UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-10281
SMITH CORONA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0286862
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
839 Route 13 South, Cortland, New York 13045
(Address of principal executive offices)(Zip Code)
(607) 753-6011
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of 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. [ ]
The aggregate market value of the voting stock and non-voting common equity of
the registrant held by non-affiliates of the registrant as of September 1, 1997:
$7,112,993 (Such amount has been computed as described in "Market for
Registrant's Common Equity and Related Stockholder Matters.")
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No
Number of shares of Common Stock outstanding as of September 1, 1997: 2,676,197.
Documents Incorporated by Reference
Document Part of Form 10-K
Portions of the Proxy Statement relating to registrant's Part III
1997 Annual Meeting of Stockholders, to be filed with the
Commission within 120 days after the close of the
registrant's fiscal year
TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Item 1. Business. . .. . . . . . . . . . . . . . . . . . . . . . . . . .1
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Restructuring and Bankruptcy Reorganization. . . . . . .. . . . . .1
History of the Business. . . . . . . . . . . . . . . . . . . . . .3
Products . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .4
Marketing, Sales and Distribution. . . . . . . . . . . . . . . . .5
Service. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . .6
Seasonality. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Manufacturing Operations . . . . . . .. . . . . . . . . . . . . . .6
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Patents, Trademarks and Licenses . . . . . . . . . . . . . . . . 7
Employees. . . . . . . . . . . .. . . . . . . . . . . . . . . . . 8
Research and Development . . . . . . . . . . . . . . . . . . . . 8
Raw Materials. . . . . . .. . . . . . . . . . . . . . . . . . . . 8
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 11
Executive Officers of the Registrant. . . . . . . . . . . . . . . . . 11
PART II. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 14
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters14
Item 6. Selected Financial Data . . . . . . . . .. . . . . . . . . . . 15
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition . . . . . .. . . . . . . . . . . . . 17
Item 8. Financial Statements and Supplementary Data . . . . . . . . . 23
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . . . . . . . 23
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 10. Directors and Executive Officers of the Registrant . . . . . 24
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . 24
Item 12. Security Ownership of Certain Beneficial Owners and Management24
Item 13. Certain Relationships and Related Transactions . . . . . .. . 24
PART IV. . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 25
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 25
Index to Consolidated Financial Statements and Financial Statement Schedule. 30
PART I
Item 1. Business
The Company
General
Smith Corona Corporation (the "Company") is dedicated to
providing office product solutions to the small office/home
office and home markets through new and emerging technologies in
addition to its traditional portable electronic typewriters,
personal word processors and related accessories and supplies
business.
The Company was incorporated in 1985 in the State of Delaware.
Prior to 1986, the businesses of the Company were operated by SCM
Corporation ("SCM") which was acquired by Hanson PLC ("Hanson")
in March 1986. At the time it was acquired, SCM consisted of a
number of businesses, including the current business of the
Company and businesses in the chemical, paper and food
industries. On August 3, 1989, the Company completed a
registered public offering of 14,750,000 shares of common stock,
par value $.01 per share (the "Old Common Stock"). On July 5,
1995, the Company filed for relief under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code"). Upon emergence
from bankruptcy proceedings on February 28, 1997, the Old Common
Stock was canceled, registered holders of the Old Common Stock as
of August 15, 1996 received warrants to purchase one share of
common stock, par value $.001 per share (the "Common Stock"), for
each twenty shares of Old Common Stock and certain of the
Company's creditors received Common Stock. (See "Restructuring
and Bankruptcy Reorganization" for further discussion of the
bankruptcy proceedings.)
Restructuring and Bankruptcy Reorganization
On May 8, 1995 the Company announced a major restructuring plan
whereby (i) the Company's typewriter manufacturing would be
relocated from its Singapore and Batam Island, Indonesia
facilities to its Mexico facility and (ii) approximately 180
support positions within research and development, finance,
service, distribution, selling and marketing areas in both its
Cortland, New York and New Canaan, Connecticut locations would be
eliminated (the "Restructuring").
As a result of the Company experiencing sales declines and
operating losses, having extended payment of obligations owed to
its trade vendors, and needing additional financing to meet
operating requirements and fund the Restructuring, on July 5,
1995 (the "Petition Date"), the Company filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court"). On August 18, 1995, SCM Office
Supplies, Inc., SCC LI Corporation (formerly known as Histacount
Corporation) and Hulse Manufacturing Company, all wholly-owned
nonoperating subsidiaries of the Company (collectively, the
"Nonoperating Subsidiaries"), filed Chapter 11 petitions. On
October 31, 1996, Smith Corona Overseas Holdings, Inc., SCM
Inter-American Corporation and SCM (United Kingdom) Limited, all
wholly-owned domestic subsidiaries (the "Wholly-Owned Domestic
Subsidiaries"), also filed Chapter 11 petitions. (The petitions
of the Company, the Nonoperating Subsidiaries and the Wholly-Owned Domestic
Subsidiaries are referred to herein collectively
as the "Bankruptcy Proceedings"). The primary purpose of the
October 31, 1996 filings, which had no effect on operations, was
to better protect corporate assets during the reorganization
period. The Bankruptcy Proceedings primarily related to all U.S.
assets and operations and did not involve the Company's
international subsidiaries. From July 5, 1995 to February 28,
1997, the Company operated as a debtor-in-possession.
On September 9, 1996, the Company filed its Third Amended Second
Joint Plan of Reorganization (the "POR") and Third Amended Second
Disclosure Statement with the Bankruptcy Court, which Disclosure
Statement was approved by the Bankruptcy Court for solicitation
of creditor acceptance of the POR. On January 27, 1997 the
Bankruptcy Court entered an order confirming the Company's POR
(the "Confirmation Order"). The Confirmation Order was subject
to satisfaction of certain conditions precedent to the effective
date. The Company satisfied the conditions and emerged from the
Bankruptcy Proceedings on February 28, 1997 (the "Effective
Date").
Under the POR, all allowed general unsecured claims will be
satisfied through the distribution to holders of such claims of
(i) the unsecured class cash of approximately $11.3 million (less
any amounts paid to holders of allowed convenience class claims
discussed below), and (ii) 85 percent of the Common Stock to be
issued pursuant to the POR (determined on a fully diluted basis,
not including the effect of the exercise of any of the below
described warrants). Each holder of an allowed general unsecured
claim will receive one share of the Common Stock for each ten
dollars in allowed claim value. All allowed claims senior to
allowed general unsecured claims will be satisfied by the payment
in full in cash or notes (as provided by the Bankruptcy Code) or
the assumption of all such claims. The distributions to holders
of allowed general unsecured claims and claims senior to such
claims have commenced. In addition, allowed convenience class
claims (general unsecured claims of one thousand five hundred
dollars or less) have received payment in cash in an amount equal
to 60 percent of the amount of such claims and registered holders
as of August 15, 1996, of the Old Common Stock have received
warrants to purchase one share of Common Stock for each twenty
shares of Old Common Stock.
For further discussion of the Company's Restructuring and
bankruptcy reorganization, see "Business - Manufacturing
Operations" and "Management's Discussion and Analysis of Results
of Operations and Financial Condition."
History of the Business
The Company's typewriter and personal word processor business
traces its origins back to the 1880's with the development of
office typewriters. The Company introduced the world's first
portable electric typewriter in 1957 and, for the next decade,
the Company had the only portable electric typewriter available
in the marketplace. In 1973, the Company introduced its
revolutionary cartridge ribbon system, which is still used today.
Beginning in 1979, the Company moved into electronics with major
research and development efforts and, in 1981, introduced its
first electronic typewriter product to the marketplace.
During the early 1980's, as the market shifted to electronic
typewriters, Japanese manufacturers became a significant factor
in the world marketplace. In order to compete effectively,
between 1984 and 1986 the Company developed and implemented a
major business restructuring of its typewriter operations which
resulted in substantially reduced manufacturing costs, a
streamlined product line, a 50% reduction in worldwide employment
and the consolidation of certain of its United States operations.
In 1985, the Company developed and introduced the industry's
first personal word processors, and, in 1989, the Company
introduced the industry's first laptop personal word processor.
During the year ended June 30, 1995, the Company sold
substantially all of the assets and liabilities of SCM Office
Supplies, Inc. and Histacount Corporation ("Histacount"),
respectively, two of its wholly-owned subsidiaries. The results
of operations and gain (loss) on sale related to SCM Office
Supplies, Inc. and Histacount are presented as discontinued
operations in the consolidated financial statements (see
Consolidated Financial Statements in this Form 10-K Annual
Report). Business operations of these two entities primarily
consisted of the manufacture and distribution of office supplies
and customized printed products, respectively.
From July 5, 1995 to February 28, 1997 the Company operated as a
debtor-in-possession while in the Bankruptcy Proceedings. On
January 27, 1997 the Bankruptcy Court entered the Confirmation
Order. The Confirmation Order was subject to satisfaction of
certain conditions precedent to the Effective Date. The Company
satisfied the conditions and emerged from the Bankruptcy
Proceedings on the Effective Date. During the Bankruptcy
Proceedings, the Company confined expenditures to those
manufacturing and operating costs that were necessary to preserve
and maintain going-concern value. In light of its financial
condition, the Company also implemented a planned reduction in
its workforce and a consolidation of its world headquarters from
New Canaan, Connecticut to its facility in Cortland, New York.
Additionally, as part of the Restructuring, the Company relocated
its typewriter manufacturing operations to its Mexico facility
from facilities in Singapore and Batam Island, Indonesia. See
"Business -- Restructuring and Bankruptcy Reorganization" and
"Management's Discussion and Analysis of Results of Operations
and Financial Condition."
Products
The Company plans to significantly expand its product line,
primarily by sourcing new products from outside manufacturers.
Such sourcing includes entering into strategic alliances with
third parties in the United States, Europe and the Far East to
provide products or services. In that respect, the Company's
efforts are focused on forging alliances with companies that
provide technologically advanced products for the small office
and home office environment but presently do not have a
substantial United States market share or market presence, and
are intent on building or increasing market share by selling
their products under the well-known "Smith Corona" name. The
Company intends to rely on its existing distribution network to
become a leading vendor of technologically advanced products for
the small office and home office. In the fall of 1997, newly
sourced and manufactured products will be available under the
Smith Corona brand name. The product offerings will include
items in the telephony and facsimile product lines. Further, the
Company intends to maintain its core business of manufacturing
and distributing its current product line of typewriters and
related supplies and accessories to satisfy continuing worldwide
demand for these products. Due to substantial sales volume
reductions, in June 1997 the Company ceased the manufacture of
personal word processors; servicing and customer support of
personal word processors, however, will continue.
The Company currently designs, manufactures and sells, both
domestically and internationally, portable and compact electronic
typewriters and related accessories and supplies for use in the
home, at school and in small offices. The Company focuses its
design and development of these products on the major desires of
purchasers: ease of use and incorporation of displays, as well as
a full array of word processing features, including dictionary
spell checkers and grammar features. The Company's market base
of typewriters and personal word processors provides a market for
its accessories and supplies business.
The products or classes of similar products that accounted for
10% or more of net sales of the Company in any of the Company's
last three fiscal years were (i) portable and compact electronic
typewriters, which accounted for 45.1%, 38.1% and 39.8% of net
sales in the fiscal years ended June 30, 1997, 1996 and 1995,
respectively, (ii) personal word processors, which accounted for
11.5%, 21.8% and 34.6% of net sales in the fiscal years ended
June 30, 1997, 1996 and 1995, respectively, and (iii) typewriters
and personal word processor supplies and accessories, which
accounted for 36.5%, 29.4% and 20.0% of net sales in fiscal years
ended June 30, 1997, 1996 and 1995, respectively.
Marketing, Sales and Distribution
In the United States, the Company advertises, markets and
promotes its products through national print media, both consumer
and trade. Advertisements focus on the key features and benefits
of the various product lines. During the Bankruptcy Proceedings
advertising expenditures were limited. The Company anticipates
increased levels of advertising to support introduction and
sell-through of new products. The Company also supports local
advertising campaigns of its customers, if the campaigns comply
with certain standards set by the Company.
The Company makes available for use, at retail store locations,
various point-of-sale materials and other in-store visual
supports. In addition, the Company provides training support for
its customers' sales staffs conducted by a Company field-based
marketing support representative.
In the United States, the Company distributes its products
through more than 8,000 outlets in all major channels of
distribution, including (i) national retail chain stores, such as
Wal-Mart and Target; (ii) warehouse clubs, such as Sam's and BJ
Wholesale; (iii) catalog merchandisers, such as Service
Merchandise; (iv) national and regional office supply wholesalers
such as United Stationers and S.P. Richards; (v) office
superstores, such as Office Depot, Inc., OfficeMax and Staples;
(vi) office equipment dealers; (vii) regional discount stores,
such as FedCo; and (viii) United States military exchanges. The
Company does not enter into long-term contracts with its
customers and there can therefore be no assurance that the
Company will continue to receive sales revenues from any
particular source.
The Company also conducts sales activities in Canada, the United
Kingdom, the Benelux countries, France, Germany and in other
international markets. The channels of distribution in the
international markets are similar to those in the United States
market and include national retail chains, catalog merchandisers,
department stores, office equipment dealers, discount stores,
stationers and direct mail accounts. In other international
markets, the Company currently has approximately 39 distributors
serving the Australia, Far East, Latin America, Europe and
Caribbean markets. As a result, the Company's results of
operations are subject to the risks of doing business abroad,
including currency exchange rate fluctuations, nationalization,
expropriation, limits on repatriation of funds and other risks
associated with economic or political uncertainty in countries in
which significant sales are made or manufacturing operations were
located. See the footnotes to the Consolidated Financial
Statements in this Form 10-K Annual Report for information
regarding the Company's business operations within and outside
the United States.
Payment terms granted to customers reflect general practices in
the industry. Terms vary with product and competitive
conditions, but generally require payment within 30 to 90 days.
Historically, bad debts have been insignificant. Wal-Mart
Stores, Inc., one of the Company's largest customers, was
responsible for 19.8% of consolidated net sales in the year ended
June 30, 1997. This one customer was the only customer
responsible for more than 10% of net sales. Substantially all of
the Company's sales are to customers who are not affiliated with
the Company.
Service
The Company's typewriter and personal word processor products are
serviced in the United States by a Smith Corona factory service
center located in Cortland, New York and at approximately 400
factory-appointed service stations. The service center and
stations employ trained technicians, maintain parts inventory and
perform warranty and other repairs.
Seasonality
The Company believes that its business in the aggregate is not
seasonal, although certain of its products sell more heavily in
gift-giving seasons such as the Christmas and school graduation
seasons.
Manufacturing Operations
The Company's sole manufacturing operation is located in Mexico.
As a result of the Restructuring, the Company ceased production
in Singapore and Batam Island in mid-November 1995, and completed
the process of relocating certain equipment to Mexico where
typewriter production commenced in December 1995.
The Company placed its Singapore facility and the underlying land
lease up for sale following the Petition Date. The sale of the
Singapore facility, including the leasehold interest of the
Company's wholly-owned Singapore subsidiary, Smith Corona Private
Limited, to ST Computer Systems and Services Limited, a
subsidiary of Singapore Technologies Inc., took place on February
8, 1996. The Singapore sale resulted in net proceeds to the
Company of approximately $21.0 million and resulted in a pretax
gain for the Company, recorded during the year ended June 30,
1996, of approximately $17.8 million. The Batam Island facility
lease expired December 26, 1995. In addition, all manufacturing
equipment at the Singapore and Batam Island facilities which was
not transferred to Mexico, was sold resulting in proceeds of
approximately $2.3 million which resulted in a loss of
approximately $1.5 million. The Restructuring resulted in the
termination of approximately 1,300 workers in Singapore and Batam
Island.
Competition
The portable and compact electronic typewriter and personal word
processor business is highly competitive. Competition focuses on
price, product features and product quality. The Company faces
competition from various Japanese and other companies, including,
among others, Brother International Corporation, which
manufactures portable and compact electronic typewriters and
personal word processors, some of which may have greater
financial resources than the Company. It also faces competition
from companies which manufacture office typewriters and word
processors, though these manufacturers currently serve a
different segment of the industry than the Company. As the
portable and compact electronic typewriter and personal word
processor market has continued to mature, competition has
increased. To remain competitive, the Company has been required
to reduce the prices of its typewriters and personal word
processors. The success of the Company depends, in part, on its
ability to source, market and sell new products. Telephony
products will compete against brands such as Lucent, Sony, Uniden
and Panasonic. Facsimile products will compete against brands
such as Brother, Canon and Sharp. The telephony and facsimile
markets are growing and much larger than those of the mature and
shrinking markets for typewriters, personal word processors and
supplies and accessories.
Patents, Trademarks and Licenses
The Company owns or licenses a number of patents and patent
applications which are valuable to its business. The Company is
the owner of a number of trademarks and U.S. and foreign
registrations thereof, the most important of which is the
trademark, "Smith Corona".
Employees
As of June 30, 1997, the Company employed approximately 1,000
people. Management considers its employee relations to be good.
Research and Development
The Company's expenditures for research and development
activities were approximately $1.9 million, $2.0 million and $7.2
million for the fiscal years ended June 30, 1997, 1996 and 1995,
respectively. Research and development expenses were
concentrated primarily in improving product manufacturing,
integration of products/technology to the Company's product lines
and development of new products. As part of the Restructuring,
research and development costs have significantly declined, being
limited primarily to manufacturing support. The Company expects
increased spending associated with the development of its new
products.
Raw Materials
The Company's products are manufactured from a wide variety of
electronic components, plastics, metals, paper and other
materials. The Company generally is not dependent on any one
source for the materials or purchased components essential to its
business and believes that such materials and components will be
available from sources in adequate quantities to meet anticipated
production schedules.
Item 2. Properties
The Company utilizes approximately 798,000 square feet of space,
of which about 500,000 square feet is located in the United
States and about 298,000 square feet is located outside the
United States, primarily in Mexico. Of the total of 798,000
square feet, approximately 422,000 square feet is owned and the
remaining 376,000 square feet is leased. Information with
respect to the principal facilities used by the Company is set
forth below:
<TABLE>
<S> <C> <C> <C>
Approximate
Square Owned/
Location Primary Use Footage Leased
Cortland, NY...... Headquarters/
Warehousing/Service 422,000 Owned
Toronto, Canada... Warehousing/Sales 27,000 Leased
Tijuana, Mexico... Manufacturing 252,000 Leased
San Diego, CA..... Warehousing/Office 77,000 Leased
778,000
All other locations Warehousing/
Sales/Service 20,000 Leased
Total............. 798,000
</TABLE>
Item 3. Legal Proceedings
Description of Legal Proceedings
Certain aspects of the Company's past handling and/or disposal of
hazardous substances have been the subject of investigation by
federal and state regulatory authorities, or have been the
subject of lawsuits filed by such authorities or by private
parties. At June 30, 1997 and June 30, 1996, the Company had
recorded liabilities of approximately $2,952 and $4,160,
respectively, related to environmental matters. Because of the
uncertainties associated with assessing environmental matters,
the related ultimate liabilities are not presently determinable.
However, based on facts presently known, management does not
believe that these investigations, if resolved adversely to the
Company, would individually or in the aggregate have a material
adverse effect on the Company's financial position or results of
operations.
The Company was the owner and operator of manufacturing
facilities in Groton, New York (the "Groton Site") and
Cortlandville, New York (the "Cortlandville Site" and together,
the "Owner/Operator Sites"). The Company's liability, if any, at
the Owner/Operator Sites stems from groundwater contamination at
the Cortlandville Site and soil contamination at the Groton Site.
Remediation programs at the Owner/Operator Sites currently
consist of round-the-clock pumping and filtering (Cortlandville
Site) or soil venting with a soil infiltration injection system
(Groton Site). The costs of establishing remediation programs at
the Owner/Operator Sites had largely been paid by the Company
prior to the Petition Date. To the Company's knowledge, the only
future costs that will be associated with remediation of those
sites are for operation, maintenance, monitoring, shutdown, and
post-shutdown of the systems. Under the POR, the Company
continues to be responsible for those costs. The Company
believes that it has set aside adequate reserves for the payment
of expenses for the ongoing remediation programs at the Groton
and Cortlandville Sites. Claims asserted by the New York
Department of Environmental Conservation ("DEC") and the New York
Department of Health ("DOH") in the Company's bankruptcy
proceedings for past and future costs at the Groton and
Cortlandville Sites, and at eight other sites, were resolved by
the Company and the State of New York on August 6, 1996 at
amounts that were not material to the Company's financial
results.
The Company was served in June 1992 with a summons and complaint
and, in June 1994, with an amended complaint, in a contribution
action brought by five private plaintiffs in the United States
District Court for the Northern District of New York pursuant to
the federal Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") and certain state law theories (the
"Cooper Industries action"). The plaintiffs in this action are
Cooper Industries, Inc., Keystone Consolidated Industries, Inc.,
The Monarch Machine Tool Co., Niagara Mohawk Power Corporation
and Overhead Door Corporation. The amended complaint, which
listed the Company and fourteen other persons or entities as
defendants, sought contribution or reimbursement for response
costs incurred to date, and to be incurred in the future, for the
remediation of a site in Cortland, New York known as the "Rosen
Site". Claims concerning the Rosen Site were filed against the
Company in the Bankruptcy Court by the United States
Environmental Protection Agency ("EPA"), the United States
Department of the Interior ("DOI"), the DEC, the DOH and certain
plaintiffs and defendants in the Cooper Industries action. The
Company entered into a written agreement with the United States
(on behalf of the EPA and DOI), the State of New York (on behalf
of the DEC and DOH), and the five Cooper Industries plaintiffs
dated as of February 14, 1997 (the "Rosen Site Settlement"). The
Rosen Site Settlement was approved by the Bankruptcy Court on May
29, 1997 after all the conditions precedent to the settlement had
been satisfied. Pursuant to the Rosen Site Settlement, all Rosen
Site-related claims of the signing parties, including the Cooper
Industries action, will be resolved as to the Company in exchange
for consideration that includes an allowed general unsecured
claim in the Bankruptcy Proceedings. In addition, the Rosen Site
Settlement provides for a grant of judicial protection to the
Company against contribution actions or claims regarding the
matters addressed therein, including such claims of the Company's
co-defendants in the Cooper Industries action.
The Company is also a defendant or plaintiff in various other
legal actions that have arisen in the ordinary course of its
business. It is the opinion of management that the ultimate
resolution of these matters and the environmental matters
discussed above will not have a material adverse effect on the
Company's financial position or results of operation.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
The officers of the Company are elected by and serve at the
pleasure of the Board of Directors. The executive officers of
the Company and their respective positions, ages at September 14,
1997 and backgrounds are as follows:
<TABLE>
<S> <C> <C>
Name Position Age
W. Michael Driscoll ........ President, Chief Executive
Officer and Director 51
John A. Piontkowski ........ Executive Vice President,
Chief Financial Officer and
Assistant Secretary 43
Michael W. Chernago......... Vice President/Operations 51
Jerry L. Diener ............ Senior Vice President/Sales 61
Lynn F. Knopp ............ Vice President/ West Coast
Operations 50
Gary J. Lynch ............ Vice President/Treasurer 47
James B. McCormick ......... Vice President/Product
Management 63
David P. Verostko .......... Vice President/Human
Resources 54
Martin D. Wilson ........... Vice President/Controller 37
John W. Wolff ............ Vice President/Product
Development 45
</TABLE>
Mr. Driscoll was named President and Chief Executive Officer on
February 28, 1997. From October 14, 1996 to February 27, 1997
Mr. Driscoll served as a consultant to the Company pending his
appointment to President and Chief Executive Officer. From
December 18, 1995 until September 30, 1996, Mr. Driscoll served
as Chief Executive Officer of IPC Technologies, Inc., a
manufacturer and marketer of personal desktop and notebook
computers and network servers. Prior to that time, he served as
Vice President/Operations for the Company from March 16, 1995 to
December 15, 1995 and Vice President/Operations and Engineering
from July 1, 1992 to March 16, 1995. He served as Director of
Materials from February 17, 1992 to July 1, 1992.
Mr. Piontkowski was named Executive Vice President and Chief
Financial Officer on May 7, 1997. From June 21, 1995 to May 15,
1996, he also held the office of Treasurer. He has served as an
Assistant Secretary of the Company since July 1, 1993. Mr.
Piontkowski served as Senior Vice President and Chief Financial
Officer from June 21, 1995 to May 6, 1997, as Vice
President/Finance and Controller from March 28, 1995 to June 21,
1995 and as Vice President/Controller of the Company from July 1,
1993 to March 28, 1995. Mr. Piontkowski served as Director of
Accounting and Financial Reporting of the Company from December
19, 1991 to July 1, 1993.
Mr. Chernago was named Vice President/Operations on January 26,
1996. From July, 1994 to January 26, 1996, Mr. Chernago served
as Vice President Product Assurance and Vice President/Operations
of the Company. Mr. Chernago served as Director, Manufacturing
Engineering from September 1989 to July 1994. Mr. Chernago has
held various other positions within the Company since 1977.
Mr. Diener has served as Senior Vice President/Sales since
January 1, 1992. He served as Vice President/Sales of the
Company and its predecessor, SCM/Consumer Products, from 1978 to
January 1, 1992.
Mr. Knopp has served as Vice President/West Coast Operations
since December 1, 1996. He served as General Manager - Mexico
from January 15, 1996 to December 1, 1996 and as Director of
Quality Assurance from December 16, 1992 to January 15, 1996.
Mr. Knopp has held various other positions within the Company
since 1966.
Mr. Lynch has served as Vice President/Treasurer of the Company
since May 15, 1996. From April 16, 1995 to May 15, 1996, Mr.
Lynch served as Director of Treasury Services. Mr. Lynch served
as Director of Budgets and Financial Analysis from April 1987 to
April 16, 1995. Mr. Lynch has held various other positions
within the Company since 1978.
Mr. McCormick has served as Vice President/Product Management
since February 14, 1997. From June 12, 1995 to February 13,
1997, Mr. McCormick served as Vice President/Supplies Division.
From May 1993 to May 16, 1995, Mr. McCormick served as Vice
President of Imaging Supplies and Printers and served as
Director, Supplies and Accessories Marketing from June 1985 to
May 1993. Mr. McCormick has held various other positions within
the Company since 1959.
Mr. Verostko was named Vice President/Human Resources of the
Company on January 1, 1992. He served as Corporate
Director/Human Resources from September 1, 1990 to January 1,
1992. Mr. Verostko was Director, Employee Relations from
October, 1983 to September, 1990.
Mr. Wilson was named Vice President/Controller of the Company on
May 15, 1996. Prior to that time, he served as Controller from
July 26, 1995 to May 15, 1996, Assistant Controller from April
16, 1995 to July 26, 1995, and as Director/Accounting and
Financial Reporting from January 3, 1994 to April 16, 1995.
Prior to joining the Company, he served as Financial Reporting
Manager for Fisher-Price Inc., an international manufacturer,
marketer and distributor of infant and preschool toys and
juvenile products, from November 1991 through December 1993.
Mr. Wolff has served as Vice President/Product Development since
January 20, 1997. He served as Director of Materials from
February 23, 1996 to January 20, 1997, Director of Procurement
and Distribution from December 21, 1995 to February 23, 1996,
Director of Division Procurement and Cortland Materials from
November 1, 1994 to December 21, 1995, Director of Engineering
from August 1, 1993 to November 1, 1994 and Director of
Engineering - Singapore from January 1, 1989 to August 1, 1993.
Mr. Wolff has held various other positions within the Company
since 1981.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Common Stock (NASDAQ symbol: SCCO) commenced trading on the
Nasdaq SmallCap Market on May 29, 1997. From February 28, 1997
to May 29, 1997, the Common Stock was traded over-the-counter.
Since the suspension of the trading on the New York Stock
Exchange on May 30, 1996 until the Old Common Stock was canceled
on February 28, 1997, there was no established public trading
market for the Old Common Stock.
The following table sets forth the range of high and low bid
prices of the Common Stock since February 28, 1997, the date of
the first trade of the Common Stock.
<TABLE>
<S> <C> <C>
Year Ended
June 30, 1997
High Low
Third quarter (from February 28, 1997
to March 31, 1997)(1) . . . . . . . . . . $6.00 $2.50
Fourth quarter (from April 1, 1997
to May 29, 1997)(1) . . . . . . . . . . . 4.13 2.38
Fourth quarter (from May 29, 1997
to June 30, 1997) . . . . . . . . . . . . 5.06 3.88
</TABLE>
(1) The range of high and low prices for the periods from
February 28, 1997 to March 31, 1997 and April 1, 1997 to May 29,
1997, were bid prices as reported by the National Quotation
Bureau, LLC (the "NQB") and the Nasdaq Trading and Marketing
Services (the "NTMS"), respectively. The bid prices obtained
from NQB and NTMS represent prices between dealers which do not
include retail markup, markdown or commission and may not
necessarily represent actual transactions.
As of September 1, 1997, there were approximately 428 holders of
record of Common Stock.
The name and address of the Transfer Agent and Registrar for the
Company is Marine Midland Bank, Corporate Trust Services, 140
Broadway, New York, NY 10005-1180.
The Company is prohibited from paying dividends by the terms of
its Loan and Security Agreement (as hereinafter defined), except
for non-cash dividends pursuant to the Rights Agreement. The
Company did not pay any cash dividends in the fiscal years ended
June 30, 1997 and 1996.
On February 28, 1997, pursuant to the POR, the Board of Directors
of the Company declared a dividend distribution of one Right for
each outstanding share of Common Stock, payable to stockholders
of record at the close of business on such date and payable with
respect to Common Stock issued thereafter.
The calculation of the number of shares of Common Stock held by
non-affiliates shown on the cover page of this Form 10-K Annual
Report was made on the assumption that there were no affiliates
other than the executive officers and directors of the Company,
the Pension Benefit Guaranty Corporation (the "PBGC") and Peter
Parts Electronic, Inc.
The POR canceled all of the Old Common Stock and provided
registered shareholders of the Old Common Stock as of August 15,
1996 with warrants to purchase one share of Common Stock for each
twenty shares of Old Common Stock. The exercise price of the
warrants is $8.50 per share. The warrants may be exercised at
any time from August 28, 1997 to February 28, 1999.
Item 6. Selected Financial Data
The following table summarizes certain historical financial
information derived from the consolidated financial statements of
the Company. This information should be read in conjunction with
the consolidated financial statements and related notes and
Management's Discussion and Analysis of Results of Operations and
Financial Condition, both of which are contained in this Form
10-K Annual Report.
<TABLE>
<S> <C> <C> <C> <C> <C>
SELECTED FIVE-YEAR FINANCIAL DATA
(Dollars in thousands, For the year ended June 30,
except per share amounts) 1997 1996 1995(1) 1994(1) 1993 (1)
Net sales $77,313 $112,548 $196,309 $261,306 $ 236,846
Gross margin 17,910 9,193 15,350 56,979 57,491
Operating income (loss)(2) $ (858) $ (8,576) $(46,766) $ 8,422 $ (15,348)
Income (loss) from
continuing operations $ (795) $(11,122) $(62,245) $ 5,094 $ (10,244)
Discontinued operations
(net of income taxes):
Income from discontinued
operations - - 671 2,233 1,222
Gain(loss) on disposal
of discontinued
operations - - 9,127 (2,200) -
Income (loss) before
extraordinary gain (795) (11,122) (52,447) 5,127 (9,022)
Extraordinary gain(3) 8,122 - - - -
Net income (loss) $ 7,327 $(11,122) $(52,447) $ 5,127 $ (9,022)
Income (loss) per common
and common equivalent
share (4) -
Income (loss) from
continuing operations $ (.32) $ (4.95) $ (27.68) $ 2.27 $ (4.55)
Discontinued operations:
Income from discontinued
operations - - .30 .99 .54
Gain(loss) on disposal
of discontinued
operations - - 4.06 (.98) -
Income (loss) before
extraordinary gain (.32) (4.95) (23.32) 2.28 (4.01)
Extraordinary gain 3.22 - - - -
Net income (loss)
per common and common
equivalent share $ 2.90 $ (4.95) $ (23.32) $ 2.28 $ (4.01)
Weighted average common
and common equivalent
shares(4) 2,524 2,249 2,249 2,249 2,249
Working capital $ 27,045 $ 54,117 $ 27,116 $89,469 $ 97,375
Total assets 60,629 83,872 136,066 193,688 190,616
Bank loans - - 17,400 20,002 18,669
Stockholders' equity 26,390 9,128 20,250 75,722 76,645
Cash dividends declared
per common share(5) $ - $ - $ .10 $ .20 $ .20
</TABLE>
(1) Amounts have been reclassified, where applicable, to reflect the
discontinued operations of SCM Office Supplies, Inc. and Histacount.
(2) Includes approximately a $3,400 pension curtailment gain and a $6,500
postretirement curtailment gain in 1997; $19,500 restructuring
income in 1996, a $14,900 provision in 1995 and a $16,500
provision in 1993 for restructuring costs.
(3) Includes an $8,122 pre-tax and after-tax extraordinary gain
for debt forgiveness associated with emergence from the
Bankruptcy Proceedings.
(4) For all periods prior to June 30, 1997 the weighted average
common and common equivalent shares outstanding are based on
the weighted average number of common shares outstanding from
the Effective Date until March 31, 1997.
(5) Based on 30,250 shares of Old Common Stock, outstanding as of
June 30, 1995, 1994 and 1993.
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
With the Company experiencing sales declines and operating losses,
having extended payment of obligations owed to its trade vendors,
and needing additional financing to meet operating requirements and
fund the Restructuring, the Company filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy
Court on July 5, 1995. On August 18, 1995, SCM Office Supplies,
Inc., SCC LI Corporation (formerly Histacount Corporation) and
Hulse Manufacturing Company, the Nonoperating Subsidiaries, filed
Chapter 11 petitions. On October 31, 1996 the Wholly-Owned Domestic
Subsidiaries, Smith Corona Overseas Holdings, Inc., SCM
Inter-American Corporation and SCM (United Kingdom) Limited, filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code.
On January 27, 1997 the Bankruptcy Court entered the Confirmation
Order and the Company emerged from the Bankruptcy Proceedings on
the Effective Date of February 28, 1997.
During the Bankruptcy Proceedings, the Company confined
expenditures to those manufacturing and operating costs that were
necessary to preserve and maintain going-concern value. In light
of its financial condition, the Company also implemented a planned
reduction in its workforce and a consolidation of its manufacturing
and distribution operations and relocated its world headquarters
from New Canaan, Connecticut to its facility in Cortland, New York.
Additionally, as part of the Restructuring, the Company relocated
its typewriter manufacturing operations to its Mexico facility from
facilities in Singapore and Batam Island, Indonesia.
The forward-looking comments in this Management's Discussion and
Analysis of Results of Operations and Financial Condition are
estimates by the Company's management of future performance and are
subject to a variety of risks and uncertainties that could cause
actual results to differ from management's current expectations.
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Results of Operations
Net sales of $77.3 million for the year ended June 30, 1997
decreased 31.3 percent from net sales for the year ended June 30,
1996 of $112.5 million, primarily due to lower volumes. Unit sales
of typewriters, personal word processors and related accessories
and supplies are lower than a year ago, both domestically and
internationally, as a result of a shrinking market and a continuing
difficult and competitive environment. The Company plans to
significantly expand its product line, primarily by sourcing new
products from outside manufacturers. Such sourcing includes
entering into strategic alliances with third parties in the United
States, Europe and the Far East to provide products or services.
In that respect, the Company's efforts are focused on forging
alliances with companies that provide technologically advanced
products for the small office and home office environment but
presently do not have a substantial United States market share or
market presence, and are intent on building or increasing market
share by selling their products under the well-known "Smith Corona"
name. The Company intends to rely on its existing distribution
network to become a leading vendor of technologically advanced
products for the small office and home office. In the fall of
1997, newly sourced and manufactured products will be available
under the Smith Corona brand name. The product offerings will
include items in the telephony and facsimile product lines. The
Company views its new product capabilities with favorable
anticipation considering that the telephony and facsimile products,
globally, represent opportunities in growth markets. Further, the
Company intends to maintain its core business of manufacturing and
distributing its current product line of typewriters and related
supplies and accessories to satisfy continuing worldwide demand for
the products. Due to substantial volume reductions, in June 1997
the Company ceased the manufacture of personal word processors;
servicing and customer support of personal word processors,
however, will continue. The success of the Company depends, in
part, on its ability to source, market and sell new products.
Gross margin, as a percentage of net sales, was 23.2 percent for
the year ended June 30, 1997 as compared to 8.2 percent for the
comparable period last year. The margin improvement is primarily
the result of manufacturing efficiencies gained from the
Restructuring and proportionate increases of sales of higher margin
products. Included in cost of goods sold are writedowns of
inventories of $1.9 million and $4.3 million, for the years ended
June 30, 1997 and June 30, 1996, respectively.
Selling, general and administrative expenses for the year ended
June 30, 1997 were 16.5 percent of net sales as compared to 24.7
percent in the comparable period last year. The decreases reflect
the overall savings in employee-related costs as a result of the
Restructuring and reorganization efforts as well as the impact of a
pension plan curtailment gain of $3.4 million and a postretirement
curtailment gain of $6.5 million. Going forward, the Company
anticipates increased levels of advertising and research and
development expenditures to support the development, introduction
and sell-through of new products. During the Bankruptcy
Proceedings professional fees were charged to reorganization costs
in the consolidated statements of operations.
The Company recorded reorganization costs for its Bankruptcy
Proceedings aggregating $5.9 million for the year ended June 30,
1997 compared to $10.3 million for the same period a year ago. The
charges for the year ended June 30, 1997 include professional fees,
a provision for closing its world headquarters in New Canaan,
Connecticut and relocating such to its facility in Cortland, New
York and costs associated with the distribution of the POR, offset
by income from a purchase deposit forfeiture of $.5 million,
interest income earned on domestic cash balances of $.6 million and
a settlement the Company reached with its banks relating to the
Company's debtor-in-possession financing of $.5 million.
As a result of emergence from the Bankruptcy Proceedings the
Company recorded a pre-tax and after-tax extraordinary gain of $8.1
million for debt forgiveness.
Financial Condition
The Company's primary source of liquidity and capital resources, on
both a short- and long-term basis, are cash balances, cash flows
generated from operations and available borrowing capacity.
