, which resignation shall be effective 60 days
after delivery to the Employer. The Trustee may be removed by the Employer by
written notice to the Trustee, which removal shall be effective 60 days after
delivery to the Trustee.
Upon resignation or removal of the Trustee, the Employer may appoint a
successor trustee. Any such successor trustee will, upon written acceptance of
his appointment, become vested with the estate, rights, powers, discretion,
duties and obligations of the Trustee hereunder as if he had been originally
named as Trustee in this Agreement.
Upon resignation or removal of the Trustee, the Employer will no longer
participate in this prototype plan and will be deemed to have adopted an
individually designed plan. In such event, the Employer shall appoint a
successor trustee within said 60-day period and the Trustee will transfer the
assets of the Trust to the successor trustee upon receipt of sufficient evidence
(such as a determination letter or opinion letter from the Internal Revenue
Service or an opinion of counsel satisfactory to the Trustee) that such trust
will be a qualified trust under the Code.
The appointment of a successor trustee shall be accomplished by delivery
to the Trustee of written notice that the Employer has appointed such successor
trustee, and written acceptance of such appointment by the successor trustee.
The Trustee may, upon transfer and delivery of the Trust Fund to a successor
trustee, reserve such reasonable amount as it shall deem necessary to provide
for its fees, compensation, costs and expenses, or for the payment of any other
liabilities chargeable against the Trust Fund for which it may be
67
<PAGE> 72
liable. The Trustee shall not be liable for the acts or omissions of any
successor trustee.
14.18. FISCAL YEAR OF THE TRUST. The fiscal year of the Trust will coincide with
the Plan Year.
14.19. DISCHARGE OF DUTIES BY FIDUCIARIES. The Trustee and the Employer and any
other fiduciary shall discharge their duties under the Plan and this Trust
Agreement solely in the interests of Participants and their Beneficiaries in
accordance with the requirements of ERISA.
14.20. AMENDMENT. In accordance with provisions of the Plan, and subject to the
limitations set forth therein, this Trust Agreement may be amended by an
instrument in writing signed by the Employer and the Trustee. No amendment to
this Trust Agreement shall divert any part of the Trust Fund to any purpose
other than as provided in Section 2 hereof.
14.21. PLAN TERMINATION. Upon termination or partial termination of the Plan or
complete discontinuance of contributions thereunder, the Trustee will make
distributions to the Participants or other persons entitled to distributions as
the Employer or Administrator directs in accordance with the provisions of the
Plan. In the absence of such instructions and unless the Plan otherwise
provides, the Trustee will notify the Employer or Administrator of such
situation and the Trustee will be under no duty to make any distributions under
the Plan until it receives written instructions from the Employer or
Administrator. Upon the completion of such distributions, the Trust will
terminate, the Trustee will be relieved from all liability under the Trust, and
no Participant or other person will have any claims thereunder, except as
required by applicable law.
14.22. PERMITTED REVERSION OF FUNDS TO EMPLOYER. If it is determined by the
Internal Revenue Service that the Plan does not initially qualify under Section
401 of the Code, all assets then held under the Plan will be returned by the
Trustee, as directed by the Administrator, to the Employer, but only if the
application for determination is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan was adopted or such
later date as may be prescribed by regulations. Such distribution will be made
within one year after the date the initial qualification is denied. Upon such
distribution the Plan will be considered to be rescinded and to be of no force
or effect.
Contributions under the Plan are conditioned upon their deductibility
under Section 404 of the Code. In the event the deduction of a contribution made
by the Employer is disallowed under Section 404 of the Code, such contribution
(to the extent disallowed) must be returned to the Employer within one year of
the disallowance of the deduction.
Any contribution made by the Employer because of a mistake of fact must be
returned to the Employer within one year of the contribution.
68
<PAGE> 73
14.23. GOVERNING LAW. This Trust Agreement will be construed, administered and
enforced according to ERISA and, to the extent not preempted thereby, the laws
of the Commonwealth of Massachusetts.
69
<PAGE> 74
CORPORATEPLAN FOR RETIREMENT(SM)
PROFIT SHARING/401(k) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
AMENDMENT ONE
SECTION 2.01(a)(7) "COMPENSATION" is amended to include:
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision. Notwithstanding
2.01(a)(7)(A), for purpose of Section 4.02 (Additional Limit on Deferral
Contributions) and Section 4.04 (Limit on Matching Contributions), the Employer
may use Compensation as defined in Section 5.03(e)(2) excluding reimbursements
or other expense allowances, fringe benefits (cash and non-cash), moving
expenses, deferred compensation and welfare benefits, but including amounts that
are not includable in the gross income of the Participant under a salary
reduction agreement by reason of the application of Section 125, 402(a)(8),
402(h) or 403(b) of the Code.
If compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
SECTION 8.01(d) "DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES" is
amended to include:
(5) If a distribution is one to which sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less than 30
days after the notice required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(2) the Participant, after receiving the notice, affirmatively elects
a distribution.
<PAGE> 75
CORPORATEPlan for Retirement(SM)
Profit Sharing/401(k) Plan
Fidelity Basic Plan Document No. 07
Amendment Two
Effective December 1, 1996, Section 2.01(a)(25) shall be amended to read as
follows:
(25) "Registered Investment Company" means any one or more corporations,
partnerships or trusts registered under the Investment Company Act of
1940.
<PAGE> 76
ADDENDUM
to
CORPORATEplan for Retirement
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT No. 07
Re: Retroactive Effective Dates
This addendum is intended to clarify and set forth the effective dates of
certain provisions of the Plan with respect to the adopting Employer. This
Addendum applies only to the extent that the Employer has not amended the Plan
with respect to the applicable provisions of the Tax Reform Act of 1986 ("TRA
'86"). Unless otherwise specifically provided by the terms of the Plan, this
amendment and restatement is effective with respect to each change made to
satisfy the provisions of (i) TRA '86, (ii) any other change in the Code or
ERISA, or (iii) regulations, rulings, or other published guidance issued under
the Code, ERISA, or TRA '86, the first day of the first period (which may or may
not be the first day of a Plan year) with respect to which such change became
required because of such provision (including any day that became such as a
result of an election or waiver by an Employer or a waiver or exemption issued
under the Code, ERISA, or TRA '86), including, but not limited to, the
following:
(a) The following changes as required by TRA '86 are effective for Plan Years
beginning after December 31, 1986, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable exemption
or waiver:
(1) Changes in the definition of Employee in Section 2.01(a)(10) to
reflect changes in the safe harbor exclusion for Leased Employees;
(2) Changes in the definition of Highly Compensated Employee in Section
2.01(a)(16);
(3) Addition of the aggregate deferral limit under Section 402(g) of the
Code in Section 4.01(c);
(4) Changes to the Code Section 401(k) discrimination test in Section
4.02;
(5) Addition of the Code Section 401(m) discrimination test and
application of the Aggregate Limit in Section 4.04;
(6) Compliance with the Code Section 414(s) compensation definition
requirements in Sections 5.03 and 9.03;
(7) Changes in the Participant Loan provisions in Section 7.09; if
applicable, to reflect new dollar limitations, repayment requirements, and
restrictions applicable to Highly Compensated Employees under Section
72(p) of the Code;
<PAGE> 77
(8) Changes in the definition of Key Employee in Section 9.02(a); and
(9) Changes in the definition of Top-Heavy Ratio in Section 9.02(c)(3) to
provide for ratable accrual.
(b) Changes in the 415 limitations in Section 5.03 as required by TRA '86 are
effective for limitation years beginning after December 31, 1986, unless a
delayed effective date applies because the Plan is collectively-bargained or
because of an applicable waiver or exemption; provided, however, that Annual
Additions shall not be recalculated to take into account all Employee
contributions for limitation years beginning before the effective date.
