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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-12102
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HADCO CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2393279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12A MANOR PARKWAY, SALEM, NEW HAMPSHIRE 03079
(Address of principal executive offices) (Zip Code)
</TABLE>
(603) 898-8000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.05
par value
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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 __.
The aggregate market value of voting Common Stock held by non-affiliates of
the registrant was $607,651,635 based on the price of the last reported sale on
the New York Stock Exchange on January 3, 2000 as reported by the NYSE.
As of January 3, 2000, there were 13,726,100 shares of Common Stock, $.05
par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Company intends to file a definitive proxy statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended October 30,
1999. Portions of such proxy statement are incorporated by reference into Part
III of this Report.
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Except for the historical information contained herein, the matters
discussed in this Annual Report on Form 10-K are forward-looking statements that
involve risks and uncertainties. Hadco Corporation makes such forward-looking
statements under the provision of the "Safe Harbor" section of the Private
Securities Litigation Reform Act of 1995. Any forward-looking statements should
be considered in light of the factors described below in Item 7 under "Factors
That May Affect Future Results." Actual results may vary materially from those
projected, anticipated or indicated in any forward-looking statements. In this
Annual Report on Form 10-K, the words "anticipates," "believes," "expects,"
"intends," "future," "could," and similar words or expressions (as well as other
words or expressions referencing future events, conditions or circumstances)
identify forward-looking statements.
As used herein, the terms "Company" and "Hadco," unless otherwise indicated
or the context otherwise requires, refer to Hadco Corporation and its
subsidiaries, including Hadco Phoenix, Inc. ("Hadco Phoenix") (formerly
Continental Circuits Corp. ("Continental")) and Hadco Santa Clara, Inc. ("Hadco
Santa Clara") (formerly Zycon Corporation ("Zycon")). Hadco Santa Clara holds
the assets formerly held by Zycon, and Hadco Phoenix holds the assets formerly
held by Continental. Zycon Corporation and Continental Circuits Corp. are
currently wholly owned subsidiaries of the Company and are merely name holding
entities. References herein to a fiscal year-end relate to a year ending on the
last Saturday in October (for example, fiscal 1999 refers to the Company's
fiscal year ended October 30, 1999). On March 20, 1998, the Company acquired all
of the outstanding capital stock of Continental (the "Continental Acquisition"),
and on January 10, 1997, the Company acquired all of the outstanding capital
stock of Zycon (the "Zycon Acquisition"). The Continental Acquisition and the
Zycon Acquisition are collectively referred to herein as the "Acquisitions."
Unless otherwise indicated or the context otherwise requires, the results of
Zycon's operations and other financial information relating to Zycon since
January 10, 1997 are included in the Company's historical consolidated financial
information presented herein. Similarly, unless otherwise indicated or the
context otherwise requires, the results of Continental's operations and other
financial information relating to Continental since March 20, 1998 are included
in the Company's historical consolidated financial information presented herein.
PART I
ITEM 1. BUSINESS
GENERAL
Hadco is the largest manufacturer of advanced electronic interconnect
products in North America. The Company offers a wide array of sophisticated
manufacturing, engineering and systems integration services to meet its
customers' electronic interconnect needs.
The Company's principal products are multilayer rigid printed circuits and
backplane and systems assemblies. Printed circuits are the basic platforms used
to interconnect microprocessors, integrated circuits and other components
essential to the functioning of electronic systems. Backplane assemblies are
generally larger and thicker printed circuits on which connectors are mounted to
receive and interconnect printed circuits, integrated circuits and other
electronic components. Systems assemblies include the backplane, power supply,
fan card, cabling and system chassis.
Hadco's advanced manufacturing and assembly facilities are designed to meet
the accelerated time-to-market and time-to-volume requirements of its customers
whose markets are characterized by high growth rates, rapid technological
advances and short product life cycles. Through the office of the Chief
Technology Officer (CTO), the Company coordinates the activities of the
development groups at each production facility. The CTO and production site
development groups work closely with customers during the early stages of the
product life-cycle in an effort to develop process changes and refinements
required for volume production. The development projects include increased
printed circuit density, embedded passive components, advanced materials, laser
direct imaging, fine pitch assembly and new product offerings.
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Hadco acquired Zycon on January 10, 1997. This acquisition increased
Hadco's net sales significantly, added approximately 600,000 square feet of
manufacturing space (approximately a 100% increase at the time) and
substantially expanded the Company's manufacturing capabilities and geographic
reach. These acquired manufacturing capabilities include state-of-the-art West
Coast facilities for volume production of complex printed circuits and backplane
and system assemblies, a quick-turn prototype and design facility on the East
Coast, and a volume production facility in Malaysia.
Hadco acquired Continental Circuits on March 20, 1998. This acquisition
also increased Hadco's net sales significantly, added approximately 305,000
square feet of manufacturing space, and further expanded the Company's
manufacturing capabilities and geographic reach. These acquired manufacturing
capabilities include a facility in Phoenix, Arizona for the volume production of
complex printed circuits, a quick-turn prototype facility in Austin, Texas, a
flexible printed circuit facility in California, and printed circuit engineering
and design sites in Texas, California, and Colorado. On April 30, 1999, the
Company sold substantially all of the assets of its flexible printed circuit
facility (Dynaflex division) for approximately $2.7 million. Dynaflex's assets,
liabilities and operations were not significant to the Company. Accordingly, pro
forma information has not been presented.
The Acquisitions have broadened the Company's customer base, expanded its
involvement in various industry sectors, added new proprietary technologies and
increased its sales force.
The Company was incorporated in Massachusetts in 1966. The Company's
principal executive offices are located at 12A Manor Parkway, Salem, New
Hampshire 03079; its telephone number is (603) 898-8000, and its internet site
is http://www.hadco.com.
PRODUCTS AND SERVICES
The Company's products and services are designed to meet its customers'
interconnect needs for dense multilayer printed circuits and backplane and
system assemblies. See Note 14 of Notes to Consolidated Financial Statements for
financial segment information concerning printed circuits and backplane and
system assemblies. Hadco offers complementary processes and capabilities that
span the product life cycle. The Company's offering includes the following
products and services:
Development. Through the office of the CTO and the development groups
located at various facilities, Hadco identifies, develops and markets new
technologies that benefit its customers. The CTO and the development groups work
closely with customers during all stages of product life cycles. For instance,
process design changes and refinements required for volume production are
identified and implemented prior to production. The CTO and the development
groups also focus on the special requirements of the Company's customers,
including increasing printed circuit densities, embedded passive components and
advanced materials and products.
Design. The Company provides design and engineering assistance in the
early stages of product development, which assures both mechanical and
electrical considerations are integrated to achieve a high quality and cost
effective product. The Company also evaluates customer designs for
manufacturability and, when appropriate, recommends design changes to reduce
manufacturing costs or lead times or to increase manufacturing yields or the
quality of finished printed circuits. The Company believes that this long-term
view of manufacturing and customer relationships distinguishes the Company from
many manufacturers which compete primarily in the quick-turn market. By working
closely with its customers, the Company also gains a better understanding of the
future requirements of OEMs. This cooperative process shortens the time in
transition from the development of the prototype design to volume manufacturing
and facilitates the delivery of high quality products to customer premises in a
timely fashion.
Quick-Turn Prototype. Prototypes typically require lead times of three to
seven days, and as short as 24 hours. The Company provides quick-turn prototype
services to the product development groups of customers that require small test
quantities. Hadco offers these services through facilities in Massachusetts,
Texas and California. Prototype development at these facilities has included
multilayer printed circuits of up to 50 layers, embedded discrete components,
heavy copper substrates, sequential lamination, cavity substrates, thermal
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management products, Single Chip Carriers (SCC), planar magnetics, advanced
surface finishes and various high performance substrates for the high frequency
microwave market. These facilities also support advanced attachment technologies
such as Direct Chip Attach (DCA) and High Density Interconnect (HDI). In
combining the design of a printed circuit with the manufacture of the prototype,
Hadco can reduce the length of the design/manufacture cycle. By working closely
with customers at the design and prototype stage, the Company believes it
strengthens long-term relationships with its customers and gains an advantage in
securing a preferred vendor status when customers begin volume production.
Pre-Production. Pre-production is the manufacture of limited quantities of
electronic interconnects during the transition period from prototype to volume
production. Pre-production generally requires quick-turn delivery to accommodate
time-to-volume pressures or as a temporary solution for unforeseen customer
demands. Pre-production is done both in the quick-turn prototype and volume
production facilities.
Volume Production. Volume production is characterized by longer lead times
and increased emphasis on lower cost as the product moves to full-scale
commercial production. As customers increasingly demand a quick transition from
prototype to volume production, few independent manufacturers can provide
complex printed circuits of 20 or more layers in the volume provided by Hadco's
larger facilities. The Company operates six facilities located in California,
New York, New Hampshire, Arizona and Malaysia for medium-and high-volume printed
circuit production.
Backplane and System Assembly. Backplanes are generally larger and thicker
printed circuits on which connectors are mounted to interconnect printed
circuits, integrated circuits and other electronic components. System assemblies
include the backplane, power supply, fan card, cabling and system chassis. Hadco
incorporates its own printed circuits in backplane and system assemblies to
provide customers with a high level of printed circuit technology on a
quick-turn and volume basis. Net sales of backplane and system assemblies
accounted for approximately 11%, 16%, and 18% of total Company net sales during
fiscal 1997, 1998 and 1999, respectively. See Note 14 of Notes to Consolidated
Financial Statements. With its backplane and system assembly operations, Hadco
is one of a few companies that provides its customers with the advantage of an
integrated offering to meet their needs from development and design through
volume production to backplane and system assembly.
The Company's advanced process capabilities enhance each of the above
services and include:
Manufacture of High Performance Printed Circuits. At its quick-turn
prototype and volume production facilities, the Company produces technologically
advanced printed circuits primarily for the high performance market. These
printed circuits, used principally in the data communications and
telecommunications industries, are designed to function at high frequencies with
excellent reliability. Materials used by the Company for these products include
high T(g), epoxy, Teflon(R), cyanate ester, GETEK(R), epoxy/polyphenylene oxide,
polyimides, and bismaleimide triazine epoxies.
Development of Emerging Technologies. The Company undertakes projects to
develop advanced or improved processes, materials and product lines. Buried
Capacitance(TM) is an advanced material developed by the Company to provide
improved electrical performance and greater interconnect densities. The Company
receives revenue from sales of products containing this technology, as well as
net royalty income from licensing its use. In addition, the Company is
developing various microvia processes, which include horizontal plating, plasma
etching and laser drilling. Microvias provide a significant increase in printed
circuit interconnect density and performance. The Continental Acquisition added
PCA Design's microvia design methodology. The Company also produces rigid flex
printed circuit products utilizing licensed HVRFlex(TM) technology. These
products enable customers to fold a printed circuit and reduce the need for
cable connectors in the portable computer and telecommunications markets. See
Item 2, "Manufacturing and Facilities."
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MARKETS AND CUSTOMERS
Hadco's customers are a diverse group of electronic manufacturing services
(EMS) providers and original equipment manufacturers (OEMs) in the computing
(mainly workstations, servers, mainframes, storage and notebooks), data
communications/telecommunications and industrial automation industries,
including process controls, automotive, medical and instrumentation. The
following table shows, for the periods indicated, the Company's net sales and
percentage of its net sales to the principal end-user markets it serves. The
information reflected in the table includes the combined operations of Zycon and
the Company since January 10, 1997 and of Continental and the Company since
March 20, 1998.
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<CAPTION>
FISCAL YEAR ENDED
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OCTOBER 25, OCTOBER 31, OCTOBER 30,
MARKETS 1997 1998 1999
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(DOLLARS)IN MILLIONS
<S> <C> <C> <C> <C> <C> <C>
Electronic Manufacturing Services................ $289.2 44% $341.8 41% $ 507.5 51%
Computing........................................ 205.0 32 278.3 34 218.1 22
Data Communications/Telecommunications........... 119.1 18 146.7 18 214.9 21
Industrial Automation............................ 24.8 4 40.1 5 40.7 4
Other............................................ 10.6 2 19.5 2 24.8 2
------ --- ------ --- -------- ---
Total Net Sales........................ $648.7 100% $826.4 100% $1,006.0 100%
====== === ====== === ======== ===
</TABLE>
The Company supplied its products and services to a diverse base of
approximately 740 customers in fiscal 1999, including 77 customers with
purchases in excess of $1 million. The Company attempts to market its products
to customers that currently have, or have the potential to achieve, significant
market share in their respective industries. The following were the Company's
largest customers in fiscal 1999:
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<S> <C>
*Avex Electronics *Hewlett Packard
*Cabletron Systems *Lucent Technologies
*Celestica *Nortel
*Cisco Systems *SCI Systems
*Compaq Computer *Solectron
</TABLE>
During fiscal 1997, 1998 and 1999, one customer, Solectron, accounted for
approximately 15%, 17% and 15%, respectively, of Hadco's net sales. The
Company's ten largest customers together accounted for approximately 47%, 51%
and 56% of the Company's net sales, respectively, during the same periods. See
Note 13 of Notes to Consolidated Financial Statements.
The Company generally does not obtain long-term purchase orders or
commitments from its customers, and the orders received by the Company generally
require delivery within 90 days. However, many of the Company's customers have
maintained long-term purchasing relationships with the Company. See Item 7,
"Factors That May Affect Future Results -- Risks Relating to Variability of
Orders from Customers; Backlog."
During fiscal 1999, 22.7% of the Company's net sales were attributable to
sales outside of the United States, principally in Singapore, Canada and Europe.
The Company intends to expand its sales efforts outside of the United States.
See Note 14 of Notes to Consolidated Financial Statements.
SALES AND MARKETING
The Company markets its products through its own sales and marketing
organization and independent manufacturers' representatives. The Company is
represented by independent manufacturers' representatives located in North
America, South America, Europe, Mexico, South Africa, Asia, Australia, New
Zealand and the Middle East. Regional direct sales offices are located
throughout North America, and in Ireland and Singapore. In addition, the Miami,
Florida sales office provides sales support for Latin America. The Company's
sales organization also has a support staff of sales engineers and technical
service personnel responsible for technical liaison and problem solving, market
research and marketing communications.
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The Company focuses on developing close relationships with customers
beginning at the earliest development and design phases and continuing
throughout all stages of product production. The Company identifies, develops
and markets new technologies that benefit its customers and are intended to
position the Company as an important source for these solutions. The Company
hosts regional technology symposiums at which the Company's technical
capabilities are presented to, and industry technical trends are discussed with,
its customers.
SUPPLIER RELATIONSHIPS
Historically, the majority of raw materials used in the Company's
manufacture of printed circuits and components used in backplane and system
assemblies have been readily available. However, product changes and the overall
demand for electronic interconnect products could increase the industry's use of
new laminate materials, multilayer blanks, laser drilling, mechanical drilling,
non-standard surface finishes, electronic components and other materials and
services, and therefore such materials and services may not be readily available
to the Company in the future. The Company believes that the potential exists for
a shortage of materials and services in the printed circuit and electronic
assembly industries which could have a material adverse effect on the Company's
manufacturing operations and future unit costs. In response to such concerns,
the Company engages in the normal industry practice of maintaining primary and
secondary vendors. There can be no assurance that shortages of certain types of
raw materials, manufacturing services, or components or price fluctuations will
not occur in the future. See Item 7, "Factors That May Affect Future Results --
Risks of Inability to Obtain Raw Materials and Components."
The Company works with its suppliers to develop just-in-time supply systems
which reduce inventory carrying costs. The Company also maintains a Supplier
Certification Program which evaluates potential vendors on the basis of such
factors as quality, on-time delivery, cost, technical capability, and potential
technical advancement. Certification is based on both actual performance and
audits of vendors' manufacturing sites. Key suppliers are reviewed quarterly to
preserve strong relationships with these suppliers and maintain regular dialogue
on quality, cost and technical advancement issues.
COMPETITION
The electronic interconnect industry is highly fragmented and characterized
by intense competition. The Company believes that its major competitors are the
large U.S. and international independent and captive producers that also
manufacture multilayer printed circuits and provide backplane and other
electronic assemblies. Some of these competitors have significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than the Company. In addition, these competitors
may have the ability to respond more quickly to new or emerging technologies,
may adapt more quickly to changes in customer requirements and may devote
greater resources to the development, promotion and sale of their products than
the Company. Hadco competes on the basis of product quality, timeliness of
delivery, price, customer technical support and its integrated offering, from
development and design through volume production to backplane and system
assembly.
During periods of recession or economic slowdown in the electronics
industry and other periods when excess capacity exists, EMS providers and OEMs
are able to negotiate lower prices, which could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, the Company believes that price competition from printed circuit
manufacturers in Asia and other locations with lower production costs may play
an increasing role in the printed circuit markets in which the Company competes.
This price competition from Asian printed circuit manufacturers may intensify as
a result of economic turmoil, currency devaluations or financial market
instability that many Asian countries have experienced in the past. The
Company's basic interconnect technology is generally not subject to significant
proprietary protection, and companies with significant resources or
international operations may enter the market. Increased competition could
result in price reductions, reduced margins or loss of market share, any of
which could materially adversely affect the Company's business, financial
condition and results of operations.
The demand for printed circuits has continued to be affected by the
development of smaller, more powerful electronic components requiring less
printed circuit area. Expansion of the Company's existing
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products or services could expose the Company to new competition. Moreover, new
developments in the electronics industry could render existing technology
obsolete or less competitive and could potentially introduce new competition
into the industry. There can be no assurance that the Company will continue to
compete successfully against present and future competitors or that competitive
pressures faced by the Company will not have a material adverse effect on the
Company's business, financial condition and results of operations.
PRODUCT PROTECTION
The Company has obtained 13 United States patents and 33 foreign patents
directed to printed circuit boards and methods of manufacturing printed circuit
boards which expire between the years 2009 through 2014. Although Hadco seeks to
protect certain proprietary technology and other intangible assets through
patents and trademark filings, it has relatively few patents and relies
primarily on trade secret protection. There can be no assurance that the Company
will be able to protect its trade secrets or that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to the Company's trade secrets. The future success of the
Company will depend on the continued development of processes and capabilities.
The Company believes that its accumulated experience with respect to materials
and process technology is also important to its operations. See Item 3, "Legal
Proceedings and Claims."
RELEASED BACKLOG
The Company's released backlog as of October 30, 1999 was $148.7 million,
compared with $140.1 million as of October 31, 1998. Released backlog consists
of orders for which artwork has been received, a delivery date has been
scheduled and which the Company anticipates it will manufacture and deliver. The
Company anticipates delivering approximately 92% of its released backlog during
the first quarter of fiscal 2000. Cancellation and postponement charges, to the
extent they exist with respect to released backlog, generally vary depending
upon the time of cancellation or postponement, and a significant portion of the
Company's released backlog at any time may be subject to cancellation or
postponement without penalty. Variations in the size, timing and delivery
schedules of purchase orders received by the Company, as well as changes in
customers' delivery requirements, may result in substantial fluctuations in
released backlog from period to period. Accordingly, the Company believes that
released backlog is not a meaningful indicator of future quarterly or annual
financial results.
EMPLOYEES
As of October 30, 1999, the Company had 7,850 employees compared to 7,673
employees as of October 31, 1998. The employees are not represented by a union,
and the Company has never experienced any labor problems resulting in a work
stoppage.
ENVIRONMENTAL MATTERS
The Company is required to comply with all federal, state, county and
municipal regulations regarding protection of the environment. There can be no
assurance that more stringent environmental laws will not be adopted in the
future and, if adopted, the costs of compliance with more stringent
environmental laws could be substantial. Waste treatment and disposal are major
considerations for printed circuit manufacturers. The Company uses chemicals in
the manufacture of its products that are classified by the Environmental
Protection Agency (EPA) as hazardous substances. The Company is aware of certain
chemicals that exist in the ground at certain of its facilities. The Company has
notified various governmental agencies and continues to work with them to
monitor and resolve these matters. During March 1995, the Company received a
Record Of Decision (ROD) from the New York State Department of Environmental
Conservation (NYSDEC), regarding soil and groundwater contamination at its
Owego, New York facility. Based on a Remedial Investigation and Feasibility
Study (RIFS) for apparent on-site contamination at that facility and a Focused
Feasibility Study (FFS), each prepared by environmental consultants of the
Company, the NYSDEC has approved a remediation program of groundwater withdrawal
and treatment and iterative soil flushing. The Company has executed a
Modification of the Order on Consent to implement the approved ROD. Capital
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equipment for this remediation has already been acquired by the Company, and
future operation and maintenance costs, which will be incurred and expended over
the estimated life of the program of the next 28 years, are estimated at between
$40,000 and $100,000 per year. In the summer of 1998, NYSDEC took additional
samples from a wetland area near the Company's Owego facility. Analytical
reports of earlier sediment samples indicated the presence of certain
inorganics. The new samples showed elevated levels of certain metals, but NYSDEC
has not made a determination as to the potential source of such metals, the
remedial action to be taken, or the persons to undertake and/or pay for any
remediation. There can be no assurance that the Company and/or other third
parties will not be required to conduct additional investigations and
remediation at that location, the costs of which are currently indeterminable
due to the numerous variables described in the fourth paragraph of this
"--Environmental Matters" section.
See Item 3, "Legal Proceedings and Claims" for a discussion of certain
environmental matters relating to a printed circuit manufacturing facility
formerly operated by the Company in Florida.
The Company commenced the operation of a groundwater extraction system at
its Derry, New Hampshire facility to address certain groundwater contamination
and groundwater migration control issues. Further investigation is underway to
determine the areal extent of the groundwater contaminant plume. Because of the
uncertainty regarding both the quantity of contaminants beneath the building at
the site and the long-term effectiveness of the groundwater migration control
system the Company has installed, it is not possible to make a reliable estimate
of the length of time remedial activity will have to be performed. However, it
is anticipated that the groundwater extraction system will be operated for at
least 30 years. There can be no assurance that the Company will not be required
to conduct additional investigations and remediation relating to the Derry
facility. The total costs of such groundwater extraction system and of
conducting any additional investigations and remediation relating to the Derry
facility are not fully determinable due to the numerous variables described in
the next paragraph.
The Company accrues estimated costs associated with known environmental
matters when such costs can be reasonably estimated. The cost estimates relating
to future environmental clean-up are subject to numerous variables, the effects
of which can be difficult to measure, including the stage of the environmental
investigations, the nature of potential remedies, possible joint and several
liability, the magnitude of possible contamination, the difficulty of
determining future liability, the time over which remediation might occur, and
the possible effects of changing laws and regulations.
Management believes the ultimate disposition of above known environmental
matters described in this "--Environmental Matters" section will not have a
material adverse effect upon the liquidity, capital resources, business or
consolidated financial position of the Company. However, one or more of such
environmental matters could have a significant negative impact on the Company's
consolidated financial results for a particular reporting period. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 9 of Notes to the Company's Consolidated Financial
Statements.
The Company plans additional capital expenditures during fiscal 2000 to
further reduce air emissions and reduce waste generation. See discussion under
Item 2, "Manufacturing and Facilities" concerning the Company's capital
expenditures relating to environmental control facilities and equipment, and
under Item 3, "Legal Proceedings and Claims" relating to lawsuits regarding
environmental matters.
ITEM 2. MANUFACTURING AND FACILITIES
The need for high volume production of dense multilayer printed circuits
requires complex manufacturing processes and necessitates high levels of
investment in facilities, materials, production processes and product design
capabilities. The Company employs numerous advanced manufacturing techniques and
systems including Computer Aided Manufacturing (CAM) systems, Computer
Integrated Manufacturing (CIM) systems, computer controlled laser and mechanical
drilling, routing and scoring systems, dry film and laser direct imaging,
automated optical inspection, computer-controlled high-volume lamination in high
pressure and temperature presses, computer-controlled horizontal and vertical
plating systems, direct current and reverse pulse plating, high-volume liquid
photoimageable solder mask surface coating, various specialty finishes, and
high-density electrical testers. These techniques enable Hadco to manufacture
multilayer printed
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circuits of consistent quality, in high volume and on a timely basis. All of the
Company's production facilities are ISO9002 certified. See Item 1, "Business --
Products and Services."
In the backplane and system assembly segment, Hadco utilizes sophisticated
automated connector placement equipment and high-capability surface mount
systems to meet the escalating demand for high mix, prototype and volume
assemblies. The Company has also invested in the resources to facilitate
materials acquisition and logistics requirements, both of which the Company
considers important to maintaining competitive service levels.
In total, the Company leases or owns approximately 1.8 million square feet
of manufacturing space. The Company's significant facilities are as follows:
<TABLE>
<CAPTION>
FUNCTION LOCATION SQUARE FEET
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<S> <C> <C>
Printed Circuit-Volume............. Santa Clara and San Jose, CA 365,000
Owego, NY 292,000
Phoenix, AZ 275,000
Derry, NH 200,000
Kuching, Malaysia 180,000
Hudson, NH 67,000
Printed Circuit-Quick-Turn
Prototype........................ Haverhill, MA 71,000
Watsonville, CA 46,000
Austin, TX 59,000
Backplane and System Assembly...... Salem, NH 60,000
San Jose, CA 37,000
Engineering and Administrative..... Salem, NH 53,000
Santa Clara, CA 30,000
Limerick, Ireland 3,700
Warehouse.......................... San Jose, CA 51,000
</TABLE>
The Company owns its volume production facilities in Owego, New York,
Derry, New Hampshire, Hudson, New Hampshire and Phoenix, Arizona. The Company
leases its volume production and backplane and system assembly facilities in
Santa Clara and San Jose, California. These facilities are located in four
adjacent buildings; the leases for these four buildings expire in March 2009,
and contain options to extend for up to two additional periods of five years
each. The Company leases the land on which the volume production facility in
Kuching, Malaysia is located for a period of 60 years, expiring in November
2055. The Hudson, New Hampshire operations are located in two separate
buildings, one of which, containing 41,300 square feet, is owned by the Company,
and the second of which, containing 25,400 square feet, is leased with the lease
expiring in December 2000, with options to extend through December 2009.
The Company's quick-turn prototype facility in Haverhill, Massachusetts is
located in three separate buildings, two of which are covered by leases expiring
in December 2003 with options to extend until December 2008, and the third of
which is covered by a lease expiring in December 2003 with an option to extend
until December 2013. The lease for the Watsonville, California quick-turn
prototype facility expires in December 2002, with options to extend until
December 2011. The lease for the quick-turn prototype facility in Austin, Texas
expires in March 2004, with options to extend until March 2014.
The lease for the backplane and system assembly facility in Salem, New
Hampshire expires in May 2005, with options to extend until May 2011. The leases
for the Santa Clara, California buildings include the 37,000 square feet of
backplane and system assembly operations.
The administrative and corporate offices in Salem, New Hampshire are
located in three separate buildings, one of which is covered by a lease expiring
in May 2003 with options to extend until May 2006, the second of which is
covered by a lease expiring in May 2008 with options to extend until May 2014,
and the third of which is covered by a lease expiring in July 2003, with options
to extend until July 2009. The leases for the Santa Clara, California buildings
include the 30,000 square feet of administrative space.
8
<PAGE> 10
The lease for the warehouse space in San Jose, California extends for ten
years from commencement of the lease term for the entire area subject to the
lease, and commencement of the lease term has not yet occurred. The Company is
currently in early occupancy of 51,000 square feet of warehouse space. The lease
includes one option to extend for an additional five-year term.
Additionally, the Company owns approximately six acres of land in Salem,
New Hampshire, approximately five acres of land in Derry, New Hampshire,
approximately 29 acres of land in Owego, New York and approximately four acres
of land in Phoenix, Arizona.
The Company believes its facilities are currently adequate for its
operating needs.
In fiscal 1999, the Company's capital expenditures relating to its
environmental control facilities and equipment totaled approximately $3.6
million. The Company estimates that it will make capital expenditures with
respect to its environmental control facilities and equipment of approximately
$3 million and $2 million in fiscal 2000 and 2001, respectively.
ITEM 3. LEGAL PROCEEDINGS AND CLAIMS
The Company is one of 33 entities which have been named as potentially
responsible parties in a lawsuit pending in the federal district court of New
Hampshire concerning environmental conditions at the Auburn Road, Londonderry,
New Hampshire landfill site. Local, state and federal entities and certain other
parties to the litigation seek contribution for past costs, totaling
approximately $20 million, allegedly incurred to assess and remediate the Auburn
Road site. In December 1996, following publication and comment period, the EPA
amended the ROD to change the remedy at the Auburn Road site from active
groundwater remediation to future monitoring. In June 1999, the Company entered
into a Consent Decree with 30 of the defendants and third-party defendants. The
Consent Decree was approved by the federal and state governments in December
1999, and lodged with the Court. The Court must still approve the Consent
Decree. Under the terms of the Consent Decree, the Company is a cash-out party
and does not have responsibility for performance of ongoing remedial or
monitoring work at the site.
From 1974 to 1980, the Company operated a printed circuit manufacturing
facility in Florida as a lessee. This property is the subject of a pending
lawsuit in the circuit court for Broward County, Florida (the "Florida Lawsuit")
and an investigation by the Florida Department of Environmental Protection
("FDEP"). In connection with the investigation, Hadco and others have
participated in alternative dispute resolution regarding the site with an
independent mediator. Mediation sessions began in 1992 and continued over the
next several years through May 1998. In June 1995, Hadco and Gould, Inc.,
another prior lessee of the site, were joined as third-party defendants in the
pending Florida lawsuit by a party who had previously been named as a defendant
when the Florida lawsuit was commenced in 1993 by the FDEP. As a result of the
mediation, a Settlement Agreement was entered into among Hadco, Gould and the
FDEP in March 1999. The third-party complaints against Hadco and Gould in the
pending Florida lawsuit were dismissed. The Settlement Agreement provides that
Hadco and Gould will undertake remedial action based on a Supplemental
Contamination Assessment Report and a later Feasibility Study, which has been
prepared by a consultant to Hadco and Gould and approved by the FDEP. The
estimated cost of the recommended source removal described in the Feasibility
Study is approximately $165,000, and for ongoing monitoring and remediation is
approximately $2.1 million. Actual remedial activities have not yet commenced
but are expected to begin in the near future.
In March 1993, the EPA notified Hadco Santa Clara of its potential
liability for maintenance and remediation costs in connection with a hazardous
waste disposal facility operated by Casmalia Resources, a California Limited
Partnership, in Santa Barbara County, California. The EPA identified Hadco Santa
Clara as one of the 65 generators which had disposed of the greatest amounts of
materials at the site. Based on the total tonnage contributed by all generators,
Hadco Santa Clara's share is estimated at approximately 0.2% of the total
weight.
The Casmalia site was regulated by the EPA during the period when the
material was accepted. There is no allegation that Hadco Santa Clara violated
any law in the disposal of material at the sites. Rather the
9
<PAGE> 11
EPA's actions stemmed from the fact that Casmalia Resources may not have the
financial means to implement a closure plan for the site and because of Hadco
Santa Clara's status as a generator of hazardous waste.
In June 1997, the United States District Court in Los Angeles, California
approved and entered a Consent Decree among the EPA and 49 entities (including
Hadco Santa Clara) acting through the Casmalia Steering Committee (CSC). The
Consent Decree sets forth the terms and conditions under which the CSC will
carry out work aimed at final closure of the site. Certain closure activities
will be performed by the CSC. Later work will be performed by the CSC, if funded
by other parties. Under the Consent Decree, the settling parties will work with
the EPA to pursue the non-settling parties to ensure they participate in
contributing to the closure and long-term operation and maintenance of the
facility.
The EPA will continue as the lead regulatory agency during the final
closure work. Because long-term maintenance plans for the site will not be
determined for a number of years, it has not yet been decided which regulatory
agency will oversee this phase of the work plan or how the long-term costs will
be funded. However, the Consent Decree provides a mechanism for ensuring that an
appropriate federal, state or local agency will assume regulatory responsibility
for long-term maintenance.
On January 12, 1998, Hadco Santa Clara received notice of the filing of a
lawsuit, before the Superior Court (County of Santa Clara, California), against
it by Jackie Riley, Keith Riley and Richard Riley for damages (including
punitive damages) for alleged injuries suffered, including Richard Riley's
cancer, as a result of the alleged emission at the Hadco Santa Clara facility of
effluent from allegedly toxic and hazardous chemical substances. In October
1999, the court approved a settlement of this litigation. The Company has
performed all its obligations under the settlement.
The future costs in connection with the lawsuits described in the preceding
paragraphs, which arise under state and federal laws that impose legal liability
that may be joint and several, are currently indeterminable due to such factors
as the unknown timing and extent of any future remedial actions which may be
required, the extent of any liability of the Company and of other potentially
responsible parties, and the financial resources of the other potentially
responsible parties. See Note 9 of Notes to the Company's Consolidated Financial
Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended October 30, 1999.
10
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "HDC." Prior to October 14, 1999, the Company's Common Stock was
traded on the Nasdaq National Market under the symbol "HDCO." The following
table sets forth, for the periods indicated, the range of high and low sale
prices for the Company's Common Stock on the Nasdaq National Market or the New
York Stock Exchange, as appropriate.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Fiscal 1998
First Quarter............................................. 65 1/4 37 1/2
Second Quarter............................................ 54 35 1/2
Third Quarter............................................. 40 17 1/2
Fourth Quarter............................................ 33 3/4 19 1/4
Fiscal 1999
First Quarter............................................. 40 1/8 28 23/32
Second Quarter............................................ 37 3/8 24 7/16
Third Quarter............................................. 47 1/2 27 1/4
Fourth Quarter............................................ 45 1/8 36 3/4
</TABLE>
The Company has never declared or paid a cash dividend on its Common Stock,
and it is anticipated that the Company will continue to retain its earnings for
use in its business and not pay cash dividends. Declaration of dividends is
within the discretion of the Company's Board of Directors, which will review
such dividend policy from time to time. The Company's credit facility with
various banks (the "Credit Facility") currently contains a covenant prohibiting
the Company from paying a cash dividend. See Note 7 of Notes to the Company's
Consolidated Financial Statements.
As of January 3, 2000, there were approximately 308 holders of record of
the Common Stock. On January 3, 2000, the last sale price reported on the New
York Stock Exchange for the Company's Common Stock was $47.50 per share.
Under the Company's Outside Directors Compensation Plan of 1998 (the
"Outside Directors Plan"), the non-employee directors ("Non-Employee Directors")
of the Company receive payment of an annual fee in the form of restricted Common
Stock of the Company. Non-Employee Directors may elect to defer receipt of any
such payment. Shares issued and deferred under this plan during fiscal 1999 were
as follows:
<TABLE>
<CAPTION>
FAIR MARKET FAIR MARKET
NUMBER NUMBER NET VALUE PER VALUE OF
OF SHARES OF SHARES SHARES SHARE AT SHARES
ISSUE DATE ISSUED DEFERRED RECEIVED ISSUE DATE ISSUED
---------- --------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
March 1999........................... 2,289 654 1,635 $30.56 $ 69,952
September 1999....................... 1,452 484 968 41.31 59,982
----- ----- ----- --------
3,741 1,138 2,603 $129,934
===== ===== ===== ========
</TABLE>
Each of the shares of Common Stock of the Company referenced above was
issued by the Company in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act for an offering to a small number of
knowledgeable persons.
11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data for Hadco
and subsidiaries. The selected consolidated financial data for each of the years
ended October 28, 1995, October 26, 1996, October 25, 1997, October 31, 1998 and
October 30, 1999 have been derived from the Company's audited Consolidated
Financial Statements. The selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto appearing elsewhere in this Annual Report on Form 10-K and Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
OCT. 28, OCT. 26, OCT. 25, OCT. 31, OCT. 30,
1995 1996 1997(1) 1998(2) 1999
-------- ----------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS:
Net sales............................... $265,168 $350,685 $648,705 $826,359 $1,005,970
Gross profit............................ 67,440 90,455 141,392 123,690 156,870
Restructuring and other non-recurring
charges............................... -- -- -- 7,053 --
Amortization of goodwill and acquired
intangible assets..................... -- -- 5,215 9,750 12,226
Write-off of acquired in-process
research and development.............. -- -- 78,000 63,050 --
Income (loss) from operations........... 33,906 51,532 (1,194) (28,040) 65,966
Net income (loss)....................... $ 21,374 $ 32,014 $(36,493) $(54,110) $ 21,964
Net income (loss) per share:
Basic................................. $ 2.18 $ 3.12 $ (3.18) $ (4.09) $ 1.62
Diluted............................... $ 1.98 $ 2.89 $ (3.18) $ (4.09) $ 1.60
Weighted average shares outstanding:
Basic................................. 9,805 10,245 11,458 13,216 13,533
Diluted............................... 10,806 11,084 11,458 13,216 13,751
</TABLE>
<TABLE>
<CAPTION>
AS OF
----------------------------------------------------
OCT. 28, OCT. 26, OCT. 25, OCT. 31, OCT. 30,
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.......................... $ 41,043 $ 43,561 $ 53,693 $ 91,830 $ 47,781
Total assets............................. 162,991 219,501 502,517 743,825 724,823
Long-term debt and capital lease
obligations............................ 2,387 1,515 109,716 354,291 278,309
Stockholders' investment................. 100,774 138,841 239,912 191,549 219,009
</TABLE>
- ---------------
(1) Net loss for the year ended October 25, 1997 includes a non-recurring
write-off of $78.0 million relating to the Zycon Acquisition for acquired
in-process research and development. Excluding the non-recurring write-off,
income from operations was $76.8 million, net income was $41.5 million and
diluted net income per share was $3.48 (based on weighted average shares
outstanding of approximately 11,942,000).
(2) Net loss for the year ended October 31, 1998 includes restructuring and
other non-recurring charges amounting to $7.1 million pre-tax, and $4.2
million after tax, and a non-recurring write-off of $63.0 million, pre-tax
and after tax, relating to the Continental Acquisition for acquired
in-process research and development. Excluding the non-recurring write-offs,
income from operations was $42.1 million, net income was $13.2 million and
diluted net income per share was $0.97 (based on weighted average shares
outstanding of approximately 13,537,000).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements which involve
risks and uncertainties. Hadco makes such forward-looking statements under the
provision of the "Safe Harbor" section of the Private Securities Litigation
Reform Act of 1995. Any forward-looking statements should be considered in light
of the factors described below in this Item 7 under "Factors That May Affect
Future Results." Actual results may vary materially from those projected,
anticipated or indicated in any forward-looking statements. In this Item 7, the
words "anticipates," "believes," "expects," "intends," "future," "could," and
similar words or expressions (as well as other words or expressions referencing
future events, conditions or circumstances) identify forward-looking statements.
12
<PAGE> 14
ACQUISITIONS
On January 10, 1997, the Company acquired all of the outstanding capital
stock of Zycon. The acquisition added facilities for volume production of
multilayer printed circuits and backplane and system assemblies in the Silicon
Valley area, a quick-turn prototype and design facility in Massachusetts, and a
newly constructed facility for volume production of printed circuits in
Malaysia. Hadco acquired Zycon for approximately $212 million (including
acquisition costs) and recorded the acquisition under the purchase method of
accounting. As a result, a purchase price premium of approximately $182 million
was recorded on the transaction. A significant portion of the purchase price was
identified in an independent appraisal, using proven valuation procedures and
techniques, as intangible assets. These intangible assets included approximately
$78 million for acquired in-process research and development ("in-process R&D")
for projects that did not have future alternative uses. This allocation
represents the estimated fair market value based on risk-adjusted cash flows
related to the in-process R&D projects. At the date of acquisition, the
development of these projects had not yet reached technological feasibility, and
the in-process R&D had no alternative future uses. Accordingly, these costs were
written off in the fiscal quarter ended January 25, 1997. The remaining premium
of approximately $104 million was allocated to identifiable intangibles and
goodwill, and is being written off over 12 to 30 years, with an average
amortization period of 17 years. The acquisition was financed with borrowings
under the Credit Facility, plus existing cash and equivalents.
On March 20, 1998, the Company acquired all of the outstanding capital
stock of Continental, further broadening Hadco's product and service
capabilities. The acquisition added a facility for volume production of
multilayer printed circuits in Phoenix, Arizona, a quick-turn prototype facility
in Austin, Texas, a flexible printed circuit facility in California (which was
sold on April 30, 1999) and printed circuit engineering and design sites in
California, Texas and Colorado. Hadco acquired Continental for approximately
$190 million (including acquisition costs) and recorded the acquisition under
the purchase method of accounting. As a result, a purchase price premium of $165
million was recorded on the transaction. A significant portion of the purchase
price was identified in an independent appraisal, using proven valuation
procedures and techniques, as intangible assets. These intangible assets
included approximately $63 million for in-process R&D for projects that did not
have future alternative uses. This allocation represents the estimated fair
market value based on risk-adjusted cash flows related to the in-process R&D
projects. At the date of acquisition, the development of these projects had not
yet reached technological feasibility, and the in-process R&D had no alternative
future uses. Accordingly, these costs were written off in the fiscal quarter
ended May 2, 1998. The remaining premium of $101.9 million was allocated to
identifiable intangibles and goodwill, and is being written off over 12 to 20
years, with an average amortization period of 17 years. The acquisition was
financed from borrowings under the Credit Facility.
RESULTS OF OPERATIONS
The following table sets forth certain Consolidated Statements of
Operations data and other data as a percentage of net sales. The table and the
discussion below should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto that appear elsewhere in this Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
OCT. 25, OCT. 31, OCT. 30,
1997(1) 1998(2) 1999
-------- -------- --------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS:
Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 78.2 85.0 84.4
----- ----- -----
Gross profit................................................ 21.8 15.0 15.6
Operating expenses.......................................... 9.2 8.7 7.8
Amortization of goodwill and acquired intangible assets..... 0.8 1.2 1.2
Restructuring and other non-recurring charges............... -- 0.9 --
Write-off of acquired in-process research and development... 12.0 7.6 --
----- ----- -----
Income (loss) from operations............................... (0.2) (3.4) 6.6
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
OCT. 25, OCT. 31, OCT. 30,
1997(1) 1998(2) 1999
-------- -------- --------
<S> <C> <C> <C>
Interest income (expense) and other, net.................... (1.2) (2.4) (3.0)
----- ----- -----
Income (loss) before provision for income taxes............. (1.4) (5.8) 3.6
Provision for income taxes.................................. 4.2 0.7 1.4
----- ----- -----
Net income (loss)........................................... (5.6)% (6.5)% 2.2%
===== ===== =====
</TABLE>
- ---------------
(1) Net loss for the year ended October 25, 1997 includes a non-recurring
write-off relating to the Zycon Acquisition for acquired in-process research
and development. As a percentage of net sales, income from operations was
11.8%, income before provision for income taxes was 10.7%, and net income
was 6.4%, all before deducting the non-recurring write-off.
(2) Net loss for the year ended October 31, 1998 includes a non-recurring
write-off relating to the Continental Acquisition for acquired in-process
research and development and for restructuring and other non-recurring
expenses. As a percentage of net sales for the year ended October 31, 1998,
income from operations was 5.1%, income before provision for income taxes
was 2.6%, and net income was 1.6%, all before deducting the non-recurring
write-off and restructuring charges.
Fiscal Years Ended October 30, 1999 and October 31, 1998
Net sales for fiscal 1999 increased 21.7%, or $179.6 million over net sales
for fiscal 1998. The increase resulted from several factors including a full
year of sales from the Continental Acquisition, which added $71.7 million to
printed circuit net sales. Excluding the Continental Acquisition, printed
circuit net sales increased $60.0 million in fiscal 1999 due to higher unit
shipments and a shift in mix towards higher priced printed circuits with more
layers and greater densities. This increase was partially offset by a 3.7%
decline in average pricing for printed circuits. Backplane and system assembly
net sales increased $47.9 million to $178.5 million. Backplane and system
assembly net sales increased due to higher production volumes and shipments.
The gross profit margin increased to 15.6% for fiscal 1999 from 15.0% in
fiscal 1998. Improved capacity utilization from both printed circuit and
assembly operations caused gross margins to increase 3.4 percentage points, and
improved production efficiencies in printed circuit operations caused gross
margins to increase by 0.3 percentage points. These increases in gross margin
were offset by lower pricing on printed circuits, which decreased gross margins
by 2.7 percentage points, and a shift in mix in assembly operations to products
with higher material content which caused gross margins to decrease by 0.4
percentage points.
Operating expenses increased by $9.3 million for fiscal 1999 over fiscal
1998. The increase was due to a full year of amortization of goodwill and
purchased intangibles from the Continental Acquisition, and higher selling
expenses from expanded sales coverage. Operating expenses as a percent of net
sales decreased to 9.0% for fiscal 1999 versus 9.9% for fiscal 1998 due to
increased net sales and the relatively fixed nature of the Company's operating
expenses.
Income from operations for the year ended October 30, 1999 increased by
$94.0 million over fiscal 1998. However, fiscal 1998 income from operations was
reduced by $63.0 million due to a non-recurring write-off of acquired in-process
research and development recorded in connection with the Continental
Acquisition. In addition, income from operations for the year ended October 31,
1998 was reduced by approximately $7.1 million for restructuring and other
non-recurring charges related to the consolidation of the Company's East Coast
Tech Center operations and a limited restructuring of the Company's workforce.
Excluding the non-recurring write-off and restructuring charges during
fiscal 1998, income from operations increased as a percent of net sales to 6.6%
for the year ended October 30, 1999 from 5.1% in fiscal 1998. The increase
resulted primarily from the same factors affecting gross profit margins plus
increased leverage of operating expenses.
14
<PAGE> 16
Interest income decreased for the year ended October 30, 1999 as compared
to the prior fiscal year due to lower average cash balances available for
investing. Interest expense increased in the year ended October 30, 1999 as
compared to the year ended October 31, 1998 due to a full year of interest
expense on outstanding debt to finance the Continental Acquisition.
The Company includes in operating expenses charges for actual expenditures
and accruals, based on estimates, for environmental matters. To the extent and
in amounts Hadco believes circumstances warrant, it will continue to accrue and
charge to operating expenses cost estimates relating to known environmental
matters. See Item 1, "Business -- Environmental Matters" and Item 3, "Legal
Proceedings and Claims."
The Company's effective annual income tax rate for 1998 and 1999 was
39.75%. The provision for income taxes is calculated on income before provision
for taxes without taking into account the write-off of acquired in-process R&D
of $63.0 million. Income before the provision for income taxes excluding the
write-off would have been $14.8 million for 1998. The effective rate for both
years is approximately equal to the combined federal and state statutory rates.
The effective rate was increased by amortization of goodwill, which is not tax
deductible, and was offset by the tax benefit of the Company's foreign sales
corporation and various state investment tax credits.
Fiscal Years Ended October 31, 1998 and October 25, 1997
Net sales for fiscal 1998 increased 27.4%, or $177.7 million, over net
sales for fiscal 1997. The increase resulted from several factors including the
Continental Acquisition, which added $80.4 million to printed circuit net sales.
Excluding the Continental Acquisition, printed circuit net sales increased $36.6
million, due to higher production volume and shipments as well as the shift
towards printed circuits with more layers and greater densities. This increase
in printed circuit net sales was partially offset by a 10.3% decrease in average
pricing. Backplane and system assembly net sales increased $60.7 million to
$130.6 million. Backplane and system assembly net sales increased due to higher
production volume and shipments.
The gross profit margin decreased to 15.0% in 1998 from 21.8% in 1997.
Lower pricing on printed circuits caused margins to decrease by 5.8 percentage
points. Lower capacity utilization from printed circuit operations caused
margins to decrease by 1.7 percentage points. The effect of lower overall gross
margins from Hadco Santa Clara and Hadco Phoenix operations caused margins to
decrease by 2.0 percentage points. All of these decreases were partially offset
by lower unit costs achieved through improved production efficiencies resulting
in an overall decrease in the gross margin of 6.8 percentage points.
Operating expenses, as a percent of net sales, decreased slightly to 9.9%
in fiscal 1998 from 10.0% in fiscal 1997. This decrease was partially offset by
goodwill and purchased intangibles amortization of $9.7 million in fiscal 1998
as compared to $5.2 million in 1997. For additional information regarding the
factors affecting gross and operating margins, please see "Factors That May
Affect Future Results -- Risks Relating to Fluctuations in Quarterly Operating
Results," "Factors That May Affect Future Results -- Dependence on Electronics
Industry" and "Factors That May Affect Future Results -- Risks Relating to the
Acquisitions and the Company's Acquisition Strategy."
Income from operations for 1998 and 1997 was reduced by $63.0 million and
$78.0 million, respectively, due to non-recurring write-offs of acquired
in-process R&D recorded in connection with the Acquisitions. The remaining
goodwill and purchased intangibles are being amortized over 12 to 30 years, with
an average amortization period of 17 years, which will reduce income from
operations by approximately $12.2 million per fiscal year. In addition, income
from operations for 1998 was reduced by approximately $7.1 million for
restructuring and other non-recurring charges related to the consolidation of
the Company's East Coast quick-turn prototype operations and limited
restructuring of the Company's workforce. The limited restructuring in the third
fiscal quarter temporarily reduced the Company's workforce by approximately 3%.
Included in the restructuring and other charges is $2.5 million, which
represents the write-down of existing assets to their net realizable value, in
accordance with SFAS 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of. See Note 15 of Notes to the Company's
Consolidated Financial Statements. Additionally, the general economic slowdown
in the broad electronics industry, the economic
15
<PAGE> 17
situation in Asia, inventory levels in the end user market, customer inventory
adjustments and customer product transitions negatively affected net income for
fiscal 1998.