On February 28, 1997, the Company entered into a loan and security
agreement (the "Loan and Security Agreement") with its lender. The
Loan and Security Agreement provides for extensions of revolving
credit loans, term loans and letters of credit, limited to a
percentage of eligible accounts receivable and inventories in the
amount not to exceed $25.0 million through the February 28, 2000
expiration date. Interest is .75 percent over the Prime Rate or 3
percent over the Adjusted Eurodollar Rate. Payment of dividends is
prohibited by the terms of the Loan and Security Agreement, except
for non-cash dividends pursuant to the Rights Agreement. Pursuant
to the provisions of the Loan and Security Agreement the Company
must maintain an adjusted net worth of $11.1 million. Management
believes that it has adequate flexibility and that such a covenant
should not impose an undue restriction on the operations of the
Company. The Loan and Security Agreement is secured by all of the
Company's assets.
During the year ended June 30, 1997, the Company's operating
activities provided $5.0 million of cash, primarily as a result of
a decrease in accounts receivable, prepaid and other current assets
and inventories. Accounts receivable and inventories decreased
$7.8 million which is attributable to the reduction of sales
compared to the prior year and prepaid expenses and other current
assets decreased $2.6 million primarily as a result of obtaining
terms with vendors after emergence from the Bankruptcy Proceedings.
During the quarter ended March 31, 1997 the Company made a
disbursement of $12.5 million to the distribution agent for payment
of allowed general unsecured claims and claims senior to such
claims. Once disputed general unsecured claims are resolved and
allowed, such claimants will share, on a prorata basis, in the
aforementioned cash pool.
During the year ended June 30, 1997 the Company terminated its
defined benefit pension plan for hourly employees and froze the
benefits of its defined benefit pension plan for salaried
employees. Additionally, the Company elected to increase the
assets of the defined benefit plans to their market value. The
Company estimates it will save approximately $10.9 million in
minimum funding cash contributions over the next four years
primarily as a result of the above noted changes in the defined
benefit plans.
The Company had no material commitments for capital expenditures at
June 30, 1997. The Company anticipates increased expenditures due
to implementation of a new information system and tooling for new
products.
The Company believes that its cash and borrowing capabilities will
be sufficient to meet its operating cash and capital expenditure
requirements in the foreseeable future.
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Results of Operations
Net sales of $112.5 million for the year ended June 30, 1996
declined 42.7 percent from net sales for the year ended June 30,
1995 of $196.3, primarily due to lower volumes. Both domestically
and internationally, typewriters and personal word processor
volumes were sharply lower than a year ago as a result of the
continued decline in the market and the Company's share of that
market. New product net sales for the year were $7.5 million as
compared with $11.8 million for the prior year.
For the year ended June 30, 1996, gross margin as a percentage of
net goods sold increased to 8.2 percent as compared with 7.8
percent for the year ended June 30, 1995. Included in 1996 and
1995 cost of goods sold are writedowns of property, plant and
equipment of $.9 million and $4.6 million, respectively.
Additionally, 1996 and 1995 cost of goods sold includes writedowns
of inventories of $4.3 million and $8.1 million, respectively.
Selling, general and administrative expenses for the year ended
June 30, 1996 decreased $20.8 million from the prior year and were
24.7 percent of net sales in both 1996 and 1995. This decrease in
expenses was primarily due to lower advertising expenses and an
overall reduction in salaries as a result of the Restructuring. In
1996 during the bankruptcy proceedings, professional fees were
charged to reorganization costs in the consolidated statements of
operations. Additionally, costs associated with the Restructuring
of approximately $1.6 million, primarily related to the shut-down
of Singapore operations, were included in selling, general and
administrative expenses as they did not qualify as restructuring
costs.
The Company recorded reorganization costs for its Bankruptcy
Proceedings totaling $10.3 million in 1996. These charges
primarily included professional fees attributable to the Bankruptcy
Proceedings of the Company which were partially offset by $.3
million of interest income earned on domestic cash balances. There
were no such items in 1995.
Restructuring income primarily represents a gain on the sale of the
Singapore facility and underlying land lease of approximately $17.8
million and a pension curtailment gain of approximately $1.5
million.
In October 1995, the Company completed a transaction to purchase a
building previously used as warehousing space located in Cortland,
New York and to concurrently sell the building and land on which
the building is located to a third party purchaser. The net
proceeds of approximately $1.4 million were used to pay down the
bank loan. This sale resulted in a 1996 gain of approximately $1.3
million included in other income. Additionally, other income
included a gain of approximately $.7 million from an insurance
settlement, offset by charges of approximately $1.5 million for the
estimated loss on liquidation of the Company's wholly-owned
subsidiary in Australia and the write-off of goodwill.
An administrator was appointed on August 2, 1995 for the Company's
wholly-owned subsidiary in Australia. The administrator was
appointed as liquidator on August 29, 1995. Due to the
liquidation, the Australian subsidiary's assets, liabilities and
operating results were removed from the consolidated financial
statements as of August 2, 1995 and the Company recorded in other
income an estimated loss on liquidation of approximately $.4
million and $.3 million in the first and third quarters,
respectively, of the year ended June 30, 1996. The Company has
established a distributor relationship in the Australian market for
the purpose of maintaining its distribution capacity.
Interest earned on domestic cash balances is included in
reorganization costs while interest earned on international cash
balances is included in interest expense in the statement of
operations.
The provision for income taxes for 1996 relates principally to
valuation allowances set up for the Company's remaining deferred
tax assets due to uncertainty over future operations.
Financial Condition
On July 10, 1995, the Company entered into a Debtor-In-Possession
Credit Agreement (the "Debtor-In-Possession Credit Agreement") with
two banks (the "Lenders") which was approved by the Bankruptcy
Court on August 2, 1995. Proceeds from the Debtor-In-Possession
Credit Agreement were used to pay off amounts outstanding under the
Amended and Restated Credit Agreement dated April 7, 1995 under
which the Company was, as of June 30, 1995, in technical default.
The Debtor-In-Possession Credit Agreement, as amended, provided for
extensions of revolving credit loans, term loans and letters of
credit, limited to a percentage of eligible receivables and
inventories, in an amount not to exceed $24.0 million through the
June 30, 1996 termination date. The Debtor-In-Possession Credit
Agreement provided for a security interest in substantially all of
the Company's assets. On July 10, 1996, the Company and its
lenders amended and extended the Debtor-In-Possession Credit
Agreement whereby the June 30, 1996 termination date was extended
to the earlier of Confirmation or September 30, 1996, and the bank
commitment was reduced to $10.0 million. The Debtor-In-Possession
Credit Agreement was further amended to extend its termination to
the earlier of March 31, 1997 or confirmation of the POR. In
January 1996, the Company repaid the funded portion of its bank
loans. Other obligations remained outstanding under the
Debtor-In-Possession Credit Agreement or the Amended and Restated Credit
Agreement including reimbursement obligations under letters of
credit and certain indemnification obligations.
Due to the Bankruptcy Proceedings, substantially all claims against
the Company, prior to July 5, 1995, (and prior to August 18, 1995
for the three Nonoperating Subsidiaries and prior to October 31,
1996 for the three Wholly-Owned Domestic Subsidiaries added to the
proceedings) were subject to the automatic stay provisions under
the Bankruptcy Code while the Company continued business operations
as a debtor-in-possession.
At the Company's request, the Bankruptcy Court established a bar
date of October 31, 1995 for pre-petition claims against the
Company. The Company gave notice to all known actual or potential
claimants subject to the bar date of their need to file a proof of
claim with the Bankruptcy Court. Accordingly, allowed claims may
arise which are not currently reflected in the Company's financial
statements and recorded claims are subject to change. The Company
commenced the claims reconciliation process after such date and
during the year ended June 30, 1996 it did not result in any
material adjustments to the Company's financial records. The
ultimate amount of and settlement terms for such liabilities are
subject to the POR which was subject to confirmation by the
Bankruptcy Court and, accordingly, were not determinable as of June
30, 1996.
During 1996, the Company's operating activities provided $15.9
million of cash, primarily the result of a decrease in inventories
and accounts receivable partially offset by a decrease in trade
payables and accrued liabilities. The reduction in inventories of
$32.3 million reflects the Company's continued focus on controlling
inventory levels. Accounts receivable declined $20.5 million and
is attributable to the reduction in sales levels. Trade payables
and accrued liabilities decreased $22.1 million, primarily as a
result of the wind-down of Singapore operations, including related
severance payments.
The Company had no material commitments for capital expenditures at
June 30, 1996. Under the provisions of the Debtor-In-Possession
Credit Agreement, the Company was restricted to $.5 million of
capital expenditures in each six month period ended December 31,
1995 and June 30, 1996.
In the year ended June 30, 1996 there were no dividends paid. A
quarterly cash dividend of $1.5 million ($.05 per share of Old
Common Stock) was paid in the first and second quarters of the year
ended June 30, 1995.
From time to time the Company enters into foreign exchange
contracts to reduce its exposure to foreign currency rate changes.
As of June 30, 1996 and for the year then ended, no contracts were
in place.
Item 8. Financial Statements and Supplementary Data
See Consolidated Financial Statements in this Form 10-K Annual
Report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
This information required by this item is incorporated by reference
from Part I of this Form 10-K Annual Report and the Company's
definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange
Commission on or about September 29, 1997.
Item 11. Executive Compensation
This information required by this item is incorporated by reference
from the Company's definitive Proxy Statement for the 1997 Annual
Meeting of Stockholders, to be filed with the Securities and
Exchange Commission on or about September 29, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
This information required by this item is incorporated by reference
from the Company's definitive Proxy Statement for the 1997 Annual
Meeting of Stockholders, to be filed with the Securities and
Exchange Commission on or about September 29, 1997.
Item 13. Certain Relationships and Related Transactions
This information required by this item is incorporated by reference
from the Company's definitive Proxy Statement for the 1997 Annual
Meeting of Stockholders, to be filed with the Securities and
Exchange Commission on or about September 29, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a)(1) Financial Statements. See Consolidated Financial
Statements in this Form 10-K Annual Report.
(a)(2) Financial Schedules. See Consolidated Financial Statements
in this Form 10-K Annual Report. All other schedules are omitted because
they are not applicable or the required information is shown in the
financial statements or notes thereto.
(b) Reports on Form 8-K.
None
(c) Exhibits (filed herewith or incorporated by reference; see
index to exhibits).
2.1 Debtors' Third Amended Second Joint Plan of Reorganization under
Chapter 11 of the United States Bankruptcy Code (incorporated by
reference to Exhibit 2.1 to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1996 (File No. 1-10281)
(see Exhibit A included therein).
2.2 Motion to Approve Technical Amendments to the Debtors' Third
Amended Second Joint Plan of Reorganization, as approved by the
United States Bankruptcy Court for the District of Delaware
(incorporated by reference to Exhibit 2 to the Registrant's
Registration Statement on Form 8-A dated January 30, 1997 (File No.
1-10281)).
3.1 Restated Certificate of Incorporation of Smith Corona Corporation
(incorporated by reference to Exhibit 3.1 to the Registrant's Form
8-K Current Report dated February 28, 1997 (File No. 1-10281)).
3.2 Certificate of Designation, Preferences and Rights of Preferred
Stock, Series A (incorporated by reference to Exhibit 3.2 to the
Registrant's Form 8-K Current Report dated February 28, 1997 (File
No. 1-10281)).
3.3 By-Laws of Smith Corona Corporation (incorporated by reference to
Exhibit 3.3 to the Registrant's Form 8-K Current Report dated
February 28, 1997 (File No. 1-10281)).
4.1 Rights Agreement between Smith Corona Corporation and Marine
Midland Bank, as Rights Agent, dated as of February 28, 1997
(incorporated by reference to Exhibit 4.1 to the Registrant's Form
8-K Current Report dated February 28, 1997 (File No. 10281)).
4.2 Warrant Agreement between Smith Corona Corporation and Marine
Midland Bank, as Warrant Agent, dated as of February 28,1997
(incorporated by reference to Exhibit 4.2 to the Registrant's Form
8-K Current Report dated February 28, 1997 (File No. 1-10281)).
*10.1 Smith Corona Corporation Retirement Savings and Investment Plan
adopted effective July 1, 1989, as amended and restated effective
January 1, 1997.
*10.2 The CORPORATEplan for Retirement, The Profit Sharing/401(K) Plan,
Fidelity Basic Plan Document No. 07 effective July 1, 1997.
*10.3 Adoption Agreement - Article 1 between Smith Corona Corporation and
Fidelity Management Trust Company, as Trustee effective July 1,
1997.
10.4 Smith Corona Corporation Short Term Incentive Compensation Plan
(incorporated by reference to Exhibit 10.15 to the Company's
Form 10-K Annual Report for the fiscal year ended June 30, 1995,
which is on file with the Commission).
10.5 Export Enterprise Certificate No. 156 granted to Smith-Corona
Private Limited by the Ministry of Trade and Industry, Republic
of Singapore, dated May 12, 1981 (incorporated by reference to
Exhibit 10.15 to the Company's Registration Statement on file
with the Commission (Registration No. 33-29101)).
10.6 Pioneer Certificate No. 942 granted to Smith Corona PTE Ltd. by
the Ministry of Trade and Industry, Republic of Singapore, dated
March 23, 1987 (incorporated by reference to Exhibit 10.16 to
the Company's Registration Statement on file with the Commission
(Registration No. 33-29101)).
10.7 Stockholders' Agreement between Smith Corona Corporation and HM
Holdings, Inc. dated as of June 2, 1989 (incorporated by
reference to Exhibit 10.17 to the Company's Registration
Statement on file with the Commission (Registration No. 33-29101)).
10.8 Amended and Restated Cross-Indemnification Agreement between
Smith Corona Corporation and HM Holdings, Inc. dated as of July
14, 1989 (incorporated by reference to Exhibit 10.18 to the
Company's Registration Statement on file with the Commission
(Registration No. 33-29101)).
10.9 Amended and Restated Tax Sharing and Indemnification Agreement
between Smith Corona Corporation and HM Holdings, Inc. dated as
of June 2, 1989 (incorporated by reference to Exhibit 10.19 to
the Company's Registration Statement on file with the Commission
(Registration No. 33-29101)).
10.10 Smith Corona Corporation Salaried Employees Retirement Plan, as
amended and restated as of January 1, 1994 (incorporated by
reference to Exhibit 10.32 to the Company's Form 10-K Annual
Report for the fiscal year ended June 30, 1995, which is on file
with the Commission).
10.11 Smith Corona Corporation Hourly Employees' Retirement Plan and
SCM Office Supplies, Inc. Salaried Employees' and Hourly
Employees' Retirement Plan (incorporated by reference to Exhibit
10.36 to the Company's Form 10-K Annual Report for the fiscal
year ended June 30, 1996, which is on file with the Commission).
10.12 Lease Agreement between Inmobiliarian Mex-Hong, S.A. De E.V. and
Smith Corona De Mexico, S.A. De C.V. dated November 24, 1992
(incorporated by reference to Exhibit 10.47 to the Company's
Form 10-K Annual Report for the fiscal year ended June 30, 1993,
which is on file with the Commission).
10.13 Lease Agreement between Inmobiliarian Mex Hong, S.A. De E.V. and
Smith Corona De Mexico, S.A. De C.V. dated June 4, 1993
(incorporated by reference to Exhibit 10.48 to the Company's
Form 10-K Annual Report for the fiscal year ended June 30, 1993,
which is on file with the Commission).
10.14 Lease Agreement between Turnberry Associates and Smith Corona
Corporation dated May 5, 1993 (incorporated by reference to
Exhibit 10.49 to the Company's Form 10-K Annual Report for the
fiscal year ended June 30, 1993, which is on file with the
Commission).
10.15 Asset Purchase Agreement, dated as of June 8, 1994, among Ampad
Corporation, SCM Office Supplies, Inc. and Smith Corona
Corporation (incorporated by reference to exhibit 1 to the
Company's Form 8-K Current Report dated July 19, 1994, which is
on file with the Commission).
10.16 Asset Purchase Agreement, dated as of November 4, 1994, by and
among HC Delaware Acquisition Corporation, Histacount
Corporation and Smith Corona Corporation (incorporated by
reference to Exhibit 10.44 to the Company's Form 10-Q Quarterly
Report for the quarter ended December 31, 1994, which is on file
with the Commission).
10.17 Debtor-in-Possession Credit Agreement dated as of July 10, 1995
among Smith Corona Corporation, the lenders party thereto and
Chemical Bank, as Agent (incorporated by reference to Exhibit
10.44 to the Company's Form 10-K Annual Report for the fiscal
year ended June 30, 1995, which is on file with the Commission).
10.18 First Amendment to Debtor-In-Possession Credit Agreement dated
as of July 24, 1995 (incorporated by reference to Exhibit 10.45
to the Company's Form 10-K Annual Report for the fiscal year
ended June 30, 1995, which is on file with the Commission).
10.19 Second Amendment to Debtor-In-Possession Credit Agreement dated
as of August 15, 1995 (incorporated by reference to Exhibit
10.46 to the Company's Form 10-K Annual Report for the fiscal
year ended June 30, 1995, which is on file with the Commission).
10.20 Third Amendment to Debtor-In-Possession Credit Agreement dated
as of December 6, 1995 incorporated by reference to Exhibit 10
to the Company's Form 10-Q Quarterly Report for the quarter
ended December 31, 1995, which is on file with the Commission).
10.21 Fourth Amendment to Debtor-In-Possession Credit Agreement dated
as of June 30, 1996 (incorporated by reference to Exhibit 10.52
to the Company's Form 10-K Annual Report for the fiscal year
ended June 30, 1996, which is on file with the Commission).
10.22 Fifth Amendment to Debtor-In-Possession Credit Agreement dated
as of September 30, 1996 (incorporated by reference to Exhibit
10 to the Company's Form 10-Q Quarterly Report for the quarter
ended September 30, 1996, which is on file with the Commission).
10.23 Sixth Amendment to Debtor-In-Possession Credit Agreement dated
as of December 9, 1996 (incorporated by reference to Exhibit 10
to the Company's Form 10-Q Quarterly Report for the quarter
ended December 31, 1996, which is on file with the Commission).
10.24 Consulting Agreement between Smith Corona Corporation and R. F.
Stengel & Co., Inc., dated June 29, 1995 (incorporated by
reference to Exhibit 10.47 to the Company's Form 10-K Annual
Report for the fiscal year ended June 30, 1995, which is on file
with the Commission).
10.25 Sale by Tender between Smith Corona Private Limited and ST
Computer Systems & Services Ltd., dated November 2, 1995
(incorporated by reference to Exhibit 10.56 to the Company's
Form 10-K Annual Report for the fiscal year ended June 30, 1996,
which is on file with the Commission).
10.26 Loan and Security Agreement by and between Congress Financial
Corporation, as Lender, and Smith Corona Corporation, as
Borrower, dated February 28, 1997 (incorporated by reference to
Exhibit 10 to the Company's Form 10-Q Quarterly Report for the
quarterly period ended March 31, 1997, which is on file with the
Commission).
*10.27 First Amendment to Loan and Security Agreement dated July 2,
1997.
*10.28 Employment Agreement between Smith Corona Corporation and W.
Michael Driscoll dated as of October 14, 1996 amended as of
June 2, 1997.
*10.29 Employment Agreement between Smith Corona Corporation and John
A. Piontkowski dated as of May 5, 1997.
*11 Statement Re Computation of Earnings (Loss) Per Common Share
*21 Schedule of Subsidiaries of the Registrant
*27 Financial Data Schedule
* Filed herewith
Stockholders may, upon payment of a fee therefor, obtain copies of any of
the exhibits to this Form 10-K Annual Report by writing to the Secretary,
Smith Corona Corporation, 839 Route 13 South, Cortland, New York 13045.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SMITH CORONA CORPORATION
September 16, 1997 By /s/ W. Michael Driscoll
W. Michael Driscoll
President, Chief Executive
Officer and Director
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.
Signature Title Date
/s/ Ronald F. Stengel
....................... Chairman of the Board September 16, 1997
(Ronald F. Stengel)
/s/ W. Michael Driscoll
........................ President, Chief Executive September 16, 1997
(W. Michael Driscoll) Officer and Director
/s/ John A. Piontkowski
........................ Executive Vice President and September 16, 1997
(John A. Piontkowski) Chief Financial Officer
(Principal Financial Officer)
/s/ Jerome A. Colletti
........................ Director September 16, 1997
(Jerome A. Colletti)
/s/ William J. Morgan
........................ Director September 16, 1997
(William J. Morgan)
/s/ Michael J. Murray
........................ Director September 16, 1997
(Michael J. Murray)
/s/ Peter N. Parts
........................ Director September 16, 1997
(Peter N. Parts)
/s/ Dr. Richard N. Rosett
........................ Director September 16, 1997
(Dr. Richard N. Rosett)
/s/ Martin D. Wilson
........................ Vice President/Controller September 16, 1997
(Martin D. Wilson) (Principal Accounting
Officer)
<PAGE>
Index to Consolidated Financial Statements and Financial Statement Schedule
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . 31
Consolidated Balance Sheets as of June 30, 1997 and 1996 . . . . . . . . 32
Consolidated Statements of Operations for the Years Ended June 30, 1997,
1996 and 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended June 30, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . . 34
Consolidated Statements of Cash Flows for the Years Ended June 30, 1997,
1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 37
Consolidated Supplemental Financial Statement Schedule for the Years
Ended June 30, 1997, 1996 and 1995
Schedule II - Valuation and Qualifying Accounts. . . . . . . . . . . . . 63
<PAGE>
INDEPENDENT AUDITORS' REPORT
Smith Corona Corporation:
We have audited the accompanying consolidated balance sheets of Smith
Corona Corporation and subsidiaries (the "Company") as of June 30,
1997 and 1996, and the related consolidated statements of operations,
statements of changes in stockholders' equity and statements of cash
flows for each of the three years in the period ended June 30, 1997.
Our audits also include the financial statement schedule listed in the
Index to Consolidated Financial Statements and Financial Statement
Schedule. These financial statements and financial statement schedule
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, such consolidated financial statements present fairly,
in all material respects, the financial position of Smith Corona
Corporation and subsidiaries at June 30, 1997 and 1996 and the results
of their operations and their cash flows for each of the three years
in the period ended June 30, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements,
on February 28, 1997 the Company emerged from bankruptcy
proceedings under Chapter 11 of the Federal Bankruptcy Code. As
part of the Company's reorganization plan, the Company will be
expanding its product offerings along with maintaining its core
typewriter and supplies business. The Company's long-term
viability is dependent upon the successful implementation of its
reorganization plan and the attainment of profitable operations.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Stamford, Connecticut
August 14, 1997
<PAGE>
Smith Corona Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
June 30, June 30,
(Dollars in thousands) 1997 1996
Assets
Current assets:
Cash and cash equivalents $ 21,985 $ 29,929
Accounts receivable (net of allowance
for doubtful accounts of $931 and
$1,576 for 1997 and 1996, respectively) 11,238 17,185
Inventories 12,627 16,873
Prepaid expenses and other current
assets 2,108 4,754
Total current assets 47,958 68,741
Property, plant and equipment-net 12,092 12,639
Deferred income taxes, net - -
Other assets 579 2,492
Total $ 60,629 $ 83,872
Liabilities and stockholders' equity
Current liabilities:
Trade payables $ 5,199 $ 3,569
Accrued liabilities 11,614 10,353
Income taxes payable 4,100 702
Total current liabilities 20,913 14,624
Postretirement benefits 5,904 -
Pension liability 4,777 -
Other long-term liabilities 2,645 -
Liabilities subject to compromise - 60,120
Total liabilities 34,239 74,744
Stockholders' equity:
Common stock- 2,754,238 shares and
30,250,000 shares issued
and outstanding, respectively 3 303
Additional paid-in capital 55,164 44,697
Deferred compensation (232) -
Accumulated deficit (28,545) (35,872)
Total stockholders' equity 26,390 9,128
Total $ 60,629 $ 83,872
</TABLE>
See accompanying notes to consolidated financial statements.
Smith Corona Corporation and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<S> <C> <C> <C>
(Dollars in thousands, For the year ended June 30,
except per share amounts) 1997 1996 1995
Net sales $77,313 $112,548 $196,309
Cost of goods sold 59,403 103,355 180,959
Gross margin 17,910 9,193 15,350
Selling, general and administrative
expenses 12,754 27,773 48,532
Reorganization costs 5,864 10,255 -
Restructuring expense (income) - (19,461) 13,584
Other expense (income) 150 (798) -
Operating loss (858) (8,576) (46,766)
Interest (income) expense (326) 515 965
Loss from continuing
operations before income taxes (532) (9,091) (47,731)
Income taxes 263 2,031 14,514
Loss from continuing operations (795) (11,122) (62,245)
Discontinued operations (net of
income taxes):
Income from discontinued operations - - 671
Gain on disposal
of discontinued operations - - 9,127
Loss before extraordinary gain (795) (11,122) (52,447)
Extraordinary gain 8,122 - -
Net income (loss) $ 7,327 $(11,122) $(52,447)
Income (loss) per common and
common equivalent share -
Loss from continuing operations $ (.32) $ (4.95) $ (27.68)
Discontinued operations (net of
income taxes):
Income from discontinued operations - - .30
Gain on disposal
of discontinued operations - - 4.06
Loss before extraordinary gain (.32) (4.95) (23.32)
Extraordinary gain 3.22 - -
Net income (loss) per common
and common equivalent share $ 2.90 $ (4.95) $ (23.32)
Weighted average common and
common equivalent shares
outstanding (in thousands) 2,524 2,249 2,249
</TABLE>
See accompanying notes to consolidated financial statements.
Smith Corona Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For the years ended June 30, 1997, 1996 and 1995
<TABLE>
<S> <C> <C> <C> <C> <C>
Retained
Earnings
Additional Deferred (Accumu-
Common Paid-In Compens- lated
Stock Capital ation Deficit) Total
Balance June 30, 1994 $303 $44,697 - $30,722 $75,722
Net loss - - - (52,447) (52,447)
Dividends declared
(.10 per share) - - - (3,025) ( 3,025)
Balance June 30, 1995 303 44,697 - (24,750) 20,250
Net loss - - - (11,122) (11,122)
Balance June 30, 1996 303 44,697 - (35,872) 9,128
Net income - - - 7,327 7,327
Deferred compensation - 267 $(267) - -
Amortization of deferred
compensation - - 35 - 35
Cancellation of old
common stock (303) 303 - - -
Issuance of common
stock to creditors 3 9,897 - - 9,900
Balance June 30, 1997 $ 3 $55,164 $(232) $(28,545) $26,390
</TABLE>
See accompanying notes to consolidated financial statements.
Smith Corona Corporation and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<S> <C> <C> <C>
For the year ended June 30,
(Dollars in thousands) 1997 1996 1995
Cash flows from operating activities:
Net income (loss) $ 7,327 $(11,122) (52,447)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
continuing operating activities:
Discontinued operations - - (9,798)
Depreciation and amortization 3,534 5,665 6,689
(Gain) loss on disposition of property,
plant and equipment (450) (16,786) 1,532
Restructuring costs - - 13,584
Deferred income taxes - 3,406 11,096
Inventory provisions 2,364 5,199 9,930
Pension curtailment gain (3,394) (1,524) -
Extraordinary gain (8,122) - -
Postretirement curtailment gain (6,534) - -
Other noncash items (132) 832 2,980
Changes in assets and liabilities:
Accounts receivable 5,947 20,469 10,556
Inventories 1,882 32,263 (1,570)
Prepaid expenses and other
current assets 2,646 (1,177) 139
Other assets (102) 777 895
Trade payables 1,696 (5,821) (7,572)
Accrued liabilities and income
taxes payable (158) (16,310) (4,280)
Postretirement benefits and
pension liability (1,270) (98) (1,211)
Other long-term liabilities (217) 81 1,443
Net cash provided by (used in)
continuing operations 5,017 15,854 (18,034)
Net cash provided by
discontinued operations - - 1,370
Net cash provided by (used in)
operating activities 5,017 15,854 (16,664)
Cash flows from investing activities:
Proceeds from sale of
discontinued operations - - 27,500
Proceeds from the sale of property,
plant and equipment 512 24,803 -
Capital expenditures (999) (331) (3,166)
Net cash provided by (used in)
investing activities (487) 24,472 24,334
Smith Corona Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Continued
For the year ended June 30,
(Dollars in thousands) 1997 1996 1995
Cash flows from financing activities:
Bank loans (repayments), net - (17,400) (2,602)
Payments made to settle
liabilities subject to
compromise (12,474) - -
Dividends paid - - (4,537)
Net cash used in financing activities (12,474) (17,400) (7,139)
Increase (decrease) in cash and
cash equivalents (7,944) 22,926 531
Cash and cash equivalents:
Beginning of year 29,929 7,003 6,472
End of year $21,985 $29,929 $7,003
Cash paid during the year for:
Interest $ - $ 662 $1,146
Income taxes $ 610 $ 644 $2,300
</TABLE>
See accompanying notes to consolidated financial statements.<PAGE>
Smith Corona Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
1. Petition for Reorganization Under Chapter 11 and Basis of
Presentation
On July 5, 1995 (the "Petition Date"), Smith Corona
Corporation (the "Company") filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). On August 18,
1995, SCM Office Supplies, Inc., SCC LI Corporation (formerly
known as Histacount Corporation) and Hulse Manufacturing Company,
all wholly-owned nonoperating subsidiaries of the Company
(collectively, the "Nonoperating Subsidiaries"), filed Chapter 11
petitions. On October 31, 1996, Smith Corona Overseas Holdings,
Inc., SCM Inter-American Corporation and SCM (United Kingdom)
Limited, all wholly-owned domestic subsidiaries
(the "Wholly-Owned Domestic Subsidiaries"),
also filed Chapter 11 petitions.
(The petitions of the Company, the Nonoperating Subsidiaries and
the Wholly-Owned Domestic Subsidiaries are referred to herein
collectively as the "Bankruptcy Proceedings"). The primary
purpose of the October 31, 1996 filings, which had no effect on
operations, was to better protect corporate assets during the
reorganization period. The Bankruptcy Proceedings primarily
related to all U.S. assets and operations and did not pertain to
the Company's international subsidiaries. From July 5, 1995 to
February 28, 1997, the Company operated as a debtor-in-possession.
On January 27, 1997 the Bankruptcy Court entered an order
confirming the Company's Third Amended Second Joint Plan of
Reorganization (the "Confirmation Order"). The Confirmation
Order was subject to satisfaction of certain conditions precedent
to the effective date. The Company satisfied the conditions and
emerged from the Bankruptcy Proceedings on February 28, 1997 (the
"Effective Date").
The consolidated financial statements as of and for the year
ended June 30, 1996 are presented in accordance with the American
Institute of Certified Public Accountants Statement of Position
90-7: "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code". The consolidated financial statements are
prepared in accordance with generally accepted accounting
principles applicable to a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. Accordingly, the consolidated
financial statements as of June 30, 1996 and for the year then
ended did not reflect adjustments or provide for the potential
consequences of the Bankruptcy Proceedings. In particular, such
consolidated financial statements do not purport to show (a) the
realizable value of assets on a liquidation basis or their
availability to satisfy liabilities; (b) prepetition liability
amounts that may be allowed for claims or contingencies or the
status and priority thereof; or (c) the effect of any changes
that may be made to the capitalization of the Company.
Liabilities recorded by the Company as of June 30, 1996,
that were expected to be compromised under a plan of
reorganization consisted of the following:
<TABLE>
<S> <C>
June 30,
1996
Trade payables $10,417
Accrued liabilities 10,787
Income taxes payable 3,088
Postretirement benefits 12,497
Pension liability 17,681
Other long-term liabilities 5,650
Total(1) $60,120
</TABLE>
(1) Excludes a net intercompany payable in the amount of $24,637
to the Company's subsidiaries not included in the Bankruptcy
Proceedings. If the Wholly-Owned Domestic Subsidiaries were
reflected as part of the June 30, 1996 amount, the net
intercompany balance would have been a net intercompany
receivable of $1,203.
The Company recorded reorganization costs relating to its
Bankruptcy Proceedings aggregating $5,864 for the year ended June
30, 1997. These charges include professional fees, a provision
for closing the New Canaan, Connecticut headquarters and
relocation of such headquarters to Cortland, New York, and costs
associated with the distribution of the Company's Third Amended
Second Joint Plan of Reorganization (the "POR") for the
solicitation of creditors, offset by interest income earned on
domestic cash balances of $607, a purchase deposit forfeiture of
$500 and a settlement the Company reached with its banks relating
to the Company's debtor-in-possession financing of $500.
Reorganization costs of $10,255 for the year ended June 30, 1996
were primarily professional fees.
An administrator was appointed on August 2, 1995 for the
Company's wholly-owned subsidiary in Australia. The
administrator was appointed as liquidator on August 29, 1995.
Due to the liquidation, the Australian subsidiary's assets,
liabilities and operating results were removed from the
consolidated financial statements as of August 2, 1995 and the
Company recorded in other expense (income) an estimated loss on
liquidation of approximately $415 and $291 in the first and third
quarters, respectively, of the year ended June 30, 1996. On
December 6, 1996, the Company received the final distribution of
funds in the liquidation of the Australian subsidiary which
resulted in a gain, recorded in other income, of approximately
$157 during the second quarter ended December 31, 1996. The
Company has established a distributor relationship in the
Australian market for the purpose of maintaining its distribution
capacity.
At the Company's request, the Bankruptcy Court established a
bar date of October 31, 1995 for pre-petition claims against the
Company. The Bankruptcy Court also established an administrative
claims bar date of (i) October 18, 1996 for claims that occurred
on or before August 16, 1996 and (ii) April 29, 1997 for claims
that occurred after August 16, 1996 and on or before the
Effective Date. A bar date is the date by which claims against
the Company must be filed if the claimants wish to receive any
distribution in the Bankruptcy Proceedings. The Company has
given notice to all known actual or potential claimants subject
to the October 31, 1995, October 18, 1996 and April 29, 1997 bar
dates of their need to file a proof of claim with the Bankruptcy
Court. The Company is reconciling claims that differ from the
Company's records, and any differences that cannot be resolved by
negotiated agreements between the Company and the claimant will
be resolved by the Bankruptcy Court.
Under the POR, all allowed general unsecured claims will be
satisfied through the distribution to holders of such claims of
(i) the unsecured class cash of approximately $11,330 (less any
amounts paid to holders of allowed convenience class claims
discussed below), and (ii) 85 percent of the reorganized
company's common stock to be issued pursuant to the POR
(determined on a fully diluted basis not including the effect of
the exercise of any of the below described warrants). Each holder
of an allowed general unsecured claim will receive one share of
the reorganized company's common stock for each ten dollars in
allowed claim value. All allowed claims senior to allowed
general unsecured claims will be satisfied by the payment in full
in cash or notes (as provided for by the Bankruptcy Code) or the
assumption of all such claims. As described below, the
distributions to holders of allowed general unsecured claims and
claims senior to such claims have commenced. Allowed convenience
class claims (general unsecured claims of one thousand five
hundred dollars or less) have received payment in cash in an
amount equal to 60 percent of the amount of such claims. In
addition, registered holders as of August 15, 1996, of the
Company's common stock, par value $.01 per share, which was
outstanding prior to the Effective Date (the "Old Common Stock")
have received warrants to purchase one share of common stock, par
value $.001 per share (the "Common Stock"), in the reorganized
company for each twenty shares of Old Common Stock.
During the quarter ended March 31, 1997, the Company made a
disbursement of $12,474 to the distribution agent for payment of
allowed general unsecured claims and claims senior to such
claims. Additionally, as of June 30, 1997, 2,660,344 shares of
Common Stock were issued to allowed general unsecured claim
holders. Once disputed general unsecured claims are resolved and
allowed, such claimants will share, on a pro rata basis, in the
aforementioned cash pool as well as in 85 percent of the Common
Stock. On February 28, 1997 the Company recorded a value of
approximately $9,900 for 85 percent of the Common Stock. In
connection with the POR going effective, certain liabilities
recorded as subject to compromise were retained by the Company
and approximately $30,496 of such liabilities were settled which
resulted in a pre-tax and after-tax extraordinary gain of
approximately $8,122.
The Company plans to significantly expand its product line,
primarily by sourcing new products from outside manufacturers.
Such sourcing includes entering into strategic alliances with
third parties in the United States, Europe and the Far East to
provide products or services. In that respect, the Company's
efforts are focused on forging alliances with companies that
provide technologically advanced products for the small office
and home office environment but presently do not have a
substantial United States market share or market presence, and
are intent on building or increasing market share by selling
their products under the well-known "Smith Corona" name. The
Company intends to rely on its existing distribution network to
become a leading vendor of technologically advanced products for
the small office and home office. In the fall of 1997, newly
sourced and manufactured products will be available under the
Smith Corona brand name. The product offerings will include
items in the telephony and facsimile product lines. Further, the
Company intends to maintain its core business of manufacturing
and distributing its current product line of typewriters and
related supplies and accessories to satisfy continuing worldwide
demand for these products. Due to substantial sales volume
reductions, in June 1997, the Company ceased the manufacture of
personal word processors; servicing and customer support of
personal word processors, however, will continue. The Company's
long-term viability is dependent upon the successful
implementation of its reorganization plan and the attainment of
profitable operations.
2. Significant Accounting Policies
Basis of Consolidation: The consolidated financial statements
include the accounts of Smith Corona Corporation and its wholly-owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Statement of Cash Flows: All highly liquid investments purchased
with a maturity of three months or less are considered to be cash
equivalents. Included in the fiscal year ended June 30, 1996
("Fiscal 1996") gain (loss) on disposition of property, plant and
equipment is the gain from the sale of the building in Singapore
of $17,755. This item is included in the Fiscal 1996 Statement
of Operations as restructuring income.
Inventories: Inventories are stated at the lower of cost or
market. Cost is determined principally by the first-in, first-out
(FIFO) method.
Property, Plant and Equipment: Property, plant and equipment are
stated at cost. Depreciation is provided on the straight-line
basis at rates based on estimated useful lives. Lives used in
computing depreciation range from two to twelve years for
equipment and up to forty years for buildings. Leasehold
improvements are amortized over the lease term. Maintenance and
repairs are charged against operations as incurred. Expenditures
that materially increase capacities or extend useful lives of
property, plant and equipment are capitalized.
During fiscal 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of". The adoption of the provisions of this
Statement did not have a material effect on the Company's
financial statements.
Retirement Plans: During the year ended June 30, 1997, the
Company terminated its defined benefit pension plan for hourly
employees and froze the benefits of its defined benefit pension
plan for salaried employees (see Note 10). Substantially all
domestic employees participate in the Company's retirement plans
for salaried and hourly employees. The cost of United States
pension plans is accrued in amounts equal to the normal cost of
current service under the plans together with amortization of
prior service costs. Outside of the United States, costs are
accrued and paid in accordance with local requirements.