(c) The following changes as required by TRA '86 are effective for Plan years
beginning after December 31, 1987, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable waiver or
exemption:
(1) Changes required to provide that allocations shall not be decreased or
discontinued because of attainment of any age, if any; and
(2) Changes in the definition of Normal Retirement Age in Section 1.06(a),
if any, to reflect the five years of participation rule.
(d) The following changes as required by TRA '86 are effective for Plan Years
beginning after December 31, 1988, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable waiver or
exemption:
(1) Changes in the vesting schedule specified in Section 1.07, if
applicable;
(2) Changes in the permitted disparity rules in Section 4.06(b)(2), if
applicable; and
(3) Changes in the requirements for electing a former vesting schedule in
Section 10.03, if applicable.
Notwithstanding the foregoing and subject to applicable law, with respect to
Plan years beginning after December 31, 1986, and before the date of this
restatement of the Plan, the Employer may elect to operate the Plan in
accordance with any transitional rule published by the Internal Revenue Service
or a reasonable, good faith interpretation of TRA '86 and related applicable
law, in which event such transitional rule or good faith interpretation shall
prevail over the provisions in this restatement of the Plan with respect to such
Plan Year.
Each other change made under the Plan is effective as of the date specified in
Section 1.01(g) of the Adoption Agreement, unless otherwise specifically
provided by the terms of the Plan.
<PAGE> 78
THE CORPORATEPLAN FOR RETIREMENT(SM)
(PROFIT SHARING/401(K) PLAN)
A FIDELITY PROTOTYPE PLAN
NON-STANDARDIZED ADOPTION AGREEMENT 002
BASIC PLAN NO. 07
<PAGE> 79
ADOPTION AGREEMENT
ARTICLE 1
NON-STANDARDIZED PROFIT SHARING PLAN
1.01 PLAN INFORMATION
(a) NAME OF PLAN:
This is the
------------------------------------------------------
Plan (the "Plan").
-----------------------------------------------
(b) TYPE OF PLAN:
(1) [ ] 401(k) and Profit Sharing
(2) [ ] Profit Sharing Only
(3) [ ] 401(k) Only
(c) NAME OF PLAN ADMINISTRATOR, IF NOT THE EMPLOYER:
-----------------------------------------------------------------
Address:
---------------------------------------------------
Phone Number:
---------------------------------------------------
The Plan Administrator is the agent for service of legal process
for the Plan.
(d) LIMITATION YEAR (check one):
(1) [ ] Calendar Year
(2) [ ] Plan Year
(3) [ ] Other:
---------------------------------------------
(e) THREE DIGIT PLAN NUMBER:
----------------------------------------
(f) PLAN YEAR END (month/day):
--------------------------------------
(g) PLAN STATUS (check one):
(1) [ ] Effective Date of new Plan:
------------------------
<PAGE> 80
(2) [ ] Amendment Effective Date: _______________. This is
(check one):
(A) [ ] an amendment of The CORPORATEplan for
Retirement(SM) Adoption Agreement previously
executed by the Employer; or
(B) [ ] a conversion from another plan document into The
CORPORATEplan for Retirement(SM).
The original effective date of the Plan: _______
The substantive provisions of the Plan shall
apply prior to the Effective Date to the extent
required by the Tax Reform Act of 1986 or other
applicable laws.
1.02 EMPLOYER
(a) THE EMPLOYER IS
------------------------------------------------
Address:
------------------------------------------------
------------------------------------------------
Contact's Name:
------------------------------------------------
Telephone Number:
------------------------------------------------
(1) Employer's Tax Identification Number:
--------------------
(2) Business form of Employer (check one):
<TABLE>
<S> <C> <C>
(A) [ ] Corporation (D) [ ] Governmental
(B) [ ] Sole proprietor or (E) [ ] Tax-exempt organization
partnership
(C) [ ] Subchapter S Corporation (F) [ ] Rural Electric Cooperative
</TABLE>
(3) Employer's fiscal year end:
--------------------------------
(4) Date business commenced:
--------------------------------
2
<PAGE> 81
(b) THE TERM "EMPLOYER" INCLUDES THE FOLLOWING RELATED EMPLOYER(S)
(as defined in Section 2.01(a)(26)):
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
1.03 COVERAGE
(a) ALL EMPLOYEES WHO MEET THE CONDITIONS SPECIFIED BELOW WILL BE
ELIGIBLE TO PARTICIPATE IN THE PLAN:
(1) SERVICE REQUIREMENT (check one):
(A) [ ] no service requirement.
(B) [ ] three consecutive months of service (no
minimum number Hours of Service can be required).
(C) [ ] six consecutive months of service (no minimum
number Hours of Service can be required).
(D) [ ] one Year of Service (1,000 Hours of Service is
required during the Eligibility Computation
Period.)
(2) AGE REQUIREMENT (check one):
(A) [ ] no age requirement.
(B) [ ] must have attained age ______ (not to exceed 21).
3
<PAGE> 82
(3) THE CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE IN THE PLAN
(check one):
(A) [ ] includes all Employees of the Employer.
(B) [ ] includes all Employees of the Employer except for
(check the appropriate box(es)):
(i) [ ] Employees covered by a collective
bargaining agreement.
(ii) [ ] Highly Compensated Employees as defined
in Code Section 414(q).
(iii) [ ] Leased Employees as defined in
Section 2.01(a)(18).
(iv) [ ] Nonresident aliens who do not receive any
earned income from the Employer which
constitutes United States source income.
(v) [ ] Other
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
NOTE: No exclusion in this section may create a
discriminatory class of employees. An Employer's
Plan must still pass the Internal Revenue Code
coverage and participation requirements if one
or more of the above groups of Employees have
been excluded from the Plan.
(b) THE ENTRY DATE(S) SHALL BE (check one):
(1) [ ] the first day of each Plan Year (do not select if
Section 1.03 (a)(1)(D) is elected or if there is an
age requirement of greater than 20-1/2 in Section
1.03(a)(2)(B)).
(2) [ ] the first day of each Plan Year and the date six
months later.
(3) [ ] the first day of each Plan Year and the first day
of the fourth, seventh, and tenth months.
(4) [ ] the first day of each month.
4
<PAGE> 83
(c) DATE OF INITIAL PARTICIPATION - AN EMPLOYEE WILL BECOME A
PARTICIPANT UNLESS EXCLUDED BY SECTION 1.03(a)(3) ABOVE ON THE
ENTRY DATE IMMEDIATELY FOLLOWING THE DATE THE EMPLOYEE COMPLETES
THE SERVICE AND AGE REQUIREMENT(S) IN SECTION
1.03(a), IF ANY, EXCEPT (check one):
(1) [ ] No exceptions.
(2) [ ] Employees employed on the Effective Date in
Section 1.01(g) will become Participants on that
date.
(3) [ ] Employees who meet the age and service
requirement(s) of Section 1.03(a) on the Effective
Date in Section 1.01(g) will become Participants on
that date.
1.04 COMPENSATION
(a) FOR PURPOSES OF DETERMINING CONTRIBUTIONS UNDER THE PLAN,
COMPENSATION SHALL BE AS DEFINED IN SECTION 2.01(a)(7), BUT
EXCLUDING (check the appropriate box(es)):
(1) [ ] Overtime Pay.
(2) [ ] Bonuses.
(3) [ ] Commissions.
(4) [ ] The value of a qualified or a non-qualified stock
option granted to an Employee by the Employer to the
extent such value is includable in the Employee's
taxable income.
NOTE: These exclusions shall not apply for purposes of
the "Top Heavy" requirements in Section 9.03 or for
allocating Discretionary Employer Contributions if
an Integrated Formula is elected in
Section 1.05(a)(2).