Interest income decreased in 1998 as compared to 1997, due to lower average
daily cash balances available for investing. Interest expense increased in 1998
as compared to 1997, due to an increase in outstanding debt as a result of the
Acquisitions.
The provision for income taxes is calculated on income before provision for
taxes without taking into account the write-off of acquired in-process R&D. This
write-off was $63.0 million and $78.0 million for 1998 and 1997, respectively.
Income before the provision for income taxes excluding the write-off would have
been $14.8 million and $69.2 million for 1998 and 1997, respectively. The
Company's effective annual income tax rate for 1998 and 1997 was 39.75% and
40.0%, respectively. The effective rate for both years is approximately equal to
the combined federal and state statutory rates. The effective rate was increased
by amortization of goodwill, which is not tax deductible, and was offset by the
tax benefit of the Company's foreign sales corporation and various state
investment tax credits.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow from operations for fiscal 1999 was $146.2 million, an
increase of $83.3 million from the prior year. This increase resulted from an
increase of $22.1 million in earnings before non-cash items, the receipt of
$17.5 million in income tax refunds, and improved working capital management.
The increased earnings were attributable to higher net sales and increased
production efficiencies. Improvements in working capital management include
faster collections of accounts receivable, increased turnover of inventory, and
extended credit terms with suppliers.
Cash used in investing activities in fiscal 1999 was $71.6 million, a
decrease of $204.5 million from fiscal 1998. Reduced investing activities
combined with increased cash flow from operations resulted in increased cash
available to reduce debt incurred to finance the Acquisitions. Debt reductions
during fiscal 1999 were $77.8 million.
At October 30, 1999, the Company had working capital of $47.8 million and a
current ratio of 1.30, as compared to working capital of $91.8 million and a
current ratio of 1.71 at October 31, 1998. The decrease in working capital
resulted from the collection of $17.5 million in income tax refunds and
improvements in working capital management that accelerated the conversion of
working capital into cash, which was, in turn, used to reduce debt.
Net cash flow from operations for fiscal 1998 was $62.9 million, an
increase of $12.3 million from the prior year. This increase resulted from
improved working capital management, including faster collection of accounts
receivable. This increase was partially offset by a reduction in earnings before
non-cash items of $4.6 million. The reduction in earnings was attributable to
lower pricing and lower capacity utilization for printed circuit operations, as
a result of the slowdown of the electronics industry experienced during fiscal
1998.
Cash used in investing activities in fiscal 1998 was $276.0 million, a
decrease of $0.7 million from the prior year. Fiscal 1998 investing activities
included capital expenditures of $83.5 million and the Continental Acquisition
for $192.5 million. These investing activities were financed from cash flow from
operations plus a net increase in indebtedness of $200.9 million.
The Company seeks to reduce reliance on debt financing and to reduce the
costs associated with maintaining its Credit Facility. The Credit Facility
commitment was reduced from the lesser of $288.8 million or the Borrowing Base
(as defined in the Credit Facility) to the lesser of $198.8 million or the
Borrowing Base, on May 14, 1999. As of October 30, 1999, the Company had $75.0
million in outstanding borrowings under the Credit Facility at a weighted
average interest rate of 6.31%, with up to a maximum of $123.8 million of the
Credit Facility unused and available. For a further discussion of the Credit
Facility see Note 7 of Notes to the Company's Consolidated Financial Statements.
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On May 18, 1998, the Company sold $200 million aggregate principal amount
of its 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") to certain
purchasers. The Notes were sold at a price equal to 99.66% of their principal
amount. The net proceeds received by the Company from the issuance and sale of
the Notes was used to repay outstanding indebtedness under the Credit Facility
previously incurred to, among other things, finance the Acquisitions. On
November 12, 1998, the Company consummated an exchange offer pursuant to which
the Notes were exchanged for notes (with terms identical in all material
respects) that were registered with the Securities and Exchange Commission. For
a further discussion of the Notes, see Note 8 to the Company's Consolidated
Financial Statements.
The Company currently anticipates that its capital expenditures for fiscal
2000 will be between $90 and $100 million. At October 30, 1999, the Company had
$10.6 million of future commitments to purchase manufacturing equipment and
leasehold improvements. The amount of these anticipated capital expenditures may
change based on future changes in business plans and conditions of the Company
and changes in economic conditions.
The Company believes its current borrowing capacity, coupled with the funds
generated from the Company's operations will be sufficient to fund its
anticipated working capital, capital expenditure and debt payment requirements
through fiscal year 2000. Because the Company's capital requirements cannot be
predicted with certainty, however, there is no assurance that the Company will
not require additional financing during this period. There is no assurance that
any additional financing will be available on terms satisfactory to the Company
or not disadvantageous to the Company's security holders, including the holders
of the Notes.
The Company believes the ultimate disposition of known environmental
matters will not have a material adverse effect upon the liquidity, capital
resources, business or consolidated financial position of the Company. However,
one or more of such environmental matters could have a significant negative
impact on the Company's consolidated financial results for a particular
reporting period.
YEAR 2000 READINESS DISCLOSURE STATEMENT
The Company has completed an internal assessment of its operations to
determine the extent to which the Company may be adversely affected by Year 2000
issues. This internal assessment has included both Information Technology (IT)
systems and non-IT systems.
The critical software systems used by the Company to run its business
include MFG/PRO, PeopleSoft, Oracle, and Corsair. The Company believes that none
of these applications have date-related processing issues. The Company has
experienced and may continue to experience interfacing problems when upgrades
are received from the vendors of these software programs.
The Company has completed testing of its various IT systems, running
programs with dates including and after the Year 2000. During these tests the
Company has not experienced problems processing data or effecting transactions.
The Company's internal assessment of its manufacturing equipment for Year 2000
compliance was done on a plant-by-plant basis and was completed in May 1999.
Thereafter, software upgrades were installed in certain manufacturing systems.
The Company has tested the new software and has not encountered date-related
processing issues. There can be no assurance, however, that the Company's
testing of its various IT systems and manufacturing equipment and software was
sufficient to discover all Year 2000 issues. Year 2000 issues not discovered by
the Company could have a material adverse effect on the Company's business,
results of operation and financial condition.
In fiscal 1999, the Company developed business continuity/contingency plans
for all facilities. Such plans cover Year 2000 issues and potential disruptions.
There can be no assurance that the implementation of business
continuity/contingency plans developed by the Company will result in alleviation
or remediation of any business interruption or disruption that the Company may
experience.
The Company has surveyed most of its suppliers, including all of its active
suppliers, to determine their Year 2000 compliance status. The Company has
worked with its key suppliers to obtain more detailed information about their
compliance status, and has performed on-site assessment of certain critical
suppliers. The Company has also completed contingency plans for addressing
potential supply disruptions. There can be
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no assurance that the Company will not experience disruption in its supply
chain, or that its contingency plans will alleviate or remedy any disruption
experienced.
To date, approximately 29,400 hours of employee time have been devoted to
Year 2000 issues and approximately $5.8 million has been expended in systems
upgrades directly relating to Year 2000. The source of these funds has been the
working capital of the Company. Present estimates for further expenditures of
both employee time and expenses to address Year 2000 matters, which include but
are not limited to year-end coverage and equipment upgrades, are between 1,000
and 1,500 hours and between $75,000 and $100,000. There can be no assurance that
the Company's costs relating to its Year 2000 compliance will not be greater
than that currently expected.
A software or system Year 2000 compliance failure, with respect to the
Company's internal systems, software and equipment or that of third party
service providers, major customers or suppliers, could prevent the Company from
fulfilling customer orders. Any such failure, if not quickly remedied, would
have a material adverse effect on the Company's business, results of operations,
and financial condition. The lost revenues that would result from the Company's
inability to operate even one of its major volume manufacturing plants for any
significant period of time would have a material adverse effect on the Company.
The Company could face an even greater risk of significant damages if the
Company were to be found responsible for the shutdown of one of its customers'
facilities. This could occur if the Company was unable to supply parts integral
to the end products manufactured by the Company's customer. In such
circumstances, the legal liability of the Company could have a material adverse
effect on the Company's business, results of operations, and financial
condition.
NEW ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS
No. 137, Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of SFAS No. 133, which defers the
effective date of SFAS No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires entities to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company does
not anticipate the adoption of these Statements will have a material impact on
its financial position or results of operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This Annual Report on Form 10-K contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, without limitation, those set forth in the
following risk factors and elsewhere in this Annual Report on Form 10-K. In
addition to the other information included or incorporated by reference in this
Annual Report on Form 10-K, the following risk factors should be considered
carefully in evaluating the Company and its business.
Dependence on Electronics Industry
The Company's principal customers are EMS providers and OEMs in the
computing (mainly workstations, servers, mainframes, storage and notebooks),
data communications/telecommunications and industrial automation industries,
including process controls, automotive, medical and instrumentation. These
industry segments, and the electronics industry as a whole, are characterized by
intense competition, relatively short product life-cycles and significant
fluctuations in product demand. In addition, the electronics industry is
generally subject to rapid technological change and product obsolescence.
Discontinuance or modifications of products containing components manufactured
by the Company could have a material adverse effect on the Company's business,
financial condition and results of operations. Further, the electronics industry
is subject to economic cycles and has in the past experienced, and is likely in
the future to experience, recessionary periods. A recession or any other event
leading to excess capacity or a downturn in the electronics industry
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<PAGE> 20
would likely result in intensified price competition, reduced gross margins and
a decrease in unit volume, all of which would have a material adverse effect on
the Company's business, financial condition and results of operations. See Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and Item 1, "Business -- Markets and Customers."
Risks Relating to Fluctuations in Quarterly Operating Results
The Company's quarterly operating results have varied and may continue to
fluctuate significantly from period to period, including on a quarterly basis.
At times in the past, the Company's net sales and net income have decreased from
the prior quarter. Operating results are affected by a number of factors,
including the timing and volume of orders and shipments relative to the
Company's manufacturing capacity, product and price competition, product mix,
number of working days in a particular quarter, manufacturing process yields,
the timing of expenditures in anticipation of future sales, timing of customer
requests for delivery from consignment stocks, raw material and component
availability, the length of sales cycles, trends in the electronics industry and
general economic factors. In recent years, the Company's gross margins have
varied primarily as a result of pricing, capacity utilization, product mix, lead
times, volume levels and complexity of customer orders. There can be no
assurance that the Company will be able to manage the utilization of
manufacturing capacity or product mix in a manner that will maintain or improve
gross margins. The Company's expense levels are relatively fixed and are based,
in part, on expectations of future revenues. Consequently, if revenue levels are
below expectations, this occurrence is likely to materially adversely affect the
Company's business, financial condition and results of operations. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Risks Relating to Variability of Orders from Customers; Backlog
The level and timing of orders placed by the Company's customers vary due
to a number of factors, including customer attempts to manage inventory, changes
in the customers' manufacturing strategies and variations in demand for customer
products due to, among other things, technological changes, new product
introductions, product life-cycles, competitive conditions or general economic
conditions. Since the Company generally does not obtain long-term purchase
orders or commitments from its customers, it must anticipate the future volume
of orders based on discussions with its customers. A substantial portion of
sales in a given quarter may depend on obtaining orders for products to be
manufactured and shipped in the same quarter in which those orders are received.
The Company relies on its estimate of anticipated future volumes when making
commitments regarding the level of business that it will seek and accept, the
mix of products that it intends to manufacture, the timing of production
schedules and the levels and utilization of personnel and other resources. A
variety of conditions, both specific to the individual customer and generally
affecting the customer's industry, may cause customers to cancel, reduce or
delay orders that were previously made or anticipated. A significant portion of
the Company's sales are currently made through consignment stocking programs
which afford the Company's customers greater flexibility on timing of delivery
of product. The Company may experience sudden drops in shipment of product from
consignment stock and a corresponding decline in current revenues. A significant
portion of the Company's released backlog at any time may be subject to
cancellation or postponement without penalty. The Company cannot assure the
timely replacement of canceled, delayed or reduced orders. Significant or
numerous cancellations, reductions or delays in deliveries from consignment
stocks or in orders by a customer or group of customers could materially
adversely affect the Company's business, financial condition and results of
operations. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Item 1, "Business -- Released Backlog."
Competition
The electronic interconnect industry is highly fragmented and characterized
by intense competition. The Company believes its major competitors are the large
U.S. and international independent producers that manufacture multilayer printed
circuits and provide backplane and other electronic system assemblies. Some of
these competitors have significantly greater financial, technical and marketing
resources, greater name
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recognition and a larger installed customer base than the Company. In addition,
these competitors may have the ability to respond more quickly to new or
emerging technologies, may adapt more quickly to changes in customer
requirements and may devote greater resources to the development, promotion and
sale of their products than the Company.
During periods of recession or economic slowdown in the electronics
industry and other periods when excess capacity exists, EMS providers and OEMs
are able to negotiate lower prices, which could have a material adverse effect
on the Company. In addition, the Company believes that price competition from
printed circuit manufacturers in Asia and other locations with lower production
costs plays a significant role in the printed circuit markets in which the
Company competes. The price competition from Asian printed circuit manufacturers
may intensify from time to time as a result of economic turmoil, currency
devaluations or financial market instability in Asian economies. Moreover the
Company's basic interconnect technology is generally not subject to significant
proprietary protection, and companies with significant resources or
international operations may enter the market. Increased competition could
result in price reductions, reduced margins or loss of market share, any of
which could materially adversely affect the Company's business, financial
condition and results of operations.
The demand for printed circuits has continued to be affected by the
development of smaller, more powerful electronic components requiring less
printed circuit area. Expansion of the Company's existing products or services
could expose the Company to new competition. Moreover, new developments in the
electronics industry could render existing technology obsolete or less
competitive and could potentially introduce new competition into the industry.
There can be no assurance that the Company will continue to compete successfully
against present and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on the Company's business,
financial condition and results of operations. See Item 1, "Business --
Competition."
Risks Relating to the Acquisitions and the Company's Acquisition Strategy
The Company has limited experience in integrating acquired companies or
technologies into its operations. Therefore, there can be no assurance that the
Company will operate its acquired businesses profitably in the future. The
Company expects that its gross profit margin may be lower in future fiscal
quarters than has historically been the case due, in part, to the Acquisitions.
Operating expenses associated with the acquired businesses may have a material
adverse effect on the Company's business, financial condition and results of
operations in the future. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Item 1,
"Business -- General."
The Company may from time to time pursue the acquisition of other
companies, assets, products or technologies. The Company may incur additional
indebtedness and additional charges against earnings in connection with future
acquisitions. Acquisitions involve a number of operating risks that could
materially adversely affect the Company's operating results, including the
diversion of management's attention to assimilate the operations, products and
personnel of the acquired companies, the amortization of acquired intangible
assets, and the potential loss of key employees of the acquired companies.
Furthermore, acquisitions may involve businesses in which the Company lacks
experience. There can be no assurance that the Company will be able to manage
one or more acquisitions successfully, or that the Company will be able to
integrate the operations, products or personnel gained through any such
acquisitions without a material adverse effect on the Company's business,
financial condition and results of operations.
Risks of Inability to Manage Significant Growth
In recent years, the Company significantly expanded its operations,
including geographically, which placed, and will continue to place, significant
demands on the Company's management, operational, technical and financial
resources. The Acquisitions have intensified these demands. The Company expects
that expansion will require additional management personnel and the development
of further expertise by existing management and supervisory personnel, in order
to train, motivate and manage its employees. The Company's ability to manage
growth effectively, particularly given the increasing scope of its operations,
will require it to
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continue to implement and improve its operational, financial and management
information systems. The Company's failure to effectively manage future growth
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Factors That May Affect Future
Results -- Risks Relating to the Acquisitions and the Company's Acquisition
Strategy" and "Factors That May Affect Future Results -- Dependence on Key
Personnel."
Risks Relating to Operation of Malaysian Facility and Asian Economic Turmoil
Hadco Santa Clara completed construction of a volume manufacturing facility
for printed circuits in Malaysia in fiscal 1997. Hadco's management has limited
experience in operating foreign manufacturing facilities, and there can be no
assurance that the Company will operate the facility on a profitable basis.
International operations are also subject to a number of risks, including
unforeseen changes in regulatory requirements, exchange rates, tariffs and other
trade barriers, misappropriation of intellectual property, currency
fluctuations, and political and economic instability. In recent years, Malaysia
and other Asian countries have experienced economic turmoil and a significant
devaluation of their local currencies. There can be no assurance that this
period of Asian economic turmoil will not result in increased price competition,
reduced sales by the Company's customers in Asia with a concomitant reduction in
such customers' orders for the Company's products, restrictions on the transfer
of funds overseas, employee turnover, labor unrest, the reversal of current
policies encouraging foreign investment and trade, or other domestic Asian
economic problems that could materially adversely affect the Company's business,
financial condition and results of operations.
Rapid Technological Change, Continuing Process Development and Potential
Process Disruption
The market for the Company's products and services is characterized by
rapidly changing technology and continuing process development. The future
success of the Company's business will depend in large part upon its ability to
maintain and enhance its technological capabilities, develop and market products
and services that meet changing customer needs and successfully anticipate or
respond to technological changes, on a cost-effective and timely basis. In
addition, the electronic interconnect industry in the future could encounter
competition from new technologies that render existing electronic interconnect
technology less competitive or obsolete, including technologies that may reduce
the number of printed circuits required in electronic components. There can be
no assurance that the Company will effectively respond to the technological
requirements of the changing market. To the extent the Company determines that
new technologies and equipment are required to remain competitive, the
development, acquisition and implementation of such technologies and equipment
are likely to continue to require significant capital investment by the Company.
There can be no assurance that capital will be available for this purpose in the
future or that investments in new technologies will result in commercially
viable technological processes or that there will be commercial applications for
these technologies. Moreover, the Company's business involves highly complex
manufacturing processes that have in the past and could in the future be subject
to periodic failure or disruption. Process disruptions can result in delays in
certain product shipments, and there can be no assurance that failures or
disruptions will not occur in the future. In addition, the Company has a large
manufacturing facility in Santa Clara, California, an area of the United States
that is subject to significant natural disasters, including earthquakes, fires
and flooding. The loss of revenue and earnings to the Company from such a
technological change, process development or process disruption, as well as any
disruption of the Company's operations resulting from a natural disaster in
California or other locations where the Company has facilities could have a
material adverse effect on the Company's business, financial condition and
results of operations. See Item 1, "Business -- Products and Services" and Item
2, "Manufacturing and Facilities."
Customer Concentration
During the past several years, the Company's sales to a small number of its
customers have accounted for a significant percentage of the Company's annual
net sales. During fiscal 1997, 1998 and 1999, the Company's ten largest
customers accounted for approximately 47%, 51% and 56% of net sales,
respectively. In fiscal 1998 and 1999, Solectron accounted for approximately 17%
and 15% of the net sales of the Company. The
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Company has one customer that accounted for approximately 13% and 11% of
consolidated accounts receivable at October 31, 1998 and October 30, 1999,
respectively. Another customer accounted for 10% of consolidated accounts
receivable at October 30, 1999. The Company generally does not obtain long-term
purchase orders or commitments from its customers, and the orders received by
the Company generally require delivery within 90 days. Given the Company's
strategy of developing long-term purchasing relationships with high growth
companies, the Company's dependence on a number of its most significant
customers may increase. There can be no assurance that the Company will be able
to identify, attract and retain customers with high growth rates or that the
customers that it does attract and retain will continue to grow. Although there
can be no assurance that the Company's principal customers will continue to
purchase products and services from the Company at current levels, the Company
expects to continue to depend upon its principal customers for a significant
portion of its net sales. The loss of or decrease in orders from one or more
major customers or the inability or refusal of such customer to pay for such
orders could have a material adverse effect on the Company's business, financial
condition and results of operations. See Item 1, "Business -- Markets and
Customers" and "Factors That May Affect Future Results -- Risks Relating to
Variability of Orders from Customers; Backlog."
Manufacturing Capacity
The Company believes its long-term competitive position depends in part on
its ability to increase manufacturing capacity. The Company may obtain such
additional capacity through acquisitions or expansion of its current facilities.
Either approach would require substantial additional capital, and there can be
no assurance that such capital will be available from cash generated by current
operations. Further, there can be no assurance that the Company will be able to
acquire sufficient capacity or successfully integrate and manage such additional
facilities. Although the Company has historically needed to increase its
manufacturing capacity, the Company believes that excess capacity may exist in
the printed circuit industry. In addition, growth rates in the electronics
industry as a whole have fluctuated historically. These factors could have a
material adverse effect on future orders and pricing. The Company's expansion of
its manufacturing capacity has significantly increased and will continue to
significantly increase its fixed costs, and the future profitability of the
Company will depend on its ability to utilize its manufacturing capacity in an
effective manner. The failure to obtain sufficient capacity when needed or to
successfully integrate and manage additional manufacturing facilities could
adversely impact the Company's relationships with its customers and materially
adversely affect the Company's business, financial condition and results of
operations. See "Factors That May Affect Future Results -- Rapid Technological
Change, Continuing Process Development and Potential Process Disruption" and
Item 2, "Manufacturing and Facilities."
Environmental Matters
The Company is subject to a variety of local, state and federal
environmental laws and regulations relating to the storage, use, discharge and
disposal of chemicals, solid waste and other hazardous materials used during its
manufacturing process, as well as air quality regulations and restrictions on
water use. When violations of environmental laws occur, the Company can be held
liable for damages and the costs of remedial actions and can also be subject to
revocation of permits necessary to conduct its business. Any such revocations
could require the Company to cease or limit production at one or more of its
facilities, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, the Company's
failure to comply with present and future regulations could restrict the
Company's ability to expand its facilities or could require the Company to
acquire costly equipment or to incur other significant expenses to comply with
environmental regulations.
Environmental laws could become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with violation.
The Company operates in several environmentally sensitive locations and is
subject to potentially conflicting and changing regulatory agendas of political,
business and environmental groups. Changes or restrictions on discharge limits,
emissions levels, permitting requirements or processes, or material storage or
handling might require a high level of unplanned capital investment and/or
relocation. There can be no assurance that compliance with new or existing
regulations will
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not have a material adverse effect on the Company's business, financial
condition and results of operations. See Item 1, "Business -- Environmental
Matters," Item 3, "Legal Proceedings and Claims" and Note 9 of Notes to the
Company's Consolidated Financial Statements.
Risks of Inability to Obtain Raw Materials and Components
Although the Company does not have guaranteed sources of raw materials,
production services and components utilized in its operations, it does have
supply agreements with a limited number of key suppliers, and it routinely
purchases raw materials, services and components from several material
suppliers. Although alternative material and services suppliers are currently
available, a significant unplanned event at a major supplier could have a
material adverse effect on the Company's operations. The Company believes that
the potential exists for shortages of materials and services in the printed
circuit and electronic assembly industries, which could have a material adverse
effect on the Company's manufacturing operations and future unit costs. Product
changes and the overall demand for electronic interconnect products could
increase the industry's use of new laminate materials, multilayer blanks, laser
drilling, mechanical drilling, non-standard surface finishes, electronic
components and other materials and services, and therefore such materials and
services may not be readily available to the Company in the future. Electronic
components used by the Company in producing backplane and system assemblies are
purchased by the Company and, in certain circumstances, the Company may bear the
risk of component price fluctuations. There can be no assurance that shortages
of certain types of electronic components will not occur in the future.
Component shortages or price fluctuations could have a material adverse effect
on the Company's backplane and system assembly business, thereby materially
adversely affecting the Company's business, financial condition and results of
operations. See Item 1, "Business -- Supplier Relationships."
Dependence on Key Personnel
The Company's future success depends to a large extent upon the continued
services of key managerial and technical employees. Most of the executive
officers of the Company are bound by employment or non-compete agreements. The
non-compete restrictions expire one year or, under certain circumstances, up to
two years, after the termination of the executive officer's employment with the
Company. Certain other key employees of the Company also have employment or
non-compete agreements. The loss of the services of any of the Company's key
employees could have a material adverse effect on the Company. The Company
believes that its future success depends on its continuing ability to attract
and retain highly qualified technical, managerial and marketing personnel.
Competition for such personnel is intense, especially for engineering personnel,
and there can be no assurance that the Company will be able to attract,
assimilate or retain such personnel. If the Company is unable to hire and retain
key personnel, the Company's business, financial condition and results of
operations may be materially adversely affected.
Investments in Intellectual Property; Intellectual Property Protection
The Company's success depends in part on its proprietary techniques and
manufacturing expertise, particularly in the area of dense multilayer printed
circuits. As of October 30, 1999, the Company had capitalized approximately
$179.3 million of acquired intangible assets, consisting primarily of developed
technology, customer relationships and goodwill. These intangible assets are
being amortized over lives ranging from 12 to 30 years. The Company assesses the
realizability and valuation of intangible assets based on the estimated cash
flows to be generated by such assets. Based on its most recent analyses, the
Company believes that no material impairment of intangible assets exists as of
October 30, 1999. Impairment occurs when actual cash flows generated do not
equal or exceed estimated cash flows. The estimated cash flows are based on
assumptions the Company believes to be reasonable, but which are inherently
uncertain and unpredictable. The Company's assumptions may be incomplete or
inaccurate, and no assurance can be given that unanticipated events and
circumstances will not occur. Accordingly, actual cash flows may vary from the
projected cash flows. In such event, the Company may be required to write-off or
write-down the value of assets which are impaired. Any such write-off or
write-down may result in a material adverse effect on the
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financial condition and results of operations of the Company. See Notes 2 and 5
of Notes to the Company's Consolidated Financial Statements.
The Company has few patents and relies primarily on trade secret protection
of its intellectual property. There can be no assurance that the Company will be
able to protect its trade secrets or that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets. In addition, litigation may be
necessary to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others or to defend against claims of patent
infringement. If any infringement claim is asserted against the Company, the
Company may seek to obtain a license of the other party's intellectual property
rights. There is no assurance that a license would be available on reasonable
terms or at all. Litigation with respect to patents or other intellectual
property matters could result in substantial costs and diversion of management
and other resources and could have a material adverse effect on the Company's
business, financial condition and results of operations. See Item 1, "Business
Product Protection."
Anti-Takeover Provisions
The Company's Stockholder Rights Plan and certain provisions of the
Company's Restated Articles of Organization and By-Laws and of Massachusetts
Law, including Massachusetts General Laws Chapter 110D, entitled "Regulation of
Control Share Acquisitions" and Chapter 110F, the so-called Business Combination
Statute, could discourage potential acquisition proposals and could delay or
prevent a change in control or sale of the Company. Each and all of the above
provisions and statutes could diminish the opportunities for a stockholder to
participate in tender offers, including tender offers at a price above the then
current market value of Common Stock and may render more difficult or discourage
a merger, consolidation or tender offer (even if such transaction is supported
by the Company's Board of Directors or is favorable to the stockholders), the
assumption of control by a holder of a large block of the Company's shares, and
the removal of incumbent management.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Derivative Financial Instruments, Other Financial Instruments, and
Derivative Commodity Instruments. SFAS No. 107 requires disclosure about fair
value of financial instruments. Financial instruments consist of cash
equivalents, accounts receivable, accounts payable and long-term debt
obligations. The fair value of these financial instruments approximates their
carrying amount, except for the 9 1/2% Senior Subordinated Notes (the Notes) at
October 30, 1999. The fair market value of the Notes was $191 million with a
carrying amount of $199.4 million at October 30, 1999. Although the fair market
value of the Notes is less than the carrying amount, settlement at the reported
fair value is not possible due to cost-prohibitive redemption premiums.
Primary Market Risk Exposures. The Company's primary market risk exposures
are in the areas of interest rate risk and foreign currency exchange rate risk.
The Company incurs interest expense on loans made under the Credit Facility at
interest rates which are fixed for a maximum of six months. At October 30, 1999,
the Company's outstanding borrowings under the Credit Facility were $75.0
million, at a weighted average interest rate of 6.31%. This interest rate is a
combination of three Eurodollar rate loans. The interest rates on the three
Eurodollar rate loans will expire during the first quarter of fiscal 2000, at
which time the Company may fix these rates for periods of one, two, three or six
months. The Eurodollar Rate is subject to market risks and will fluctuate.
Substantially all of the Company's business outside the United States is
conducted in U.S. dollar denominated transactions. The Company does operate a
volume manufacturing facility in Malaysia. Some of the expenses of this facility
are denominated in Malaysian ringgits. Expenses denominated in ringgits include
local salaries and wages, utilities and some operating supplies. The Company
also funds a small sales office in Ireland, where expenses are paid in British
Pounds, Irish Punts and Eurodollars. However, the Company believes that these
operating expenses will not have a material adverse effect on the Company's
business, results of operations or financial condition.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements and the Report of
Independent Public Accountants thereon are presented in the following pages. The
Consolidated Financial Statements filed in Item 8 are as follows:
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Report of Independent Public Accountants.................... 25
Consolidated Balance Sheets as of October 31, 1998 and
October 30, 1999.......................................... 26
Consolidated Statements of Operations for the years ended
October 25, 1997, October 31, 1998 and October 30, 1999... 27
Consolidated Statements of Stockholders' Investment for the
years ended October 25, 1997, October 31, 1998 and October
30, 1999.................................................. 28
Consolidated Statements of Cash Flows for the years ended
October 25, 1997, October 31, 1998 and October 30, 1999... 29
Notes to Consolidated Financial Statements.................. 30
</TABLE>
25
<PAGE> 27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hadco Corporation:
We have audited the accompanying consolidated balance sheets of Hadco
Corporation (a Massachusetts corporation) and subsidiaries as of October 31,
1998 and October 30, 1999, and the related consolidated statements of
operations, stockholders' investment and cash flows for each of the three years
in the period ended October 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hadco Corporation and
subsidiaries as of October 31, 1998 and October 30, 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended October 30, 1999, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in item 14(a)(2) is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states, in all
material respects, the financial data required to be set forth therein, in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
November 18, 1999
26
<PAGE> 28
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 30,
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 7,169 $ 9,078
Accounts receivable, net of allowance of $2,129 in 1998
and $1,478 in 1999.................................... 111,094 116,580
Inventories............................................ 67,017 63,926
Deferred tax asset..................................... 17,156 11,480
Prepaid expenses and other current assets.............. 18,666 7,688
-------- --------
Total current assets.............................. 221,102 208,752
Property, Plant and Equipment, net.......................... 322,887 328,181
Acquired Intangible Assets, net............................. 191,421 179,319
Other Assets................................................ 8,415 8,571
-------- --------
$743,825 $724,823
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt...................... $ 4,377 $ 2,515
Accounts payable....................................... 79,350 100,100
Accrued payroll and other employee benefits............ 26,529 36,419
Other accrued expenses................................. 19,016 21,937
-------- --------
Total current liabilities......................... 129,272 160,971
-------- --------
Long-Term Debt, net of current portion...................... 354,291 278,309
-------- --------
Deferred Tax Liability...................................... 59,521 57,342
-------- --------
Other Long-Term Liabilities................................. 9,192 9,192
-------- --------
Commitments and Contingencies (Note 9)
Stockholders' Investment:
Common stock, $.05 par value;
Authorized -- 50,000 shares
Issued and outstanding -- 13,366 in 1998 and 13,631 in
1999.................................................. 669 683
Paid-in capital............................................. 173,906 179,528
Deferred compensation....................................... (44) (184)
Retained earnings........................................... 17,018 38,982
-------- --------
Total stockholders' investment.................... 191,549 219,009
-------- --------
$743,825 $724,823
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE> 29
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------------
OCTOBER 25, OCTOBER 31, OCTOBER 30,
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales................................................ $648,705 $826,359 $1,005,970
Cost of Sales............................................ 507,313 702,669 849,100
-------- -------- ----------
Gross Profit............................................. 141,392 123,690 156,870
Operating Expenses....................................... 59,371 71,877 78,678
Restructuring and Other Non-Recurring Charges (Note
15).................................................... -- 7,053 --
Amortization of Goodwill and Acquired Intangible
Assets................................................. 5,215 9,750 12,226
Write-off of Acquired In-Process Research and Development
(Note 2)............................................... 78,000 63,050 --
-------- -------- ----------
Income (Loss) from Operations............................ (1,194) (28,040) 65,966
Interest and Other Income, net........................... 3,296 2,295 1,384
Interest Expense......................................... (10,923) (22,468) (30,895)
-------- -------- ----------
Income (Loss) Before Provision for Income Taxes.......... (8,821) (48,213) 36,455
Provision for Income Taxes............................... 27,672 5,897 14,491
-------- -------- ----------
Net Income (Loss)........................................ $(36,493) $(54,110) $ 21,964
======== ======== ==========
Net Income (Loss) per Share:
Basic............................................... $ (3.18) $ (4.09) $ 1.62
======== ======== ==========
Diluted............................................. $ (3.18) $ (4.09) $ 1.60
======== ======== ==========
Weighted Average Shares Outstanding:
Basic............................................... 11,458 13,216 13,533
======== ======== ==========
Diluted............................................. 11,458 13,216 13,751
======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE> 30
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
NUMBER OF $.05 PAR PAID-IN DEFERRED RETAINED
SHARES VALUE CAPITAL COMPENSATION EARNINGS
--------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Balance, October 26, 1996................ 10,382 $521 $ 30,939 $(240) $107,621
Terminated stock options............... -- -- (2) 2 --
Exercise of stock options.............. 263 12 1,291 -- --
Sale of common stock, net of offering
costs of $1,033..................... 2,441 122 130,966 -- --
Compensation expense associated with
granting nonqualified stock
options............................. -- -- -- 121 --
Tax benefit of exercise of nonqualified
stock options....................... -- -- 5,052 -- --
Net loss............................... -- -- -- -- (36,493)
------ ---- -------- ----- --------
Balance, October 25, 1997................ 13,086 655 168,246 (117) 71,128
Exercise of stock options.............. 179 9 1,073 -- --
Sale of common stock................... 40 2 1,478 -- --
Proceeds from employee stock purchase
plan................................ 61 3 1,110 -- --
Compensation expense associated with
granting nonqualified stock
options............................. -- -- -- 73 --
Tax benefit of exercise of nonqualified
stock options....................... -- -- 1,999 -- --
Net loss............................... -- -- -- -- (54,110)
------ ---- -------- ----- --------
Balance, October 31, 1998................ 13,366 669 173,906 (44) 17,018
Exercise of stock options.............. 117 6 614 -- --
Proceeds from employee stock purchase
plan................................ 136 7 3,251 -- --
Director and executive officer stock
grants.............................. 12 1 540 (276) --
Compensation expense associated with
granting nonqualified stock
options............................. -- -- -- 136 --
Tax benefit of exercise of nonqualified
stock options....................... -- -- 1,217 -- --
Net income............................. -- -- -- -- 21,964
------ ---- -------- ----- --------
Balance, October 30, 1999................ 13,631 $683 $179,528 $(184) $ 38,982
====== ==== ======== ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 31
HADCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------------
OCTOBER 25, OCTOBER 31, OCTOBER 30,
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)......................................... $(36,493) $(54,110) $ 21,964
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Write-off of acquired in-process research and
development........................................... 78,000 63,050 --
Depreciation and amortization.......................... 41,845 67,164 77,934
Deferred compensation and deferred taxes............... (873) (1,955) (2,043)
Director and executive officer stock grants............ -- -- 265
Loss (Gain) on disposal of fixed assets................ (1,862) 1,840 (51)
Changes in assets and liabilities, net of acquisitions in
1997 and 1998 --
Increase in accounts receivable........................ (26,762) (2,406) (3,502)
Decrease (Increase) in inventories..................... (12,824) (9,488) 2,939
Decrease (Increase) in prepaid expenses and other
current assets........................................ 308 1,836 (4,523)
Decrease (Increase) in refundable taxes................ 3,296 (8,348) 21,137
Decrease (Increase) in other assets.................... 385 2,811 (1,463)
Increase in accounts payable and accrued expenses...... 5,577 2,565 33,561
Increase (Decrease) in long-term liabilities........... 70 (22) --
-------- -------- ---------
Net Cash Provided by Operating Activities............ 50,667 62,937 146,218
-------- -------- ---------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment................ (69,851) (83,508) (71,791)
Proceeds from sale of property, plant and equipment....... 2,760 -- 231
Acquisition of Zycon Corporation in 1997 and Continental
Circuits Corp. in 1998, net of cash acquired........... (209,661) (192,532) --
-------- -------- ---------
Net Cash Used in Investing Activities................ (276,752) (276,040) (71,560)
-------- -------- ---------
Cash Flows from Financing Activities:
Principal payments of long-term debt...................... (164,766) (258,424) (107,144)
Net proceeds from issuance of long-term debt.............. 224,954 459,289 29,300
Proceeds from exercise of stock options................... 1,303 1,082 620
Proceeds from employee stock purchase plan................ -- 1,113 3,258
Proceeds from the sale of common stock, net of issuance
costs.................................................. 131,088 1,480 --
Tax benefit from exercise of nonqualified stock options... 5,052 1,999 1,217
-------- -------- ---------
Net Cash (Used in) Provided by Financing
Activities.......................................... 197,631 206,539 (72,749)
-------- -------- ---------
Net Increase (Decrease) in Cash, Cash Equivalents and
Short-Term Investments.................................... (28,454) (6,564) 1,909
Cash, Cash Equivalents and Short-Term Investments, Beginning
of Period................................................. 42,187 13,733 7,169
-------- -------- ---------
Cash, Cash Equivalents and Short-Term Investments, End of
Period.................................................... $ 13,733 $ 7,169 $ 9,078
======== ======== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................... $ 10,270 $ 11,520 $ 29,317
======== ======== =========
Income taxes (net of refunds).......................... $ 21,099 $ 11,786 $ 7,749
======== ======== =========
Acquisition of Zycon Corporation in 1997 and Continental
Circuits Corp. in 1998:
Fair value of assets acquired............................. $206,009 $137,623 $ --
Liabilities assumed....................................... (110,503) (66,381) --
Cash paid................................................. (204,885) (186,083) --
Acquisition costs incurred................................ (7,600) (4,073) --
Write-off of acquired in-process research and
development............................................ 78,000 63,050 --
-------- -------- ---------
Goodwill.................................................. $(38,979) $(55,864) $ --
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE> 32
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Hadco Corporation (the "Company" or "Hadco") was incorporated in
Massachusetts in 1966. Principal products and services of the Company include:
PRINTED CIRCUITS:
Printed circuits are the basic platform used to interconnect
microprocessors, integrated circuits and other components essential to the
functioning of electronic systems. The Company provides customers with printed
circuit designs and fabricates the printed circuit for the customer. The design
and fabricated printed circuits are sold either separately or as a complete
package. The majority of printed circuits fabricated by the Company are based on
designs provided by the customer.
VALUE ADDED MANUFACTURING:
Value Added Manufacturing (VAM) consists of backplane and system
assemblies. Backplane assemblies are generally larger and thicker printed
circuits on which connectors are mounted to receive and interconnect printed
circuits, integrated circuits and other electronic components. System assemblies
include the backplane, power supply, fan card, cabling and system chassis.
The consolidated financial statements reflect the application of certain
accounting policies as described in this Note and elsewhere in the accompanying
notes to consolidated financial statements.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Management Estimates and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Company is subject to a number of risks and uncertainties similar to
those of other companies of the same size within the electronics industry,
including, without limitation, dependence on the electronics industry,
variability of customer orders, competition, rapid technological changes,
environmental matters and dependence on key individuals.
Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
About Fair Value of Financial Instruments, requires disclosure about fair value
of financial instruments. Financial instruments consist of cash equivalents,
accounts receivable, accounts payable and long-term debt obligations. The fair
value of these financial instruments approximates their carrying amount, except
for the 9 1/2% Senior Subordinated Notes (the Notes) at October 30, 1999. The
fair market value of the Notes was $191 million with a carrying amount of $199.4
million at October 30, 1999. Although the fair market value of the Notes is less
than the carrying amount, settlement at the reported fair value is not possible
due to prohibitive redemption premiums. See Note 8 of the Notes to the
Consolidated Financial Statements.
31
<PAGE> 33
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash Equivalents
The Company considers all highly liquid investment instruments purchased
with a maturity of three months or less to be cash equivalents. Cash equivalents
consist primarily of investments in money market funds and were approximately
$5,850,000 and $5,881,000 as of October 31, 1998 and October 30, 1999,
respectively.
Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. As of October 30, 1999, the Company had no significant
off-balance-sheet concentrations of credit risk such as foreign currency
exchange contracts or other hedging arrangements. Financial instruments that
subject the Company to credit risk consist of cash and cash equivalents, trade
accounts receivable and long-term debt obligations. The Company maintains the
majority of its cash and cash equivalent balances with financial institutions.
The Company has not experienced any losses on these investments to date.
Substantially all of the Company's accounts receivable are concentrated in the
high technology and electronics industry. The Company has not experienced
significant recurring losses related to receivables from individual customers or
groups of customers in the high technology and electronics industry or by
geographic region, although the Company has and may in the future incur a
significant loss in a particular reporting period. Due to these factors, no
additional credit risk beyond amounts provided for is believed by management to
be inherent in the Company's accounts receivable.
Depreciation and Amortization of Property, Plant and Equipment
The Company provides for depreciation and amortization on a straight-line
basis over the following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
- -------------------- -----------
<S> <C>
Land betterments............................................ 10-18 Years
Buildings and improvements.................................. 10-40 Years
Machinery and equipment..................................... 3-10 Years
Furniture and fixtures...................................... 5-7 Years
Computer software........................................... 3 Years
Vehicles.................................................... 3-5 Years
Capital leases.............................................. Lease term
</TABLE>
Revenue Recognition
The Company recognizes revenue at the time products are shipped.
Research and Development Expenses
The Company charges research and development expenses to operations as
incurred. For the fiscal years ended October 1997, 1998 and 1999, research and
development expenses were approximately $6,929,000, $6,111,000 and $5,924,000,
respectively, and are included in operating expenses.
Net Income (Loss) per Share
The Company applies SFAS No. 128, Earnings per Share. Under SFAS No. 128,
basic net income (loss) per common share is computed based on net income (loss)
available to common stockholders and the weighted average number of common
shares outstanding during the period. The diluted net income (loss) per
32
<PAGE> 34
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
share is computed including the number of additional common shares that would
have been outstanding if the dilutive potential common shares had been issued.
A reconciliation of basic and diluted shares outstanding is as follows:
<TABLE>
<CAPTION>
OCTOBER 25, OCTOBER 31, OCTOBER 30,
1997 1998 1999
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Basic weighted average shares
outstanding............................... 11,458 13,216 13,533
Weighted average common equivalent
shares.................................. -- -- 218
------ ------ ------
Diluted weighted average shares
outstanding............................. 11,458 13,216 13,751
====== ====== ======
</TABLE>
Diluted weighted average shares outstanding does not include 1,070,000,
1,308,000 and 655,000 common equivalent shares at October 25, 1997, October 31,
1998 and October 30, 1999, respectively, as their effect would be anti-dilutive.
Stock-Based Compensation
The Company applies SFAS No. 123, Accounting for Stock-Based Compensation.
SFAS No. 123 defines a fair-value-based method of accounting for employee stock
options and other stock-based compensation. The compensation expense arising
from this method of accounting can be reflected in the financial statements or,
alternatively, the pro forma net income (loss) and per share amounts effect of
the fair-value-based accounting can be disclosed in the financial footnotes. The
Company has adopted the disclosure-only alternative. (See Note 10,
"Stockholders' Investment.")
Foreign Currency Translation
The financial statements of the Company's Malaysian and Irish subsidiaries
are translated in accordance with SFAS No. 52, Foreign Currency Translation. The
functional currency of the Company's Malaysian and Irish subsidiaries is the
U.S. dollar. Accordingly, all assets and liabilities of the foreign subsidiaries
are translated using the exchange rate at the balance sheet date, except for
prepaid expenses, equipment and improvements and stockholders' investment, which
are translated at historical rates. Revenues and expenses are translated at
historical rates. Translation gains and losses arising from the translations
were not material to the financial statements taken as a whole. These gains and
losses are included in the consolidated statements of operations, since the
functional currency is the U.S. dollar for all operations.
Reclassification
The Company has reclassified certain prior year information to conform with
the current year's presentation.
Comprehensive Income (Loss)
As of November 1, 1998, Hadco adopted SFAS No. 130, Reporting Comprehensive
Income. This Statement established standards for reporting and display of
comprehensive income (loss) and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. Comprehensive
income (loss) is defined as the change in equity of a business enterprise during
a period from transactions and other events and circumstances from non-owner
sources. Hadco's comprehensive income (loss) is equal to net income (loss) for
all periods presented.
33
<PAGE> 35
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
New Accounting Standards
In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS
No. 137, Accounting for Derivative Instruments and Hedging Activities --
Deferral of the Effective Date of FASB Statement No. 133, which defers the
effective date of SFAS No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires entities to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company does
not anticipate the adoption of these Statements to have a material impact on its
financial position or results of operations.
(2) ACQUISITIONS
On January 10, 1997 the Company acquired all of the outstanding common
stock of Zycon Corporation ("Zycon") (the "Zycon Acquisition"), and on March 20,
1998, the Company acquired all of the outstanding common stock of Continental
Circuits Corp. ("Continental") (the "Continental Acquisition," and together with
the Zycon Acquisition, the "Acquisitions"). These Acquisitions were financed by
the Company's unsecured senior revolving credit facility with a group of banks.
The Company borrowed approximately $215,000,000 upon consummation of the Zycon
Acquisition and approximately $220,000,000 upon consummation of the Continental
Acquisition. The Acquisitions were accounted for as purchases in accordance with
Accounting Principles Board Opinion (APB) No. 16 and accordingly, Zycon's and
Continental's operating results since the respective dates of acquisition are
included in the accompanying consolidated financial statements. In accordance
with APB Opinion No. 16, the Company allocated the purchase price of the
Acquisitions based on the fair value of the assets acquired and liabilities
assumed. Significant portions of the purchase price of both were identified in
independent appraisals, using proven valuation procedures and techniques, as
intangible assets. These intangible assets include approximately $78,000,000 and
$63,050,000 for Zycon and Continental, respectively, for acquired in-process
research and development ("in-process R&D") for projects that did not have
future alternative uses. This allocation represents the estimated fair value
based on risk-adjusted cash flows related to the in-process R&D projects. At the
date of each acquisition, the development of these projects had not yet reached
technological feasibility, and the R&D in progress had no alternative future
uses. Accordingly, these costs were expensed as of the respective acquisition
date.
The aggregate purchase prices of $212,485,000 and $190,156,000, including
acquisition costs, for the Zycon Acquisition and Continental Acquisition,
respectively, were allocated as follows:
<TABLE>
<CAPTION>
ZYCON CONTINENTAL
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current assets........................................ $ 41,790 $ 24,056
Property, plant and equipment......................... 95,193 67,144
Acquired intangibles.................................. 65,500 46,190
In-process R&D........................................ 78,000 63,050
Other assets.......................................... 3,526 233
Goodwill.............................................. 38,979 55,864
Liabilities assumed................................... (110,503) (66,381)
-------- --------
$212,485 $190,156
======== ========
</TABLE>
34
<PAGE> 36
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited pro forma operating results for the Company, assuming the Zycon
Acquisition occurred on October 27, 1996 and the Continental Acquisition
occurred on October 26, 1997, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
OCTOBER 25, OCTOBER 31,
1997 1998
----------- -----------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Net sales......................................... $837,650 $878,311
Net income........................................ 37,544 1,519
Basic net income per share........................ 3.28 0.11
Diluted net income per share...................... 3.14 0.11
</TABLE>
For purposes of these pro forma operating results, the in-process R&D for
Zycon and Continental was assumed to have been written off prior to October 27,
1996 and October 26, 1997, respectively, so that the operating results presented
include only recurring costs.
(3) INVENTORIES
Inventories are stated at the lower of cost or market on a first-in,
first-out (FIFO) basis, and consist of the following:
<TABLE>
<CAPTION>
1998 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials........................................... $25,856 $18,679
Work-in-process and finished goods...................... 41,161 45,247
------- -------
$67,017 $63,926
======= =======
</TABLE>
The work-in-process consists of materials, labor and manufacturing
overhead.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
1998 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land betterments.................................... $ 5,562 $ 5,562
Buildings and improvements.......................... 139,164 146,435
Machinery and equipment............................. 447,340 492,318
Furniture and fixtures.............................. 12,439 12,522
Computer software................................... 7,012 9,426
Vehicles............................................ 668 622
Construction-in-progress............................ 21,985 36,667
--------- ---------
634,170 703,552
Accumulated depreciation and amortization........... (311,283) (375,371)
--------- ---------
$ 322,887 $ 328,181
========= =========
</TABLE>
(5) INTANGIBLE ASSETS
The Company assesses the realizability of long-lived and intangible assets
in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of. Under SFAS No. 121, the
Company is required to assess the valuation of its long-lived assets, including
intangible assets, based on the estimated cash flows to be generated by such
assets. Based on its most recent analysis, the Company believes that no material
impairment of long-lived and intangible assets exists as of
35
<PAGE> 37
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
October 30, 1999. Intangible assets are amortized on a straight-line basis,
based on their estimated lives, as follows:
<TABLE>
<CAPTION>
ESTIMATED LIFE OCTOBER 31, 1998 OCTOBER 30, 1999
-------------- ---------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Developed technology................... 12 years $ 52,190 $ 52,190
Customer relationships............... 20-25 years 37,000 37,000
Assembled workforce.................. 12-15 years 16,000 16,000
Trade names/trademarks............... 30 years 6,500 6,500
Goodwill............................. 20 years 94,719 94,843
-------- --------
206,409 206,533
Less -- Accumulated amortization..... (14,988) (27,214)
-------- --------
$191,421 $179,319
======== ========
</TABLE>
(6) INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes.