Postretirement Plans: The Company provides for the expected cost
of postretirement benefits over the employee's years of active
service. In June 1997, the Company implemented a new premium
structure for retiree health care benefits whereby retired
employees will absorb the total cost of health care premiums
phased in over the next three years (see Note 10).
Research and Development: The Company's product development
costs are expensed as incurred. Research and development expense
was $1,915, $1,991 and $7,218 for the years ended June 30, 1997,
1996 and 1995, respectively.
Goodwill: The excess of the allocated acquisition cost over the
fair value of net assets of businesses acquired are amortized by
the straight-line method over forty years. Due to operating
losses and uncertainty of future operations, the Company wrote
off the remaining net book value of Goodwill of approximately
$739 in the year ended June 30, 1996.
Foreign Currency: The functional currency of the Company's
foreign operations is deemed to be the United States dollar.
Consequently, all translation gains and losses are included in
income.
Forward Foreign Currency Contracts: From time to time, the
Company may enter into forward foreign currency contracts to
hedge against foreign currency fluctuations. Gains and losses on
these contracts are recorded in net income in the period in which
the exchange rate changes. During the year ended June 30, 1995,
forward foreign currency contracts were in place to reduce the
impact of foreign currency fluctuations on transactions
designated in a currency other than the U.S. dollar. At June 30,
1997 and June 30, 1996, there were no outstanding forward
contracts.
Environmental Remediation Costs: The Company accrues for losses
associated with environmental remediation obligations when such
losses are probable and reasonably estimable. Costs of future
expenditures for environmental remediation obligations are not
discounted to their present value.
Income Taxes: Deferred income taxes are determined based on the
difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
Stock-Based Compensation - The Company adopted the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("FAS 123"), in the first quarter
of the year ended June 30, 1997. The Company, as provided for by
FAS 123, is continuing to apply Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" for
employee stock compensation measurement.
Income (Loss) Per Common and Common Equivalent Share: Income
(loss) per common and common equivalent share for the twelve
months ended June 30, 1997 are based on the weighted average
number of common shares outstanding since the Effective Date and
the effect of considering common stock equivalents. For
comparability purposes, income (loss) per common and common
equivalent share for the twelve months ended June 30, 1996 and
1995 are based on the weighted average number of common shares
outstanding from the Effective Date until March 31, 1997 and the
effect of considering common stock equivalents. Primary and
fully diluted income (loss) per common and common equivalent
share are approximately the same, and therefore, are not shown
separately.
Statement of Financial Accounting Standards No 128 "Earnings Per
Share" ("SFAS 128"), was issued in March 1997, and is effective
for periods ended after December 15, 1997. Earlier application
is not permitted. SFAS 128 simplifies the standards for
computing earnings per share ("EPS") and makes them comparable to
international standards for computing EPS. When effective, this
statement will replace the presentation of primary EPS with
presentation of basic EPS and will require a dual presentation of
basic EPS and diluted EPS on the face of the Statements of
Operations. For the Company basic and diluted EPS under SFAS 128
would have been the same for the years ended June 30, 1997 and
1996 and would have equaled the reported EPS for the
aforementioned periods.
Management Estimates: 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 the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ from
those estimates.
New Financial Accounting Standards Board Releases: Statements of
Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" ("SFAS 130"), and No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS 131"), were issued
in June, 1997.
SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general
purpose financial statements. It requires that all items that
are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. Comprehensive income is defined as "the
change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources. It includes all changes in equity during a period,
except those resulting from investments by owners and
distributions to owners". This statement is effective for fiscal
years beginning after December 15, 1997.
SFAS 131 established the way that public business enterprises
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports
issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic
areas, and major customers. This statement is effective for
financial statements for periods beginning after December 15,
1997. The disclosure impact of this statement is currently being
assessed by the Company.
Reclassifications: Certain reclassifications have been made to
the prior years' financial statements to conform with the 1997
presentation. In addition, amounts in the year ended June 30,
1995 Consolidated Statement of Operations were reclassified to
reflect continuing operations (see Note 11).
3. Inventories
A summary of inventories, by major classification and net of
reserves, is as follows:
<TABLE>
<S> <C> <C>
June 30,
1997 1996
Raw materials and work-in-process $ 4,961 $ 6,180
Finished goods 7,666 10,693
Total $12,627 $16,873
</TABLE>
4. Property, Plant and Equipment
A summary of property, plant and equipment, by major
classification, is as follows:
<TABLE>
<S> <C> <C>
June 30,
1997 1996
Land $ 810 $ 56
Buildings and improvements 6,704 5,263
Machinery and other equipment 57,765 57,887
Total 65,279 63,206
Accumulated depreciation (53,187) (50,567)
Total $12,092 $12,639
</TABLE>
Included in other assets as of June 30, 1996 are assets
located in Cortland, New York previously held for sale with a net
book value of $2,000. Upon emergence from the Bankruptcy
Proceedings the Company decided to maintain its world
headquarters in Cortland, New York and as such the assets were
reclassified to property, plant and equipment.
5. Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<S> <C> <C>
June 30,
1997 1996
Bankruptcy expenses $ 1,762 $ 2,272
Payroll and related expenses 3,297 2,590
Promotional expenses 3,940 2,888
Warranty expenses 1,067 857
Other 1,548 1,746
Total $11,614 $10,353
</TABLE>
6. Leases
The Company leases certain facilities, equipment and
vehicles for various periods through 2009 under non-cancelable
operating leases. Rental expense under these operating leases
was $3,461, $4,184 and $6,243 for the years ended June 30, 1997,
1996 and 1995, respectively.
The future minimum rental commitments for the operating
leases are as follows:
<TABLE>
<S> <C>
Year Ending Amount
June 30, (In thousands)
1998 $2,367
1999 2,044
2000 1,946
2001 1,907
2002 255
Thereafter 1,299
Total $9,818
</TABLE>
7. Bank Loans
On July 10, 1995, the Company entered into a Debtor-In-Possession
Credit Agreement (the "Debtor-In-Possession Credit
Agreement") with its lenders which was approved by the Bankruptcy
Court on August 2, 1995. Proceeds from the Debtor-In-Possession
Credit Agreement were used to repay amounts outstanding under the
Company's previous credit agreement dated April 7, 1995 under
which the Company was, as of June 30, 1995, in technical default.
The Debtor-In-Possession Credit Agreement, as amended, provided
for extensions of revolving credit loans, term loans and letters
of credit, limited to a percentage of eligible receivables and
inventories, in an amount not to exceed $24,000 through June 30,
1996 and $10,000 from June 30, 1996 through the termination date
of March 31, 1997 or the Effective Date, whichever was earlier.
On the Effective Date, the Debtor-In-Possession Credit Agreement
terminated.
On February 28, 1997, as part of the POR, the Company
entered into a loan and security agreement (the "Loan and
Security Agreement") with a new lender. The Loan and Security
Agreement provides for extensions of revolving credit loans, term
loans and letters of credit, limited to a percentage of eligible
accounts receivable and inventories in the amount not to exceed
$25,000 through the February 28, 2000 expiration date. Interest
is .75 percent over the Prime Rate or 3 percent over the Adjusted
Eurodollar Rate. Payment of dividends is prohibited by the terms
of the Loan and Security Agreement, except for non-cash dividends
pursuant to the Rights Agreement (as described in Note 8).
Pursuant to the provisions of the Loan and Security Agreement the
Company must maintain an adjusted net worth of $11,074.
Management believes that it has adequate flexibility and that
such a covenant should not impose an undue restriction on the
operations of the Company. The Loan and Security Agreement is
secured by all of the Company's assets.
There were no borrowings or repayments under the Company's
credit facilities during the twelve months ended June 30, 1997.
However, aggregate borrowings under the Debtor-In-Possession
Credit Agreement for the year ended June 30, 1996 and Amended and
Restated Credit Agreement for the year ended June 30, 1995
amounted to $1,330,700 and $1,376,208, respectively, while
aggregate repayments were $1,348,100 and $1,378,810,
respectively.
8. Stockholders' Equity
Common Stock
As of the Effective Date, the Company has authorized 100,000,000
shares of Common Stock, par value $.001 per share. Prior to the
Effective Date the Company had authorized 90,000,000 shares of
Old Common Stock.
Preferred Stock
As of the Effective Date, the Company has authorized 10,000,000
shares of preferred stock, par value of $.001 per share. The
Company has reserved for issuance 10,000 shares of Preferred
Stock, Series A, whose terms are fixed by the Rights Agreement.
Rights Agreement
On February 28, 1997, pursuant to the POR, the Board of Directors
of the Company declared a dividend distribution of one Right for
each outstanding share of Common Stock, payable to stockholders
of record at the close of business on such date and payable with
respect to Common Stock issued thereafter. Each right, when it
becomes exercisable, entitles the registered holder to purchase
from the Company one one-thousandth of a share (a "Unit") of
Preferred Stock, Series A at a purchase price of $25.50 per Unit,
subject to adjustment. The Rights attach to all certificates
representing shares of Common Stock, and no separate certificates
evidencing the Rights were distributed. The Rights will separate
from the Common Stock and will be exercisable upon the earlier of
(i) ten days (or such later date as the Board of Directors shall
determine) following public disclosure that a person or group of
affiliated or associated persons has become an "Acquiring Person"
(as defined below) or (ii) ten business days (or such later date
as the Board shall determine) following the commencement of a
tender offer or exchange offer that would result in a person or
group becoming an "Acquiring Person". Except for certain
claimants under the POR, for whom the percentage is higher, an
"Acquiring Person" is a person or group of affiliated or
associated persons who has acquired beneficial ownership of 15
percent or more of the outstanding shares of Common Stock. The
term "Acquiring Person" excludes (i) the Company, (ii) any
subsidiary of the Company, (iii) any employee benefit plan of the
Company or any subsidiary of the Company or (iv) any person or
entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan. The Rights, which do not
have voting rights, will expire on February 28, 2007 unless
extended or earlier redeemed by the Company.
In the event that a person becomes an Acquiring Person, each
holder of a Right will have the right to receive, upon exercise
of the Right, Common Stock having a value equal to two times the
exercise price of the Right. Rights that are owned by any
Acquiring Person will be null and void. In the event that a
person has become an Acquiring Person and the Company is acquired
in a merger or other business combination transaction in which
the Company is not the surviving corporation, or more than 50
percent of the Company's assets or earning power is sold, each
holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the
Right.
The Rights may be redeemed by the Company at a price of
$.001 per Right at any time until ten days following the date on
which a person has become an Acquiring Person.
Warrants
Also on the Effective Date, the Company issued warrants to
stockholders of record as of August 15, 1996 of the Old Common
Stock. Eligible stockholders received one warrant to purchase
one share of Common Stock for every 20 shares of the Old Common
Stock held by them. The Old Common Stock was canceled on the
Effective Date. The exercise price of the warrants is $8.50 per
share. The warrants may be exercised at any time from August 28,
1997 to February 28, 1999. As of June 30, 1997, there were
1,512,423 warrants issued.
Senior Officer Stock
Pursuant to the POR, the Chief Executive Officer, Chief Financial
Officer, Executive Vice President/Sales and Marketing and at the
discretion of the Chief Executive Officer, other officers of the
Company may be granted up to 5 percent of the total shares of
Common Stock which are issued under the provisions of the POR on
a fully diluted basis (not including the effect of the exercise
of any of the above warrants). The number of shares of the
Company's Common Stock awarded and outstanding under this plan as
of June 30, 1997 were 93,894. Rights to these shares vest on the
second anniversary of the Effective Date (the "Restriction
Period") or upon a change in control. The market value of these
shares at the date of award is reflected as deferred compensation
in Stockholders' Equity and is being amortized over the
Restriction Period.
Employee Stock Incentive Plan
Pursuant to the POR, the Company shall implement an employee
stock incentive or other similar plan, which shall provide for
the issuance of up to 10 percent of the total shares of Common
Stock (or options to acquire such shares) which are issued
pursuant to the provisions of the POR on a fully diluted basis
(not including the effect of the exercise of any of the above
warrants). This employee stock incentive plan has not yet been
implemented.
<PAGE>
9. Geographic Area Information
The Company operates in one industry segment which includes
design, manufacture and distribution of typewriters, personal
word processors and related supplies and accessories. The
Company manufactures its products principally at its facility
located in Mexico and distributes its products through a variety
of distribution channels, domestically and internationally.
Transfers between geographic areas are generally priced to
recover cost plus an appropriate markup for profit. Information
regarding the Company's operations in different geographic
locations is shown below:<TABLE>
<S> <C> <C> <C>
For the year ended June 30,
1997 1996 1995
Net sales to customers:
United States $ 67,918 $ 90,470 $158,047
Europe 6,848 17,773 26,645
Other Foreign 2,547 4,305 11,617
Total $ 77,313 $112,548 $196,309
Inter-area transfers:
United States $ 5,147 $ 11,287 $ 21,108
Singapore - 22,480 74,060
Europe 415 - -
Other Foreign 8,890 6,735 9,457
Total $ 14,452 $ 40,502 $104,625
Operating income (loss):
United States $ 8,177 $(14,944) $(24,466)
Singapore (110) 15,737 (8,294)
Europe (4,234) (6,461) (6,572)
Other Foreign (549) (730) (129)
Corporate (4,142) (3,815) (7,187)
Eliminations - 1,637 (118)
Total $ (858) $ (8,576) $(46,766)
Identifiable assets:
United States $ 51,535 $ 69,036 $88,741
Singapore 371 431 21,702
Europe 3,778 8,548 17,002
Other Foreign 4,945 5,857 8,621
Total $ 60,629 $ 83,872 $136,066
</TABLE>
Sales to one of the Company's largest customers, Wal-Mart
Stores, Inc., amounted to 19.8%, 11.4% and 12.5% of consolidated
net sales during 1997, 1996 and 1995, respectively.
Additionally, in 1996, sales to Office Depot amounted to 10.1% of
consolidated net sales. The above customers were the only
customers responsible for more than 10% of net sales in the
periods noted.
10. Pension Plans and Postretirement Benefits
As part of its ongoing reorganization efforts under the
Bankruptcy Proceedings, on August 6, 1996, the Company decided to
discontinue future benefit accruals under its salaried and hourly
defined benefit pension plans (the "Defined Benefit Plans") as of
September 1, 1996 and to seek termination of the Defined Benefit
Plans as of October 6, 1996. On August 7, 1996, pursuant to
applicable Federal law and regulations, the Company caused a
Notice of Intent to Terminate to be issued to affected parties
under the Defined Benefit Plans. The freezing of benefit
accruals resulted in a $3,394 curtailment gain recorded in
selling, general and administrative expenses during the three
months ended September 30, 1996.
On August 23, 1996, the Company filed with the Bankruptcy
Court a Motion for Approval of Distress Termination of Pension
Plans (the "Termination Motion"). Among other things, the
Termination Motion asked the Bankruptcy Court to find that the
Company met the standards for distress termination of the Defined
Benefit Plans, to approve such a termination pursuant to
applicable statutes and regulations, and to determine the claims
of the Pension Benefit Guaranty Corporation (the "PBGC"), if any,
arising from such a termination.
The PBGC opposed termination of the Defined Benefit Plans.
On December 17, 1996, the Company and the PBGC executed a
settlement agreement whereby the Company withdrew its application
with the PBGC to terminate the defined benefit plan for salaried
employees (the "Salaried Plan"), withdrew its Bankruptcy Court
motion to terminate the Salaried Plan, and notified participants
and beneficiaries that the Salaried Plan will continue on a
frozen basis, i.e., no future benefits for plan participants will
be earned. The agreement between the Company and the PBGC also
provided that the Company promptly complete its distress
termination filing with the PBGC with respect to the defined
benefit plan for hourly employees (the "Hourly Plan").
Termination of the Hourly Plan resulted in the PBGC receiving an
allowed general unsecured claim in the Bankruptcy Proceedings of
$8,300. Upon final court approval, obtained on January 22, 1997,
all PBGC claims with respect to the Salaried and Hourly Plans,
except the $8,300 general unsecured claim, were withdrawn and the
PBGC's objection to confirmation of the Company's POR also was
withdrawn.
The Salaried Plan generally provides pension benefits that
are based upon formulas that reflect all service with the Company
and its predecessors and the employee's compensation during the
employee's highest five of the last ten consecutive years of
service before retirement. The Hourly Plan generally provides
benefits of stated amounts for each year of service. Subject to
its initiation of proceedings to seek termination of its Defined
Benefit Plans the Company's policy has been to fund, at a
minimum, the amount necessary on an actuarial basis to provide
for benefits in accordance with requirements of the Employee
Retirement Income Security Act of 1974 ("ERISA").
The net periodic pension cost (income) for the years ended
June 30, 1997, 1996 and 1995 is comprised of the following
components:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Service cost $ 512 $1,455 $1,664
Interest cost 4,185 5,656 5,398
Return on plan assets:
Actual (8,845) (7,347) (9,097)
Unrecognized loss 4,162 1,498 3,395
Amortization of deferred
costs and actuarial gains - (227) (595)
Settlement gain (8,598) - -
Net curtailment gain (3,394) (1,524) -
Pension cost (income) $(11,978) $ (489) $ 765
</TABLE>
The net curtailment gains for 1997 and 1996 were a result of the
freezing of benefit accruals and the May 1995 restructuring,
respectively. The settlement gain is a result of termination of the
Hourly Plan and is included as a component of the extraordinary gain.
The assumptions used in the development of these amounts were:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Discount rate 7.50% 7.50% 8.00%
Rates of increase in
compensation levels 4.50% 4.50% 5.50%
Rate of return on
plan assets 9.25% 9.25% 9.25%
</TABLE>
The following tables set forth the funded status of the plans and
amounts recognized in the Company's consolidated balance sheets:
<TABLE>
<S> <C>
June 30, 1997
Smith
Corona
Salaried
Plan
Actuarial present value
of benefit obligation:
Vested benefit obligation $40,890
Accumulated benefit obligation $41,221
Projected benefit obligation $41,221
Market value of assets
(principally publicly traded
securities) $42,297
Funded status (1,076)
Unrecognized gains 5,853
Net accrued pension liability $ 4,777
</TABLE>
<TABLE>
<S> <C> <C> <C>
June 30, 1996
Over- Under-
Funded Funded
Plans Plans Total
Actuarial present value
of benefit obligation:
Vested benefit obligation $37,869 $32,727 $70,596
Accumulated benefit obligation $38,693 $32,733 $71,426
Projected benefit obligation $42,972 $32,733 $75,705
Market value of assets
(principally publicly traded
securities) $39,528 29,238 68,766
Funded status 3,444 3,495 6,939
Unrecognized gains 5,241 5,501 10,742
Net accrued pension liability $ 8,685 $ 8,996 $17,681
</TABLE>
The net accrued pension liability in the amount of $17,681
is reflected on the June 30, 1996 consolidated balance sheet as
liabilities subject to compromise.
The Company also has defined contribution savings plans
covering its domestic and certain of its foreign employees, under
which the Company matches a portion of the contributions made by
participating employees. The Company's costs for matching
contributions under savings plans totaled $254, $337 and $543 for
the years ended June 30, 1997, 1996 and 1995, respectively.
The Company had a non-qualified supplemental pension plan
covering certain employees which provided for incremental pension
payments from the Company's funds. The net accrued pension
liability related to the unfunded plan was $1,869 at June 30,
1996. The net accrued pension liability in the amount of $1,869
was reflected on the June 30, 1996 consolidated balance sheet as
liabilities subject to compromise. Pension expense for the
non-qualified plan was $189 and $683 in the years ended June 30, 1996
and 1995, respectively. The plan was terminated and additional
benefit accruals ceased on January 31, 1996 which resulted in a
curtailment gain of $213.
The Company also provides health care and life insurance
benefits for certain retired employees. Substantially all of the
Company's domestic employees, and certain employees in foreign
countries, may become eligible for such benefits if they reach a
specified retirement age while working for the Company.
In June 1997, a letter was distributed to all of the
Company's currently retired employees providing a new premium
structure for health care benefits which will be implemented
beginning January 1, 1998 whereby retired employees will absorb
incremental increases in the total cost of health care premiums.
By January 1, 2000, retired employees will absorb 100% of the
health care premium. Furthermore, the Company decided to
terminate life insurance benefits for retired employees effective
January 1, 2000. These changes resulted in a net curtailment
gain of $6,534 which was recorded in selling, general and
administrative expenses during the fourth quarter of the year
ended June 30, 1997.
Summary information on the Company's postretirement benefit
plans, which are unfunded, is as follows:
<TABLE>
<S> <C> <C>
Year ended June 30,
1997 1996
Financial status of plans:
Accumulated postretirement
benefit obligation (APBO):
Retirees $ 1,248 $ 8,626
Fully eligible, active
plan participants - 1,200
Other active plan
participants - 929
Unrecognized gains 4,656 1,742
Accrued postretirement
benefit cost $5,904 $12,497
</TABLE>
The accrued postretirement benefit cost as of June 30, 1996
was reflected on the balance sheet as liabilities subject to
compromise.<PAGE>
The components of net periodic postretirement benefit
cost are as follows:
<TABLE>
<S> <C> <C>
Year ended June 30,
1997 1996
Service cost, benefits attributed to
employee service during the year $ 84 $ 130
Interest cost on accumulated
postretirement benefit obligation 687 802
Amortization of gains (164) (109)
Net curtailment gain (6,534) (639)
Net periodic postretirement benefit
cost (income) $(5,927) $ 184
</TABLE>
The net curtailment gains were primarily the result of the
change in postretirement benefits in the year ended June 30, 1997
and employee terminations in the year ended June 30, 1996.
The discount rate used in determining the APBO was 7.5% in
1997 and 1996, respectively. The assumed health care cost trend
rate used in measuring the accumulated postretirement benefit
obligation was 10.0% and 10.5% in 1997 and 1996, respectively,
declining to an ultimate rate of 5.5% over approximately sixty
years.
If the health care cost trend rate assumptions were
increased by 1.0%, the APBO as of June 30, 1997 would have been
increased by approximately 8.0%. The effect of this change in
health care cost trend rates on service and interest periodic
postretirement benefit cost in Fiscal 1997 would have been an
increase of approximately 9.0%.
11. Discontinued Operations
On November 4, 1994 the Company sold substantially all of
the assets and liabilities of Histacount Corporation, a
wholly-owned subsidiary, for $14,500. The after-tax gain on the sale
includes utilization of a capital tax-loss carry-forward and was
recorded in the year ended June 30, 1995 statement of operations.
On July 5, 1994 the Company sold substantially all the assets and
liabilities of SCM Office Supplies, Inc., a wholly-owned
subsidiary, for $13,000. The loss on the sale was recorded in
the year ended June 30, 1994 statement of operations. The sale
proceeds of approximately $27,500 were used to reduce the
Company's debt and accounts payable.
Accordingly, the consolidated statements of operations
reflect SCM Office Supplies, Inc. and Histacount Corporation's
operating results as discontinued operations.
<PAGE>
Summary operating results of discontinued operations are as
follows for the year ended June 30, 1995:<TABLE>
<S> <C>
Net sales, $5,774
Income from operations
before income taxes $1,018
Income taxes 347
Net income from operations 671
Gain on disposal
of assets (net of tax benefit
of $196) 9,127
Net income $9,798
</TABLE>
12. Income Taxes
The components of loss from continuing operations
before income taxes are as follows:
<TABLE>
<S> <C> <C> <C>
Year ended June 30,
1997 1996 1995
United States $3,124 $(21,590) $(37,798)
Foreign (3,656) 12,499 (9,933)
Total $ (532) $ (9,091) $(47,731)
The components of income tax expense consist of:
Year ended June 30,
1997 1996 1995
United States:
Current $ - $(1,921) $ 141
Deferred - 2,217 8,787
Foreign 104 1,218 2,071
State 159 517 3,666
Total $ 263 $ 2,031 $14,665
Income tax expense is included in the financial statements as
follows:
Year ended June 30,
1997 1996 1995
Continuing operations $ 263 $2,031 $14,514
Discontinued operations - - 151
Extraordinary Gain - - -
Total $ 263 $2,031 $14,665
</TABLE>
The components of net deferred tax assets were as follows:
<TABLE>
<S> <C> <C>
June 30,
1997 1996
Deferred tax assets:
Accounts receivable $1,066 $1,365
Inventory 1,960 3,144
Prepaid and other current assets 2,363 -
Postretirement benefits
other than pensions 2,257 4,777
Pension 1,825 6,758
Restructuring 469 3,476
Other liabilities 4,050 6,250
Property, plant and equipment 3,291 3,924
Net operating loss carryforwards 21,195 18,963
Capital loss carryforwards 7,515 7,529
Miscellaneous 2,615 2,480
Valuation allowances (48,606) (58,666)
Net deferred tax assets $ - $ -
</TABLE>
For the year ended June 30, 1996 the Company recorded a
charge to income tax expense increasing valuation allowances to
provide for full valuation of all of its deferred income tax
assets.
The provisions for income taxes differ from the amounts
computed by applying the federal income tax statutory rate. The
following is a summary of the reasons for these differences:
<TABLE>
<S> <C> <C> <C>
Year Ended June 30,
1997 1996 1995
Income (loss) from continuing
operations before income taxes $ (532) $(9,091) $(47,731)
Statutory tax rate 34% 34% 34%
Tax computed at statutory rate (181) (3,091) ( 16,229)
Increase (reduction):
State income taxes,
net of federal benefit 2,980 405 (1,685)
Effect of foreign earnings 1,661 (930) 1,105
Valuation allowance (6,956) 8,425 32,232
Other adjustments 2,759 (2,778) (909)
Total $ 263 $ 2,031 $14,514
</TABLE>
The other adjustments of $2,759 for the year ended June 30,
1997 resulted primarily from permanent capitalization of certain
professional services related to the Bankruptcy Proceedings for
income tax purposes. The other adjustments of $2,778 for the
year ended June 30, 1996 primarily relate to adjustments to
current taxes payable for the results of the Internal Revenue
Service and New York State tax examinations.
All U.S. income tax returns through June 30, 1995 have been
examined by the Internal Revenue Service. The examination
resulted in a current liability of approximately $3,000.
Additionally, the New York State tax authority completed its
examination of all returns through June 30, 1995. Settlement of
this examination resulted in a current liability of $300. The
U.S. income tax return for the year ended June 30, 1996 is
currently under examination by the Internal Revenue Service.
Management does not expect a material adjustment to result from
this examination.
For U.S. federal income tax purposes the Company has a net
operating loss carryforward of approximately $9,812 which will
expire on June 30, 2012. In addition, the Company has net
operating losses attributable to its foreign subsidiaries of
approximately $40,711 of which approximately $35,404 may be
carried forward indefinitely and the remaining amount will expire
in five to seven years. The tax benefit of the net operating
loss carryforwards has been fully offset by valuation allowances.
13. Commitments and Other Matters
Certain aspects of the Company's past handling and/or
disposal of hazardous substances have been the subject of
investigation by federal and state regulatory authorities, or
have been the subject of lawsuits filed by such authorities or by
private parties. At June 30, 1997 and June 30, 1996, the Company
had recorded liabilities of approximately $2,952 and $4,160,
respectively, related to environmental matters. Because of the
uncertainties associated with assessing environmental matters,
the related ultimate liabilities are not presently determinable.
However, based on facts presently known, management does not
believe that these investigations, if resolved adversely to the
Company, would individually or in the aggregate have a material
adverse effect on the Company's financial position or results of
operations.
The Company was the owner and operator of manufacturing
facilities in Groton, New York (the "Groton Site") and
Cortlandville, New York (the "Cortlandville Site" and, together,
the "Owner/Operator Sites"). The Company's liability, if any, at
the Owner/Operator Sites stems from groundwater contamination at
the Cortlandville Site and soil contamination at the Groton Site.
Remediation programs at the Owner/Operator Sites currently
consist of round-the-clock pumping and filtering (Cortlandville
Site) or soil venting with a soil infiltration injection system
(Groton Site). The costs of establishing remediation programs at
the Owner/Operator Sites had largely been paid by the Company
prior to the Petition Date. To the Company's knowledge, the only
future costs that will be associated with remediation of those
sites are for operation, maintenance, monitoring, shutdown, and
post-shutdown of the systems. Under the POR, the Company will
continue to be responsible for those costs. The Company believes
that it has set aside adequate reserves for the payment of
expenses for the ongoing remediation programs at the Groton and
Cortlandville Sites. Claims asserted by the New York Department
of Environmental Conservation ("DEC") and the New York Department
of Health ("DOH") in the Company's bankruptcy proceedings for
past and future costs at the Groton and Cortlandville Sites, and
at eight other sites, were resolved by the Company and the State
of New York on August 6, 1996 at amounts that were not material
to the Company's financial results.
The Company was served in June 1992 with a summons and
complaint and, in June 1994, with an amended complaint, in a
contribution action brought by five private plaintiffs in the
United States District Court for the Northern District of New
York pursuant to the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") and certain
state law theories (the "Cooper Industries action"). The
plaintiffs in this action are Cooper Industries, Inc., Keystone
Consolidated Industries, Inc., The Monarch Machine Tool Co.,
Niagara Mohawk Power Corporation and Overhead Door Corporation.
The amended complaint, which listed the Company and fourteen
other persons or entities as defendants, sought contribution or
reimbursement for response costs incurred to date, and to be
incurred in the future, for the remediation of a site in
Cortland, New York known as the "Rosen Site". Claims concerning
the Rosen Site were filed against the Company in the Bankruptcy
Court by the United States Environmental Protection Agency
("EPA"), the United States Department of the Interior ("DOI"),
the DEC, the DOH and certain plaintiffs and defendants in the
Cooper Industries action. The Company entered into a written
agreement with the United States (on behalf of the EPA and DOI),
the State of New York (on behalf of the DEC and DOH), and the
five Cooper Industries plaintiffs dated as of February 14, 1997
(the "Rosen Site Settlement"). The Rosen Site Settlement was
approved by the Bankruptcy Court on May 29, 1997 after all
conditions precedent to the settlement had been satisfied.
Pursuant to the Rosen Site Settlement, all Rosen Site-related
claims of the signing parties, including the Cooper Industries
action, will be resolved as to the Company in exchange for
consideration that includes an allowed general unsecured claim in
the Bankruptcy Proceedings. In addition, the Rosen Site
Settlement provides for a grant of judicial protection to the
Company against contribution actions or claims regarding the
matters addressed therein, including such claims of the Company's
co-defendants in the Cooper Industries action. This agreement
resulted in a fiscal 1997 second quarter charge of $250.
The Company is also a defendant or plaintiff in various
other legal actions that have arisen in the ordinary course of
its business. It is the opinion of management that the ultimate
resolution of these matters and the environmental matters
discussed above will not have a material adverse effect on the
Company's financial position or results of operation.
The Company has severance agreements in place with certain
executive officers. Substantially all the agreements expire by
March 1, 2000 and provide for severance benefits of one year
salary and aggregate approximately $500 in the event all
employees under such severance agreements were involuntarily
terminated.
14. Restructuring Costs
Over the past few years, the Company has faced intense
competition from foreign producers. On May 8, 1995 the Company
announced a major Restructuring whereby the Company's typewriter
manufacturing would be relocated from its Singapore and Batam
Island, Indonesia facilities to its Mexico facility. This action
resulted in the termination of approximately 1,300 workers in
Singapore and Batam Island. The Company ceased production in
Singapore and Batam Island, Indonesia in November 1995, and
relocated equipment to Mexico where typewriter production
commenced in December 1995. The Company sold certain of its
Singapore machinery and equipment for proceeds of approximately
$2,333 resulting in a loss of approximately $1,489 which was
accrued as part of the Fiscal 1995 restructuring charge.
Additionally, the Company sold its Singapore facility and the
underlying land lease on February 8, 1996 for net proceeds of
approximately $21,041. The sale of the facility resulted in a
third quarter pretax gain of approximately $17,755 and is
included in restructuring income.
In addition to the relocation of typewriter manufacturing to
Mexico, the Company also eliminated approximately 180 support
positions within the research and development, finance, service,
distribution, selling and marketing areas in both its Cortland,
New York and New Canaan, Connecticut locations. Approximately
$10,000 in additional annual pretax savings were realized during
the year ended June 30, 1997 from elimination of these support
positions. These reductions were completed by the end of the
first quarter of Fiscal 1996 and resulted in a first quarter
pension curtailment gain of approximately $1,524 and were
included in restructuring expense (income) for the third quarter
of Fiscal 1996.
As a result of these actions, the Company recorded a pretax
charge of approximately $14,870 in the fourth quarter of the year
ended June 30, 1995, of which approximately $1,877 represented
primarily non-cash machinery and equipment asset write-offs, and
the remainder related to employee severance. Additionally,
certain costs, primarily relating to the shutdown of Singapore
operations, of approximately $1,622, pretax were recognized as
charges to operations as incurred during the year ended June 30,
1996 as they did not qualify as restructuring costs.
The fiscal 1995 restructuring provision and subsequent
activity is as follows:
<TABLE>
<S> <C> <C> <C> <C>
Asset
Impair- Other
Severance ments Costs Total
1995 Provision $12,993 $1,492 $ 385 $14,870
1995 Activity (1) (1,499) - (100) (1,599)
June 30, 1995 balance 11,494 1,492 285 13,271
1996 Activity (2) (6,809) (1,492) 35 (8,266)
June 30, 1996 balance 4,685 - 320 5,005
1997 Activity(3) (4,685) - (320) (5,005)
June 30, 1997 balance $ - $ - $ - $ -
</TABLE>
(1) Represents cash payments, except for other costs which are
non-cash items.
(2) Represents cash payments for severance of approximately
$6,286 and non-cash items for foreign currency exchange rate
changes, severance provision adjustments and writeoff of
property, plant and equipment. The net increase in other
costs represents expected future cash payouts for final
liquidation of Singapore operations.
(3) The severance amount of $4,685 and other costs amount of
$279 were compromised and paid as part of the POR.
Additionally, other costs included cash payments for
liquidation of Singapore operations amounting to $41.
15. Quarterly Financial Data (Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Fiscal Year Ended First Second Third Fourth
June 30, 1997 Quarter(1) Quarter Quarter Quarter(2)
Net sales $20,986 $22,463 $16,905 $16,959
Gross margin 3,929 6,112 2,917 4,952
Operating income (loss) 73 (2,607) (3,255) 4,931
Income (loss) before
extraordinary gain 85 (2,636) (3,186) 4,942
Extraordinary gain - - 8,122 -
Net income (loss) $ 85 $(2,636) $ 4,936 $ 4,942
Earnings per common
and common equivalent
share:
Income (loss) before
extraordinary gain $ .04 $(1.17) $(1.42) $1.89
Extraordinary gain
Net income (loss) per - - 3.61 -
share $ .04 $(1.17) $2.19 $1.89
Weighted average common
and common equivalent
shares outstanding (3) 2,249 2,249 2,249 2,610
Fiscal Year Ended First Second Third Fourth
June 30, 1996 Quarter(4) Quarter(5) Quarter(6) Quarter(7)
Net sales $33,463 $36,303 $20,026 $ 22,756
Gross margin 4,003 904 1,112 3,174
Operating income (loss) (4,852) (8,468) 9,322 (4,578)
Net income (loss) $(5,429) $(8,636) $ 9,071 $ (6,128)
Earnings per common
and common equivalent
share:
Net income (loss) per
share $(2.41) $(3.84) $4.03 $(2.73)
Weighted average common
and common equivalent
shares outstanding (3) 2,249 2,249 2,249 2,249
<\TABLE.
(1) Includes pension curtailment gain of approximately $3,400.
(2) Includes postretirement curtailment gain of approximately $6,500.
(3) For all quarters in the fiscal year ended June 30, 1996 and the
first, second and third quarters in the fiscal year ended
June 30, 1997, the weighted average common and common equivalent
shares outstanding are based on the weighted average number of
common shares outstanding from the Effective Date until March 31,
1997.
(4) Includes pension curtailment gain of approximately $1,500.
(5) Incudes gain from sale of property located in Cortland, New York of
approximately $1,300 and charges of approximately $4,300 for
writedown of inventory.
(6) Includes gain from sale of Singapore property of approximately
$17,000.
(7) Includes charges related to writeoff of the remaining deferred tax
assets of approximately $3,406 due to the Company's assessment that
it is more likely than not that such assets will not be recovered as
well as goodwill of $739. In addition, included is a charge of $900
relating to writedown of property, plant and equipment and an
additional gain from the sale of the Singapore building of $800.
Financial Statement Schedule II
SMITH CORONA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the years ended June 30, 1997, 1996 and 1995
(In thousands)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Balance at
Beginning Costs and Reductions- End of
of Period Expenses Writeoffs Period
Year ended June 30, 1997:
Allowance for doubtful
trade receivables $ 1,576 $ 394 $1,039 $ 931
Allowance for inventory
obsolescence and shrinkage $ 7,552 $2,364 $4,501 $ 5,415
Year ended June 30, 1996:
Allowance for doubtful
trade receivables $ 1,484 $ 523 $ 431 $ 1,576
Allowance for inventory
obsolescence and shrinkage $10,595 $5,199 $8,242 $ 7,552
Year ended June 30, 1995:
Allowance for doubtful
trade receivables $ 1,512 $ 61 $ 89 $ 1,484
Allowance for inventory
obsolescence and shrinkage $ 4,037 $9,930 $3,372 $10,595
</TABLE>
<TABLE>
<S> <C>
EXHIBIT INDEX
EXHIBIT #
10.1 Smith Corona Corporation Retirement Savings and Investment
Plan adopted effective July 1, 1989, as amended and
restated effective January 1, 1997.
10.2 The CORPORATEplan for Retirement The Profit Sharing/401(k)
Plan, Fidelity Basic Plan Document No. 07 effective July
1, 1997.
10.3 Adoption Agreement - Article 1 between Smith Corona
Corporation and Fidelity Management Trust Company, as
Trustee effective July 1, 1997.
10.27 First Amendment to Loan and Security Agreement dated July 2, 1997.
10.28 Employment Agreement between Smith Corona Corporation and
W. Michael Driscoll dated as of October 14, 1996 amended
as of June 2, 1997.
10.29 Employment Agreement between Smith Corona Corporation and
John A. Piontkowski dated as of May 5, 1997.