(5) [ ] No exclusions.
5
<PAGE> 84
(b) COMPENSATION FOR THE FIRST YEAR OF PARTICIPATION
Contributions for the Plan Year in which an Employee first
becomes a Participant shall be determined based on the Employee's
Compensation (check one):
(1) [ ] For the entire Plan Year.
(2) [ ] For the portion of the Plan Year in which the
Employee is eligible to participate in the Plan.
1.05 CONTRIBUTIONS
(a) [ ] EMPLOYER CONTRIBUTIONS:
(1) [ ] FIXED FORMULA - NONINTEGRATED FORMULA (check (A)
or (B)):
(A) [ ] Fixed Percentage Employer Contribution:
For each Plan Year, the Employer will
contribute for each eligible Participant an
amount equal to __________% (not to exceed
15%) of such Participant's Compensation.
(B) [ ] Fixed Flat Dollar Employer Contribution:
For each Plan Year, the Employer will
contribute for each eligible Participant an
amount equal to $_________.
(2) [ ] DISCRETIONARY FORMULA
The Employer may decide each Plan Year whether to make a
discretionary Employer contribution on behalf of eligible
Participants in accordance with Section 4.06. Such
contributions shall be allocated to eligible Participants
based upon the following (check (A) or (B)):
(A) [ ] Nonintegrated Allocation Formula:
In the ratio that each eligible Participant's
Compensation bears to the total Compensation
paid to all eligible Participants for the Plan
Year.
(B) [ ] Integrated Allocation Formula:
In accordance with Section 4.06.
NOTE: An Employer who maintains any other plan that
provides for Social Security Integration
(permitted disparity) may not elect (2)(B).
6
<PAGE> 85
(3) ELIGIBILITY REQUIREMENT(S)
A Participant shall be entitled to Employer Contributions
for a Plan Year under this Subsection (a) if the
Participant satisfies the following requirement(s) (Check
the appropriate box(es) - Options (B) and (C) may not be
elected together):
(A) [ ] is employed by the Employer on the last day
of the Plan Year.
(B) [ ] earns at least 500 Hours of Service during the
Plan Year.
(C) [ ] earns at least 1,000 Hours of Service during
the Plan Year.
(D) [ ] no requirements.
NOTE: If option (A), (B) or (C) above is selected
then Employer contributions can only be FUNDED
by the Employer AFTER Plan Year end. Employer
contributions funded during the Plan Year
shall not be subject to the eligibility
requirements of this Section 1.05(a)(3).
(b) [ ] DEFERRAL CONTRIBUTIONS
(1) REGULAR CONTRIBUTIONS
The Employer shall make a Deferral Contribution in
accordance with Section 4.01 on behalf of each Participant
who has an executed salary reduction agreement in effect
with the Employer for the payroll period in question, not
to exceed ___________% (NO MORE THAN 15%) of Compensation
for that period.
(A) A Participant may increase or decrease, on a
prospective basis, his salary reduction agreement
percentage (check one):
(i) [ ] As of the beginning of each
payroll period.
(ii) [ ] As of the first day of each
month.
(iii) [ ] As of the next Entry Date.
(iv) [ ] (Specify, but must be at least
once per Plan Year)
---------------------------------
---------------------------------
(B) A Participant may revoke, on a prospective basis, a
salary reduction agreement at any time upon proper
notice to the Administrator but in such case may
not file a new salary reduction agreement until
(check one):
(i) [ ] The first day of the next Plan
Year.
(ii) [ ] Any subsequent Plan Entry Date.
(iii) [ ] (Specify, but must be at least
once per Plan Year)
---------------------------------
7
<PAGE> 86
(2) [ ] CATCH-UP CONTRIBUTIONS
The Employer may allow Participants upon proper notice and
approval to enter into a special salary reduction
agreement to make additional Deferral Contributions in an
amount up to 100% of their Compensation for the payroll
period(s) in the final month of the Plan Year.
(3) [ ] BONUS CONTRIBUTIONS
The Employer may allow Participants upon proper notice and
approval to enter into a special salary reduction
agreement to make Deferral Contributions in an amount up
to 100% of any Employer paid cash bonuses made for such
Participants during the Plan Year. The Compensation
definition elected by the Employer in Section 1.04(a) must
include bonuses if bonus contributions are permitted.
NOTE: A Participant's contributions under (2) and/or
(3) may not cause the Participant to exceed the
percentage limit specified by the Employer in (1)
after the Plan Year. The Employer has the right
to restrict a Participant's right to make
Deferral Contributions if they will adversely
affect the Plan's ability to pass the actual
deferral percentage and/or the actual
contribution percentage test.
(4) [ ] QUALIFIED DISCRETIONARY CONTRIBUTIONS
The Employer may contribute an amount which it designates
as a Qualified Discretionary Contribution to be included
in the actual deferral percentage or actual contribution
percentage test. Qualified Discretionary Contributions
shall be allocated to Non-highly Compensated Employees
(check one):
(A) [ ] in the ratio which each such Participant's
Compensation for the Plan Year bears to the
total of all such Participants' Compensation
for the Plan Year.
(B) [ ] as a flat dollar amount for each such
Participant for the Plan Year.
8
<PAGE> 87
(c) [ ] MATCHING CONTRIBUTIONS (only if Section 1.05(b) is
checked)
(1) THE EMPLOYER SHALL MAKE A MATCHING CONTRIBUTION ON BEHALF
OF EACH PARTICIPANT IN AN AMOUNT EQUAL TO THE FOLLOWING
PERCENTAGE OF A PARTICIPANT'S DEFERRAL CONTRIBUTIONS
DURING THE PLAN YEAR (check one):
(A) [ ] 50%
(B) [ ] 100%
(C) [ ] ___%
(D) [ ] (Tiered Match) _______% of the first ________%
of the Participant's Compensation contributed
to the Plan,
_______% of the next ________% of the
Participant's Compensation contributed to
the Plan,
_______% of the next ________% of the
Participant's Compensation contributed to
the Plan.
NOTE: THE PERCENTAGES SPECIFIED ABOVE FOR MATCHING
CONTRIBUTIONS MAY NOT INCREASE AS THE PERCENTAGE OF
COMPENSATION CONTRIBUTED INCREASES.
(E) [ ] The percentage declared for the year, if
any, by a Board of Directors' Resolution (or
by a Letter of Intent for a Sole Proprietor or
Partnership).
(2) [ ] THE EMPLOYER MAY AT PLAN YEAR END MAKE AN ADDITIONAL
MATCHING CONTRIBUTION EQUAL TO A PERCENTAGE DECLARED
BY THE EMPLOYER, THROUGH A BOARD OF DIRECTORS'
RESOLUTION (OR BY A LETTER OF INTENT FOR A SOLE
PROPRIETOR OR PARTNERSHIP), OF THE DEFERRAL
CONTRIBUTIONS MADE BY EACH PARTICIPANT DURING THE
PLAN YEAR (only if an option is checked under
Section 1.05(c)(1)).
(3) [ ] MATCHING CONTRIBUTION LIMITS (check the appropriate
box):
(A) [ ] Deferral Contributions in excess of ________%
of the Participant's Compensation for the
period in question shall not be considered
for Matching Contributions.
Note: If the Employer elects a percentage limit in
(A) above and requests the Trustee to account
separately for matched and unmatched Deferral
Contributions, the Matching Contributions
allocated to each Participant must be
computed, and the percentage limit applied,
based upon each payroll period.
(B) [ ] Matching Contributions for each Participant
for each Plan Year shall be limited
to $___________.