The provision for income taxes shown in the accompanying consolidated
statements of operations is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
----------------------------
1997 1998 1999
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal
Current........................................... $24,072 $6,617 $13,495
Deferred.......................................... 1,369 (1,681) (680)
------- ------ -------
25,441 4,936 12,815
------- ------ -------
State
Current........................................... 2,273 1,307 1,728
Deferred.......................................... (42) (346) (52)
------- ------ -------
2,231 961 1,676
------- ------ -------
$27,672 $5,897 $14,491
======= ====== =======
</TABLE>
The deferred provision for income taxes results from the following:
<TABLE>
<CAPTION>
1997 1998 1999
------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Difference between book and tax depreciation............ $1,939 $ 2,559 $2,717
Deferred compensation................................... 146 66 50
Amortization of goodwill and acquired intangible
assets................................................ (1,210) (2,198) (421)
Reserves and expenses recognized in different periods
for book and tax purposes............................. 480 (2,383) (2,849)
Other, net.............................................. (28) (71) (229)
------ ------- ------
$1,327 $(2,027) $ (732)
====== ======= ======
</TABLE>
36
<PAGE> 38
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax rate used in the computation of the provision for federal and state
income taxes differs from the statutory federal and state rates due to the
following:
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Provision for statutory rate............................ 35.00% 35.00% 35.00%
Increase in tax resulting from state income taxes, net
of federal tax benefit................................ 4.30 4.26 2.99
Tax-exempt interest income.............................. (0.30) (0.02) (0.01)
Amortization of goodwill................................ 0.89 8.71 4.55
Foreign Sales Corporation............................... (0.69) (5.97) (2.45)
Other, net.............................................. 0.80 (2.23) (0.33)
----- ----- -----
Provision for income taxes.............................. 40.00% 39.75% 39.75%
===== ===== =====
</TABLE>
The provision for income taxes in 1997 and 1998 is calculated on income
before provision for taxes without taking into account the write-off of acquired
in-process R&D. This write-off was $78.0 million and $63.0 million for 1997 and
1998, respectively. Income before the provision for income taxes excluding the
write-off would have been $69.2 million and $14.8 million for 1997 and 1998,
respectively.
The tax effects of temporary differences that give rise to significant
portions of the current and long-term deferred tax asset and liability at
October 31, 1998 and October 30, 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Asset
Not currently deductible reserves................. $ 11,480 $ 5,986
Not currently deductible environmental accruals... 4,125 4,029
Deferred compensation plans....................... 1,551 1,465
-------- --------
Total gross deferred tax asset............ 17,156 11,480
-------- --------
Deferred Tax Liability
Acquisition related intangibles................... (39,653) (39,713)
Property, plant and equipment, principally due to
differences in depreciation.................... (19,868) (17,629)
-------- --------
Total gross deferred tax liability........ (59,521) (57,342)
-------- --------
Net deferred tax liability.......................... $(42,365) $(45,862)
======== ========
</TABLE>
(7) LINES OF CREDIT
The Company's revolving line of credit with various banks is pursuant to an
Amended and Restated Revolving Credit Agreement, as amended (the "Credit
Facility"). The Credit Facility provides, among other things, for direct
borrowings for up to the lesser of $198,750,000 or the Borrowing Base, as
defined in the Credit Facility, and expires January 8, 2002. Interest on loans
outstanding under the Credit Facility is payable at the Company's option at
either (i) the Base Rate (as defined in the Credit Facility) or (ii) the
Eurodollar Rate, plus the Applicable Eurodollar Rate Margin (both as defined in
the Credit Facility). The Company is required to pay a quarterly commitment fee
ranging from .2% to .375% per annum, based on certain financial ratios of the
Company, of the unused commitment under the Credit Facility. The Company is also
required to pay a quarterly usage fee based on an Applicable Base Rate Usage Fee
Margin and an Applicable Eurodollar Rate Usage Fee Margin (both as defined in
the Credit Facility). At October 31, 1998 and October 30, 1999, borrowings of
$150,000,000 and $75,000,000, respectively, were outstanding under the Credit
Facility at weighted average interest rates of 6.58% and 6.31%, respectively.
Borrowing availability under the Credit Facility was up to a maximum amount of
$123,750,000 at October 30, 1999.
37
<PAGE> 39
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Credit Facility contains customary representations and warranties. The
Credit Facility also contains extensive affirmative and negative covenants,
including, among others, certain limits on the ability of the Company and its
subsidiaries to incur indebtedness, create liens, make investments, pay
dividends or other distributions, engage in mergers, consolidations,
acquisitions or dispositions, enter into sale and lease-back transactions, enter
into guarantees, prepay subordinated indebtedness, create any new series of
capital stock or amend the terms of existing capital stock. The Credit Facility
also requires the Company to maintain certain financial covenants, including
maximum ratio of Consolidated Funded Debt to EBITDA, minimum interest coverage,
minimum consolidated net worth and minimum fixed charge coverage. At October 30,
1999, the Company was in compliance with all loan covenants.
The Company has a line of credit arrangement with a Malaysian bank
denominated in Malaysian ringgits and U.S. dollars for aggregate borrowings of
approximately $3.4 million for the purpose of acquiring land, facilities and
equipment for the Company's Malaysian subsidiary. The arrangement is renewable
annually. At October 30, 1999, there were no amounts outstanding under this
arrangement.
(8) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
OCTOBER
--------------------
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Variable rate mortgages..................................... $ 732 $ 640
Revolving credit agreement (Note 7)......................... 150,000 75,000
9 1/2% senior subordinated notes due 2008................... 199,354 199,422
Obligations under capital leases with interest rates ranging
from 7% to 7.75%.......................................... 8,582 5,762
-------- --------
358,668 280,824
Less -- Current portion..................................... 4,377 2,515
-------- --------
$354,291 $278,309
======== ========
</TABLE>
On May 18, 1998, the Company sold $200 million aggregate principal amount
of its 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") to certain
purchasers. The purchasers subsequently resold the Notes to "qualified
institutional buyers" in reliance upon Rule 144A under the Securities Act of
1933, as amended (the "Securities Act"), and offshore purchasers pursuant to
Rule 904 of Regulation S under the Securities Act. The Notes were sold at a
price equal to 99.66% of their principal amount.
On November 12, 1998, the Company consummated an exchange offer pursuant to
which the Notes were exchanged for Notes (with terms identical in all material
respects) that were registered with the Securities and Exchange Commission under
a registration statement on Form S-4.
Interest on the Notes is payable semi-annually on each June 15 and December
15 and commenced December 15, 1998. The Notes are redeemable at the option of
the Company, in whole or in part, at any time on or after June 15, 2003, at
104.75% of their principal amount, plus accrued interest, with such percentages
declining ratably to 100% of their principal amount, plus accrued interest. At
any time on or prior to June 15, 2001 and subject to certain conditions, up to
35% of the aggregate principal amount of the Notes may be redeemed, at the
option of the Company, with the proceeds of certain equity offerings of the
Company at 109.50% of the principal amount thereof, plus accrued interest. In
addition, at any time prior to June 15, 2003, the Company may redeem the Notes,
at its option, in whole or in part, at a price equal to the principal amount
thereof, together with accrued interest, plus the Applicable Premium (as defined
in the Indenture governing the Notes).
The Notes are guaranteed, on a senior subordinated basis, by each of the
Company's U.S. Restricted Subsidiaries (as defined in the Indenture) (the
"Guarantors"). The net proceeds received by the Company
38
<PAGE> 40
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
from the issuance and sale of the Notes, approximately $193.8 million, were used
to repay outstanding indebtedness under the Credit Facility previously incurred
to, among other things, finance the Acquisitions.
The Indenture under which the Notes were issued (the "Indenture") imposes
certain limitations on the ability of the Company, its subsidiaries and, in
certain circumstances, the Guarantors, to, among other things, incur
indebtedness, pay dividends, prepay subordinated indebtedness, repurchase
capital stock, make investments, create liens, engage in transactions with
stockholders and affiliates, sell assets and engage in mergers and
consolidations.
Maturities of long-term debt and capital lease obligations are as follows
as of October 30, 1999:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Year Ending October
2000................................................... $ 2,515
2001................................................... 1,589
2002................................................... 75,092
2003................................................... 92
2004................................................... 92
Thereafter............................................. 201,444
--------
$280,824
========
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases manufacturing space under noncancelable operating leases
with terms expiring through 2009. Future minimum lease payments under these
leases as of October 30, 1999 are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Year Ending October
2000................................................... $ 6,919
2001................................................... 5,903
2002................................................... 5,614
2003................................................... 5,390
2004................................................... 4,707
Thereafter............................................. 16,771
-------
Future minimum lease payments..................... $45,304
=======
</TABLE>
Total rental expense of approximately $6,628,000, $9,805,000 and $9,700,000
was incurred for the fiscal years ended October 1997, 1998 and 1999,
respectively.
Environmental Matters
During March 1995, the Company received a Record of Decision ("ROD") from
the New York State Department of Environmental Conservation ("NYSDEC"),
regarding soil and groundwater contamination at its Owego, New York facility.
Based on a Remedial Investigation and Feasibility Study ("RIFS") for apparent
on-site contamination at that facility and a Focused Feasibility Study ("FFS"),
each prepared by environmental consultants of the Company, the NYSDEC has
approved a remediation program of groundwater withdrawal and treatment and
iterative soil flushing. The Company has executed a Modification of the Order on
Consent to implement the approved ROD. Capital equipment for this remediation
has already been acquired by the Company, and future operation and maintenance
costs, which will be incurred and expended over the estimated life of the
program of the next 28 years, are estimated at between $40,000 and $100,000 per
39
<PAGE> 41
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year. Beginning in the summer of 1998, NYSDEC took additional samples from a
wetland area near the Company's Owego facility. Analytical reports of earlier
sediment samples indicated the presence of certain inorganics. The new samples
showed elevated levels of certain metals, but NYSDEC has not made a
determination as to the potential source of such metals, the remedial action to
be taken, or the persons to undertake and/or pay for any remediation. There can
be no assurance that the Company and/or other third parties will not be required
to conduct additional investigations and remediation at that location, the costs
of which are currently indeterminable.
The Company has commenced the operation of a groundwater extraction system
at its Derry, New Hampshire facility to address certain groundwater
contamination and migration control issues. It is not possible to make a
reliable estimate of the length of time remedial activity will have to be
performed. However, it is anticipated that the groundwater extraction system
will be operated for at least 30 years. There can be no assurance that the
Company will not be required to conduct additional investigations and
remediation relating to the Derry facility. The total costs of such groundwater
extraction system and of conducting any additional investigations and
remediation relating to the Derry facility are not fully determinable.
The Company accrues estimated costs associated with known environmental
matters, when such costs can be reasonably estimated. The cost estimates
relating to future environmental clean-up are subject to numerous variables, the
effects of which can be difficult to measure, including the stage of the
environmental investigations, the nature of potential remedies, possible joint
and several liability, the magnitude of possible contamination, the difficulty
of determining future liability, the time over which remediation might occur,
and the possible effects of changing laws and regulations. The total reserve for
environmental matters currently identified by the Company amounted to $10.6
million at October 31, 1998 and $11.1 million at October 30, 1999. The current
portion of these costs amounted to approximately $1.4 million as of October 31,
1998 and $1.9 million at October 30, 1999, and is included in other accrued
expenses. The long-term portion of these costs amounted to approximately $9.2
million as of October 31, 1998 and October 30, 1999, and is reported under the
caption Other Long-Term Liabilities. Based on its assessment at the current
time, management estimates the cost of ultimate disposition of the known
environmental matters to range from approximately $7.0 million to $12.0 million,
and is expected to be spread over a number of years. Management believes the
ultimate disposition of the above known environmental matters will not have a
material adverse effect on the liquidity, capital resources, business or
consolidated financial position of the Company. However, one or more of such
environmental matters could have a significant negative impact on the Company's
consolidated financial results for a particular reporting period.
Included in operating expenses are charges for actual expenditures and
accruals, based on estimates, for environmental matters. During fiscal 1997,
1998 and 1999, the Company made, and charged to operating expenses, actual
payments of approximately $296,000, $92,000, and $260,000, respectively, for
environmental matters.
Litigation
The Company is one of 33 entities which have been named as potentially
responsible parties in a lawsuit pending in the federal district court of New
Hampshire concerning environmental conditions at the Auburn Road, Londonderry,
New Hampshire landfill site. Local, state and federal entities and certain other
parties to the litigation seek contribution for past costs, totaling
approximately $20 million, allegedly incurred to assess and remedy the Auburn
Road site. In December 1996, following publication and comment period, the U.S.
Environmental Protection Agency (EPA) amended the ROD to change the remedy at
the Auburn Road site from active groundwater remediation to future monitoring.
In June 1999, the Company entered into a Consent Decree with 30 of the
defendants and third-party defendants. The Consent Decree was approved by the
federal and state governments in December 1999, and lodged with the Court. The
Court must still approve the
40
<PAGE> 42
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consent Decree. Under the terms of the Consent Decree, the Company is a cash-out
party and does not have responsibility for performance of ongoing remedial or
monitoring work at the site.
From 1974 to 1980, the Company operated a printed circuit manufacturing
facility in Florida as a lessee. This property is the subject of a pending
lawsuit in the circuit court for Broward County, Florida (the "Florida Lawsuit")
and an investigation by the Florida Department of Environmental Protection
("FDEP"). In connection with the investigation, Hadco and others have
participated in alternative dispute resolution regarding the site with an
independent mediator. Mediation sessions began in 1992 and continued over the
next several years through May 1998. In June 1995, Hadco and Gould, Inc.,
another prior lessee of the site, were joined as third-party defendants in the
pending Florida lawsuit by a party who had previously been named as a defendant
when the Florida lawsuit was commenced in 1993 by the FDEP. As a result of the
mediation, a Settlement Agreement was entered into among Hadco, Gould and the
FDEP in March 1999. The third-party complaints against Hadco and Gould in the
pending Florida lawsuit were dismissed. The Settlement Agreement provides that
Hadco and Gould will undertake remedial action based on a Supplemental
Contamination Assessment Report and a later Feasibility Study, which has been
prepared by a consultant to Hadco and Gould and approved by the FDEP. The
estimated cost of the recommended source removal described in the Feasibility
Study is approximately $165,000, and for ongoing monitoring and remediation is
approximately $2.1 million. Actual remedial activities have not yet commenced,
but are expected to begin in the near future.
In March 1993, the EPA notified Hadco Santa Clara of its potential
liability for maintenance and remediation costs in connection with a hazardous
waste disposal facility operated by Casmalia Resources, a California Limited
Partnership, in Santa Barbara County, California. The EPA identified Hadco Santa
Clara as one of the 65 generators that had disposed the greatest amounts of
materials at the site. Based on the total tonnage contributed by all generators,
Hadco Santa Clara's share is estimated at approximately 0.2% of the total
weight.
In June 1997, the United States District Court in Los Angeles, California
approved and entered a Consent Decree among the EPA and 49 entities (including
Hadco Santa Clara) acting through the Casmalia Steering Committee ("CSC"). The
Consent Decree sets forth the terms and conditions under which the CSC will
carry out work aimed at final closure of the site. Certain closure activities
will be performed by the CSC. Later work will be performed by the CSC, if funded
by other parties. Under the Consent Decree, the settling parties will work with
the EPA to pursue the non-settling parties to ensure they participate in
contributing to the closure and long-term operation and maintenance of the
facility.
On January 12, 1998, Hadco Santa Clara received notice of the filing of a
lawsuit, before the Superior Court (County of Santa Clara, California), against
it by Jackie Riley, Keith Riley and Richard Riley for damages (including
punitive damages) for alleged injuries suffered, including Richard Riley's
cancer, as a result of the alleged emission at the Hadco Santa Clara facility of
effluent from allegedly toxic and hazardous chemical substances. In October
1999, the court approved a settlement of this litigation. The Company has
performed all its obligations under the settlement.
The future costs in connection with the lawsuits described in the above
paragraphs are currently indeterminable due to such factors as the unknown
timing and extent of any future remedial actions which may be required, the
extent of any liability of the Company and of other potentially responsible
parties, and the financial resources of the other potentially responsible
parties. Management currently believes, based on the facts currently known to
it, that it is probable that the ultimate dispositions of the above lawsuits
will not have a material adverse effect on the Company's business and financial
condition; however, there can be no assurance that this will be the case.
41
<PAGE> 43
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Purchase Commitments
The Company had commitments to purchase approximately $9.2 million of
manufacturing equipment and approximately $1.4 million of leasehold improvements
as of October 30, 1999. The majority of these commitments is expected to be
completed by the end of fiscal 2000.
(10) STOCKHOLDERS' INVESTMENT
Employee Stock Options
The Company has several stock option plans that provide for the granting of
stock options to employees. The plans are administered by the Compensation
Committee of the Board of Directors and generally provide for the granting of
options at fair market value at the date of grant. The options vest over various
periods not to exceed 10 years, and expire at various times not exceeding 10
years plus 90 days from the date of grant. Substantially all employee stock
options granted are nonqualified stock options. The discussion below does not
include the plans pursuant to which the Board of Directors has determined not to
make future grants of options.
December 1991 Director Plan
This plan provides for the granting of options to purchase up to 300,000
shares of common stock at a price equal to the fair market value at the date of
grant. Initial options granted under this plan are exercisable ratably over a
four year period and expire no later than seven years from the date of grant.
This plan also provides for an annual grant of a vested option for 3,000 shares
to each non-employee director who has served as a director for five years or
more.
November 1995 Plan
This plan provides for the granting of options to purchase up to 1,000,000
shares of common stock at a price equal to fair market value at the date of
grant. The options vest according to each option agreement and they expire no
later than 10 years from the date of grant.
The 1998 Stock Plan
This plan provides for the granting of stock rights including options,
awards, and purchases up to 1,000,000 shares of common stock at a minimum price
equal to the fair market value at the date of grant. Stock rights may be granted
to employees, directors, and other associated parties. Stock rights will expire
as specified by the Compensation Committee, but in no case longer than 10 years
from the date of grant. The Company made awards of 9,085 shares under this plan
in fiscal 1999.
Outside Directors Compensation Plan of 1998
The Company adopted the Outside Directors Compensation Plan of 1998 (the
"Directors Plan") in December 1997. The Directors Plan provides that the annual
fee for the outside directors shall be paid in restricted stock, and that
additional meeting fees may, at the option of the director, be paid in
restricted stock. A total of 12,000 shares of common stock have been reserved
for grant under the Directors Plan (as reduced by the Board of Directors from
24,000 shares). The Company issued 4,436 and 3,741 shares in fiscal 1998 and
1999, respectively, under the Directors Plan. Subject to the approval of the
Outside Directors Compensation Plan of 2000 by the stockholders of the Company,
the Board of Directors determined not to make future grants of shares under the
Outside Directors Compensation Plan of 1998.
42
<PAGE> 44
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Outside Directors Compensation Plan of 2000
The Company adopted the Outside Directors Compensation Plan of 2000 (the
"Directors Plan of 2000') in December 1999 subject to stockholder approval. The
Directors Plan of 2000 provides that the annual fee for the outside directors
shall be paid in restricted stock, and that additional fees may, at the option
of a director, be paid in restricted stock. A total of 50,000 shares of common
stock have been reserved for grant under the Directors Plan of 2000, and no
shares have been issued to date.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the ESP Plan) was approved by the
stockholders in March 1998 to allow eligible employees, as defined in the ESP
Plan, to purchase shares of common stock during one or more six-month periods
through payroll deductions. Shares are purchased at 85% of fair value, as
defined. A total of 500,000 shares of common stock have been reserved for
purchase under the ESP Plan. During fiscal 1998 and 1999, the Company issued
57,226 and 135,630 shares, respectively, under the ESP Plan. At October 30,
1999, the Company has 307,144 shares available for purchase under the ESP Plan.
Stockholder Rights Plan
The Company adopted a Stockholder Rights Plan in August 1995 pursuant to
which the Company declared the distribution of one Common Stock Purchase Right
("Right") for each share of outstanding common stock. Under certain conditions,
each Right may be exercised for one share of common stock at an exercise price
of $130, subject to adjustment. Under circumstances defined in the Stockholder
Rights Plan, the Rights entitle holders to purchase stock having a value of
twice the exercise price of the Rights. Until they become exercisable, the
Rights are not transferable apart from the common stock. The Rights may be
redeemed by the Company at any time prior to the occurrence of certain events at
$.01 per Right. The Stockholder Rights Plan will expire on September 11, 2005,
unless the Rights are earlier redeemed by the Company.
The following table summarizes stock option activity with respect to all
stock options:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE EXERCISE
OF SHARES PRICE RANGE PRICE
-------------- --------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Outstanding, October 26, 1996............. 1,108 $ 2.00 -- $31.50 $ 9.45
Options granted...................... 267 45.31 -- 67.00 48.52
Options exercised.................... (263) 2.00 -- 31.50 4.98
Options canceled..................... (42) 2.00 -- 51.88 19.68
----- ---------------- ------
Outstanding, October 25, 1997............. 1,070 2.10 -- 67.00 19.87
Options granted...................... 533 31.78 -- 63.50 48.47
Options exercised.................... (179) 2.10 -- 11.06 6.04
Options canceled..................... (116) 2.10 -- 67.00 38.60
----- ---------------- ------
Outstanding, October 31, 1998............. 1,308 2.10 -- 67.00 31.72
Options granted...................... 349 29.97 -- 31.97 30.42
Options exercised.................... (117) 2.10 -- 31.50 5.54
Options canceled..................... (125) 3.60 -- 67.00 40.42
----- ---------------- ------
Outstanding, October 30, 1999............. 1,415 $ 2.78 -- $67.00 $32.80
===== ================ ======
</TABLE>
43
<PAGE> 45
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
and exercisable at October 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE WEIGHTED EXERCISE
REMAINING AVERAGE PRICE OF
RANGE OF OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISABLE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE OPTIONS
- --------------- ----------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 2.78--$ 4.00..... 41,665 0.60 $ 3.71 30,345 $ 3.78
4.94-- 6.69..... 22,420 2.13 5.02 22,420 5.02
8.00-- 12.00..... 273,800 4.41 8.64 169,775 8.66
27.00-- 38.13..... 687,025 8.08 32.50 70,185 31.44
44.25-- 67.00..... 390,380 7.18 54.96 94,557 52.23
--------- ------ ------- ------
October 30, 1999... 1,415,290 $32.80 387,282 $22.83
========= ====== ======= ======
October 31, 1998... 361,368 $13.74
======= ======
October 25, 1997... 379,000 $ 7.65
======= ======
</TABLE>
The Company has reserved as of October 30, 1999, a total of 2,631,325
shares of common stock for issuance under stock option plans. During fiscal
1997, 1998 and 1999, approximately $121,000, $73,000, and $136,000,
respectively, were charged against income as compensation expense associated
with the granting of these options.
The Company has computed the pro forma disclosures required under SFAS No.
123 using the Black-Scholes option pricing model for all stock options and stock
issuances under the Employee Stock Purchase Plan. The assumptions used, weighted
average information and the pro forma effect of applying SFAS No. 123 for the
years ended October 25, 1997, October 31, 1998 and October 30, 1999 are as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Risk-free interest rates............... 6.20% -- 6.66% 5.75% -- 6.08% 5.24% -- 6.01%
Expected dividend yield................ -- -- --
Expected lives......................... 6.77 years 6.24 years 5.36 years
Expected volatility.................... 43.6% 47.0% 52.7%
Weighted average grant-date fair value
per share of options granted during
the period, net of an estimated
termination rate of 32.70%........... $26.51 $24.17 $13.55
Weighted average exercise price of
options granted during the period,
net of an estimated termination rate
of 32.70%............................ $48.15 $43.76 $28.94
Weighted average remaining contractual
life of options outstanding.......... 8.66 years 8.03 years 7.01 years
Pro forma net income (loss) (in
thousands)........................... $(37,088) $(55,755) $18,813
Pro forma diluted net income (loss) per
share................................ $(3.18) $(4.09) $1.37
</TABLE>
(11) RETIREMENT PLAN
The Hadco Corporation Retirement Plan, as amended (the "Plan") covers all
employees who have completed a six-month period of service, as defined in the
Plan. "Employees" exclude non-resident aliens employed outside the United States
and certain leased employees. Annual profit sharing contributions are made at
the discretion of the Board of Directors, but cannot exceed any of (1) the
Company's current and accumulated net profit, as defined, or (2) the amount
allowable as a deduction for federal income tax purposes
44
<PAGE> 46
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
or (3) the aggregate individual contribution limitations set out in the Plan.
The Company provided for profit sharing contributions of $4,016,000, $1,040,000
and $1,847,000 to the Plan for the fiscal years ended October 1997, 1998 and
1999, respectively.
The Plan permits participants to elect to have contributions made to the
Plan in the form of reductions in salary under Section 401(k) of the Internal
Revenue Code subject to limitations set out in the Plan. Under the Plan, the
Company will match employee contributions up to 50% of the first six percent of
an employee's 401(k) compensation, as defined, for any Plan year. Employee
contributions become vested when made, and Company contributions become vested
at the rate of 33 1/3% for each year of service with the Company. The amounts
contributed by the Company as 401(k) matches against employee contributions were
approximately $834,000, $3,798,000 and $5,119,000 during fiscal 1997, 1998 and
1999, respectively.
(12) QUARTERLY RESULTS (UNAUDITED)
The following summarized unaudited results of operations for the fiscal
quarters in the years ended October 1998 and 1999 have been accounted for using
generally accepted principles for interim reporting purposes and include
adjustments (consisting of normal recurring adjustments) that the Company
considers necessary for the fair presentation of results for these interim
periods.
<TABLE>
<CAPTION>
1998 1999
----------- -----------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
First Fiscal Quarter --
Net sales...................................... $198,276 $235,979
Gross profit................................... 39,068 32,433
Net income..................................... 12,127 2,014
Diluted net income per share................... 0.90 0.15
Diluted weighted average shares outstanding.... 13,505 13,651
Second Fiscal Quarter --
Net sales...................................... $209,587 $255,586
Gross profit................................... 36,730 38,377
Net income (loss).............................. (59,739) 4,622
Diluted net income (loss) per share............ (4.54) 0.34
Diluted weighted average shares outstanding.... 13,161 13,713
Third Fiscal Quarter --
Net sales...................................... $201,392 $252,361
Gross profit................................... 18,580 41,022
Net income (loss).............................. (6,880) 6,586
Diluted net income (loss) per share............ (0.52) 0.48
Diluted weighted average shares outstanding.... 13,255 13,767
Fourth Fiscal Quarter --
Net sales...................................... $217,104 $262,044
Gross profit................................... 29,312 45,038
Net income..................................... 382 8,742
Diluted net income per share................... 0.03 0.63
Diluted weighted average shares outstanding.... 13,560 13,884
</TABLE>
(13) CUSTOMERS
During fiscal years 1997, 1998 and 1999, one customer accounted for
approximately 15%, 17% and 15% of consolidated net sales, respectively. The
Company's five largest customers accounted for approximately 34%, 37% and 40% of
consolidated net sales during fiscal 1997, 1998 and 1999, respectively. The
Company has one customer that accounted for approximately 16%, 13% and 11% of
consolidated accounts receivable at
45
<PAGE> 47
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
October 25, 1997, October 31, 1998 and October 30, 1999, respectively. Another
customer accounted for 10% of consolidated accounts receivable at October 30,
1999.
(14) BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
During the fourth quarter of fiscal 1999, the Company adopted SFAS No. 131,
Disclosure about Segments of an Enterprise and Related Information. The
Company's businesses are internally reported as two segments. These segments,
which are based on differences in products, technologies, and services, are
Printed Circuits and Value Added Manufacturing (VAM). See Note 1 for a
description of the products and services provided by these segments.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies described in Note 1. Hadco
evaluates performance of these segments based on profit or loss from operations,
not including non-recurring charges.
Transactions between segments are recorded at fair market value. Costs of
centralized sales, marketing and administration are allocated to the segments
receiving benefits of the centralized function. Unallocated general corporate
expenses include the elimination of inter-segment profits, the costs of
executive management for the Company, plus the amortization of acquired
intangibles and goodwill relating to the Acquisitions. Management does not
represent that these segments, if operated independently, would report the
operating income and other financial information shown.
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Sales:
Printed Circuits............................ $598,429 $728,709 $ 859,874
VAM......................................... 69,971 130,637 178,505
Elimination................................. (19,695) (32,987) (32,409)
-------- -------- ----------
$648,705 $826,359 $1,005,970
======== ======== ==========
Operating Income*:
Printed Circuits............................ $ 86,229 $ 53,376 $ 86,743
VAM......................................... 4,719 7,149 7,545
Unallocated general corporate............... (14,142) (18,462) (28,322)
-------- -------- ----------
$ 76,806 $ 42,063 $ 65,966
======== ======== ==========
Identifiable Assets:
Printed Circuits............................ $333,741 $442,972 $ 462,211
VAM......................................... 34,299 50,306 48,608
Unallocated general corporate............... 134,477 250,547 214,004
-------- -------- ----------
$502,517 $743,825 $ 724,823
======== ======== ==========
Depreciation and Amortization:
Printed Circuits............................ $ 34,725 $ 54,113 $ 60,803
VAM......................................... 1,045 2,424 3,235
Unallocated general corporate............... 6,075 10,627 13,896
-------- -------- ----------
$ 41,845 $ 67,164 $ 77,934
======== ======== ==========
</TABLE>
46
<PAGE> 48
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital Expenditures:
Printed Circuits............................ $ 65,076 $ 74,664 $ 66,207
VAM......................................... 2,569 6,969 2,182
Unallocated general corporate............... 2,206 1,875 3,402
-------- -------- ----------
$ 69,851 $ 83,508 $ 71,791
======== ======== ==========
</TABLE>
- ---------------
* Excludes non-recurring charges in fiscal 1997 for the write-off of acquired
in-process research and development ($78.0 million), and excludes
non-recurring charges in fiscal 1998 for restructuring ($7.1 million) and the
write-off of acquired in-process research and development ($63.0 million.)
The following is a reconciliation of segment operating income to
consolidated income (loss) before provision for income taxes:
<TABLE>
<CAPTION>
1997 1998 1999
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Total operating income for reportable segments....... $76,806 $ 42,063 $65,966
Unallocated amounts:
Write-off of in-process R&D..................... (78,000) (63,050) --
Restructuring and non-recurring charges......... -- (7,053) --
Interest and other income, net.................. 3,296 2,295 1,384
Interest expense................................ (10,923) (22,468) (30,895)
------- -------- -------
Income (loss) before provision for income taxes...... $(8,821) $(48,213) $36,455
======= ======== =======
</TABLE>
The following summarizes financial information by geographic areas:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Sales
United States............................... $554,778 $648,953 $ 777,414
Canada...................................... 62,224 89,224 105,109
Europe...................................... 29,703 48,623 64,637
Asia........................................ -- 35,372 49,374
Other....................................... 2,000 4,187 9,436
-------- -------- ----------
$648,705 $826,359 $1,005,970
======== ======== ==========
Long-lived assets
United States............................... $300,520 $473,694 $ 466,434
Asia........................................ 35,314 49,029 49,420
Europe...................................... -- -- 217
-------- -------- ----------
$335,834 $522,723 $ 516,071
======== ======== ==========
</TABLE>
(15) RESTRUCTURING AND OTHER NON-RECURRING CHARGES
On April 6, 1998, the Company announced the planned consolidation of its
two East Coast quick-turn prototype facilities into the larger of the two
facilities located at Haverhill, MA. The Company incurred and recorded in the
fiscal quarter ended May 2, 1998 non-recurring charges in connection with the
consolidation totaling $5.9 million. Non-recurring costs include costs
associated with the abandonment of assets at one of the facilities. On July 31,
1998, the Company announced a limited restructuring, which temporarily reduced
the Company's workforce by approximately 3%. This restructuring was in addition
to the consolidation of the East Coast quick-turn prototype facilities. The cost
of this limited restructuring is comprised of severance and related benefits for
the terminated employees. As of October 31, 1998 the Company had recorded a
liability
47
<PAGE> 49
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for both restructurings totaling $897,000, which relates to severance and other
payroll related costs, as well as lease termination costs. As of October 30,
1999, all amounts accrued for each restructuring had been paid. The component of
the charges classified as restructuring-related met the criteria set forth in
Emerging Issues and Task Force Issue ("EITF") 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)."
The components of the restructuring and other non-recurring costs during
the year ended October 31, 1998 are as follows:
<TABLE>
<CAPTION>
EAST COAST COMPANY-
FACILITY WIDE
CONSOLIDATION RESTRUCTURING TOTAL
------------- ------------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Loss on abandonment of assets........................ $1,965 $ -- $1,965
Severance benefits and associated costs.............. 130 1,105 1,235
Lease termination loss............................... 1,336 -- 1,336
------ ------ ------
Total restructuring charges................ 3,431 1,105 4,536
Other non-recurring charges.......................... 2,517 -- 2,517
------ ------ ------
Total restructuring and other charges...... $5,948 $1,105 $7,053
====== ====== ======
</TABLE>
Included in the restructuring and other charges is $2.5 million, which
represents the write-down of existing assets to their net realizable value, in
accordance with SFAS 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of.
(16) SALE OF ASSETS
On April 30, 1999, the Company sold substantially all of the assets of its
Dynaflex division for approximately $2.7 million. Dynaflex's assets, liabilities
and operations were not significant to the Company. Proceeds from the sale were
received on May 3, 1999.
(17) SUPPLEMENTAL GUARANTORS CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
Basis of presentation. In connection with the Continental Acquisition,
which was financed with approximately $184 million of borrowings from the Credit
Facility, the Company on May 18, 1998 sold $200 million aggregate principal
amount of 9 1/2% Senior Subordinated Notes due in 2008 (the "Notes"). The Notes
are fully and unconditionally guaranteed on a senior subordinated basis, jointly
and severally, by certain of the Company's wholly-owned domestic subsidiaries
(the "Guarantors"). The Guarantors are Hadco Santa Clara, Inc., Hadco Phoenix,
Inc., CCIR of Texas Corp. and CCIR of California Corp. The condensed
consolidating financial statements of the Guarantors are presented below and
should be read in connection with the Consolidated Financial Statements of the
Company. Separate financial statements of the Guarantors are not presented
because (i) the Guarantors are wholly-owned and have fully and unconditionally
guaranteed the Notes on a joint and several basis and (ii) the Company's
management has determined such separate financial statements are not material to
investors and believes the condensed consolidating financial statements
presented are more meaningful in understanding the financial position of the
Guarantors.
There are no significant restrictions on the ability of the Guarantors to
make distributions to the Company.
48
<PAGE> 50
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1998
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........ $ 836 $ 2 $ 6,331 $ -- $ 7,169
Accounts receivable, net......... 54,092 6,382 50,620 -- 111,094
Inventories...................... 24,984 5,560 36,473 -- 67,017
Deferred tax asset............... -- -- 17,156 -- 17,156
Prepaid and other current
assets......................... 999 227 17,440 -- 18,666
-------- ------- -------- --------- --------
Total current assets........ 80,911 12,171 128,020 -- 221,102
Property, Plant and Equipment, net.... 138,912 49,029 134,946 -- 322,887
Intercompany Receivable............... -- 160 91,463 (91,623) --
Investments in Subsidiaries........... 17,895 -- 267,882 (285,777) --
Acquired Intangible Assets, net....... 191,421 -- -- -- 191,421
Other Assets.......................... 686 -- 7,729 -- 8,415
-------- ------- -------- --------- --------
$429,825 $61,360 $630,040 $(377,400) $743,825
======== ======= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term
debt........................... $ 3,417 $ 158 $ 802 $ -- $ 4,377
Accounts payable................. 34,249 4,941 40,160 -- 79,350
Intercompany payable............. 54,523 37,100 -- (91,623) --
Accrued payroll and other
employee benefits.............. 3,465 160 22,904 -- 26,529
Other accrued expenses........... 18,427 265 324 -- 19,016
-------- ------- -------- --------- --------
Total current liabilities... 114,081 42,624 64,190 (91,623) 129,272
-------- ------- -------- --------- --------
Long-Term Debt, net of current
portion............................. 3,796 230 350,265 -- 354,291
-------- ------- -------- --------- --------
Deferred Tax Liability................ 44,677 -- 14,844 -- 59,521
-------- ------- -------- --------- --------
Other Long-Term Liabilities........... -- -- 9,192 -- 9,192
-------- ------- -------- --------- --------
Stockholders' Investment:
Common stock, $0.05 par value;
Authorized -- 50,000 shares
Issued and
outstanding -- 13,366.......... 11 29,654 669 (29,665) 669
Paid-in capital.................. 400,616 -- 173,906 (400,616) 173,906
Deferred compensation............ -- -- (44) -- (44)
Retained earnings................ (133,356) (11,148) 17,018 144,504 17,018
-------- ------- -------- --------- --------
Total stockholders'
investment................ 267,271 18,506 191,549 (285,777) 191,549
-------- ------- -------- --------- --------
$429,825 $61,360 $630,040 $(377,400) $743,825
======== ======= ======== ========= ========
</TABLE>
49
<PAGE> 51
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF OCTOBER 30, 1999
---------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............ $ (2,679) $ 1,378 $ 10,379 $ -- $ 9,078
Accounts receivable,
net.................... 49,926 7,566 59,088 -- 116,580
Inventories.............. 28,085 6,590 29,251 -- 63,926
Deferred tax asset....... -- -- 11,480 -- 11,480
Prepaid and other current
assets................. 2,221 244 5,223 -- 7,688
-------- ------- -------- --------- --------
Total current
assets............ 77,553 15,778 115,421 -- 208,752
Property, Plant and Equipment,
net......................... 141,510 49,638 137,033 -- 328,181
Intercompany Receivable....... 24,783 3,122 46,365 (74,270) --
Investments in Subsidiaries... 12,162 -- 280,444 (292,606) --
Acquired Intangible Assets,
net......................... 179,319 -- -- -- 179,319
Other Assets.................. 29 -- 8,542 -- 8,571
-------- ------- -------- --------- --------
$435,356 $68,538 $587,805 $(366,876) $724,823
======== ======= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of
long-term debt......... $ 2,114 $ 73 $ 328 $ -- $ 2,515
Accounts payable......... 41,842 5,583 52,675 -- 100,100
Intercompany payable..... 28,089 46,181 -- (74,270) --
Accrued payroll and other
employee benefits...... 1,628 300 34,491 -- 36,419
Other accrued expenses... 37,355 97 (15,515) -- 21,937
-------- ------- -------- --------- --------
Total current
liabilities....... 111,028 52,234 71,979 (74,270) 160,971
-------- ------- -------- --------- --------
Long-Term Debt, net of current
portion..................... 3,307 43 274,959 -- 278,309
-------- ------- -------- --------- --------
Deferred Tax Liability........ 44,676 -- 12,666 -- 57,342
-------- ------- -------- --------- --------
Other Long-Term Liabilities... -- -- 9,192 -- 9,192
-------- ------- -------- --------- --------
Stockholders' Investment:
Common stock, $0.05 par
value;
Authorized -- 50,000
shares
Issued and
outstanding -- 13,631.. 11 29,655 683 (29,666) 683
Paid-in capital.......... 400,616 -- 179,528 (400,616) 179,528
Deferred compensation.... -- -- (184) -- (184)
Retained earnings........ (124,282) (13,394) 38,982 137,676 38,982
-------- ------- -------- --------- --------
Total stockholders'
investment........ 276,345 16,261 219,009 (292,606) 219,009
-------- ------- -------- --------- --------
$435,356 $68,538 $587,805 $(366,876) $724,823
======== ======= ======== ========= ========
</TABLE>
50
<PAGE> 52
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 25, 1997
---------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Sales...................... $195,411 $26,411 $426,883 $ $648,705
Cost of Sales.................. 164,069 18,773 324,471 -- 507,313
-------- ------- -------- -------- --------
Gross Profit.............. 31,342 7,638 102,412 -- 141,392
Operating Expenses............. 7,606 7,696 44,069 -- 59,371
Amortization of Goodwill and
Acquired Intangible Assets... 5,215 -- -- 5,215
Write-off of Acquired
In-Process Research and
Development.................. 78,000 -- -- -- 78,000
-------- ------- -------- -------- --------
Income (Loss) From
Operations................... (59,479) (58) 58,343 -- (1,194)
Interest and Other Income,
net.......................... 655 -- 2,641 -- 3,296
Interest Expense............... (2,003) (557) (8,363) -- (10,923)
-------- ------- -------- -------- --------
Income (Loss) Before
Provision for Income
Taxes................... (60,827) (615) 52,621 -- (8,821)
Provision for Income Taxes..... 6,860 275 20,537 -- 27,672
Equity in Loss of Subsidiary... (2,852) -- (68,577) 71,429 --
-------- ------- -------- -------- --------
Net Loss.................. $(70,539) $ (890) $(36,493) $ 71,429 $(36,493)
======== ======= ======== ======== ========
</TABLE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1998
---------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Sales...................... $341,974 $35,378 $449,007 $ -- $826,359
Cost of Sales.................. 306,752 35,776 360,141 -- 702,669
-------- ------- -------- -------- --------
Gross Profit.............. 35,222 (398) 88,866 -- 123,690
Operating Expenses............. 8,189 3,828 59,860 -- 71,877
Amortization of Goodwill and
Acquired Intangible Assets... 9,750 -- -- -- 9,750
Restructuring and Other Non-
Recurring Charges............ -- 7,053 -- 7,053
Write-off of Acquired
In-Process Research and
Development.................. 63,050 -- -- -- 63,050
-------- ------- -------- -------- --------
Income (Loss) From
Operations.............. (45,767) (4,226) 21,953 -- (28,040)
Interest and Other Income,
net.......................... (419) 2,752 (3,250) 3,212 2,295
Interest Expense............... (852) (404) (21,212) -- (22,468)
-------- ------- -------- -------- --------
Loss Before Provision for
Income Taxes............ (47,038) (1,878) (2,509) 3,212 (48,213)
Provision for Income Taxes..... 10,240 450 (4,793) -- 5,897
Equity in Loss of Subsidiary... (5,540) -- (59,606) 65,146 --
-------- ------- -------- -------- --------
Net Loss.................. $(62,818) $(2,328) $(57,322) $ 68,358 $(54,110)
======== ======= ======== ======== ========
</TABLE>
51
<PAGE> 53
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 30, 1999
---------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Sales...................... $459,088 $48,875 $498,007 $ -- $1,005,970
Cost of Sales.................. 403,965 48,102 397,033 -- 849,100
-------- ------- -------- ------- ----------
Gross Profit.............. 55,123 773 100,974 -- 156,870
Operating Expenses............. 9,116 2,995 66,567 -- 78,678
Amortization of Goodwill and
Acquired Intangible Assets... 12,226 -- -- -- 12,226
-------- ------- -------- ------- ----------
Income (Loss) From
Operations.............. 33,781 (2,222) 34,407 -- 65,966
Interest and Other Income...... (774) 469 (1,798) 3,487 1,384
Interest Expense............... (365) (17) (30,513) -- (30,895)
-------- ------- -------- ------- ----------
Income (Loss) Before
Provision for Income
Taxes................... 32,642 (1,770) 2,096 3,487 36,455
Provision for Income Taxes..... 17,835 476 (3,820) -- 14,491
Equity in Income (Loss) of
Subsidiary................... (5,733) -- 12,561 (6,828) --
-------- ------- -------- ------- ----------
Net Income (Loss)......... $ 9,074 $(2,246) $ 18,477 $(3,341) $ 21,964
======== ======= ======== ======= ==========
</TABLE>
52
<PAGE> 54
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 25, 1997
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities................. $44,591 $ 9,978 $ (3,902) $-- $ 50,667
------- ------- --------- -- ---------
Cash Flows from Investing Activities:
Investments in subsidiaries...... 9,496 726 (10,222) -- --
Purchases of property, plant and
equipment...................... (19,976) (4,092) (45,783) -- (69,851)
Proceeds from sale of property,
plant and equipment............ -- -- 2,760 -- 2,760
Foreign Sales Corp. dividend..... -- (1,962) 1,962 -- --
Acquisition of Zycon Corporation,
net of cash acquired........... -- -- (209,661) -- (209,661)
------- ------- --------- -- ---------
Net cash used in investing
activities................ (10,480) (5,328) (260,944) -- (276,752)
------- ------- --------- -- ---------
Cash Flows from Financing Activities:
Principal payments of long-term
debt........................... (35,714) (2,505) (126,547) -- (164,766)
Proceeds from issuance of
long-term debt................. -- -- 224,954 -- 224,954
Proceeds from exercise of stock
options........................ -- -- 1,303 -- 1,303
Sale of common stock, net of
issuance costs................. -- -- 131,088 -- 131,088
Tax benefit from exercise of non-
qualified stock options........ -- -- 5,052 -- 5,052
------- ------- --------- -- ---------
Net cash (used in) provided
by financing activities... (35,714) (2,505) 235,850 -- 197,631
------- ------- --------- -- ---------
Net Increase (Decrease) in Cash, Cash
Equivalents and Short-Term
Investments......................... (1,603) 2,145 (28,996) -- (28,454)
Cash, Cash Equivalents and Short-Term
Investments, Beginning of Period.... -- 104 42,083 -- 42,187
------- ------- --------- -- ---------
Cash, Cash Equivalents and Short-Term
Investments, End of Period.......... $(1,603) $ 2,249 $ 13,087 $-- $ 13,733
======= ======= ========= == =========
</TABLE>
53
<PAGE> 55
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1998
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................. $65,020 $17,586 $(22,881) $3,212 $ 62,937
------- ------- -------- ------ ---------
Cash Flows from Investing Activities:
Foreign Sales Corp. dividend....... -- (3,212) 3,212 -- --
Purchases of property, plant and
equipment........................ (21,867) (19,764) (41,877) -- (83,508)
Investments in subsidiaries........ -- 3,212 -- (3,212) --
Acquisition of Continental Circuits
Corp., net of cash acquired...... -- -- (192,532) -- (192,532)
------- ------- -------- ------ ---------
Net cash used in investing
activities.................. (21,867) (19,764) (231,197) (3,212) (276,040)
------- ------- -------- ------ ---------
Cash Flows from Financing Activities:
Principal payments of long-term
debt............................. (40,714) (69) (217,641) -- (258,424)
Net Proceeds from issuance of
long-term debt................... -- -- 459,289 -- 459,289
Proceeds from exercise of stock
options.......................... -- -- 1,082 -- 1,082
Proceeds from employee stock
purchase plan.................... -- -- 1,113 -- 1,113
Proceeds from the sale of common
stock............................ -- -- 1,480 -- 1,480
Tax benefit from exercise of stock
options.......................... -- -- 1,999 -- 1,999
------- ------- -------- ------ ---------
Net cash provided by (used in)
financing activities........ (40,714) (69) 247,322 -- 206,539
------- ------- -------- ------ ---------
Net Increase (Decrease) in Cash, Cash
Equivalents and Short-Term
Investments........................... 2,439 (2,247) (6,756) -- (6,564)
------- ------- -------- ------ ---------
Cash, Cash Equivalents and Short-Term
Investments, Beginning of Period...... (1,603) 2,249 13,087 -- 13,733
------- ------- -------- ------ ---------
Cash, Cash Equivalents and Short-Term
Investments, End of Period............ $ 836 $ 2 $ 6,331 $ -- $ 7,169
======= ======= ======== ====== =========
</TABLE>
54
<PAGE> 56
HADCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL GUARANTOR CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 30, 1999
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities............................ $26,644 $8,584 $107,503 $3,487 $146,218
------- ------ -------- ------ --------
Cash Flows from Investing Activities:
Foreign Sales Corp. dividend...... -- (3,487) 3,487 -- --
Purchases of property, plant and
equipment....................... (28,496) (6,947) (36,348) -- (71,791)
Proceeds from sale of property,
plant and equipment............. 130 11 90 -- 231
Investments in subsidiaries....... -- 3,487 -- (3,487) --
------- ------ -------- ------ --------
Net cash used in investing
activities................. (28,366) (6,936) (32,771) (3,487) (71,560)
------- ------ -------- ------ --------
Cash Flows from Financing Activities:
Principal payments of long-term
debt............................ (1,793) (272) (105,079) -- (107,144)
Proceeds from issuance of
long-term debt.................. -- -- 29,300 -- 29,300
Proceeds from exercise of stock
options......................... -- -- 620 -- 620
Proceeds from the employee stock
purchase plan................... -- -- 3,258 -- 3,258
Tax benefit from exercise of stock
options......................... -- -- 1,217 -- 1,217
------- ------ -------- ------ --------
Net cash used in financing
activities................. (1,793) (272) (70,684) -- (72,749)
------- ------ -------- ------ --------
Net Increase (Decrease) in Cash, Cash
Equivalents and Short-Term
Investments.......................... (3,515) 1,376 4,048 -- 1,909
Cash, Cash Equivalents and Short-Term
Investments, Beginning of Period..... 836 2 6,331 -- 7,169
------- ------ -------- ------ --------
Cash, Cash Equivalents and Short-Term
Investments, End of Period........... $(2,679) $1,378 $ 10,379 $ -- $ 9,078
======= ====== ======== ====== ========
</TABLE>
55
<PAGE> 57
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable
PART III
Anything herein to the contrary notwithstanding, in no event whatsoever are
the sections entitled "Stock Performance Graph" and "Compensation Committee
Report on Executive Compensation" to be incorporated by reference herein from
the Company's definitive proxy statement in connection with its Annual Meeting
of Stockholders to be held on March 2, 2000.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to directors and executive officers of the
Company is incorporated by reference herein from the Company's definitive proxy
statement in connection with its Annual Meeting of Stockholders to be held on
March 2, 2000, which proxy statement will be filed with the Securities and
Exchange Commission not later than 120 days after the close of the Company's
fiscal year ended October 30, 1999.