11 Statement Re Computation of Earnings (Loss) per common share.
21 Schedule of Subsidiaries of the Registrant
27 Financial Data Schedule (Edgar Filing Only)
</TABLE>
Exhibit 10.1
Introduction
SCM Corporation adopted the Retirement Savings and
Investment Plan of SCM Corporation effective October 28, 1971 for
the benefit of certain of its employees including employees of
certain of its affiliates ("Prior Plan"). From and after 1985
employees of Smith Corona Corporation, an affiliate of SCM
Corporation, together with the employees of three wholly-owned
subsidiaries of Smith Corona Corporation, namely, Hulse
Manufacturing Company, SCM Office Supplies, Inc. and Histacount
Corporation, participated in the Prior Plan.
In July, 1989, Smith Corona Corporation became a public
company with an offering of a majority of its common stock on the
New York Stock Exchange. Effective as of July 1, 1989, Smith
Corona Corporation and two of its subsidiaries, namely, SCM
Office Supplies, Inc. and Histacount Corporation, each adopted
separate but identical defined contribution plans for their
respective employees entitled respectively, Smith Corona
Corporation Retirement Savings and Investment Plan ("Plan"), SCM
Office Supplies, Inc. Retirement Savings and Investment Plan and
Histacount Corporation Retirement Savings and Investment Plan.
Effective also as of January 1, 1989, Hulse Manufacturing Company
adopted the Plan as a participating employer. The assets and
liabilities of the employees of Smith Corona Corporation and its
subsidiaries were "spun-off" from the Prior Plan and transferred
to the three respective plans. The "spin-off" was accomplished
pursuant to Section 414(l) of the Internal Revenue Code of 1986,
as amended.
Effective January 1, 1992, the SCM Office Supplies,
Inc. Retirement Savings and Investment Plan was merged with and
into the Plan and the Plan was amended and restated as of such
date. On July 5, 1994, all the assets of SCM Office Supplies,
Inc. were sold and all of the employees of SCM Office Supplies,
Inc. were terminated.
On November 4, 1994, all of the assets of Histacount
Corporation were sold and all employees of Histacount Corporation
were terminated. Effective December 31, 1996, the Histacount
Corporation Retirement Savings and Investment Plan was merged
with and into the Plan. The Plan was again amended and restated
effective January 1, 1997. The Trustee for the Plan is Bankers
Trust Company under a trust agreement established as of July 1,
1989.
The current principal purpose of the Plan is to
encourage employees to save for retirement by offering matching
Employer Contributions and to provide them with a convenient way
to save for retirement on a regular and tax effective basis.
Provisions of this Plan are only applicable to
employees in the employment of a participating employer and who
have an Hour of Service on or after January 1, 1997. Any
employee who was covered under the Prior Plan or the Plan and who
retired or terminated employment prior to January 1, 1997 shall
be entitled to benefits as determined by the Prior Plan or Plan,
as in effect at the retirement or termination date.
ARTICLE I
Definitions
As used herein, unless otherwise defined or required by
the context, the following words and phrases shall have the
meanings indicated. Some of the words and phrases used in the
Plan are not defined in this Article I, but, for convenience are
defined as they are introduced into the text.
1.1 "Account" means a Member's Employee Contributions
Account, Compensation Deferral Contribution Account, Rollover
Contribution Account, and Employer Contribution Account, or any
such account or subaccount thereof, as the context requires.
1.2 "Affiliate" means any company which is related to
the Employer as a member of a controlled group of corporations in
accordance with Section 414(b) of the Code, as a trade or
business under common control in accordance with Section 414(c)
of the Code or members of an affiliated service group as defined
under Section 414(m) of the Code and any other entity required to
be aggregated with the Employer pursuant to Section 414(o) of the
Code.
1.3 "Appropriate Form" means the form prescribed by
the Committee for a particular purpose.
1.4 "Basic Contributions" means Compensation Deferral
Contributions that are eligible for matching by Employer
Contributions in accordance with Section 4.1 (Amount of Employer
Contributions).
1.5 "Basic Contributions Subaccount" means the
separate subaccount in the Compensation Deferral Contribution
Account maintained for a Member to record such Member's share of
the Trust attributable to Basic Contributions.
1.6 "Beneficiary" means the person or persons
designated by the Plan or by a Member under Section 2.5
(Beneficiary Designation) to receive benefits payable under the
Plan as a result of the Member's death.
1.7 "Board" or "Board of Directors" means the Board of
Directors of Smith Corona Corporation or any successor thereto.
1.8 "Code" means the Internal Revenue Code of 1986, as
amended from time to time and references to sections thereof
shall be deemed to include any such sections as amended, modified
or renumbered.
1.9 "Committee" means the Benefits Administration
Committee of Smith Corona Corporation appointed in accordance
with Section 10.3 (Appointment of the Committee).
1.10 "Compensation" means with respect to a Plan Year,
the sum of the amount reported by the Employer to the Internal
Revenue Service on Form W-2 as the Member's compensation for such
calendar year and the amount of any Compensation Deferral
Contributions made on such Member's behalf to the Plan and the
amount contributed by the Employer pursuant to a salary reduction
agreement which is not included in a Member's gross income under
Section 125 of the Code; but exclusive of termination or
severance pay, prizes, awards, grievance settlements, overseas
cost of living allowances, relocation allowances, mortgage
assistance, executive perquisites, stock options, and such other
extraordinary items of remuneration as the Committee shall
determine from time to time pursuant to such uniform and
nondiscriminatory rules as it shall adopt. Compensation of each
Employee taken into account under the Plan for any Plan Year
shall not exceed $160,000 as thereafter adjusted for inflation in
accordance with Section 415(d) of the Code. If the Plan
determines Compensation for a Plan Year less than 12 calendar
months, then the limitation shall be equal to the annual
compensation limitation determined by multiplying the limitation
by the ratio obtained by dividing the number of full months in
such Plan Year by 12.
1.11 "Compensation Deferral Contributions" means
contributions made by the Employer pursuant to an election by the
Member to reduce the cash compensation otherwise currently
payable to such Member by an equivalent amount, in accordance
with the provisions of Section 3.1 (Compensation Deferral
Contributions).
1.12 "Compensation Deferral Contributions Account"
means the separate account maintained for a Member to record such
Member's share of the Trust Fund attributable to Compensation
Deferral Contributions made on such Member's behalf.
1.13 "Effective Date" means July 1, 1989.
1.14 "Eligible Employee" means an employee who (i) has
attained age 21 and (ii) has completed at least 90 days of
employment with the Employer measured from his date of hire as a
full-time Employee excluding an individual who is covered by a
collective bargaining agreement between the Employer and any
union unless participation by such Employee in the Plan has been
agreed to by the parties to such agreement and also excluding any
Employee who is a nonresident alien with no earned income from
the Employer which constitutes income from sources within the
United States.
1.15 "Employee" means a person (but not including a
person acting only as a director) who is a common law employee
employed by the Employer and excluding any "leased employee"
within the meaning of Section 414(n)(2) of the Code.
1.16 "Employee Contributions" means after tax
contributions that were made by a Member under the Prior Plan
prior to January 1, 1989 and were transferred to this Plan.
1.17 "Employee Contributions Account" means the
separate account maintained for a Member to record such Member's
share of the Trust Fund attributable to the Member's Employee
Contributions. The Employee Contributions Account of each Member
will consist of a subaccount for basic Employee Contributions
that were eligible for matching by Employer Contributions and a
subaccount for supplemental Employee contributions that were not
eligible for matching by Employer Contributions.
1.18 "Employer" means Smith Corona Corporation and
with respect to a participating subsidiary who adopts the Plan
pursuant to Section 13.7, such subsidiary, where appropriate.
1.19 "Employer Contributions" means the Employer
contributions made to the Trust Fund pursuant to Article IV
(Employer Contributions).
1.20 "Employer Contribution Account" means the
separate Account maintained for a Member to record such Member's
share of the Trust Fund attributable to Employer Contributions
made on such Member's behalf.
1.21 "Enrollment Date" means the first day of any
calendar month.
1.22 "ERISA" means Public Law No. 93-406, the Employee
Retirement Income Security Act of 1974, as amended from time to
time and references to sections thereof shall be deemed to
include any such sections, as amended, modified or renumbered.
1.23 "Highly Compensated Employee" means any Employee
who is a 5% owner (as defined in Section 416(i)(1) of the Code),
at any time during the Plan Year or the preceding Plan Year and
any Employee who received Compensation for the preceding Plan
Year in excess of $80,000 (adjusted for increases in the cost-of-living
in accordance with Section 415(d) of the Code) and if the
Employer elects, also in the Top Paid Group (as defined in
Section 414(q)(3) of the Code).
1.24 "Hour of Service" means each hour for which an
Employee is paid, or entitled to payment, or receives earned
income from an Employer or an Affiliate:
(i) for performance of duties;
(ii) on account of a period of time during which
no duties were performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, jury duty, military duty or authorized
Leave of Absence, provided that, except in the case of an
Authorized Leave of Absence, no more than 501 Hours of
Service shall be credited for any single continuous period
during which an Employee performs no duty, and provided that
no Hours of Service shall be credited for periods of time in
respect of which an Employee receives severance pay or for
payments made or due under a plan maintained solely for the
purpose of complying with applicable workers' compensation,
unemployment compensation or disability insurance laws, or
for reimbursement of medical expenses; and
(iii) for which back pay, irrespective of
mitigation of damages, is awarded or agreed to by the
Employer; provided that Hours of Service credited under (i)
or (ii) shall not be credited under (iii).
Hours of Service credited to an Employee for the
performance of duties will be credited to the computation period
in which the duties are performed. The determination of Hours of
Service for reasons other than the performance of duties shall be
calculated and credited in accordance with the provisions of
Labor Department Regulations Section 2530.200b-2(b) and (c), and
Hours of Service shall be credited to the computation periods to
which the award or agreement pertains. Except in the case of an
authorized Leave of Absence, not more than 501 Hours of Service
shall be credited for any continuous period during which an
Employee performs no duty or, in the case of service required to
be credited for payments of back pay awarded or agreed to, for a
period during which an employee did not or would not have
performed duties.
To the extent not credited above, for periods of an
authorized Leave of Absence of an Employee shall be credited with
a number of Hours of Service for each week of such authorized
Leave of Absence equal to the Employee's weekly average number of
Hours of Service scheduled for the six-week period immediately
preceding such authorized Leave of Absence.
1.25 "Initial Enrollment Date" means the earliest date
for Eligible Employees to apply to become Members of the Plan.
1.26 "Investment Fund" means any investment option
approved by the Committee pursuant to Section 7.1 (Investment of
Accounts).
1.27 "Investment Manager" means the individual and/or
other entity appointed in accordance with Section 11.3
(Investment Manager) who has acknowledged in writing that such
individual is a fiduciary with respect to the Plan and who is:
(a) registered as an investment adviser under the
Investment Advisers Act of 1940, or
(b) a bank, as defined in such Act, or
(c) an insurance company qualified to manage,
assign or dispose of assets of pension plans.
1.28 "Leave of Absence" means an absence or
interruption of service approved by the Committee under uniform
and nondiscriminatory rules and procedures and any absence
pursuant to the Family and Medical Leave Act of 1993. Members on
leave of absence for service in the uniformed services of the
United States, however, shall be deemed to have been on a Leave
of Absence, provided they return to service with an Employer
within the required time limitations set forth in the Uniformed
Services Employment and Reemployment Rights Act of 1994.
1.29 "Member" means an Eligible Employee who has
become a member of the Plan in accordance with Article II
(Eligibility and Membership). Each Member shall continue to be
such until the later of the date such Member ceases to be an
Eligible Employee or such Member's Accounts have been completely
distributed.
1.30 "Parental Leave" means a period not in excess of
two (2) years commencing after December 31, 1984 during which an
individual is absent from work for any period:
(1) by reason of the pregnancy of the individual,
(2) by reason of the birth of a child of the
individual,
(3) by reason of the placement of a child with
the individual in connection with the adoption of such child
by such individual, or
(4) for purposes of caring for such child for a
period beginning immediately following such birth or
placement.
An absence from work shall not be a Parental Leave unless the
Employee furnishes the Committee such timely information as may
reasonably be required to establish that the absence from work
was for one of the reasons specified in this Section 1.30 and the
number of days for which there was such an absence. Nothing
contained herein shall be construed to establish an Employer
policy of treating a Parental Leave as a Leave of Absence.
1.31 "Plan" means the Smith Corona Corporation
Retirement Savings and Investment Plan as set forth herein or as
amended from time to time and in accordance with Section
401(a)(27)(B) is designated a profit-sharing plan.
1.32 "Plan Year" means the calendar year except the
first Plan Year means the period between July 1, 1989 and
December 31, 1989.
1.33 "Required Beginning Date" means April 1 of the
calendar year following the later of (a) the Plan Year in which
the Member attains the age of 70-1/2 years or (b) the calendar
year in which he retires.
1.34 "Retirement Age" means the date such Member
attains age 65.
1.35 "Rollover Contribution" means an amount which is
transferred from another plan to this Plan, in accordance with
the provisions of Section 2.7 (Rollover Contributions From Other
Plans).
1.36 "Rollover Contribution Account" means the
separate Account maintained for a Member to record such Member's
share of the Trust Fund attributable to any Rollover
Contributions made to the Plan on his behalf.
1.37 "Service" means the period of employment
(including a Leave of Absence) beginning on the first day the
Eligible Employee performs duties for the Employer or an
Affiliate and ending on the day of quit, retirement, discharge or
death, two years after the commencement of absence on account of
Parental Leave, or one year after an absence for any other
reason. All prior periods of employment with the Employer or an
Affiliate, and breaks in employment of less than one year shall
be included in Service. If a break in employment of not more
than two years is on account of Parental Leave not more than one
year of Service shall be credited to an Eligible Employee for a
period of Parental Leave. Service for purposes of vesting under
Section 6.1 shall be measured in full years with a fraction of a
year equal to 6 months or more treated as a full year and a
fraction of a year equal to less than 6 months disregarded.
1.38 "Specific Involuntary Termination" means a
termination by the Employer without cause following written
notice from the Employer to the Member advising that the Member's
position is being eliminated in the immediate future without
cause or a resignation on account of (i) a material reduction in
position or compensation, or (ii) a required geographic
relocation of more than 50 miles.
1.39 "Supplemental Contributions" means Compensation
Deferral Contributions that are not eligible for matching by
Employer Contributions in accordance with Section 4.1 (Amount of
Employer Contributions).
1.40 "Supplemental Contributions Subaccount" means the
separate subaccount in a Compensation Deferral Contributions
Account maintained to record a Member's share of the Trust Fund
attributable to Supplemental Contributions.
1.41 "Suspense Account" means the separate account
maintained for a Member who had monies credited to such account
pursuant to Section 4.6 (Limitation on Annual Additions),
reflecting the current dollar value of such credit.
1.42 "Total and Permanent Disability" means permanent
incapacity which results in a Member being unable to engage in
regular employment or occupation by reason of any medically
demonstrable physical or mental condition acceptable to the
Committee on a nondiscriminatory basis and which would entitle
the Member to benefits under Employer's long-term disability
plan, if any, or to Social Security disability benefits as
evidenced by a disability award letter. However, no Member shall
be deemed to be disabled if such incapacity (a) resulted from or
consists of habitual drunkenness or addiction to narcotics, or
(b) was incurred, suffered or occurred while the Member was
engaged in, or resulted from having engaged in, a criminal
enterprise, or (c) was intentionally self-inflicted, or (d) arose
out of service in the armed forces of any country.
1.43 "Trustee" means the corporate trustee appointed
from time to time by the Company to administer the Trust Fund in
accordance with Section 11.2 (Trustee).
1.44 "Trust Fund" means the trust fund established in
accordance with Section 11.1 (Trust Fund) from which benefits
provided under this Plan will be paid.
1.45 "Valuation Date" means the last business day of
each calendar month on which the New York Stock Exchange is open
for trading.
1.46 "Use of Masculine Pronoun". The use of the
masculine pronoun shall include the feminine and the singular
shall include the plural.
ARTICLE II
Eligibility and Membership
2.1 Members on the Restatement Date. Each person who
was a Member of the Plan on December 31, 1996 shall continue as a
Member of the Plan on January 1, 1997.
2.2 Eligible Employees on and after the January 1,
1997. On and after January 1, 1997 an Eligible Employee may
elect to become a Member on the Initial Enrollment Date or any
Enrollment Date thereafter. Notwithstanding the foregoing, a
former Eligible Employee who is reemployed as an Eligible
Employee following a separation from Service, shall be eligible
to become a Member of the Plan upon reemployment. Such
reemployed Eligible Employee may rejoin the Plan on an Enrollment
Date effective as of the start of first full payroll period after
his re-enrollment. If a former Employee with at least 90 days of
employment with the Employer, separates from Service prior to
attaining age 21 and is reemployed as an Employee before the
greater of (a) a period of five consecutive twelve-month periods
starting with his separation of Service or (b) the period of
Service prior to his separation, shall be eligible to become a
Member of the Plan on the later of his attainment of age 21 or
his reemployment date. Such reemployed Employee may join the
Plan on an Enrollment Date effective as of the start of the first
full payroll period after his re-enrollment. Each other former
Employee who separates from Service prior to becoming an Eligible
Employee, shall be treated as a new Employee upon reemployment.
2.3 Completion of Appropriate Form. In order to
become a Member on any Enrollment Date, an Eligible Employee must
complete and return the Appropriate Form to the Committee at
least 30 days (or such other period as the Committee may
prescribe) prior to that Enrollment Date.
2.4 Elections Upon Becoming a Member. The Eligible
Employee, in completing the Appropriate Form specified in
Section 2.3, shall (i) authorize Employer to reduce current
compensation for Compensation Deferral Contributions pursuant to
Section 3.1 (Compensation Deferral Contributions), (ii) make an
investment election from among those options approved by the
Committee under Section 7.1 (Investment of Accounts), and (iii)
designate a Beneficiary in accordance with Section 2.5
(Beneficiary Designation). Any such payroll authorization,
investment election or Beneficiary Designation shall remain in
effect until changed by notice to the Committee on the
Appropriate Form, subject to the provisions of the Plan.
2.5 Beneficiary Designation. Each Member shall
designate a Beneficiary on the Appropriate Form provided by the
Committee. The designated Beneficiary may be an individual,
estate or trust; however, if the Member is married at the time of
such Member's death, such Member's surviving spouse shall
automatically be such Member's sole Beneficiary unless the spouse
has consented in writing in accordance with Section 9.9 (Spousal
Consent) to a designation of a different Beneficiary. If more
than one individual or trust is named, the Member shall indicate
the shares and/or precedence of each individual or trust so
named. Any Beneficiary so designated may be changed by the
Member at any time (subject to his spouse's consent, if
applicable) by signing and filing the Appropriate Form with the
Committee.
In the event that no Beneficiary had been designated or
that no designated Beneficiary survives the Member, the following
Beneficiaries (if then living) shall be deemed to have been
designated in the following priority: (1) spouse, (2) children,
including adopted children and stepchildren, in equal shares, (3)
parents, in equal shares, of the Member's surviving parent, if
only one parent survives, and (4) Member's estate.
2.6 Transfers to or from Non-Covered Status. If a
Member ceases to meet the definition of Eligible Employee as set
forth in Section 1.14 (Eligible Employee) but continues to be an
Employee or an employee of an Affiliate, such Member's right to
make or have contributions made on such Member's behalf to the
Plan shall be suspended. If, during the period of suspension, a
Member's employment with the Employer or an Affiliate terminates
for any reason, there shall be a distribution of such Member's
Accounts in accordance with the provisions of Article IX
(Distribution Upon Termination of Employment). If and when the
suspended Member again becomes an Eligible Employee, such Member
may resume having Compensation Deferral Contributions made on
such Member's behalf as of any payroll date thereafter by giving
written notice to the Committee on the Appropriate Form not less
than 30 days (or such other period as the Committee may
prescribe) prior to such payroll date.
2.7 Rollover Contributions From Other Plans. An
Eligible Employee or an individual who meets the definition of
Eligible Employee in Section 1.14 except for the age or service
requirements, who is in receipt of a distribution of cash which
is eligible to be "rolled over" to a qualified plan in accordance
with applicable Code sections may, in accordance with and subject
to such rules and procedures approved by the Committee, transfer
all or part of such distribution into the Plan; provided, that
the transfer is in conformity with requirements set forth in the
Code.
Upon approval by the Committee, the amount transferred
to the Plan shall be deposited in the Trust Fund in cash and
shall be credited to a Rollover Contribution Account. For
purposes of this Section, Rollover Contributions shall include,
on and after January 1, 1993, optional direct rollover transfers
of all or a portion of an eligible rollover distribution as
provided for in Section 401(a)(31) of the Code.
If a Rollover Contribution is made on behalf of an
individual who has not yet become a Member, such individual shall
be deemed a Member upon the establishment of the Rollover
Contribution Account; however, participation in the Plan shall be
limited to the Rollover Contribution Account until the other
requirements for membership under this Article II are fulfilled.
ARTICLE III
Compensation Deferral Contributions
3.1 Compensation Deferral Contributions. Each Member
who is an Eligible Employee may elect to have the Employer make
Compensation Deferral Contributions not to exceed $9,500 per year
(subject to adjustment for inflation in accordance with Section
415(d) of the Code) to the Plan on such Member's behalf to be
credited to such Member's Compensation Deferral Contributions
Account, in which case the cash compensation otherwise payable by
the Employer to the Member shall be reduced by an amount equal to
the Compensation Deferral Contributions so made. Subject to the
limitations prescribed in Section 3.4, the amount of Compensation
Deferral Contributions in any payroll period shall be in whole
percentages from 2% to 12% of the Member's Compensation as the
Member shall designate (or such greater or lesser percentages as
the Committee may from time to time prescribe for the Plan). If
the Compensation Deferral Contributions of a Member exceeds the
annual dollar limit of this Section 3.1 applicable for a Plan
Year, the excess amount and the income, if any, allocable thereto
shall be distributed to the Member not later than the April 15
following the close of the taxable year of the Member.
3.2 Changes and Suspension of Contributions. Subject
to Section 3.1, Compensation Deferral Contributions made on a
Member's behalf may be increased or decreased by giving 30 days'
written notice to the Committee on the Appropriate Form,
effective the next following Enrollment Date. Compensation
Deferral Contributions may be suspended effective at the
beginning of the next payroll period, by giving 10 days' written
notice to the Committee. A Member who has suspended Compensation
Deferral Contributions may resume having such contributions made
on his or her behalf commencing on any subsequent Enrollment Date
by giving 30 days' written notice to the Committee (or such
shorter notice period as the Committee may from time to time
permit) on the Appropriate Form.
3.3 Transfer of Contributions to Trustee.
Contributions made under this Article III will be transferred to
the Trustee as soon as reasonably possible following the month in
which the Member's cash compensation is reduced; provided that
all Compensation Deferral Contributions for a Plan Year shall be
transferred to the Trustee not later than 15 business days after
the close of the month in which such amounts were deducted and
withheld.
3.4 Limitation on Compensation Deferral Contributions.
Compensation Deferral Contributions for any Plan Year shall be
subject to the actual deferral percentage limitations of Section
401(k)(3) of the Code. The Committee may take any and all action
it deems necessary to comply with the actual deferral percentage
limitations of Section 401(k)(3) of the Code with respect to any
Plan Year including limiting the percentage or amount of
Compensation Deferral Contributions elected by any or all Members
who are Highly Compensated Employees and including actions
permitted by Sections 401(k)(8) and 402(g)(2)(A)(i) of the Code
and the regulations thereunder.
ARTICLE IV
Employer Contributions
4.1 Amount of Employer Contributions. The Employer
shall make contributions to the Plan, with respect to each
payroll period on behalf of each Member who is an Eligible
Employee, equal to 50% (or such greater percentage, not exceeding
100%, as the Board may from time to time authorize) of that
portion of the Member's Compensation Deferral Contributions which
do not exceed 6% (or such other percentage as the Board may from
time to time permit) of Compensation in such payroll period. The
Board of Directors may, in its discretion, temporarily
discontinue Employer Contributions with respect to Member's
Compensation Deferral Contributions (which are Basic
Contributions) for Compensation not yet earned on the date such
Employer Contributions are temporarily discontinued. The Board
of Directors may also, in its discretion, authorize to be made as
of the close of a Plan Year a special Employer Contribution with
respect to some or all Members to be a "qualified nonelective
contribution" as defined in Section 401(m)(4) of the Code and
applicable regulations.
4.2 Limitations on Matching Contributions. Matching
Employer Contributions for a Plan Year in respect of a Member who
is a Highly Compensated Employee shall be subject to the actual
contributions percentage limitations of Section 401(m)(2) of the
Code and may be reduced to the extent necessary, as determined by
the Committee, to comply with the contributions percentage
requirements of Section 401(m)(2) of the Code with respect to any
Plan Year including the prohibition on the multiple use of the
alternative limitation under Treasury Regulation Section
1.401(m)-2. Moreover, the Committee may take any action
permitted by Section 401(m)(6) of the Code and the regulations
thereunder to comply with the contributions percentage
requirements of Section 401(m)(2) of the Code and may take any
corrective action permitted by Treasury Regulation Section
1.401(m)-2(c).
4.3 Treatment of Forfeitures. Any amounts forfeited
in accordance with Sections 6.4 (Forfeitures) and 13.6 (Unclaimed
Amounts) shall be applied as a credit towards the amount of
Employer Contributions otherwise required under Section 4.1.
However, if pursuant to Section 4.1, Employer Contributions are
temporarily discontinued, for Plan Years following the Plan Year
in which such temporary discontinuance occurs, any such forfeited
amounts in excess of the amounts required to restore forfeited
amounts to the Employer Contribution Accounts of Members who are
reemployed in accordance with Section 6.4 shall be allocated as
of the last day of the Plan Year to Members' Employer
Contribution Accounts in an amount equal to the amount of such
forfeited amounts available for allocation multiplied by a
fraction the numerator of which is the Members' Compensation
Deferral Contributions for the Plan Year not in excess of six
percent of such Member's Compensation and the denominator of
which is the aggregate of all Members' Compensation Deferral
Contributions not in excess of six percent of all such Members'
Compensation.
4.4 Transfer of Contributions to Trustee. Employer
Contributions under this Article IV with respect to each payroll
period shall be paid to the Trustee as soon as practicable after
the close of the month in which such payroll period ends (but in
no event later than 15 business days after the last day of such
month) and such Employer Contributions (inclusive of the credit
for forfeitures as provided in Section 4.3) shall be credited as
of the last day of such month to each Member's Employer
Contribution Account.
4.5 Contributions After Certain Leave of Absences.
Notwithstanding any Plan provision to the contrary, a Member who
returns to service with an Employer on or after December 12, 1994
under the Uniformed Services Employment and Reemployment Rights
Act of 1994 following a Leave of Absence shall be eligible to
make additional Compensation Deferral Contributions with respect
to the Plan Years (or portions thereof) comprehended by such
Leave of Absence, provided that, such Contributions are made
during a period which begins on the Member's reemployment date
and ends on the date which is the earlier of (a) five years
therefrom or (b) the date after reemployment which is equal to
three times the length of such Leave of Absence. The maximum
amount of such Compensation Deferral Contributions shall not
exceed the amount he would have been permitted to make under the
limitations imposed under this Article IV had he remained
employed during such Leave of Absence. Such Member shall also be
entitled to receive and have credited to his Account matching
Employer Contributions for such Leave of Absence to the extent he
actually makes Compensation Deferral Contributions upon which
allocation of such matching Employer Contributions are
contingent. For purposes of computing the amount of Compensation
Deferral Contributions and matching Employer Contributions, a
Member's Compensation during such Leave of Absence shall be
deemed to be equal to the rate of Compensation he would have
earned during such Leave of Absence or, if this is uncertain, his
average Compensation during the 12-month period immediately
preceding such Leave of Absence (or, if shorter, the portion of
the year preceding such Leave of Absence). With respect to any
Contributions made under this Section, (i) no earnings shall be
credited for any period before such Contributions are actually
made and (ii) such Contributions shall not be subject to any
otherwise applicable limitation under Section 402(g), 401(a),
401(k), 401(m), 404(a) or 415 of the Code for the Plan Year(s)
such Contributions are actually made.
4.6 Limitation of Annual Additions.
(a) Notwithstanding anything herein to the contrary,
in no event shall the Annual Additions (as hereinafter defined)
with respect to any Member in any Plan Year exceed the Maximum
Annual Addition. A Member's "Maximum Annual Additions" means the
lesser of (i) 25% of the Member's compensation within the meaning
of Section 415(c)(3) of the Code or (ii) $30,000.
(b) For purposes of this Section 4.5 the term "Annual
Additions" means the sum for any Plan year of:
(i) Compensation Deferral Contributions made in
accordance with Section 3.1 (Compensation Deferral
Contributions).
(ii) Employer Contributions including forfeitures
as applied in accordance with Section 4.1 (Amount of
Employer Contributions) and Section 4.3 (Treatment of
Forfeitures).
(iii) The amount of annual additions (as defined in
Section 415(c)(2) of the Code) under other plans, if any, of
the Employer or Affiliate including (a) qualified defined
contribution plans, (b) qualified defined benefit plans with
individual medical benefit accounts (as defined in Section
415(l) of the Code) and (c) welfare benefit plans with
post-retirement medical benefits for key employees (as defined in
Section 419A(d)(2) of the Code).
(c) If the Member's Annual Additions exceed the
Maximum Annual Additions limitations in accordance with this
Section 4.6, such amounts shall be handled as provided in
Section 4.6(f).
(d) Combined Fraction.
(1) Notwithstanding the foregoing, if a Member is
a participant in any qualified defined benefit plan
maintained by an Employer or an Affiliate, the sum of the
"Defined Benefit Plan Fraction" (as defined below) and the
"Defined Contribution Plan Fraction" (as defined below) for
such Member shall not exceed 1.0 (called "Combined
Fraction"). If for any Plan Year the Combined Fraction of a
Member exceeds 1.0 after application of provisions for
limitation of benefits under all such qualified defined
benefit plans, the Maximum Annual Additions of such Member
shall be reduced as provided in Section 4.5(c) to the extent
necessary to reduce the Combined Fraction of such Member
to 1.0.
(2) The "Defined Benefit Plan Fraction"
applicable to a Member for any Plan Year is a fraction, the
numerator of which is the sum of the Projected Annual
Benefit of the Member under all of the qualified defined
benefit plans maintained by the Employer or an Affiliate
(whether or not terminated) in which such Member
participates (determined as of the close of the Plan Year)
and the denominator of which is the lesser of (i) the
product of 1.25 multiplied by the maximum dollar limitation
on a Member's Projected Annual Benefit under Sections 415(b)
and (d) of the Code, or (ii) 140 percent of the Member's
highest covered compensation, including any adjustments
under Section 415(b) of the Code. Notwithstanding the
above, if the member was a participant as of the first day
of the first Plan Year after December 31, 1986, in one or
more defined benefit plans maintained by the Employer or an
Affiliate which were in existence on May 6, 1986, the
denominator of the fraction will not be less than 125
percent of the sum of the annual benefits under such plans
which the Member had accrued as of the close of the last
limitation year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the
plan after May 5, 1986. The preceding sentence applies only
if the defined benefits plans individually and in the
aggregate satisfied the requirements of Section 415 of the
Code for all limitation years beginning before January 1,
1987.
(3) The "Defined Contribution Plan Fraction"
applicable to a Member for any Plan Year is a fraction, the
numerator of which is the sum of the annual additions to the
Member's Account under all the defined contribution plans
(whether or not terminated) maintained by the Employer or an
Affiliate for the current and all prior Plan Years
(including the annual additions attributable to a Member's
nondeductible employee contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer
or an Affiliate, and the annual additions attributable to
all welfare benefit funds, as defined in Section 419(e) of
the Code, and individual medical accounts, as defined in
Section 415(1)(2) of the Code, maintained by the Employer or
an Affiliate), and the denominator of which is the sum of
the maximum aggregate amounts for the current and all prior
Plan Years of Service with the Employer or an Affiliate
(regardless of whether a defined contribution plan was
maintained by the Employer). The maximum aggregate amount
in any limitation year is the lesser of 125 percent of the
dollar limitation determined under Sections 415(b) and (d)
of the Code in effect under Section 415(c)(1)(A) of the Code
or 35 percent of the Member's Compensation for such year.
(e) Definitions.
(1) "Highest Average Compensation" means the
average of a Member's high three consecutive Plan Years
(determined as of the close of the Plan Year) of employment
with the Employer (or the actual number of years of
employment for those Members) who are employed for less than
three consecutive years with the Employer).
(2) "Projected Annual Benefit" means the annual
benefit a Member would receive from employer contributions
under a defined benefit plan, adjusted, in the case of any
benefit payable in a form other than a single life annuity
or a qualified joint and survivor annuity, to the actuarial
equivalent of a single life annuity, assuming (i) the Member
continues employment until reaching the plan's normal
retirement age (or the Member's current age, if later),
(ii) compensation remains unchanged and (iii) all other
relevant factors used to determine benefits under the plan
remain constant in the future.
(f) In the event that, notwithstanding the foregoing
provisions of this Section 4.6, the limitations with respect to
Annual Additions prescribed hereunder are exceeded with respect
to any Member and such excess arises as a consequence of
reasonable error in estimating a Member's compensation or such
other circumstances as the Secretary of Treasury shall permit,
the Employer Contribution portion including Compensation Deferral
Contributions, if any, of such excess shall be held in a Suspense
Account and, if such Member remains a Member, shall be used to
reduce Employer Contributions for such Member for the succeeding
Plan Years, and, if such Member ceases participating in the Plan,
shall be used to reduce Employer Contributions for all Members in
the Plan Year of cessation and succeeding Plan Years, as
necessary.
(g) For purposes of this Section 4.6, the standard of
control for determining if a company is an Affiliate under
Section 414(b) and 414(c) of the Internal Revenue Code shall be
deemed to be "more than 50%" rather than "at least 30%."
(h) For all Plan Years beginning on and after
January 1, 2000, Sections 4.6(d), (e), (f) and (g) shall no
longer apply and shall be of no force or effect.
ARTICLE V
Accounts
5.1 Maintenance of Accounts. For each Member the
Committee shall, where applicable, maintain a separate
Compensation Deferral Contributions Account (with a Basic
Contributions Subaccount and a Supplemental Contributions
Subaccount), an Employer Contribution Account and a Rollover
Contribution Account. For Employee Contributions made prior to
January 1, 1989 to the Prior Plan which were not Compensation
Deferral Contribution Accounts, the Committee shall continue to
maintain a separate Employee Contributions Account consisting of
the Basic Employee Contributions Subaccount and the Supplemental
Employee Contributions Subaccount under the Prior Plan.
5.2 Valuations. As of each Valuation Date, the
Committee shall cause to be adjusted the Employee Contributions
Account, if any, (including each subaccount thereunder), the
Compensation Deferral Contributions Account (including each
subaccount thereunder) the Employer Contribution Account and the
Rollover Contribution Account for each Member to reflect his
share of contributions (including for this purpose contributions
made after such Valuation Date but credited as of such Valuation
Date), amounts of principal and interest paid to the Plan with
respect to a loan made to such Member pursuant to Section 8.5,
withdrawals, distributions, forfeitures, income, expenses payable
from the Trust Fund and any increase or decrease in the value of
Trust Fund assets since the preceding Valuation Date. Each
separate account maintained for each loan made to a Member
pursuant to Section 8.5 shall be valued as of each Valuation Date
by adjusting the balance of the loan for the payment principal
thereunder.
ARTICLE VI
Vesting of Accounts
6.1 Employer Contribution Account. A Member's entire
Employer Contribution Account shall be vested when the Member has
completed at least five years of Service. If a Member separates
from Service before completing five years of Service, such Member
shall be deemed to have received an immediate constructive cash-out
distribution of his entire nonvested Employer Contribution
Account at separation equal to zero dollars.
6.2 Other Accounts. Interests in Rollover
Contribution Accounts, Employee Contributions Accounts and
Compensation Deferral Contributions Accounts shall be fully
vested at all times.
6.3 Earlier Vesting in Employer Contribution Account.
Notwithstanding the foregoing, a Member's interest in his
Employer Contribution Account shall be fully vested (i) on the
date of termination of employment by reason of death, Total and
Permanent Disability, or Specific Involuntary Termination (ii)
when and if this Plan shall at any time be terminated for any
reason, (iii) upon the complete discontinuance of contributions
by the Employer hereunder, (iv) upon partial termination of this
Plan if such Member is a member affected by such partial
termination or (v) on the date a Member reaches Retirement Age.
6.4 Forfeitures. A Member's Employer Contribution
Account which is not vested in accordance with this Article VI at
the time of Member's separation from Service shall be forfeited
as of the last day of the Plan Year in which the Member has a
separation from Service. However, if a Member who has separated
from Service is reemployed before the end of a period of five
consecutive Plan Years beginning with the Plan Year in which the
Member has a separation from Service and during which the Member
is not an Employee on the last day of each Plan Year, any
forfeited amounts shall be restored to the Member's Employer
Contribution Account without the necessity of the re-employed
Member to repay the previous distribution. For purposes of the
preceding sentence, any Plan Year in which a Member is absent
from work on the last day of the Plan Year by reason of a
Parental Leave shall not be counted as one of the Plan Years in
such a period of five consecutive Plan Years and the Plan Year
immediately following a Plan Year in which such Member is absent
from work on the last day of the Plan Year by reason of Parental
Leave shall be deemed to be consecutive.
Amounts required to be restored to the Employer Contri-
bution Accounts of a Member shall be reinstated, to the extent
not contributed by an Employer, out of amounts forfeited under
this Section 6.4 or Section 13.6 (Unclaimed Amounts) for the Plan
Year.
A Member who separates from Service shall have his
prior Service restored for purposes of vesting when he is
reemployed as an Employee if (a) he was vested when he separated
from Service or (b) he was not vested when he separated from
Service, but is reemployed as an Employee before the greater of
(i) a period of five consecutive 12-month periods starting with
his separation from Service or (ii) the period of Service prior
to his separation.
ARTICLE VII
Investment of Accounts
7.1 Investment of Accounts.
Upon becoming a Member, the Member shall direct that
Compensation Deferral Contributions and Rollover Contributions be
invested in any one or more of the Investment Funds approved by
the Committee in increments of at least 25%. The Committee
reserves the right to add, delete or replace any Investment Fund
under the Plan.
The Employer, Committee or Trustee doesn't guarantee
the rate of return on any of the Investment Funds. The actual
rates of return will vary with the investment performance of the
Investment Fund(s) chosen by Members.