9
<PAGE> 88
(4) ELIGIBILITY REQUIREMENT(S)
A Participant who makes Deferral Contributions during the
Plan Year under Section 1.05(b) shall be entitled to
Matching Contributions for that Plan Year if the
Participant satisfies the following requirement(s) (Check
the appropriate box(es). Options (B) and (C) may not be
elected together):
(A) [ ] Is employed by the Employer on the last day
of the Plan Year.
(B) [ ] Earns at least 500 Hours of Service during the
Plan Year.
(C) [ ] Earns at least 1,000 Hours of Service during
the Plan Year.
(D) [ ] Is not a Highly Compensated Employee for the
Plan Year.
(E) [ ] Is not a Partner of the Employer, if the
Employer is a Partnership.
(F) [ ] No requirements.
NOTE: If option (A), (B) or (C) above is selected
then Matching Contributions can only be FUNDED
by the Employer AFTER the Plan Year ends. Any
Matching Contribution funded before Plan Year
end shall not be subject to the eligibility
requirements of this Section 1.05(c)(4)). If
option (A), (B), or (C) is adopted during a
Plan Year, such option shall not become
effective until the first day of the next Plan
Year.
(D) [ ] EMPLOYEE AFTER-TAX CONTRIBUTIONS (check one):
(1) [ ] FUTURE CONTRIBUTIONS
Participants may make voluntary non-deductible Employee
Contributions pursuant to Section 4.09 of the Plan. This
option may only be elected if the Employer has elected to
permit Deferral Contributions under Section 1.05(b).
Matching Contributions by the Employer are not allowed on
any voluntary non-deductible Employee Contributions.
Withdrawals are limited to one per year unless Employee
Contributions were allowed under a previous plan document
which authorized more frequent withdrawals.
(2) [ ] FROZEN CONTRIBUTIONS
Participants may not make voluntary non-deductible
Employee Contributions, but the Employer does maintain
frozen Participant voluntary non-deductible Employee
Contribution Accounts.
10
<PAGE> 89
1.06 RETIREMENT AGE(S)
(a) THE NORMAL RETIREMENT AGE UNDER THE PLAN IS (check one):
(1) [ ] age 65.
(2) [ ] age ____ (specify between 55 and 64).
(3) [ ] later of the age ___ (can not exceed 65) or the
fifth anniversary of the Participant's Employment
Commencement Date.
(b) [ ] THE EARLY RETIREMENT AGE IS THE FIRST DAY OF THE MONTH
AFTER THE PARTICIPANT ATTAINS AGE __ (SPECIFY 55 OR
GREATER) AND COMPLETES __ YEARS OF SERVICE FOR VESTING.
(c) [ ] A PARTICIPANT IS ELIGIBLE FOR DISABILITY RETIREMENT IF
HE/SHE (check the appropriate box(es)):
(1) [ ] satisfies the requirements for benefits under
the Employer's Long-Term Disability Plan.
(2) [ ] satisfies the requirements for Social Security
disability benefits.
(3) [ ] is determined to be disabled by a physician
approved by the Employer.
11
<PAGE> 90
1.07 VESTING SCHEDULE
(a) THE PARTICIPANT'S VESTED PERCENTAGE IN EMPLOYER CONTRIBUTIONS (FIXED
OR DISCRETIONARY) ELECTED IN SECTION 1.05(a) AND/OR MATCHING
CONTRIBUTIONS ELECTED IN SECTION 1.05(c) SHALL BE BASED UPON THE
SCHEDULE(S) SELECTED BELOW, EXCEPT WITH RESPECT TO ANY PLAN YEAR
DURING WHICH THE PLAN IS TOP-HEAVY. THE SCHEDULE ELECTED IN SECTION
1.12(d) SHALL AUTOMATICALLY APPLY FOR A TOP-HEAVY PLAN YEAR AND ALL
PLAN YEARS THEREAFTER UNLESS THE EMPLOYER HAS ALREADY ELECTED A MORE
FAVORABLE VESTING SCHEDULE BELOW.
<TABLE>
<CAPTION>
(1) EMPLOYER CONTRIBUTIONS (2) MATCHING CONTRIBUTIONS
(check one): (check one):
<S> <C> <C> <C> <C> <C>
(A) [ ] N/A - No Employer Contributions (A) [ ] N/A - No Matching Contributions
(B) [ ] 100% Vesting immediately (B) [ ] 100% Vesting immediately
(C) [ ] 3 year cliff (see C below) (C) [ ] 3 year cliff (see C below)
(D) [ ] 5 year cliff (see D below) (D) [ ] 5 year cliff (see D below)
(E) [ ] 6 year graduated (see E below) (E) [ ] 6 year graduated (see E below)
(F) [ ] 7 year graduated (see F below) (F) [ ] 7 year graduated (see F below)
(G) [ ] Other vesting (complete G1 below) (G) [ ] Other vesting (complete G2 below)
</TABLE>
<TABLE>
<CAPTION>
YEARS OF VESTING SCHEDULE
SERVICE FOR
VESTING C D E F G1 G2
- ------------ --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
0 0% 0% 0% 0% ___ ___
1 0% 0% 0% 0% ___ ___
2 0% 0% 20% 0% ___ ___
3 100% 0% 40% 20% ___ ___
4 100% 0% 60% 40% ___ ___
5 100% 100% 80% 60% ___ ___
6 100% 100% 100% 80% ___ ___
7 100% 100% 100% 100% 100% 100%
</TABLE>
NOTE: A schedule elected under G1 or G2 above must be at least as favorable as
one of the schedules in C, D, E or F above.
(b) [ ] YEARS OF SERVICE FOR VESTING SHALL EXCLUDE:
(1) [ ] for new plans, service prior to the Effective Date as
defined in Section 1.01(g)(1).
(2) [ ] for existing plans converting from another plan document,
service prior to the original Effective Date as defined
in Section 1.01(g)(2).
12
<PAGE> 91
1.08 PREDECESSOR EMPLOYER SERVICE
[ ] SERVICE FOR PURPOSES OF ELIGIBILITY IN SECTION 1.03(a)(1) AND
VESTING IN SECTION 1.07(a) OF THIS PLAN SHALL INCLUDE SERVICE
WITH THE FOLLOWING EMPLOYER(S):
(a)
-----------------------------------------------------------------
(b)
-----------------------------------------------------------------
(c)
-----------------------------------------------------------------
(d)
-----------------------------------------------------------------
1.09 PARTICIPANT LOANS
PARTICIPANT LOANS (check (a) or (b)):
(a) [ ] WILL BE ALLOWED IN ACCORDANCE WITH SECTION 7.09, SUBJECT TO
A $1,000 MINIMUM AMOUNT AND WILL BE GRANTED (check (1)
or (2)):
(1) [ ] for any purpose.
(2) [ ] for hardship withdrawal (as defined in Section 7.10)
purposes only.
(b) [ ] WILL NOT BE ALLOWED.
1.10 HARDSHIP WITHDRAWALS
PARTICIPANT WITHDRAWALS FOR HARDSHIP PRIOR TO TERMINATION OF EMPLOYMENT
(check one):
(a) [ ] WILL BE ALLOWED IN ACCORDANCE WITH SECTION 7.10, SUBJECT TO
A $1,000 MINIMUM AMOUNT.
(b) [ ] WILL NOT BE ALLOWED.
13
<PAGE> 92
1.11 DISTRIBUTIONS
(a) SUBJECT TO ARTICLES 7 AND 8 AND (B) BELOW, DISTRIBUTIONS UNDER
THE PLAN WILL BE PAID (check the appropriate box(es)):
(1) [ ] as a lump sum.
(2) [ ] under a systematic withdrawal plan (installments).