ITEM 11. EXECUTIVE COMPENSATION
Certain information relating to remuneration of directors and executive
officers and other transactions involving management is incorporated by
reference herein from the Company's definitive proxy statement in connection
with its Annual Meeting of Stockholders to be held on March 2, 2000, which proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the Company's fiscal year ended October 30,
1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain information relating to security ownership of certain beneficial
owners and management is incorporated by reference herein from the Company's
definitive proxy statement in connection with its Annual Meeting of Stockholders
to be held on March 2, 2000, which proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the close of
the Company's fiscal year ended October 30, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain information relating to certain relationships and related
transactions is incorporated by reference herein from the Company's definitive
proxy statement in connection with its Annual Meeting of Stockholders to be held
on March 2, 2000, which proxy statement will be filed with the Securities and
Exchange Commission not later than 120 days after the close of the Company's
fiscal year ended October 30, 1999.
56
<PAGE> 58
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS:
The following consolidated financial statements are included in Item 8:
Report of Independent Public Accountants.
Consolidated Balance Sheets as of October 31, 1998 and October 30, 1999.
Consolidated Statements of Operations for the years ended October 25,
1997, October 31, 1998 and October 30, 1999.
Consolidated Statements of Stockholders' Investment for the years ended
October 25, 1997, October 31, 1998 and October 30, 1999.
Consolidated Statements of Cash Flows for the years ended October 25,
1997, October 31, 1998 and October 30, 1999.
Notes to Consolidated Financial Statements.
(a) 2. FINANCIAL STATEMENT SCHEDULES:
The following consolidated financial statement schedules are included in
Item 14(d):
II -- Valuation and Qualifying Accounts.
Schedules other than those listed above have been omitted since they are
either not required or the information is otherwise included.
(a) 3. LISTING OF EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <C> <S>
3.1 -- Restated Articles of Organization of Registrant (filed as
Exhibit 3.1 to the Registration Statement No. 333-21977 on
Form S-3 and incorporated herein by reference).
3.2 -- By-laws of Registrant, as amended (filed as Exhibit 3.2 to
the Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
3.3 -- Amendment to Restated Articles of Organization of Registrant
dated March 4, 1998 (filed as Exhibit 3.1 to Quarterly
Report on Form 10-Q, File No. 0-12102, for the quarter ended
January 31, 1998 and incorporated herein by reference).
4.0 -- Description of Capital Stock, contained in Article 4 of
Registrant's Restated Articles of Organization (filed as
Exhibit 3.1 to the Registration Statement No. 333-21977 on
Form S-3 and incorporated herein by reference).
*10.1 -- Registrant's December 5, 1986 Non-Qualified Stock Option
Plan (filed as Exhibit 10.7 to Annual Report on Form 10-K,
File No. 0-12102, for the year ended October 25, 1986 and
incorporated herein by reference).
10.2 -- Amendment dated as of January 9, 1986 to Lease between
Registrant and Lupe Burgstrom dated April 30, 1984 (filed as
Exhibit 10.79 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 25, 1986 and
incorporated herein by reference).
10.3 -- Amendment dated as of January 9, 1986 to Lease between
Registrant and Freedom Associates dated May 17, 1985 (filed
as Exhibit 10.80 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 25, 1986 and
incorporated herein by reference).
10.4 -- Amendment dated as of March 7, 1986 to Lease between
Registrant and Freedom Associates dated December 23, 1980
(filed as Exhibit 10.81 to Annual Report on Form 10-K, File
No. 0-12102, for the year ended October 25, 1986 and
incorporated herein by reference).
10.5 -- Lease dated July 15, 1988 between Registrant and C&M
Associates I (filed as Exhibit 10.67 to Annual Report on
Form 10-K, File No. 0-12102, for the year ended October 29,
1988 and incorporated herein by reference).
</TABLE>
57
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <C> <S>
*10.6 -- Form of Stock Option Agreement under Registrant's
Non-Qualified Stock Option Plan of September 7, 1990 (filed
as Exhibit 10.68 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 27, 1990 and
incorporated herein by reference).
10.7 -- Loan Agreement by and between Registrant and New York State
Urban Development Corporation ("NYSUDC"); Mortgage between
Registrant and Tioga, Note between Registrant and NYSUDC;
all dated as of April 10, 1991 (filed as Exhibit 10.2 to
Quarterly Report on Form 10-Q, File No. 0-12102, for the
quarter ended April 27, 1991 and incorporated herein by
reference).
*10.8 -- Form of Stock Option Agreement under Registrant's 1991
Non-Employee Director Stock Option Plan (filed as Exhibit
10.82 to Annual Report on Form 10-K, File No. 0-12102, for
the year ended October 26, 1991 and incorporated herein by
reference).
10.9 -- Lease dated March 1, 1992 between Registrant and Equity
Property Associates I (filed as Exhibit 10.65 to Annual
Report on Form 10-K, File No. 0-12102, for the year ended
October 31, 1992 and incorporated herein by reference).
10.10 -- Lease dated January 13, 1995 between Registrant and Nash
Family Investment Properties and Ballinger Properties d/b/a
Sagamore Industrial Properties (filed as Exhibit 10.2 to
Quarterly Report on Form 10-Q, File No. 0-12102, for the
quarter ended January 28, 1995 and incorporated herein by
reference).
10.11 -- Rights Agreement dated as of August 22, 1995 between the
Registrant and the First National Bank of Boston (filed as
Exhibit 4.1 to Current Report on Form 8-K, File No. 0-12102,
dated August 22, 1995 and incorporated herein by reference).
*10.12 -- Agreement dated as of August 14, 1995 between the Registrant
and Patrick Sweeney (filed as Exhibit 10.49 to Annual Report
on Form 10-K, File No. 0-12102, for year ended October 28,
1995 and incorporated herein by reference).
10.13 -- Amendment dated May 1, 1995 to lease dated March 1, 1992
between Registrant and Equity Property Associates I (filed
as Exhibit 10.1 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended April 27, 1996 and
incorporated herein by reference).
10.14 -- Lease dated November 1, 1995 between Registrant and Equity
Property Associates I (filed as Exhibit 10.2 to Quarterly
Report on Form 10-Q, File No. 0-12102, for the quarter ended
April 27, 1996 and incorporated herein by reference).
10.15 -- Lease dated November 1, 1995 between Registrant and Equity
Property Associates I (filed as Exhibit 10.3 to Quarterly
Report on Form 10-Q, File No. 0-12102, for the quarter ended
April 27, 1996 and incorporated herein by reference).
10.16 -- Amendment dated April 1, 1996 to lease dated March 1, 1992
between Registrant and Equity Property Associates I (filed
as Exhibit 10.4 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended April 27, 1996 and
incorporated herein by reference).
*10.17 -- Amended and Restated 1991 Non-Employee Director Stock Option
Plan of Registrant as of December 3, 1996 (filed as Exhibit
10.43 to Annual Report on Form 10-K, File No. 0-12102, for
the year ended October 25, 1997 and incorporated herein by
reference).
10.18 -- Amended and Restated Revolving Credit Agreement dated as of
December 8, 1997 between the Registrant and BankBoston, N.A.
(filed as Exhibit 10.45 to Annual Report on Form 10-K, File
No. 0-12102, for the year ended October 25, 1997 and
incorporated herein by reference).
10.19 -- Leases for premises located at 435-445 El Camino Real, Santa
Clara, California, by and between Zycon Corporation and
University Research Center and addenda thereto dated March
1, 1988; July 8, 1988; February 27, 1989; August 30, 1989;
May 19, 1993; and August 9, 1993 (filed as Exhibit 10.1 to
the Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
10.20 -- Provisional Lease dated November 14, 1995 for the premises
located at the Muara Tebas Land of Kuching East Malaysia by
and between Sudarsono Osman and Zycon Corporation Sendirian
Berhad (filed as Exhibit 10.2 to the Registration Statement
No. 333-21977 on Form S-3 and incorporated herein by
reference).
10.21 -- Construction Agreement dated August 3, 1995 by and between
Zycon Corporation and Hiti Engineering Sdn.Bhd. (filed as
Exhibit 10.3 to the Registration Statement No. 333-21977 on
Form S-3 and incorporated herein by reference).
10.22 -- Facilities Agreement dated February 9, 1996 by and among
Zycon Corporation Sdn.Bhd., Bank Bumiputra Malaysia Berhad
and BBMB Kewangan Berhad (filed as Exhibit 10.4 to the
Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <C> <S>
10.23 -- Corporate Guarantee dated February 9, 1996 issued by Zycon
Corporation in favor of Bank Bumiputra Malaysia Berhad and
BBMB Kewangan Berhad (filed as Exhibit 10.5 to the
Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
10.24 -- Lease for the three acre premises located in Santa Clara,
California by and between Zycon Corporation and Sobrato
Interests III, dated January 4, 1996 (filed as Exhibit 10.6
to the Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
10.25 -- Form of Assignment and Acceptance to Revolving Credit
Agreement (filed as Exhibit 10.9 to the Registration
Statement No. 333-21977 on Form S-3 and incorporated herein
by reference).
*10.26 -- Outside Directors Compensation Plan of 1998 (filed as
Exhibit 10.1 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended January 31, 1998 and
incorporated herein by reference).
*10.27 -- Employee Stock Purchase Plan of November 17, 1997 (filed as
Exhibit 10.1 to the Registration Statement No. 333-47589 on
Form S-8 and incorporated herein by reference).
10.28 -- First Amendment and Modification Agreement by and among the
Registrant and BankBoston, N.A. dated as of March 19, 1998
amending the Amended and Restated Revolving Credit Agreement
(filed as Exhibit (b)(2) to the Amendment No. 2 to the
Schedule 14D-1 filed by the Registrant on February 20, 1998
and incorporated herein by reference).
10.29 -- Guaranty dated as of March 19, 1998 by Hadco Acquisition
Corp. II in favor of BankBoston, N.A. (filed as Exhibit
(b)(3) to the Amendment No. 2 to the Schedule 14D-1 filed by
the Registrant on February 20, 1998 and incorporated herein
by reference).
10.30 -- Stock Pledge Agreement dated as of March 19, 1998 by Hadco
Acquisition Corp. II in favor of BankBoston, N.A. (filed as
Exhibit (b)(4) to the Amendment No. 2 to the Schedule
14D-1 filed by the Registrant on February 20, 1998 and
incorporated herein by reference).
*10.31 -- Form of Option Agreement under Registrant's Non-Qualified
Stock Option Plan dated November 29, 1995, as amended and
restated April 7, 1998 (filed as Exhibit 10.2 to Quarterly
Report on Form 10-Q, File No. 0-12102, for the quarter ended
May 2, 1998 and incorporated herein by reference).
*10.32 -- Stock Purchase Agreement dated as of March 20, 1998 between
Registrant and Frederick G. McNamee, III (filed as Exhibit
10.3 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended May 2, 1998 and incorporated herein by
reference).
*10.33 -- Employment Agreement dated as of February 17, 1998 between
Registrant and Frederick G. McNamee, III (filed as Exhibit
10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended May 2, 1998 and incorporated herein by
reference).
10.34 -- Second Amendment and Modification Agreement among Registrant
and a group of Banks dated as of May 11, 1998 (filed as
Exhibit 10.5 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended May 2, 1998 and incorporated
herein by reference).
*10.35 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Andrew E. Lietz (filed as Exhibit
10.2 to Quarterly Report Form 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
*10.36 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and John D. Caruso (filed as Exhibit
10.3 to Quarterly Report on From 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
*10.37 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Timothy P. Losik (filed as Exhibit
10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
*10.38 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Michael K. Sheehy (filed as Exhibit
10.5 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
*10.39 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Frederick G. McNamee, III (filed as
Exhibit 10.6 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended August 1, 1998 and
incorporated herein by reference).
*10.40 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Robert E. Snyder (filed as Exhibit
10.7 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
</TABLE>
59
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <C> <S>
10.41 -- Indenture (including Form of Exchange Note) dated as of May
18, 1998 by and among the Company, the Guarantors and State
Street Bank and Trust, as Trustee (filed as Exhibit 4.1 to
Form S-4, Registration No. 333-57467, and incorporated
herein by reference).
10.42 -- Registration Rights Agreement dated May 13, 1998 among the
Company, the Guarantors, Morgan Stanley & Co. Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BancAmerica Robertson Stephens, and BT Alex Brown
Incorporated, as initial purchasers (filed as Exhibit 4.2 to
Form S-4, Registration No. 333-57467 and incorporated herein
by reference).
10.43 -- Placement Agreement dated May 13, 1998 by and among the
Company, the Guarantors, Morgan Stanley & Co. Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BancAmerica Robertson Stephens, and BT Alex Brown
Incorporated, as initial purchasers (filed as Exhibit 10.1
to Form S-4, Registration No. 333-57467 and incorporated
herein by reference).
10.44 -- Third Amendment and Modification Agreement dated as of
September 14, 1998 among Registrant and a group of Banks
(filed as Exhibit 10.5 to Form S-4, Registration No.
333-57467 and incorporated herein by reference).
*10.45 -- Form of Executive Agreement dated as of November 2, 1998 by
and between the Company and F. Gordon Bitter (filed as
Exhibit 10.57 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.46 -- Amended and Restated Non-Qualified Stock Option Plan dated
September 7, 1990, dated as of April 7, 1998 (filed as
Exhibit 10.58 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.47 -- Amended and Restated Non-Qualified Stock Option Plan dated
November 29, 1995, dated as of July 1, 1998 (filed as
Exhibit 10.59 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.48 -- Amendment dated as of July 1, 1998 to Option Agreement of
Andrew E. Lietz dated April 8, 1998 (filed as Exhibit 10.60
to Annual Report on Form 10-K, File No. 0-12102, for the
year ended October 31, 1998 and incorporated herein by
reference).
*10.49 -- Amendment dated as of July 1, 1998 to Option Agreement of
Andrew E. Lietz dated February 26, 1997 (filed as Exhibit
10.61 to Annual Report on Form 10-K, File No. 0-12102, for
the year ended October 31, 1998 and incorporated herein by
reference).
10.50 -- Amendment dated May 29, 1998 to Lease between Registrant and
Equity Property Associates I dated March 1, 1992 (filed as
Exhibit 10.63 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
10.51 -- Amendment dated May 29, 1998 to Lease between Registrant and
Equity Property Associates I dated November 1, 1995, for 12A
Manor Parkway, Salem, New Hampshire (filed as Exhibit 10.64
to Annual Report on Form 10-K, File No. 0-12102, for the
year ended October 31, 1998 and incorporated herein by
reference).
10.52 -- Amendment No. 2 dated October 29, 1998, for 12A Manor
Parkway, Salem, New Hampshire to Lease between Registrant
and Manor Parkway LLC dated November 1, 1995 (filed as
Exhibit 10.65 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
10.53 -- Amendment dated May 29, 1998 to Lease between Registrant and
Equity Property Associates I dated November 1, 1995, for 12B
Manor Parkway, Salem, New Hampshire (filed as Exhibit 10.66
to Annual Report on Form 10-K, File No. 0-12102, for the
year ended October 31, 1998 and incorporated herein by
reference).
*10.54 -- Hadco Corporation Executive Incentive Compensation Deferred
Bonus Plan, as amended and restated July 1, 1998 (filed as
Exhibit 10.67 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.55 -- Amendment to Outside Directors Compensation Plan of 1998,
dated as of November 12, 1998 (filed as Exhibit 10.68 to
Annual Report on Form 10-K, File No. 0-12102, for the year
ended October 31, 1998 and incorporated herein by
reference).
*10.56 -- Agreement dated as of November 12, 1998 by and between the
Company and Andrew E. Lietz (filed as Exhibit 10.69 to
Annual Report on Form 10-K, File No. 0-12102, for the year
ended October 31, 1998 and incorporated herein by
reference).
</TABLE>
60
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <C> <S>
*10.57 -- Form of Agreement dated as of November 12, 1998 by and
between the Company and various employees of the Company
(filed as Exhibit 10.70 to Annual Report on Form 10-K, File
No. 0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.58 -- Hadco Corporation 1998 Stock Plan as Amended and Restated
March 3, 1999 (filed as Exhibit 4.4 to the Registration
Statement No. 333-79029 on Form S-8 and incorporated herein
by reference).
*10.59 -- Form of Option Agreement under the Registrant's 1998 Stock
Plan (filed as Exhibit 10.2 to Quarterly Report on Form
10-Q, File No. 0-12102, for the quarter ended May 1, 1999
and incorporated herein by reference).
*10.60 -- Fourth Amendment and Modification Agreement dated as of
April 30, 1999 among the Company and a group of Banks (filed
as Exhibit 10.3 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended May 1, 1999 and incorporated
herein by reference).
*10.61 -- Executive Agreement dated May 11, 1999 between the
Registrant and William M. Beckenbaugh (filed as Exhibit 10.4
to Quarterly Report on Form 10-Q, File No. 0-12102, for the
quarter ended May 1, 1999 and incorporated herein by
reference).
*10.62 -- Executive Agreement dated August 10, 1999 between the
Registrant and Christopher T. Mastrogiacomo (filed as
Exhibit 10.1 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended July 31, 1999 and
incorporated herein by reference).
*10.63 -- Consulting Agreement dated June 21, 1999 between the
Registrant and Patrick Sweeney.
10.64 -- Fifth Amendment and Modification Agreement dated as of
November 23, 1999 among the Company and a group of Banks.
10.65 -- Hadco Corporation Retirement Plan, as Amended and Restated
through March 3, 1999.
10.66 -- Hadco Corporation Retirement Trust dated June 1, 1996
between the Registrant and Fidelity Management & Trust
Company.
10.67 -- First Amendment to Trust Agreement between the Registrant
and Fidelity Management & Trust Company dated as of October
1, 1997.
10.68 -- Second Amendment to Trust Agreement between the Registrant
and Fidelity Management & Trust Company dated as of January
15, 1998.
10.69 -- Third Amendment to Trust Agreement between the Registrant
and Fidelity Management & Trust Company dated as of January
1, 1998.
21 -- Subsidiaries of the Registrant, (filed as exhibit 21 to
Annual Report on Form 10-K, File No. 0-12102, for the year
ended October 31, 1998 and incorporated herein by
reference).
23 -- Consent of Arthur Andersen LLP.
27 -- Financial Data Schedule.
</TABLE>
- ---------------
(*) Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an Exhibit pursuant to Item 14(c).
(b) REPORTS ON FORM 8-K
None
(c) EXHIBITS
The Company hereby files as part of this Form 10-K the exhibits listed in
Item 14(a)(3) above. Exhibits which are incorporated herein by reference can be
inspected and copied at the public reference facilities maintained by the
Commission, 450 Fifth Street, NW, Room 1024, Washington, D.C., and at the
Commission's regional offices at 219 South Dearborn Street, Room 1204, Chicago,
Illinois; 26 Federal Plaza, Room 1102, New York, New York and 5757 Wilshire
Boulevard, Suite 1710, Los Angeles, California. Copies of such material can also
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
(d) FINANCIAL STATEMENT SCHEDULES
The Company hereby files as part of this Form 10-K in Item 14(b) attached
hereto the consolidated financial statement schedules listed in Item 14(a)(2)
above.
61
<PAGE> 63
SIGNATURES
Pursuant to the requirement 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.
HADCO CORPORATION
By: /s/ ANDREW E. LIETZ
------------------------------------
ANDREW E. LIETZ, PRESIDENT
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Dated: December 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ HORACE H. IRVINE II Chairman of the Board and Director December 29, 1999
- ---------------------------------------------------
(Horace H. Irvine II)
/s/ ANDREW E. LIETZ President, Chief Executive Officer December 29, 1999
- --------------------------------------------------- and Director (Principal Executive
(Andrew E. Lietz) Officer)
/s/ F. GORDON BITTER Senior Vice President, Treasurer December 29, 1999
- --------------------------------------------------- and Chief Financial Officer
(F. Gordon Bitter) (Principal Financial Officer and
Principal Accounting Officer)
/s/ OLIVER O. WARD Director December 29, 1999
- ---------------------------------------------------
(Oliver O. Ward)
/s/ JOHN F. SMITH Director December 29, 1999
- ---------------------------------------------------
(John F. Smith)
/s/ JOHN E. POMEROY Director December 29, 1999
- ---------------------------------------------------
(John E. Pomeroy)
/s/ JAMES C. TAYLOR Director December 29, 1999
- ---------------------------------------------------
(James C. Taylor)
/s/ MAURO J. WALKER Director December 29, 1999
- ---------------------------------------------------
(Mauro J. Walker)
/s/ GILBERT M. RODDY, JR. Director December 29, 1999
- ---------------------------------------------------
(Gilbert M. Roddy, Jr.)
</TABLE>
62
<PAGE> 64
SCHEDULE II
HADCO CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE ADDITIONS
AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND FROM END OF
OF PERIOD EXPENSES RESERVES(1) PERIOD
--------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
October 25, 1997............................ $1,100 922 (322) $1,700
October 31, 1998............................ $1,700 828 (399) $2,129
October 30, 1999............................ $2,129 1,257 (1,908) $1,478
RESTRUCTURING ACCRUAL
October 31, 1998............................ $ -- 4,536 (3,639) $ 897
October 30, 1999............................ $ 897 -- (897) $ --
</TABLE>
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(1) Amounts deemed uncollectible.
S-1
<PAGE> 65
EXHIBIT INDEX
<TABLE>
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EXHIBIT
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3.1 -- Restated Articles of Organization of Registrant (filed as
Exhibit 3.1 to the Registration Statement No. 333-21977 on
Form S-3 and incorporated herein by reference).
3.2 -- By-laws of Registrant, as amended (filed as Exhibit 3.2 to
the Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
3.3 -- Amendment to Restated Articles of Organization of Registrant
dated March 4, 1998 (filed as Exhibit 3.1 to Quarterly
Report on Form 10-Q, File No. 0-12102, for the quarter ended
January 31, 1998 and incorporated herein by reference).
4.0 -- Description of Capital Stock, contained in Article 4 of
Registrant's Restated Articles of Organization (filed as
Exhibit 3.1 to the Registration Statement No. 333-21977 on
Form S-3 and incorporated herein by reference).
*10.1 -- Registrant's December 5, 1986 Non-Qualified Stock Option
Plan (filed as Exhibit 10.7 to Annual Report on Form 10-K,
File No. 0-12102, for the year ended October 25, 1986 and
incorporated herein by reference).
10.2 -- Amendment dated as of January 9, 1986 to Lease between
Registrant and Lupe Burgstrom dated April 30, 1984 (filed as
Exhibit 10.79 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 25, 1986 and
incorporated herein by reference).
10.3 -- Amendment dated as of January 9, 1986 to Lease between
Registrant and Freedom Associates dated May 17, 1985 (filed
as Exhibit 10.80 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 25, 1986 and
incorporated herein by reference).
10.4 -- Amendment dated as of March 7, 1986 to Lease between
Registrant and Freedom Associates dated December 23, 1980
(filed as Exhibit 10.81 to Annual Report on Form 10-K, File
No. 0-12102, for the year ended October 25, 1986 and
incorporated herein by reference).
10.5 -- Lease dated July 15, 1988 between Registrant and C&M
Associates I (filed as Exhibit 10.67 to Annual Report on
Form 10-K, File No. 0-12102, for the year ended October 29,
1988 and incorporated herein by reference).
*10.6 -- Form of Stock Option Agreement under Registrant's
Non-Qualified Stock Option Plan of September 7, 1990 (filed
as Exhibit 10.68 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 27, 1990 and
incorporated herein by reference).
10.7 -- Loan Agreement by and between Registrant and New York State
Urban Development Corporation ("NYSUDC"); Mortgage between
Registrant and Tioga, Note between Registrant and NYSUDC;
all dated as of April 10, 1991 (filed as Exhibit 10.2 to
Quarterly Report on Form 10-Q, File No. 0-12102, for the
quarter ended April 27, 1991 and incorporated herein by
reference).
*10.8 -- Form of Stock Option Agreement under Registrant's 1991
Non-Employee Director Stock Option Plan (filed as Exhibit
10.82 to Annual Report on Form 10-K, File No. 0-12102, for
the year ended October 26, 1991 and incorporated herein by
reference).
10.9 -- Lease dated March 1, 1992 between Registrant and Equity
Property Associates I (filed as Exhibit 10.65 to Annual
Report on Form 10-K, File No. 0-12102, for the year ended
October 31, 1992 and incorporated herein by reference).
10.10 -- Lease dated January 13, 1995 between Registrant and Nash
Family Investment Properties and Ballinger Properties d/b/a
Sagamore Industrial Properties (filed as Exhibit 10.2 to
Quarterly Report on Form 10-Q, File No. 0-12102, for the
quarter ended January 28, 1995 and incorporated herein by
reference).
10.11 -- Rights Agreement dated as of August 22, 1995 between the
Registrant and the First National Bank of Boston (filed as
Exhibit 4.1 to Current Report on Form 8-K, File No. 0-12102,
dated August 22, 1995 and incorporated herein by reference).
*10.12 -- Agreement dated as of August 14, 1995 between the Registrant
and Patrick Sweeney (filed as Exhibit 10.49 to Annual Report
on Form 10-K, File No. 0-12102, for year ended October 28,
1995 and incorporated herein by reference).
10.13 -- Amendment dated May 1, 1995 to lease dated March 1, 1992
between Registrant and Equity Property Associates I (filed
as Exhibit 10.1 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended April 27, 1996 and
incorporated herein by reference).
10.14 -- Lease dated November 1, 1995 between Registrant and Equity
Property Associates I (filed as Exhibit 10.2 to Quarterly
Report on Form 10-Q, File No. 0-12102, for the quarter ended
April 27, 1996 and incorporated herein by reference).
10.15 -- Lease dated November 1, 1995 between Registrant and Equity
Property Associates I (filed as Exhibit 10.3 to Quarterly
Report on Form 10-Q, File No. 0-12102, for the quarter ended
April 27, 1996 and incorporated herein by reference).
</TABLE>
<PAGE> 66
<TABLE>
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EXHIBIT
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10.16 -- Amendment dated April 1, 1996 to lease dated March 1, 1992
between Registrant and Equity Property Associates I (filed
as Exhibit 10.4 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended April 27, 1996 and
incorporated herein by reference).
*10.17 -- Amended and Restated 1991 Non-Employee Director Stock Option
Plan of Registrant as of December 3, 1996 (filed as Exhibit
10.43 to Annual Report on Form 10-K, File No. 0-12102, for
the year ended October 25, 1997 and incorporated herein by
reference).
10.18 -- Amended and Restated Revolving Credit Agreement dated as of
December 8, 1997 between the Registrant and BankBoston, N.A.
(filed as Exhibit 10.45 to Annual Report on Form 10-K, File
No. 0-12102, for the year ended October 25, 1997 and
incorporated herein by reference).
10.19 -- Leases for premises located at 435-445 El Camino Real, Santa
Clara, California, by and between Zycon Corporation and
University Research Center and addenda thereto dated March
1, 1988; July 8, 1988; February 27, 1989; August 30, 1989;
May 19, 1993; and August 9, 1993 (filed as Exhibit 10.1 to
the Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
10.20 -- Provisional Lease dated November 14, 1995 for the premises
located at the Muara Tebas Land of Kuching East Malaysia by
and between Sudarsono Osman and Zycon Corporation Sendirian
Berhad (filed as Exhibit 10.2 to the Registration Statement
No. 333-21977 on Form S-3 and incorporated herein by
reference).
10.21 -- Construction Agreement dated August 3, 1995 by and between
Zycon Corporation and Hiti Engineering Sdn.Bhd. (filed as
Exhibit 10.3 to the Registration Statement No. 333-21977 on
Form S-3 and incorporated herein by reference).
10.22 -- Facilities Agreement dated February 9, 1996 by and among
Zycon Corporation Sdn.Bhd., Bank Bumiputra Malaysia Berhad
and BBMB Kewangan Berhad (filed as Exhibit 10.4 to the
Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
10.23 -- Corporate Guarantee dated February 9, 1996 issued by Zycon
Corporation in favor of Bank Bumiputra Malaysia Berhad and
BBMB Kewangan Berhad (filed as Exhibit 10.5 to the
Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
10.24 -- Lease for the three acre premises located in Santa Clara,
California by and between Zycon Corporation and Sobrato
Interests III, dated January 4, 1996 (filed as Exhibit 10.6
to the Registration Statement No. 333-21977 on Form S-3 and
incorporated herein by reference).
10.25 -- Form of Assignment and Acceptance to Revolving Credit
Agreement (filed as Exhibit 10.9 to the Registration
Statement No. 333-21977 on Form S-3 and incorporated herein
by reference).
*10.26 -- Outside Directors Compensation Plan of 1998 (filed as
Exhibit 10.1 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended January 31, 1998 and
incorporated herein by reference).
*10.27 -- Employee Stock Purchase Plan of November 17, 1997 (filed as
Exhibit 10.1 to the Registration Statement No. 333-47589 on
Form S-8 and incorporated herein by reference).
10.28 -- First Amendment and Modification Agreement by and among the
Registrant and BankBoston, N.A. dated as of March 19, 1998
amending the Amended and Restated Revolving Credit Agreement
(filed as Exhibit (b)(2) to the Amendment No. 2 to the
Schedule 14D-1 filed by the Registrant on February 20, 1998
and incorporated herein by reference).
10.29 -- Guaranty dated as of March 19, 1998 by Hadco Acquisition
Corp. II in favor of BankBoston, N.A. (filed as Exhibit
(b)(3) to the Amendment No. 2 to the Schedule 14D-1 filed by
the Registrant on February 20, 1998 and incorporated herein
by reference).
10.30 -- Stock Pledge Agreement dated as of March 19, 1998 by Hadco
Acquisition Corp. II in favor of BankBoston, N.A. (filed as
Exhibit (b)(4) to the Amendment No. 2 to the Schedule
14D-1 filed by the Registrant on February 20, 1998 and
incorporated herein by reference).
*10.31 -- Form of Option Agreement under Registrant's Non-Qualified
Stock Option Plan dated November 29, 1995, as amended and
restated April 7, 1998 (filed as Exhibit 10.2 to Quarterly
Report on Form 10-Q, File No. 0-12102, for the quarter ended
May 2, 1998 and incorporated herein by reference).
*10.32 -- Stock Purchase Agreement dated as of March 20, 1998 between
Registrant and Frederick G. McNamee, III (filed as Exhibit
10.3 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended May 2, 1998 and incorporated herein by
reference).
*10.33 -- Employment Agreement dated as of February 17, 1998 between
Registrant and Frederick G. McNamee, III (filed as Exhibit
10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended May 2, 1998 and incorporated herein by
reference).
10.34 -- Second Amendment and Modification Agreement among Registrant
and a group of Banks dated as of May 11, 1998 (filed as
Exhibit 10.5 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended May 2, 1998 and incorporated
herein by reference).
</TABLE>
<PAGE> 67
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EXHIBIT
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*10.35 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Andrew E. Lietz (filed as Exhibit
10.2 to Quarterly Report Form 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
*10.36 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and John D. Caruso (filed as Exhibit
10.3 to Quarterly Report on From 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
*10.37 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Timothy P. Losik (filed as Exhibit
10.4 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
*10.38 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Michael K. Sheehy (filed as Exhibit
10.5 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
*10.39 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Frederick G. McNamee, III (filed as
Exhibit 10.6 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended August 1, 1998 and
incorporated herein by reference).
*10.40 -- Form of Executive Agreement dated as of July 1, 1998 by and
between the Company and Robert E. Snyder (filed as Exhibit
10.7 to Quarterly Report on Form 10-Q, File No. 0-12102, for
the quarter ended August 1, 1998 and incorporated herein by
reference).
10.41 -- Indenture (including Form of Exchange Note) dated as of May
18, 1998 by and among the Company, the Guarantors and State
Street Bank and Trust, as Trustee (filed as Exhibit 4.1 to
Form S-4, Registration No. 333-57467, and incorporated
herein by reference).
10.42 -- Registration Rights Agreement dated May 13, 1998 among the
Company, the Guarantors, Morgan Stanley & Co. Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BancAmerica Robertson Stephens, and BT Alex Brown
Incorporated, as initial purchasers (filed as Exhibit 4.2 to
Form S-4, Registration No. 333-57467 and incorporated herein
by reference).
10.43 -- Placement Agreement dated May 13, 1998 by and among the
Company, the Guarantors, Morgan Stanley & Co. Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BancAmerica Robertson Stephens, and BT Alex Brown
Incorporated, as initial purchasers (filed as Exhibit 10.1
to Form S-4, Registration No. 333-57467 and incorporated
herein by reference).
10.44 -- Third Amendment and Modification Agreement dated as of
September 14, 1998 among Registrant and a group of Banks
(filed as Exhibit 10.5 to Form S-4, Registration No.
333-57467 and incorporated herein by reference).
*10.45 -- Form of Executive Agreement dated as of November 2, 1998 by
and between the Company and F. Gordon Bitter (filed as
Exhibit 10.57 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.46 -- Amended and Restated Non-Qualified Stock Option Plan dated
September 7, 1990, dated as of April 7, 1998 (filed as
Exhibit 10.58 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.47 -- Amended and Restated Non-Qualified Stock Option Plan dated
November 29, 1995, dated as of July 1, 1998 (filed as
Exhibit 10.59 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.48 -- Amendment dated as of July 1, 1998 to Option Agreement of
Andrew E. Lietz dated April 8, 1998 (filed as Exhibit 10.60
to Annual Report on Form 10-K, File No. 0-12102, for the
year ended October 31, 1998 and incorporated herein by
reference).
*10.49 -- Amendment dated as of July 1, 1998 to Option Agreement of
Andrew E. Lietz dated February 26, 1997 (filed as Exhibit
10.61 to Annual Report on Form 10-K, File No. 0-12102, for
the year ended October 31, 1998 and incorporated herein by
reference).
10.50 -- Amendment dated May 29, 1998 to Lease between Registrant and
Equity Property Associates I dated March 1, 1992 (filed as
Exhibit 10.63 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
10.51 -- Amendment dated May 29, 1998 to Lease between Registrant and
Equity Property Associates I dated November 1, 1995, for 12A
Manor Parkway, Salem, New Hampshire (filed as Exhibit 10.64
to Annual Report on Form 10-K, File No. 0-12102, for the
year ended October 31, 1998 and incorporated herein by
reference).
10.52 -- Amendment No. 2 dated October 29, 1998, for 12A Manor
Parkway, Salem, New Hampshire to Lease between Registrant
and Manor Parkway LLC dated November 1, 1995 (filed as
Exhibit 10.65 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
10.53 -- Amendment dated May 29, 1998 to Lease between Registrant and
Equity Property Associates I dated November 1, 1995, for 12B
Manor Parkway, Salem, New Hampshire (filed as Exhibit 10.66
to Annual Report on Form 10-K, File No. 0-12102, for the
year ended October 31, 1998 and incorporated herein by
reference).
</TABLE>
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<TABLE>
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EXHIBIT
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*10.54 -- Hadco Corporation Executive Incentive Compensation Deferred
Bonus Plan, as amended and restated July 1, 1998 (filed as
Exhibit 10.67 to Annual Report on Form 10-K, File No.
0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.55 -- Amendment to Outside Directors Compensation Plan of 1998,
dated as of November 12, 1998 (filed as Exhibit 10.68 to
Annual Report on Form 10-K, File No. 0-12102, for the year
ended October 31, 1998 and incorporated herein by
reference).
*10.56 -- Agreement dated as of November 12, 1998 by and between the
Company and Andrew E. Lietz (filed as Exhibit 10.69 to
Annual Report on Form 10-K, File No. 0-12102, for the year
ended October 31, 1998 and incorporated herein by
reference).
*10.57 -- Form of Agreement dated as of November 12, 1998 by and
between the Company and various employees of the Company
(filed as Exhibit 10.70 to Annual Report on Form 10-K, File
No. 0-12102, for the year ended October 31, 1998 and
incorporated herein by reference).
*10.58 -- Hadco Corporation 1998 Stock Plan as Amended and Restated
March 3, 1999 (filed as Exhibit 4.4 to the Registration
Statement No. 333-79029 on Form S-8 and incorporated herein
by reference).
*10.59 -- Form of Option Agreement under the Registrant's 1998 Stock
Plan (filed as Exhibit 10.2 to Quarterly Report on Form
10-Q, File No. 0-12102, for the quarter ended May 1, 1999
and incorporated herein by reference).
*10.60 -- Fourth Amendment and Modification Agreement dated as of
April 30, 1999 among the Company and a group of Banks (filed
as Exhibit 10.3 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended May 1, 1999 and incorporated
herein by reference).
*10.61 -- Executive Agreement dated May 11, 1999 between the
Registrant and William M. Beckenbaugh (filed as Exhibit 10.4
to Quarterly Report on Form 10-Q, File No. 0-12102, for the
quarter ended May 1, 1999 and incorporated herein by
reference).
*10.62 -- Executive Agreement dated August 10, 1999 between the
Registrant and Christopher T. Mastrogiacomo (filed as
Exhibit 10.1 to Quarterly Report on Form 10-Q, File No.
0-12102, for the quarter ended July 31, 1999 and
incorporated herein by reference).
*10.63 -- Consulting Agreement dated June 21, 1999 between the
Registrant and Patrick Sweeney.
10.64 -- Fifth Amendment and Modification Agreement dated as of
November 23, 1999 among the Company and a group of Banks.
10.65 -- Hadco Corporation Retirement Plan, as Amended and Restated
through March 3, 1999.
10.66 -- Hadco Corporation Retirement Trust dated June 1, 1996
between the Registrant and Fidelity Management & Trust
Company.
10.67 -- First Amendment to Trust Agreement between the Registrant
and Fidelity Management & Trust Company dated as of October
1, 1997.
10.68 -- Second Amendment to Trust Agreement between the Registrant
and Fidelity Management & Trust Company dated as of January
15, 1998.
10.69 -- Third Amendment to Trust Agreement between the Registrant
and Fidelity Management & Trust Company dated as of January
1, 1998.
21 -- Subsidiaries of the Registrant, (filed as exhibit 21 to
Annual Report on Form 10-K, File No. 0-12102, for the year
ended October 31, 1998 and incorporated herein by
reference).
23 -- Consent of Arthur Andersen LLP.
27 -- Financial Data Schedule.
</TABLE>
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(*) Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an Exhibit pursuant to Item 14(c).
<PAGE> 1
Exhibit 10.63
CONSULTING AGREEMENT
AGREEMENT made as of this 17th day of June, 1999, by and between HADCO
CORPORATION (the "Company") and PATRICK SWEENEY ("Sweeney").
WHEREAS, Sweeney has retired from his position as a member of the Board
of Directors of the Company; and
WHEREAS, the Company is desirous of utilizing the services of Sweeney as
a consultant to the Company.
NOW, THEREFORE, in consideration of the premises and other mutual
covenants contained herein, the receipt and legal sufficiency of which are
hereby acknowledged, Sweeney and the Company agree as follows:
1. CONSULTING ARRANGEMENT. Effective July 1, 1999 through December
31, 2000, Sweeney shall serve as a consultant to the Company.
2. COMPENSATION AS CONSULTANT. During the term of the consulting
arrangement, from July 1, 1999 through December 31, 2000, Sweeney shall be paid
at the rate of $36,000 per annum, payable in equal monthly installments of
$3,000 on or about the 15th of each month beginning on or about July 15, 1999.
Sweeney acknowledges that during the period of the consulting arrangement, he
shall be an independent contractor of the Company and not an employee and,
accordingly, Sweeney shall be solely responsible for payment of all federal and
state withholding taxes, FICA and Medicare taxes, and all other applicable
employment related fees, taxes or charges. Sweeney shall be entitled to and
shall receive no fringe benefits from the Company during the term of the
consulting arrangement, including without limitation, pension contributions,
401(k) contributions, health (medical, dental and vision) and disability
insurance, life insurance coverage, and the like.
3. DUTIES. Sweeney shall perform such duties and responsibilities as
may be reasonably requested of him by the President of the Company. Both parties
anticipate that such duties may include marketing and public relation services
for the Company, both domestically and internationally.
4. CONFIDENTIALITY OF COMPANY INFORMATION. Sweeney recognizes and
acknowledges that he has been and will be privy to confidential information
concerning the Company's business, including without limitation, financial data,
personnel data, computer programs, supplier lists, technology, processes,
methods, techniques, developments, inventions, improvements, apparatus,
products, policies, customer lists, research data, plans, know-how, and trade
secrets, as well as information relating to sales, costs, profits, organization,
customers, pricing and pricing methods and other general business operations,
which are valuable, special and unique assets of the Company,
<PAGE> 2
access to and knowledge of which have been essential to the performance of
Sweeney's duties at the Company (hereinafter collectively the "Confidential
Information"). Sweeney agrees that he will not, during the term of his
consulting relationship or thereafter at any time, disclose any of this
Confidential Information to any person, firm, corporation, association or other
entity, excepting the authorized employees and agents of the Company, nor make
use of such Confidential Information either during the term of his consulting
relationship or at any time thereafter, for any purpose other than incident to
his duties with the Company. Without limiting the generality of the foregoing,
Sweeney expressly agrees that such Confidential Information will not be used to
compete directly or indirectly with the Company.
Sweeney agrees that all materials developed or existing at the
Company, all programs developed for customers or prospective customers, all
files, letters, memoranda, reports, records, data, specifications, customer
lists, proposals, contracts, computer programs or computer-generated data
(whether hard copy or machine-readable form) and other documentation are the
exclusive property of the Company. Sweeney agrees, during the term of his
consulting relationship with the Company, to keep and use such materials only in
connection with the performance of his duties with the Company. Sweeney agrees
to return all such materials and any copies thereof and all other tangible
property of the Company immediately upon termination of any specific consulting
project.
5. CONFIDENTIALITY OF CUSTOMER AND SUPPLIER INFORMATION. Sweeney
recognizes and acknowledges that certain confidential data of the Company's
customers and suppliers may be made available to or utilized by him in the
course of his consulting relationship with the Company. Sweeney further
acknowledges that the Company may, in certain cases, be subject to
non-disclosure or secrecy agreements with certain customers and suppliers.
Accordingly, Sweeney expressly agrees and warrants that he will not, during the
term of or in the course of his consulting relationship or at any time
thereafter, disclose any such confidential data of any customer or supplier to
others, excepting the authorized employees and agents of the Company, nor make
use of such confidential data either during the term of his consulting
relationship or at any time thereafter, for any purpose other than incident to
his duties with the Company. Sweeney further agrees to sign any and all
non-disclosure and confidentiality agreements reasonably required by the
Company's customers and suppliers and approved by the Company's senior
management.
Sweeney agrees to return to the Company immediately upon the
termination of his consulting relationship any and all copies of all
confidential data with respect to the Company's customers or suppliers,
including without limitation, materials secured from the Company's customers or
suppliers, programs developed for customers or suppliers, all files, letters,
memoranda, reports, records, data, specifications, customer lists, proposals,
contracts, computer programs or computer-generated data (whether hard copy or
machine-readable form) and other documentation relating to the confidential
information, data or technology of the Company's customers or suppliers.
2
<PAGE> 3
6. NON-COMPETITION. During the term of this Agreement, Sweeney agrees
that he will not, without the Company's prior express written consent, engage
in, have an interest in, be employed by, or be in any way, directly or
indirectly, connected with as an individual proprietor, partner, stockholder,
officer, employee, director, representative, agent, joint venturer, investor,
lender, or in any other employment, consulting or ownership capacity whatsoever
(other than as the holder of not more than one [1%] percent of the total
outstanding stock of a publicly-held company) any business that is substantially
similar to or competitive with that in which the Company is engaged. Without
limiting the generality of the foregoing, the Company agrees that Sweeney may
serve on the board of the IPC, and that such service by itself will not violate
the non-competition provisions of this Agreement.
7. NON-SOLICITATION. During the term of this Agreement, Sweeney
agrees that he will not, directly or indirectly, (a) employ, retain or engage
any person or entity who has worked for or with the Company as an employee or
consultant during the term of Sweeney's employment or during the term of
Sweeney's consulting arrangement; (b) recruit, solicit or induce, or attempt to
recruit, solicit or induce, any employee or consultant of the Company to
terminate his, her or its employment or consultant relationship with the
Company; (c) solicit, divert or take away, or attempt to solicit, divert or take
away, the business or patronage of any of the customers or accounts, or
prospective customers or accounts, of the Company which were contacted,
solicited or served during the term of his consulting arrangement with the
Company; or (d) induce or attempt to induce any customer, vendor or account of
the Company to reduce its business with, or to cease its business with, the
Company.
8. REMEDIES. Both parties agree that the restrictions contained in
Sections 4, 5, 6 and 7 are necessary for the protection of the business and
goodwill of the Company, and they are considered by Sweeney to be reasonable for
such purposes. Sweeney agrees that, in the event of a breach or threatened
breach by him of the provisions of Sections 4, 5, 6 or 7, the Company will
suffer irreparable harm which cannot be adequately compensated by a payment of
money damages. Accordingly, Sweeney agrees that, in the event of such a breach
or threatened breach by him, the Company shall be entitled to injunctive relief,
both preliminarily and permanently, and to specific enforcement of the
provisions of Sections 4, 5, 6 and 7. Nothing contained in this section shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including recovery of monetary
damages from Sweeney or others.
Sweeney agrees, in addition to and not in lieu of any other
remedies the Company may have, that in the event he violates any of the
provisions of Sections 4, 5, 6 and 7, he shall forfeit entitlement to any
consulting fee not already paid.
9. SEVERABILITY. If any restriction set forth in Sections 4, 5, 6 or
7 are found by any court of competent jurisdiction to be unenforceable because
it extends for too long a period of time or over too great a range of activities
or in too broad a geographic area, it
3
<PAGE> 4
shall be interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable. If any
provision of this Agreement shall be held by a court of competent jurisdiction
to be illegal or invalid, the validity of the remaining parts, terms or
provisions shall not be affected thereby and said illegal or invalid part, term
or provision shall be deemed not to be part of this Agreement, while the
remaining provisions shall continue in full force and effect.
10. PUBLICATION OF THIS AGREEMENT. Both parties agree that the terms
and contents of this Agreement, and the contents of negotiations and discussions
resulting in this Agreement shall be maintained in confidence by Sweeney, the
Company, and their respective agents and representatives, and none of the above
shall be disclosed except (i) to the extent required by federal or state law,
(ii) as otherwise agreed to in writing by both parties, (iii) to enforce this
Agreement, or (iv) in a press release by the Company in a form deemed by the
Company in good faith to be appropriate and in any SEC filing by the Company
that is deemed appropriate by the Company, including without limitation in its
proxy statement, Form 8-K, Form 10-Q or Form 10-K, or any exhibits to any of the
foregoing.
Sweeney agrees that he will speak positively about the Company and
its activities, and endorse and support the business and products of the Company
whenever the opportunity arises. Sweeney further agrees that he will not in any
way verbally or in writing communicate statements or opinions which would be
derogatory to the reputation or the business and financial integrity of the
Company, or do any other act which might be detrimental to the Company.
11. ENTIRE AGREEMENT. This Agreement contains and constitutes the sole
and entire understanding and agreement between the parties with respect to
Sweeney's consulting arrangement, and supersedes and terminates all previous
oral or written negotiations and agreements (except that the covenants and
commitments of Sweeney contained in the Agreement dated August 14, 1995 between
the parties shall survive). This Agreement may not be amended or modified or
waived, in whole or in part, except by a writing signed by both parties.
12. APPLICABLE LAW. This Agreement shall be governed by and construed
and enforced in accordance with the substantive law of the Commonwealth of
Massachusetts, without giving effect to the choice of law provisions thereof.
13. MISCELLANEOUS. This Agreement may be executed in any number of
counterparts, and each executed counterpart shall have the same force and effect
as the original instrument, as if all parties to the counterparts have signed
the same instrument. This instrument shall not be construed for or against any
party because that party's legal representative drafted the Agreement, or any
portion of the Agreement. Section headings are for convenience only and should
not be considered in the interpretation of this Agreement. This Agreement shall
be binding upon, and inure to the benefit of and be
4
<PAGE> 5
enforceable by each of the parties hereto, their respective heirs, legal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have set their hands this 17th day
of June, 1999.