7.2 Redirection of Future Contributions. A Member's
investment direction under Section 7.1 may be changed once each
calendar quarter. To make an investment direction change, the
Member must give written notice to the Committee on the
Appropriate Form on or before, but not later than, the last
business day of the month and the change will be effective as of
the first day of the month following the timely submission of the
Appropriate Form. Such a change in direction shall be as to
future Compensation Deferral Contributions and future Employer
Contributions only and shall not be effective as to amounts
previously contributed or invested. The Appropriate Form, once
submitted to the Committee, may not be revoked. The Committee
reserves the right to allow redirection of future contributions
by use of an interactive telephone system.
7.3 Reinvestment of Prior Contributions.
(a) A Member may, by giving written notice to the
Committee on the Appropriate Form, on or before, but not later
than, the last business day of a month, direct that 25%, 50%, 75%
or 100% of the total value in any Investment Fund of the Member's
Rollover Contribution Account, if any, Employee Contributions
Account and Employer Contributions Account, if any, Compensation
Deferral Contributions Account be transferred from such
Investment Fund to any other Investment Fund (in increments of at
least 25%) once each calendar quarter. All of a Member's
Accounts shall be treated as one for reinvestment purposes. The
value of any Account or portion thereof to be reinvested shall be
determined on the Valuation Date of the month of transfer which
shall be the month in which a timely submission of the
Appropriate Form is made. The Appropriate Form, once submitted
to the Committee, may not be revoked. The Committee reserves the
right to all reinvestment of prior contributions by use of an
interactive telephone system.
(b) The Committee may, in its sole discretion,
impose, at any time or from time to time, such restrictions on
the transfers of monies from one Investment Fund to another as it
deems necessary or appropriate.
7.4 Statements of Accounts. Each Member shall be fur-
nished a quarterly statement of accounts. A like statement shall
be furnished to a Member upon any distribution being made under
the Plan.
7.5 Crediting of Contribution Accounts. Interests in
each of the Investment Funds shall be credited to each Member's
Accounts as units of value determined separately for each
Investment Fund, as follows:
(a) the initial value of a unit in each Investment
Fund shall be one dollar,
(b) the unit of value of each Investment Fund shall be
redetermined on each Valuation Date by dividing the then
fair market value of all of the assets of such Investment
Fund by the number of units therein then outstanding.
Amounts held as a result of forfeiture shall not be included
in the value of the Smith Corona Corporation Common Stock
Fund in determining the unit of value; and
(c) current Compensation Deferral Contributions,
Employer Contributions and Rollover Contributions will be
credited to the Member's Accounts as units of value, the
number of which is determined by dividing the dollar amount
of the contribution by the then current unit of value.
If a Suspense Account credited in accordance with
Section 4.6(f) is in existence on a Valuation Date, the number of
units of value in the Suspense Account shall be adjusted as of
each Valuation Date so that such an account does not participate
in the Trust's investment gains or losses. To the extent a
Member's Compensation Deferral Contributions Account is invested
pursuant to Section 8.5 in a loan to the Member, the Member's
Accounts shall be credited and charged directly with income,
gains, losses and expenses attributable to such loan as of each
Valuation Date and the value of such Account will be adjusted
through the date of a distribution to reflect the value of such
direct investments on the distribution date. The Member's loan
principal and interest payments (i) shall be credited to the
Member's Compensation Deferral Contributions Account or Employee
Contributions Account, as appropriate, as units of value, the
number of which is determined as of the Valuation Date coinciding
with or next following the date of such payment by dividing the
dollar amount of the payment by the then current unit of value
and (ii) shall be invested in accordance with the Member's
investment directions for future Compensation Deferral Contri-
butions pursuant to Section 7.2.
7.6 Correction of Error. In the event of an error in
the adjustment of a Member's Account, the Committee, in its sole
discretion, may correct such error by either crediting or
charging the adjustment required to make such correction to or
against forfeitures for the Plan Year or to or against income as
an expense of the Trust for the Plan Year in which the correction
is made, or if the Employer contributes an amount to correct any
such error, from such amount. Except as provided in this
Section, the Accounts of other Members shall not be readjusted on
account of such error.
ARTICLE VIII
Withdrawals and Loans During Employment
8.1 Withdrawal Options.
(a) Age 59-1/2. After a Member's attainment of age
59-1/2, a Member may make, in any twelve-month period, one
withdrawal of all or any portion of the value of the Member's
Compensation Deferral Contributions Account, Employee
Contributions Account, if any, Rollover Contribution Account, if
any, and the vested portion of his Employer Contribution Account
by filing the Appropriate Form with the Committee. Such a
withdrawal can be made for any reason. Unless waived by the
Committee, withdrawal by a Member who is married must be
consented to in writing by the Member's spouse.
(b) Hardships. In the event of Hardship (as defined
in Section 8.2), a Member may, by filing the Appropriate Form
with the Committee, elect to withdraw all or such portion of the
Member's Rollover Contribution Account, if any, as is needed on
account of such Hardship. Also, in the event of Hardship, a
Member who (i) has not yet attained age 59-1/2, (ii) has
withdrawn all funds to the maximum extent permitted under the
Plan, and (iii) is not eligible to make a loan under Section 8.5
may, by filing the Appropriate Form with the Committee, elect to
withdraw all or such portion of the Member's Compensation
Deferral Contributions Account (excluding earnings and
appreciation after December 31, 1988 attributable thereto) as is
needed on account of such Hardships. Unless waived by the
Committee, a hardship withdrawal by a Member who is married must
be consented to in writing by the Member's spouse.
(c) Employee Contributions Account. A Member may
withdraw, once in any twelve-month period, all or any portion of
the Member's Employee Contributions Account, if any, (excluding
earnings or appreciation attributable thereto) by filing the
Appropriate Form with the Committee. Such a withdrawal can be
made for any reason. Unless waived by the Committee, withdrawal
from a Member's Employee Contributions Account by a Member who is
married must be consented to in writing by the Member's spouse.
(d) No Other Withdrawals. Prior to a Member's
employment termination, no other withdrawals from the Member's
Account may be made.
8.2 Hardship Withdrawals.
(a) Frequency. Hardship withdrawals for any reason
other than payment of tuition and related educational fees may be
made only once in any twelve-month period.
(b) Verification of Need. Each request for a hardship
withdrawal must be accompanied by a statement signed by the
Member attesting that the financial need cannot be relieved,
(i) Through reimbursement or compensation by
insurance or otherwise,
(ii) By liquidation of the Member's assets
(including those assets of the Member's spouse and minor
children that are reasonably available to the Member) to the
extent such liquidation will not itself cause immediate and
heavy financial need,
(iii) By ceasing Compensation Deferral
Contributions under the Plan, or
(iv) By other distribution or nontaxable (at the
time of the loan) loans from any plan maintained by the
Employer or any other employer, or by borrowing from
commercial sources on reasonable commercial terms.
In the absence of contrary knowledge, the Committee
shall be entitled to rely on the Member's statement of need
without inquiry into the Member's financial circumstances or the
veracity of such statement.
(c) Determination of Hardship.
A withdrawal will be deemed to be a hardship
withdrawal if made on account of:
(i) Medical expenses incurred by the Member, the
Member's spouse, or any dependent of the Member,
(ii) Purchase (excluding mortgage payments) of a
principal residence for the Member,
(iii) Payment of tuition and related educational
fees for the next 12 months of post-secondary education for
the Member, the Member's spouse or any dependent of the
Member.
(iv) The need to prevent the eviction of the
Member from the Member's principal residence or foreclosure
on the mortgage of the Member's principal residence,
(v) Such other immediate and heavy financial need
as the Commissioner of Internal Revenue may from time to
time publish by revenue rulings, notices and other documents
of general applicability, or
(vi) Any other immediate and heavy financial need
as determined on the basis of all relevant facts and
circumstances by the Committee in an objective and
nondiscriminatory manner in accordance with the requirements
of the Code and the applicable regulations and in accordance
with the following standards and principles:
(A) the need shall be due to an extra-
ordinary emergency,
(B) the need shall be heavy,
(C) the need shall be immediate,
(D) the need shall be for reasons of
hardship as commonly understood such as financial
expenses and not for entertainment or pleasure, and
(E) the need shall not fail to qualify as
immediate and heavy merely because such need was
reasonably foreseeable or voluntarily incurred.
8.3 Values. All withdrawals under Section 8.1 shall
be based on the values of Accounts as of the Valuation Date
coinciding with or next following the filing of the Appropriate
Form or the date of approval of the application by the Committee,
if later. Any withdrawal from an Account (or Subaccount thereof)
under Section 8.1 shall be charged proportionately against each
Investment Fund described in Article VII (Investment of Accounts)
in which such Account (or Subaccount thereof) is invested.
8.4 Payment of Withdrawals. Any amount withdrawn
under Section 8.1 shall be paid to a Member in a lump sum in
cash, as soon as practicable after the Valuation Date as of which
the withdrawal election is effective except that any withdrawal
other than for Hardship which involves Employer Securities shall
include whole numbers of Employer Securities unless the Member
requests otherwise and the Committee approves such request.
8.5 Loans. A Member may borrow for any purpose either
from his Compensation Deferral Contributions Account or from his
Employee Contributions Account (but not both and loans from
different accounts may not be outstanding at the same time) once
in any three-year period an amount which shall be not less than
$1,000 nor more than 50% of the account in question (but not in
excess of $50,000).
For the purposes of the foregoing, the highest
outstanding balance of an existing loan (from the Plan and any
other qualified plans of the Employer or Affiliate) during the
one year period ending on the day before the date of the loan
shall be aggregated with any additional funds being borrowed in
order to calculate a Member's borrowing limit. Transactions for
additional funds shall be booked and documented at the then
current interest rates as a new loan in the aggregate sum of the
balance of the old loan and the newly borrowed money and the old
loan shall be canceled.
All loans shall be made pursuant to such other
procedures and terms as shall be adopted by the Committee,
subject to the following:
(a) A loan shall be repayable within five years from
the date of borrowing upon such terms as determined by the
Committee; provided, however, that if the proceeds of such
loan were applied toward the acquisition of any dwelling
unit used as a principal residence of the Member, the term
of such loan may exceed five years as determined by the
Committee.
The Committee may in its absolute discretion grant such
loan in accordance with such uniform and nondiscriminatory
rules as it may from time to time establish. Any such loan
shall be made at one percent above a then prevailing prime
rate of interest charged by a commerical bank selected by
the Committee and on such terms of repayment (in level
amortized payments not less frequent than monthly) and
subject to such rules and restrictions as the Committee
shall determine, provided that any such loans shall be
available to all Members on a reasonably equivalent basis.
The Committee may require repayment of a loan by payroll
deduction and repayments will be invested in accordance with
the investment direction in effect for such Member.
All Member loans shall be secured by 50% of the balance
of the account from which the loan is made and shall be
charged proportionately against the Investment Fund in which
the funds borrowed are invested. To the extent a loan is
unpaid, it shall be deducted from the amount payable to such
Member or such Member's beneficiary at the time of
distribution of the entire Account. A Member who terminates
employment with an outstanding loan who elects not to have
an immediate distribution under Section 9.2, may continue to
repay the loan directly over the remaining loan term. Any
loan made to a married Member under this Section 8.5 shall
be made by a check payable jointly to the Member and the
Member's spouse unless the spouse has consented in writing
in accordance with Section 9.9 (Spousal Consent) to the
payment of the proceeds of such loan to the Member alone.
If a married Member who has elected an annuity form of
distribution under Section 9.3 applies for a loan under this
Section 8.5, the Member's spouse must consent in writing to
the loan in accordance with Section 9.9;
(b) In the event that a Member fails to repay a loan
according to its terms and foreclosure occurs, the Plan may
foreclose on the portion of the Member's Account for which a
distributable event has occurred. In the event of
foreclosure, a distributable event shall be deemed to occur
immediately following the next Valuation Date for any
portion of a Member's Compensation Deferral Contributions
Account or Employee Contributions Account, if any, with
respect to which the Member or the Member's Beneficiary
would be permitted in accordance with Sections 8.1 or 9.1 to
elect an immediate distribution;
(c) The note representing the loan (and other loans to
the same Member) will be segregated in a separate fund held
by the Trustee as a separate earmarked investment solely for
the Account of the Member. A Member's payments to the Trust
of principal and interest on a note held in such a
segregated fund shall be invested by the Trustee as elected
by the Member in accordance with the Member's investment
directions for future Compensation Deferral Contributions in
accordance with Section 7.2, as soon as reasonably
practical.
(d) Loan applications may be obtained from the
Committee at any time by any Member. Completed applications
may be submitted to the Committee or its designee at any
time.
8.6 Loan Proceeds Value. All loans under Section 8.5
shall be based on the values of Accounts as of the Valuation Date
coinciding with or next following the date of approval of the
loan application by the Committee. The loan proceeds from an
Account (or Subaccount thereof) under Section 8.5 shall be
charged proportionately against each Investment Fund described in
Article VII (Investment of Accounts) in which such Account (or
Subaccount thereof) is invested.
ARTICLE IX
Distribution
9.1 Amount of Distribution. The Member or the
Member's Beneficiary, as the case may be, shall be entitled to
receive a distribution of the vested value of the Member's
Account upon:
(a) the Member's termination of employment, death or
Total and Permanent Disability, or
(b) termination of the Plan without establishment of a
successor plan, or
(c) the disposition of substantially all of the assets
of the Employer to an acquiring corporation which continues
the employment of the Member.
(d) the disposition by the Employer of its interest in
subsidiary participating in the Plan to an acquiring
corporation which continues the employment of the Member.
The vested value of the Member's Account shall be
determined in accordance with Article VI (Vesting of Accounts) as
of the Valuation Date coinciding with or next following such
event except that, in the case of the Member's Total and
Permanent Disability, the vested value of the Member's Account
shall be determined as of the Valuation Date coinciding with or
next following the date the Committee determines that the Member
has a Total and Permanent Disability. If a Member dies prior to
commencement of the distribution of the vested value of his
Account, distribution shall be paid to the Member's Beneficiary
(a) if payment is to be made in lump sum as a normal form of
distribution under Section 9.2, the entire distribution must be
paid within five years after the Member's death or (b) if payment
is to be made in an alternative form of distribution under
Section 9.3, the installments or annuity must commence within one
year of the Member's death if the Beneficiary is other than the
Member's surviving spouse or no earlier than the Member's
Required Beginning Date if the Beneficiary is the Member's
surviving spouse and be payable over a period not to exceed the
Beneficiary's life or a period not in excess of the Beneficiary's
life expectancy. If a Member dies after the distribution of his
benefits has commenced, the remaining portion of his distribution
will be distributed to the Member's Beneficiary at least as
rapidly as under the method of distribution being used at the
date of Member's death.
9.2 Normal Form of Distribution. Unless otherwise elected
in accordance with Section 9.3 and subject to Section 9.7,
distributions shall be made by the Trustee as soon as practicable
after the Valuation Date coinciding with or next following the event
giving rise to the distribution in a single lump sum in cash except
that (a) unless the Member elects otherwise Employer Securities held
in the Member's Accounts shall be distributed in kind and (b) in the
discretion of the Committee, a note with respect to a Member's loan
from such Member's Compensation Deferral Account or Employee
Contributions Account may be distributed in kind. If the amount
distributable from the Member's Accounts is in excess of $3,500, the
Member's consent to such immediate distribution shall be required, but
a distribution of up to $3,500 shall not require such consent. In the
absence of such consent where required, the amount otherwise
distributable to the Member shall remain in the Member's Accounts
until the Valuation Date coinciding with or next following the date on
which the Member reaches age 70 or his death, if earlier, when,
without the necessity of any consent (other than spousal consent under
Section 9.9, if applicable), his entire interest in the Plan shall be
distributed. A Member who has terminated employment and declined to
consent to an immediate distribution may, prior to attaining age 70,
elect to receive the distribution of his entire interest in the Plan
as of the Valuation Date immediately following the filing of such
election. In addition, the Committee may, in its discretion, approve
a request filed by such a Member seeking a partial distribution from
his Accounts provided the Member is also receiving, or has received, a
retirement benefit from a defined benefit qualified plan sponsored by
his Employer. A partial distribution request (1) must be for a
minimum of $1,000, (2) cannot be approved if the Member's balance in
his Accounts will fall below $3,500 as a result of such partial
distribution and (3) may not be filed more than once in any calendar
year. While a Member's Accounts remain in the Plan after his
termination of employment, such Member shall have the right to
transfer the investment of his Account pursuant to the terms of
Sections 7.3 and 7.4 of the Plan. However, such a Member may not
borrow from his Accounts under Section 8.5 of the Plan.
9.3 Alternate Form of Distribution. A Member (or a
Member's Beneficiary in the event of the Member's death) may request
to have the value of the Member's Accounts distributed in a manner
other than in accordance with Section 9.2.
Such alternate form of payment shall be limited to the form
described in Section 9.8 (Annuities) or periodic installments
commencing as soon as practicable after the Member's death or at such
other time as the Member or the Member's Beneficiary, as the case may
be, shall elect in accordance with the Plan over a fixed period not to
exceed the lesser of ten years or the life expectancy of the Member or
Beneficiary as applicable, at the time payments commence.
9.4 Identity of Payee. The determination of the Committee
as to the identity of the proper payee of any benefit under the Plan
and the amount of such benefit properly payable shall be conclusive,
and payment in accordance with such determination shall constitute a
complete discharge of all obligations on account of such benefit.
9.5 Non-alienation of Benefits.
(a) No benefit payable at any time under this Plan shall be
subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment, or other legal processes, or encumbrance of any
kind. Any attempt to alienate, sell, transfer, assign, pledge or
otherwise encumber any such benefits, whether currently or thereafter
payable, shall be void. No benefit, nor any fund which may be
established for the payment of such benefits, shall, in any manner, be
liable for or subject to the debts or liabilities including bankruptcy
of any person entitled to such benefits. If any person shall attempt
to, or shall alienate, sell, transfer, assign, pledge or otherwise
encumber benefits to which such person may become entitled under this
Plan.
(b) Notwithstanding Section 9.5(a), the Trustee
(i) shall comply with an order entered on or after
January 1, 1985, determined by the Committee to be a Qualified
Domestic Relations Order as provided in Section 9.6,
(ii) shall comply with a domestic relations order
entered before January 1, 1985, if benefits are already
being paid under such order, and
(iii) may treat an order entered before January 1,
1985, as a Qualified Domestic Relations Order even if it
does not meet the requirements of Section 9.6.
9.6 Qualified Domestic Relations Order.
(a) "Qualified Domestic Relations Order" means any
judgment, decree, or order (including approval of a property
settlement agreement):
(i) which is made pursuant to a state domestic
relations law (including a community property law),
(ii) which relates to the provision of child
support, alimony payments, or marital property rights to a
spouse, former spouse, child, or other dependent of a
Member,
(iii) which creates or recognizes the existence of
an alternate payee's right to receive all or a portion of
the Member's Accounts under the Plan, and
(iv) with respect to which the requirements of
paragraphs (b) and (c) are met.
(b) A domestic relations order can be a Qualified
Domestic Relations Order only if such order clearly specifies:
(i) the name and the last known mailing address,
if any, of the Member and the name and mailing address or
each alternate payee covered by the order,
(ii) the amount or percentage of the Member's
Accounts to be paid by the Plan to each such alternate
payee, or the manner in which such amount or percentage is
to be determined,
(iii) the number of payments or period to which
such order applies, and
(iv) each Plan to which such order applies.
(c) A domestic relations order can be a Qualified Do-
mestic Relations Order only if such order does not:
(i) require the Plan to provide any type or form
of benefit, or any option not otherwise provided under the
Plan,
(ii) require the Plan to provide increased
benefits (determined on the basis of actuarial value), or
(iii) require the payment of benefits to an
alternate payee which are required to be paid to another
alternate payee under another order previously determined to
be a Qualified Domestic Relations Order.
(d) In the case of any payment before a Member has had
a termination of employment, a domestic relations order shall not
be treated as failing to meet the requirements of Section
9.6(b)(i) solely because such order requires that payment of
benefits be made to an alternate payee:
(i) on the earlier of (a) the date on which the
Member is entitled to a distribution under the Plan, (b) the
later of (I) the date the Member attains age 50 or (II) the
earliest date on which the Member could begin receiving
benefits under the Plan if the Member separated from Service
or (c) upon application of the alternate payee within a
specified period of time after entry of the domestic
relations order as provided in such order,
(ii) as if the Member had retired on the date on
which such payment is to begin under such order (but taking
into account only the present value of the benefits actually
accrued and not taking into account the present value of any
Employer subsidy for early retirement), and
(iii) in any form in which such benefits may be
paid under the Plan to the Member (other than in the form of
a Qualified Joint and Survivor Annuity with respect to the
alternate payee and his or her subsequent spouse).
(e) To the extent provided in any Qualified Domestic
Relations Order, the former spouse of a Member shall be treated
as the surviving spouse of such Member for purposes of being the
Beneficiary of 100% of the Member's vested Account and providing
for a valid consent in accordance with Section 9.9.
9.7 Commencement of Benefits. Unless a Member elects
otherwise, the payment of benefits under the Plan shall begin no
later than the 60th day after the latest of the close of the Plan
Year in which:
(a) the Member attains his Retirement Age;
(b) the 10th anniversary of the date the Member's
participation in the Plan occurs;
(c) the Member's employment with the Employer or an
Affiliate is terminated;
provided that no benefits shall be distributed unless the Member
has filed a claim for benefits until the Valuation Date
immediately proceeding the Required Beginning Date and further
provided that all benefits shall be distributed to the Member no
later than the Member's Required Beginning Date.
9.8 Annuities. Subject to subsections (a) and (b)
hereof, if the form of distribution is to be an annuity contract,
it may be in such form and with such provisions as the Member or
the Member's Beneficiary, as the case may be, may elect which are
available for purchase from an insurance company including, but
not limited to, a full cash refund life annuity, an annuity with
income for life or an annuity with income for a period certain
(payable at least annually). Such distribution is to be provided
through the purchase from an insurance company and distribution
from the Trust Fund of a nontransferable annuity contract;
provided the benefit under such annuity contract cannot be paid
to anyone other than the Member prior to the Member's death, and
if a joint and survivor annuity is provided, unless such joint
annuitant shall be the Member's spouse, the actuarial value of
the Member's benefits, as of the date benefit payments commence,
shall be more than 50 percent (50%) of the Member's vested
Accounts.
(a) Limitations on Participant Elections.
Notwithstanding any elections of an annuity form of payment made
by a Member, benefit payments shall be made over a period not in
excess of the life of the Member or the lives of the Member and
the Member's Beneficiary or the Member's life expectancy or the
joint and last survivor life expectancy of the Member and the
Member's Beneficiary and otherwise meet the requirements of
Section 401(a)(9) of the Code.
(b) Qualified Joint and Survivor Annuities. Not-
withstanding the foregoing provisions of this Section 9.8, in the
case of a Member who has elected to receive an annuity form of
benefit, distribution shall be in the form of a Qualified Joint
and Survivor Annuity, unless the Member with the Member's
spouse's consent as provided in Section 9.9 elects to receive a
different form of annuity. The term "Qualified Joint and
Survivor Annuity" means an annuity payable to the Member for life
and, if the Member's spouse survives the Member, a survivor an-
nuity payable to the spouse for life in an amount equal to 50
percent (50%) of the annuity payable to the Member.
If the Member who has elected to receive an annuity
form of benefit is not married, subject to Section 9.6 (Qualified
Domestic Relations Order), the annuity shall be paid in the form
of a single life annuity unless the Member waives the single life
annuity. The amount of the benefits payable under a Qualified
Joint and Survivor Annuity shall be the amount which can be
purchased from an insurance company with the Member's Accounts.
(c) A Member who elects to receive benefits in the
form of a life annuity and to whom benefits would be payable in
the form of a Qualified Joint and Survivor Annuity pursuant to
this Section 9.8 shall have the right to waive a Qualified Joint
and Survivor Annuity (such waiver shall be consented to by the
Member's spouse in writing in accordance with Section 9.9) by
delivering written notice to the Committee, at any time within
the 90-day period prior to the annuity starting date, to receive
a different form of annuity. If a Member elects to receive bene-
fits in the form of an annuity, the Committee shall within a
reasonable period of time (no less than 30 days and no more than
90 days before the annuity starting date) provide the Member, by
personal delivery or first class mail, with a written explanation
of:
(1) the terms and conditions of the Qualified
Joint and Survivor Annuity;
(2) the Member's right to make, and the effect
of, an election to waive the Qualified Joint and Survivor
Annuity;
(3) the rights of the Member's spouse to consent
to the Member's election to waive the Qualified Joint and
Survivor Annuity and the effect of consenting to such
waiver; and
(4) the Member's right to make, and the effect
of, a revocation of an election to waive the Qualified Joint
and Survivor Annuity.
Any election made by a Member pursuant to Sections
9.8(b) and 9.8(c) may be revoked by such Member by delivering
written notice to the Committee at any time prior to the Member's
annuity starting date and, once revoked, may be made again at any
time by delivering written notice to the Committee prior to the
Member's annuity starting date.
9.9 Spousal Consent. A valid spousal consent to the
Member's naming of a Beneficiary other than the Member's spouse
or to the Member's waiver of a Qualified Joint and Survivor
Annuity as defined in Section 9.8(b) shall be designated:
(a) in a writing acknowledging the effect of the
consent;
(b) witnessed by a notary public or Plan
representative; and
(c) effective only for the spouse who exercises the
consent;
provided that, notwithstanding the provisions of this Article IX,
the consent of a Member's spouse shall not be required if it is
established to the satisfaction of the Plan Administrator that
such consent may not be obtained because there is no spouse,
because the spouse cannot be located, there is a legal
separation, the Member proves abandonment by his spouse as
evidenced by a court order or because of such other circumstances
as the Secretary of the Treasury may by regulations prescribe.
9.10 Lump Sum Payment without Election. Notwith-
standing any other provision of this Article IX, if a Member or a
Beneficiary is entitled to a distribution and if the vested value
of a Member's Account or the vested value of the Beneficiary's
share of the Member's Account before benefits are paid or
commence to be paid hereunder does not exceed $3,500, the
Committee may in accordance with uniform and nondiscriminatory
rules direct the immediate distribution of such benefit to the
person entitled thereto regardless of any election or consent of
the Member, the Member's spouse or other Beneficiary.
9.11 Direct Rollover Election. Notwithstanding any
provision of the Plan to the contrary, if (i) a Member, (ii) a
Beneficiary who is a Member's spouse, or (iii) a Member's spouse
or former spouse who is an alternate payee under a qualified
domestic relations order becomes entitled to a Plan distribution
which qualifies as an eligible rollover distribution as defined
in Section 402(c)(4) of the Code, such individual may elect to
have all or a portion of such distribution transferred directly
to a designated eligible retirement plan as defined in Section
402(c)(8)(B) of the Code, provided that such retirement plan to
which such transfer is to be made accepts such transfer. The
Committee may establish reasonable rules and procedures regarding
direct rollover distributions permitted hereunder. A direct
rollover may be made less than 30 days after the distributee is
informed of his right to elect such a distribution, provided
that, the Committee clearly informs the distributee that he has
the right to a period of at least 30 days after being so notified
to make such election and the distributee affirmatively elects
such direct rollover.
ARTICLE X
Administration of the Plan
10.1 Plan Administrator. The Committee shall be the
Plan Administrator:
(a) The Committee shall administer, enforce and
interpret the Plan and the trust agreement established hereunder
and shall have the powers necessary thereto, including, but not
by way of limitation, the powers to exercise its responsibilities
in accordance with Sections 1.3 (Appropriate Form), 1.10
(Compensation), 1.22 (Enrollment Date), 1.29 (Leave of Absence),
1.45 (Total and Permanent Disability), Article II (Eligibility
and Membership), 3.1 (Compensation Deferral Contributions), 3.2
(Changes and Suspension of Contributions), 3.4 (Limitation on
Compensation Deferral Contributions), 5.2 (Maintenance of
Accounts), 5.3 (Valuations), Article VII (Investment of
Accounts), Article VIII (Withdrawals and Loans During
Employment), 11.6 (Disbursement of Funds), Article XIII
(Miscellaneous), and the remainder of this Article X, and
(b) Authority to hold the funds of the Plan shall be
delegated to the Trustee in accordance with Section 11.2
(Trustee), and
(c) Authority to direct the investment of the Plan's
funds shall be delegated to an Investment Manager in accordance
with Section 11.3 (Investment Manager).
With respect to all other responsibilities of the Plan
Administrator the Committee shall act through its duly authorized
officers and agents.
10.2 Board of Directors. With respect to Sections 4.1
(Amount of Employer Contributions), 10.8 (Personal Liability) and
12.2 (Suspension or Termination) the Employer shall act only by
or pursuant to a resolution of the Board of Directors.
10.3 Appointment of the Committee. The Committee
shall be the Benefits Administration Committee of Smith Corona
Corporation.
10.4 Compensation Expenses. All proper expenses
incurred by the Committee, the Employer or the Trustee for
accounting, legal and other professional, consulting or technical
services required for the administration of the Plan, shall be
paid by the Trustee out of the Trust Fund unless paid voluntarily
by the Employer.
10.5 Committee Actions, Agents. The Committee may
appoint such agents, who need not be members of the Committee, as
it may deem necessary for the effective performance of its duties
and may delegate to such agents such powers and duties as the
Committee may deem expedient or appropriate.
Any action of the Committee, including but not by way
of limitation, instructions to the Trustee, shall be evidenced by
the signature of a member who has been so authorized by the
Committee to sign for it, and the Trustee shall be fully
protected in acting thereon. A certificate of the secretary or
an assistant secretary of the Committee setting forth the name of
the members thereof shall be sufficient evidence at all times as
to the persons then constituting the Committee.
10.6 Committee Meetings. The Committee shall hold
meetings upon such notice, at such time and place as they may
determine. The Committee shall act by a majority of its members
at the time in office and such action may be taken from time to
time by a vote at a meeting or in writing without a meeting. A
majority of the members of the Committee at the time in office
shall constitute a quorum for transaction of business.
10.7 Authority and Duties of the Committee. The
Committee may from time to time establish rules for the
administration of the Plan. The Committee shall have the
exclusive right to interpret the Plan and to decide any matters
arising thereunder in connection with the administration of the
Plan. It shall endeavor to act by general rules so as not to
discriminate in favor of any person. Its decisions and the
records of the Committee shall be conclusive and binding upon the
Employer, Members and all other persons having an interest under
the Plan. No member of the Committee shall be disqualified from
exercising the powers and discretions herein conferred by reason
of the fact that the exercise of any such power or discretion may
affect the payment of benefits to such member under the Plan;
however, no member may vote on a matter relating exclusively to
such member. To the extent that it is administratively feasible,
the period of notice required for Members' elections to commence,
change or suspend contributions hereunder or to make or change
investment elections for either future contributions or existing
accounts may be relaxed, reduced or eliminated by the Committee
in accordance with uniform and non-discriminatory rules.
The Committee shall keep or cause to be kept all
records and other data as may be necessary for the administration
of the Plan.
10.8 Personal Liability. To the extent not contrary
to the provisions of ERISA, no member of the Committee, officer,
director or employee of an Employer shall be personally liable
for acts done in good faith hereunder unless resulting from such
member's own negligence or willful misconduct. Each such member
of the Committee, officer and director shall be indemnified by
the Employer against expenses reasonably incurred by such member
in connection with any action to which he may be a party by
reason of such member's responsibilities hereunder, except in
relation to matters as to which such member shall be adjudged in
such action to be liable for negligence or misconduct in the
performance of such member's duty. However, nothing in this Plan
shall be deemed to relieve any person who is a fiduciary under
the Plan for purposes of ERISA from any responsibility or
liability which such statute shall impose upon such member.
10.9 Dealings between the Committee and Individual
Members. Any notice required to be given to, or any document
required to be filed with, the Committee will be properly given
or filed if mailed by registered or certified mail, postage
prepaid, or delivered to the Chairman of the Benefits
Administration Committee, c/o Smith Corona Corporation, 839
Route 13 South, Cortland, NY 13045, or to such other place as
the Committee may hereafter from time to time designate.
The Committee shall make available to such Member for
examination upon reasonable request in advance, such of its
records as pertain to the benefits to which such Member shall be
entitled under the Plan.
10.10 Information To Be Supplied by the Employer. The
Employer shall provide the Committee or its delegate with such
information as it shall from time to time need in the discharge
of its duties.
10.11 Records. The regularly kept records of the
Committee and the Employer shall be conclusive evidence of the
Service of an Employee, the Employee's Compensation, age, marital
status, status as an Employee, and all other matters contained
therein applicable to this Plan; provided that an Employee may
request a correction in the record of age or any other disputed
fact at any time prior to retirement. Such correction shall be
made if within 90 days after such request the Employee furnishes
the Committee in support thereof documentary proof of age or the
other disputed fact satisfactory to the Committee.
10.12 Fiduciary Capacity. Any person or group of
persons may serve in more than one fiduciary capacity with
respect to the Plan.
10.13 Fiduciary Responsibility. If a Plan fiduciary
acts in accordance with ERISA, Title I, Subtitle 8, Part 4,
(a) in determining that a Member's spouse has con-
sented to the naming of a Beneficiary other than the spouse or
that the consent of the Member's spouse may not be obtained
because there is no spouse, the spouse cannot be located or other
circumstances prescribed by the Secretary of the Treasury by
regulations, then to the extent of payments made pursuant to such
consent, revocation or determination, the Plan and its fiduci-
aries shall have no further liability; or
(b) in treating a domestic relations order as being
(or not being) a Qualified Domestic Relations Order, or, during
any period in which the issue of whether a domestic relations
order is a Qualified Domestic Relations Order is being determined
(by the Committee, by a court of competent jurisdiction, or
otherwise), in segregating in a separate account in the Plan or
in an escrow account the amounts which would have been payable to
the alternate payee during such period if the order had been
determined to be a Qualified Domestic Relations Order in paying
the amounts segregated or held in escrow by the person entitled
thereto if within 18 months the domestic relations order (or a
modification thereof) is determined to be a Qualified Domestic
Relations Order, in paying such amounts to the person entitled
thereto if there had been no order if within 18 months the
domestic relations order is determined not to be qualified or if
the issue is not resolved within 18 months and in prospectively
applying a domestic relations order which is determined to be
qualified after the close of the 18 month period, then the
obligation of the Plan and its fiduciaries or the Member and each
alternate payee shall be discharged to the extent of any payment
made pursuant to such acts.
10.14 Claim Procedure.
(a) Each Member or Beneficiary ("Claimant") may submit
application for benefits ("Claim") to the Committee (or to such
other person as may be designated by the Committee) in writing in
such form as is provided or approved by the Committee. A
Claimant shall have no right to seek review of a denial of
benefits, or to bring any action in any court to enforce a Claim
prior to filing a Claim and exhausting all rights to review in
accordance with this Section.
When a Claim has been filed properly, such Claim shall
be evaluated and the Claimant shall be notified of the approval
or the denial of the Claim within ninety (90) days after the
receipt of such Claim unless special circumstances require an
extension of time for processing the claim. If such an extension
of time for processing is required, written notice of the
extension shall be furnished to the Claimant prior to the
termination of the initial ninety (90) day period, which notice
shall specify the special circumstances requiring an extension
and the date by which a final decision will be reached (which
date shall not be later than one hundred and eighty (180) days
after the date on which the Claim was filed). Claimant shall be
given a written notice in which the Claimant shall be advised as
to whether the Claim is granted or denied, in whole or in part.
If a Claim is denied, in whole or in part, the notice shall
contain (1) the specific reasons for the denial, (2) references
to pertinent Plan provisions upon which the denial is based, (3)
a description of any additional material or information necessary
to perfect the Claim and an explanation of why such material or
information is necessary, and (4) the Claimant's rights to seek
review of the denial.
(b) If a Claim is denied, in whole or in part, the
Claimant shall have the right to (i) request that the Committee
(or such other person as shall be designated in writing by the
Committee) review the denial, (ii) review pertinent documents,
and (iii) submit issues and comments in writing, provided that
the Claimant files a written request for review with the
Committee within sixty (60) days after the date on which the
Claimant received written notification of the denial. Within
sixty (60) days after a request for review is received, the
review shall be made and the Claimant shall be advised in writing
of the decision on review, unless special circumstances require
an extension of time for processing the review, in which case the
Claimant shall be given a written notification within such
initial sixty (60) day period specifying the reasons for the
extension and when such review shall be completed (within one
hundred and twenty (120) days after the date on which the request
for review was filed). The decision on review shall be forwarded
to the Claimant in writing and shall include specific reasons for
the decision and references to Plan provisions upon which the
decision is based. A decision on review shall be final and
binding on all persons for all purposes. If a Claimant shall
fail to file a request for review in accordance with the
procedures herein outlined, such Claimant shall have no rights to
review and shall have no right to bring action in any court and
the denial of the Claim shall become final and binding on all
persons for all purposes.
10.15 Lawsuits. Any lawsuit involving a Claim brought
by a Claimant must be commenced before the expiration of three
(3) years from the event giving rise to the Claim or, if later,
the date of receipt of notice of claim denial under Section
10.14(b). If such suit, no matter what jurisdiction it is
brought in, is not commenced within such time limit, it shall be
barred.
ARTICLE XI
Operation of the Trust Fund
11.1 Trust Fund. All assets of the Plan shall be held
in trust as a Trust Fund for the exclusive benefit of Members and
their Beneficiaries, and no part of the corpus or income shall be
used for or diverted to any other purpose. No person shall have
any interest in or right to any part of the Trust Fund, except to
the extent provided in the Plan.
11.2 Trustee. All contributions to the Plan shall be
paid to a Trustee or Trustees which shall be appointed from time
to time by the Board of Directors or the Employer by appropriate
instrument with such powers in the Trustee as to control and
disbursement of the funds as the Employer shall approve and as
shall be in accordance with the Plan. The Employer may remove
any Trustee at any time, upon reasonable notice and upon such
removal or upon the resignation of any Trustee the Employer shall
designate a successor Trustee.
11.3 Investment Manager. In accordance with the terms
of the trust agreement, the Board of Directors or the Employer
may appoint one or more Investment Managers (individuals and/or
other entities), who may include the Trustee and who are
collectively referred to herein as the Investment Manager, to
direct the investment and reinvestment of part or all of the
Plan's funds. The Employer may change the appointment of the
Investment Manager from time to time.
11.4 Disbursement of Funds. The funds held by the
Trustee shall be applied, in the manner determined by the
Committee, to the payment of benefits to such persons as are
entitled thereto in accordance with the Plan.