(b) [ ] CHECK IF A PARTICIPANT WILL BE ENTITLED TO RECEIVE A
DISTRIBUTION OF ALL OR ANY PORTION OF THE FOLLOWING ACCOUNTS
WITHOUT TERMINATING EMPLOYMENT UPON ATTAINMENT OF AGE 59 1/2
(CHECK ONE):
(1) [ ] Deferral Contribution Account
(2) [ ] All Accounts
(c) [ ] CHECK IF THE PLAN WAS CONVERTED (BY PLAN AMENDMENT) FROM
ANOTHER DEFINED CONTRIBUTION PLAN, AND THE BENEFITS WERE
PAYABLE AS (check the appropriate box(es)):
(1) [ ] a form of single or joint and survivor life annuity.
(2) [ ] an in-service withdrawal of vested employer contributions
maintained in a participant's account (check (A)
and/or (B)):
(A) [ ] for at least ________ (24 or more) months.
(B) [ ] after the Participant has at least 60 months of
participation.
(3) [ ] another distribution option that is a "protected benefit"
under Section 411(d)(6) of the Internal Revenue Code.
Please attach a separate page identifying the
distribution option(s).
These additional forms of benefit may be provided for such plans
under Articles 7 or 8.
NOTE: Under Federal Law, distributions to Participants must
generally begin no later than April 1 following the year
in which the Participant attains age 70 1/2.
14
<PAGE> 93
1.12 TOP HEAVY STATUS
(a) THE PLAN SHALL BE SUBJECT TO THE TOP-HEAVY PLAN REQUIREMENTS OF
ARTICLE 9 (check one):
(1) [ ] for each Plan Year.
(2) [ ] for each Plan Year, if any, for which the Plan is Top-
Heavy as defined in Section 9.02.
(3) [ ] Not applicable. (This option is available for plans
covering only employees subject to a collective
bargaining agreement and there are no Employer
or Matching Contributions elected in Section 1.05.)
(b) IN DETERMINING TOP-HEAVY STATUS, IF NECESSARY, FOR AN EMPLOYER
WITH AT LEAST ONE DEFINED BENEFIT PLAN, THE FOLLOWING ASSUMPTIONS
SHALL APPLY:
(1) Interest rate: _____% per annum
(2) Mortality table: _____________
(3) [ ] Not Applicable.
(c) IN THE EVENT THAT THE PLAN IS TREATED AS TOP-HEAVY FOR A PLAN
YEAR, EACH NON-KEY EMPLOYEE SHALL RECEIVE AN EMPLOYER
CONTRIBUTION OF AT LEAST (3, 4, 5, OR 7 1/2) % OF COMPENSATION
FOR THE PLAN YEAR IN ACCORDANCE WITH SECTION 9.03 (check one):
(1) [ ] under this Plan in any event.
(2) [ ] under this Plan only if the Participant is not entitled
to such contribution under another qualified plan of the
Employer.
(3) [ ] Not applicable. (This option is available for plans
covering only employees subject to a collective
bargaining agreement and there are no Employer or
Matching Contributions elected in Section 1.05.)
NOTE: Such minimum Employer contribution may be less than the
percentage indicated in (c) above to the extent provided
in Section 9.03(a).
15
<PAGE> 94
(d) IN THE EVENT THAT THE PLAN IS TREATED AS TOP-HEAVY FOR A PLAN
YEAR, THE FOLLOWING VESTING SCHEDULE SHALL APPLY INSTEAD OF THE
SCHEDULE(S) ELECTED IN SECTION 1.07(A) FOR SUCH PLAN YEAR AND
EACH PLAN YEAR THEREAFTER (check one):
(1) [ ] 100% vested after ______________ (not in excess of 3)
Years of Service for Vesting.
<TABLE>
<CAPTION>
(2) [ ] Years of Service for Vesting Vesting Percentage Must be at Least
---------------------------- ------------------ ----------------
<S> <C> <C> <C>
0 ________ 0%
1 ________ 0%
2 ________ 20%
3 ________ 40%
4 ________ 60%
5 ________ 80%
6 ________ 100%
</TABLE>
NOTE: If the schedule(s) elected in Section 1.07(a)
is(are) more favorable in all cases than the
schedule elected in (d) above, then the schedule(s)
in Section 1.07(a) will continue to apply even in
Plan Years in which the Plan is Top-Heavy.
1.13 TWO OR MORE PLANS - CODE SECTION 415 LIMITATION ON ANNUAL ADDITIONS
If the Employer maintains or ever maintained another qualified plan in
which any Participant in this Plan is (or was) a participant or could
become a participant, the Employer must complete this section. The
Employer must also complete this section if it maintains a welfare
benefit fund, as defined in Section 419(e) of the Code, or an individual
medical account, as defined in Section 415(l)(2) of the Code, under
which amounts are treated as annual additions with respect to any
Participant in this Plan.
(a) IF THE EMPLOYER MAINTAINS, OR MAINTAINED, ANY OTHER DEFINED
CONTRIBUTION PLAN WHICH IS NOT A MASTER OR PROTOTYPE PLAN, ANNUAL
ADDITIONS FOR ANY LIMITATION YEAR TO THIS
PLAN WILL BE LIMITED (check one):
(1) [ ] in accordance with Section 5.03 of this Plan.
(2) [ ] in accordance with another method set forth on an
attached separate sheet.
(3) [ ] Not Applicable.
16
<PAGE> 95
(b) IF THE EMPLOYER MAINTAINS, OR MAINTAINED, ANY DEFINED BENEFIT
PLAN(S), THE SUM OF THE DEFINED CONTRIBUTION FRACTION AND DEFINED
BENEFIT FRACTION FOR A LIMITATION YEAR MAY NOT EXCEED THE
LIMITATION SPECIFIED IN CODE SECTION 415(E), MODIFIED BY SECTION
416(H)(1) OF THE CODE. THIS COMBINED PLAN LIMIT WILL BE MET AS
FOLLOWS (check one):
(1) [ ] Annual Additions to this Plan are limited so that
the sum of the Defined Contribution Fraction and the
Defined Benefit Fraction does not exceed 1.0.
(2) [ ] another method of limiting Annual Additions or
reducing projected annual benefits is set forth on an
attached schedule.
(3) [ ] Not Applicable.
1.14 ESTABLISHMENT OF TRUST AND INVESTMENT DECISIONS
(a) INVESTMENT DIRECTIONS
Participant Accounts will be invested (check one):
(1) [ ] in accordance with investment directions provided to the
Trustee by the Employer for allocating all Participant
Accounts among the options listed in (b) below.
(2) [ ] in accordance with investment directions provided to the
Trustee by each Participant for allocating his entire
Account among the options listed in (b) below.
(3) [ ] in accordance with investment directions provided to the
Trustee by each Participant for all contribution sources
in a Participant's Account except the following sources
shall be invested as directed by the Employer (check (A)
and/or (B)):
(A) [ ] Fixed or Discretionary Employer Contributions
(B) [ ] Employer Matching Contributions
The Employer must direct the applicable sources among the
same investment options made available for Participant
directed sources listed in (b) below.
17
<PAGE> 96
(B) PLAN INVESTMENT OPTIONS
The Employer hereby establishes a Trust under the Plan in
accordance with the provisions of Article 14, and the Trustee
signifies acceptance of its duties under Article 14 by its
signature below. Participant Accounts under the Trust will be
invested among the Fidelity Funds listed below pursuant to
Participant and/or Employer directions.