Dated: June 17, 1999 /s/ Patrick Sweeney
--------------------------------
PATRICK SWEENEY
HADCO CORPORATION
Dated: June 17, 1999 By: /s/ Andrew E. Lietz
----------------------------
President and CEO
<PAGE> 1
Exhibit 10.64
FIFTH AMENDMENT AND MODIFICATION AGREEMENT
FIFTH AMENDMENT AND MODIFICATION AGREEMENT dated as of November 23,
1999 (this "Amendment") by and among HADCO CORPORATION, a Massachusetts
corporation (the "Borrower"); the direct and indirect subsidiaries of the
Borrower listed on the signature pages hereto (collectively, the "Guarantors");
BANKBOSTON, N.A., AS AGENT (the "Agent") and BANKBOSTON, N.A., individually, and
the other lending institutions (collectively, the "Banks") listed on SCHEDULE 1
to the Amended and Restated Revolving Credit Agreement dated as of December 8,
1997 (as amended and in effect from time to time, the "Credit Agreement") among
the Borrower, the Banks and the Agent. Terms not otherwise defined herein which
are defined in the Credit Agreement shall have the respective meanings assigned
to such terms in the Credit Agreement, as amended hereby.
WHEREAS, the Borrower has requested that the Agent and the Banks amend
certain provisions of the Credit Agreement; and
WHEREAS, upon the terms and subject to the conditions contained herein,
the Agent and the Banks are willing to amend such provisions of the Credit
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained in
the Credit Agreement, the other Loan Documents and this Amendment and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SS.1. AMENDMENT OF SS.1.1 OF THE CREDIT AGREEMENT. Section 1.1 of the
Credit Agreement is hereby amended by:
(a) inserting the following new definitions in the proper
alphabetical order:
"FIFTH AMENDMENT EFFECTIVE DATE. The "Effective Date", as
defined in the Fifth Amendment and Modification Agreement dated as of
November 23, 1999 among the Borrower, the Guarantors, the Agent and the
Banks."
"SECTION 9.5.2 SUBSIDIARY. Any Subsidiary acquired pursuant to
Section 9.5.2 that is organized under the laws of a jurisdiction other
than the United States of America and the States (or the District of
Columbia) thereof."
(b) deleting the definition of "Guarantors" in its entirety
and substituting in lieu thereof the following new definition:
<PAGE> 2
-2-
"GUARANTORS. (i) Hadco Santa Clara, Hadco Phoenix, CCIR of
Texas, and, until the completion of the Restructuring Transaction, CCIR
of California; and (ii) any other direct or indirect Subsidiary of the
Borrower (other than Hadco FSC, New Zycon, Hadco Scotland, Hadco
Ireland, Hadco Malaysia, Hadco Singapore, New Continental, CCIR
International and any Section 9.5.2 Subsidiary)."
SS.2. AMENDMENT OF SS.9.1(i) OF THE CREDIT AGREEMENT. Section 9.1(i) of
the Credit Agreement is hereby deleted in its entirety and the following new
ss.9.1(i) is hereby substituted in lieu thereof:
"(i) Indebtedness of (i) a Guarantor, following its execution
and delivery of its Guaranty to the Agent, to the Borrower; (ii) Hadco
FSC to the Borrower in an aggregate amount not to exceed $2,000,000;
(iii) Hadco Malaysia and the Section 9.5.2 Subsidiaries to the Borrower
in an aggregate amount for all such entities not to exceed $65,000,000,
PROVIDED, HOWEVER, that no more than $25,000,000 may be incurred by
Hadco Malaysia in any one fiscal year of the Borrower and if during any
such fiscal year the amount of such Indebtedness permitted to be
incurred by Hadco Malaysia is not so utilized, such unutilized amount
may be utilized in the next succeeding fiscal year; PROVIDED, FURTHER,
that no more than $15,000,000 in the aggregate may be incurred by the
Section 9.5.2 Subsidiaries and any such Indebtedness shall be evidenced
by a duly executed promissory note (A) issued by such Section 9.5.2
Subsidiary to the Borrower and (B) duly endorsed to the Agent pursuant
to the Security Agreement; (iv) New Zycon or New Continental to the
Borrower in an aggregate amount, for each such company, not to exceed
$50,000; (v) CCIR International to the Borrower in an aggregate amount
not to exceed $2,000,000; and (vi) Hadco Scotland, Hadco Singapore
and/or Hadco Ireland to the Borrower in an aggregate amount for all
such entities not to exceed $5,000,000;".
SS.3. AMENDMENT OF SS.9.5.2 OF THE CREDIT AGREEMENT. Section 9.5.2 of
the Credit Agreement is hereby deleted in its entirety and the following new
ss.9.5.2 is hereby substituted in lieu thereof:
"9.5.2 ACQUISITIONS. The Borrower will not, and will not
permit any of the other Transaction Parties to agree to or effect any
asset acquisition or stock acquisition (other than the acquisition of
assets in the ordinary course of business consistent with past
practices); PROVIDED, HOWEVER, that so long as no Default or Event of
Default has occurred and is continuing or would result therefrom, the
Borrower may make one or more asset or stock acquisitions in an amount
not to exceed $30,000,000 in the aggregate; PROVIDED, HOWEVER, that (i)
the business to be acquired (the "Target") is in the same or similar
lines of business as the Borrower and the other Transaction Parties,
(ii) after giving effect to such Permitted Acquisition, and assuming
full funding of such Permitted Acquisition
<PAGE> 3
-3-
on the initial Drawdown Date of the sole or initial Loan, the proceeds
of which are to be used to fund all or any portion of such Permitted
Acquisition, the ratio of Consolidated Funded Debt as at the most
recent fiscal quarter end of the Borrower to EBITDA for the four
consecutive fiscal quarters of the Borrower ending with such quarter
end (as shown on a PRO FORMA basis based upon (A) the most recently
delivered financial statements of the Borrower and its Subsidiaries
delivered in accordance with ss.8.4 and (B) audited financial
statements for such Target as at the most recent fiscal quarter end of
the Borrower which are accompanied by an unqualified audited opinion
letter from Arthur Anderson LLP or another nationally recognized
accounting firm satisfactory to the Agent and the Majority Banks or
which are otherwise satisfactory to the Agent and the Majority Banks)
would not exceed 3.25:1.0; and (iii) contemporaneously with the closing
of such Permitted Acquisition, the Borrower shall provide to the Agent
and the Banks a compliance certificate in the form of EXHIBIT C, duly
certified by the principal financial or accounting officer of the
Borrower, indicating the Borrower's compliance with (x) the financial
covenants contained in ss.10 immediately prior to and, on A Pro FORma
basis, immediately following such Permitted Acquisition and (y) on a
PRO FORMA basis, the requirement set forth in ss.9.5.2(ii); anD
PROVIDED FURTHER that, contemporaneously with the closing of such
Permitted Acquisition, the Borrower shall (i) take such action as may
be necessary or advisable in the opinion of the Agent to pledge or
cause to be pledged to the Agent, for the benefit of the Banks and the
Agent, on a perfected, first-priority basis all of the capital stock or
other equity interests of such Subsidiary (except that 65% (or such
larger percentage as may be permitted without creating material adverse
tax consequences for the Borrower under the Code) of the capital stock
of such Subsidiary that is organized under the laws of a jurisdiction
other than the United States of America and the States (or the District
of Columbia) thereof shall be pledged) pursuant to a pledge agreement
in form and substance satisfactory to the Agent, which such pledge
agreement shall be a Stock Pledge Agreement and a Security Document
hereunder, (ii) cause any such Subsidiary which is or is to become a
Guarantor to guaranty all of the Obligations hereunder pursuant to a
Guaranty in the form of EXHIBIT E, which Guaranty shall be a Guaranty
and Security Document hereunder, (iii) cause any such Subsidiary which
is or is to become a Guarantor to take all steps as may be necessary or
advisable in the opinion of the Agent to grant to the Agent, for the
benefit of the Banks and the Agent, a first priority, perfected
security interest in substantially all of its assets as collateral
security for such guaranty, pursuant to security documents, mortgages,
pledges and other documents in form and substance satisfactory to the
Agent, each of which documents shall be Security Documents hereunder;
and (iv) deliver to the Agent all such evidence of corporate
authorization, legal opinions (including local counsel opinions where
applicable), and other documentation as
<PAGE> 4
-4-
the Agent may request. To the extent that any such Permitted
Acquisition alters the accuracy or completeness of any of the Schedules
hereto, the Borrower shall deliver to the Agent, contemporaneously with
the delivery of the loan documentation referred to above, revised
schedules reflecting changes resulting from such Permitted Acquisition;
PROVIDED that the Agent shall only be required to accept such revised
schedules, and such revised schedules shall only become part of this
Credit Agreement, in the event that the Borrower shall have taken any
and all action necessary to bring such newly acquired Subsidiary into
compliance with each representation and warranty set forth herein,
including in ss.7 hereof; and PROVIDED FURTHER that no change resulting
from any Permitted Acquisition would have a material adverse effect on
the Borrower and the other Transaction Parties, taken as a whole."
Ss.4. AMENDMENT OF SS.9.10 OF THE CREDIT AGREEMENT. Section 9.10 of the
Credit Agreement is hereby amended by deleting the last sentence thereof in its
entirety and substituting in lieu thereof the following:
"Neither the Borrower nor any of the other Transaction Parties
shall (a) without limiting the Indebtedness and Investment limitations
set forth in ss.ss.9.1(i), 9.3(f) and 9.3(g), transfer assets to Hadco
Scotland, Hadco Ireland, Hadco Singapore (following the incorporation
thereof), Hadco Malaysia or any Section 9.5.2 Subsidiary in an
aggregate amount exceeding, for all such entities, $2,000,000 or (b)
permit Hadco Scotland, Hadco Ireland, Hadco Singapore (following the
incorporation thereof), Hadco Malaysia or any Section 9.5.2 Subsidiary
at any one time to own, hold or have an interest in, property or
assets, whether tangible or intangible and including cash and cash
equivalents, in excess of those reasonably required for the conduct of
each such entity's business operations in the ordinary course."
SS.5. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to be
effective as of the date first written above (the "Effective Date") upon the
Agent's receipt of the following, each in form and substance satisfactory to the
Agent:
(a) facsimile copies of original counterparts (to be followed
promptly by original counterparts) or original counterparts of this
Amendment, duly executed by each of the Borrower, the Guarantors, the
Agent and the Majority Banks;
(b) each of the Borrower and the Guarantors shall have
certified (a) that its charter or other incorporation documents and
by-laws have not been amended since the date such charter or other
incorporation documents and by-laws were certified to the Agent (or
shall deliver the same if amended), (b) that it is in good standing or
is authorized to do business in its state of incorporation and in each
<PAGE> 5
-5-
state in which it does business, (c) resolutions of its Board of
Directors authorizing this Amendment and the transactions contemplated
hereby, and (d) that its Perfection Certificate is true and correct in
all material respects as of the date hereof (or shall deliver an
amended and restated Perfection Certificate);
(c) such other documents, agreements and items as the Agent
may require.
SS.6. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION. Each
of the Borrower and the Guarantors hereby represents and warrants to each of the
Agent and the Banks as follows:
(a) Each of the representations and warranties of the Borrower
and the Guarantors contained in the Credit Agreement, the other Loan
Documents or in any document or instrument delivered pursuant to or in
connection with the Credit Agreement, the other Loan Documents or this
Amendment was true as of the date as of which it was made and is true
as of the Effective Date (except to the extent of changes resulting
from transactions contemplated or permitted by the Credit Agreement, as
amended hereby, and the other Loan Documents and changes occurring in
the ordinary course of business that singly or in the aggregate are not
materially adverse and to the extent that such representations and
warranties relate expressly to an earlier date), and no Default or
Event of Default has occurred and is continuing as of the date of this
Amendment or would occur after giving effect to the transactions
contemplated by this Amendment; and
(b) This Amendment has been duly authorized, executed and
delivered by the Borrower and each of the Guarantors, and shall be in
full force and effect upon the satisfaction of the conditions set forth
in ss.5 hereof, and the agreements of the Borrower and each of the
Guarantors contained herein, in the Credit Agreement as herein amended,
or in the other Loan Documents respectively, constitute the legal,
valid and binding obligations of the Borrower and each of the
Guarantors party hereto or thereto, enforceable against the Borrower or
such Guarantor, in accordance with their respective terms, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief
is subject to the discretion of the court before which any proceeding
therefor may be brought.
SS.7. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. All
<PAGE> 6
-6-
references in the Credit Agreement or such other Loan Documents or in any
related agreement or instrument to the Credit Agreement or such other Loan
Documents shall hereafter refer to such agreements as amended hereby, pursuant
to the provisions of the Credit Agreement.
SS.8. NO PRESENT CLAIMS. In order to eliminate any possibility that any
past conditions, acts, omissions, events, circumstances or matters would impair
or otherwise adversely affect any of the rights, interests, contracts,
collateral security or remedies of the Agent or any of the Banks, each of the
Borrower and the Guarantors hereby acknowledges and agrees that: (i) neither it
nor any of the other Transaction Parties has any claim or cause of action
against the Agent, any of the Banks or any of their directors, officers,
employees or agents; (ii) neither it nor any of the other Transaction Parties
has any offset right, counterclaim or defense of any kind against any of its
obligations, indebtedness or liabilities to the Agent and/or the Banks,
including, without limitation, the Obligations; and (iii) each of the Agent and
the Banks has heretofore properly performed and satisfied in a timely manner all
of its obligations to each of the Borrower and the other Transaction Parties.
SS.9. EXPENSES. Without limiting the expense reimbursement requirements
set forth in ss.16 of the Credit Agreement, the Borrower agrees to pay on demand
all costs and expenses, including reasonable attorneys' fees, of the Agent
incurred in connection with this Amendment.
SS.10. NO IMPLIED WAIVER, ETC. Except as expressly provided herein,
nothing contained herein shall constitute a waiver of, impair or otherwise
affect any of the Obligations, any other obligations of the Borrower or any of
the Transaction Parties or any right of the Agent or the Banks consequent
thereon. The waivers and consents provided herein are limited strictly to their
terms. Neither the Agent nor any of the Banks shall have any obligation to issue
any further waiver or consent with respect to the subject matter hereof or any
other matter.
SS.11. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
SS.12. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO CHOICE OR CONFLICTS OF LAWS).
<PAGE> 7
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
a document under seal as of the date first above written.
HADCO CORPORATION
By: /s/ F. Gordon Bitter
-----------------------------------
Name: F. Gordon Bitter
Title: CFO/Treasurer, Sr. Vice
President
BANKBOSTON, N.A., individually and
as Agent
By: /s/ Sharon A. Stone
-----------------------------------
Name: Sharon A. Stone
Title: Director
BANK OF AMERICA, N.A.
By: /s/ Robert Kosche
-----------------------------------
Name: Robert Kosche
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ James S. Adelsheim By: /s/ John D. Rogers
------------------------------- -----------------------------------
Name: James S. Adelsheim Name: John D. Rogers
Title: Group Vice President Title: Vice President
BANK ONE, N.A. (f/k/a The First
National Bank Of Chicago)
By: /s/ Stephen E. McDonald
-----------------------------------
Name: Stephen E. McDonald
Title: Senior Vice President
<PAGE> 8
-8-
KEYBANK NATIONAL ASSOCIATION.
By: /s/ Francis Lotz
-----------------------------------
Name: Francis Lotz
Title: Portfolio Officer
THE BANK OF NOVA SCOTIA
By: /s/ T.M. Pitcher
-----------------------------------
Name: T.M. Pitcher
Title: Authorized Signatory
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Francoise Berthelot
-----------------------------------
Name: Francoise Berthelot
Title: Vice President
SUNTRUST BANK, ATLANTA
By: /s/ W. David Wisdom
-----------------------------------
Name: W. David Wisdom
Title: Vice President
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Bruce S. Daniels
-----------------------------------
Name: Bruce S. Daniels
Title: V.P.
USTRUST
By: Eastman, D.G.
-----------------------------------
Name: Eastman, D.G.
Title: Vice President
<PAGE> 9
-9-
FLEET BANK-NH
By: /s/ Marcia Clatorre
-----------------------------------
Name: Marcia Clatorre
Title: Vice President
FIRST UNION NATIONAL BANK,
successor by merger to CORESTATES
BANK, N.A.
By: /s/ Robert A. Brown
-----------------------------------
Name: Robert A. Brown
Title: Vice President
MELLON BANK, N.A.
By: /s/ R. Jane Westrich
-----------------------------------
Name: R. Jane Westrich
Title: Vice President
CITIZENS BANK NEW HAMPSHIRE
By: /s/ Lori A. Chandonnais
-----------------------------------
Name: Lori A. Chandonnais
Title: Vice President
<PAGE> 10
-10-
Each of the undersigned hereby acknowledges the foregoing Amendment as of the
Effective Date and agrees that its obligations under the Guaranty to which it is
a party will extend to the Agreement, as so amended, and the other Loan
Documents, as so amended.
HADCO SANTA CLARA, INC.
By: /s/ F. Gordon Bitter
-----------------------------------
Title: Treasurer
HADCO PHOENIX, INC.
By: /s/ F. Gordon Bitter
-----------------------------------
Title: Treasurer
CCIR OF CALIFORNIA CORP.
By: /s/ F. Gordon Bitter
-----------------------------------
Title: Treasurer
CCIR OF TEXAS CORP.
By: /s/ F. Gordon Bitter
-----------------------------------
Title: Treasurer
<PAGE> 1
Exhibit 10.65
PLAN 001
FIN 04-2393279
HADCO CORPORATION RETIREMENT PLAN
AS AMENDED AND RESTATED
THROUGH MARCH 3,1999
June 17, 1999 (2)
<PAGE> 2
i
TABLE OF CONTENTS
PAGE NO.
INTRODUCTION...................................................................1
ARTICLE I -DEFINITIONS.........................................................2
ARTICLE II -PLAN PARTICIPATION................................................11
2.01 INITIAL PARTICIPATION.......................................11
2.02 CESSATION OF PARTICIPATION..................................11
2.03 REINSTATEMENT OF ACTIVE PARTICIPATION.......................12
ARTICLE III -CONTRIBUTIONS AND ALLOCATIONS....................................13
3.01 PROFIT SHARING CONTRIBUTIONS................................13
3.02 401(k) CONTRIBUTIONS........................................14
3.03 MATCHING CONTRIBUTIONS......................................14
3.04 QUALIFIED NON-ELECTIVE CONTRIBUTIONS........................15
3.05 AFTER-TAX CONTRIBUTIONS.....................................16
3.06 ROLLOVER CONTRIBUTIONS......................................16
3.07 FORFEITURES.................................................17
3.08 INVESTMENT ADJUSTMENT.......................................17
3.09 LIMITATIONS ON ALLOCATIONS AND CONTRIBUTIONS................17
3.10 ALLOCATION OF EXCESS ALLOCATIONS AND CONTRIBUTIONS..........23
3.11 CONTRIBUTIONS FOR TOP HEAVY PLAN YEARS......................26
3.12 CONTRIBUTIONS UNDER USERRA..................................27
ARTICLE IV -DISTRIBUTIONS PRIOR TO TERMINATION OF EMPLOYMENT..................27
4.01 DISTRIBUTIONS FROM AFTER-TAX CONTRIBUTIONS ACCOUNTS.........27
4.02 DISTRIBUTIONS FROM PROFIT SHARING ACCOUNT...................27
4.03 DISTRIBUTIONS FROM ROLLOVER ACCOUNT.........................28
4.04 DISTRIBUTIONS FROM 401(k) ACCOUNT (INCLUDING 401(k) AND
QUALIFIED NON-ELECTIVE CONTRIBUTIONS) AND MATCHING
CONTRIBUTIONS ACCOUNT.......................................28
4.05 PROCEDURES FOR PERMITTED WITHDRAWALS........................29
4.06 LOANS TO PARTICIPANTS.......................................31
4.07 DISTRIBUTIONS PURSUANT TO QUALIFIED DOMESTIC RELATIONS
ORDER.......................................................33
ARTICLE V -VESTING............................................................34
5.01 FULL VESTING................................................34
5.02 PARTIAL VESTING.............................................35
5.03 VESTING AFTER RECEIPT OF DISTRIBUTION.......................36
5.04 VESTING FOR TOP HEAVY PLAN..................................37
5.05 CREDITING YEARS OF SERVICE..................................37
<PAGE> 3
-ii-
ARTICLE VI -DISTRIBUTION AT RETIREMENT, DEATH, OR DISABILITY..................40
6.01 DISTRIBUTION AT RETIREMENT..................................40
6.02 DISTRIBUTION UPON INCURRING DISABILITY......................41
6.03 DISTRIBUTIONS AT DEATH......................................41
6.04 NOTICES AND ELECTION PROCEDURES.............................42
6.05 DEFINITIONS AND APPLICATION.................................44
6.06 DISTRIBUTION OF SMALL ACCOUNTS..............................45
ARTICLE VII -TERMINATION OF EMPLOYMENT........................................46
7.01 TERMINATION DISTRIBUTIONS...................................46
7.02 TERMINATION FORFEITURES.....................................46
7.03 REPAYMENT TO REINSTATE FORFEITED AMOUNTS....................47
ARTICLE VIII -INVESTMENT OF TRUST FUNDS.......................................48
8.01 TRUSTEE'S RESPONSIBILITY....................................48
8.02 DIRECTED INVESTMENTS OF PARTICIPANT ACCOUNTS................48
8.03 INVESTMENT COMMITTEE........................................48
ARTICLE VIIIA -PROVISIONS FOR RADIAN SOURCE ACCOUNTS..........................51
8A.01 PROTECTED BENEFITS, RIGHTS AND FEATURES........................51
8A.02 IN-SERVICE WITHDRAWALS.........................................51
8A.03 PARTICIPANT LOANS..............................................51
8A.04 DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT, DISABILITY,
RETIREMENT OR DEATH............................................52
ARTICLE IX -ADMINISTRATION....................................................57
9.01 ALLOCATION OF RESPONSIBILITY................................57
9.02 APPOINTMENT OF PLAN ADMINISTRATOR...........................57
9.03 ESTABLISHMENT AND VALUATION OF ACCOUNTS.....................57
9.04 CLAIMS PROCEDURE............................................68
9.05 RECORDS AND REPORTS.........................................59
9.06 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR.................59
9.07 RULES AND DECISIONS.........................................59
9.08 AUTHORIZATION OF BENEFITS PAYMENTS..........................60
9.09 APPLICATION AND FORMS FOR BENEFITS..........................60
9.10 FACILITY OF PAYMENT.........................................60
ARTICLE X -MISCELLANEOUS......................................................61
10.01 NONGUARANTEE OF EMPLOYMENT..................................61
10.02 RIGHTS OF EMPLOYEES AND BENEFICIARIES.......................61
10.03 NONALIENATION OF BENEFITS...................................61
10.04 DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS....................61
10.05 NO REVERSION IN EMPLOYER....................................61
10.06 JURISDICTION................................................62
10.07 TIMING OF DISTRIBUTIONS.....................................62
10.08 BENEFICIARY DESIGNATIONS....................................63
1
<PAGE> 4
-iii-
10.09 BENEFITS OF LOST PARTICIPANTS...............................64
10.10 DIRECT TRUSTEE-TO-TRUSTEE TRANSFER OPTION...................65
ARTICLE XI -AMENDMENTS AND ACTION BY EMPLOYER.................................66
11.01 AMENDMENTS..................................................66
11.02 ACTION BY EMPLOYER..........................................66
ARTICLE XII -SUCCESSOR EMPLOYER AND MERGER OR CONSOLIDATION OF PLANS..........67
12.01 SUCCESSOR EMPLOYER..........................................67
12.02 PLAN ASSETS.................................................67
ARTICLE XIII -PLAN TERMINATION................................................69
13.01 RIGHT TO TERMINATE..........................................69
13.02 PARTIAL TERMINATION.........................................69
13.03 LIQUIDATION OF THE PLAN.....................................69
13.04 MANNER OF DISTRIBUTION......................................69
ARTICLE XIV -DISCHARGE OF DUTIES BY FIDUCIARIES...............................70
<PAGE> 5
INTRODUCTION
WHEREAS, HADCO Corporation, hereinafter referred to as the "Employer",
a corporation organized and existing under the laws of the Commonwealth of
Massachusetts, established effective October 27, 1973 the Hadco Printed
Circuits, Inc. Profit Sharing Plan and Trust for the purpose of providing
retirement benefits for those employees of the Employer entitled to participate
therein, and
WHEREAS, the Employer has previously amended and restated said Plan;
and
WHEREAS, the Employer has recently amended said Plan on September 15,
1998, December 2, 1998 and March 3, 1999, such amendments to be effective on or
before October 1, 1998;
NOW, THEREFORE, the Employer hereby publishes this Restatement of the
HADCO Corporation Retirement Plan reflecting amendments adopted through March 3,
1999 for those of its Employees entitled to participate herein pursuant to the
provisions hereof.
<PAGE> 6
-2-
ARTICLE I
DEFINITIONS
Whenever used herein or in the Trust agreement, the following words and phrases
shall have the meanings set forth below, unless a different definition is
specifically provided or a different meaning is clearly required by the context
in which such word or phrase is used. The words and phrases are in alphabetical
order and are capitalized when used throughout the Plan and Trust agreement.
(1/l/92)
1.01 ADJUSTMENT FACTOR shall mean the cost of living adjustment factor
prescribed by the Secretary of the Treasury under Section 415(d) of the
Code for years beginning after December 31, 1987, as applied to such
items and in such manner as the Secretary shall provide. (1/l/88)
1.02 AFFILIATED EMPLOYER means any corporation which is a member of
controlled group of corporations (as defined in Section 414(b) of the
Code) which includes the Employer, any trade or business (whether or
not incorporated) which is under common control (as defined in Section
414(c) of the Code) with the Employer, any organization (whether or not
incorporated) which is a member of an affiliated service group (as
defined in Section 414(m) of the Code) which includes the Employer, and
any other entity required to be aggregated with the Employer pursuant
to regulations under Section 414(o) of the Code.
(1/l/88)
1.03 AFTER-TAX CONTRIBUTIONS ACCOUNT shall mean the portion of a
Participant's interest in this Plan which is attributable to his
After-Tax Contributions. (Name change effective 1/l/92)
1.04 AFTER-TAX CONTRIBUTIONS shall mean the voluntary contributions made by
a Participant pursuant to Section 3.05 of the Plan. (Name change
effective 1/l/92)
1.05 BENEFICIARY shall mean the person(s) or other recipient designated in
accordance with the provisions of Article X hereof to receive any death
benefit which may become payable under this Plan.
1.06 BREAK IN SERVICE shall mean a Computation Period in which an Employee
completes less than five hundred one (501) Hours of Service. (1/l/85)
1.07 CODE shall mean the Internal Revenue Code of 1986 and amendments
thereto. (1/l/87)
1.08 COMPENSATION generally shall mean 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
the Plan Year, for which the Employer is required to furnish the
Employee a written statement under Section 6041(d) and 6051(a)(3) of
the Code. Compensation shall be determined without regard to any rules
under Section 3401(a) that limit the remuneration included in wages
based on the nature or location of the employment or the services
performed.
2
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414(q) Compensation shall mean Compensation increased by elective
deferrals as defined in Section 402(g)(3) of the Code and any amount
which is contributed or deferred by the Employer at the election of the
Employee and which is not includible in the gross income of the
Employee under Section 125 of the Code. (1/l/98)
401(k) Compensation shall mean 414(q) Compensation reduced by the
amount of any cash bonuses, noncash fringe benefits, moving expenses
and disability paid to the Employee for the Plan Year.
(1/l/92; 3/10/93)
1.09 DEFINED CONTRIBUTION PLAN shall mean all defined contribution plans
(whether or not terminated) of an employer which shall be treated as
one defined contribution plan for purposes of applying the limitations
of Section 415(b), (c), and (e) of the Code.
1.10 DETERMINATION DATE shall mean December 31. (1/l/87)
1.11 DISABILITY shall mean a Participant's permanent and total incapacity of
engaging in any employment of the Employer for physical or mental
reasons. Disability shall be deemed to exist only when a written
application has been filed with the Plan Administrator by or on behalf
of such Participant and when Disability is certified to the Plan
Administrator by a licensed physician approved by the Plan
Administrator; provided, however, that in the event any such
Participant meets the requirements for disability benefits under the
Social Security law then in effect, he shall thereafter be deemed to be
disabled within the meaning of this definition.
1.12 EARLY RETIREMENT DATE shall mean the date the Participant attains age
fifty-five (55) and completes seven (7) Years of Service. (10/l/97)
1.13 EFFECTIVE DATE shall mean the original effective date of the Plan,
October 27, 1973.
1.14 EMPLOYEE shall mean any individual who is employed on or after the
Effective Date by the Employer or by any Affiliated Employer, other
than a non-resident alien employed outside the United States, and any
individual who is a Leased Employee deemed to be an Employee pursuant
to Section 1.28 below. (1/l/88)
Notwithstanding the preceding paragraph, if a group of individuals
would otherwise become Employees within the meaning of this Section
1.14 as a result of an asset or stock acquisition, merger or other
similar transaction occurring on or after January 1, 1997, such
individuals shall not become Employees hereunder until the date the
Board of Directors of the Employer affirmatively votes to include such
group in the Plan. (1/l/97)
1.15 EMPLOYER shall mean HADCO Corporation, a corporation organized and
existing under the laws of the Commonwealth of Massachusetts, and all
its subsidiaries. (1/l/84)
1.16 EMPLOYER CONTRIBUTIONS shall mean the contributions paid hereunder by
the Employer to the Trustee in accordance with the provisions of
Article III of this document.
3
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1.17 ENTRY DATE shall mean any January 1, April 1, July 1 or October 1
following the date a Participant meets the eligibility requirements of
Section 2.01 of the Plan. (1/l/88)
1.18 ERISA shall mean Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, and any amendments thereto.
1.19 FAMILY MEMBER generally means, with respect to any Employee or former
Employee, any individual who is the spouse of the Employee or former
Employee, a lineal ascendant or descendant of the Employee or former
Employee, or the spouse of any such lineal ascendant or descendant.
(1/l/88)
1.20 FISCAL YEAR shall mean a twelve (12) month period ending on the last
Saturday in October.
1.21 FORFEITURES shall mean the portion of a Participant's Profit Sharing
Account and/or Matching Contributions Account which is forfeited in
accordance with Section 7.02 of Article VII hereof. (1/l/88)
1.22 401(k) ACCOUNT shall mean that portion of a Participant's Account which
is attributable to 401(k) Contributions and Qualified Non-elective
Contributions made on behalf of such Participant under Sections 3.02
and 3.04 of the Plan. (1/l/88) (Name change effective 1/l/92)
1.23 401(k) CONTRIBUTIONS shall mean contributions to the Plan made by the
Employer during the Plan Year at the election of the Participant in
lieu of cash compensation made pursuant to a salary reduction agreement
under Section 3.02 of the Plan. (1/l/88) (Name change effective 1/l/92)
1.24 HIGHLY COMPENSATED EMPLOYEE shall mean, for Plan Years beginning on or
after January 1, 1997, an Employee who performs services for the
Employer during the determination year and (a) was a five percent owner
at any time during the determination year or the look-back year or (b)
received 414(q) Compensation from the Employer in excess of $80,000.00
for the look-back year and was in the top-paid group of Employees for
such look-back year.
For Plan Years ending on or before December 31, 1996, Highly
Compensated Employee shall mean an Employee who performs services for
the Employer during the determination year and is in one or more of the
following groups:
(a) Employees who were five percent owners of the Employer at any
time during the look-back year or the determination year;
(b) Employees who received 414(q) Compensation during the
look-back year in excess of $75,000.00;
(c) Employees who received 414(q) Compensation during the
look-back year in excess of $50,000.00 and who were in the
top-paid group for the look-back year;
4
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(d) Employees who were officers of the Employer during the
look-back year and who received 414(q) Compensation during the
look-back year in excess of 50% of the limit in effect under
Section 415(b)(1)(A) of the Code for that year; and
(e) Employees who were in the group of the one hundred Employees
who received the most 414(q) Compensation from the Employer
during the determination year and are also described in any of
paragraphs (b), (c) or (d) above when those paragraphs are
modified to substitute the determination year for the
look-back year.
Highly Compensated Employee shall also include any former Employee who
separated from service prior to the determination year and who was an
active Highly Compensated Employee in the year of separation or in any
determination year after attaining age 55, except as provided in the
following sentence. A former Employee who separated from service prior
to 1987 shall be treated as Highly Compensated Employee only if during
the separation year, the year preceding the separation year, the last
year ending before the Employee's 55th birthday, or any year after the
Employee attained age 55, the Employee was a five percent owner or
received 414(q) Compensation in excess of $50,000.00.
The following rules apply for purposes of this definition:
The "determination year" shall be the Plan Year for which testing is
being performed. The "look-back year" shall be the twelvemonth period
immediately preceding the determination year.
Each Employee who is, on any day during a determination year or
lookback year ending on or before December 31, 1996, a Family Member of
either a five percent owner who is an active or former Employee or a
Highly Compensated Employee who is one of the ten most highly
compensated Employees, ranked on the basis of 414(q) Compensation paid
by the Employer during such year, shall be aggregated with the five
percent owner or top ten Highly Compensated Employee. In such case, the
Family Members and five 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, contributions or benefits of the Family Member and five
percent owner or top ten Highly Compensated Employee.
The determination of who is a Highly Compensated Employee, including
the determination of Employees who are five percent owners, the number
and identity of Employees in the top-paid group, the top one hundred
Employees, the number of Employees treated as officers, and the
compensation that is considered (including adjustments by the Secretary
of the Treasury for cost of living changes), will be made in accordance
with Section 414(q) of the Code and the regulations thereunder.
(1/1/88; 1/1/97)
1.25 HOUR OF SERVICE shall mean:
<PAGE> 10
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(a) Each hour for which an Employee is paid or entitled to payment
for the performance of duties for the Employer. These hours
shall be credited to the Employee for the computation period
in which the duties are performed; and
(b) Each hour for which an Employee is paid or entitled to payment
by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty, or leave of absence. No more than 501 Hours of
Service shall be credited under this paragraph for any single
continuous period (whether or not such period occurs in a
single computation period). Hours under this paragraph shall
be calculated and credited pursuant to Section 2530.200b2 of
the Department of Labor Regulations which are incorporated
herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The
same Hours of Service shall not be credited both under
paragraphs (a) or (b), as the case may be, and under this
paragraph (c). These hours shall be credited to the Employee
for the computation period in which the award, agreement, or
payment pertains rather than the period in which such award,
agreement or payment is made.
1.26 INVESTMENT COMMITTEE means the committee appointed by the Employer and
acting in accordance with Section 8.03 of the Plan. (1/l/89)
1.27 KEY EMPLOYEE generally shall mean any Employee, former Employee, or
Beneficiary of any Employee or former Employee who, at any time during
a Plan Year or any of the four (4) preceding Plan Years, is:
(a) An officer of the Employer having an annual 414(q)
Compensation in excess of 50% of the limit in effect under
Section 415(b)(1)(A) of the Code for such year;
(b) One of the ten (10) Employees having an annual 414(q)
Compensation in excess of the limitation in effect under
Section 415(c)(1)(A) of the Code and owning (or considered as
owning within the meaning of Section 318 of the Code) the
largest interests in the Employer;
(c) five percent owner of the Employer; or
(d) A one percent owner of the Employer having an annual 414(q)
Compensation in excess of $150,000.
The determination of who is a Key Employee, including the determination
of the Employees who are one percent or five percent owners, the number
of Employees treated as officers, and the compensation that is
considered, will be made in accordance with Section 416(i) of the Code
and the regulations thereunder.
(1/l/88)
<PAGE> 11
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1.28 LEASED EMPLOYEE shall mean any individual (other than an Employee) who,
pursuant to an agreement between the Employer and any other person
(referred to as the "leasing organization") has performed services for
the Employer on a substantially full time basis for a period of at
least one year, if such services are performed under the primary
direction or control of the Employer. Contributions or benefits
provided a Leased Employee by the leasing organization which are
attributable to services performed for the Employer shall be treated as
provided by the Employer.
A Leased Employee shall not be considered an Employee if (a) such
individual is covered by a money purchase pension plan providing (i) a
nonintegrated employer contribution rate of at least ten percent of
compensation as defined in Code Section 415(c)(3), but including
amounts contributed pursuant to a salary reduction agreement which are
excludable from the employee's gross income under Code Sections 125,
402(a)(8), 402(h) or 403(b), (ii) immediate participation, and (iii)
full and immediate vesting; and (b) Leased Employees do not constitute
more than 20 percent of the Non-highly Compensated Employees of the
Employer.
(1/l/88; 1/l/97)
1.29 MATCHING CONTRIBUTIONS shall mean contributions to the Trust made by
the Employer for the Plan Year under Section 3.03 of the Plan and
allocated to a Participant's Matching Contributions Account by reason
of the Participant's 401(k) Contributions. (1/l/88)
1.30 MATCHING CONTRIBUTIONS ACCOUNT shall mean the portion of a
Participant's Account which is attributable to Matching Contributions
made on behalf of such Participant. (1/l/88)
1.31 NET PROFIT shall mean the net profit of HADCO Corporation and its
subsidiaries on a consolidated basis, determined in accordance with
generally accepted accounting principles. (1/l/84)
1.32 NON-HIGHLY COMPENSATED EMPLOYEE shall mean an Employee who is neither a
Highly Compensated Employee nor a Family Member of a Highly Compensated
Employee. (1/l/88)
1.33 NORMAL RETIREMENT AGE shall mean age sixty-five (65). NORMAL RETIREMENT
DATE shall mean the later of the following:
(a) The Participant's sixty-fifth (65th) birthday, or
(b) The tenth (10th) anniversary of the time the Participant
commenced participation in the Plan.
A Participant may continue participation beyond his Normal Retirement
Date.
<PAGE> 12
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1.34 PARTICIPANT shall mean an Employee who is actively participating in the
Plan in accordance with the provisions of Section 2.01 of Article II
hereof.
1.35 PARTICIPANT'S ACCOUNT shall mean a Participant's Profit Sharing
Account, Matching Contributions Account, After-Tax Contributions
Account, 401(k) Account and Rollover Account referred to collectively.
(1/l/88)
1.36 PARTICIPATION COMPUTATION PERIOD shall mean a twelve (12) consecutive
month period during which an Employee completes one thousand (1,000)
hours of service with the Employer. An Employee's initial Participation
Computation Period shall be the twelve month period commencing with the
Employee's employment commencement date. Thereafter, the Participation
Computation Period shall be the Plan Year beginning with the Plan Year
which includes the first anniversary of the Employee's employment
commencement date, provided that an Employee who is credited with one
thousand (1,000) hours of service in both the initial Participation
Computation Period and the Plan Year which includes the first
anniversary of the Employee's employment commencement date shall be
credited with two years of service for purposes of eligibility to
participate. (1/l/81)
1.37 PLAN shall mean the HADCO Corporation Retirement Plan. (Name change
effective I/l/92)
1.38 PLAN ADMINISTRATOR shall mean the Employer or such other person or
entity appointed by the Employer and acting in accordance with Section
9.02 of the Plan. If the functions of the Plan Administrator are
assigned to the Administrative Committee, PLAN ADMINISTRATOR shall mean
the Administrative Committee.
(1/l/92)
1.39 PLAN FIDUCIARY shall mean each of the Employer, the Plan Administrator,
the Investment Committee, and the Trustee, but only with respect to the
specific responsibilities of each for Plan and Trust Administration,
all as described in Article IX, and shall also mean any investment
manager appointed under Article VIII. (1/l/92)
1.40 PLAN YEAR shall mean, for years ending on or before October 28, 1979,
the Fiscal Year. There shall be a short Plan Year beginning October 28,
1979 and ending December 31, 1979. Thereafter, a Plan Year shall mean
the twelve (12) month period beginning on each January 1 and ending on
the succeeding December 31.
(10/28/79)
1.41 PROFIT SHARING ACCOUNT shall mean the portion of a Participant's
Account which is attributable to Profit Sharing Contributions made on
behalf of such Participant.
(1/1/88) (Name change effective 1/1/92)
1.42 PROFIT SHARING CONTRIBUTIONS shall mean contributions to the Trust made
by the Employer for the Plan Year, other than 401(k) Contributions,
Matching Contributions and Qualified Non-elective Contributions, and
allocated to Profit Sharing Accounts under Section 3.01 of the Plan.
(1/l/88) (Name change effective 1/l/92)
<PAGE> 13
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1.43 QUALIFIED JOINT AND SURVIVOR ANNUITY generally shall mean an annuity
for the life of the Participant with a survivor annuity for the life of
his spouse which is equal to two-thirds of the annuity payable during
the joint lives of the Participant and his spouse, and which is the
actuarial equivalent of a single life annuity for the life of the
Participant. For benefits payable from account balances originally
accrued under the Zycon Corporation Profit Sharing 401(k) Plan,
QUALIFIED JOINT AND SURVIVOR ANNUITY shall mean an annuity for the life
of the Participant with a survivor annuity for the life of his spouse
which is equal to fifty percent (50%) of the annuity payable during the
joint lives of the Participant and his spouse, and which is the
actuarial equivalent of a single life annuity for the life of the
Participant. (10/l/97)
1.44 QUALIFIED NON-ELECTIVE CONTRIBUTIONS shall mean contributions to the
Trust made by the Employer for the Plan Year, other than 401(k)
Contributions, Profit Sharing Contributions, and Matching
Contributions, and allocated to Participants' 401(k) Accounts under
Section 3.04 of the Plan. (1/l/88)
1.45 ROLLOVER ACCOUNT shall mean the portion of a Participant's interest in
this Plan which is attributable to his Rollover Contributions. (1/l/84)
1.46 ROLLOVER CONTRIBUTION shall mean a contribution made by an Employee
from another qualified plan as provided in Section 3.06 of this Plan.
(1/l/84)
1.47 TOP HEAVY PLAN shall mean this Plan with respect to any Plan Year if,
as of the last day of the preceding Plan Year, (i) the aggregate of the
accounts of Key Employees under the Plan exceeds sixty (60%) percent of
the aggregate of the accounts of all Employees under the Plan or (ii)
this Plan is part of a top heavy group. For purposes of determining
whether this Plan is a Top Heavy Plan, (A) each plan of the Employer in
which a Key Employee is a Participant and (B) each other plan of the
Employer which enables any plan described in subclause (A) to meet the
requirements of Sections 401(a)(4) or 410 of the Code shall be
aggregated. This Plan shall be considered as part of a top-heavy group
for any Plan Year if it is included in a group of plans which are
aggregated in accordance with the preceding sentence and the sum of (x)
the present value of the cumulative accrued benefits for Key Employees
under all defined benefit plans included in such aggregation group and
(y) the aggregate of the accounts of Key Employees under all defined
contribution plans included in such aggregation group exceeds sixty
(60%) percent of a similar sum determined for all Employees. The
following shall apply for purposes of this Section 1.47:
(a) For purposes of determining the present value of the
cumulative accrued benefit for any Employee or the amount of
the account of any Employee, such present value or amount
shall be increased by the aggregate distributions made with
respect to such Employee during the five (5) year period
ending on the Determination Date.
(b) Except to the extent provided in regulations issued by the
Secretary of the Treasury or his designate, any Rollover
Contribution (or similar transfer) initiated
<PAGE> 14
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by an Employee and made after December 31, 1983 to a plan
shall not be taken account with respect to the transferee plan
for purposes of determining whether such plan is a Top Heavy
Plan (or whether any aggregation group which includes such
plan is a top heavy group).
(c) If an individual is not a Key Employee with respect to any
plan for any Plan Year, but such individual was a Key Employee
with respect to such plan for any prior Plan Year, any accrued
benefit for such Employee and the account of such Employee
shall not be taken into account.
(d) If an individual has not received any Compensation from the
Employer (other than benefits under the Plan) at any time
during the five (5) year period ending on the determination
date, any accrued benefit for such individual and the account
of such individual shall not be taken into account. (1/l/85)
(e) To the extent provided in regulations issued by the Secretary
of the Treasury or his designate, this section shall be
applied on the basis of any year specified in such regulations
in lieu of plan years.
(1/l/84)
1.48 TRUST shall mean the HADCO Corporation Retirement Trust established
under a separate trust agreement between the Employer and Trustee, and
forming a part of this Plan. (1/l/92)
1.49 TRUSTEE shall mean any person or other entity appointed by the Employer
to act as Trustee under the Trust, and any successor Trustee, who or
which has executed and is acting under the Trust. (1/l/92)
1.50 VALUATION DATE shall mean the last day of each calendar quarter.
1.51 VESTING COMPUTATION PERIOD shall mean the Plan Year. Each Vesting
Computation Period during which the Employee completes one thousand
(1,000) Hours of Service shall be considered a Year of Service for
vesting purposes. An Employee who completes more than 1,000 hours of
service during both twelve month periods extending from October 28,
1979 to October 25, 1980 and from January 1, 1980 to December 3 1, 1980
shall be credited with two Years of Service for purposes of determining
his vested interest in his Profit Sharing Account. For purposes of
crediting Years of Service under this Plan, an individual who becomes
an Employee as a result of an asset or stock acquisition, merger or
other similar transaction shall receive credit for service with his
prior employer who was a party to such transaction. (10/28/79; 10/1/97)
1.52 Wherever used herein, a pronoun in the masculine gender shall be
considered as including the feminine gender unless the context clearly
indicates otherwise.
<PAGE> 15
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ARTICLE II
PLAN PARTICIPATION
2.01 INITIAL PARTICIPATION
For Plan Years ending on or before December 31, 1987, each Employee,
other than an Employee who is covered by a collective bargaining
agreement under which retirement benefits were the subject of good
faith bargaining, shall commence participation hereunder on the first
day of the month next following his completion of a Participation
Computation Period during which he completed one thousand (1,000) Hours
of Service, but in no event earlier than the Effective Date. For Plan
Years beginning on or after January 1, 1988, each Employee, other than
an Employee who is covered by a collective bargaining agreement under
which retirement benefits were the subject of good faith bargaining,
shall commence participation hereunder on the Entry Date next following
the completion of a six month period of service with the Employer
without regard to the number of Hours of Service completed. (1/l/88)
For purposes of determining an Employee's initial eligibility to
participate, an Employee shall receive credit for the time period
commencing with the first day he performs an Hour of Service for the
Employer and ending on the date a twelve consecutive month period of
severance begins. A period of severance shall mean a period of time
during which the Employee is no longer employed by the Employer, and
shall begin on the earlier of (i) the date on which the Employee quits,
retires, is discharged or dies or (ii) the first anniversary of the
first day of a period in which the Employee remains absent from service
(with or without pay) with the Employer for any reason other than quit,
retirement, discharge or death, such as on account of vacation,
holiday, sickness, disability, leave of absence or layoff; provided,
however, that "second anniversary" shall be substituted for "first
anniversary" under this clause (ii) for an Employee who is absent from
service beyond the first anniversary of the first day of absence by
reason of the pregnancy of the individual, the birth of a child of the
individual, the placement of a child with the individual in connection
with the adoption of such child by such individual, or for purposes of
caring for such child for a period beginning immediately following such
birth or placement.
(1/l/88)
For purposes of determining eligibility to participate in this Plan, an
individual who becomes an Employee as a result of an asset or stock
acquisition, merger or other similar transaction shall receive credit
for service with his prior employer who was a party to such
transaction. (10/l/97)
2.02 CESSATION OF PARTICIPATION
A Participant shall become an inactive Participant on the date his
employment with the Employer terminates. He shall remain an inactive
Participant until the date on which the balance of his Participant
Account is distributed to him, or is forfeited, at which time he shall
cease to be an inactive Participant and become a former Participant.
Active
<PAGE> 16
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participation in this Plan subsequent to either of those dates shall be
determined in accordance with Section 2.03.
2.03 REINSTATEMENT OF ACTIVE PARTICIPATION
An inactive or former Participant shall recommence active participation
in this Plan on his date of reemployment by the Employer. (1/l/85)
<PAGE> 17
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ARTICLE III
CONTRIBUTIONS AND ALLOCATIONS
3.01 PROFIT SHARING CONTRIBUTIONS
The Employer may make annual Profit Sharing Contributions to the Trust
in accordance with this Section 3.01 for the Fiscal Year during which
this Plan is established and for each subsequent Fiscal Year. The
Profit Sharing Contribution for each Fiscal Year shall be an amount
from the Employer's current or accumulated Net Profit as determined
annually by the Board of Directors of the Employer, subject to the
limitations set forth in this Section 3.01 and in Section 3.09,
provided that the Board of Directors may determine that no Profit
Sharing Contribution shall be made for a particular Fiscal Year
regardless of whether the Employer has a Net Profit for such year or an
accumulated Net Profit for prior Fiscal Years.
The Profit Sharing Contribution for each Fiscal Year shall be limited
in amount so that it does not exceed any of the following amounts:
(a) The sum of the Employer's Net Profit for such Fiscal Year plus
its accumulated Net Profit for prior Fiscal Years; or
(b) The maximum amount deductible from the Employer's income for
such Fiscal Year under Section 404 of the Code as a
contribution to a profit sharing plan which meets the
requirements for qualification under Section 401 of the Code,
after taking into consideration all other Employer
contributions under this Plan; or
(c) The aggregate individual Participant limitations in accordance
with Section 415 of the Code, as applied in accordance with
Section 3.09.