The Committee shall determine the manner in which the
funds of the Plan shall be disbursed in accordance with the Plan,
including the form of voucher or warrant to be used in
authorizing disbursements and the qualification of persons
authorized to approve and sign the same and any other matters
incident to the disbursement of such funds.
All charges of the record keeper, of the Trustee and of
the Investment Manager shall be paid by the Trust unless paid by
the Employer.
11.5 Exclusive Benefit of Members. All contributions
under the Plan shall be paid to the Trustee and deposited in the
Trust Fund and shall be held, managed and distributed solely in
the interest of the Members and Beneficiaries for the exclusive
purpose of (1) providing benefits to Members and Beneficiaries
and (2) defraying reasonable administrative expenses of the Plan
and the Trust, to the extent such expenses are not paid by the
Employer provided that:
(a) if the Plan is denied initial qualification under
Section 401(a) of the Code, contributions conditioned upon
the continued qualification of the Plan shall be returned to
the Employer making such contributions within one year of
the denial of qualification;
(b) if, and to the extent, deduction for a
contribution under Section 404 of the Code is disallowed,
contributions conditioned upon deductibility shall be
returned to the Employer within one year after the
disallowance of the deduction; and
(c) if, and to the extent, contribution is made
through mistake of fact, such contribution shall be returned
to the Employer within one year of the payment of the
contribution.
For purposes of subsection (b) of this Section 11.5, all Employer
Contributions shall be deemed conditioned upon deductibility
under Section 404 of the Code when made.
ARTICLE XII
Amendment, Termination and Merger
12.1 Right to Amend. The Employer reserves the right
at any time, and from time to time, to modify or amend in whole
or in part the provisions of the Plan, but no such amendment
shall divest any Member of any amount previously credited to a
Member's Accounts or, except to the extent permitted by the
Secretary of the Treasury by regulation, shall eliminate with
respect to a Member's Account balance at the time of such
amendment an optional form of benefit, and further provided that
no part of the assets of the Trust Fund shall, by reason of any
modification or amendment, be used for or diverted to, purposes
other than for the exclusive benefit of Members and their
Beneficiaries, under the Plan. Any amendment or modification of
the Plan may be made by the Board of Directors of the Employer or
its delegate such as the Committee, except that any amendment
which substantially increases the cost of the Plan to the
Employer must be approved by the Board of Directors.
12.2 Suspension or Termination. The Employer may at
any time temporarily suspend Employer Contributions and
Compensation Deferral Contributions in whole or in part. Such
suspension of Employer Contributions and/or Compensation Deferral
Contributions shall not, in itself, constitute a Plan
termination. The Employer may at any time completely discontinue
contributions or terminate the Plan by filing with the Committee
a certified copy of the resolution of its board of directors
authorizing such action.
If the Plan is terminated, no further contributions
shall be made by the Employer and subject to Section 9.1 and
Section 401(k)(10) of the Code, the Account of each Member shall
be applied for the Member's (or the Member's Beneficiary's)
benefit by payment in cash or in kind. Alternatively, if the
Plan is frozen, no further contributions shall be made by the
Employer but the Plan shall continue in full force and effect and
the Trust Fund shall continue in accordance with the trust
instrument until all funds in the Trust are distributed in
accordance with the Plan.
12.3 Merger, Consolidation or Transfer. In the case
of any merger, or consolidation with, or transfer of assets or
liabilities to any other plan, each Member in the Plan would (if
the Plan then terminated) receive a benefit immediately after the
merger, consolidation, or transfer which is equal to or greater
than the benefit such Member would have been entitled to receive
immediately before the merger consolidation, or transfer (if the
Plan had then terminated).
ARTICLE XIII
Miscellaneous
13.1 Uniform Administration. Whenever, in the
administration of the Plan, any action is required by the
Employer or the Committee, including, but not by way of
limitation, action with respect to eligibility or classification
of employees, contributions or benefits, such action shall be
uniform in nature as applied to all persons similarly situated
and no such action shall be taken which will discriminate in
favor of Members who are officers or significant shareholders or
Highly Compensated Employees of the Employer or persons whose
principal duties consist of supervising the work of other
Employees.
13.2 Payment Due an Incompetent. If the Committee
determines that any person to whom a payment is due hereunder is
incompetent by reason of physical or mental disability, the
Committee shall have power to cause the payments becoming due to
such person to be made to another for the benefit of the
incompetent, without responsibility of the Committee or the
Trustee to see to the application of such payment. Payments made
in accordance with such power shall operate as a complete
discharge of all obligations on account of such payment of the
Committee, the Trustee and the Trust Fund. The Committee shall
not be under any responsibility to assure that any such payment
is used for the benefit of the person to whom it was due.
13.3 Source of Payments. All benefits under the Plan
shall be paid or provided solely from the Trust Fund and the
Employer assumes no liability or responsibility therefor, except
to the extent required by law.
13.4 Plan Not a Contract of Employment. Nothing
herein contained shall be deemed to give any Employee, Eligible
Employee or Member the right to be retained in the employ of the
Employer or to interfere with the right of the Employer to
discharge any Employee, Eligible Employee or Member at any time
for any reason.
13.5 Applicable Law. Except to the extent governed by
Federal law, including ERISA, the Plan shall be administered and
interpreted in accordance with the laws of the State of New York
(other than the principles of conflicts of laws of such State).
13.6 Unclaimed Amounts. It shall be the duty and re-
sponsibility of a Member or a Beneficiary to keep the Committee
apprised of such Member's whereabouts and of such Member's
current mailing address. Unclaimed amounts shall consist of the
amounts of the Accounts of a retired, deceased or terminated
Member which cannot be distributed because of the Committee's
inability, after a reasonable search (including utilizing the
services of the Internal Revenue Service pursuant to Revenue
Procedure 94-22), to locate a Member or a Member's Beneficiary
within a period of two (2) years after the payment of benefits
becomes due. Unclaimed amounts for a Plan Year shall be
forfeitures for the Plan Year in which such two-year period shall
end. Such Forfeitures shall be treated as provided in Section
4.3
If an unclaimed amount is subsequently properly claimed
by the Member or the Member's Beneficiary ("Reclaimed Amount")
and unless the Employer, in its discretion, makes a contribution
to the Plan for such year in an amount sufficient to pay such
Reclaimed Amount to the extent that the Reclaimed Amount
originated as an unclaimed amount, it shall be charged against
forfeitures for the Plan Year and, to the extent such forfeitures
are not sufficient, shall charged against income as an expense of
the Trust Fund.
13.7 Adoption of Plan by Subsidiary. Any corporation
of which the Employer owns directly or indirectly at least 50% of
the outstanding common stock may adopt the Plan as to its
eligible employees with the consent of the Board of Directors of
the Employer. Likewise, any such subsidiary which maintains a
qualified plan with a qualified cash or deferred arrangement may,
with the consent of the Board of Directors of the Employer, merge
such plan with and into the Plan.
ARTICLE XIV
Top Heavy Provisions
14.1 Application. The definitions in Section 14.2
shall apply under this Article XIV and the special rules in
Section 14.3 shall apply in accordance with Code Section 416,
notwithstanding any other provisions of the Plan, for any Plan
Year in which the Plan is a Top Heavy Plan and for such other
Plan Years as may be specified herein. This Article XIV shall
have no effect on the amount of, or eligibility for, benefits
under the Plan of a Member unless and until the Plan becomes a
Top Heavy Plan.
14.2 Special Top Heavy Definitions. The following
special definitions shall apply under this Article XIV.
(a) "Aggregate Employer Contributions" means the sum
of all Employer Contributions including forfeitures under this
Plan allocated for a Member to the Plan and employer
contributions and forfeitures allocated for the Member to all
Related Defined Contribution Plans in the Aggregation Group;
provided, however, that for Plan Years beginning before
January 1, 1985, Compensation Deferral Contributions under this
Plan and employer contributions attributable to compensation
reduction or similar arrangement under Related Defined
Contribution Plans shall not be included in Aggregate Employer
Contributions.
(b) "Aggregation Group" means the group of plans in a
Mandatory Aggregation Group, if any, that includes the Plan,
unless inclusion of Related Plans in the Permissive Aggregation
Group in the Aggregation Group would prevent the Plan from being
a Top Heavy Plan, in which case "Aggregation Group" means the
group of plans consisting of the Plan and each other Related Plan
in a Permissive Aggregation Group with the Plan.
(1) "Mandatory Aggregation Group" means each plan
(considering the Plan and Related Plans) that, during the
Plan Year that contains the Determination Date or any of the
four preceding Plan Years,
(A) had a Member who was a Key Employee, or
(B) was necessary to be considered with a
plan in which a Key Employee participated in order to
enable the plan in which the Key Employee participated
to meet the requirements of Section 401(a)(4) and
Section 410(b) of the Code.
If the Plan is not described in (A) or (B)
above, it shall not be part of a Mandatory Aggregation
Group.
(2) "Permissive Aggregation Group" means the
group of plans consisting of (A) the plans, if any, in a
Mandatory Aggregation Group with the Plan, and (B) any other
Related Plan, that, when considered as a part of the
Aggregation Group, does not cause the Aggregation Group to
fail to satisfy the requirements of Section 401(a)(4) and
Section 410(b) of the Code. A Related Plan in (B) of the
preceding sentence may include a simplified employee pension
plan, as defined in Code Section 408(k), and a collectively
bargained plan, if, when considered as a part of the
Aggregation Group, such plan does not cause the Aggregation
Group to fail to satisfy the requirements of Section
401(a)(4) and Section 410(b) of the Code considering, if the
plan is a multiemployer plan as described in Code Section
414(f) or a multiple employer plan as described in Code
Section 413(c), benefits under the plan only to the extent
provided to Employees of the employer because of service
with the Employer, and, if the plan is a simplified employee
pension plan, only the employer's contribution to the plan.
(c) "Determination Date" means, with respect to a Plan
Year, the last day of the preceding Plan Year or, in the case of
the first Plan Year, the last day of such Plan Year. If the Plan
is aggregated with other plans in the Aggregation Group, the
Determination Date for each other plan shall be, with respect to
any Plan Year, the Determination Date for each such other plan
which falls in the same calendar year as the Determination Date
for the Plan.
(d) "Key Employee" means, for the Plan Year containing
the Determination Date, any person or the beneficiary of any
person who is an Employee or former Employee of an Employer or an
Affiliate as determined under Code Section 416(i) and who, at any
time during the Plan Year containing the Determination Date or
any of the four (4) preceding Plan Years (the "Measurement
Period") is a person described in paragraph (1), (2), (3) or (4),
subject to paragraph (5).
(1) An officer of the Employer or an Affiliate
who in any Measurement Period is an officer during the Plan
Year and has annual Compensation for the Plan Year in an
amount greater than fifty percent (50%) of the amount in
effect under Section 415(b)(1)(A) of the Code for the
calendar year in which such Plan Year ends ($30,000 in 1989
adjusted in subsequent years as determined in accordance
with regulations prescribed by the Secretary of the Treasury
or his delegate pursuant to the provisions of Section 415(d)
of the Code).
No more than a total of fifty (50) persons (or, if
lesser, the greater of three (3) persons or ten percent
(10%) of all persons or beneficiaries of persons who are
Employees or former Employees) shall be treated as Key
Employees under this paragraph (1) for any Measurement
Period. In the case of an Employer or an Affiliate which is
not a corporation (I) in any Measurement Period, in the case
of a Plan Year beginning on or before February 28, 1985, no
persons shall be treated as Key Employees under this
paragraph (1); and (II) in any Measurement Period, in the
case of a Plan Year beginning after February 28, 1985, the
term "officer" as used in this subsection (d) shall include
administrative executives as described in Treas. Reg.
Section 1.416-1(T-13).
(2) One (1) of the ten (10) persons who, during a
Plan Year in the Measurement Period:
(A) have annual Compensation from the
Employer or Affiliate for such Plan Year greater than
the amount in effect under Section 415(c)(1)(A) of the
Code for the calendar year in which such Plan Year ends
($30,000 in 1984, adjusted in subsequent years as
determined in accordance with regulations prescribed by
the Secretary of the Treasury or his delegate pursuant
to the provisions of Section 415(d) of the Code); and
(B) own (or are considered as owning within
the meaning of Code Section 318) in such Plan Year, the
largest percentage interests in the Employer or
Affiliate, in such Plan Year, provided that no person
shall be treated as a Key Employee under this paragraph
unless he owns more than one-half of one percent (0.5%)
interest in the Employer or Affiliate.
No more than a total of ten (10) persons or
beneficiaries of persons who are Employees or former
Employees shall be treated as Key Employees under this
paragraph (2) for any Measurement Period.
(3) A person who, for a Plan Year in the
Measurement Period, is a more than five percent (5%) owner
(or is considered as owning more than five percent (5%)
within the meaning of Code Section 318) of the Employer or
Affiliate.
(4) A person who, for a Plan Year in the
Measurement Period, is a more than one percent (1%) owner
(or is considered as owning more than one percent (1%)
within the meaning of Code Section 318) of the Employer or
an Affiliate and has an annual Compensation for such Plan
Year of more than $150,000.
(5) If the number of persons who meet the
requirements to be treated as Key Employees under paragraph
(1) or (2) exceed the limitation on the number of Key
Employees to be counted under paragraph (1) or (2), those
persons with the highest annual Compensation in a Plan Year
in the Measurement Period for which the requirements are met
and who are within the limitation on the number of Key
Employees will be treated as Key Employees.
If the requirements of paragraph (1) or (2) are met by
a person in more than one (1) Plan Year in the Measurement
Period, each person will be counted only once under paragraph (1)
or (2):
(C) under paragraph (1), the Plan Year in
the Measurement Period in which a person who was an
officer and had the highest annual Compensation shall
be used to determine whether the person will be treated
as a Key Employee under the preceding sentence;
(D) under paragraph (2), the Plan Year in
the Measurement Period in which the ownership
percentage interest is the greatest shall be used to
determine whether the person will be treated as a Key
Employee under the preceding sentence.
Notwithstanding the above provisions of paragraph (5),
a person may be counted in determining the limitation under both
paragraphs (1) and (2). In determining the sum of the Present
Value of Accrued Benefits for Key Employees under subsection (f)
of this Section, the Present Value of Accrued Benefits for any
person shall be counted only once. For purposes of determining
ownership in the Employer or Affiliate under paragraphs (2), (3)
and (4), the aggregation rules of Sections 414(b), (c) and (m) of
the Code shall not apply.
(e) "Non-Key Employee" means for the Plan Year
containing the Determination Date a person or the beneficiary of
a person who had an account balance in the Plan or an account
balance in any Related Plan in the Aggregation Group during the
Plan Year containing the Determination Date or any of the four
(4) preceding Plan Years and who is not a Key Employee.
(f) "Present Value of Accrued Benefits" means, for any
Plan Year, an amount equal to the sum of (1), (2) and (3) for
each person, who in the Plan Year containing the Determination
Date, was a Key Employee or a Non-Key Employee.
(1) Subject to (4) below, the value of a Member's
Accounts under the Plan (including his Compensation Deferral
Contributions) and each Related Defined Contribution Plan in
the Aggregation Group, determined as of the Valuation Date
coincident with or immediately preceding the Determination
Date, adjusted for contributions due as of the Determination
Date, as follows:
(A) in the case of a plan not subject to the
minimum funding requirements of Section 412 of the
Code, by including the amount of any contributions
actually made after the Valuation Date but on or before
the Determination Date, and, in the first plan year of
a plan, by including contributions made after the
Determination Date that are allocated as of a date in
that first plan year; and
(B) in the case of a plan that is subject to
the minimum funding requirements, by including the
amount of any contributions that would be allocated as
of a date not later than the Determination Date, plus
adjustments to those amounts as required under
applicable rulings, even though those amounts are not
yet required to be contributed or allocated (e.g.,
because they have been waived) and by including the
amount of any contributions actually made (or due to be
made) after the Valuation Date but before the
expiration of the extended payment period in Section
412(c)(10) of the Code.
For purposes of this paragraph (1), the Valuation Date is
the most recent Valuation Date within a 12-month period
ending on the Determination Date.
(2) Subject to (4) below, the sum of the
actuarial present values of a person's accrued benefits
under each Related Defined Benefit Plan in the Aggregation
Group, expressed as a benefit commencing at normal
retirement date (or the person's attained age, if later)
determined based on the following actuarial assumptions:
(A) Interest rate of 5% compounded; and
(B) 80% of the rates underlying the 1984
Unisex Pension Mortality Table, adjusted by applying a
3-year age setback for the Member's spouse, where
applicable;
and determined in accordance with Code Section 416(g).
The present value of an accrued benefit for any person
who is employed by an Employer maintaining a plan on the
Determination Date is determined as of the most recent valuation
date which is within a 12-month period ending on the Deter-
mination Date, provided however that:
(C) for the first plan year of the plan, the
present value for an Employee is determined as if the
Employee had a termination of employment (1) on the
Determination Date or (2) on such Valuation Date but taking
into account the estimated accrued benefits as of the
Determination Date; and
(D) for the second and subsequent plan years of
the plan, the accrued benefit taken into account for an
employee is not less than the accrued benefit taken into
account for the first plan year unless the difference is
attributable to using an estimate of the accrued benefit as
of the Determination Date for the first plan year and using
the actual accrued benefit as of the Determination for the
second plan year.
For purposes of this paragraph (2), the Valuation Date
is the valuation date used by the plan for computing plan costs
for minimum funding, regardless of whether a valuation is
performed that year.
If the plan provides for a nonproportional subsidy as
described in Treasury Regulations Section 1.416-1(T-26), the
present value of accrued benefits shall be determined by taking
into account the value of nonproportional subsidized early
retirement benefits and nonproportional subsidized benefit
options.
(3) Subject to (4) below, the aggregate value of
amounts distributed from the Plan and each Related Plan in the
Aggregation Group during the Plan Year that includes the
Determination Date or any of the four preceding Plan Years
including amounts distributed under a termination plan which, if
it had not been terminated, would have been in the Aggregation
Group.
(4) The following rules shall apply in determining the
Present Value of Accrued Benefits:
(A) Amounts attributable to qualified voluntary
employee contributions, as defined in Section 219(e) of
the Code, shall be excluded;
(B) In computing the Present Value of Accrued
Benefits with respect to rollovers or plan-to-plan
transfers, the following rules shall be applied to
determine whether amounts which have been distributed
during the five (5) year period ending on the
Determination Date from or accepted into this Plan or
any plan in the Aggregation Group shall be included in
determining the Present Value of Accrued Benefits:
(i) Unrelated Transfers accepted into the
Plan or any plan in the Aggregation Group after
December 31, 1983 shall not be included.
(ii) Unrelated Transfers accepted on or
before December 31, 1983 and all Related Transfers
accepted at any time into the Plan or any plan in
the Aggregation Group shall be included.
(iii) Unrelated Transfers made from the Plan
or any plan in the Aggregation Group shall be
included.
(iv) Related Transfers made from the Plan or
any plan in the Aggregation Group shall not be
included by the transferror plan (but shall be
counted by the accepting plan).
The accrued benefit of any individual who has not
performed services for an Employer maintaining the Plan (or a
business with which the Employer is an Affiliate) at any time
during the five (5) year period ending on the Determination Date
shall be excluded in computing the Present Value of Accrued
Benefits.
(g) "Related Plan" means any other defined benefit
plan or a defined contribution plan (as defined in Section 415(k)
of the Code) maintained by an Employer or other Affiliate,
respectively called a "Related Defined Benefit Plan" and a
"Related Defined Contribution Plan".
(h) "Related Transfer" means a rollover or a plan-to-plan
transfer which is either not initiated by the Employee or is
made between plans each of which is maintained by an Employer or
an Affiliate.
(i) A "Top Heavy Aggregation Group" means the
Aggregation Group in any Plan Year for which, as of the
Determination Date, the sum of the Present Values of Accrued
Benefits for Key Employees under all plans in the Aggregation
Group exceeds sixty percent (60%) of the sum of the Present
Values of Accrued Benefits for all Employees under all plans in
the Aggregation Group; provided that, for purposes of determining
the sum of Present Values of Accrued Benefits for all Employees,
there shall be excluded the Present Values of Accrued Benefits of
any Non-Key Employee who was a Key Employee for any Plan Year
preceding the Plan Year that contains the Determination Date.
For purposes of applying the special rules herein with respect to
a Super Top Heavy Plan, a Top Heavy Aggregation Group will also
constitute a "Super Top Heavy Aggregation Group" if in any Plan
Year as of the Determination Date, the sum of the Present Values
of Accrued Benefits for Key Employees under all plans in the
Aggregation Group exceeds ninety percent (90%) of the sum of the
Present Values of Accrued Benefits for all employees under all
plans in the Aggregation Group.
(j) "Top Heavy Plan" means the Plan in any Plan Year
in which it is a member of a Top Heavy Aggregation Group,
including a Top Heavy Aggregation Group consisting solely of the
Plan. For purposes of applying the rules herein with respect to
a Super Top Heavy Plan, a Top Heavy Plan will also constitute a
"Super Top Heavy Plan" if the Plan in any Plan Year is a member
of a Super Top Heavy Aggregation Group consisting solely of the
Plan.
(k) "Unrelated Transfer" means a rollover or a plan-to-plan transfer
which is initiated by the Employee and (a) made
from a plan maintained by an Affiliate to a plan maintained by an
Employer which is not an Affiliate or (b) made to a plan
maintained by an Affiliate from a plan maintained by an Employer
which is not an Affiliate.
14.3 Special Top Heavy Provisions. For each Plan Year
in which the Plan is a Top Heavy Plan, the following rules shall
apply, except that the special provisions of this Section 14.3
shall not apply with respect to any Employee who is covered by a
collective bargaining agreement between Employee representatives
and one or more Employers unless participation by such Employee
in the Plan has been agreed to by the parties to such agreement.
(a) Minimum Employer Contributions.
(1) In any Plan Year in which the Plan is a Top
Heavy Plan, the Employer shall make additional Employer
Contributions to the Plan as necessary for each Member who
is employed on the last day of the Plan Year and who is a
Non-Key Employee to bring the amount of each Member's
Aggregate Employer Contributions for the Plan Year up to at
least three percent (3%) of each Member's Compensation, or
if the Plan is not required to be included in an aggregation
group in order to permit a defined benefit plan in the
Aggregation Group to satisfy the requirements of Section
401(a)(4) or Section 410(b) of the Code, such lesser amount
as is equal to the largest percentage of a Key Employee's
Compensation (as limited in accordance with Section 14.3(c))
allocated to the Key Employee as Aggregate Employer
Contributions. Compensation Deferral Contributions may not
be treated as Employer Contributions for purposes of
satisfying the Non-Key Employee's minimum contribution
requirement set forth in this subparagraph (1).
(2) Notwithstanding Section 14.3(a)(1), if there
is a Related Defined Benefit Plan in the Aggregation Group,
if a Non-Key Employee participates in both the Plan and a
Related Defined Benefit Plan and
(A) if the Related Defined Benefit Plan
provides the minimum benefit required under Code
Section 416(c)(1) for the Non-Key Employee, then no
minimum Employer Contribution shall be required under
this Section 14.3(a),
(B) if the Related Defined Benefit Plan does
not provide the minimum benefit required under Code
Section 416(c)(1) for the Non-Key Employee, then the
minimum Aggregate Employer Contribution under this
Section 14.3(a) shall be five percent (5%) of such
Non-Key Employee's Compensation.
(3) For purposes of determining whether a Non-Key
Employee is a Member entitled to have minimum Employee
Contributions made for such Member, a Non-Key Employee will
be treated as a Member even if he is not otherwise a Member
(or accrues no benefit) under the Plan because:
(A) such Member has failed to complete the
requisite number of Hours of Service (if any) after
becoming a Member in the Plan,
(B) such Member is excluded from
participation in the Plan (or accrues no benefit)
merely because his Compensation is less than a stated
amount, or
(C) such Member is excluded from parti-
cipation in the Plan (or accrues no benefit) merely
because of a failure to make mandatory employee
contributions or, if the Plan is a Plan described in
Section 401(k) of the Code, because of a failure to
make elective (401(k)) contributions.
(b) Vesting. For each Plan Year and for each Plan
Year thereafter, in which the Plan is a Top Heavy Plan, the
vesting schedule under the Plan shall be three (3) year cliff
vesting under which each Member shall be zero percent vested in
the Employer Contribution Account until such Member has three (3)
years of Service (including Service prior to when the Plan is a
Top-Heavy Plan) after which a Member shall be 100% vested in such
Account; provided that this vesting schedule shall not apply to
the accrued benefit of any Member who does not have an Hour of
Service in or after a Plan Year in which the Plan is Top Heavy.
(c) Compensation. For each Plan Year in which the
Plan is a Top Heavy Plan, Compensation taken into account under
the Plan shall not exceed $200,000 (as at 1984, adjusted in
subsequent years for the cost of living adjustments determined in
accordance with regulations prescribed by the Secretary of the
Treasury or his delegate pursuant to the provisions of Section
416(d)(2) of the Code).
(d) Top Heavy Limitations.
(1) In computing the limitations under Sect-
ion 4.5 hereof, if the Plan is a Top Heavy Plan and is not a
Super Top Heavy Plan, the special rules of Section 416(h) of
the Code shall be applied in accordance with applicable
regulations and rulings so that
(A) in determining the denominator of the
Defined Contribution Plan Fraction and the Defined
Benefit Plan Fraction, at each place at which "1.25"
would have been used, "1.00" shall be substituted and
(B) in determining the numerator of the
transition fraction described in Section 415(e)(6)(B)
of the Code by substituting $41,500 for $51,875
unless the special requirements of Section 416(h)(2) of the
Internal Revenue Code have been satisfied.
(2) In computing the limitations under
Section 4.5 thereof, if the Plan is a Super Top Heavy Plan,
the special rules of Section 416(h) of the Code shall be
applied in accordance with applicable regulations and
rulings so that
(A) in determining the denominator of the
Defined Contribution Plan Fraction and the Defined
Benefit Plan Fraction, at each place at which "1.25"
would have been used, "1.00" shall be substituted and
(B) in determining the numerator of the
transitional fraction described in Section 415(e)(6)(B)
of the Code, $41,500 shall be substituted for $51,875.
(e) Transition Rule for a Top Heavy Plan. Notwith-
standing the provisions of Sections 14.3(d), for each Plan Year
in which the Plan is a Top Heavy Plan and in which the Plan does
not meet the special requirements of Section 416(h)(2) of the
Code in order to use 1.25 in the denominator of the Defined
Contribution Plan Fraction and the Defined Benefit Plan Fraction,
if an Employee was a participant in one or more defined benefit
plans and in one or more defined contribution plans maintained by
an Employer or an Affiliate before the plans became Top Heavy
Plans and if such Member's Combined Fraction exceeds 1.00 because
of accruals and additions that were made before the plans became
Top Heavy Plans, a factor equal to the lesser of 1.25 or such
lesser amount (but not less than 1.00) as shall be needed to make
the Employee's Combined Fraction equal to 1.00 shall be used in
the denominator of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction if there are no further
accruals or annual additions under any Top Heavy Plans until the
Member's Combined Fraction is not greater than 1.00 when a factor
of 1.00 is used in the denominators of the Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction. Any
provisions herein to the contrary notwithstanding, if the Plan is
a Top Heavy Plan and the Plan does not meet the special re-
quirements of Section 416(h)(2) of the Code, in order to use 1.25
in the denominator of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction, there shall be no further
Annual Additions for a Member whose Combined Fraction is greater
than 1.00 when a factor of 1.00 is used in the denominator of the
Defined Benefit Plan Fraction Plan and the Defined Contribution
Plan Fraction, until such time as the Member's Combined Fraction
is not greater than 1.00.
(f) Transition Rule for a Super Top Heavy Plan.
Notwithstanding the provisions of Sections 14.3(d) and 14.3(e),
for each Plan Year in which the Plan is a Super Top Heavy Plan,
(1) if an Employee was a participant in one or more defined
benefit plans and in one or more defined contribution plans
maintained by an Employer or an Affiliate before the plans became
Super Top Heavy Plans, and (2) if such Member's Combined Fraction
exceeds 1.00 because of accruals and additions that were made
before the plans became Super top Heavy Plans the Combined
Fraction as then computed did not exceed 1.00, then a factor
equal to the lesser of 1.25 or such lesser amount (but not less
than 1.00) as shall be needed to make the Employee's Combined
Fraction equal to 1.00 shall be used in the denominator of the
Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction if there are no further accruals or Annual Additions
under any Super Top Heavy Plans until the Member's Combined
Fraction is not greater than 1.00 when a factor of 1.00 is used
in the denominators of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction. Any provisions herein to the
contrary notwithstanding, if the Plan is a Super Top Heavy Plan,
there shall be no further Annual Additions for a Member whose
Combined Fraction is greater than 1.00 when a factor of 1.00 is
used in the denominator of the Defined Benefit Plan Fraction and
the Defined Contribution Plan Fraction until the Member's
Combined Fraction is not greater than 1.00.
(g) Terminated Plan. If the Plan becomes a Top Heavy
Plan after it has formally been terminated, has
ceased crediting for benefit accruals and vesting and had been or
is distributing all plan assets to Members and their
beneficiaries as soon as administratively feasible, or if a
terminated plan has distributed all benefits of Members and their
beneficiaries, the provisions of Section 14.3 shall not apply to
the Plan.
(h) Frozen Plans. If the Plan becomes a Top Heavy
Plan after contributions have ceased under the Plan but all
assets have not been distributed to Members or their
beneficiaries, the provisions of Section 14.3 shall apply to the
Plan.
14.4 Effect of Change in Applicable Legislation or
Regulation. In the event that Congress should provide by statute
or the Secretary of the Treasury should provide by regulation a
ruling, that the provisions of this Article XIV are no longer
necessary for the Plan to meet the requirements of Section 401(a)
or other applicable provisions of the Code, such limitations
shall become void and shall no longer apply, without the
necessity of further amendment to the Plan.
__________________________________________________________
SMITH CORONA CORPORATION
RETIREMENT SAVINGS AND INVESTMENT PLAN
Adopted Effective July 1, 1989
Amended and Restated Effective January 1, 1997
__________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
1.1 "Account" . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . 1
1.3 "Appropriate Form". . . . . . . . . . . . . . . . . . 1
1.4 "Basic Contributions" . . . . . . . . . . . . . . . . 1
1.5 "Basic Contributions Subaccount". . . . . . . . . . . 1
1.6 "Beneficiary" . . . . . . . . . . . . . . . . . . . . 1
1.7 "Board" or "Board of Directors" . . . . . . . . . . . 1
1.8 "Code". . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 "Committee" . . . . . . . . . . . . . . . . . . . . . 2
1.10 "Compensation" . . . . . . . . . . . . . . . . . . . 2
1.11 "Compensation Deferral Contributions". . . . . . . . 2
1.12 "Compensation Deferral Contributions Account". . . . 2
1.13 "Effective Date" . . . . . . . . . . . . . . . . . . 2
1.14 "Eligible Employee". . . . . . . . . . . . . . . . . 2
1.15 "Employee" . . . . . . . . . . . . . . . . . . . . . 3
1.16 "Employee Contributions" . . . . . . . . . . . . . . 3
1.17 "Employee Contributions Account" . . . . . . . . . . 3
1.18 "Employer" . . . . . . . . . . . . . . . . . . . . . 3
1.19 "Employer Contributions" . . . . . . . . . . . . . . 3
1.20 "Employer Contribution Account". . . . . . . . . . . 3
1.21 "Enrollment Date". . . . . . . . . . . . . . . . . . 3
1.22 "ERISA". . . . . . . . . . . . . . . . . . . . . . . 3
1.23 "Highly Compensated Employee". . . . . . . . . . . . 3
1.24 "Hour of Service". . . . . . . . . . . . . . . . . . 3
1.25 "Initial Enrollment Date". . . . . . . . . . . . . . 4
1.26 "Investment Fund". . . . . . . . . . . . . . . . . . 4
1.27 "Investment Manager" . . . . . . . . . . . . . . . . 4
1.28 "Leave of Absence" . . . . . . . . . . . . . . . . . 5
1.29 "Member" . . . . . . . . . . . . . . . . . . . . . . 5
1.30 "Parental Leave" . . . . . . . . . . . . . . . . . . 5
1.31 "Plan" . . . . . . . . . . . . . . . . . . . . . . . 5
1.32 "Plan Year". . . . . . . . . . . . . . . . . . . . . 6
1.33 "Required Beginning Date". . . . . . . . . . . . . . 6
1.34 "Retirement Age" . . . . . . . . . . . . . . . . . . 6
1.35 "Rollover Contribution". . . . . . . . . . . . . . . 6
1.36 "Rollover Contribution Account". . . . . . . . . . . 6
1.37 "Service". . . . . . . . . . . . . . . . . . . . . . 6
1.38 "Specific Involuntary Termination" . . . . . . . . . 6
1.39 "Supplemental Contributions" . . . . . . . . . . . . 6
1.40 "Supplemental Contributions Subaccount". . . . . . . 7
1.41 "Suspense Account" . . . . . . . . . . . . . . . . . 7
1.42 "Total and Permanent Disability" . . . . . . . . . . 7
1.43 "Trustee". . . . . . . . . . . . . . . . . . . . . . 7
1.44 "Trust Fund" . . . . . . . . . . . . . . . . . . . . 7
1.45 "Valuation Date" . . . . . . . . . . . . . . . . . . 7
1.46 "Use of Masculine Pronoun".. . . . . . . . . . . . . 7
ARTICLE II
Eligibility and Membership
2.1 Members on the Restatement Date . . . . . . . . . . . 7
2.2 Eligible Employees on and after the January 1,
1997. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Completion of Appropriate Form. . . . . . . . . . . . 8
2.4 Elections Upon Becoming a Member. . . . . . . . . . . 8
2.5 Beneficiary Designation . . . . . . . . . . . . . . . 8
2.6 Transfers to or from Non-Covered Status . . . . . . . 9
2.7 Rollover Contributions From Other Plans . . . . . . . 9
ARTICLE III
Compensation Deferral Contributions
3.1 Compensation Deferral Contributions . . . . . . . . 10
3.2 Changes and Suspension of Contributions . . . . . . 10
3.3 Transfer of Contributions to Trustee. . . . . . . . 10
3.4 Limitation on Compensation Deferral Contributions . 10
ARTICLE IV
Employer Contributions
4.1 Amount of Employer Contributions. . . . . . . . . . 11
4.2 Limitations on Matching Contributions . . . . . . . 11
4.3 Treatment of Forfeitures. . . . . . . . . . . . . . 11
4.4 Transfer of Contributions to Trustee. . . . . . . . 12
4.5 Contributions After Certain Leave of Absences . . . 12
4.6 Limitation of Annual Additions. . . . . . . . . . . 13
ARTICLE V
Accounts
5.1 Maintenance of Accounts . . . . . . . . . . . . . . 16
5.2 Valuations. . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI
Vesting of Accounts
6.1 Employer Contribution Account . . . . . . . . . . . 16
6.2 Other Accounts. . . . . . . . . . . . . . . . . . . 16
6.3 Earlier Vesting in Employer Contribution Account. . 17
6.4 Forfeitures . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII
Investment of Accounts
7.1 Investment of Accounts. . . . . . . . . . . . . . . 18
7.2 Redirection of Future Contributions . . . . . . . . 18
7.3 Reinvestment of Prior Contributions . . . . . . . . 18
7.4 Statements of Accounts. . . . . . . . . . . . . . . 19
7.5 Crediting of Contribution Accounts. . . . . . . . . 19
7.6 Correction of Error . . . . . . . . . . . . . . . . 20
ARTICLE VIII
Withdrawals and Loans During Employment
8.1 Withdrawal Options. . . . . . . . . . . . . . . . . 20
8.2 Hardship Withdrawals. . . . . . . . . . . . . . . . 21
8.3 Values. . . . . . . . . . . . . . . . . . . . . . . 22
8.4 Payment of Withdrawals. . . . . . . . . . . . . . . 22
8.5 Loans . . . . . . . . . . . . . . . . . . . . . . . 22
8.6 Loan Proceeds Value . . . . . . . . . . . . . . . . 24
ARTICLE IX
Distribution
9.1 Amount of Distribution . . . . . . . . . . . . . . 24
9.2 Normal Form of Distribution. . . . . . . . . . . . 25
9.3 Alternate Form of Distribution . . . . . . . . . . 26
9.4 Identity of Payee. . . . . . . . . . . . . . . . . 26
9.5 Non-alienation of Benefits . . . . . . . . . . . . 26
9.6 Qualified Domestic Relations Order . . . . . . . . 27
9.7 Commencement of Benefits . . . . . . . . . . . . . 29
9.8 Annuities. . . . . . . . . . . . . . . . . . . . . 29
9.9 Spousal Consent. . . . . . . . . . . . . . . . . . 31
9.10 Lump Sum Payment without Election. . . . . . . . . 31
9.11 Direct Rollover Election . . . . . . . . . . . . . 31
ARTICLE X
Administration of the Plan
10.1 Plan Administrator. . . . . . . . . . . . . . . . 32
10.2 Board of Directors. . . . . . . . . . . . . . . . 32
10.3 Appointment of the Committee. . . . . . . . . . . 32
10.4 Compensation Expenses . . . . . . . . . . . . . . 32
10.5 Committee Actions, Agents . . . . . . . . . . . . 33
10.6 Committee Meetings. . . . . . . . . . . . . . . . 33
10.7 Authority and Duties of the Committee . . . . . . 33
10.8 Personal Liability. . . . . . . . . . . . . . . . 33
10.9 Dealings between the Committee and Individual
Members . . . . . . . . . . . . . . . . . . . . . 34
10.10 Information To Be Supplied by the Employer. . . . 34
10.11 Records . . . . . . . . . . . . . . . . . . . . . 34
10.12 Fiduciary Capacity. . . . . . . . . . . . . . . . 34
10.13 Fiduciary Responsibility. . . . . . . . . . . . . 34
10.14 Claim Procedure . . . . . . . . . . . . . . . . . 35
10.15 Lawsuits. . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XI
Operation of the Trust Fund
11.1 Trust Fund . . . . . . . . . . . . . . . . . . . . 36
11.2 Trustee. . . . . . . . . . . . . . . . . . . . . . 37
11.3 Investment Manager . . . . . . . . . . . . . . . . 37
11.4 Disbursement of Funds. . . . . . . . . . . . . . . 37
11.5 Exclusive Benefit of Members . . . . . . . . . . . 37
ARTICLE XII
Amendment, Termination and Merger
12.1 Right to Amend . . . . . . . . . . . . . . . . . . 38
12.2 Suspension or Termination. . . . . . . . . . . . . 38
12.3 Merger, Consolidation or Transfer. . . . . . . . . 39
ARTICLE XIII
Miscellaneous
13.1 Uniform Administration . . . . . . . . . . . . . . 39
13.2 Payment Due an Incompetent . . . . . . . . . . . . 39
13.3 Source of Payments . . . . . . . . . . . . . . . . 39
13.4 Plan Not a Contract of Employment. . . . . . . . . 39
13.5 Applicable Law . . . . . . . . . . . . . . . . . . 40
13.6 Unclaimed Amounts. . . . . . . . . . . . . . . . . 40
13.7 Adoption of Plan by Subsidiary . . . . . . . . . . 40
ARTICLE XIV
Top Heavy Provisions
14.1 Application. . . . . . . . . . . . . . . . . . . . 40
14.2 Special Top Heavy Definitions. . . . . . . . . . . 41
14.3 Special Top Heavy Provisions . . . . . . . . . . . 48
14.4 Effect of Change in Applicable Legislation or
Regulation . . . . . . . . . . . . . . . . . . . . 51
Exhibit 10.2
The CORPORATEplan for RetirementSM
(Profit Sharing/401(k) Plan)
A Fidelity Prototype Plan
Non-Standardized Adoption Agreement 002
Basic Plan No. 07
ADOPTION AGREEMENT
ARTICLE 1
NON-STANDARDIZED PROFIT SHARING PLAN
1.01 PLAN INFORMATION
(a) Name of Plan:
This is the Smith Corona Corporation Retirement Savings and
Investments Plan
(the "Plan").