<TABLE>
<CAPTION>
Fund Name Fund Number
--------- -----------
<S> <C> <C>
(1)
-------------------------------------- ----------------
(2)
-------------------------------------- ----------------
(3)
-------------------------------------- ----------------
(4)
-------------------------------------- ----------------
(5)
-------------------------------------- ----------------
(6)
-------------------------------------- ----------------
(7)
-------------------------------------- ----------------
(8)
-------------------------------------- ----------------
(9)
-------------------------------------- ----------------
(10)
-------------------------------------- ----------------
</TABLE>
NOTE: An additional annual recordkeeping fee will be charged
for each fund in excess of five funds.
To the extent that the Employer selects as an investment
option the Managed Income Portfolio of the Fidelity Group
Trust for Employee Benefit Plans (the "Group Trust"), the
Employer hereby (A) agrees to the terms of the Group
Trust and adopts said terms as a part of this Agreement
and (B) acknowledges that it has received from the
Trustee a copy of the Group Trust, the Declaration of
Separate Fund for the Managed Income Portfolio of the
Group Trust, and the Circular for the Managed Income
Portfolio.
NOTE: The method and frequency for change of investments will
be determined under the rules applicable to the selected
funds or, if applicable, the rules of the Employer
adopted in accordance with Section 6.03. Information will
be provided regarding expenses, if any, for changes in
investment options.
18
<PAGE> 97
1.15 RELIANCE ON OPINION LETTER
An adopting Employer may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this
Plan is qualified under Section 401 of the Code. If the Employer wishes
to obtain reliance that his or her Plan(s) are qualified, application
for a determination letter should be made to the appropriate Key
District Director of the Internal Revenue Service. Failure to fill out
the Adoption Agreement properly may result in disqualification of the
Plan.
This Adoption Agreement may be used only in conjunction with Fidelity
Prototype Plan Basic Plan Document No. 07. The Prototype Sponsor shall
inform the adopting Employer of any amendments made to the Plan or of
the discontinuance or abandonment of the prototype plan document.
1.16 PROTOTYPE INFORMATION:
Name of Prototype Sponsor: Fidelity Management & Research Co.
Address of Prototype Sponsor: 82 Devonshire Street
Boston, MA 02109
Questions regarding this prototype document may be directed to the
following telephone number:
1-(800) 343-9184.
19
<PAGE> 98
EXECUTION PAGE
(FIDELITY'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this ________day of _______________, 19_______.
Employer
-----------------------------------------
By
-----------------------------------------
Title
-----------------------------------------
Employer
-----------------------------------------
By
-----------------------------------------
Title
-----------------------------------------
Accepted by
Fidelity Management Trust Company, as Trustee
By Date
----------------------------------- ------------------
Title
----------------------------------
20
<PAGE> 99
EXECUTION PAGE
(EMPLOYER'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this ________day of _______________, 19_______.
Employer
-----------------------------------------
By
-----------------------------------------
Title
-----------------------------------------
Employer
-----------------------------------------
By
-----------------------------------------
Title
-----------------------------------------
Accepted by
Fidelity Management Trust Company, as Trustee
By Date
----------------------------------- ------------------
Title
----------------------------------
21
<PAGE> 1
EXHIBIT 10.6
DEP CORPORATION EXECUTIVE BONUS PLAN
FISCAL YEAR ENDED JULY 31, 1997
I. BONUSES ARE EARNED ON THE FOLLOWING PERFORMANCE OBJECTIVES:
<TABLE>
<CAPTION>
Performance Objectives
----------------------
Category Category Description Business Personal
-------- -------------------- -------- --------
<S> <C> <C> <C>
I President and CEO 100% --
II Chief Financial Officer 100% --
III Senior V.P. and V.P. 100% --
</TABLE>
II. CORPORATE/DIVISION BUSINESS OBJECTIVES:
To foster each executive's commitment to teamwork and share in the
Company's overall success, targeted Business Objectives for participants should
include Corporate/Division performance factors as below:
<TABLE>
<CAPTION>
Percentage of Total Business Objectives
Participant's Reporting ---------------------------------------
Level Corporate Division
----------------------- --------- --------
<S> <C> <C>
President and CEO 100% n/a
Vice President, Sales 50% 50%
Vice President, Marketing 50% 50%
Senior Vice President, International 50% 50%
Vice President, Operations 80% 20%
Vice President, R&D and Contract Packaging 80% 20%
All Other Vice Presidents 100% n/a
</TABLE>
Except for the President and CEO who is covered by a separate plan,
Corporate Business Objectives for Operational and Administrative Executives are
set forth in Schedule A; Corporate Business Objectives for Sales and Marketing
Executives are set forth in Schedule B; Division Business Objectives are set
forth in Schedule C.
Exhibit 10.6
<PAGE> 2
SCHEDULE A
CORPORATE BUSINESS OBJECTIVES
OPERATIONAL AND ADMINISTRATIVE
Corporate Business Objectives are the attainment of planned levels of
Operating Income covering a three year period, as follows:
<TABLE>
<CAPTION>
Fiscal Years Ending July 31,
-----------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Threshold Level $ $ $
Target Level $ $ $
</TABLE>
The annual Performance Awards payable for the achievement of each of the
above levels, are as follows:
A. CASH COMPENSATION:
<TABLE>
<CAPTION>
Fiscal Years Ending July 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Threshold Bonus 15% 15% 15%
and
Target Bonus 25% 35% 45%
TOTAL POTENTIAL 40% 50% 60%
</TABLE>
B. DEFERRED COMPENSATION BASED ON STOCK OPTION APPRECIATION RIGHTS. Payout is
equal to the difference of the market price on the third anniversary of the
grant less a per share price of $1.625 multiplied by the number of shares
granted. The grant date is October 1 after the end of each fiscal year if profit
levels are achieved. The shares subject to grant are as follows:
<TABLE>
<S> <C> <C> <C>
Threshold Shares 2,500 2,500 2,500
and
Target Shares 5,000 5,000 5,000
TOTAL POTENTIAL 7,500 7,500 7,500
</TABLE>
If actual performance falls between the Threshold and Target levels, the
percentage of the Performance Award earned, cash and stock options, will be at
the discretion of: (1) the Compensation Committee of the Board of Directors, in
the case of Category I and (2) the Chief Executive Officer, in the case of
Category II and III, in each case based upon the individual executives personal
performance.
<PAGE> 3
SCHEDULE B
CORPORATE BUSINESS OBJECTIVES
SALES AND MARKETING
Corporate Business Objectives are the attainment of planned levels of
Operating Income covering a three year period, as follows:
<TABLE>
<CAPTION>
Fiscal Years Ending July 31,
-----------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Threshold Level $ $ $
Target Level $ $ $
</TABLE>
The annual Performance Awards payable for the achievement of each of the
above levels, are as follows:
A. CASH COMPENSATION:
<TABLE>
<CAPTION>
Fiscal Years Ending July 31,
----------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Threshold Bonus 20% 20% 20%
and
Target Bonus 25% 40% 50%
TOTAL POTENTIAL 45% 60% 70%
</TABLE>
B. DEFERRED COMPENSATION BASED ON STOCK APPRECIATION. Payout is equal to the
difference of the market price on the third anniversary of the grant less a per
share price of $1.625 multiplied by the number of shares granted. The grant date
is October 1 after the end of each fiscal year if profit levels are achieved.
The shares subject to grant are as follows:
<TABLE>
<S> <C> <C> <C>
Threshold Shares 2,500 2,500 2,500
and
Target Shares 5,000 5,000 5,000
TOTAL POTENTIAL 7,500 7,500 7,500
</TABLE>
If actual performance falls between the Threshold and Target levels, the
percentage of the Performance Award earned, cash and stock options, will be at
the discretion of the Chief Executive Officer based upon the individual
executives personal performance.