The Profit Sharing Contribution for each Fiscal Year shall be paid to
the Trustee as soon as practicable after the end of the Fiscal Year,
but in any event not later than the due date for the Employer's federal
income tax return for such Fiscal Year, including extensions. If no
Profit Sharing contribution is to be made for a particular Fiscal Year,
the Employer shall so notify the Trustee within sixty (60) days after
the end of such Fiscal Year. Profit Sharing Contributions shall be
allocated to the Profit Sharing Accounts of those Participants who
shall have received any 401(k) Compensation during such Fiscal Year and
who are employed on the last day of the Fiscal Year. Such contribution
shall be allocated according to the ratio that each such Participant's
401(k) Compensation for the Fiscal Year bears to the total 401(k)
Compensation of all such Participants for the Fiscal Year. For
individuals who have become Participants during the 1997 Fiscal Year as
a result of an asset or stock acquisition, merger or other similar
transaction, the 401(k) Compensation to be taken into account hereunder
for said Fiscal Year shall be 401(k) Compensation received during the
period from January 1, 1997 through October 25, 1997 from the Employer
or from the individual's prior employer who was a party to the
transaction. For individuals who have become Participants during the
1998 Fiscal Year
<PAGE> 18
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as a result of an asset or stock acquisition, merger or other similar
transaction, the 401(k) Compensation to be taken into account hereunder
for said Fiscal Year shall be 401(k) Compensation received during the
period from April 1, 1998 through October 31, 1998 from the Employer or
from the individual's prior employer who was a party to the
transaction.
(1/1/88; 3/10/93; 1/1/97; 1/1/98)
3.02 401(k) CONTRIBUTIONS
Effective as of April 1, 1988, an Employee who has met the eligibility
and participation requirements of Article II may elect to defer not
less than 1% nor more than 15% of his 401(k) Compensation pursuant to a
salary reduction agreement with the Employer, in lieu of receiving cash
compensation. Such deferred amounts shall be paid by the Employer to
the Trustee as 401(k) Contributions promptly following each pay period
and shall be allocated to the Participant's 401(k) Account. 401(k)
Contributions may be made under this Section 3.02 without regard to
current or accumulated Net Profits of the Employer.
An initial election to authorize 401(k) Contributions must be effective
as of an Entry Date following the date of the election. A Participant
may change the amount of his 401(k) Contribution as of the beginning of
any calendar quarter, or more frequently if administratively feasible,
and may revoke any election to authorize 401(k) Contributions at any
time. No such change or revocation may be retroactively effective. No
Participant shall be required to make an election under this Section
3.02.
No Employee shall be permitted to have 401(k) Contributions made under
this Plan during any calendar year in excess of $7,000.00 adjusted for
cost of living changes determined by the Secretary of the Treasury
under Section 402(g) of the Code. In addition, 401(k) Contributions on
behalf of Highly Compensated Employees shall be limited as provided in
Section 3.09. The provisions of Section 4.04 shall further limit the
election and amount of 401(k) Contributions for any Participant who has
received a hardship distribution pursuant to that Section.
(1/l/88; 7/l/96)
3.03 MATCHING CONTRIBUTIONS
The Employer shall make Matching Contributions to the Trust on behalf
of each Participant for whom 401(k) Contributions have been made during
the Plan Year, in accordance with this Section 3.03 and subject to the
limits of Section 3.09.
The amount of the Matching Contribution for Plan Years ending on or
before December 31, 1996 shall be equal to 25% of the amount of the
Participant's aggregate 401(k) Contributions for the Plan Year that do
not exceed four (4%) percent of the Participant's aggregate 401(k)
Compensation for the Plan Year.
<PAGE> 19
-15-
The amount of the Matching Contribution for the 1997 Plan Year shall be
equal to the sum of (1) 25% of the amount of the Participant's
aggregate 401(k) Contributions for the period from January 1, 1997
through October 31, 1997 that do not exceed four (4%) percent of the
Participant's aggregate 401(k) Compensation for such period, and (2)
50% of the amount of the Participant's aggregate 401(k) Contributions
for the period from November 1, 1997 through December 31, 1997 that do
not exceed six (6%) percent of the Participant's aggregate 401(k)
Compensation for such period.
The amount of the Matching Contribution for Plan Years beginning on or
after January 1, 1998 shall be equal to 50% of the amount of the
Participant's aggregate 401(k). Contributions for the Plan Year that do
not exceed six (6%) percent of the Participant's aggregate 401(k)
Compensation for the Plan Year.
The Employer's Matching Contribution for each Participant shall be
recalculated monthly or more frequently based upon the Participant's
year-to-date 401(k) Contributions and 401(k) Compensation. For the 1997
Plan Year, any Participant who reached the maximum permitted 401(k)
Contributions under Section 3.02 prior to the end of the Plan Year and
who is employed on the last day of the Plan Year shall be treated as
having made his 401(k) Contributions and having received his 401(k)
Compensation in equal monthly amounts over the entire Plan Year.
Matching Contributions under this Section 3.03 may be made without
regard to current or accumulated Net Profits.
Matching Contributions shall be paid by the Employer to the Trustees
not later than the due date for the Employer's federal income tax
return for the Fiscal Year which ends within the Plan Year, including
extensions. Matching Contributions shall be allocated to the Matching
Contributions Accounts of the respective Participants on whose behalf
the contributions are made.
(1/l/88; 1/l/94; 11/l/97)
3.04 QUALIFIED NON-ELECTIVE CONTRIBUTIONS
The Employer may make Qualified Non-elective Contributions to the Trust
in accordance with this Section 3.04 for any Plan Year. If a
Participant authorizes 401(k) Contributions under Section 3.02 when he
first becomes eligible to do so, the Employer shall contribute to the
Trust on behalf of such Participant as a Qualified Non-elective
Contribution the sum of $100.00 without regard to the amount of the
401(k) Contribution. Any additional Qualified Non-elective Contribution
for any Plan Year shall be an amount as determined annually by the
Board of Directors of the Employer, subject to the limitations set
forth in Section 3,.09, provided that the Board of Directors may
determine that no Qualified Non-elective Contribution shall be made for
a particular Plan Year, and provided further that the Board of
Directors may authorize any additional Qualified Non-elective
Contribution to be allocated among all Participants who are Non-highly
Compensated Employees equally, or according to the ratio that each such
Participant's 401(k) Contributions for the
<PAGE> 20
-16-
Plan Year bears to the total 401(k) Contributions of all Participants
who are Non-highly Compensated Employees, or according to the ratio
that each such Participant's Compensation bears to the total
Compensation of all Participants who are Non-highly Compensated
Employees for the Plan Year.
Qualified Non-elective Contributions under this Section 3.04 may be
made without regard to current or accumulated Net Profits.
Qualified Non-elective Contributions shall be paid to the Trustee as
soon as practicable after the end of the Plan Year, but in any event
not later than the due date for the Employer's federal income tax
return for the Fiscal Year which ends within such Plan Year, including
extensions, shall be allocated to the 401(k) Accounts of Participants
on whose behalf the contributions are made, and shall be fully vested
when made.
(1/l/88)
3.05 AFTER-TAX CONTRIBUTIONS
For Plan Years ending on or before December 31, 1987, a Participant may
elect to make After-Tax Contributions to the Trust by executing an
application authorizing the Employer to make regular payroll deductions
of said After-Tax Contributions or by means of a lump sum payment to
the Trust. The amount of such After-Tax Contributions shall be subject
to the limitations of Section 3.09, and the aggregate of all amounts a
Participant contributes shall not exceed ten (10%) percent of the total
Compensation paid to him since he became a Participant in the Plan.
After-Tax Contributions shall be allocated to the After-Tax
Contributions Account of the Participant who has made such
contribution.
(1/l/88)
3.06 ROLLOVER CONTRIBUTIONS
An Employee may, with the consent of the Plan Administrator and the
Trustee, contribute to the Trust a participant note for a plan loan or
cash as a Rollover Contribution from another qualified plan or trust or
an individual retirement account or annuity in accordance with Sections
402(c)(4), 403(a)(4) or 408(d)(3) of the Code and the regulations
thereunder. A participant note for a plan loan must be assigned to the
Trust directly from the other qualified plan or trust. The Plan
Administrator or Trustee shall maintain a separate Rollover Account
under the Trust for each Employee who has made a Rollover Contribution.
All such Rollover Contributions and the investments thereon shall
immediately become and at all times remain fully vested in the
Employee. Rollover contributions shall not be taken into consideration
in determining the limitations set forth in Section 3.09. (1/l/88;
1/l/97)
<PAGE> 21
-17-
3.07 FORFEITURES
Any Forfeitures from Profit Sharing Accounts which have become
available for distribution during a Plan Year shall be credited to the
Profit Sharing Accounts of those Participants who are entitled to share
in the Employer's Profit Sharing Contribution for the Fiscal Year
ending with or within such Plan Year (regardless of whether a Profit
Sharing Contribution has been made) and such amounts shall be allocated
in the same manner as the Employer's Profit Sharing Contribution under
Section 3.01.
Any Forfeitures from Matching Contributions Accounts which have arisen
during a Plan Year shall be used to reduce the amount of Matching
Contributions required to be made by the Employer under Section 3.03
for the Plan Year. In the event that the amount of such Forfeitures
exceeds the amount of Matching Contributions so required, the excess
shall be held in a suspense account to be used to reduce the amount of
Matching Contributions required for any subsequent Plan Year. In the
event that upon the termination of the Plan there is any amount then
held in such suspense account, such amount shall be allocated among
those Participants who have a balance in their Matching Contributions
Accounts according to the ratio that the aggregate of each such
Participant's Matching Contributions Account and 401(k) Account bears
to the aggregate of all Participants' Matching Contributions Accounts
and 401(k) Accounts, and such amounts shall be credited to such
Matching Contributions Accounts, subject to Sections 3.09 and 3.10.
(1/l/88)
3.08 INVESTMENT ADJUSTMENT
Beginning as of July 1, 1996, the net earnings or losses of the trust
fund shall be computed on a daily basis. Dividends and interest shall
be credited as of the date they are declared, and gains and losses from
investments shall be credited or debited at the time they are realized.
(1/l/88; 7/l/96)
3.09 LIMITATIONS ON ALLOCATIONS AND CONTRIBUTIONS
(a) Maximum Annual Additions
All annual additions made under the provisions of this Article
III within any Plan Year and with respect to any Participant
shall not exceed the lesser of:
(i) Thirty thousand dollars ($30,000.00) or, if greater,
one-fourth of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code, or
(ii) for Plan Years ending on or before December 31, 1997,
25% of the Participant's Compensation for such Plan
Year, or for Plan Years
<PAGE> 22
-18-
beginning on or after January 1, 1998, 25% of the
Participant's 414(q) Compensation for such Plan Year.
For Plan Years ending on or before December 31, 1986, the term
"annual addition" shall mean the sum of (1) Employer
Contributions, plus (2) the lesser of one-half (1/2) of the
Participant's After-Tax Contributions or such Participant's
After-Tax Contributions in excess of six percent (6%) of his
annual Compensation, plus (3) Forfeitures. For Plan Years
beginning after December 31, 1986, the term "annual addition"
shall mean the amount allocated to a Participant's Account
during the Plan Year that constitutes Profit Sharing
Contributions, 401(k) Contributions, Matching Contributions,
Qualified Non-elective Contributions, After-Tax Contributions
and Forfeitures.
In the event the limits of this Section 3.09(a) are exceeded,
the provisions of Section 3.10(a) shall become effective.
(1/1/88; 1/1/98)
(b) Maximum 401(k) Contributions ("ADP Test")
The average actual deferral percentage for eligible
Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the greater of (i) or (ii) below:
(i) the average actual deferral percentage for eligible
Participants who are Non-highly Compensated Employees
for the Plan Year multiplied by 1.25, or
(ii) the average actual deferral percentage for eligible
Participants who are Non-highly Compensated Employees
for the Plan Year multiplied by 2.0, provided that
the average actual deferral percentage for eligible
Participants who are Highly Compensated Employees
does not exceed the average actual deferral
percentage for eligible Participants who are
Non-highly Compensated Employees by more than two
percentage points or such lesser amount as the
Secretary of the Treasury may prescribe by
regulation, and provided further that the provisions
of Section 3.09(d) are not applicable.
For purposes of this Section 3.09(b) and Section 3.10(c), the
following definitions shall be used:
(x) "Actual deferral percentage" shall mean the ratio
(expressed as a percentage and rounded to the nearest
one-hundredth of a percent) of 401(k) Contributions
and, to the extent needed to meet the requirements of
Section 401(k)(3)(A)(ii) of the Code, Qualified
Non-elective Contributions on behalf of the eligible
Participant for the Plan Year to the eligible
Participant's 414(q) Compensation for the Plan Year
and shall be
<PAGE> 23
-19-
determined separately for each eligible Participant.
The actual deferral percentage of an eligible
Participant who does not elect to have 401(k)
Contributions made to his Account shall be zero.
(y) "Average actual deferral percentage" shall mean the
average (expressed as a percentage and rounded to the
nearest one-hundredth of a percent) of the actual
deferral percentages of the eligible Participants in
a group.
(z) "Eligible Participant" shall mean any Participant who
is eligible under the terms of the Plan to have
401(k) Contributions allocated to his Account for all
or any part of the Plan Year and includes an Employee
who would be a Participant but for his failure to
elect 401(k) Contributions, an Employee whose
eligibility to elect 401(k) Contributions has been
suspended because of an election not to participate
or because of a distribution or a loan, and an
Employee who cannot elect 401(k) Contributions
because the limitations on annual additions set out
in Section 3.09(a) above would be exceeded.
For purposes of calculating actual deferral percentages, a
401(k) Contribution shall be taken into account for the Plan
Year being tested only if the contribution (1) is allocated to
the Participant's Account as of a date within the Plan Year,
(2) is not contingent upon the Participant's participation in
the Plan or performance of services on any date subsequent to
that date, (3) is actually paid to the trust no later than the
end of the 12-month period immediately following the Plan Year
to which the contribution relates, and (4) relates to
compensation that, but for the Participant's election to
authorize the contribution, would have been received by him in
the Plan Year or within two and one-half months after the
close of the Plan Year. Qualified Non-elective Contributions
may be taken into account to the extent needed to meet the
requirements of Section 401(k)(3)(A)(ii) of the Code, as set
out in paragraphs (i) and (ii) above, in accordance with the
provisions of Treasury Reg. ss.1.401(k)-1 (b) which is
incorporated herein by reference.
For Plan Years ending on or before December 31, 1996, for
purposes of the ADP Tests under paragraphs (i) and (ii) above,
Employees who are Family Members of a five percent owner or a
Highly Compensated Employee who is one of the ten most highly
compensated Employees, ranked on the basis of 414(q).
Compensation paid by the Employer during such year, shall be
aggregated with the Highly Compensated Employee. Where family
aggregation is required, the related Employees are treated as
one Highly Compensated Employee and the actual deferral
percentage for the group is the ratio determined by combining
the 414(q) Compensation, 401(k) Contributions and Qualified
Non-elective Contributions of the Highly Compensated Employee
and all Family Members. Once the ratio for the group has been
determined, the 414(q) Compensation, 401(k) Contributions and
Qualified Non-elective Contributions of each Family Member are
not separately taken into account in the applicable test.
<PAGE> 24
-20-
The determination and treatment of the 401(k) Contributions,
Qualified Non-elective Contributions and actual deferral
percentage of any Participant shall satisfy such other
requirements as may be prescribed under Treasury Reg.
ss.1.401(k)-1(b).
In the event the limits of this Section 3.09(b) are exceeded,
the provisions of Section 3.10(c) shall become effective.
(1/l/93)
(c) Maximum Employee Contributions and Matching Contributions
("ACP Test")
The average contribution percentage for eligible Participants
who are Highly Compensated Employees for the Plan Year shall
not exceed the greater of (i) or (ii) below:
(i) The average contribution percentage for eligible
Participants who are Non-highly Compensated Employees
for the Plan Year multiplied by 1.25; or
(ii) The average contribution percentage for eligible
Participants who are Non-highly Compensated Employees
for the Plan Year multiplied by 2.0, provided that
the average contribution percentage for eligible
Participants who are Highly Compensated Employees
does not exceed the average contribution percentage
for eligible Participants who are Non-highly
Compensated Employees by more than two percentage
points or such lesser amount as the Secretary of the
Treasury may prescribe by regulation, and provided
further that the provisions of Section 3.09(d) are
not applicable.
For purposes of this Section 3.09(c) and Section 3.10(d), the
following definitions shall be used:
(w) "Average contribution percentage" shall mean the
average (expressed as a percentage and rounded to the
nearest one-hundredth of a percent) of the
contribution percentages of the eligible Participants
in a group.
(x) "Contribution percentage" shall mean the ratio
(expressed as a percentage and rounded to the nearest
one-hundredth of a percent), of the sum of the
employee contributions and Matching Contributions
under the Plan on behalf of the eligible Participant
for the Plan Year to the eligible Participant's
414(q) Compensation for the Plan Year and shall be
determined separately for each eligible Participant.
The contribution percentage of an eligible
Participant who makes no employee contributions and
receives no Matching Contributions shall be zero.
(y) "Eligible Participant" shall mean any Participant who
is eligible under the terms of the Plan to have
Employee Contributions or Matching
<PAGE> 25
-21-
Contributions allocated to his account for all or any
part of the Plan Year and includes an Employee who
would be a Participant but for his failure to make
contributions under this or any other Plan, an
employee whose eligibility to make employee
contributions or to receive Matching Contributions
has been suspended because of an election not to
participate, and an Employee who cannot make employee
contributions or receive a Matching Contribution
because the limitations on annual additions set out
in Section 3.09(a) above would be exceeded.
(z) "Employee Contributions" shall mean any mandatory or
voluntary contribution to the plan that is treated at
the time of contribution as an after-tax employee
contribution and is allocated to a separate account
to which earnings and losses are allocated and
includes After-Tax Contributions and amounts
attributable to Excess 401(k) Contributions as
defined in Section 3.10(c) that have been
recharacterized as contributed by the Participant to
the Trust. Employee contributions do not include
repayment of loans, repayment of distributions
described in Section 411(a)(7)(C) of the Code and
Section 7.03 of the Plan, and employee contributions
that are transferred to the Plan from another Plan.
For purposes of calculating actual contribution percentages,
an employee contribution shall be taken into account for the
Plan Year being tested only if the contribution is paid to the
trust during the Plan year or paid to an agent of the Plan
within the Plan Year and transmitted to the Trust within a
reasonable period after the end of the Plan Year. An Excess
401(k) Contribution that is re-characterized shall be taken
into account in the Plan Year in which the contribution would
have been received in cash by the Participant had he not
elected to defer the amount. A Matching Contribution shall be
taken into account for a Plan Year only if it (1) is made on
account of the Participant's elective or employee
contributions for the Plan year, (2) is allocated to the
Participant's Account as of a date within the Plan Year, and
(3) is actually paid to the trust no later than the end of the
12-month period immediately following the Plan Year to which
the contribution relates. A Matching Contribution that is
forfeited to correct Excess Aggregate Contributions, or
because the contribution to which it relates is treated as an
Excess Deferral under Section 3.10(b), an Excess 401(k)
Contribution under Section 3.10(c), or an Excess Aggregate
Contribution under Section 3.10(d) shall not be taken into
account for purposes of calculating actual contribution
percentages. Qualified Non-elective Contributions may be
treated as Matching Contributions and taken into account to
the extent needed to meet the requirements of Section 401(m)
(2)(A) of the Code, as set out in paragraphs (i) and (ii)
above, if and to the extent not used to meet the requirements
of Section 401(k)(3)(A)(ii) of the Code and if the
requirements of Treasury Reg. ss.1.401 (m)-1(b)(5) are
satisfied.
For Plan Years ending on or before December 31, 1996, for
purposes of the ACP Tests under paragraphs (i) and (ii) above,
Employees who are Family Members of a five percent owner or a
Highly Compensated Employee who is one of the ten
<PAGE> 26
-22-
most highly compensated Employees shall be aggregated with the
Highly Compensated Employee. Where family aggregation is
required, the related Employees are treated as one Highly
Compensated Employee and the contribution percentage for the
group is the ratio determined by combining the 414(q)
Compensation, employee contributions and Matching
Contributions of the Highly Compensated Employee and all
Family Members. Once the ratio for the group has been
determined, the 414(q) Compensation, employee contributions
and Matching Contributions of each Family Member are not
separately taken into account in the applicable test. (1/l/97)
The determination and treatment of employee contributions,
Matching Contributions and Qualified Non-elective
Contributions and the contribution percentage of any eligible
Participant shall satisfy such other requirements as may be
prescribed under Treasury Reg. ss.1.401(m)(I)(b), which is
incorporated herein by reference.
In the event the limits of this Section 3.09(c) are exceeded,
the provisions of Section 3.10(d) shall become effective.
(1/l/93)
(d) Restrictions on Multiple Use of Alternative Limitation for ADP
and ACP Tests
The provisions of Sections 3.09(b)(ii) and 3.09(c)(ii) set
forth alternative methods of compliance with Sections 401(k)
and 401(m) of the Code, respectively, and are referred to in
this section as the "alternative limitation." Multiple use of
the alternative limitation under both Section 3.09(b) and
Section 3.09(c) is not permitted. A determination whether
multiple use of the alternative limitation has occurred shall
be made in accordance with Treasury Reg.
ss.1.401(m)-1(b).
In the event multiple use of the alternative limitation has
occurred with respect to a Plan Year, such multiple use shall
be corrected in accordance with this Section 3.09(d). The
Employer shall have the option of eliminating the multiple use
of the alternative limitation by making Qualified Non-elective
Contributions. If such Qualified Non-elective Contributions
are not made, or are made but do not eliminate the multiple
use of the alternative limitation, the actual contribution
percentage of the entire group of eligible Participants who
are Highly Compensated Employees shall be reduced so that
there is no multiple use of the alternative limitation. The
calculation of the amount of the reduction of the actual
contribution percentages shall be made in accordance with the
provisions of Treasury Reg. ss.1.401(m)-1(e)(2), which is
incorporated herein by reference.
(1/l/93)
(e) Limitations on Compensation
For Plan Years beginning after December 31, 1993, the
Compensation of each Employee taken into account under this
Plan shall not exceed $150,000.00,
<PAGE> 27
-23-
adjusted for cost of living changes determined by the
Secretary of the Treasury under Section 401(a)(17)(B) of the
Code. For Plan Years beginning after December 31, 1988 and
before January 1, 1994, the Compensation of each Employee
taken into account under this Plan shall not exceed $200,000
adjusted for cost of living changes determined by the
Secretary of the Treasury under Section 401(a)(17) of the
Code. The Compensation of an Employee who is a five percent
owner or a Highly Compensated Employee who is one of the ten
most highly compensated employees ranked on the basis of
Compensation paid by the Employer during such year shall
include the Compensation of the spouse of the Employee and of
any lineal descendant of the Employee who has not attained age
19 before the end of the Plan Year, and such persons shall not
be considered separate Employees.
(1/l/89; 1/l/94)
3.10 ALLOCATION OF EXCESS ALLOCATIONS AND CONTRIBUTIONS
(a) Excess Annual Additions
The following steps shall be taken when a Participant has
received an allocation to his Participant Account in a given
Plan Year which results in an annual addition that would
exceed the limitations in 3.09(a) above:
(i) That portion of a Participant's After-Tax
Contribution for that Plan Year which is a part of
the annual additions shall be refunded to him to the
extent necessary to reduce the annual addition to the
allowable limits as set forth in Section 3.09(a)
above.
(ii) If, after returning a Participant's After-Tax
Contributions for that Plan Year as called for in (i)
above, the limits of Section 3.09(a) are still
exceeded, then the excess portion of the allocation
of Profit Sharing Contributions and Forfeitures shall
be reallocated to eligible Participants as a
Forfeiture for the Year in the manner described in
Section 3.07 of this Article III.
(iii) In the event that any Profit Sharing Contributions
and/or Forfeitures may still be remaining subsequent
to the procedures set forth in (ii) above, then such
amounts shall be placed in a suspense account to be
reallocated on the next succeeding Allocation Date in
accordance with Section 3.07 of this Article Ill. In
the event of termination of the Plan, the suspense
account shall revert to the Employer to the extent it
may not then be allocated to any Participant's
Account.
(iv) Notwithstanding any other provisions of this Plan,
the Employer shall not contribute any amount that
would cause an allocation to the suspense account as
of the date the contribution is allocated. If the
contribution is
<PAGE> 28
-24-
made prior to the date as of which it is to be
allocated, then such contribution shall not exceed an
amount that would cause an allocation to the suspense
account if the date of contribution were on the
allocation date. If an allocation is made to such
suspense account, it shall contain gains or losses.
Any such gains shall be viewed as an annual addition
at the time they are allocated to a Participant's
Account.
(1/l/87)
(b) Excess Deferrals
In the event the aggregate elective deferrals of a Participant
under one or more plans described in Sections 401(k), 408(k)
or 403(b) of the Code exceed $7,000.00 (adjusted for cost of
living changes as provided in Section 3.02) for any taxable
year of such Participant, the excess deferral amount for such
year that the Participant allocates to this Plan and income
allocable thereto shall be distributed no later than April 1
following the close of such taxable year, provided that the
Participant gives written notice on or before March 1
following the close of the taxable year specifying the excess
deferral amount allocated to this Plan and stating that if
such amounts are not distributed, such excess deferral amount,
when added to amounts deferred under other plans or
arrangements described in Sections 401(k), 408(k), or 403 (b)
of the Code, will exceed the limit imposed on the Participant
by Section 402(g) of the Code for the year in which the
deferral occurred. Notwithstanding a distribution under this
Section 3.10(b), any excess deferral amount allocated to this
Plan shall be treated as a 401(k) Contribution for purposes of
applying Section 3.09(b). (1/l/88; 7/l/96)
(c) Excess 401(k) Contributions
The Plan Administrator may suspend, reduce or prohibit all
401(k) Contributions made on behalf of Participants who are
Highly Compensated Employees for any Plan Year or part
thereof, if the Plan Administrator in its discretion
determines that such 401(k) Contributions may result in an
actual deferral percentage that exceeds the limits of Section
3.09(b). In the event the limits of Section 3.09(b) are
exceeded for any Plan Year, the excess contributions shall be
treated as provided in (i) or (ii) below:
(i) At the Participant's written election, excess
contributions and income allocable thereto shall be
treated as an amount distributed to the Participant
and then contributed by the Participant to the Trust,
provided that such treatment does not cause the
limitations of Sections 3.09(a) or 3.09(c) to be
exceeded.
(ii) For Plan Years ending on or before December 31, 1996,
except as otherwise elected in writing by a
Participant pursuant to (i) above, excess
contributions and income or loss allocable thereto
shall be distributed no
<PAGE> 29
-25-
later than the last day of the following Plan Year to
Participants on whose behalf such excess
contributions were made. Any distribution of excess
contributions for any Plan Year shall be made to
Highly Compensated Employees on the basis of the
respective portions of the excess contributions
attributable to each of such Employees. For Plan
Years beginning on or after January 1, 1997, any
distribution of excess contributions for any Plan
Year shall be made to Highly Compensated Employees on
the basis of the amount of contributions by, or on
behalf of, each of such Employees. (1/1/97)
Allocable income or loss shall include income or loss for the
Plan Year in which the limits were exceeded. Allocable income
or loss shall be determined by multiplying the income or loss
for the Plan Year by a fraction, the numerator of which is the
excess contributions for the Plan Year and the denominator of
which is the Participant's account balance attributable to
401(k) Contributions, Matching Contributions and Qualified
Non-elective Contributions as of the end of the Plan Year
minus the income or plus the loss allocable to such account
balance for the Plan Year.
(1/1/88)
The term "excess contributions" means, with respect to any
Plan Year, the excess of (x) the aggregate amount of 401(k)
Contributions, Matching Contributions and Qualified
Non-elective Contributions actually paid over to the Trustees
on behalf of Highly Compensated Employees for such Plan Year,
over (y) the maximum amount of such contributions permitted
under the limitations of Section 3.09(b) (determined by
reducing contributions made on behalf of Highly Compensated
Employees in order of actual deferral percentages beginning
with the highest of such percentages).
(1/l/88)
(d) Excess Aggregate Contributions
In the event the limits of Section 3.09(c) are exceeded for
any Plan Year, excess aggregate contributions and income or
loss allocable thereto shall be forfeited, if otherwise
forfeitable under the terms of this Plan, or if not
forfeitable, distributed no later than the last day of the
following Plan Year to Participants to whose accounts such
After-Tax Contributions or Matching Contributions were
allocated. For Plan Years ending on or before December 31,
1996, any distribution of excess aggregate contributions for
any Plan Year shall be made to Highly Compensated Employees on
the basis of the respective portions of such amounts
attributable to each of such Employees. Forfeitures of excess
aggregate contributions may not be allocated to Participants
whose contributions are reduced under this paragraph. For Plan
Years beginning on or after January 1, 1997, any distribution
of excess aggregate contributions for any Plan Year shall be
made to Highly Compensated
<PAGE> 30
-26-
Employees on the basis of the amount of contributions by, or
on behalf of, each of such Employees. (1/1/97)
Allocable income or loss shall include income or loss both for
the Plan Year in which the limits were exceeded. Allocable
income or loss shall be determined by multiplying the income
or loss for the Plan Year by a fraction, the numerator of
which is the excess aggregate contributions for the Plan Year
and the denominator of which is the Participant's account
balance attributable to After-Tax Contributions and Matching
Contributions as of the end of the Plan Year minus the income
or plus the loss allocable to such account balance for the
Plan Year.
The term "excess aggregate contributions" means, with respect
to any Plan Year, the excess of (x) the aggregate amount of
contributions taken into account in computing the contribution
percentage under Section 3.09(c) actually made on behalf of
Highly Compensated Employees for such Plan Year, over (y) the
maximum amount of such contributions permitted under the
limitations of Section 3.09(c) (determined by reducing
contributions made on behalf of Highly Compensated Employees
in order of their contribution percentages beginning with the
highest of such percentages). The determination of the amount
of excess aggregate contributions shall be made after first
applying the provisions of Sections 3.10(b) and 3.10(c).
(1/l/87)
3.11 CONTRIBUTIONS FOR TOP HEAVY PLAN YEARS
For any Plan Year for which this Plan is deemed to be a Top Heavy Plan
under the provisions of Section 1.47 of the Plan, the following
provisions shall apply:
(a) The Employer shall contribute for each Participant who is not
a Key Employee not less than three (3%) percent of such
Participant's Compensation for the year, except as provided in
Section 3.11(b) below. For purposes hereof, any Participant
who has not separated from service at the end of the Plan Year
shall receive the minimum contribution provided for herein
without regard to the number of hours worked during the Plan
Year.
(b) The percentage referred to in Section 3.11(a) above for any
year shall not exceed the percentage at which contributions
are made under the Plan for such year for the Key Employee for
whom such percentage is the highest for the year. The
determination of the percentage at which contributions are
made for each Key Employee shall be made by dividing the
contribution for such Employee by so much of his Compensation
for the year as does not exceed the amount in effect under
Section 3.09(e). (7/l/96)
(c) The annual Compensation of each Employee taken into account
under this Plan shall not exceed $200,000 multiplied by the
Adjustment Factor. For Plan Years
<PAGE> 31
-27-
beginning on or after January 1, 1989, Section 3.09(e) shall
be applied in lieu of this Section 3.11(c).
(1/l/89)
3.12 CONTRIBUTIONS UNDER USERRA
Notwithstanding any provision of the Plan to the contrary,
contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of
the Internal Revenue Code.
ARTICLE IV
DISTRIBUTIONS PRIOR TO TERMINATION OF EMPLOYMENT
4.01 DISTRIBUTIONS FROM AFTER-TAX CONTRIBUTIONS ACCOUNTS
A Participant may, at any time prior to his separation from service
with the Employer, whether by reason of death, disability, retirement
or termination of employment, elect to receive a distribution equal to
all or a specified portion of the value of his After-Tax Contributions
Account. Any request for a distribution shall be made in accordance
with the provisions of Section 4.05.
For years ending prior to December 31, 1987, any Participant who
receives a distribution from his After-Tax Contributions Account shall
be prohibited from making After-Tax Contributions for a period of
twelve (12) months. The Participant may elect to resume After-Tax
Contributions as of the first day of any month which succeeds the date
of withdrawal by at least twelve (12) months. Election to resume
payments must be made in writing to the Plan Administrator at least
thirty one (31) days prior to the first day of the month in which the
Participant wishes the resumption to be made effective.
Amounts withdrawn by a Participant hereunder may not be returned to the
Trust.
Upon a Participant's separation from service with the Employer, whether
by reason of death, disability, retirement or termination of
employment, distribution of the Participant's After-Tax Contributions
Account shall be subject to the provisions of Article VI or VII, as the
case may be.
(1/l/92)
4.02 DISTRIBUTIONS FROM PROFIT SHARING ACCOUNT
In no event shall a Participant be eligible to elect a distribution
from his Profit Sharing Account except upon his termination from
service with the Employer, whether by reason of death, disability,
retirement or termination of employment, at which time such
distribution shall be subject to the terms of Article VI or VII, as the
case may be.
<PAGE> 32
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(1/l/92)
4.03 DISTRIBUTIONS FROM ROLLOVER ACCOUNT
(a) A Participant may, at any time after he has attained age 59
1/2, elect to withdraw a cash amount equal to all or a
specified portion of his Rollover Account. Any withdrawal
shall be made in accordance with the provisions of Section
4.05.
(b) Prior to his termination from service with the Employer, a
Participant may request, and the Plan Administrator may
authorize, distributions from the Participant's Rollover
Account in the event of hardship, as defined in Section 4.05.
Any hardship distribution shall be made in accordance with the
provisions of Section 4.05.
(c) Upon a Participant's termination from service with the
Employer, whether by reason of death, disability, retirement
or termination of employment, distribution of the
Participant's Rollover Account shall be subject to the terms
of Article VI or VII, as the case may be.
(Paragraphs (b) and (c) eff. 1/l/92; paragraph (a) eff. 1/l/93)
4.04 DISTRIBUTIONS FROM 401(k) ACCOUNT (INCLUDING 401(k) AND QUALIFIED
NON-ELECTIVE CONTRIBUTIONS) AND MATCHING CONTRIBUTIONS ACCOUNT
Prior to his termination from service with the Employer, a Participant
shall be eligible to elect or request a distribution from his 401(k)
Account (including 401(k) and Qualified Non-elective Contributions) or
Matching Contributions Account only as provided herein.
(a) A Participant may, at any time after he has attained age 59
1/2, elect to withdraw a cash amount equal to all or a
specified portion of his 401(k) Account and the vested portion
of his Matching Contributions Account. Any withdrawal shall be
made in accordance with the provisions of Section 4.05.
(1/l/93)
(b) In the event this Plan terminates without the establishment of
a successor plan, a Participant may elect to receive a lump
sum distribution of the balance of his 401(k) Account and
Matching Contributions Account. Any distribution shall be made
in accordance with the provisions of Section 4.05.
(c) A Participant may request, and the Plan Administrator may
authorize, distributions from a Participant's 401(k) Account
in the event of hardship, as defined in Section 4.05. Any
hardship distribution shall be made in accordance with the
provisions of Section 4.05.
<PAGE> 33
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Any Participant who receives a hardship distribution under this Section
4.04(c) shall be prohibited from making 401(k) Contributions under this
Plan, as well as any other elective contributions to all other plans of
deferred compensation maintained by the Employer, for a period of
twelve (12) months after the date of receipt of the distribution. The
Participant may elect to resume 401(k) Contributions as of the Entry
Date which succeeds the date of the hardship distribution by at least
twelve (12) months, provided that the Participant's 401(k)
Contributions for his taxable year immediately following the taxable
year of the distribution shall not exceed the limit set forth in
Section 3.02 of this Plan decreased by the amount of the Participant's
401(k) Contributions for the taxable year of the hardship distribution.
An election to resume 401(k) Contributions must be made during the
thirty (30) day period prior to the Entry Date on which the Participant
wishes the resumption to be made effective.
Hardship distributions under this Section 4.04(c) shall be limited to
that portion of the Participant's 401(k) Account that is attributable
to his 401(k) Contributions and shall not include any portion of such
account that is attributable to income earned on such account after
December 31, 1988. In addition, hardship distributions shall not
include any portion of the Participant's 401(k) Account that is
attributable to Qualified Non-elective Contributions or qualified
employer matching contributions (if any) or any income earned thereon.
(7/1/96)
(d) Upon a Participant's separation from service with the
Employer, whether by reason of death, disability, retirement
or termination of employment, distribution of the
Participant's 401(k) Account and Matching Contributions
Account shall be subject to the provisions of Article VI or
VII as the case may be.
(1/l/92)
4.05 PROCEDURES FOR PERMITTED WITHDRAWALS
(a) All requests for distributions under Sections 4.01, 4.03(a),
4.04(a) and 4.04(b) shall be made in accordance with
non-discriminatory procedures established by the Plan
Administrator. The minimum distribution amount shall be the
total balance of the Account or in increments of $100.00.
Distributions shall be made as soon as administratively
feasible following the request for withdrawal.
(b) Requests for hardship distributions under Sections 4.03(b) and
4.04(c) shall be made to the Plan Administrator. Distributions
shall be made as soon as administratively feasible following
approval of the request for distribution.
Hardship shall mean an immediate and heavy financial need of
the Participant where such Participant lacks other available
resources to meet the need. The amount of the hardship
distribution cannot exceed the amount necessary to satisfy the
need.
<PAGE> 34
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The following will be deemed immediate and heavy financial
needs: expenses incurred or necessary for medical care,
described in Code Section 213(d), of the Participant or the
Participant's spouse, children or dependents; payment of the
funeral expenses of a family member; payment of tuition,
related educational fees and room and board expenses for not
more than the next twelve months of postsecondary education
for the Participant, or the Participant's spouse, children or
dependents; the purchase (excluding mortgage payments) of a
principal residence for the Participant; or the need to
prevent the eviction of the Participant from, or a foreclosure
on the mortgage of, the Participant's principal residence.
A distribution will be deemed to be necessary to satisfy an
immediate and heavy financial need of the Participant only if
(i) the Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all
plans maintained by the Employer and (ii) the distribution is
not in excess of the amount necessary to meet the 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).
The Plan Administrator may determine that a distribution is
necessary to satisfy an immediate and heavy financial need of
the Participant if (i) the amount of the distribution is not
in excess of the amount required to relieve the need and (ii)
the need may not be satisfied from other resources that are
reasonably available to the Participant, including resources
of the Participant, the Participant's spouse and minor
children. In making this determination, the Plan Administrator
may rely upon the Participant's representation (unless the
Plan Administrator has actual knowledge to the contrary) that
the need cannot reasonably be relieved: (i) through
reimbursement or compensation by insurance or otherwise; (ii)
by liquidation of the Participant's assets; (iii) by cessation
of 401(k) Contributions (for hardship distributions from
401(k) Accounts); or (iv) by other distributions or nontaxable
(at the time of the loan) loans from plans maintained by the
Employer or by any other employer, or by borrowing from
commercial sources on reasonable commercial terms in an amount
sufficient to satisfy the need. For purposes of this
paragraph, a need cannot reasonably be relieved by one of the
actions listed above if the effect would be to increase the
amount of the need.
(c) If a distribution is to be made from any portion of a
Participant's Account that accrued prior to July 1, 1996 and
if the Participant is married, the spouse of the Participant
must consent to any lump sum distribution in excess of $3,500.
The spouse's consent must be in writing and must acknowledge
the effect of the election. The spouse's signature must be
witnessed by a Plan representative or a notary public.
(d) amounts withdrawn by a Participant may not be returned to the
Trust.
(1/l/92; 7/l/96)
<PAGE> 35
-31-
4.06 LOANS TO PARTICIPANTS
The Plan Administrator may, subject to rules of uniform application,
authorize the Trustee to make loans to a Participant or to a
Beneficiary, subject to the provisions of this Section 4.06.
(a) Loans under this Section 4.06 may be made to any Participant,
or to any former Participant or Beneficiary who is a party in
interest under ERISA with respect to this Plan, so long as
such individual has an account balance in his 401(k) account,
Rollover Account and/or Matching Contributions Account.
(1/1/92)
(b) The amount of any loan to a Participant or Beneficiary, when
added to the outstanding balance of all other loans from this
Plan or a related plan to such Participant or Beneficiary,
shall be limited to one-half of the present value of the
Participant's or Beneficiary's vested interest in his 401(k)
Account, Matching Contributions Account and Rollover Account,
but shall not be more than fifty thousand ($50,000) dollars
reduced by the excess, if any, of the highest outstanding
balance of loans from the Plan during the one-year period
ending on the day before the date on which the loan is made,
over the outstanding balance of loans from the Plan on the
date on which the loan is made. (1/1/92)
(c) The minimum loan amount shall be $1,000 and the loan amount in
excess of the minimum shall be in increments of $100.00.
(d) Loans shall be made available to eligible Participants and
Beneficiaries on a reasonably equivalent basis. The Plan
Administrator may, however, reasonably decide to approve or
deny a loan based upon an applicant's credit worthiness, other
outstanding financial obligations, financial need and other
factors that the Plan Administrator determines may adversely
affect repayment of the loan. The Plan Administrator may
charge a loan administration fee.
(e) Any loan hereunder shall be evidenced by a valid promissory
note, payable on a date or dates certain, with interest at a
rate to be established by the Plan Administrator with
reference to the then-current interest rates available from
commercial lending institutions for similar loans. Monthly
payments shall be in an amount that results in substantially
level amortization of the principal and interest of the loan
over the terms of the loan. Unless the loan is to be used to
acquire any dwelling unit which, within a reasonable time of
the date of the loan, is to be used as a principal residence
of the Participant, the note shall provide that the loan is to
be repaid within a period not exceeding five (5) years. The
note shall also provide that the loan will become due and
payable prior to the end of such period in the event of
default by the borrower as defined below.
(f) If the borrower is an Employee of the Employer, he shall
authorize the Employer to withhold the amount of his periodic
payments under the note from his compensation and to pay such
amounts directly to the Trustee.
<PAGE> 36
-32-
(g) The Plan Administrator may require adequate security for the
loan, determined with reference to the type and amount of
security which would be required in the case of a similar
arms-length transaction between unrelated parties in a
commercial setting. The Participant's or Beneficiary's
401(k)Account, Matching Contributions Account and Rollover
Account may be used as security for a loan, but only 50% of
the present value of his vested interest in such Accounts,
determined as of the origination of the loan, may be
considered in determining the adequacy of such security. If
any portion of such Accounts that accrued prior to July 1,
1996 is to be used as security, the spouse of a married
Participant must consent in writing to the use of the Accounts
as security and such consent must be given at the time the
security interest is entered into.
(h) A Participant or Beneficiary shall be in default with respect
to any loan granted hereunder, and the note will become due
and payable upon demand, upon the occurrence of any of the
following:
(1) Failure by the borrower to pay when due any interest
or principal or both under the note;
(2) The occurrence of an event of default under any other
note of the borrower to the Trustee;
(3) If any property pledged as security for the note
becomes subject to attachment or garnishment;
(4) If any property pledged as security for the note is
disposed of without prior substitution of other
security satisfactory to the Plan Administrator; or
(5) The occurrence of an event requiring the commencement
of benefit payments or a distribution of the
borrower's vested interest in his Accounts under the
Plan.
In the event the Borrower makes an assignment for the benefit
of creditors, files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, or becomes a subject of any wage earner
plan under state or federal law, or in the event a bankruptcy
or similar proceeding is commenced against borrower to which
borrower consents, assents or acquiesces, or which remains
undismissed or stayed for a period of 60 days, the note will
become immediately due and payable.
(i) The Plan Administrator shall take such actions as it deems
reasonable and prudent to collect such amounts as are due and
unpaid including but not limited to foreclosure on the
security interest given to secure the loan. If the security
interest is the Participant's or Beneficiary's 401(k) Account,
Matching Contributions Account and/or Rollover Account the
Plan Administrator may direct the Trustee to deduct such
amounts from such Account or Accounts, in which event such
amounts shall be treated as distributed to the borrower and
applied by the
<PAGE> 37
-33-
borrower as a payment of the unpaid principal and interest
under the note. The Plan Administrator shall not, however,
take any action that would result in a disqualifying
distribution under the Plan.
(j) Any loan granted under this Section 4.06 shall be deemed to be
made first from the borrower's 401(k) Account, then from his
Matching Contributions Account, then from his Rollover
Account, and the investment experience of such loan shall be
credited to (or deducted from) the borrower's said Accounts in
the proportion in which the fiends were borrowed. (1/ I /92)
(10/l/89; Rollover Accounts added effective 1/l/92;7/l/96)
4.07 DISTRIBUTIONS PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDER
All or a specified portion of a Participant's vested interest in his
Participant's Account may be distributed to an Alternate Payee in the
form of a single sum cash distribution pursuant to a qualified domestic
relations order which meets the requirements of Section 414(p) of the
Code prior to the time the Participant would be entitled to a
distribution under the Plan. The distribution shall be made as soon as
administratively feasible following the close of the calendar quarter
coinciding with or next following a determination by the Plan
Administrator that a domestic relations order is qualified. This
section shall not be interpreted as requiring that a domestic relations
order provide for an Alternate Payee's benefit to be paid in a
particular form or at a particular time in order to be qualified.
(1/l/93)
<PAGE> 38
-34-
ARTICLE V
VESTING
5.01 FULL VESTING
(a) A Participant shall be one hundred percent (100%) vested in
his After-Tax Contributions Account, Rollover Account and
401(k) Account at all times.
(b) A Participant's interest in his Profit Sharing Account shall
become one hundred percent (100%) vested at the earliest of
the following dates:
(i) For Plan Years ending on or before December 31, 1987,
the date the Participant has completed ten (10) Years
of Service with the Employer; for Plan Years
beginning after December 31, 1987, and ending on or
before June 30, 1996, the date the Participant has
completed five (5) Years of Service with the
Employer; provided that, if the Participant has
completed five (5) Years of Service on or before
December 31, 1987 and is employed on that date, he
shall become one hundred percent (100%) vested as of
December 31, 1987; and for Plan Years beginning after
June 30, 1996, the date the Participant has completed
three (3) Years of Service with the Employer,
provided that if the Participant has completed three
Years of Service on or before June 30, 1996 and is
employed on that date, he shall become one hundred
percent (100%) vested as of June 30, 1996;
(ii) The date of the Participant's death;
(iii) The date the Participant incurs a Disability;
(iv) The Participant's Normal Retirement Age;
(v) The date of termination of this Plan or partial
termination of this Plan with respect to the
Participant as provided in Article XIII, or the date
of complete discontinuance of Employer contributions
as provided in Section 10.04.
(c) A Participant's interest in his Matching Contributions Account
shall become one hundred percent (100%) vested at the earliest
of the following dates:
(i) The date the Participant has completed three (3)
Years of Service with the Employer;
(ii) The date of the Participant's death;
(iii) The date the Participant incurs a Disability;
(iv) The Participant's Normal Retirement Age;
<PAGE> 39
-35-
(v) The date of termination of this Plan or partial
termination of this Plan with respect to the
Participant as provided in Article XIII.
(1/l/88; 7/l/96)
5.02 PARTIAL VESTING
Prior to the date that the Participant's interest in his Profit Sharing
Account or Matching Contributions Account becomes fully vested in
accordance with Section 5.01, his current vested interest shall be
determined in accordance with (a), (b), (c) or (d) below:
(a) For Plan Years ending on or before December 31, 1987, the
following schedule shall apply with respect to Profit Sharing
Accounts:
Vested Percentage of
Years of Service Participant's Profit
With the Employer Sharing Account
----------------- --------------------
Less than 4 0%
4 40%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
(b) For Plan Years beginning after December 31, 1987 and ending
before June 30, 1996, the following schedule shall apply with
respect to Profit Sharing Accounts:
Vested Percentage of
Years of Service Participant's Profit
With the Employer Sharing Account
----------------- --------------------
Less than 2 0%
2 25%
3 50%
4 75%
5 or more 100%
(c) For Plan Years beginning after December 31, 1987, the
following schedule shall apply with respect to Matching
Contributions Accounts:
<PAGE> 40
-36-
Vested Percentage of
Years of Service Participant's Matching
With the Employer Contributions Account
----------------- ----------------------
Less than 1 0%
1 33 1/3%
2 66 2/3%
3 or more 100%
(1/l/88)
(d) For Plan Years beginning on or after July 1, 1996, the
following schedule shall apply with respect to both Profit
Sharing Accounts and Matching Contributions Accounts:
Vested Percentage of
Years of Service Participant's Profit Sharing and
With the Employer Matching Contributions Account
----------------- --------------------------------
Less than 1 0%
1 33 1/3%
2 66 2/3%
3 or more 100%
(7/l/96)
5.03 VESTING AFTER RECEIPT OF DISTRIBUTION
In the event that a Participant receives a distribution from his Profit
Sharing Account in accordance with the provisions of this Plan
governing distributions prior to the date he is one hundred percent
(100%) vested in such Account, then his vested interest in such Account
on any date of determination subsequent to the date of distribution and
prior to the date he ceases participation shall not be less than an
amount ("X") determined by the formula:
X = P (AB + (R) (D)) (R) (D), where
AB = The Participant's Account Balance as of the date of
determination
D = Amount of the distribution
P = The Vested percentage applicable to the Participant as of the
date of determination
R = The ratio of the Account Balance as of the date of
determination to the Account Balance after the distribution
<PAGE> 41
-37-
5.04 VESTING FOR TOP HEAVY PLAN
(a) In the event this Plan is deemed to a Top Heavy Plan, a
Participant's current vested interest in his Profit Sharing
Account shall be determined in accordance with this Section
5.04 notwithstanding the foregoing provisions of this Article
V.