(b) Type of Plan:
(1) X 401(k) and Profit Sharing
(2 ) Profit Sharing Only
(3) 401(k) Only
(c) Name of Plan Administrator, if not the Employer:
Benefit Administration Committee
Address: 839 Route 13 South
Phone Number: (607)753-6011
The Plan Administrator is the agent for service of legal
process for the Plan.
(d) Limitation Year (check one):
(1) Calendar Year
(2) x Plan Year
(3) Other:
(e) Three Digit Plan Number: 003
(f) Plan Year End (month/day): 12/31
(g) Plan Status (check one):
(1) Effective Date of new Plan:
(2) x Amendment Effective Date: _7/1/97__. This is
(check one):
(A) an amendment of The CORPORATEplan for
RetirementSM Adoption Agreement previously
executed by the Employer; or
(B) X a conversion from another plan document into
The CORPORATEplan for RetirementSM.
The original effective date of the Plan:
7/1/89
The substantive provisions of the Plan shall apply
prior to the Effective Date to the extent required
by the Tax Reform Act of 1986 or other applicable
laws.
1.02 EMPLOYER
(a) The Employer is Smith Corona Corporation
Address: 839 Route 13 South
Cortland, NY 13045
Contact's Name: David D. Verostko
Telephone Number: (607)758-5610
(1) Employer's Tax Identification Number: 51-0286862
(2) Business form of Employer (check one):
(A) x Corporation (D)
Governmental
(B) Sole proprietor or
partnership (E) Tax-exempt
organization
(C) Subchapter S Corporation
(F) Rural Electric Cooperative
(3) Employer's fiscal year end: 6/30
(4) Date business commenced: 1886 (IPO 1989)
(b) The term "Employer" includes the following Related
Employer(s)
(as defined in Section 2.01(a)(26)):
Attached
1.03 COVERAGE
(a) All Employees who meet the conditions specified below
will be eligible to participate in the Plan:
(1) Service requirement (check one):
(A) no service requirement.
(B) x three consecutive months of service (no
minimum number Hours of Service can be
required).
(C) six consecutive months of service (no minimum
number Hours of Service can be required).
(D) one Year of Service (1,000 Hours of Service
is required during the
Eligibility Computation Period.)
(2) Age requirement (check one):
(A) no age requirement.
(B) x must have attained age _21___ (not to exceed
21).
(3) The class of Employees eligible to participate in the
Plan (check one):
(A) includes all Employees of the Employer.
(B) x includes all Employees of the Employer
except for (check the appropriate box(es)):
(i)x Employees covered by a collective
bargaining agreement.
(ii) Highly Compensated Employees as
defined in Code Section 414(q).
(iii) x Leased Employees as defined in Section
2.01(a)(18).
(iv) x Nonresident aliens who do not receive
any earned income from the Employer which
constitutes United States source income.
(v) Other
Note: No exclusion in this section may create a
discriminatory class of employees. An
Employer's Plan must still pass the Internal
Revenue Code coverage and participation
requirements if one or more of the above groups
of Employees have been excluded from the Plan.
(b) The Entry Date(s) shall be (check one):
(1) the first day of each Plan Year (do not select if
Section 1.03 (a)(1)(D) is elected or if there is
an age requirement of greater than 20.5 in Section
1.03(a)(2)(B)).
(2) the first day of each Plan Year and the date six
months later.
(3) the first day of each Plan Year and the first day
of the fourth, seventh, and tenth months.
(4) X the first day of each month.
(c) Date of Initial Participation - An Employee will become a
Participant unless excluded by Section 1.03(a)(3) above
on the Entry Date immediately following the date the
Employee completes the service and age requirement(s) in
Section 1.03(a), if any, except (check one):
(1) x No exceptions.
(2) Employees employed on the Effective Date in Section
1.01(g) will become Participants on that date.
(3) Employees who meet the age and service requirement(s)
of Section 1.03(a) on the Effective Date in
Section 1.01(g) will become Participants on that date.
1.04 COMPENSATION
(a) For purposes of determining contributions under the Plan,
Compensation shall be as defined in Section 2.01(a)(7),
but excluding (check the appropriate box(es)):
(1) Overtime Pay.
(2) Bonuses.
(3) Commissions.
(4) X The value of a qualified or a non-qualified stock
option granted to an Employee by the Employer
to the extent such value is includable in the
Employee's taxable income.
Note: These exclusions shall not apply for purposes
of the "Top Heavy" requirements in Section 9.03 or
for allocating Discretionary Employer
Contributions if an Integrated Formula is elected
in Section 1.05(a)(2).
(5) No exclusions.
(b) Compensation for the First Year of Participation
Contributions for the Plan Year in which an Employee
first becomes a Participant shall be determined based on
the Employee's Compensation (check one):
(1) For the entire Plan Year.
(2) x For the portion of the Plan Year in which the
Employee is eligible to participate in the
Plan.
1.05 CONTRIBUTIONS
(a) x Employer Contributions :
(1) Fixed Formula - Nonintegrated Formula (check (A) or
(B)):
(A) Fixed Percentage Employer Contribution:
For each Plan Year, the Employer will
contribute for each eligible Participant an
amount equal to __________% (not to exceed
15%) of such Participant's Compensation.
(B) Fixed Flat Dollar Employer Contribution:
For each Plan Year, the Employer will
contribute for each eligible Participant an
amount equal to $_________.
(2) x Discretionary Formula
The Employer may decide each Plan Year whether to make a
discretionary Employer
contribution on behalf of eligible Participants in
accordance with Section 4.06. Such contributions shall
be allocated to eligible Participants based upon the
following (check (A) or (B)):
(A) XNonintegrated Allocation Formula:
In the ratio that each eligible Participant's
Compensation bears to the total Compensation
paid to all eligible Participants for the
Plan Year.
(B) Integrated Allocation Formula:
In accordance with Section 4.06.
Note:An Employer who maintains any other plan that
provides for Social Security Integration
(permitted disparity) may not elect (2)(B).
(3) Eligibility Requirement(s)
A Participant shall be entitled to Employer
Contributions for a Plan Year under this Subsection
(a) if the Participant satisfies the following
requirement(s) (Check the appropriate box(es) -
Options (B) and (C) may not be elected together):
(A) is employed by the Employer on the last day
of the Plan Year.
(B) earns at least 500 Hours of Service during the
Plan Year.
(C) earns at least 1,000 Hours of Service during
the Plan Year.
(D)x no requirements.
Note:If option (A), (B) or (C) above is selected
then Employer contributions can only be funded
by the Employer after Plan Year end. Employer
contributions funded during the Plan Year shall
not be subject to the eligibility requirements
of this Section 1.05(a)(3).
(b) x Deferral Contributions
(1) Regular Contributions
The Employer shall make a Deferral Contribution in
accordance with Section 4.01 on behalf of each
Participant who has an executed salary reduction
agreement in effect with the Employer for the
payroll period in question, not to exceed
__15_______% (no more than 15%) of Compensation for
that period.
(A) A Participant may increase or decrease, on
a prospective basis, his
salary reduction agreement percentage (check
one):
(i) As of the beginning of each
payroll period.
(ii) X As of the first day of each
month.
(iii) As of the next Entry Date.
(iv) (Specify, but must be at least
once per Plan Year)
(B)A Participant may revoke, on a prospective
basis, a salary reduction agreement at any time
upon proper notice to the Administrator but in
such case may not file a new salary reduction
agreement until (check one):
(i) The first day of the next Plan
Year.
(ii) Any subsequent Plan Entry Date.
(iii) x (Specify, but must be at least
once per Plan Year)
As of the first day of each month
(2) Catch-Up Contributions
The Employer may allow Participants upon proper
notice and approval to enter into a special salary
reduction agreement to make additional Deferral
Contributions in an amount up to 100% of their
Compensation for the payroll period(s) in the final
month of the Plan Year.
(3) Bonus Contributions
The Employer may allow Participants upon proper
notice and approval to enter into a special salary
reduction agreement to make Deferral Contributions
in an amount up to 100% of any Employer paid cash
bonuses made for such Participants during the Plan
Year. The Compensation definition elected by the
Employer in Section 1.04(a) must include bonuses if
bonus contributions are permitted.
Note: A Participant's contributions under (2) and/or
(3) may not cause the Participant to exceed
the percentage limit specified by the Employer
in (1) after the Plan Year. The Employer has
the right to restrict a Participant's right to
make Deferral Contributions if they will
adversely affect the Plan's ability to pass
the actual deferral percentage and/or the
actual contribution percentage test.
(4) Qualified Discretionary Contributions
The Employer may contribute an amount which it
designates as a Qualified Discretionary
Contribution to be included in the actual deferral
percentage or actual contribution percentage test.
Qualified Discretionary Contributions shall be
allocated to Non-highly Compensated Employees (check
one):
(A) in the ratio which each such Participant's
Compensation for the Plan Year bears to the
total of all such Participants' Compensation for
the Plan Year.
(B) as a flat dollar amount for each such
Participant for the Plan Year.
(c) x Matching Contributions (only if Section 1.05(b) is
checked)
(1) The Employer shall make a Matching Contribution on
behalf of each Participant in an amount equal to the
following percentage of a Participant's Deferral
Contributions during the Plan Year (check one):
(A) x 50%
(B) 100%
(C) %
(D) (Tiered Match) % of the first
% of the Participant's Compensation
contributed to the Plan,
% of the next % of
the Participant's Compensation contributed to
the Plan,
% of the next % of
the Participant's Compensation contributed to
the Plan.
Note: The percentages specified above for Matching
Contributions may not increase as the percentage
of Compensation contributed increases.
(E) The percentage declared for the year, if
any, by a Board of Directors' Resolution
(or by a Letter of Intent for a Sole
Proprietor or Partnership).
(2) The Employer may at Plan Year end make an
additional Matching Contribution equal to a
percentage declared by the Employer, through a
Board of Directors' Resolution (or by a Letter of
Intent for a Sole Proprietor or Partnership), of
the Deferral Contributions made by each
Participant during the Plan Year (only if an option
is checked under Section 1.05(c)(1)).
(3) x Matching Contribution Limits (check the
appropriate box):
(A) x Deferral Contributions in excess of
___6____% of the Participant's Compensation
for the period in question shall not be
considered for Matching Contributions.
Note: If the Employer elects a percentage
limit in (A) above and requests the Trustee
to account separately for matched and
unmatched Deferral Contributions, the
Matching Contributions allocated to each
Participant must be computed, and the
percentage limit applied, based upon each
payroll period.
(B) Matching Contributions for each Participant
for each Plan Year shall be limited to
$___________.
(4) Eligibility Requirement(s)
A Participant who makes Deferral Contributions
during the Plan Year under Section 1.05(b) shall be
entitled to Matching Contributions for that Plan
Year if the Participant satisfies the following
requirement(s) (Check the appropriate box(es).
Options (B) and (C) may not be elected together):
(A) Is employed by the Employer on the last day of
the Plan Year.
(B) Earns at least 500 Hours of Service during the
Plan Year.
(C) Earns at least 1,000 Hours of Service during
the Plan Year.
(D) Is not a Highly Compensated Employee for the
Plan Year.
(E) Is not a Partner of the Employer, if the
Employer is a Partnership.
(F)X No requirements.
Note: If option (A), (B) or (C) above is selected
then Matching Contributions can only be funded
by the Employer after the Plan Year ends. Any
Matching Contribution funded before Plan Year
end shall not be subject to the eligibility
requirements of this Section 1.05(c)(4)). If
option (A), (B), or (C) is adopted during a
Plan Year, such option shall not become
effective until the first day of the next Plan
Year.
(d) x Employee After-Tax Contributions (check one):
(1) Future Contributions
Participants may make voluntary non-deductible
Employee Contributions pursuant to Section 4.09 of
the Plan. This option may only be elected if the
Employer has elected to permit Deferral
Contributions under Section 1.05(b). Matching
Contributions by the Employer are not allowed on any
voluntary non-deductible Employee Contributions.
Withdrawals are limited to one per year unless
Employee Contributions were allowed under a previous
plan document which authorized more frequent
withdrawals.
(2) x Frozen Contributions
Participants may not make voluntary non-deductible
Employee Contributions, but the Employer does
maintain frozen Participant voluntary non-deductible
Employee Contribution Accounts.
1.06 RETIREMENT AGE(S)
(a) X The Normal Retirement Age under the Plan is (check
one):
(1) x age 65.
(2) age ____ (specify between 55 and 64).
(3) later of the age ___ (can not exceed 65) or the
fifth anniversary of the Participant's
Employment Commencement Date.
(b) The Early Retirement Age is the first day of the month
after the Participant attains age (specify
55 or greater) and completes Years
of Service for Vesting.
(c) x A Participant is eligible for Disability Retirement
if he/she (check the appropriate box(es)):
(1) x satisfies the requirements for benefits under the
Employer's Long-Term
Disability Plan.
(2) x satisfies the requirements for Social Security
disability benefits.
(3) is determined to be disabled by a physician
approved by the Employer.
1.07 VESTING SCHEDULE
(a) The Participant's vested percentage in Employer
contributions (Fixed or Discretionary) elected in Section
1.05(a) and/or Matching Contributions elected in Section
1.05(c) shall be based upon the schedule(s) selected below,
except with respect to any Plan Year during which the Plan
is Top-Heavy. The schedule elected in Section 1.12(d) shall
automatically apply for a Top-Heavy Plan Year and all Plan
Years thereafter unless the Employer has already elected a
more favorable vesting schedule below.
(1) Employer Contributions (2) Matching Contributions
(check one): (check one):
(A) N/A - No Employer Contributions (A) N/A - No Matching
Contributions
(B) 100% Vesting immediately (B) 100% Vesting immediately
(C) 3 year cliff (see C below) (C) 3 year cliff (see C below)
(D)x 5 year cliff (see D below) (D) x 5 year cliff (see D
below)
(E) 6 year graduated (see E below) (E) 6 year graduated (see E
below)
(F) 7 year graduated (see F below) (F) 7 year graduated (see F
below)
(G) Other vesting (complete G1 below) (G) Other vesting (complete
G2 below)
Years of Vesting Schedule
Service for
Vesting C D E F G1 G2
0 0% 0% ___ ___
0% 0%
1 0% 0% 0% ___ ___
0%
2 0% 0% 0% ___ ___
20%
3 100% 0% ___ ___
40% 20%
4 100% 0% ___ ___
60% 40%
5 100% 100% ___ ___
80% 60%
6 100% 100% ___ ___
100% 80%
7 100% 100%
100% 100% 100% 100%
Note: A schedule elected under G1 or G2 above must be at
least as favorable as one of the schedules in C, D, E or
F above.
(b) Years of Service for Vesting shall exclude:
(1) for new plans, service prior to the Effective Date
as defined in Section 1.01(g)(1).
(2) for existing plans converting from another plan
document, service prior to the original Effective
Date as defined in Section 1.01(g)(2).
1.08 PREDECESSOR EMPLOYER SERVICE
Service for purposes of eligibility in Section 1.03(a)(1)
and vesting in Section 1.07(a) of this Plan shall include
service with the following employer(s):
(a) N/A
(b)
(c)
(d)
1.09 PARTICIPANT LOANS
Participant loans (check (a) or (b)):
(a) x will be allowed in accordance with Section 7.09,
subject to a $1,000 minimum amount and will
be granted (check (1) or (2)):
(1)x for any purpose.
(2) for hardship withdrawal (as defined in Section
7.10) purposes only.
(b) will not be allowed.
1.10 HARDSHIP WITHDRAWALS
Participant withdrawals for hardship prior to termination of
employment (check one):
(a) x will be allowed in accordance with Section
7.10, subject to a $1,000 minimum amount.
(b) will not be allowed.
1.11 DISTRIBUTIONS
(a) Subject to Articles 7 and 8 and (b) below,
distributions under the Plan will be paid (check the
appropriate box(es)):
(1) x as a lump sum.
(2) x under a systematic withdrawal plan
(installments).
(b) Check if a Participant will be entitled to receive a
distribution of all or any portion of the following
Accounts without terminating employment upon
attainment of age 59 1/2 (check one):
(1) Deferral Contribution Account
(2) x All Accounts
(c) x Check if the Plan was converted (by plan amendment)
from another defined contribution plan, and the
benefits were payable as (check the appropriate
box(es)):
(1) x a form of single or joint and survivor life
annuity.
(2) an in-service withdrawal of vested employer
contributions maintained in a
participant's account (check (A) and/or (B)):
(A) for at least (24 or more)
months.
(B) after the Participant has at least 60
months of participation.
(3) x another distribution option that is a
"protected benefit" under Section 411(d)(6) of
the Internal Revenue Code. Please attach a separate
page identifying the distribution
option(s).
These additional forms of benefit may be provided for
such plans under Articles 7 or 8.
Note: Under Federal Law, distributions to
Participants must generally begin no later than
April 1 following the year in which the Participant
attains age 70 1/2.
1.12 TOP HEAVY STATUS
(a) The Plan shall be subject to the Top-Heavy Plan requirements
of Article 9 (check one):
(1) for each Plan Year.
(2) x for each Plan Year, if any, for which the Plan is
Top-Heavy as defined in Section 9.02.
(3) Not applicable. (This option is available for
plans covering only employees subject to a
collective bargaining agreement and there are no
Employer or Matching Contributions elected in
Section 1.05.)
(b) In determining Top-Heavy status, if necessary, for an
employer with at least one defined benefit plan, the
following assumptions shall apply:
(1) Interest rate: _5__% per annum
(2) Mortality table: 80% of the 1984 unsex pension
mortality table adjusted for a 3-year age setback
for member's spouse, if applicable.
(3) Not Applicable.
(c) In the event that the Plan is treated as Top-Heavy for a
Plan Year, each non-key Employee shall receive an
Employer Contribution of at least 3 (3,
4, 5, or 7 1/2) % of Compensation for the Plan Year in
accordance with Section 9.03 (check one):
(1) under this Plan in any event.
(2) x under this Plan only if the Participant is not
entitled to such contribution under another
qualified plan of the Employer.
(3) Not applicable. (This option is available for
plans covering only employees subject to a
collective bargaining agreement and there are no
Employer or Matching Contributions elected in
Section 1.05.)
Note: Such minimum Employer contribution may be less
than the percentage indicated in (c) above to
the extent provided in Section 9.03(a).
(d) In the event that the Plan is treated as Top-Heavy for a Plan
Year, the following vesting schedule shall apply instead of
the schedule(s) elected in Section 1.07(a) for such Plan Year
and each Plan Year thereafter (check one):
(1) 100% vested after ______________ (not in excess
of 3) Years of Service for Vesting.
(2) x Years of Service for Vesting Vesting
Percentage Must be at Least
0 __0______ 0%
1 __0______ 0%
2 __0______ 20%
3 100______ 40%
4 ______ __ 60%
5 ____ ____ 80%
6 _____ ___ 100%
Note: If the schedule(s) elected in Section
1.07(a) is(are) more favorable in all cases
than the schedule elected in (d) above, then
the schedule(s) in Section 1.07(a) will
continue to apply even in Plan Years in which
the Plan is Top-Heavy.
1.13 TWO OR MORE PLANS - Code Section 415 limitation on annual
additions
If the Employer maintains or ever maintained another qualified
plan in which any Participant in this Plan is (or was) a
participant or could become a participant, the Employer must
complete this section. The Employer must also complete this
section if it maintains a welfare benefit fund, as defined in
Section 419(e) of the Code, or an individual medical account, as
defined in Section 415(l)(2) of the Code, under which amounts are
treated as annual additions with respect to any Participant in
this Plan.
(a) If the Employer maintains, or maintained, any other defined
contribution plan which is not a Master or Prototype Plan,
Annual Additions for any Limitation Year to this Plan will
be limited (check one):
(1) x in accordance with Section 5.03 of this Plan.
(2) in accordance with another method set forth on
an attached separate sheet.
(3) Not Applicable.
(b) If the Employer maintains, or maintained, any defined
benefit plan(s), the sum of the Defined Contribution
Fraction and Defined Benefit Fraction for a Limitation Year
may not exceed the limitation specified in Code Section
415(e), modified by section 416(h)(1) of the Code. This
combined plan limit will be met as follows (check one):
(1) x Annual Additions to this Plan are limited so
that the sum of the Defined Contribution Fraction
and the Defined Benefit Fraction does not exceed 1.0.
(2) another method of limiting Annual Additions or
reducing projected annual benefits is set forth
on an attached schedule.
(3) Not Applicable.
1.14 ESTABLISHMENT OF TRUST AND INVESTMENT DECISIONS
(a) Investment Directions
Participant Accounts will be invested (check one):
(1) in accordance with investment directions provided to
the Trustee by the Employer for allocating all
Participant Accounts among the options listed in (b)
below.
(2) x in accordance with investment directions provided
to the Trustee by each Participant for allocating
his entire Account among the options listed in (b)
below.
(3) in accordance with investment directions provided to
the Trustee by each Participant for all contribution
sources in a Participant's Account except the
following sources shall be invested as directed by
the Employer (check (A) and/or (B)):
(A) Fixed or Discretionary Employer
Contributions
(B) Employer Matching Contributions
The Employer must direct the applicable sources
among the same investment options made available for
Participant directed sources listed in (b) below.
(b) Plan Investment Options
The Employer hereby establishes a Trust under the Plan in
accordance with the provisions of Article 14, and the
Trustee signifies acceptance of its duties under Article 14
by its signature below. Participant Accounts under the
Trust will be invested among the Fidelity Funds listed below
pursuant to Participant and/or Employer directions.
Fund Name Fund Number
(1) Fidelity Retirement Money Market 630
(2) Fidelity Manage Income Portfolio 632
(3) Fidelity U.S. Bond Index 651
(4) Fidelity Puritan 004
(5) Fidelity U.S. Equity Index 650
(6) Fidelity Contra Fund 022
(7) Neuburger & Berman Partners Trust
(8) Fidelity Low Priced Stock 316
(9) PBHG Growth
(10) Fidelity Drivsfied International 325
To the extent that the Employer selects as an
investment option the Managed Income Portfolio of
the Fidelity Group Trust for Employee Benefit Plans
(the "Group Trust"), the Employer hereby (A) agrees
to the terms of the Group Trust and adopts said
terms as a part of this Agreement and (B)
acknowledges that it has received from the Trustee a
copy of the Group Trust, the Declaration of Separate
Fund for the Managed Income Portfolio of the Group
Trust, and the Circular for the Managed Income
Portfolio.
Note: The method and frequency for change of
investments will be determined under the rules
applicable to the selected funds or, if applicable,
the rules of the Employer adopted in accordance with
Section 6.03. Information will be provided
regarding expenses, if any, for changes in
investment options.
1.15 RELIANCE ON OPINION LETTER
An adopting Employer may not rely on the opinion letter issued by
the National Office of the
Internal Revenue Service as evidence that this Plan is qualified
under Section 401 of the Code.
If the Employer wishes to obtain reliance that his or her Plan(s)
are qualified, application for a determination letter should be
made to the appropriate Key District Director of the Internal
Revenue Service. Failure to fill out the Adoption Agreement
properly may result in
disqualification of the Plan.
This Adoption Agreement may be used only in conjunction with
Fidelity Prototype Plan Basic
Plan Document No. 07. The Prototype Sponsor shall inform the
adopting Employer of any amendments made to the Plan or of the
discontinuance or abandonment of the prototype plan document.
EXECUTION PAGE
(Fidelity's Copy)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement
to be executed this ____1st_day of __May__________, 1997____.
Employer Smith Corona Corporation
By /s/ John A. Piontkowski
Title Senior Vice President and
Chief Financial Officer
Employer Smith Corona Corporation
By /s/ David Verostko
Title Vice President - Human Resouces
Accepted by
Fidelity Management Trust Company, as Trustee
By /s/ Eric L. Wichmann Date:May 14, 1997
Title
EXECUTION PAGE
(Employer's Copy)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement
to be executed this ___1st__day of ______May______, 19_97__.
Employer Smith Corona Corporation
By /s/ John A. Piontkowski
Title Senior Vice President and
Chief Financial Officer
Employer Smith Corona Corporation
By /s/ David P. Verostko
Title Vice President - Human Resources
Accepted by
Fidelity Management Trust Company, as Trustee
By /s/ Eric L. Wichmann Date: May 24, 1997
Title
Smith Corona Corporation
Adoption Agreement Attachment
Section 1.02(b)
Related Employers
Smith Corona (UK) Holdings Ltd.
Coronasphere, Inc.
Smith Corona Private Limited
Smith Corona Services Private Limited
PT Smith Corona Batam
Smith Corona S.A.
Smith Corona (Canada) Ltd.
Smith Corona GmbH
Smith Corona France S.A.R.L.
Smith Corona de Mexico S.A. de C.V.
Smith Corona Corporation
Adoption Agreement Attachment
Section 1.11(c)(3)
The option to be included in this section is the ability of the
Member to withdraw the frozen after-tax contributions referred to
in Section 1.05(d) of the Agreement and Section 8.1(c) of the
current SCC plan document.
Exhibit 10.3
The CORPORATEplan for Retirement
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
THE CORPORATE PLAN FOR RETIREMENT
PROFIT SHARING/401(K) PLAN
ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Reemployment
3.03 - Cessation or Resumption of Participation Following a
Change in Status
3.04 - Participation by Owner-Employee; Controlled
Businesses
3.05 - Omission of Eligible Employee
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Additional Limit on Deferral Contributions
4.03 - Matching Contributions
4.04 - Limit on Matching Contributions and Employee
Contributions
4.05 - Special Rules
4.06 - Fixed/Discretionary Employer Contributions
4.07 - Time of Making Employer Contributions
4.08 - Return of Employer Contributions
4.09 - Employee Contributions
4.10 - Rollover Contributions
4.11 - Deductible Voluntary Employee Contributions
4.12 - Additional Rules for Paired Plans
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
5.02 - Valuation of Accounts
5.03 - Code Section 415 Limitations
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
6.03 - Participant Directions to Trustee
ARTICLE 7
RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Late Retirement
7.03 - Disability Retirement
7.04 - Death
7.05 - Other Termination of Employment
7.06 - Separate Account
7.07 - Forfeitures
7.08 - Adjustment for Investment Experience
7.09 - Participant Loans
7.10 - In-Service Withdrawals
7.11 - Prior Plan In-Service Distribution Rules
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF
SERVICE
8.01 - Distribution of Benefits to Participants and
Beneficiaries
8.02 - Annuity Distributions
8.03 - Joint and Survivor Annuities/Preretirement Survivor
Annuities
8.04 - Installment Distributions
8.05 - Immediate Distributions
8.06 - Determination of Method of Distribution
8.07 - Notice to Trustee
8.08 - Time of Distribution
8.09 - Whereabouts of Participants and Beneficiaries
ARTICLE 9
TOP-HEAVY PROVISIONS
9.01 - Application
9.02 - Definitions
9.03 - Minimum Contribution
9.04 - Adjustment to the Limitation on Contributions and
Benefits
9.05 - Minimum Vesting
ARTICLE 10
AMENDMENT AND TERMINATION
10.01 - Amendment by Employer
10.02 - Amendment by Prototype Sponsor
10.03 - Amendments Affecting Vested and/or Accrued Benefits
10.04 - Retroactive Amendments
10.05 - Termination
10.06 - Distribution Upon Termination of the Plan
10.07 - Merger or Consolidation of Plan; Transfer of Plan
Assets
ARTICLE 11
AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF
FUNDS
TO OR FROM OTHER QUALIFIED PLANS
11.01 - Amendment and Continuation of Predecessor Plan
11.02 - Transfer of Funds from an Existing Plan
11.03 - Acceptance of Assets by Trustee
11.04 - Transfer of Assets from Trust
ARTICLE 12
MISCELLANEOUS
12.01 - Communication to Participants
12.02 - Limitation of Rights
12.03 - Nonalienability of Benefits and Qualified Domestic
Relations Orders
12.04 - Facility of Payment
12.05 - Information Between Employer and Trustee
12.06 - Effect of Failure to Qualify Under Code
12.07 - Notices
12.08 - Governing Law
ARTICLE 13
PLAN ADMINISTRATION
13.01 - Powers and Responsibilities of the Administrator
13.02 - Nondiscriminatory Exercise of Authority
13.03 - Claims and Review Procedures
13.04 - Named Fiduciary
13.05 - Costs of Administration
ARTICLE 14
TRUST AGREEMENT
14.01 - Acceptance of Trust Responsibilities
14.02 - Establishment of Trust Fund
14.03 - Exclusive Benefit
14.04 - Powers of Trustee
14.05 - Accounts
14.06 - Approving of Accounts
14.07 - Distribution from Trust Fund
14.08 - Transfer of Amounts from Qualified Plan
14.09 - Transfer of Assets from Trust
14.10 - Separate Trust or Fund for Existing Plan Assets
14.11 - Voting; Delivery of Information
14.12 - Compensation and Expenses of Trustee
14.13 - Reliance by Trustee on other Persons
14.14 - Indemnification by Employer
14.15 - Consultation by Trustee with Counsel
14.16 - Persons Dealing with the Trustee
14.17 - Resignation or Removal of Trustee
14.18 - Fiscal Year of the Trust
14.19 - Discharge of Duties by Fiduciaries
14.20 - Amendment
14.21 - Plan Termination
14.22 - Permitted Reversion of Funds to Employer
14.23 - Governing Law
Article 1. Adoption Agreement.
Article 2. Definitions.
2.01. Definitions.
(a) Wherever used herein, the following terms have the
meanings set forth below, unless a different meaning is
clearly required by the context:
(1) "Account" means an account established on
the books of the Trust for the purpose of recording
contributions made on behalf of a Participant and any
income, expenses, gains or losses incurred thereon.
(2) "Administrator" means the Employer
adopting this Plan, or other person designated by the
Employer in Section 1.01(c).
(3) "Adoption Agreement" means Article 1,
under which the Employer establishes and adopts, or
amends, the Plan and Trust and designates the
optional provisions selected by the Employer, and the
Trustee accepts its responsibilities under Article
14. The provisions of the Adoption Agreement shall
be an integral part of the Plan.
(4) "Annuity Starting Date" means the first
day of the first period for which an amount is
payable as an annuity or in any other form.
(5) "Beneficiary" means the person or persons
entitled under Section 7.04 to receive benefits under
the Plan upon the death of a Participant, provided
that for purposes of Section 7.04 such term shall be
applied in accordance with Section 401(a)(9) of the
Code and the regulations thereunder.
(6) "Code" means the Internal Revenue Code of
1986, as amended from time to time.
(7) "Compensation" shall mean
(A) for purposes of Article 4
(Contributions), compensation as defined in
Section 5.03(e)(2) excluding any items elected by
the Employer in Section 1.04(a), reimbursements or
other expense allowances, fringe benefits (cash
and non-cash), moving expenses, deferred
compensation and welfare benefits, but including
amounts that are not includable in the gross
income of the Participant under a salary reduction
agreement by reason of the application of Sections
125, 402(a)(8), 402(h), or 403(b) of the Code; and
(B) for purposes of Section 2.01(a)(16)
(Highly Compensated Employees), Section 5.03 (Code
Section 415 Limitations), and Section 9.03 (Top-
Heavy Plan Minimum Contribution), compensation as
defined in Section 5.03(e)(2).
Compensation shall generally be based on
the amount actually paid to the Participant during
the Plan Year or, for purposes of Article 4 if so
elected by the Employer in Section 1.04(b), during
that portion of the Plan Year during which the
Employee is eligible to participate. Notwithstanding
the preceding sentence, compensation for purposes of
Section 5.03 (Code Section 415 Limitations) shall be
based on the amount actually paid or made available
to the Participant during the Limitation Year.
Compensation for the initial Plan Year for a new plan
shall be based upon eligible Participant
Compensation, subject to Section 1.04(b), from the
Effective Date listed in Section 1.01(g)(1) through
the end of the first Plan Year.
In the case of any Self-Employed
Individual, Compensation shall mean the Individual's
Earned Income.
For years beginning after December 31,
1988, the annual Compensation of each Participant
taken into account for determining all benefits
provided under the plan for any determination period
shall not exceed $200,000. This limitation shall be
adjusted by the Secretary at the same time and in the
same manner as under Section 415(d) of the Code,
except that the dollar increase in effect on January
1 of any calendar year is effective for years
beginning in such calendar year and the first
adjustment to the $200,000 limitation is effected on
January 1, 1990. If a plan determines Compensation
on a period of time that contains fewer than 12
calendar months, then the annual Compensation limit
is the amount equal to the annual Compensation limit
for the calendar year in which the Compensation
period begins multiplied by the ratio obtained by
dividing the number of full months in the period by
12.
If Compensation for any prior
determination period is taken into account in
determining an Employee's allocations or benefits for
the current determination period, the Compensation
for such prior year is subject to the applicable
annual compensation limit in effect for that prior
year. For this purpose, for years beginning before
January 1, 1990, the applicable annual compensation
limit is $200,000.
In determining the Compensation of a
Participant for purposes of this limitation, the
rules of Section 414(q)(6) of the Code shall apply,
except that in applying such rules, the term "family"
shall include only the spouse of the Participant and
any lineal descendants of the Participant who have
not attained age 19 before the close of the year. If
the $200,000 limitation is exceeded as a result of
the application of these rules, then the limitation
shall be prorated among the affected individuals in
proportion to each such individual's Compensation as
determined under this Section prior to the
application of this limitation.
(8) "Earned Income" means the net earnings of
a Self-Employed Individual derived from the trade or
business with respect to which the Plan is
established and for which the personal services of
such individual are a material income-providing
factor, excluding any items not included in gross
income and the deductions allocated to such items,
except that for taxable years beginning after
December 31, 1989 net earnings shall be determined
with regard to the deduction allowed under Section
164(f) of the Code, to the extent applicable to the
Employer. Net earnings shall be reduced by
contributions of the Employer to any qualified plan,
to the extent a deduction is allowed to the Employer
for such contributions under Section 404 of the Code.
(9) "Eligibility Computation Period" means each
12-consecutive month period beginning with the
Employment Commencement Date and each anniversary
thereof or, in the case of an Employee who, before
completing the eligibility requirements set forth in
Section 1.03(a)(1), incurs a break in service for
participation purposes and thereafter returns to the
employ of the Employer or Related Employer, each 12-
consecutive month period beginning with the first day
of reemployment and each anniversary thereof.
A "break in service for participation purposes" shall
mean an Eligibility Computation Period during which
the participant does not complete more than 500 Hours
of Service with the Employer.
(10) "Employee" means any employee of the
Employer, any Self-Employed Individual or Owner-
Employee. The Employer must specify in Section
1.03(a)(3) any Employee or class of Employees not
eligible to participate in the Plan. If the Employer
elects to exclude collective bargaining employees,
the exclusion applies to any employee of the Employer
included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee
representatives and one or more employers unless the
collective bargaining agreement requires the employee
to be included within the Plan. The term "employee
representatives" does not include any organization
more than half the members of which are owners,
officers, or executives of the Employer.
For purposes of the Plan, an individual
shall be considered to become an Employee on the date
on which he first completes an Hour of Service and he
shall be considered to have ceased to be an Employee
on the date on which he last completes an Hour of
Service. The term also includes a Leased Employee,
such that contributions or benefits provided by the
leasing organization which are attributable to
services performed for the Employer shall be treated
as provided by the Employer. Notwithstanding the
above, a Leased Employee shall not be considered an
Employee if Leased Employees do not constitute more
than 20 percent of the Employer's non-highly
compensated work-force (taking into account all
Related Employers) and the Leased Employee is covered
by a money purchase pension plan maintained by the
leasing organization and providing (A) a
nonintegrated employer contribution rate of at least
10 percent of compensation, as defined for purposes
of Section 415(c)(3) of the Code, but including
amounts contributed pursuant to a salary reduction
agreement which are excludable from gross income
under Section 125, Section 402(a)(8), Section 402(h)
or Section 403(b) of the Code, (B) full and immediate
vesting, and (C) immediate participation by each
employee of the leasing organization.
(11) "Employer" means the employer named in
Section 1.02(a) and any Related Employers required by
this Section 2.01(a)(11). If Article 1 of the
Employer's Plan is the Standardized Adoption
Agreement, the term "Employer" includes all Related
Employers. If Article 1 of the Employer's Plan is
the Non-standardized Adoption Agreement, the term
"Employer" includes those Related Employers
designated in Section 1.02(b).
(12) "Employment Commencement Date" means the
date on which the Employee first performs an Hour of
Service.
(13) "ERISA" means the Employee Retirement Income
Security Act of 1974, as from time to time amended.
(14) "Fidelity Fund" means any Registered
Investment Company or Managed Income Portfolio of the
Fidelity Group Trust for Employee Benefit Plans which
is made available to plans utilizing the
CORPORATEplan for Retirement.
(15) "Fund Share" means the share, unit, or other
evidence of ownership in a Fidelity Fund.