<PAGE> 4
SCHEDULE C
DIVISION BUSINESS OBJECTIVES
FISCAL YEAR ENDING JULY 31, 1997
Annually the sales and marketing divisions develop their respective
internal plan goals which are the basis for the Company's profit plan. It is
very important that the internal plans reflect achievable results for sales and
profit growth. Although it is recognized that sales represent a vital element in
order to meet our profit goals, Division Business Objectives ("DBO's") are based
on the attainment of specified levels of the internal plan's Profit Before
General and Administrative Expenses (PBG&A). This one factor is utilized for DBO
determination for ease of understanding and recognizes that in order to meet the
PBG&A, commensurate sales levels must also be achieved. The internal plan's
DBO's and achievement levels for bonus determination are as follows:
<TABLE>
<CAPTION>
Percentage of Plan For
Participant's Reporting Internal Plan ------------------------
Level PBG&A Threshold Target
------------------------ ------------- --------- ------
<S> <C> <C> <C>
Vice President, Sales $ 90% 105%
Vice President, Marketing $ 90% 105%
Senior Vice President, International $ 90% 105%
Vice President, Operations $ 90% 105%
Vice President, R&D and Contract Pkg $ 90% 105%
</TABLE>
Determination of Cash Compensation:
If the specified percentage level of the internal plan's PBG&A is achieved, then
the executive shall be entitled to receive the corresponding bonus level
pursuant to Schedule B. The dollar bonus would be determined by: (1) multiplying
the executives base salary times the applicable Cash Compensation Bonus
percentage (Schedule B); and (2) the result of (1) times the appropriate Divison
Percentage of Total Business Objectives (under Section II Corporate/ Division
Business Objectives). For example, if the sales/marketing executive achieved the
Target Level and base salary was $100,000 per year with satisfactory personal
performance, his/her cash compensation relative to DBO's would be: $100,000 X
45% = $45,000 X 50% = $22,500.
Determination of Stock Appreciation Rights:
If the specified percentage level of the internal plan's PBG&A is achieved, then
the executive shall be entitled to receive the corresponding bonus level
pursuant to Schedule B. The number of stock rights would be determined by
multiplying the executives earned Stock Appreciation Shares, Threshold and/or
Target (Schedule B), by the appropriate Divison Percentage of Total Business
Objectives (under Section II Corporate/ Division Business Objectives). For
example, if the sales/marketing executive achieved the Target Level with
satisfactory personal performance, the earned Stock Appreciation Shares relative
to DBO's would be: 7,500 X 50% or 3,750.
<PAGE> 5
SCHEDULE D
PERSONAL PERFORMANCE OBJECTIVES
Personal Performance Objectives means the objectives established by the
Company's President, which may be described in terms of either Company-wide
objectives, divisional, departmental, or functional objectives and relate to a
given fiscal year. The President may adjust the Personal Performance Objectives
and any minimum acceptable level of achievement with respect to any Personal
Performance Objective if, in the sole judgment of the President, events or
transactions have occurred which are unrelated to the performance of the
Participant and result in a distortion of the Personal Performance Objectives or
such minimum acceptable level of achievement.
<PAGE> 1
EXHIBIT 10.8
DEP CORPORATION EXECUTIVE BONUS PLAN
FISCAL YEAR ENDED JULY 31, 1998
THIS PLAN REPLACES THE 1997 EXECUTIVE BONUS PLAN
I. BONUSES ARE EARNED ON THE FOLLOWING PERFORMANCE OBJECTIVES:
<TABLE>
<CAPTION>
Performance Objectives
----------------------
Category Category Description Business Personal
-------- -------------------- -------- --------
<S> <C> <C> <C>
I President and CEO 100% --
II Chief Financial Officer 100% --
III Senior V.P. and V.P. 100% --
</TABLE>
II. CORPORATE/DIVISION BUSINESS OBJECTIVES:
To foster each executive's commitment to teamwork and share in the
Company's overall success, targeted Business Objectives for participants should
include Corporate/Division performance factors as below:
<TABLE>
<CAPTION>
Percentage of Total Business Objectives
Participant's Reporting ---------------------------------------
Level Corporate Division
----------------------- --------- --------
<S> <C> <C>
President and CEO 100% n/a
Vice President, Sales 50% 50%
Vice President, Marketing 50% 50%
Senior Vice President, International 50% 50%
Vice President, Operations 80% 20%
Vice President, R&D and Contract Packaging 80% 20%
All Other Vice Presidents 100% n/a
</TABLE>
Except for the President and CEO who is covered by a separate plan,
Corporate Business Objectives for Operational and Administrative Executives are
set forth in Schedule A; Corporate Business Objectives for Sales and Marketing
Executives are set forth in Schedule B; Division Business Objectives are set
forth in Schedule C.
Exhibit 10.8
<PAGE> 2
SCHEDULE A
CORPORATE BUSINESS OBJECTIVES
OPERATIONAL AND ADMINISTRATIVE
Corporate Business Objectives are the attainment of planned levels of
"PRE-BONUS EBITDA" (earnings before interest, taxes, depreciation and
amortization) during a three year period, as follows:
<TABLE>
<CAPTION>
Fiscal Years Ending July 31,
-----------------------------------
1998 1999 2000
---------- ---------- -----------
<S> <C> <C> <C>
Threshold Level $ $ $
Target Level $ $ $
</TABLE>
The annual Performance Awards payable for the achievement of each of the
above levels, are as follows:
A. CASH COMPENSATION:
<TABLE>
<CAPTION>
Fiscal Years Ending July 31,
------------------------------------
1998 1999 2000
------ ------ ------
<S> <C> <C> <C>
Threshold Bonus 15% 15% 15%
and
Target Bonus 35% 45% 45%
TOTAL POTENTIAL 50% 60% 60%
</TABLE>
B. DEFERRED COMPENSATION BASED ON STOCK OPTION APPRECIATION RIGHTS. Payout is
equal to the difference of the market price on the third anniversary of the
grant less a per share price of $1.3125 multiplied by the number of shares
granted. The grant date is October 1 after the end of each fiscal year if profit
levels are achieved. The shares subject to grant are as follows:
<TABLE>
<S> <C> <C> <C>
Threshold Shares 2,500 2,500 2,500
and
Target Shares 5,000 5,000 5,000
TOTAL POTENTIAL 7,500 7,500 7,500
</TABLE>
If actual performance falls between the Threshold and Target levels, the
percentage of the Performance Award earned, cash and stock options, will be at
the discretion of: (1) the Compensation Committee of the Board of Directors, in
the case of Category I and (2) the Chief Executive Officer, in the case of
Category II and III, in each case based upon the individual executives personal
performance.
<PAGE> 3
SCHEDULE B
CORPORATE BUSINESS OBJECTIVES
SALES AND MARKETING
Corporate Business Objectives are the attainment of planned levels of
"PRE-BONUS EBITDA" (earnings before interest, taxes, depreciation and
amortization) during a three year period, as follows:
<TABLE>
<CAPTION>
Fiscal Years Ending July 31,
-----------------------------------
1998 1999 2000
---------- ---------- -----------
<S> <C> <C> <C>
Threshold Level $ $ $
Target Level $ $ $
</TABLE>
The annual Performance Awards payable for the achievement of each of the
above levels, are as follows:
A. CASH COMPENSATION:
<TABLE>
<CAPTION>
Fiscal Years Ending July 31,
------------------------------------
1998 1999 2000
------ ------ ------
<S> <C> <C> <C>
Threshold Bonus 20% 20% 20%
and
Target Bonus 40% 50% 50%
TOTAL POTENTIAL 60% 70% 70%
</TABLE>
B. DEFERRED COMPENSATION BASED ON STOCK APPRECIATION. Payout is equal to the
difference of the market price on the third anniversary of the grant less a per
share price of $1.3125 multiplied by the number of shares granted. The grant
date is October 1 after the end of each fiscal year if profit levels are
achieved. The shares subject to grant are as follows:
<TABLE>
<S> <C> <C> <C>
Threshold Shares 2,500 2,500 2,500
and
Target Shares 5,000 5,000 5,000
TOTAL POTENTIAL 7,500 7,500 7,500
</TABLE>
If actual performance falls between the Threshold and Target levels, the
percentage of the Performance Award earned, cash and stock options, will be at
the discretion of the Chief Executive Officer based upon the individual
executives personal performance.