(b) The following vesting schedule shall be applicable in lieu of
the vesting schedule set out in Section 5.02(a), with respect
to Plan Years ending on or before December 31, 1987:
Vested Percentage of
Years of Service Participant's Profit
With the Employer Sharing Account
----------------- --------------------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(c) The vesting schedule set out in section 5.02(b) shall be
applicable with respect to Plan Years beginning after December
31, 1987 and ending on or before June 30, 1996. The vesting
schedule set out in Section 5.02(d) shall be applicable with
respect to Plan Years beginning on or after July 1, 1996.
(7/l/96)
(d) For purposes of this Section 5.04, Years of Service shall be
determined under the applicable provisions of Sections 1.50,
2.02 and 2.03 of this Plan.
(e) At such time as the Plan ceases to be a Top Heavy Plan, the
vesting schedule of Section 5.02 shall again become applicable
in determining a Participant's vested interest in his Profit
Sharing Account; provided, however, that no Participant's
vested interest may be reduced hereunder; and provided
further, that any Participant who has completed at least three
(3) years of service at the time the Plan ceases to be a
Top-Heavy Plan may elect to continue to have his vested
percentage determined under the schedule set out in this
Subsection 5.04.
(1/l/88)
5.05 CREDITING YEARS OF SERVICE
(a) Years of Service for vesting purposes shall be credited in
accordance with the following provisions:
(1) All Years of Service of a Participant who has never
incurred a Break in Service or who has incurred fewer
than five (5) consecutive Breaks in
<PAGE> 42
-38-
Service shall be taken into account in determining
his vested interest in his Profit Sharing Account
and/or Matching Contributions Account.
(2) In the case of a Participant who has incurred five
(5) or more consecutive Breaks in Service, and who
has retained a vested interest in this Plan, separate
accounts will be maintained for the Profit Sharing
Contributions and Matching Contributions accrued
prior to such Breaks and Profit Sharing Contributions
and Matching Contributions accrued after such Breaks.
Years of Service after such Breaks shall be
disregarded for purposes of determining such
Participant's vested interest in his pre Break Profit
Sharing Account and/or Matching Contributions
Account, and all Years of Service shall be taken into
account in determining his vested interest in his
post Break Profit Sharing Account and/or Matching
Contributions Account.
(3) All Years of Service of an inactive or former
Participant whose vested percentage in this Plan in
accordance with this Article V is zero (0) shall be
taken into account for purposes of determining such
Participant's vested interest after re-employment
with the Employer unless the number of his
consecutive Breaks in Service equals or exceeds five
(5), in which case pre-break service shall be
disregarded. (1/l/88)
(b) For purposes of determining whether a Participant has incurred
a Break in Service, the following provisions shall apply in
the case of any individual who is absent from work for any
period by reason of the pregnancy of the individual, the birth
of a child of the individual, the placement of a child with
the individual in connection with the adoption of such child
by such individual, or for purposes of caring for such child
for a period beginning immediately following such birth or
placement.
(1) The following hours shall be treated as Hours of
Service under the Plan:
(i) the Hours of Service which otherwise
normally would have been credited to such
individual but for such absence, or
(ii) eight (8) hours per day of such absence, if
the actual number of hours described in
paragraph (i) cannot be determined;
except that the total number of hours
treated as Hours of Service hereunder shall
not exceed 501 hours.
(2) The hours described in subsection (1) above shall be
treated as Hours of Service only in the Plan Year in
which the absence from work begins, if a Participant
would be prevented from incurring a Break in Service
in such year solely because the period of absence is
treated as Hours of Service as
<PAGE> 43
-39-
provided in subsection (1) above, or otherwise in the
immediately following year.
(3) The Plan Administrator may require a Participant to
provide reasonable evidence to establish that the
absence from work is covered by these provisions and
the number of days for which there was such an
absence.
(1/l/85)
<PAGE> 44
-40-
ARTICLE VI
DISTRIBUTION AT RETIREMENT, DEATH, OR DISABILITY
6.01 DISTRIBUTION AT RETIREMENT
(a) A Participant shall, upon retirement on or after his Early
Retirement Date (if applicable) or his Normal Retirement Date,
be entitled to a distribution of his Participant Account as
described in this section.
(b) For benefits accrued prior to July 1, 1996, unless otherwise
elected as provided in Section 6.04 below, the Plan benefit to
be distributed to a Participant shall be paid in the form of a
Qualified Joint and Survivor Annuity. For benefits payable
from account balances originally accrued under the Zycon
Corporation Profit Sharing 401(k) Plan prior to October 1,
1997, the Plan benefit to be distributed to a Participant
shall be paid in the form of a Qualified Joint and Survivor
Annuity.
(c) For benefits accrued prior to July 1, 1996 (or, with respect
to account balances originally accrued under the Zycon
Corporation Profit Sharing 401(k) Plan, for benefits accrued
prior to October 1, 1997), if a Participant elects to waive a
benefit in the form described in paragraph (b) above, in
accordance with the election procedures described in Section
6.04 below, he may choose to receive a benefit in any one of
the following forms or in a combination of any of the
following forms:
(i) A single sum cash distribution equal to the total
amount contained in his Participant Account;
(ii) An annuity for the life of the Participant;
(iii) A contingent annuitant annuity;
(iv) A year certain and life annuity; or
(v) A full cash refund annuity.
(d) For benefits accrued on or after July 1, 1996 (or, with
respect to account balances originally accrued under the Zycon
Corporation Profit Sharing 401(k) Plan, for benefits accrued
on or after October 1, 1997), a Participant may choose to
receive a benefit in either of the following forms or in a
combination of the following forms:
(i) A single sum cash distribution equal to the total
amount contained in his Participant Account;
(ii) Payments in monthly, quarterly, semiannual or annual
cash installments over a period certain extending not
longer than the Participant's life
<PAGE> 45
-41-
expectancy (or the life expectancy of the Participant
and his designated beneficiary) based upon the total
value of his Participant's Account.
(c) For benefits accrued prior to July 1, 1996, if a Participant
elects to waive a benefit in the form described in paragraph
(b) above, in accordance with the election procedures
described in Section 6.04 below, he may choose to receive a
benefit in any one of the following forms or in a combination
of any of the following forms:
(i) A single sum cash distribution equal to the total
amount contained in his Participant Account;
(ii) An annuity for the life of the Participant;
(iii) A contingent annuitant annuity;
(iv) A year certain and life annuity; or
(v) A full cash refund annuity.
(d) For benefits accrued on or after July 1, 1996, a Participant
may choose to receive a benefit in either of the following
forms or in a combination of the following forms:
(i) A single sum cash distribution equal to the total
amount contained in his Participant Account; or
(ii) Payments in monthly, quarterly, semiannual or annual
cash installments over a period certain extending not
longer than the Participant's life expectancy (or the
life expectancy of the Participant and his designated
beneficiary) based upon the total value of his
Participant's Account.
(7/l/96)
6.02 DISTRIBUTION UPON INCURRING DISABILITY
If a Participant should become disabled prior to his Retirement Date,
he may elect, in accordance with the procedure described in Section
6.04 below, to receive a distribution of benefits in any of the forms
described in Section 6.01 above at any time after the date he incurs
the Disability. As of the Participant's Retirement Date, any amount
then remaining in his Participant Account shall commence to be paid as
a retirement benefit in accordance with Section 6.01 above.
6.03 DISTRIBUTIONS AT DEATH
(a) The Beneficiary of a Participant who dies before benefits have
commenced under this Plan shall be entitled to a death benefit
based on the value of the Participant's Account as of the date
of distribution. (7/l/96)
<PAGE> 46
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(b) For benefits accrued prior to July 1, 1996, unless otherwise
elected as provided in Section 6.04 below, the Plan benefit to
be distributed to the spouse of a Participant who is married
and who dies before benefits have commenced shall be paid in
the form of a qualified pre-retirement survivor annuity.
(7/l/96) For benefits payable from account balances originally
accrued under the Zycon Corporation Profit Sharing 401(k) Plan
prior to October 1, 1997, unless otherwise elected as provided
in Section 6.04 below, the Plan benefit to be distributed to
the spouse of a Participant who is married and who dies before
benefits have commenced shall be paid in the form of a
qualified pre-retirement survivor annuity. (10/l/97)
(c) If a Participant or his spouse elects to waive a benefit in
the form of a qualified pre-retirement survivor annuity in
accordance with the election procedures described in Section
6.04 below, or if the Participant is not married or has not
been married for the one-year period ending on the date of the
Participant's death, or if the value of the Participant's
Account is $3,500.00 or less for benefits accrued on or after
July 1, 1996 (or, for benefits accrued under the Zycon
Corporation Profit Sharing 401(k) Plan, benefits accrued on or
after October 1, 1997), the Plan benefit to be distributed in
the event of a Participant's death to or for the benefit of
his Beneficiary shall be paid in a single sum cash
distribution as soon as administratively feasible following
the date the Plan Administrator receives notice of the
Participant's death. For Plan Years beginning on or after
January 1, 1998, the $3,500.00 dollar limit stated above shall
be changed to $5,000.00. (1/l/88; 7/l/96; 10/l/97; 1/l/98)
(d) In the case of a Participant's death after the commencement of
a benefit under this Plan, any death benefit shall be payable
in accordance with the particular form of benefit the
Participant had elected.
(1/l/93; 7/l/96)
6.04 NOTICES AND ELECTION PROCEDURES
(a) For any Participant whose Participant Account includes
benefits accrued on or before June 30, 1996 (or, for benefits
accrued under the Zycon Corporation Profit Sharing 401(k)
Plan, benefits accrued on or before September 30, 1997),
within a reasonable time before or after the Participant's
annuity starting date consistent with regulations of the
Secretary of the Treasury, the Plan Administrator shall notify
the Participant in writing of:
(i) the terms and conditions of a Qualified Joint and
Survivor Annuity;
(ii) the Participant's right to make and the effect of an
election to waive the Qualified Joint and Survivor
Annuity form of benefit;
(iii) the rights of a Participant's spouse; and
<PAGE> 47
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(iv) the right to make, and the effect of, a revocation of
a previous election to waive the Qualified Joint and
Survivor Annuity.
The Plan Administrator shall also provide a Participant with a
written explanation, in nontechnical language, of each of the
forms of benefits described in Section 6.01 (c) above, and the
financial consequences and legal ramifications, if any,
contained therein, at the same time as the said notice
concerning the Qualified Joint and Survivor Annuity is given.
(10/l/97)
(b) In the case of a qualified pre-retirement survivor annuity,
for any Participant whose Participant Account includes
benefits accrued on or before June 30, 1996 (or, for benefits
accrued under the Zycon Corporation Profit Sharing 401(k)
Plan, benefits accrued on or before September 30, 1997), the
Plan Administrator shall provide each married Participant
within the period beginning on the first day of the Plan Year
in which the Participant attains age 32 and ending with the
close of the Plan Year in which the Participant attains age
35, a written explanation of the qualified pre-retirement
survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the
requirements of subsection (a) above applicable to a Qualified
Joint and Survivor Annuity. If a Participant enters the Plan
after the first day of the Plan Year in which the Participant
attained age 32, the Plan Administrator shall provide notice
no later than the close of the second Plan Year after the
entry of the Participant in the Plan. (10/l/97)
(c) Notwithstanding the other requirements of this Section 6.04,
the respective notices prescribed by this section need not be
given to a Participant if the Plan "fully subsidizes" the
costs of a Qualified Joint and Survivor Annuity or qualified
pre-retirement survivor annuity. For purposes of this
subsection, the Plan fully subsidizes the costs of a benefit
if under the Plan the failure to waive such benefit by a
Participant would not result in a decrease in any Plan benefit
with respect to such Participant and would not result in
increased contributions from the Participant.
(d) A Participant may elect to waive a benefit in the form of a
Qualified Joint and Survivor Annuity and a married Participant
may waive the death benefit in the form of a qualified
pre-retirement survivor annuity, provided that the waiver must
be in writing and must be consented to by the Participant's
spouse. The spouse's consent must acknowledge the effect of
the election and must be witnessed by a Plan representative or
notary public. Notwithstanding this consent requirement, if
the Participant establishes to the satisfaction of a Plan
representative that such written consent may not be obtained
because there is no spouse or the spouse cannot be located, a
waiver signed only by the Participant will be deemed a
qualified election. Any consent necessary under this provision
will be valid only with respect to the spouse who signs the
consent, or in the event of a deemed qualified election, the
designated spouse. Additionally, a revocation of a prior
waiver may be made by a Participant without the consent of the
spouse at any time
<PAGE> 48
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before the commencement of benefits. The number of waivers or
revocations shall not be limited.
(e) The election to waive a Qualified Joint and Survivor Annuity
must be made within the ninety (90) day period ending on the
date the Participant's benefits would commence or, if later,
no sooner than thirty (30) days from the date the written
notice described in this section was given; provided, however,
that a distribution cannot be made sooner than thirty (30)
days from the date such notice was given unless the
Participant (and, if applicable, the Participant's spouse)
consents and the distribution commences at least seven (7)
days after the date of such notice. Any consent shall satisfy
such requirements as may be prescribed under regulations of
the Secretary of the Treasury. (10/l/97)
(f) The election to waive a qualified pre-retirement survivor
annuity must be made within the period which begins on the
first day of the Plan year in which the Participant attains
age 35 and ends on the date of the Participant's death;
provided that, if a Participant separates from service prior
to the first day of the Plan Year in which age 35 is attained,
the election period with respect to the Participant's account
balance as of the date of separation shall begin on the date
of separation from service.
(1/l/93)
6.05 DEFINITIONS AND APPLICATION
(a) As used in this Article VI, the following terms have the meanings
set out below:
(i) Qualified Joint and Survivor Annuity: An annuity for
the life of the Participant with a survivor annuity
for the life of the spouse which meets the
requirements of Section 1.43 above, and which is the
amount of the benefit which can be purchased with the
Participant's vested account balance. A Qualified
Joint and Survivor Annuity for an unmarried
Participant is an annuity for the life of the
Participant.
(ii) Qualified pre-retirement survivor annuity: An annuity
for the life of the surviving spouse of a Participant
which is the amount of benefit which can be purchased
with the Participant's vested account balance.
(iii) Spouse: The spouse or surviving spouse of the
Participant, provided that a former spouse will be
treated as the spouse or surviving spouse to the
extent provided under a qualified domestic relations
order as described in Section 414(p) of the Code.
(b) The provisions of Section 6.01 relating to Qualified Joint and
Survivor Annuities and Section 6.03 relating to qualified
pre-retirement survivor annuities shall apply to any
Participant who is credited with at least one (1) Hour of
Service on or after August 23, 1984.
<PAGE> 49
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(c) A Participant who is living, who has been credited with at
least one (1) Hour of Service on or after September 2, 1974,
who separated from service before August 23, 1984 and who has
not commenced receiving benefits, may elect to have the
provisions of Section 6.01 and/or Section 6.03 apply to him
and his spouse.
(d) A Participant who is living, who has been credited with at
least one (1) Hour of Service in a Plan Year beginning on or
after January 1, 1976, who separated from service before
August 23, 1984 having at least ten (10) years of service
under the Plan, and who has not commenced receiving benefits,
may elect to have the provisions of Section 6.01 and/or
Section 6.03 apply to him and his spouse.
(e) An election under either subsection (c) or (d) may be made
within the period beginning on August 13, 1984 and ending on
the earlier of the date benefits would commence or the date of
the Participant's death. Notice of the right to make such
election shall be provided in accordance with applicable rules
and regulations.
(1/l/93)
6.06 DISTRIBUTION OF SMALL ACCOUNTS
If the value of the Participant's vested interest in his Participant's
Account upon retirement, death or disability is $3,500.00 or less, the
Plan Administrator may direct the distribution of such amount as a lump
sum cash payment to the Participant, whether or not the Participant has
filed an election under this Article VI. For Plan Years beginning on or
after January 1, 1998, the $3,500.00 dollar limit stated above shall be
changed to $5,000.00. (7/1/96; 1/1/98)
<PAGE> 50
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ARTICLE VII
TERMINATION OF EMPLOYMENT
7.01 TERMINATION DISTRIBUTIONS
Upon the termination of a Participant's employment with the Employer,
other than by reason of the Participant's retirement, disability or
death, the Participant's vested interest in his Participant's Account
shall be determined as of his date of termination in accordance with
Article V of this Plan. The Participant may elect to receive a lump sum
distribution of his vested interest in his Participant's Account valued
as of the date of distribution at any time after he has separated from
service on account of his termination of employment. Such lump sum
distribution shall be made as soon as administratively practicable
after the later of (i) the date the Participant becomes eligible to
receive such distribution or (ii) the date the Plan Administrator
receives notice meeting the requirements set out below.
Any election to receive a lump sum distribution of a Participant's
vested interest in his Participant's Account must be made by notice to
the Plan Administrator. If any portion of the Participant's Account was
accrued on or before June 30, 1996 (or, for benefits originally accrued
under the Zycon Corporation Profit Sharing 401(k) Plan, on or before
September 30, 1997) and if the Participant is married, the spouse of
the Participant must consent to any lump sum distribution in excess of
$3,500. The spouse's consent must be in writing and must acknowledge
the effect of the election. The spouse's signature must be witnessed by
a Plan representative or a notary public.
Notwithstanding the foregoing, if the value of the Participant's vested
interest in his Participant's Account upon termination of employment is
$3,500 or less, the Plan Administrator may direct the distribution of
such amount as a lump sum cash payment to the Participant, whether or
not the Participant has made an election under this Section 7.01. For
Plan Years beginning on or after January 1, 1998, the $3,500.00 dollar
limit stated herein shall be changed to $5,000.00.
(7/l/89; 7/l/96; 10/l/97; 1/1/98)
7.02 TERMINATION FORFEITURES
A Participant whose employment with the Employer is terminated as
described in Section 7.01 of this Article, and who has not received a
distribution of the vested portion of his Profit Sharing Account and/or
Matching Contributions Account, shall forfeit the value of that portion
of his Profit Sharing Account and/or Matching Contributions Account in
which he was not vested at the date of his termination of employment as
of the Valuation Date coincident with or next following the date he
incurs five (5) consecutive Breaks in Service after such termination of
employment. A Participant who has received a distribution of the vested
portion of his
<PAGE> 51
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Profit Sharing Account and/or Matching Contributions Account under
Section 7.01 shall forfeit the value of the portion of his Profit
Sharing Account and/or Matching Contributions Account in which he was
not vested at the date of his termination of employment as of December
31 of the Plan Year in which such distribution was made, provided that
such forfeited amounts may be reinstated as provided in Section 7.03 of
this Article. Except as provided in Article XII hereof, any amounts so
forfeited by Participants shall be allocated to remaining Participants
in accordance with Section 3.07 of Article III.
If the Participant's employment with the Employer is terminated as
described in Section 7.01 of this Article, and he subsequently resumes
employment with the Employer prior to receiving a distribution of his
vested interest in his Profit Sharing Account and/or Matching
Contributions Account, the then current value of the nonvested portion
of his Profit Sharing Account and/or Matching Contributions Account
shall not be forfeited on account of such termination of employment and
shall continue to be maintained in said Profit Sharing Account and/or
Matching Contributions Account.
(1/1/88)
7.03 REPAYMENT TO REINSTATE FORFEITED AMOUNTS
(a) A former Participant who has received a distribution from the
Plan pursuant to Section 7.01, and who resumes employment with
the Employer prior to incurring five (5) consecutive Breaks in
Service, shall have reinstated that portion of his Profit
Sharing Account and/or Matching Contributions Account which
was forfeited under Section 7.02 upon repayment by the
Participant of the full distribution made to him. Such
repayment must be made before the end of a period of five (5)
consecutive Breaks in Service after the distribution.
(b) The amount to be credited to the Participant's Profit Sharing
Account and/or Matching Contributions Account upon repayment
shall not be less than the balance of the Participant's Profit
Sharing Account and/or Matching Contributions Account at the
time of distribution, including both the amount distributed
and the nonvested amount, unadjusted by any subsequent gains
or losses.
(c) In the event that the Participant elects not to make the
repayment described in subsection (a) above, the forfeited
amounts shall not be taken into account in computing his
accrued benefit under this Plan.
(1/l/88)
<PAGE> 52
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ARTICLE VIII
INVESTMENT OF TRUST FUNDS
8.01 TRUSTEE'S RESPONSIBILITY
The Trustee shall have general authority to invest, manage and maintain
custody of the trust assets, in accordance with the terms of the Trust
and subject to the following provisions of this Article VIII.
(1/l/92)
8.02 DIRECTED INVESTMENTS OF PARTICIPANT ACCOLTNTS
Each Participant shall be permitted to direct the Trustee as to the
investment of his Participant Account in accordance with the investment
alternatives selected by the Investment Committee and offered by the
Trustee. Upon receiving a direction from a Participant, the Trustee
shall segregate that portion of the Participant's Account to which such
direction applies from the remainder of the trust fund and invest it in
accordance with the Participant's direction. The Participant's Account
shall be credited or charged with the gains and losses resulting from
such directed investment and such gains and losses shall not be
considered in determining gains or losses of the remainder of the trust
fund. A Participant shall have the opportunity to change his investment
directions with respect to all or any portion of his Participant
Account not less frequently than once in any three-month period, or
more frequently if administratively feasible.
In the event a Participant fails to direct the Trustee as to the
investment of all or any part of the Participant's Account, that
portion of the account as to which no direction has been given shall be
invested by the Trustee in accordance with instructions from the
Investment Committee. The Trustee also shall change the investment of
all or any part of a Participant's Account if so directed by the
Investment Committee.
No Participant shall be deemed a Plan Fiduciary by reason of giving
investment directives hereunder, and no person who is otherwise a Plan
Fiduciary shall be liable for any loss attributable to such directed
investments, or for any result of a Participant's exercise of control
over the investment of his accounts which would otherwise constitute a
breach of fiduciary responsibility.
(1/l/89; 7/l/96)
8.03 INVESTMENT COMMITTEE
(a) Appointment and General Responsibilities
The Employer shall appoint an Investment Committee consisting
of three employees who shall serve at the pleasure of the
Employer's Board of Directors. The members of the Investment
Committee shall be Plan Fiduciaries.
<PAGE> 53
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The Investment Committee shall be responsible for establishing
and maintaining the investment strategies and funding policies
for the Plan and Trust, including but not limited to
determining the need for short term or long term liquidity
and/or for investment growth, coordinating the investment
policy with Plan and Trust needs, and communicating those
policies to the Trustee and investment manager, if any. The
Investment Committee shall be responsible for selecting
investment alternatives for Participant-directed investments
permitted under this Plan and for giving the Trustee
investment directions with respect to that portion of any
Participant Account for which directions have not been given
by the Participant to the Trustee and with respect to that
portion of the trust fund which is not then allocated to any
Participant's Account. (1/1/89; 7/1/96)
Any act which the Investment Committee is authorized or
required to do may be done by a majority of the members of the
Committee at the time acting hereunder and the action of such
majority, expressed from time to time by a vote at a meeting
or in writing without a meeting, shall constitute the action
of the Committee and shall have the same effect for all
purposes as if assented to by all members of the Committee at
the time in office. In the event of a vacancy on the
Committee, the action by the remaining member or members shall
be valid and binding. Any such vacancy shall be filled within
a reasonable time. (1/l/92)
No member of the Committee who receives full time compensation
from the Employer shall receive any compensation or fee for
his services as a member of the Committee, but may be
reimbursed for his expenses.
(b) Right to Appoint Investment Managers
The Investment Committee may appoint and dismiss one or more
investment managers who shall have the power to manage,
acquire or dispose of any of the assets of the Trust,
including but not limited to the selection of investment
alternatives for Participant-directed investments permitted
under this plan. The Committee shall designate the portion of
the assets of the Trust which shall be subject to the
management of any such investment manager and shall so notify
the Trustee in writing. The Committee may authorize payment
for the services of an investment manager from the trust. (1 /
1/92)
Any investment manager must be (i) registered as an investment
adviser under the Investment Advisers Act of 1940, or (ii) a
bank, as defined in that Act, or (iii) an insurance company
qualified to perform trust management and investment services
under the laws of more than one state; and must acknowledge in
writing that he or it is a Fiduciary with respect to the Plan
and Trust.
(c) Adoption of Group Trust
The Investment Committee may adopt, as part of the Trust, any
group trust in which any of the assets of the Trust are or are
to be invested, and may authorize
<PAGE> 54
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the participation of the Trust in such group trust, but only
so long as such group trust remains exempt from taxation under
Section 501 (a) of the Code, in accordance with Revenue Ruling
81-100. For purposes hereof, the term "group trust" shall
include any common, collective, multiple or commingled trust
fund that satisfies the requirements of Revenue Ruling 81-100.
The Committee also shall have the power to revoke such
adoption and to terminate participation in any such group
trust. Any action under this Section 8.03(c) shall be
reflected in a writing, a copy of which shall be kept with the
original Plan documents. Nothing herein shall prevent the
Employer, by its Board of Directors, from adopting or revoking
the adoption of any such group trust as part of this Trust.
(1/l/89)
<PAGE> 55
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ARTICLE VIIIA
PROVISIONS FOR RADIAN SOURCE ACCOUNTS
8A.01 PROTECTED BENEFITS, RIGHTS AND FEATURES
Any accounts transferred to this Plan from the Continental Circuits
Corp. 401(k) Retirement Plan (the "Continental Circuits Plan") for the
benefit of former employees of Radian International LLC or an affiliate
of Radian International LLC who become employees of the Employer or any
Affiliated Employer ("Radian Participants") shall be segregated and
maintained as separate sub-accounts as provided in Section 9.03 below
for purposes of continuing to provide the benefits, rights and features
which were provided under the Continental Circuits Plan and which are
protected benefits under Section 411(d)(6) of the Code. Radian
Participants will be provided the following protected benefits, rights,
and features solely as to the Radian Source Accounts (as defined in
Section 9.03).
8A.02 IN-SERVICE WITHDRAWALS
(a) IN GENERAL. A Participant or former Participant may request
cash withdrawals from Radian Source Accounts not more than
twice during any twelve-month period commencing with any
withdrawal, subject to the sequence and conditions for
withdrawal set forth in paragraph (b) below. The minimum
amount of withdrawal shall be set by the Plan Administrator.
The withdrawals are not subject to the spousal and Participant
consent requirements contained in Code Sections 401-(a)-(11)
and 417.
(b) SEQUENCE AND CONDITIONS FOR WITHDRAWAL. A Participant shall
request the Plan Administrator to effect a cash withdrawal and
such amount shall be debited form his Radian Source Accounts.
The Administrator shall withdraw amounts in the following
sequence and upon the following conditions:
(i) First, a Participant may withdraw all or part of the
value of his After-Tax Frozen Account (as defined in
Section 9.03 below).
(ii) Second, a Participant may withdraw all or part of the
value of his Prior Plan Employee Frozen Account (as
defined in Section 9.03 below) if the Participant is
age 59 1/2 or older. If the Participant is less than
age 59 1/2, a Participant may withdraw upon written
request to the Plan Administrator all or part of the
Deferral Contributions (and earnings thereon accrued
as of December 31, 1988) in his Prior Plan Employee
Frozen Account due to financial hardship as
determined in accordance with the provisions of this
Plan.
8A.03 PARTICIPANT LOANS
<PAGE> 56
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Participants may borrow from their Radian Source Accounts in accordance
with the terms of this Plan, without the necessity of obtaining spousal
consent.
8A.04 DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT, DISABILITY, RETIREMENT OR
DEATH
A distribution option other than a one-sum cash distribution shall be
available under the following described circumstances only if the total
balance of a Participant's Radian Source Accounts at the time of a
distribution exceeds $3,500 for Plan Years beginning prior to January
1, 1998 or exceeds $5,000 for Plan Years beginning on or after January
1, 1998.
(a) RETIREMENT BENEFITS
(i) NORMAL FORM OF RETIREMENT BENEFIT. The Normal Form of
benefit shall be a one-sum cash distribution.
(ii) OPTIONAL FORMS OF RETIREMENT BENEFIT. A Participant
who terminates employment after reaching age 55, who
terminates employment and commences distribution
after reaching age 55, or who terminates employment
on account of disability (as determined under the
terms of this Plan), may elect an installment or
annuity form of distribution as described below
instead of the Normal Form described in paragraph
(a)(i) above. Any such election shall not be subject
to the spousal and Participant consent requirements
contained in Code Sections 401(a)(11) and 417.
(A) Annuity payments may be made over one of the
following periods:
(1) the life of the Participant;
(2) the life of the Participant, with a
one-sum payment upon the death of
the Participant for the excess of
the annuity's net purchase price
over the sum of payments made prior
to the death of the Participant;
(3) the lives of the Participant and a
designated Beneficiary, or
(4) a period certain and continuous not
extending beyond 10 years.
Any annuity contract distributed herefrom
must be nontransferable. Any contract for
the lives of the Participant and a
designated Beneficiary shall be a 50%,
66-2/3% or 100% joint and survivor annuity.
(B) The installment payment options provide for
periodic payments to the Participant as
hereinafter described. Installment payments
shall be
<PAGE> 57
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made over a period not to exceed the
Participant's (or the Participant's and
spouse's) life expectancy, subject to the
terms set forth herein. The Participant may
elect either:
(1) payment in equal amounts, except
that the last payment which exhausts
the Participant's Radian Source
Accounts may be greater or smaller;
(2) a specific number of payments. The
amount of each payment will equal
the then value of the Participant's
Radian Source Accounts divided by
the number of remaining payments to
be made; or
(3) payments over the Participant's life
expectancy re-determined each year.
The amount of each payment will
equal the then value of the
Participant's Radian Source Accounts
divided by the Participant's
life expectancy.
An amount may be deducted from a
Participant's Radian Source Account to cover
the expenses applicable to such installment
payment options. Installment payments will
terminate with the earlier of (a) the
payment which completely exhausts the
Participant's Radian Source Accounts or (b)
the last payment due preceding the death of
the Participant. At the death of the
Participant, any amount remaining in the
Participant's Radian Source Accounts will be
paid in a lumpsum to the Participant's
Beneficiary or Beneficiaries. In no event
will the installment period exceed that
permitted by law.
(b) Termination Of Employment
(i) NOTICE OF TERMINATION OF EMPLOYMENT. If the
termination of employment of a Participant occurs,
the Employer shall give written notice to the Plan
Administrator of the date of termination of
employment of such Participant.
(ii) AMOUNT OF PARTICIPANT'S BENEFIT. The amount of a
Participant's Plan benefit upon termination of
employment which is subject to the terms of this
Article VIII-A shall equal the total balance of his
Radian Source Accounts at the time of determination.
(iii) PARTICIPANT'S ELECTION OF A FORM OF BENEFIT. If
termination of employment occurs, the Participant
shall receive his Radian Source Accounts in a form of
benefit elected by him. The Participant's election
shall occur within 60 days after the forms of benefit
first become available to him. Written
<PAGE> 58
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notice shall be made on a form provided by the
Committee. The election once made shall be
irrevocable. The forms of benefit are:
(A) OPTION A. The Participant may elect to
continue his Radian Source Accounts until
age 70 1/2 or until age 55, at which time he
may elect Option B, Option C or Option D.
(B) OPTION B. The Participant may elect to
receive an annuity in accordance with
paragraph (a)(ii)(A) above to commence at
age 55; provided that if a Participant dies
before the first payment is made under a
deferred annuity, a death benefit will be
paid to the Beneficiary under the deferred
annuity in an amount equal to the net cost
to provide the annuity plus interest
compounded annually at a rate of at least
five percent (5%) per annum from the date
the annuity was purchased to the date of the
Participant's death.
(C) OPTION C. The Participant may elect a
one-sum cash payment.
(D) OPTION D. The Participant may elect
installment payments, in accordance with
paragraph (a)(ii)(B) above, to commence upon
separation from service.
If the value of the Participant's Radian Source
Accounts exceeds (or at the time of any prior
distribution exceeded) $3,500 for Plan Years
commencing prior to January 1, 1998, or $5,000 for
Plan Years commencing on or after January 1, 1998,
and the Accounts are immediately distributable, the
Participant and the Participant's spouse (or where
either the Participant or the spouse has died, the
survivor), must consent to any distributions of such
Radian Source Accounts. Consent is not valid unless
the Administrator notifies the Participant and the
Participant's spouse of the right to defer any
distribution until the Participant's Radian Source
Accounts are no longer immediately distributable. The
notice shall acknowledge the right, if any, to defer
distributions and must describe the investment
features. One-sum cash payments shall be made during
the Plan Year in which the event which gives rise to
the distribution occurs or as soon thereafter as is
reasonably practical.
(c) Death Benefits
(i) PRERETIREMENT DEATH OF A PARTICIPANT. If the
Participant dies before distribution of his interest
in the Radian Source Accounts begins, the Account
shall be paid to the Participant's surviving spouse.
The spouse may elect whether to receive the
Participant's account balance in the form of one of
the single life annuities provided in paragraph
(a)(ii)(A) above,
<PAGE> 59
annuity, installments in accordance with paragraph
(a)(ii)(B) above, or a one-sum cash payment.
If there is no surviving spouse, or if the surviving
spouse has already consented to distribution to
another Beneficiary in a manner which complies with
the terms of this Plan, the Radian Source Accounts
shall be paid to the Participant's designated
Beneficiary. Unless otherwise elected by the
Participant, any portion of the Participant's
interest payable to a designated Beneficiary other
than the Participant's surviving spouse shall be paid
in the form of one of the single life annuities
provided in paragraph (a)(ii)(A) above, annuity,
installments in accordance with paragraph (a)(ii)(B)
above, or a one-sum cash payment.
Distribution of Participant's entire interest in the
Radian Source Accounts shall be completed by December
31 of the calendar year containing the fifth
anniversary of the Participant's death except to the
extent that an election is made to receive
distributions in accordance with (A) or (B) below:
(A) If any portion of the Participant's interest
in payable to a designated Beneficiary,
distributions may be made over the life or
over a period certain not greater than the
life expectancy of the designated
Beneficiary commencing on or before December
31 of the calendar year immediately
following the calendar year in which the
Participant died.
(B) If the designated Beneficiary is the
Participant's surviving spouse, the date
distributions are required to begin in
accordance with (A) above shall not be
earlier than the later of (1) December 31 of
the calendar year immediately following the
calendar year in which the Participant died
and (2) December 31 of the calendar year in
which the Participant would have attained
age 70 1/2.
If the Participant has not made an election pursuant
to this paragraph by the time of his death, the
Participant's designated Beneficiary must elect the
method of distribution no later than the earlier of
(1) December 31 of the calendar year in which
distributions would be required to begin under this
Paragraph, or (2) December 31 of the calendar year
which contains the fifth anniversary of the date of
death of the Participant. If the Participant has no
designated beneficiary, or if the designated
Beneficiary does not elect a method of distribution,
distribution of the Participant's entire interest
must be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's
death.
For purposes of this Paragraph, if the surviving
spouse dies after the Participant, but before
payments to such spouse begin, the provisions of
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this Paragraph with the exception of paragraph (B)
therein, shall be applied as if the surviving spouse
were the Participant.
For the purposes of this Paragraph, distribution of a
Participant's interest is considered to begin on the
Participant's required beginning date (or, if the
spouse dies after the Participant, the date
distribution is required to begin to the surviving
spouse). If distribution in the form of an annuity
irrevocably commences to the Participant before the
required beginning date, the date distribution is
considered to begin is the date distribution actually
commences.
(ii) POST-RETIREMENT DEATH OF A PARTICIPANT. If the
Participant dies after distribution of his interest
in the Radian Source Accounts has begun, the
remaining portion of such interest shall continue to
be distributed at least as rapidly as under the
method of distribution begin used prior to the
Participant's death. In the case of an installment
payment option, installment payments remaining at the
Participant's death shall be distributed to the
Participant's designated Beneficiary as a one-sum
cash payment.
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ARTICLE IX
ADMINISTRATION
9.01 ALLOCATION OF RESPONSIBILITY
The Employer, Trustee, Investment Committee and Plan Administrator
shall have only those specific powers, duties, responsibilities and
obligations as are specifically given them under this Plan and the
Trust. In general, the Employer shall have the sole responsibility for
making the payments required in accordance with Article III to be made
by the Employer; shall appoint, and may dismiss, the Trustee, the
members of the Investment Committee and the Plan Administrator; and may
amend or terminate the Plan and Trust in whole or in part. The Plan
Administrator shall have the sole responsibility for the administration
of this Plan, which responsibility is specifically described in this
Plan. The Trustees shall have responsibility for the custody,
investment and general disposition of Plan and Trust assets, except to
the extent that one or more investment managers is appointed to manage
certain assets. The Investment Committee shall be responsible for the
funding policy; may appoint and dismiss one or more investment
managers; and may adopt a so-called group trust as part of the Trust.
(1/1/89)
9.02 APPOINTMENT OF PLAN ADMINISTRATOR
The Plan shall be administered by the Plan Administrator who shall be
appointed by and serve at the discretion of the Employer. The Plan
Administrator may be an Employee who shall not be precluded from
participating in this Plan, but he shall not receive compensation with
respect to his services as Plan Administrator, nor shall he be
permitted to make any decision or take any action with respect to his
own participation in the Plan.
The functions of the Plan Administrator may be assigned to a Committee,
to be designated as the Administrative Committee, consisting of two or
more Employees who shall serve at the pleasure of the Employer's Board
of Directors. Any act which the Plan Administrator is authorized or
required to do may be done by a majority of the Administrative
Committee at the time acting hereunder and the action of such majority,
expressed from time to time by a vote at a meeting or in writing
without a meeting, shall constitute the action of the Committee and
shall have the same effect for all purposes as if assented to by all
members of the Committee at the time in office.
(1/l/89)
9.03 ESTABLISHMENT AND VALUATION OF ACCOUNTS
(a) The Plan Administrator shall create and maintain adequate
records to disclose the interest in this Plan of each
Participant and Beneficiary. Such records shall be in the form
of individual accounts, including Profit Sharing Accounts,
401(k) Accounts, Matching Contributions Accounts, After-Tax
Contributions Accounts,
<PAGE> 62
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and Rollover Accounts. The Plan Administrator shall segregate
account balances accrued under this Plan on or before June 30,
1996 from account balances accrued after June 30, 1996. The
Plan Administrator shall segregate account balances accrued
under the Zycon Corporation Profit Sharing 401(k) Plan on or
before September 30, 1997 from account balances accrued after
September 30, 1997.
The Plan Administrator shall maintain separate sub-accounts
for any accounts transferred from the Continental Circuits
Corp. 401(k) Retirement Plan to this Plan for the benefit of
Radian Participants (as defined in Section 8A.01), for
purposes of continuing to provide the benefits, rights and
features which were provided under the Radian Plan and which
are protected benefits under Section 411(d)(6) of the Internal
Revenue Code of 1986 and the regulations thereunder. The
following sub-accounts shall be maintained: Deferred Salary
Account (referred to as "Prior Plan Employee Frozen Account");
Participant Voluntary Account (referred to as "After Tax
Frozen Account"); and Discretionary Company Contributions and
Company Matching (referred to as "Prior Plan Employer Frozen
Account"). Such sub-accounts are sometimes referred to in this
Plan collectively as the "Radian Source Accounts."
(b) All accounts shall be adjusted not less frequently than
quarterly to reflect transfers of funds, contributions,
forfeitures and net earnings credited, and withdrawals,
distributions, forfeitures and losses debited, during or with
respect to such period under the provisions of this Plan.
(c) As of each Determination Date and at such other times as may
be requested by the Employer or the Plan Administrator, the
Trustee shall determine the fair market value of the trust
fund.
(d) Not less frequently than annually, each Participant and
Beneficiary who is a party in interest with respect to a
Participant Account shall be furnished a statement showing the
value of his Participant Account, including a breakdown by
individual account.
(1/l/92; 7/l/96; 10/l/97)
9.04 CLAIMS PROCEDURE
The Plan Administrator shall make all determinations as to the right of
any person to a benefit. Any denial by the Plan Administrator of the
claim for benefits to a Participant, former Participant or Beneficiary
under the Plan shall be stated in writing by the Plan Administrator and
delivered or mailed to the Participant, former Participant or
Beneficiary; and such notice shall set forth the specific reasons for
the denial, written in a manner that may be understood without legal or
actuarial counsel.
Any person whose claim has been denied shall have the opportunity to
appeal such denial by written notification to the Plan Administrator
within sixty (60) days following receipt
<PAGE> 63
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of such written denial. Within sixty (60) days following receipt of
such written appeal, the Plan Administrator shall transmit written
notification of its decision regarding the appeal to said person
provided, however, that if the Plan Administrator determines a hearing
shall be necessary, such sixty (60) day period shall be extended to one
hundred twenty (120) days.
9.05 RECORDS AND REPORTS
The Plan Administrator shall exercise such authority and responsibility
as it deems appropriate in order to comply with ERISA, and governmental
regulations issued thereunder relating to records of Participant's
service, Retirement Benefits and the percentage of such Benefits which
are nonforfeitable under the Plan; notifications to Participants;
periodic registration with the Internal Revenue Service; annual reports
to the Department of Labor; and applicable reports to the Pension
Benefit Guaranty Corporation.
9.06 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
The Plan Administrator shall have such duties and powers as may be
necessary to discharge its duties hereunder, including, but not limited
to the following:
(a) To construe and interpret the Plan, decide all questions of
eligibility and determine the amount and time of payment of
any benefits hereunder;
(b) To prescribe procedures to be followed by Participants, Former
Participants or Beneficiaries in filing applications for
benefits;
(c) To prepare and distribute, in such manner as the Plan
Administrator determines to be appropriate, information
explaining the Plan;
(d) To receive from the appropriate sources such information as
shall be necessary for the proper administration of the Plan;
(e) To receive, review and keep on file (as the Plan Administrator
deems convenient or proper) reports of the financial
condition, and of the receipts and disbursements, of the
assets from the Trustee;
(f) To appoint or employ individuals to assist in the
administration of the Plan and Trust and any other agents the
Plan Administrator deems advisable, including legal counsel.
The Plan Administrator shall have no power to add to, subtract from or
modify any of the terms of the Plan or Trust, or to change or add to
any benefits provided by the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan.
9.07 RULES AND DECISIONS
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The Plan Administrator may adopt such rules as it deems necessary,
desirable, or appropriate. All rules and decisions of the Plan
Administrator shall be uniformly and consistently applied to all
Participants in similar circumstances. When making a determination or
calculation, the Plan Administrator shall be entitled to rely upon
information furnished by a Participant or Beneficiary, the Employer or
the legal counsel of the Employer, the Investment Committee or the
Trustee.
9.08 AUTHORIZATION OF BENEFITS PAYMENTS
The Plan Administrator shall issue directions to the appropriate party
concerning the payment of all benefits which are to be paid from the
assets of the Trust, and warrants that all such directions are in
accordance with the provisions of this Plan.
9.09 APPLICATION AND FORMS FOR BENEFITS
The Plan Administrator may require a Participant or Beneficiary to
complete and file written application for benefits and to furnish all
pertinent information. The Plan Administrator may rely upon all such
information so furnished, including the Participant's or Beneficiary's
current mailing address.
9.10 FACILITY OF PAYMENT
Whenever, in the Plan Administrator's opinion, a person entitled to
receive any benefit hereunder is under a legal disability or is
incapacitated in any way so as to be unable to manage his financial
affairs, the Plan Administrator may cause payments otherwise payable to
such person to be made to such person's legal representative or to a
relative or friend of such person for his benefit. Any payment of
benefit in accordance with the provisions of this Section shall be a
complete discharge of any liability for the making of such payment
under the provisions of this Plan.
<PAGE> 65
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ARTICLE X
MISCELLANEOUS
10.01 NONGUARANTEE OF EMPLOYMENT
Nothing contained in this Plan shall be construed as a contract of
employment between the Employer and any Employee, or as a right of any
Employee to be continued in the employment of the Employer, or as a
limitation of the right of the Employer to discharge any of its
Employees, with or without cause.
10.02 RIGHTS OF EMPLOYEES AND BENEFICIARIES
No Employee or Beneficiary shall have any right to or interest in any
assets of the Plan upon termination of his employment or otherwise,
except as provided from time to time under this Plan, and then only to
the extent of the benefits payable under the Plan to such Employee or
Beneficiary out of such assets. All payments of benefits as provided
for in this Plan shall be made solely out of Trust assets.
10.03 NONALIENATION OF BENEFITS
Benefits payable under this Plan shall not be subject in any manner to
anticipation. alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind,
either voluntary or involuntary, including any such liability which is
for alimony or other payments for the support of a spouse or former
spouse, or for any other relative of the Employee, prior to actually
being received by the person entitled to the benefit under the terms of
the Plan; and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, charge or otherwise dispose of any right to
benefits payable hereunder, shall be void. The Plan assets shall not in
any manner be liable for, or subject to the debts, contracts
liabilities, engagements or torts of any person entitled to benefits
hereunder. Nothing herein shall be construed as preventing the
assignment of all or part of a Participant's interest in this Plan
pursuant to a qualified domestic relations order which meets the
requirements of Sections 401(a)(13) and 414(p) of the Code. (1/1/85)
10.04 DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS
In the event of complete discontinuance of contributions under this
Plan to the Trust by the Employer, within the meaning of Section 411(d)
of the Code and the related regulations, the accounts of all
Participants shall, as of the date of such discontinuance, become fully
vested.
10.05 NO REVERSION IN EMPLOYER
The Employer has no beneficial interest in the Trust assets and no part
of the Trust assets shall ever revert or be repaid to the Employer,
directly or indirectly, except that if the Internal Revenue Service
initially determines that the Plan does not meet the
<PAGE> 66
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requirements of Section 401(a) of the Internal Revenue Code, any assets
attributable to contributions made by the Employer under the Plan shall
be returned to the Employer within one calendar year of denial of
qualification of the Plan.
10.06 JURISDICTION
This Plan shall be construed in accordance with the laws of the
jurisdiction of the Commonwealth of Massachusetts except to the extent
to which said laws are superseded by Federal Law.
10.07 TIMING OF DISTRIBUTIONS
(a) The distribution of any benefits under this Plan shall begin,
unless otherwise elected by the Participant, no later than the
sixtieth (60th) day after the latest of the close of the Plan
Year in which (i) the Participant attains age sixty-five (65),
(ii) occurs the tenth (tenth) anniversary of the time the
Participant commenced participation in the Plan, or (iii) the
Participant terminates his employment with the Employer.
(b) Any distribution to be made due to a Participant's termination
of employment prior to his Normal Retirement Date shall begin
no later than the sixtieth (60th) day following the date he
has incurred five (5) consecutive Breaks in Service for
vesting computation purposes, unless the Participant otherwise
elects to defer payment to a date specified in the preceding
Subsection (a). (1/l/85)
(c) The entire interest of a Participant either:
(i) will be distributed to him not later than the
required beginning date, as defined below, or
(ii) will be distributed, commencing not later than such
required beginning date, (A) in accordance with
regulations prescribed by the Secretary of the
Treasury, over the life of such Participant or over
the lives of such Participant and a designated
beneficiary or (B) in accordance with such
regulations, over a period not extending beyond the
life expectancy of such Participant or the life
expectancy of such Participant and a designated
beneficiary.
As used herein, for Plan Years ending on or before December
31, 1996, the term "required beginning date" means April 1 of
the calendar year in which the Participant attains age 70 1/2.
For Plan Years beginning on or after January 1, 1997, the term
"required beginning date" means April 1 of the calendar year
following the later of (I) the calendar year in which the
Participant attains age 70 1/2 or (II) the calendar year in
which the Participant retires; provided, however, that clause
(II) shall not apply in the case of a Participant who is a
five percent owner with respect to the Plan Year in which he
attains age 70 1/2. In the case of a Participant to whom
clause (II) applies who retires in a calendar year after the
<PAGE> 67
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calendar year in which he attains age 70 1/2, the
Participant's accrued benefit shall be actuarially increased
to take into account the period after age 70 1/2 in which the
Participant was not receiving any benefits under the Plan. The
determination of who is a five percent owner shall be made in
accordance with Section 416(i) of the Code and the regulations
thereunder.
(1/l/87; 1/l/97)
(d) If distribution of a Participant's interest has begun in
accordance with subsection 10.07(c)(ii) above and the
Participant dies before his entire interest is distributed to
him, the remaining portion of such interest will be
distributed at least as rapidly as under the method of
distribution being used as of the date of his death.
(e) If a Participant dies before the distribution of his interest
has begun in accordance with subsection 10.07(c)(ii) above,
the entire interest of the Participant will be distributed in
accordance with the following provisions:
(i) Any portion payable to or for the benefit of a
designated beneficiary will be distributed in
accordance with applicable regulations over the life
of such designated beneficiary, or over a period not
extending beyond the life expectancy of such
beneficiary, beginning not later than one year after
the date of the Participant's death; or
(ii) Any portion payable to or for the benefit of a
designated beneficiary who is the surviving spouse of
the Participant will be distributed as provided in
the preceding clause (i) beginning not later than the
date on which the Participant would have attained age
seventy and one-half (70 1/2); provided that if the
surviving spouse dies before the distributions to
such spouse begin, this subsection 10.07(e) shall be
applied as if the surviving spouse were the
Participant; or
(iii) If neither of the preceding clauses (i) and (ii)
apply, the entire interest of the Participant will be
distributed within five (5) years after the death of
such Participant.
10.08 BENEFICIARY DESIGNATIONS
(a) Except as provided in subsection (b) below, the Participant
shall have the unrestricted right to designate, and to rescind
or change any designation of, a primary and contingent
Beneficiary or Beneficiaries to receive any benefit due in the
event of his death. Each such rescission or change of
Beneficiary(ies) must be made in writing to the Plan
Administrator and must be signed by the Participant. If there
is no designated Beneficiary living when the death benefit
becomes payable or if no such designation of Beneficiary is on
file with the Plan Administrator, or if in the sole discretion
of the Plan Administrator such designation is defective, any
death benefit due will be paid to any one or more of
<PAGE> 68
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the surviving members of the Participant's relatives in the
following order of preference:
(i) to his spouse;
(ii) in equal shares to his children;
(iii) to his parents; or
(iv) to his estate.
(b) If a Participant who is married wishes to designate a primary
Beneficiary who is not the spouse of such Participant, such
designation shall not be effective unless the spouse of such
Participant consents in writing to such designation. The
written consent of the spouse must acknowledge the effect of
such consent, and must be witnessed by a plan representative
or a notary public. Any consent by a spouse hereunder shall be
effective only with respect to that spouse.
(1/l/85)
10.09 BENEFITS OF LOST PARTICIPANTS
The provisions of this Section 10.09 shall apply in the event a
Participant or Beneficiary fails to file an application for benefits,
or in the event of the termination of the Plan or other event requiring
distribution of a benefit or other Plan assets to a Participant or
Beneficiary, if the Participant or Beneficiary cannot be located.
(a) The Plan Administrator shall give written notice to each
Participant at his last known address of his right to receive
a distribution under the Plan, within a reasonable time after
the happening of an event giving rise to the right to receive
the distribution. Without limiting the generality of the
preceding sentence, a decision by the Plan Administrator to
direct the distribution of a Participant's Account having a
vested value of $3,500 or less shall be an event requiring
distribution of a benefit. (1/l/93)
(b) If the Participant cannot be located in this manner, the
account of such Participant shall continue to be held in a
Participant Account under the Plan until the occurrence of an
event described in any of Sections 10.09(c), (d) or (e)
following.
(c) If proof of death of the Participant satisfactory to the Plan
Administrator is received by the Plan Administrator, the
benefit or other distribution shall be paid to the
Participant's Beneficiary.
(d) If the Plan is terminated prior to distribution of the benefit
or other amount due, the Plan Administrator shall establish an
interest bearing custodial account for the benefit of the
Participant or his Beneficiary in a federally insured bank,
savings and loan association, or credit union, into which the
Participant's account balance
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shall be deposited. Such account shall be held in trust for
the benefit of the Participant or his Beneficiary.
(e) If no claim is made by a Participant or his Beneficiary within
one year of the date notice is given of the right to receive a
distribution under the Plan, the benefit payable to or account
balance of such Participant shall be forfeited; provided that
such forfeited benefit or amount shall be reinstated in the
event a valid claim for such amount is subsequently made by
the Participant or his Beneficiary. Any forfeiture hereunder
shall be treated as a Forfeiture under Section 3.07 of the
Plan for the year in which it occurs.
(1/l/85)
10.10 DIRECT TRUSTEE-TO-TRUSTEE TRANSFER OPTION
Whenever a Participant, Beneficiary or Alternate Payee under a
qualified domestic relations order is to receive a distribution under
the Plan that is an eligible rollover distribution, as hereinafter
defined, that would otherwise be subject to withholding under Section
3405(c) of the Code, the distributee may elect by written notice to the
Plan Administrator to have all or a specified portion of such
distribution paid directly to a specified eligible retirement plan in a
trustee-to-trustee transfer. The Plan Administrator shall prescribe
reasonable procedures for a distributee to elect a direct rollover,
including information and documentation to be provided and the time
period within which such election may be made, and shall provide notice
of this option to each distributee within a reasonable time prior to
making an eligible rollover distribution.
As used in this Section 10.10, an eligible rollover distribution means
any distribution that is described in Section 402(c)(4) of the Code and
the regulations thereunder.
As used in this Section 10.10, an eligible retirement plan generally is
an individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity (other than an endowment
annuity) described in Section 408(b) of the Code, a qualified trust
forming part of a qualified defined contribution plan described in
Section 401(a) of the Code, the terms of which permit rollover
contributions, or an annuity plan described in Section 403(a) of the
Code. If the distributee is the surviving spouse of a Participant and
is to receive a distribution on account of the Participant's death, an
eligible retirement plan is an individual retirement account or an
individual retirement annuity only.
(1/l/93)
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ARTICLE XI
AMENDMENTS AND ACTION BY EMPLOYER
11.01 AMENDMENTS
The Employer reserves the right to make from time to time any amendment
or amendments to this Plan which do not cause any part of the assets of
the Plan to be used for, or diverted to, any purpose other than the
exclusive benefit of Participants or their Beneficiaries; provided,
however, that the Employer may make any amendment it determines
necessary or desirable, with or without retroactive effect, to comply
with the requirements of the Internal Revenue code or of any other
pertinent provision of Federal or State law, or any regulation or
ruling of any duty constituted authority in connection therewith.
11.02 ACTION BY EMPLOYER
Any action by the Employer under this Plan may be made by resolution of
its Board of Directors, or by any person or persons duly authorized by
resolution of said Board to take such action.
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ARTICLE XII
SUCCESSOR EMPLOYER AND MERGER OR CONSOLIDATION OF PLANS
12.01 SUCCESSOR EMPLOYER
In the event of the dissolution, merger, consolidation or
reorganization of the Employer, provision may be made by which the Plan
will be continued by the successor; and, in that event, such successor
shall be substituted for the Employer under the Plan. The substitution
of the successor shall constitute an assumption of Plan liabilities by
the successor and the successor shall have all the powers, duties and
responsibilities of the Employer under the Plan and Trust Agreement.
12.02 PLAN ASSETS
In the event of any merger or consolidation of the Plan with, or
transfer in whole or in part of the Trust Fund assets and liabilities
of the Plan to another plan of deferred compensation maintained or to
be established for the benefit of all or some of the Participants of
this Plan, the Trust Fund assets applicable to such Participants shall
be transferred to the other plan only if:
(a) each Participant would (if either this Plan or the other 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
this Plan had then terminated);
(b) resolutions of the Board of Directors of the Employer under
this Plan, or of any new or successor employer of the affected
Participants, shall authorize such transfer of assets; and, in
the case of the new or successor employer of the affected
Participants, its resolutions shall include an assumption of
liabilities with respect to such Participant's inclusion in
the new employer's plan; and
(c) such other plan is qualified under Section 401(a) and 501(a)
of the Internal Revenue Code.
Upon any merger or consolidation of the Plan with another plan, or
transfer of assets and liabilities of the Plan to such other plan, the
Board of Directors of the Employer may authorize the Plan Administrator
to allocate immediately prior to the merger, consolidation or transfer
any amounts then held in a suspense account. If the suspense account
includes Forfeitures from Profit Sharing Accounts, the suspense account
shall be allocated among all Participants who have a balance in their
Profit Sharing Account according to the ratio that the balance of each
such Participant's Profit Sharing Account bears to the total balance of
all Participants' Profit Sharing Accounts as of the date of allocation.
If the suspense account includes Forfeitures from Matching
Contributions Accounts, the suspense account may be allocated (a) to
reduce the amount of Matching Contributions then due from the Employer
for the current Plan Year or (b) among those
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Participants who have a balance in their 401(k) and Matching
Contributions Accounts according to the ratio that the aggregate of
each such Participant's Matching Contributions Account and 401(k)
Account bears to the total balance of all Participants' 401(k) and
Matching Contributions Accounts. Allocations under this Section 12.02
shall be subject to the provisions of Sections 3.09 and 3.10. (1/l/97)
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ARTICLE XIII
PLAN TERMINATION
13.01 RIGHT TO TERMINATE
In accordance with the procedures set forth in this Article, the
Employer may terminate the Plan at any time. In the event of the
dissolution, merger, consolidation or reorganization of the Employer,
the Plan shall terminate and the Trust assets shall be liquidated
unless the Plan is continued by a successor to the Employer in
accordance with Section 12.01.
13.02 PARTIAL TERMINATION
Upon termination of the Plan with respect to a group of Participants
which constitutes a partial termination of the Plan, the Plan
Administrator shall allocate and segregate for the benefit of the
Employees then or theretofore employed by the Employer with respect to
which the Plan is being terminated the proportionate interest of such
Participants in the Trust assets. The assets so allocated and
segregated shall be used by the Plan Administrator to pay benefits to
or on behalf of Participants in accordance with Section 13.03.
13.03 LIQUIDATION OF THE PLAN
Upon termination or partial termination of the Plan, the accounts of
all Participants affected thereby shall become fully vested, and the
Plan Administrator shall, subject to the provisions of the immediately
following paragraph, cause the assets remaining in the Trust (including
any Forfeitures which shall not have been allocated) to be allocated
and distributed to the remaining Participants and Beneficiaries in
proportion to their respective account balances.
In the event that any service charges assessed under this Plan are due
and unpaid as of such Plan termination date, the payment of such
charges shall be satisfied by deducting a pro rata share of the amount
remaining to be paid from each Participant's Profit Sharing Account.
13.04 MANNER OF DISTRIBUTION
To the extent that no discrimination in value results, any distribution
after termination of the Plan may be made, in whole or in part, in
cash, in securities or in nontransferable annuity contracts, as the
Plan Administrator (in his discretion) may determine. All non-cash
distributions shall be valued at fair market value at date of
distribution.
<PAGE> 74
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ARTICLE XIV
DISCHARGE OF DUTIES BY FIDUCIARIES
The Employer, Plan Administrator, Investment Committee, investment manager,
Trustee, and any other person who, by reason of his involvement in and under
this Plan and the Trust shall be deemed to be a fiduciary within the meaning of
Title i, Section 3 (21) of ERISA, shall discharge their Plan and Trust related
duties and responsibilities solely in the interest of the Participants and their
Beneficiaries and with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims. Any provision in any agreement or other plan
document which has the effect of relieving said fiduciaries from responsibility
for acts within the discretionary authority of such persons are hereby deleted
and canceled.
A true copy of the HADCO Retirement Plan as amended
and restated to incorporate all amendments adopted
through March 3, 1999.
Attest: /s/ James C. Hamilton
--------------------------------
James C. Hamilton, Clerk
June 17, 1999
<PAGE> 1
EXHIBIT 10.66
TRUST AGREEMENT
BETWEEN
- --------------------------------------------------------------------------------
HADCO CORPORATION
AND
FIDELITY MANAGEMENT TRUST COMPANY
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HADCO CORPORATION RETIREMENT TRUST
DATED AS OF JUNE 1, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1 Trust........................................................
2 Exclusive Benefit and Reversion of Sponsor Contributions.....
3 Disbursements................................................
(a) Administrator Directed Disbursements
(b) Participant Withdrawal Requests
(c) Limitations
4 Investment of Trust..........................................
(a) Selection of Investment Options
(b) Available Investment Options
(c) Participant Direction
(d) Mutual Funds
(e) Notes
(f) Guaranteed Investment Contracts
(g) Participation in Commingled Pools
(h) Reliance of Trustee on Directions
(i) Trustee Powers
5 Recordkeeping and Administrative Services to Be Performed....
(a) General
(b) Accounts
(c) Inspection and Audit
(d) Effect of Plan Amendment
(e) Returns, Reports and Information
6 Compensation and Expenses....................................
7 Directions and Indemnification...............................
(a) Identity of Administrator and Investment Committee
(b) Directions from Administrator
(c) Directions from Investment Committee
(d) Co-Fiduciary Liability
(e) Indemnification
(f) Survival
8 Resignation or Removal of Trustee............................
(a) Resignation
(b) Removal
-i-
<PAGE> 3
9 Successor Trustee............................................
(a) Appointment
(b) Acceptance
(c) Corporate Action
10 Termination..................................................
11 Resignation, Removal, and Termination Notices................
12 Duration.....................................................
13 Amendment or Modification....................................
14 General......................................................
(a) Performance by Trustee, its Agents or Affiliates
(b) Entire Agreement
(c) Waiver
(d) Successors and Assigns
(e) Partial Invalidity
(f) Section Headings
15 Governing Law................................................
(a) Massachusetts Law Controls
(b) Trust Agreement Controls
SCHEDULES
A. Recordkeeping and Administrative Services
B. Fee Schedule
C. Investment Options
D. Administrator's Authorization Letter
E. Investment Committee's Authorization Letter
F. IRS Determination Letter or Opinion of Counsel
G. Telephone Exchange Guidelines
-ii-
<PAGE> 4
TRUST AGREEMENT, dated as of the first day of June, 1996, between HADCO
CORPORATION, a Massachusetts corporation, having an office at 12A Manor Parkway,
Salem, New Hampshire 03079 (the "SPONSOR"), and FIDELITY MANAGEMENT TRUST
COMPANY, a Massachusetts trust company, having an office at 82 Devonshire
Street, Boston, Massachusetts 02109 (the "TRUSTEE").
WITNESSETH:
WHEREAS, the Sponsor is the sponsor of the HADCO Corporation Retirement
Plan (the "PLAN"); and
WHEREAS, the Sponsor wishes to establish a trust to hold and invest
plan assets under the Plan for the exclusive benefit of participants in the Plan
and their beneficiaries; and
WHEREAS, the HADCO Corporation Retirement Plan Investment Committee
(the "INVESTMENT COMMITTEE") is the named fiduciary of the Plan (within the
meaning of section 402(a) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")); and
WHEREAS, the Trustee is willing to hold and invest the aforesaid plan
assets in trust pursuant to the provisions of this Trust Agreement, which shall
constitute a continuation, by means of an amendment and restatement, of each of
the prior trusts from which plan assets are transferred to the Trustee; and
WHEREAS, the Trustee is willing to hold and invest the aforesaid plan
assets in trust among several investment options selected by the Investment
Committee; and
WHEREAS, the Sponsor wishes to have the Trustee perform certain
ministerial recordkeeping and administrative functions under the Plan; and
<PAGE> 5
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WHEREAS, the HADCO Corporation Retirement Plan Administrative Committee
(the "ADMINISTRATOR") is the administrator of the Plan (within the meaning of
section 3(16)(A) of ERISA); and
WHEREAS, the Trustee is willing to perform recordkeeping and
administrative services for the Plan if the services are purely ministerial in
nature and are provided within a framework of plan provisions, guidelines and
interpretations conveyed in writing to the Trustee by the Administrator.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth below, the Sponsor and the Trustee
agree as follows:
Section 1. TRUST. The Sponsor hereby establishes the HADCO Corporation
Retirement Trust (the "TRUST") with the Trustee. The Trust shall consist of an
initial contribution of money or other property acceptable to the Trustee in its
sole discretion, made by the Sponsor or transferred from a previous trustee
under the Plan, such additional sums of money as shall from time to time be
delivered to the Trustee under the Plan, all investments made therewith and
proceeds thereof, and all earnings and profits thereon, less the payments that
are made by the Trustee as provided herein, without distinction between
principal and income. The Trustee hereby accepts the Trust on the terms and
conditions set forth in this Agreement. In accepting this Trust, the Trustee
shall be accountable for the assets received by it, subject to the terms and
conditions of this Agreement.
Section 2. EXCLUSIVE BENEFIT AND REVERSION OF SPONSOR CONTRIBUTIONS.
Except as provided under applicable law, no part of the Trust may be used for,
or diverted to, purposes other than the exclusive benefit of the participants in
the Plan or their beneficiaries prior to the satisfaction of all liabilities
with respect to the participants and their beneficiaries.
<PAGE> 6
-3-
Section 3. DISBURSEMENT.
(a) ADMINISTRATOR DIRECTED DISBURSEMENTS. The Trustee shall
make disbursements in the amounts and in the manner that the Administrator
directs from time to time in writing. The Trustee shall have no responsibility
to ascertain such direction's compliance with the terms of the Plan or of any
applicable law or the direction's effect for tax purposes or otherwise; nor
shall the Trustee have any responsibility to see to the application of any
disbursement.
(b) PARTICIPANT WITHDRAWAL REQUESTS. The Sponsor hereby
directs that, pursuant to the Plan, a participant withdrawal request (in-service
or full withdrawal) may be made by the participant by telephone, and the Trustee
shall process such request only after the identity of the participant is
verified by use of a personal identification number ("PIN") and social security
number. The Trustee shall process such withdrawal in accordance with written
guidelines provided by the Sponsor and documented in the Plan Administrative
Manual.
(c) LIMITATIONS. The Trustee shall not be required to make any
disbursement in excess of the net realizable value of the assets of the Trust at
the time of the disbursement. The Trustee shall not be required to make any
disbursement in cash unless the Administrator has provided a written direction
as to the assets to be converted to cash for the purpose of making the
disbursement.
Section 4. INVESTMENT OF TRUST.
(a) SELECTION OF INVESTMENT OPTIONS. The Trustee shall have no
responsibility for the selection of investment options under the Trust and shall
not render investment advice to any person in connection with the selection of
such options.
<PAGE> 7
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(b) AVAILABLE INVESTMENT OPTIONS. The Investment Committee
shall direct the Trustee as to the investment options: (i) in which the Trust
shall be invested during the participant recordkeeping reconciliation period,
which shall be defined as the period beginning on the date of the initial
transfer of assets to the Trustee and ending on the date of the completion of
the reconciliation of participant records, (ii) in which investment option any
portion of participant's accounts that are not directed by participants are to
be invested, and (iii) in which Plan participants may invest, subject to the
following limitations. The Investment Committee may determine to offer as
investment options only (i) securities issued by the investment companies
advised by Fidelity Management & Research Company ("Mutual Funds"), (ii) equity
securities issued by the Sponsor or an affiliate which are publicly-traded and
which are "qualifying employer securities" within the meaning of section
407(d)(5) of ERISA ("SPONSOR STOCK"), (iii) notes evidencing loans to Plan
participants in accordance with the terms of the Plan, (iv) guaranteed
investment contracts chosen by the Trustee, and (v) collective investment funds
maintained by the Trustee for qualified plans; provided that the Trustee shall
be considered a fiduciary with investment discretion only with respect to Plan
assets that are invested in guaranteed investment contracts chosen by the
Trustee or in collective investment funds maintained by the Trustee for
qualified plans. The investment options initially selected by the Investment
Committee are identified on Schedules "A" and "C" attached hereto. The
Investment Committee may add additional investment options with the consent of
the Trustee and upon mutual amendment of this Trust Agreement and the Schedules
thereto to reflect such additions.
(c) PARTICIPANT DIRECTION. Each Plan participant may direct
the Trustee in which investment option(s) to invest the assets in the
participant's individual accounts. Such directions may be made by Plan
participants by use of the telephone exchange system maintained
<PAGE> 8
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for such purposes by the Trustee or its agent, in accordance with written
Telephone Exchange Guidelines attached hereto as Schedule "G". In the event that
the Trustee fails to receive a proper direction, the assets shall be invested in
the investment option set forth for such purpose on Schedule "C", until the
Trustee receives a proper direction.
(d) MUTUAL FUNDS. The Sponsor hereby acknowledges that it has
received from the Trustee a copy of the prospectus for each Mutual Fund selected
by the Investment Committee as a Plan investment option or short-term investment
fund. Trust investments in Mutual Funds shall be subject to the following
limitations:
(i) EXECUTION OF PURCHASES AND SALES. Purchases and
sales of Mutual Funds (other than for exchanges) shall be made on the
date on which the Trustee receives from the Sponsor in good order all
information and documentation necessary to accurately effect such
purchases and sales (or in the case of a purchase, the subsequent date
on which the Trustee has received a wire transfer of funds necessary to
make such purchase). Exchanges of Mutual Funds shall be made in
accordance with the Telephone Exchange Guidelines attached hereto as
Schedule "G".
(ii) VOTING. Each Plan participant shall have the
right to direct the Trustee as to the manner in which the Trustee is to
vote the shares of any Mutual Funds credited to the participant's
accounts (both vested and unvested). At the time of mailing of notice
of each annual or special stockholders' meeting of any Mutual Fund, the
Trustee shall send a copy of the notice and all proxy solicitation
materials to each Plan participant who has shares of the Mutual Fund
credited to the participants accounts, together with a voting direction
form for return to the Trustee or its designee, and the Trustee shall
vote the shares as directed by the participant. The Investment
Committee shall receive a copy
<PAGE> 9
-6-
of the notice and all proxy solicitation materials for shares of the
Mutual Fund held in any short-term investment fund or liquidity
reserve. The Investment Committee shall have the right to direct the
Trustee as to the manner in which the Trustee is to vote the Mutual
Fund shares held in any short-term investment fund or liquidity
reserve, and the Trustee shall vote such shares as directed by the
Investment Committee. The Trustee shall not vote shares for which it
has received no directions from the participant or the Investment
Committee. During the participant recordkeeping reconciliation period,
the Investment Committee shall have the right to direct the Trustee as
to the manner in which the Trustee is to vote the shares of the Mutual
Funds in the Trust including Mutual Fund shares held in any short-term
investment fund for liquidity reserve. With respect to all rights other
than the right to vote, the Trustee shall follow the directions of the
participant and if no such directions are received, the directions of
the Investment Committee. The Trustee shall have no further duty to
solicit directions from participants or the Sponsor.
(e) NOTES. The Administrator shall act as the Trustee's agent
for the purpose of holding all trust investments in participant loan notes and
related documentation and as such shall: (1) hold physical custody of and keep
safe the notes and other loan documents, (ii) collect and remit all principal
and interest payments to the Trustee and (iii) keep the repayments of such loans
separate from the other assets of the Administrator and clearly identify such
assets as Plan assets and (iv) cancel and surrender the notes and other loan
documentation when a loan has been paid in full. To originate a participant
loan, the Plan participant shall direct the Trustee as to the type of loan to be
made from the participant's individual account. Such directions shall be made by
Plan participants by use of the telephone exchange system maintained for such
purpose by the Trustee or its agent. The Trustee shall determine, based on the
current value of the participant's
<PAGE> 10
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account, the amount available for the loan. Based on the interest rate supplied
by the Administrator in accordance with the terms of the Plan, the Trustee shall
advise the participant of such interest rate, as well as the installment payment
amounts. The Trustee shall forward the loan document and truth-in-lending
disclosures to the participant for execution and submission for approval to the
Administrator. The Administrator shall have the responsibility for approving the
loan and instructing the Trustee to send the loan proceeds to the Administrator
or to the participant if so directed by the Administrator. In all cases, such
instruction by the Administrator shall be made within thirty (30) days of the
participant's initial request (the origination date).
(f) GUARANTEED INVESTMENT CONTRACTS. Trust investments in
guaranteed investment contracts ("GICs") shall be subject to the following
limitations:
(i) COMMINGLED POOL INVESTMENTS. To the extent that
the Investment Committee selects as an investment option the Managed
Income Portfolio of the Fidelity Group Trust for Employee Benefit Plans
(the "Group Trust"), the Investment Committee 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.
(ii) In order to provide the necessary monies for
exchanges or redemptions from the GIC investment option, if any, under
the Plan, the Investment Committee agrees that the Plan shall maintain
a liquidity reserve allocated to the Plan GIC investment option in
Fidelity Institutional Cash Portfolios: Money Market Portfolio: Class A
or such other Mutual Fund or commingled money market pool as agreed to
by the Investment Committee and the Trustee.
<PAGE> 11
-8-
(g) RELIANCE OF TRUSTEE ON DIRECTIONS.
(i) The Trustee shall not be liable for any loss, or
by reason of any breach, which arises from any participant's exercise
or non-exercise of rights under this Section 4 over the assets in the
participant's accounts.
(ii) The Trustee shall not be liable for any loss, or
by reason of any breach, which arises from the Investment Committee's
exercise or non-exercise of rights under this Section 4, unless it was
clear on their face that the actions to be taken under the Investment
Committee's directions were prohibited by the fiduciary duty rules of
Section 404(a) of ERISA or were contrary to the terms of the Plan or
this Agreement.
(h) TRUSTEE POWERS. The Trustee shall have the following
powers and authority:
(i) Subject to paragraphs (b), (c), (d) and (e) of
this Section 4, to sell, exchange, convey, transfer, or otherwise
dispose of any property held in the Trust, by private contract or at
public auction. No person dealing with the Trustee shall be bound to
see to the application of the purchase money or other property
delivered to the Trustee or to inquire into the validity, expediency,
or propriety of any such sale or other disposition.
(ii) Subject to paragraphs (b) and (c) of this
Section 4, to invest in guaranteed investment contracts and short term
investments (including interest bearing accounts with the Trustee or
money market mutual funds advised by affiliates of the Trustee) and in
collective investment funds maintained by the Trustee for qualified
plans, in which case the provisions of each collective investment fund
in which the Trust is invested shall be deemed adopted by the Sponsor
and the provisions thereof incorporated
<PAGE> 12
-9-
as a part of this Trust as long as the fund remains exempt from
taxation under Sections 401(a) and 501(a) of the Internal Revenue Code
of 1986, as amended.
(iii) To cause any securities or other property held
as part of the Trust to be registered in the Trustee's own name, in the
name of one or more of its nominees, or in the Trustee's account with
the Depository Trust Company of New York and to hold any investments in
bearer form, but the books and records of the Trustee shall at all
times show that all such investments are part of the Trust.
(iv) To keep that portion of the Trust in cash or
cash balances as the Investment Committee or Administrator may, from
time to time, deem to be in the best interest of the Trust.
(v) To make, execute, acknowledge, and deliver any
and all documents of transfer or conveyance and to carry out the powers
herein granted.
(vi) To borrow funds from a bank not affiliated with
the Trustee in order to provide sufficient liquidity to process Plan
transactions in a timely fashion, provided that the cost of borrowing
shall be allocated in a reasonable fashion to the investment fund(s) in
need of liquidity.
(vii) To settle, compromise, or submit to arbitration
any claims, debts, or damages due to or arising from the Trust; to
commence or defend suits or legal or administrative proceedings; to
represent the Trust in all suits and legal and administrative hearings;
and to pay all reasonable expenses arising from any such action, from
the Trust if not paid by the Sponsor.
(viii) Subject to the prior approval of the Sponsor,
to employ legal, accounting, clerical, and other such extraordinary
assistance as may be required in
<PAGE> 13
-10-
carrying out the provisions of this Agreement and to pay their
reasonable expenses and compensation from the Trust if not paid by the
Sponsor.
(ix) To do all other acts although not specifically
mentioned herein, as the Trustee may deem necessary to carry out any of
the foregoing powers and the purposes of the Trust.
Section 5. RECORDKEEPING AND ADMINISTRATIVE SERVICES TO BE PERFORMED.
(a) GENERAL. The Trustee shall perform those recordkeeping and
administrative functions described in Schedule "A" attached hereto. These
recordkeeping and administrative functions shall be performed within the
framework of the Administrator's written directions regarding the Plan's
provisions, guidelines and interpretations.
(b) ACCOUNTS. The Trustee shall keep accurate accounts of all
investments, receipts, disbursements, and other transactions hereunder, and
shall report the value of the assets held in tile Trust as of the last day of
each fiscal quarter of the Plan and, if not on the last day of a fiscal quarter,
the date on which the Trustee resigns or is removed as provided in Section 8 of
this Agreement or is terminated as provided in Section 10 (the "Reporting
Date"). Within thirty (30) days following each Reporting Date or within sixty
(60) days in the case of a Reporting Date caused by the resignation or removal
of the Trustee, or the termination of this Agreement, the Trustee shall file
with the Administrator a written account setting forth all investments,
receipts, disbursements, and other transactions effected by the Trustee between
the Reporting Date and the prior Reporting Date, and setting forth the value of
the Trust as of the Reporting Date. Except as otherwise required under ERISA,
upon the expiration of six (6) months from the date of filing such account with
the Administrator, the Trustee shall have no liability or further accountability
to anyone with respect to the propriety of its acts or transactions shown in
such
<PAGE> 14
-11-
account, except with respect to such acts or transactions as to which the
Sponsor shall within such six (6) month period file with the Trustee written
objections.
(c) INSPECTION AND AUDIT. Except as required under ERISA, all
records generated by the Trustee in accordance with paragraphs (a) and (b) shall
be open to inspection and audit, during the Trustee's regular business hours
prior to the termination of this Agreement, by the Administrator or any person
designated by the Administrator. Upon the resignation or removal of the Trustee
or the termination of this Agreement, the Trustee shall provide to the
Administrator, at no expense to the Sponsor, in the format regularly provided to
the Administrator, a statement of each participant's accounts as of the
resignation, removal, or termination, and the Trustee shall provide to the
Administrator or the Plan's new recordkeeper such further records as are
reasonable, at the Sponsor's expense.
(d) EFFECT OF PLAN AMENDMENT. A confirmation of the current
qualified status of the Plan is attached hereto as Schedule "F". The Trustee's
provision of the recordkeeping and administrative services set forth in this
Section 5 shall be conditioned on the Sponsor delivering to the Trustee a copy
of any amendment to the Plan as soon as administratively feasible following the
amendment's adoption, with, if requested, an IRS determination letter or an
opinion of counsel substantially in the form of Schedule "F" covering such
amendment, and on the Administrator providing the Trustee on a timely basis with
all the information the Administrator deems necessary for the Trustee to perform
the recordkeeping and administrative services and such other information as the
Trustee may reasonably request.
(e) RETURNS, REPORTS AND INFORMATION. The Administrator shall
be responsible for the preparation and filing of all returns, reports, and
information required of the Trust or Plan by law. The Trustee shall provide the
Administrator with such information as the Administrator
<PAGE> 15
-12-
may reasonably request to make these filings. The Administrator shall also be
responsible for making any disclosures to Participants required by law, except
such disclosure as may be required under federal or state truth-in-lending laws
with regard to Participant loans, which shall be provided by the Trustee.
Section 6. COMPENSATION AND EXPENSES. Within thirty (30) days of
receipt of the Trustee's bill, which shall be computed and billed in accordance
with Schedule "B" attached thereto and made a part hereof, as amended from time
to time, the Sponsor shall send to the Trustee a payment in such amount or the
Sponsor may direct the Trustee to deduct such amount from participants' accounts
and any unallocated portion of the Trust fund on a pro rata basis. All expenses
of the Trustee relating directly to the acquisition and disposition of
investments constituting part of the Trust, and all taxes of any kind whatsoever
that may be levied or assessed under existing or future laws upon or in respect
of the Trust or the income thereof, shall be a charge against and paid from the
appropriate Plan participants' account.
Section 7. DIRECTIONS AND INDEMNIFICATION.
(a) IDENTITY OF ADMINISTRATOR AND INVESTMENT COMMITTEE. The
Trustee shall be fully protected in relying on the fact that the Investment
Committee and the Administrator under the Plan are the individuals or persons
named as such or such other individuals or persons as the Sponsor may notify the
Trustee in writing.
(b) DIRECTIONS FROM ADMINISTRATOR. Whenever the Administrator
provides a direction to the Trustee, the Trustee shall not be liable for any
loss, or by reason of any breach, arising from the direction (i) if the
direction is contained in a writing (or is oral and immediately confirmed in a
writing) signed by any individual whose name and signature have been submitted
(and not withdrawn) in writing to the Trustee by the Sponsor in the form
attached hereto as
<PAGE> 16
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Schedule "D", and (ii) if the Trustee reasonably believes the signature of the
individual to be genuine, unless it is clear on the direction's face that the
actions to be taken under the direction would be prohibited by the fiduciary
duty rules of section 404(a) of ERISA or would be contrary to the terms of the
Plan or this Agreement.
(c) DIRECTIONS FROM INVESTMENT COMMITTEE. Whenever the
Investment Committee provides a direction to the Trustee, the Trustee shall not
be liable for any loss, or by reason of any breach, arising from the direction
(i) if the direction is contained in a writing (or is oral and immediately
confirmed in a writing) signed by any individual whose name and signature have
been submitted (and not withdrawn) in writing to the Trustee by the Sponsor in
the form attached hereto as Schedule "E" and (ii) if the Trustee reasonably
believes the signature of the individual to be genuine, unless it is clear on
the direction's face that the actions to be taken under the direction would be
prohibited by the fiduciary duty rules of section 404(a) of ERISA or would be
contrary to the terms of the Plan or this Agreement.
(d) CO-FIDUCIARY LIABILITY. In any other case, the Trustee
shall not be liable for any loss, or by reason of any breach, arising from any
act or omission of another fiduciary under the Plan except as provided in
section 405(a) of ERISA.
(e) INDEMNIFICATION. The Sponsor shall indemnify the Trustee
against, and hold the Trustee harmless from, any and all loss, damage, penalty,
liability, cost, and expense, including without limitation, reasonable
attorneys' fees and disbursements, that may be incurred by, imposed upon, or
asserted against the Trustee by reason of any claim, regulatory proceeding, or
litigation arising from any act done or omitted to be done by any individual or
person with respect to the Plan or Trust, excepting only any and all loss, etc.,
arising from the Trustee's negligence or bad faith.
<PAGE> 17
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(f) SURVIVAL. The provisions of this Section 7 shall survive
the termination of this Agreement.
Section 8. RESIGNATION OR REMOVAL OF TRUSTEE.
(a) RESIGNATION. The Trustee may resign at any time upon sixty
(60) days' notice in writing to the Sponsor, unless a shorter period of notice
is agreed upon by the Sponsor.
(b) REMOVAL. The Sponsor may remove the Trustee at any time
upon sixty (60) days' notice in writing to the Trustee, unless a shorter period
of notice is agreed upon by the Trustee.
Section 9. SUCCESSOR TRUSTEE.
(a) APPOINTMENT. If the office of Trustee becomes vacant for
any reason, the Sponsor may in writing appoint a successor trustee under this
Agreement. The successor trustee shall have all of the rights, powers,
privileges, obligations, duties, liabilities, and immunities granted to the
Trustee under this Agreement. The successor trustee and predecessor trustee
shall not be liable for the acts or omissions of the other with respect to the
Trust.
(b) ACCEPTANCE. When the successor trustee accepts its
appointment under this Agreement, title to and possession of the Trust assets
shall immediately vest in the successor trustee without any further action on
the part of the predecessor trustee. The predecessor trustee shall execute all
instruments and do all acts that reasonably may be necessary or reasonably may
be requested in writing by the Sponsor or the successor trustee to vest title to
all Trust assets in the successor trustee or to deliver all Trust assets to the
successor trustee.
(c) CORPORATE ACTION. Any successor of the Trustee or
successor trustee, through sale or transfer of the business or trust department
of the Trustee or successor trustee, or
<PAGE> 18
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through reorganization, consolidation, or merger, or any similar transaction,
shall, upon consummation of the transaction, become the successor trustee under
this Agreement.
Section 10. TERMINATION. This Agreement may be terminated, without
penalty to the Sponsor, at any time by the Sponsor upon sixty (60) days' notice
in writing to the Trustee. On the date of the termination of this Agreement, the
Trustee shall forthwith transfer and deliver to such individual or entity as the
Sponsor shall designate, all cash and assets then constituting the Trust. If, by
the termination date, the Sponsor has not notified the Trustee in writing as to
whom the assets and cash are to be transferred and delivered, the Trustee may
bring an appropriate action or proceeding for leave to deposit the assets and
cash in a court of competent jurisdiction. The Trustee shall be reimbursed by
the Sponsor for all costs and expenses of the action or proceeding including,
without limitation, reasonable attorneys' fees and disbursements.
Section 11. RESIGNATION, REMOVAL, AND TERMINATION NOTICES. All notices
of resignation, removal, or termination under this Agreement must be in writing
and mailed to the party to which the notice is being given by certified or
registered mail, return receipt requested, to the Sponsor c/o Betty Green, HADCO
Corporation, 12A Manor Parkway, Salem, New Hampshire 03079 and James Hamilton,
General Counsel, Berlin, Hamilton & Dahmen, 73 Tremont Street, Boston,
Massachusetts 02108, and to the Trustee c/o John M. Kimpel, Fidelity
Investments, 82 Devonshire Street, Boston, Massachusetts 02109, or to such other
addresses as the parties have notified each other of in the foregoing manner.
Section 12. DURATION. This Trust shall continue in effect without limit
as to time, subject, however, to the provisions of this Agreement relating to
amendment, modification, and termination thereof.
<PAGE> 19
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Section 13. AMENDMENT OR MODIFICATION. This Agreement may be amended or
modified at any time and from time to time only by an instrument executed by
both the Sponsor and the Trustee. Notwithstanding the foregoing and not prior to
June 1, 1998, to reflect increased operating costs the Trustee may once each
calendar year amend Schedule "B" without the Sponsor's consent upon ninety (90)
days written notice to the Sponsor.
Section 14. GENERAL.
(a) PERFORMANCE BY TRUSTEE, ITS AGENTS OR AFFILIATES. The
Sponsor Acknowledges and authorizes that the services to be provided under this
Agreement shall be provided by the Trustee, its agents or affiliates, including
Fidelity Investments Institutional Operations Company or its successor, and that
certain of such services may be provided pursuant to one or more other
contractual agreements or relationships.
(b) ENTIRE AGREEMENT. This Agreement, including the Exhibits
attached hereto, contains all of the terms agreed upon between the parties with
respect to the subject matter hereof.
(c) WAIVER. No waiver by either party of any failure or
refusal to comply with an obligation hereunder shall be deemed a waiver of any
other or subsequent failure or refusal to so comply.
(d) SUCCESSORS AND ASSIGNS. The stipulations in this Agreement
shall inure to the benefit of, and shall bind, the successors and assigns of the
respective parties.
(e) PARTIAL INVALIDITY. If any term or provision of this
Agreement or the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall
<PAGE> 20
-17-
not be affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
(f) SECTION HEADINGS. The headings of the various sections and
subsections of this Agreement have been inserted only for the purposes of
convenience and are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement.
Section 15. GOVERNING LAW.
(a) MASSACHUSETTS LAW CONTROLS. This Agreement is being made
in the Commonwealth of Massachusetts, and the Trust shall be administered as a
Massachusetts trust. The validity, construction, effect, and administration of
this Agreement shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Massachusetts, except to the extent those laws are
superseded under section 514 of ERISA
(b) TRUST AGREEMENT CONTROLS. The Trustee is not a party to
the Plan, and in the event of any conflict between the provisions of the Plan
and the provisions of this Agreement, the provisions of this Agreement shall
control.
[Remainder of page intentionally left blank]
<PAGE> 21
-18-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
HADCO CORPORATION
Attest: /s/ James Hamilton By: /s/ Richard Saporito 5/24/96
---------------------------- ------------------------------
Clerk Vice President Date
FIDELITY MANAGEMENT TRUST COMPANY
Attest: /s/ Douglas O. Kant By: /s/ John O'Reiley 10/26/96
---------------------------- ------------------------------
Assistant Clerk Vice President Date
<PAGE> 1
EXHIBIT 10.67
FIRST AMENDMENT TO TRUST AGREEMENT BETWEEN
FIDELITY MANAGEMENT TRUST COMPANY AND
HADCO CORPORATION
THIS FIRST AMENDMENT, dated as of the first day of October, 1997, by
and between Fidelity Management Trust Company (the "Trustee") and Hadco
Corporation (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a Trust
Agreement dated June 1, 1996, with regard to the Hadco Corporation Retirement
Plan (the "Plan"); and
WHEREAS,. the Sponsor has informed the Trustee that the Zycon
Corporation Profit Sharing 401(k) Plan will merge into the Hadco Corporation
Retirement Plan and has directed the Trustee to accept and hold the assets of
the Zycon Corporation Profit Sharing 401(k) Plan; and
WHEREAS, the Trustee and the Sponsor now desire to amend said Trust
Agreement as provided for in Section 13 thereof;
NOW THEREFORE, in consideration of the above premises the Trustee and
the Sponsor hereby amend the Trust Agreement by:
(1) Amending the Trust Agreement to add the following "WHEREAS"
clause:
WHEREAS, the Sponsor wishes to establish two trusts:
one, for which Hadco Corporation serves as trustee, to hold
assets attributable to the Balanced Account; and the other for
which the Trustee serves as trustee, a trust to hold and
invest the remaining plan assets under the Plan for the
exclusive benefit of participants in the Plan and their
beneficiaries; and
(2) Amending Section 4(b)(i) AVAILABLE INVESTMENT OPTIONS by
redefining "Mutual Fund" as follows:
(i) securities issued by investment companies advised by
Fidelity Management & Research Company and certain securities
issued by registered investment companies not advised by
Fidelity Management & Research Company (collectively, "MUTUAL
FUNDS").
(3) Amending Section 4(b) by adding new subsection (vi) as
follows:
(vi) separately managed portfolios, namely the Balanced
Account for which the Investment Manager is Wentworth Hauser,
respectively, as described in Section 3(38) of ERISA, and for
which the Trustee has no responsibility with regard investment
selections.
<PAGE> 2
(4) Amending Section 4(d) by inserting the following sentence
before the first sentence of the Section:
All transactions involving Non-Fidelity Mutual Funds shall be
done in accordance with the OPERATIONAL GUIDELINES FOR
NON-FIDELITY MUTUAL FUNDS attached hereto as Schedule "I".
(5) Amending the "money classifications" section of Schedule "A"
by adding the following:
- Pre Tax Contributions QJ&S*
- After Tax Contributions QJ&S*
- Company Match QJ&S*
- Rollover QJ&S*
- Profit Sharing QJ&S*
- Sign On Bonus QJ&S*
- Pre Tax Contributions**
- Company Match**
- Rollover**
- Profit Sharing
- Sign On Bonus**
- Zycon Company Match
- Zycon Profit Sharing
* "QJ&S" indicates the source is eligible for payment as
Qualified Joint & Survivor Annuity.
** Eligible for pre-approved loans. The other sources not
eligible for pre-approved loans will require spousal
consent.
(6) Amending the "investment options" section of Schedules "A" and
"C" by adding the following:
- The Balanced Account (frozen to new investments)
- The Stock Account (also referred to as the "Harris,
Bretall, Sullivan & Smith Growth Equity Fund")
(frozen to new investments)
(7) Amending Schedule "B" by adding "Non-Fidelity Mutual Funds" as
follows:
Non-Fidelity Mutual Funds: .25 % annual administration fee
on all Non-Fidelity Mutual Fund
assets except for the Harris
Bretall fund (to be paid by the
Non-Fidelity Mutual Fund
vendor).
<PAGE> 3
Harris Bretall Fund: .25 % annual administration fee
on all assets; .10% per annum
to be paid by Harris Bretall.
.15 % per annum to be paid by
the Sponsor.
(8) Adding Schedule "J" OPERATING AGREEMENT FOR THE BALANCED
ACCOUNT IN THE HADCO CORPORATION RETIREMENT PLAN as attached.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this First
Amendment to be executed by their duly authorized officers effective as of the
day and year first written.
HADCO CORPORATION FIDELITY MANAGEMENT TRUST COMPANY
By: /s/ Richard Saporito By: /s/ Lucy Lewis 10/6/97
-------------------------------- -----------------------------
Title: Vice President Date Vice President Date
<PAGE> 1
EXHIBIT 10.68
SECOND AMENDMENT TO TRUST AGREEMENT BETWEEN
FIDELITY MANAGEMENT TRUST COMPANY AND
HADCO CORPORATION
THIS SECOND AMENDMENT, dated as of the fifteenth day of January, 1998,
by and between Fidelity Management Trust Company (the "Trustee") and HADCO
Corporation (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a Trust
Agreement dated June 1, 1996, with regard to the HADCO Corporation Retirement
Plan (the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said Trust
Agreement as provided for in Section 13 thereof,
NOW THEREFORE, in consideration of the above premises the Trustee and
the Sponsor hereby amend the Trust Agreement by:
(1) Amending Schedule "A" by adding a the second point to
subsection G, Other, as follows:
For terminated and retired participants with outstanding
loans: Fidelity shall provide to these participants a loan
coupon book for the purpose of scheduling and processing loan
repayments.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this Second
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
HADCO CORPORATION FIDELITY MANAGEMENT TRUST COMPANY
By: /s/ Timothy Matthews 12/11/97 By: /s/ Steve Quackenbush 12/26/97
-------------------------------- --------------------------------
Title: Vice President Date Vice President Date
<PAGE> 1
EXHIBIT 10.69
THIRD AMENDMENT TO TRUST AGREEMENT BETWEEN
FIDELITY MANAGEMENT TRUST COMPANY AND
HADCO CORPORATION
THIS THIRD AMENDMENT, dated as of the first day of January, 1998, by
and between Fidelity Management Trust Company (the "Trustee") and Hadco
Corporation (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a Trust
Agreement dated June 1, 1996, with regard to the Hadco Corporation Retirement
Plan (the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said Trust
Agreement as provided for in Section 13 thereof,
NOW THEREFORE, in consideration of the above premises the Trustee and
the Sponsor hereby amend the Trust Agreement by:
(1) Amending Section 4(e) by restating as follows:
(e) NOTES.
(i) NOTES ON CONTRIBUTIONS TO THE HADCO CORPORATION
RETIREMENT PLAN BEFORE JULY 1, 1996 AND ON CONTRIBUTIONS TO
THE ZYCON CORPORATION PROFIT SHARING 401(K) PLAN BEFORE
OCTOBER 1, 1997. The Administrator shall act as the Trustee's
agent for the purpose of holding all trust investments in
participant loan notes and related documentation and as such
shall (i) hold physical custody of and keep safe the notes and
other loan documents, (ii) separately account for repayments
of such loans and clearly identify such assets as Plan assets,
(iii) collect and remit all principal and interest payments to
the Trustee, and (iv) cancel and surrender the notes and other
loan documentation when a loan has been paid in full. To
originate a participant loan, the Plan participant shall
direct the Trustee as to the type of loan to be made from the
participant's individual account. Such directions shall be
made by Plan participants by use of the telephone exchange
system maintained for such purpose by the Trustee or its
agent. The Trustee shall determine, based on the current value
of the participants account, the amount available for the
loan. Based on the interest rate supplied by the Sponsor in
accordance with the terms of the Plan, the Trustee shall
advise the participant of such interest rate, as well as the
installment payment amounts. The Trustee shall forward the
loan document to the participant for execution and submission
for approval to the Administrator. The Administrator shall
have the responsibility for approving the loan and instructing
the Trustee to send the loan proceeds to the Administrator or
to the participant if so directed by the Administrator. In all
cases, approval or disapproval by the Administrator shall be
made within thirty (30) days of the participant's initial
request (the origination date).
<PAGE> 2
(ii) NOTES ON ALL OTHER CONTRIBUTIONS. The Administrator
shall act as the Trustee's agent for participant loan notes
and as such shall (i) separately account for repayments of
such loans and clearly identify such assets as Plan assets and
(ii) collect and remit all principal and interest payments to
the Trustee. To originate a participant loan, tile Plan
participant shall direct the Trustee as to the term and amount
of the loan to be made from the participant's individual
account. Such directions shall be made by Plan participants by
use of the telephone exchange system maintained for such
purpose by the Trustee or its agent. The Trustee shall
determine, based on the current value of the participant's
account on the date of the request and any guidelines provided
by the Sponsor, the amount available for the loan. Based on
the interest rate supplied by the Sponsor in accordance with
the terms of the Plan, the Trustee shall advise the
participant of such interest rate, as well as the installment
payment amounts. The Trustee shall distribute the Participant
loan agreement and truth-in-lending disclosure with the
proceeds check to the participant. To facilitate
recordkeeping, the Trustee may destroy the original of any
promissory note made in connection with a loan to a
participant under the Plan, provided that the Trustee first
creates a duplicate by a photographic or optical scanning or
other process yielding a reasonable facsimile of the
promissory note and the Plan participant's signature thereon,
which duplicate may be reduced or enlarged in size from the
actual size of the original promissory note.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this third
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
HADCO CORPORATION FIDELITY MANAGEMENT TRUST COMPANY
By: /s/ Timothy Matthews 2/4/98 By: /s/ John DiBenedetto 2/18/98
-------------------------------- ------------------------------
Title: Vice President Date Vice President Date
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated November 18, 1999 included in
Registration Statement Nos. 33-2915, 33-12555, 33-24975, 33-40616, 33-48288,
333-11485, 333-22377, 333-47589 and 333-79029. It should be noted that we have
not audited any financial statements of the Company subsequent to October 30,
1999 or performed any audit procedures subsequent to the date of our report.
/s/ Arthur Andersen LLP
Boston, Massachusetts
January 3, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-30-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-30-1999
<EXCHANGE-RATE> 1
<CASH> 9,078
<SECURITIES> 0
<RECEIVABLES> 118,058
<ALLOWANCES> (1,478)
<INVENTORY> 63,926
<CURRENT-ASSETS> 208,752
<PP&E> 703,552
<DEPRECIATION> (375,371)
<TOTAL-ASSETS> 724,823
<CURRENT-LIABILITIES> 160,971
<BONDS> 278,309
0
0
<COMMON> 683
<OTHER-SE> 218,326
<TOTAL-LIABILITY-AND-EQUITY> 724,823
<SALES> 1,005,970
<TOTAL-REVENUES> 1,007,354
<CGS> 849,100
<TOTAL-COSTS> 940,004
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 30,895
<INCOME-PRETAX> 36,455
<INCOME-TAX> 14,491
<INCOME-CONTINUING> 21,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 21,964
<EPS-BASIC> 1.62
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</TABLE>