<PAGE> 4
SCHEDULE C
DIVISION BUSINESS OBJECTIVES
FISCAL YEAR ENDING JULY 31, 1998
Annually the sales and marketing divisions and contract packaging/private
label divisions develop their respective internal plan goals which are the basis
for the Company's profit plan. It is very important that the internal plans
reflect achievable results for sales and profit growth. Although it is
recognized that sales represent a vital element in order to meet our profit
goals, Division Business Objectives ("DBO's") are based on the attainment of
specified levels of the internal plan's PROFIT BEFORE GENERAL AND ADMINISTRATIVE
EXPENSES (PBG&A). This one factor is utilized for DBO determination for ease of
understanding and recognizes that in order to meet the PBG&A, commensurate sales
levels must also be achieved. The internal plan's DBO's and achievement levels
for bonus determination are as follows:
<TABLE>
<CAPTION>
Percentage of Plan For
Participant's Reporting Internal Plan ------------------------
Level PBG&A Threshold Target
----------------------- -------------- --------- ------
<S> <C> <C> <C>
Vice President, Sales $ 100% 110%
Vice President, Marketing $ 100% 110%
Senior Vice President, International $ 100% 110%
Vice President, Operations $ 100% 110%
Vice President, R&D and Contract Pkg $ 100% 110%
</TABLE>
Determination of Cash Compensation:
If the specified percentage level of the internal plan's PBG&A is achieved, then
the executive shall be entitled to receive the corresponding bonus level
pursuant to Schedule B. The dollar bonus would be determined by: (1) multiplying
the executives base salary times the applicable Cash Compensation Bonus
percentage (Schedule B); and (2) the result of (1) times the appropriate Divison
Percentage of Total Business Objectives (under Section II Corporate/ Division
Business Objectives). For example, if the sales/marketing executive achieved the
Target Level and base salary was $100,000 per year with satisfactory personal
performance, his/her cash compensation relative to DBO's would be: $100,000 X
60% = $60,000 X 50% = $30,000; the remaining 50% would be dependent upon
corporate results. Contract packaging executives would use the percentages in
Schedule A.
Determination of Stock Appreciation Rights:
If the specified percentage level of the internal plan's PBG&A is achieved, then
the executive shall be entitled to receive the corresponding bonus level
pursuant to Schedule B. The number of stock rights would be determined by
multiplying the executives earned Stock Appreciation Shares, Threshold and/or
Target (Schedule B), by the appropriate Divison Percentage of Total Business
Objectives (under Section II Corporate/ Division Business Objectives). For
example, if the sales/marketing executive achieved the Target Level with
satisfactory personal performance, the earned Stock Appreciation Shares relative
to DBO's would be: 7,500 X 50% or 3,750.
<PAGE> 5
SCHEDULE D
PERSONAL PERFORMANCE OBJECTIVES
Personal Performance Objectives means the objectives established by the
Company's President, which may be described in terms of either Company-wide
objectives, divisional, departmental, or functional objectives and relate to a
given fiscal year. The President may adjust the Personal Performance Objectives
and any minimum acceptable level of achievement with respect to any Personal
Performance Objective if, in the sole judgment of the President, events or
transactions have occurred which are unrelated to the performance of the
Participant and result in a distortion of the Personal Performance Objectives or
such minimum acceptable level of achievement.
<PAGE> 1
PERFORMANCE BONUS PLAN FOR
CHIEF EXECUTIVE OFFICER & PRESIDENT
ROBERT BERGLASS
1. Bonuses will be based on net, after tax, income (after accruing for
bonuses) per the audited financial statements of DEP Corporation.
2. This bonus program applies for a three year period covering the fiscal
years ending July 31, 1998, 1999 and 2000.
3. A bonus would be paid only if DEP exceeds the net projected income
levels in the multi-year Court Plan that was approved by the Board in
1996 in connection with the Chapter 11 proceedings (the "Plan Net
Income"), as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending Plan Net Income
------------------ ---------------
<S> <C>
July 31, 1998 $3,392,000
July 31, 1999 $4,455,000
July 31, 2000 $5,166,000
</TABLE>
4. The bonus would be a percentage of net, after tax income, and after
bonus accrual as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending July 31,
---------------------------------
1998 1999 2000
---- ---- ----
<S> <C> <C> <C> <C>
A. If Plan Net Income is met or exceeded
in any year: 5.0% 5.0% 5.0%
B. If Plan Net Income is met or exceeded
for two consecutive years: 7.5% 7.5%
C. If Plan Net Income is met or exceeded
for three consecutive years: 10.0%
</TABLE>
5. For example, if the Plan Net Income is achieved for all three fiscal
years, the figures would be as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending July 31,
------------------------------------------------
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Net Income $3,392,000 $4,455,000 $5,166,000
Percentage bonus achieved 5% 7.5% 10%
Bonus amount $ 169,600 $ 334,125 $ 516,600
</TABLE>
Exhibit 10.15
<PAGE> 1
EXHIBIT 11
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Years ended July 31,
----------------------------------------------
1997 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
Net loss $ (438,000) $ (7,958,000) $(26,958,000)
========== ============ ============
Weighted average shares outstanding 6,701,916 6,250,368 6,244,106
========== ============ ============
Net loss per share $ (.07) $ (1.27) $ (4.32)
========== ============ ============
</TABLE>
Fully diluted shares are not shown because there is no difference between
primary and fully diluted.
Exhibit 11
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
DEP Corporation
We consent to incorporation by reference in the registration statements (No.
33-85000 and No. 33-58894) on Form S-8 of DEP Corporation and subsidiaries of
our report dated September 12, 1997 relating to the consolidated balance sheets
of DEP Corporation and subsidiaries as of July 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows and related schedule for each of the years in the three-year period ended
July 31, 1997, which report appears in the July 31, 1997 report on Form 10-K of
DEP Corporation and subsidiaries.
/s/KPMG Peat Marwick LLP
Los Angeles, California
October 24, 1997
Exhibit 23.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANY'S CONSOLIDATED BALANCE SHEET AT JULY 31, 1997, AND CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 11,788,000
<SECURITIES> 0
<RECEIVABLES> 16,218,000<F1>
<ALLOWANCES> 0
<INVENTORY> 12,996,000
<CURRENT-ASSETS> 43,016,000
<PP&E> 12,822,000<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,690,000
<CURRENT-LIABILITIES> 17,236,000
<BONDS> 61,521,000
0
0
<COMMON> 71,000<F3>
<OTHER-SE> 4,030,000
<TOTAL-LIABILITY-AND-EQUITY> 84,690,000
<SALES> 115,034,000
<TOTAL-REVENUES> 0
<CGS> 44,870,000
<TOTAL-COSTS> 108,630,000
<OTHER-EXPENSES> 29,000<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,813,000
<INCOME-PRETAX> (418,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (438,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (438,000)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
<FN>
<F1>Accounts receivable net of allowance for doubtful accounts.
<F2>Property, plant and equipment net of accumulated depreciation.
<F3>As of November 4, 1996, both Class A and Class B common stock were reclassified
as one class of Common Stock.
<F4>Includes $20,000 related to reorganization items.
</FN>
</TABLE>