(16) "Highly Compensated Employee" means both
highly compensated active Employees and highly
compensated former Employees.
A highly compensated active Employee
includes any Employee who performs service for the
Employer during the determination year and who,
during the "look-back year," (A) received
compensation from the Employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code),
(B) received compensation from the Employer in excess
of $50,000 (as adjusted pursuant to Section 415(d) of
the Code) and was a member of the top-paid group for
such year, or (C) was an officer of the Employer and
received compensation during such year that is
greater than 50 percent of the dollar limitation in
effect under Section 415(b)(1)(A) of the Code. The
term "Highly Compensated Employee" also includes (i)
Employees who are both described in the preceding
sentence if the term "determination year" is
substituted for the term "look-back year" and the
Employee is one of the 100 Employees who received the
most compensation from the Employer during the
determination year, and (ii) Employees who are 5-
percent owners at any time during the look-back year
or determination year.
If no officer has satisfied the
compensation requirement of (C) above during either a
determination year or look-back year, the highest
paid officer for such year shall be treated as a
highly compensated Employee.
For this purpose, the determination year
shall be the Plan Year. The look-back year shall be
the twelve-month period immediately preceding the
determination year. The Employer may elect to make
the look-back year calculation for a determination on
the basis of the calendar year ending with or within
the applicable determination year, as prescribed by
Section 414(q) of the Code and the regulations issued
thereunder.
A highly compensated former Employee
includes any Employee who separated from service (or
was deemed to have separated) prior to the
determination year, performs no service for the
Employer during the determination year, and was a
highly compensated active Employee for either the
separation year or any determination year ending on
or after the Employee's 55th birthday.
If an Employee is, during a determination
year or look-back year, a family member of either a 5-
percent owner who is an active or former Employee or
a highly compensated Employee who is one of the 10
most highly compensated Employees ranked on the basis
of compensation paid by the Employer during such
year, then the family member and the 5-percent owner
or top-ten highly compensated Employee shall be
aggregated. In such case, the family member and 5-
percent owner or top-ten highly compensated Employee
shall be treated as a single Employee receiving
compensation and plan contributions or benefits equal
to the sum of such compensation and contributions or
benefits of the family member and 5-percent owner or
top-ten highly compensated Employee. For purposes of
this Section, family member includes the spouse,
lineal ascendants and descendants of the Employee or
former Employee and the spouses of such lineal
ascendants and descendants.
The determination of who is a highly
compensated Employee, including the determinations of
the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees
treated as officers, and the compensation that is
considered, will be made in accordance with Section
414(q) of the Code and the regulations thereunder.
(17) "Hour of Service" means, with respect to any
Employee,
(A) Each hour for which the Employee is
directly or indirectly paid, or entitled to
payment, for the performance of duties for the
Employer or a Related Employer, each such hour to
be credited to the Employee for the Eligibility
Computation Period in which the duties were
performed;
(B) Each hour for which the Employee is
directly or indirectly paid, or entitled to
payment, by the Employer or Related Employer
(including payments made or due from a trust fund
or insurer to which the Employer contributes or
pays premiums) on account of a period of time
during which no duties are performed (irrespective
of whether the employment relationship has
terminated) due to vacation, holiday, illness,
incapacity, disability, layoff, jury duty,
military duty, or leave of absence, each such hour
to be credited to the Employee for the Eligibility
Computation Period in which such period of time
occurs, subject to the following rules:
(i) No more than 501 Hours of Service
shall be credited under this paragraph (B) on
account of any single contin-uous period during
which the Employee performs no duties;
(ii) Hours of Service shall not be
credited under this paragraph (B) for a payment
which solely reimburses the Employee for
medically-related expenses, or which is made or
due under a plan maintained solely for the
purpose of complying with applicable workmen's
compensation, unemployment compensation or
disability insurance laws; and
(iii) If the period during which the
Employee performs no duties falls within two or
more Eligibility Computation Periods and if the
payment made on account of such period is not
calculated on the basis of units of time, the
Hours of Service credited with respect to such
period shall be allocated between not more than
the first two such Eligibility Computation
Periods on any reasonable basis consistently
applied with respect to similarly situated
Employees; and
(C) Each hour not counted under paragraph
(A) or (B) for which back pay, irrespective of
mitigation of damages, has been either awarded or
agreed to be paid by the Employer or a Related
Employer, shall be credited to the Employee for
the Eligibility Computation Period to which the
award or agreement pertains rather than the
Eligibility Computation Period in which the award
agreement or payment is made.
For purposes of determining Hours of
Service, Employees of the Employer and of all
Related Employers will be treated as employed by a
single employer. For purposes of paragraphs (B)
and (C) above, Hours of Service will be calculated
in accordance with the provisions of Section
2530.200b-2(b) of the Department of Labor
regulations, which are incorporated herein by
reference.
Solely for purposes of determining whether a
break in service for participation purposes has
occurred in a computation period, an individual
who is absent from work for maternity or paternity
reasons shall receive credit for the hours of
service which would otherwise have been credited
to such individual but for such absence, or in any
case in which such hours cannot be determined, 8
hours of service per day of such absence. For
purposes of this paragraph, an absence from work
for maternity or paternity reasons means an
absence (i) by reason of the pregnancy of the
individual, (ii) by reason of a birth of a child
of the individual, (iii) by reason of the
placement of a child with the individual in
connection with the adoption of such child by such
individual, or (iv) for purposes of caring for
such child for a period beginning immediately
following such birth or placement. The hours of
service credited under this paragraph shall be
credited (a) in the computation period in which
the absence begins if the crediting is necessary
to prevent a break in service in that period, or
(b) in all other cases, in the following
computation period.
(18) "Leased Employee" means any individual who
provides services to the Employer or a Related Employer
(the "recipient") but is not otherwise an employee of
the recipient if (A) such services are provided pursuant
to an agreement between the recipient and any other
person (the "leasing organization"), (B) such
individual has performed services for the recipient (or
for the recipient and any related persons within the
meaning of Section 414(n)(6) of the Code) on a
substantially full-time basis for at least one year, and
(C) such services are of a type historically performed
by employees in the business field of the recipient.
(19) "Normal Retirement Age" means the normal
retirement age specified in Section 1.06(a) of the
Adoption Agreement. If the Employer enforces a
mandatory retirement age, the Normal Retirement Age is
the lesser of that mandatory age or the age specified in
Section 1.06(a).
(20) "Owner-Employee" means, if the Employer is a sole
proprietorship, the individual who is the sole
proprietor, or if the Employer is a partnership, a
partner who owns more than 10 percent of either the
capital interest or the profits interest of the
partnership.
(21) "Participant" means any Employee who participates
in the Plan in accordance with Article 3 hereof.
(22) "Plan" means the plan established by the Employer
in the form of the prototype plan, as set forth herein
as a new plan or as an amendment to an existing plan, by
executing the Adoption Agreement, together with any and
all amendments hereto.
(23) "Plan Year" means the 12-consecutive-month period
ending on the date designated by the Employer in Section
1.01(f).
(24) "Prototype Sponsor" means Fidelity Management and
Research Company or its successor.
(25) "Registered Investment Company" means any one or
more corporations, partnerships or trusts registered
under the Investment Company Act of 1940 for which
Fidelity Management and Research Company serves as
investment advisor.
(26) "Related Employer" means any employer other than
the Employer named in Section 1.02(a) if the Employer
and such other employer are members of a controlled
group of corporations (as defined in Section 414(b) of
the Code) or an affiliated service group (as defined in
Section 414(m)), or are trades or businesses (whether or
not incorporated) which are under common control (as
defined in Section 414(c)), or such other employer is
required to be aggregated with the Employer pursuant to
regulations issued under Section 414(o).
(27) "Self-Employed Individual" means an individual who
has Earned Income for the taxable year from the Employer
or who would have had Earned Income but for the fact
that the trade or business had no net profits for the
taxable year.
(28) "Trust" means the trust created by the Employer in
accordance with the provisions of Section 14.01.
(29) "Trust Agreement" means the agreement between the
Employer and the Trustee, as set forth in Article 14,
under which the assets of the Plan are held,
administered, and managed.
(30) "Trust Fund" means the property held in Trust by
the Trustee for the Accounts of the Participants and
their Beneficiaries.
(31) "Trustee" means the Fidelity Management Trust
Company, or its successor.
(32) "Year of Service for Participation" means, with
respect to any Employee, an Eligibility Computation
Period during which the Employee has been credited with
at least 1,000 Hours of Service. If the Plan maintained
by the Employer is the plan of a predecessor employer,
an Employee's Years of Service for Participation shall
include years of service with such predecessor employer.
In any case in which the Plan maintained by the Employer
is not the plan maintained by a predecessor employer,
service for such predecessor shall be treated as service
for the Employer, to the extent provided in Section
1.08.
(33)"Years of Service for Vesting" means, with respect
to any Employee, the number of whole years of his
periods of service with the Employer or a Related
Employer (the elapsed time method to compute vesting
service), subject to any exclusions elected by the
Employer in Section 1.07(b). An Employee will receive
credit for the aggregate of all time period(s)
commencing with the Employee's Employment Commencement
Date and ending on the date a break in service begins,
unless any such years are excluded by Section 1.07(b).
An Employee will also receive credit for any period of
severance of less than 12 consecutive months.
Fractional periods of a year will be expressed in terms
of days.
In the case of a Participant who has 5 consecutive 1-
year breaks in service, all years of service after such
breaks in service will be disregarded for the purpose of
vesting the Employer-derived account balance that
accrued before such breaks, but both pre-break and post-
break service will count for the purposes of vesting the
Employer-derived account balance that accrues after such
breaks. Both accounts will share in the earnings and
losses of the fund.
In the case of a Participant who does not have 5
consecutive 1-year breaks in service, both the pre-break
and post-break service will count in vesting both the
pre-break and post-break employer-derived account
balance.
A break in service is a period of severance of at
least 12 consecutive months. Period of severance is a
continuous period of time during which the Employee is
not employed by the Employer. Such period begins on the
date the Employee retires, quits or is discharged, or if
earlier, the 12-month anniversary of the date on which
the Employee was otherwise first absent from service.
In the case of an individual who is absent from work
for maternity or paternity reasons, the 12-consecutive
month period beginning on the first anniversary of the
first date of such absence shall not constitute a break
in service. For purposes of this paragraph, an absence
from work for maternity or paternity reasons means an
absence (A) by reason of the pregnancy of the
individual, (B) by reason of the birth of a child of the
individual, (C) by reason of the placement of a child
with the individual in connection with the adoption of
such child by such individual, or (D) for purposes of
caring for such child for a period beginning immediately
following such birth or placement.
If the Plan maintained by the Employer is the plan of
a predecessor employer, an Employee's Years of Service
for Vesting shall include years of service with such
predecessor employer. In any case in which the Plan
maintained by the Employer is not the plan maintained by
a predecessor employer, service for such predecessor
shall be treated as service for the Employer to the
extent provided in Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender
but include the feminine gender unless the context clearly
indicates otherwise.
Article 3. Participation.
3.01. Date of Participation. All Employees in the eligible
class (as defined in Section 1.03(a)(3)) who are in the
service of the Employer on the Effective Date will become
Participants on the date elected by the Employer in Section
1.03(c). Any other Employee will become a Participant in
the Plan as of the first Entry Date on which he first
satisfies the eligibility requirements set forth in Section
1.03(a). In the event that an Employee who is not a member
of an eligible class (as defined in Section 1.03(a)(3))
becomes a member of an eligible class, the individual shall
participate immediately if such individual had already
satisfied the eligibility requirements and would have
otherwise previously become a Participant.
If an eligibility requirement other than one Year of Service
is elected in 1.03(a)(1), an Employee may not be required to
complete a minimum number of Hours of Service before
becoming a Participant. An otherwise eligible Employee
subject to a minimum months of service requirement shall
become a Participant on the first Entry Date following his
completion of the required number of consecutive months of
employment measured from his Employment Commencement Date to
the coinciding date in the applicable following month. For
purposes of determining consecutive months of service, the
Related Employer and predecessor employer rules contained in
Sections 2.01(a)(17) and 2.01(a)(32) shall apply.
3.02. Resumption of Participation Following Reemployment.
If a Participant ceases to be an Employee and thereafter
returns to the employ of the Employer he will be treated as
follows:
(a) he will again become a Participant on the first date
on which he completes an Hour of Service for the
Employer following his reemployment and is in the
eligible class of Employees as defined in Section
1.03(a)(3), and
(b) any distribution which he is receiving under the
Plan will cease except as otherwise required under
Section 8.08.
3.03. Cessation or Resumption of Participation Following a
Change in Status. If any Participant continues in the
employ of the Employer or Related Employer but ceases to be
a member of an eligible class as defined in Section
1.03(a)(3), the individual shall continue to be a
Participant for most purposes until the entire amount of his
benefit is distributed; however, the individual shall not be
entitled to receive an allocation of contributions or
forfeitures during the period that he is not a member of the
eligible class. Such Participant shall continue to receive
credit for service completed during the period for purposes
of determining his vested interest in his Accounts. In the
event that the individual subsequently again becomes a
member of an eligible class of Employees, the individual
shall resume full participation immediately upon the date of
such change in status.
3.04. Participation by Owner-Employee; Controlled
Businesses.
If the Plan provides contributions or benefits for one or
more Owner-Employees who control both the trade or business
with respect to which the Plan is established and one or
more other trades or businesses, the Plan and any plan
established with respect to such other trades or businesses
must, when looked at as a single plan, satisfy Sections
401(a) and 401(d) of the Code with respect to the employees
of this and all such other trades or businesses. If the
Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or
businesses, the Employees of each such other trade or
business must be included in a plan which satisfies Sections
401(a) and 401(d) of the Code and which provides
contributions and benefits not less favorable than provided
for Owner-Employees under the Plan.
If an individual is covered as an Owner-Employee under
the plans of two or more trades or businesses which are not
controlled and the individual controls a trade or business,
then the contributions or benefits of the Employees under
the plan of the trades or businesses which are controlled
must be as favorable as those provided for him under the
most favorable plan of the trade or business which is not
controlled.
For purposes of this Section, an Owner-Employee, or two
or more Owner-Employees, shall be considered to control a
trade or business if such Owner-Employee, or such Owner-
Employees together, (a) own the entire interest in an
unincorporated trade or business or (b) in the case of a
partnership, own more than 50 percent of either the capital
interest or the profits interest in such partnership. For
this purpose, an Owner-Employee, or two or more Owner-
Employees, shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a
partnership controlled by such Owner-Employee or such Owner-
Employees.
3.05. Omission of Eligible Employee. If any Employee who
should be included as a Participant in the Plan is
erroneously omitted and discovery of such omission is not
made until after a contribution by his Employer for the year
has been made, the Employer shall make a subsequent
contribution, if necessary, so that the omitted Employee
receives the total amount which the said Employee would have
received had he not been omitted. For purposes of this
Section 3.05, the term "contribution" shall not include
Deferral Contributions and Matching Contributions made
pursuant to Sections 4.01 and 4.03, respectively.
Article 4. Contributions.
4.01. Deferral Contributions.
(a) 4.01. If so provided by the Employer in Section
1.05(b), each Participant may elect to execute a salary
reduction agreement with the Employer to reduce his
Compensation by a specified percentage not exceeding 15%
per payroll period, subject to any exceptions elected by
the Employer in Section 1.05(b)(2) and 1.05(b)(3) and
equal to a whole number multiple of one (1) percent.
Such agreement shall become effective on the first day
of the first payroll period for which the Employer can
reasonably process the request. The Employer shall make
a Deferral Contribution on behalf of the Participant
corresponding to the amount of said reduction, subject
to the restrictions set forth below. Under no
circumstances may a salary reduction agreement be
adopted retroactively.
(b) A Participant may elect to change or discontinue the
percentage by which his Compensation is reduced by
notice to the Employer as provided in Section
1.05(b)(1).
(c) No Participant shall be permitted to have Deferral
Contributions made under the Plan, or any other
qualified plan maintained by the Employer, during the
taxable year, in excess of the dollar limitation
contained in Section 402(g) of the Code in effect at the
beginning of such taxable year.
A Participant may assign to the Plan any Excess
Deferrals made during the taxable year of the
Participant by notifying the Plan Administrator on or
before March 15 following the taxable year of the amount
of the Excess Deferrals to be assigned to the Plan. A
Participant is deemed to notify the Administrator of any
Excess Deferrals that arise by taking into account only
those Deferral Contributions made to the Plan and any
other plan of the Employer. Notwithstanding any other
provision of the Plan, Excess Deferrals, plus any income
and minus any loss allocable thereto, shall be
distributed no later than April 15 to any Participant to
whose Account Excess Deferrals were so assigned for the
preceding year and who claims Excess Deferrals for such
taxable year.
"Excess Deferrals" shall mean those Deferral
Contributions that are includable in a Participant's
gross income under Section 402(g) of the Code to the
extent such Participant's Deferral Contributions for a
taxable year exceed the dollar limitation under such
Code section. For purposes of determining Excess
Deferrals, the term "Deferral Contributions" shall
include the sum of all Employer Contributions made on
behalf of such Participant pursuant to an election to
defer under any qualified CODA as described in Section
401(k) of the Code, any simplified employee pension cash
or deferred arrangement as described in Section
402(h)(1)(B) of the Code, any eligible deferred
compensation plan under Section 457 of the Code, any
plan as described under Section 501(c)(18) of the Code,
and any Employer Contributions made on the behalf of a
Participant for the purchase of an annuity contract
under Section 403(b) of the Code pursuant to a salary
reduction agreement. Deferral Contributions shall not
include any deferrals properly distributed as excess
annual additions. Excess Deferrals shall be treated as
annual additions under the Plan, unless such amounts are
distributed no later than the first April 15 following
the close of the Participant's taxable year.
Excess Deferrals shall be adjusted for any income or
loss up to the date of distribution. The income or loss
allocable to Excess Deferrals is (1) income or loss
allocable to the Participant's Deferral Contributions
Account for the taxable year multiplied by a fraction,
the numerator of which is such Participant's Excess
Deferrals for the year and the denominator is the
Participant's Account balance attributable to Deferral
Contributions without regard to any income or loss
occurring during such taxable year, or (2) such other
amount determined under any reasonable method, provided
that such method is used consistently for all
Participants in calculating the distributions required
under this Section 4.01(c) and Sections 4.02(d) and
4.04(d) for the Plan Year, and is used by the Plan in
allocating income or loss to Participants' Accounts.
Income or loss allocable to the period between the end
of the Plan Year and the date of distribution shall be
disregarded in determining income or loss.
(d) In order for the Plan to comply with the
requirements of Sections 401(k), 402(g) and 415 of the
Code and the regulations promulgated thereunder, at any
time in a Plan Year the Administrator may reduce the
rate of Deferral Contributions to be made on behalf of
any Participant, or class of Participants, for the
remainder of that Plan Year, or the Administrator may
require that all Deferral Contributions to be made on
behalf of a Participant be discontinued for the
remainder of that Plan Year. Upon the close of the Plan
Year or such earlier date as the Administrator may
determine, any reduction or discontinuance in Deferral
Contributions shall automatically cease until the
Administrator again determines that such a reduction or
discontinuance of Deferral Contributions is required.
4.02. Additional Limit on Deferral Contributions.
(a) The Actual Deferral Percentage (hereinafter "ADP")
for Participants who are Highly Compensated Employees
for each Plan Year and the ADP for participants who are
Non-highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(1) The ADP for Participants who are Highly
Compensated Employees for the Plan Year shall not
exceed the ADP for Participants who are Non-highly
Compensated Employees for the same Plan Year
multiplied by 1.25; or
(2) The ADP for Participants who are Highly
Compensated Employees for the Plan Year shall not
exceed the ADP for Participants who are Non-highly
Compensated Employees for the same Plan Year
multiplied by 2.0, provided that the ADP for
Participants who are Highly Compensated Employees
does not exceed the ADP for Participants who are Non-
highly Compensated Employees by more than two (2)
percentage points.
(b) The following special rules apply for the purposes
of this Section:
(1) The ADP for any Participant who is a
Highly Compensated Employee for the Plan Year and who
is eligible to have Deferral Contributions (and
Qualified Discretionary Contributions if treated as
Deferral Contributions for purposes of the ADP test)
allocated to his or her accounts under two or more
arrangements described in Section 401(k) of the Code
that are maintained by the Employer, shall be
determined as if such Deferral Contributions (and, if
applicable, such Qualified Discretionary
Contributions) were made under a single arrangement.
If a Highly Compensated Employee participates in two
or more cash or deferred arrangements that have
different Plan Years, all cash or deferred
arrangements ending with or within the same calendar
year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be
treated as separate if mandatorily disaggregated
under regulations under Section 401(k) of the Code.
(2) In the event that this Plan satisfies the
requirements of Sections 401(k), 401(a)(4), or 410(b)
of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the
requirements of such Sections of the Code only if
aggregated with this plan, then this Section shall be
applied by determining the ADP of Employees as if all
such plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be
aggregated in order to satisfy section 401(k) of the
Code only if they have the same Plan Year.
(3) For purposes of determining the ADP of a
Participant who is a 5-percent owner or one of the
ten most highly-paid Highly Compensated Employees,
the Deferral Contributions (and Qualified
Discretionary Contributions if treated as Deferral
Contributions for purposes of the ADP test) and
Compensation of such Participant shall include the
Deferral Contributions (and, if applicable, Qualified
Discretionary Contributions) and Compensation for the
Plan Year of Family Members (as defined in Section
414(q)(6) of the Code). Family Members, with respect
to between the end of the Plan Year and the date of
distribution shall be disregarded in determining
income or loss.
Excess Contributions shall be distributed from the
Participant's Qualified Discretionary Contribution
account only to the extent that such Excess
Contributions exceed the balance in the Participant's
Deferral Contributions account.
(4) For purposes of determining the ADP test,
Deferral Contributions and Qualified Discretionary
Contributions must be made before the last day of the
twelve-month period immediately following the Plan
Year to which contributions relate.
(5) The Employer shall maintain records
sufficient to demonstrate satisfaction of the ADP
test and the amount of Qualified Discretionary
Contributions used in such test.
(6) The determination and treatment of the ADP
amounts of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of
the Treasury.
(c) The following definitions shall apply for purposes
of this Section:
(1) "Actual Deferral Percentage" shall mean,
for a specified group of Participants for a Plan
Year, the average of the ratios (calculated
separately for each Participant in such group) of (A)
the amount of Employer contributions actually paid
over to the Trust on behalf of such Participant for
the Plan Year to (B) the Participant's Compensation
for such Plan Year. Employer contributions on behalf
of any Participant shall include (i) any Deferral
Contributions made pursuant to the Participant's
deferral election, including Excess Deferrals of
Highly Compensated Employees, but excluding (a)
Excess Deferrals of Non-highly Compensated Employees
that arise solely from Deferral Contributions made
under the Plan or plans of the Employer and (b)
Deferral Contributions that are taken into account in
the Contribution Percentage test (provided the ADP
test is satisfied both with and without exclusion of
these Deferral Contributions) and (ii) at the
election of the Employer, Qualified Discretionary
Contributions. Matching Contributions, whether or
not non-forfeitable when made, shall not be
considered as Employer Contributions for purposes of
this paragraph. For purposes of computing Actual
Deferral Percentages, an Employee who would be a
Participant but for the failure to make Deferral
Contributions shall be treated as a Participant on
whose behalf no Deferral Contributions are made.
(2) "Excess Contributions" shall mean, with
respect to any Plan Year, the excess of
(a) The aggregate amount of Employer
contributions actually taken into account in
computing the ADP of Highly Compensated Employees
for such Plan Year, over
(b) The maximum amount of such
contributions permitted by the ADP test (determined
by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs,
beginning with the highest of such percentages).
(3) "Qualified Discretionary Contributions" shall
mean contributions made by the Employer as elected in
Section 1.05(b)(4) and allocated to Participant
Accounts of Non-highly Compensated Employees that
such Participants may not elect to receive in cash
until distributed from the Plan, that are
nonforfeitable when made, and that are distributable
only in accordance with the distribution provisions
that are applicable to Deferral Contributions.
Participants shall not be required to satisfy any
hours of service or employment requirement in order
to receive an allocation of such contributions.
(d) Notwithstanding any other provision of this Plan,
Excess Contributions, plus any income and minus any loss
allocable thereto, shall be distributed no later than
the last day of each Plan Year to Participants to whose
Accounts such Excess Contributions were allocated for
the preceding Plan Year. If such excess amounts are
distributed more than 2 1/2 months after the last day of
the Plan Year in which such excess amounts arose, a ten-
(10-) percent excise tax will be imposed on the Employer
maintaining the Plan with respect to such amounts. Such
distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the
Excess Contributions attributable to each of such
employees. Excess Contributions of Participants who are
subject to the family member aggregation rules of
Section 414(q)(6) of the Code shall be allocated among
the family members in proportion to the Deferral
Contributions (and amounts treated as Deferral
Contributions) of each family member that is combined to
determine the combined ADP.
Excess Contributions shall be treated as annual
additions under the Plan.
Excess Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss
allocable to Excess Contributions is (1) income or loss
allocable to the Participant's Deferral Contribution
Account (and if applicable, the Qualified Discretionary
Contribution Account) for the Plan Year multiplied by a
fraction, the numerator of which is such Participant's
Excess Contributions for the year and the denominator is
the Participant's Account balance attributable to
Deferral Contributions without regard to any income or
loss occurring during such Plan Year, or (2) an amount
determined under any reasonable method, provided that
such method is used consistently for all Participants in
calculating any distributions required under Section
4.02(d) and Sections 4.01(c) and 4.04(d) for the Plan
Year, and is used by the Plan in allocating income or
loss to the Participants' Accounts. Income or loss
allocable to the period between the end of the Plan Year
and the date of distibution shall be disregarded in
determining income or loss.
Excess Contributions shall be distributed from the
Participant's Qualified Discretionary Contribution
Account only to the extent that such Excess
Contributions exceed the balance in the Participant's
Deferral Contributions Account.
4.03 Matching Contributions: If so provided by the Employer
in Section 1.05(c), the Employer shall make a Matching
Contribution on behalf of each Participant who had Deferral
Contributions made on his behalf during the year and who
meets the requirement, if any, of Section 1.05(c)(4). The
amount of the Matching Contribution shall be determined in
accordance with Section 1.05(c), subject to the limitations
set forth in Section 4.04 and Section 404 of the Code.
Matching Contributions will not be allowed to be made by the
Employer on any voluntary non-deductible Employee
Contributions.
4.04 Limit on Matching Contributions and Employee
Contributions:
(a) The Average Contribution Percentage (hereinafter
"ACP") for Participants who are Highly Compensated
Employees for each Plan Year and the ACP for
Participants who are Non-highly Compensated Employees
for the same Plan Year must satisfy one of the following
tests:
(1) The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not
exceed the ACP for Participants who are Non-highly
Compensated Employees for the same Plan Year
multiplied by 1.25; or
(2) The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not
exceed the ACP for Participants who are Non-highly
Compensated Employees for the same Plan Year
multiplied by two (2), provided that the ACP for
Participants who are Highly Compensated Employees
does not exceed the ACP for Participants who are Non-
highly Compensated Employees by more than two (2)
percentage points.
(b) The following special rules apply for purposes of
this section:
(1) If one or more Highly Compensated Employees
participate in both a qualified cash or deferred
arrangement described in Section 401(k) of the Code
(hereafter "CODA") and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and
ACP of those Highly Compensated Employees subject to
either or both tests exceeds the Aggregate Limit,
then the ACP of those Highly Compensated Employees
who also participate in a CODA will be reduced
(beginning with such Highly Compensated Employee
whose ACP is the highest) so that the limit is not
exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage
Amounts is reduced shall be treated as an Excess
Aggregate Contribution. The ADP and ACP of the
Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests.
Multiple use does not occur if either the ADP or ACP
of the Highly Compensated Employees does not exceed
1.25 multiplied by the ADP and ACP of the Non-highly
Compensated Employees.
(2) For purposes of this section, the Contribution
Percentage for any Participant who is a Highly
Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his or
her account under two or more plans described in
section 401(a) of the Code, or arrangements described
in section 401(k) of the Code that are maintained by
the Employer, shall be determined as if the total of
such Contribution Percentage Amounts was made under
each plan. If a Highly Compensated Employee
participates in two or more cash or deferred
arrangements that have different plan years, all cash
or deferred arrangements ending with or within the
same calendar year shall be treated as a single
arrangement. Notwithstanding the foregoing, certain
plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(m)
of the Code.
(3) In the event that this Plan satisfies the
requirements of Sections 401(m), 401(a)(4) or 410(b)
of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the
requirements of such sections of the Code only if
aggregated with this Plan, then this section shall be
applied by determining the Contribution Percentage of
Employees as if all such plans were a single plan.
For plan years beginning after December 31, 1989,
plans may be aggregated in order to satisfy Section
401(m) of the Code only if they have the same Plan
Year.
(4) For purposes of determining the Contribution
percentage of a Participant who is a five-percent
owner or one of the ten most highly-paid Highly
Compensated Employees, the Contribution Percentage
Amounts and Compensation of such Participant shall
include the Contribution Percentage Amounts and
Compensation for the Plan Year of family members (as
defined in Section 414(q)(6) of the Code). Family
members, with respect to Highly Compensated
Employees, shall be disregarded as separate Employees
in determining the Contribution Percentage both for
Participants who are Non-highly Compensated Employees
and for Participants who are Highly Compensated
Employees.
(5) For purposes of determining the Contribution
Percentage test, Employee Contributions made pursuant
to Section 1.05(d)(1) are considered to have been
made in the Plan Year in which contributed to the
Trust. Matching Contributions and Qualified
Discretionary Contributions will be considered made
for a Plan Year if made no later than the end of the
twelve-month period beginning on the day after the
close of the Plan Year.
(6) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the
amount of Qualified Discretionary Contributions used
in such test.
(7) The determination and treatment of the
Contribution Percentage of any Participant shall
satisfy such other requirements as may be prescribed
by the Secretary of Treasury.
(c) The following definitions shall apply for purposes
of this Section:
(1) "Aggregate Limit" shall mean the greater
of (A) or (B) where (A) is the sum of (i) 125 percent
of the greater of the ADP of the Non-highly
Compensated Employees for the Plan Year or the ACP of
Non-highly Compensated Employees under the Plan
subject to Section 401(m) of the Code for the Plan
Year beginning with or within the Plan Year of the
CODA and (ii) the lesser of 200% or two plus the
lesser of such ADP or ACP and where (B) is the sum of
(i) 125 percent of the lesser of the ADP of the Non-
highly Compensated Employees for the Plan Year or the
ACP of Non-highly Compensated Employees under the
Plan subject to Section 401(m) of the Code for the
Plan Year beginning with or within the Plan Year of
the CODA and (ii) the lesser of 200% or two plus the
greater of such ADP or ACP.
(2) "Average Contribution Percentage" or "ACP"
shall mean the average of the Contribution
Percentages of the Eligible Participants in a group.
(3) "Contribution Percentage" shall mean the
ratio (expressed as a percentage) of the
Participant's Contribution Percentage Amounts to the
Participant's Compensation for the Plan Year.
(4) "Contribution Percentage Amounts" shall
mean the sum of the Employee Contributions and
Matching Contributions made under the plan on behalf
of the Participant for the Plan Year. Such
Contribution Percentage Amounts shall not include
Matching Contributions that are forfeited either to
correct Excess Aggregate Contributions or because the
contributions to which they relate are Excess
Deferrals, Excess Contributions or Excess Aggregate
Contributions. If so elected by the Employer in
Section 1.05(b)(4), the Employer may include
Qualified Discretionary Contributions in the
Contribution Percentage Amounts. The Employer also
may elect to use Deferral Contributions in the
Contribution Percentage Amounts so long as the ADP
test is met before the Deferral Contributions are
used in the ACP test and continues to be met
following the exclusion of those Deferral
Contributions that are used to meet the ACP test.
(5) "Deferral Contribution" shall mean any
contribution made at the election of the Participant
pursuant to a salary reduction agreement in
accordance with Section 4.01(a).
(6) "Eligible Participant" shall mean any
Employee who is eligible to make an Employee
Contribution, or a Deferral Contribution (if the
Employer takes such contributions into account in the
calculation of the Contribution Percentage), or to
receive a Matching Contribution.
(7) "Employee Contribution" shall mean any
voluntary non-deductible contribution made to the
plan by or on behalf of a Participant that is
included in the Participant's gross income in the
year in which made and that is maintained in a
separate Account to which earnings and losses are
allocated.
(8) "Matching Contribution" shall mean an
Employer contribution made to this or any other
defined contribution plan on behalf of a Participant
on account of a Participant's Deferral Contribution.
(9) "Excess Aggregate Contributions" shall
mean, with respect to any Plan Year, the excess of
(A) The aggregate Contribution Percentage
Amounts taken into account in computing the
numerator of the Contribution Percentage actually
made on behalf of Highly Compensated Employees for
such Plan Year, over
(B) The maximum Contribution Percentage
Amounts permitted by the ACP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in the order of their
Contribution Percentages beginning with the highest
of such percentages).
Such determination shall be made
after first determining Excess Deferrals pursuant
to Section 4.01 and then determining Excess
Contributions pursuant to Section 4.02.
(d) Notwithstanding any other provision of the Plan,
Excess Aggregate Contributions, plus any income and
minus any loss allocable thereto, shall be forfeited, if
forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participants to
whose Accounts such Excess Aggregate Contributions were
allocated for the preceding Plan Year. Excess Aggregate
Contributions of Participants who are subject to the
family member aggregation rules of Section 414(q)(6) of
the Code shall be allocated among the family members in
proportion to the Employee and Matching Contributions of
each family member that is combined to determine the
combined ACP. If such Excess Aggregate Contributions
are distributed more than 2 1/2 months after the last
day of the Plan Year in which such excess amounts arose,
a ten (10) percent excise tax will be imposed on the
employer maintaining the Plan with respect to those
amounts. Excess Aggregate Contributions shall be
treated as annual additions under the Plan.
Excess Aggregate Contributions shall be adjusted for
any income or loss up to the date of distribution. The
income or loss allocable to Excess Aggregate
Contributions is (1) income or loss allocable to the
Participant's Employee Contribution Account, Matching
Contribution Account (if any, and if all amounts therein
are not used in the ADP test) and if applicable,
Qualified Non-elective Contribution Account for the Plan
Year multiplied by a fraction, the numerator of which is
such Participant's Excess Aggregate Contributions for
the year and the denominator is the Participant's
Account balance(s) attributable to Contribution
Percentage Amounts without regard to income or loss
occurring during such Plan Year, or (2) such other
amount determined under any reasonable method, provided
that such method is used consistently for all
Participants in calculating any distributions required
under Section 4.04(d) and Sections 4.01(c) and 4.02(d)
for the Plan Year, and is used by the Plan in allocating
income or loss to the Participants' Accounts. Income or
loss allocable to the period between the end of the Plan
Year and the date of distribution shall be disregarded
in determining income or loss.
Forfeitures of Excess Aggregate Contributions shall be
applied to reduce Employer contributions; the
forfeitures shall be held in the money market fund, if
any, listed in Section 1.14(b) pending such application.
Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a prorata basis from the
Participant's Employee Contribution Account, Matching
Contribution Account and if applicable, the
Participant's Deferral Contributions Account or
Qualified Discretionary Contribution Account or both.
4.05. Special Rules. Deferral Contributions and Qualified
Discretionary Contributions and income allocable to each are
not distributable to a Participant or his or her Beneficiary
or Beneficiaries, in accordance with such Participant's or
beneficiary's or beneficiaries' election, earlier than upon
separation from service, death, or disability, except as
otherwise provided in Section 7.10, 7.11 or 10.06. Such
amounts may also be distributed, but after March 31, 1988,
in the form of a lump sum only, upon
(a) Termination of the Plan without establishment
of another defined contribution plan, other than an
employee stock ownership plan (as defined in Section
4975(e) or Section 409 of the Code) or a simplified
employee pension plan as defined in Section 408(k) of
the Code.
(b) The disposition by a corporation to an
unrelated corporation of substantially all of the assets
(within the meaning of Section 409(d)(2) of the Code)
used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the
disposition, but only with respect to Employees who
continue employment with the corporation acquiring such
assets.
(c) The disposition by a corporation to an
unrelated entity of such corporation's interest in a
subsidiary (within the meaning of Section 409(d)(2) of
the Code) if such corporation continues to maintain this
Plan, but only with respect to Employees who continue
employment with such subsidiary.
The Participant's accrued benefit derived from Deferral
Contributions, Qualified Discretionary Contributions and
Employee Contributions (as defined in Section 4.09) is
nonforfeitable. Separate Accounts for Deferral
Contributions, Qualified Discretionary Contributions,
Employee Contributions and Matching Contributions will be
maintained for each Participant. Each Account will be
credited with the applicable contributions and earnings
thereon.
4.06. Fixed/Discretionary Employer Contributions. If so
provided by the Employer in Sections 1.05(a)(1) or
1.05(a)(2), for the Plan Year in which the Plan is adopted
and for each Plan Year thereafter, the Employer will make
Fixed or Discretionary Employer contributions to the Trust
in accordance with Section 1.05 to be allocated as follows:
(a) Fixed Employer contributions shall be
allocated among eligible Participants (as determined in
accordance with Section 1.05(a)(3)) in the manner
specified in Section 1.05(a).
(b) Discretionary Employer contributions shall be
allocated among eligible Participants, as determined in
accordance with Section 1.05(a)(3), as follows:
(1)If the Non-Integrated Formula is elected
in Section 1.05(a)(2)(A), such contributions
shall be allocated to eligible Participants
in the ratio that each Participant's
Compensation bears to the total Compensation
paid to all eligible Participants for the
Plan Year; or
(2) If the Integrated Formula is elected in
Section 1.05(a)(2)(B), such contributions
shall be allocated in the following steps:
(A) First, to each eligible Participant
in the same ratio that the sum of the
Participant's Compensation and Excess
Compensation for the Plan Year bears to the
sum of the Compensation and Excess
Compensation of all Participants for the
Plan Year. This allocation as a percentage
of the sum of each Participant's
Compensation and Excess Compensation shall
not exceed 5.7%.
(B) Any remaining Discretionary Employer
Contribution shall be allocated to each
eligible Participant in the same ratio that
each Participant's Compensation for the
Plan Year bears to the total Compensation
of all Participants for the Plan Year.
For purposes of this Section, "Excess
Compensation" means Compensation in excess of
the taxable wage base, as determined under
Section 230 of the Social Security Act, in
effect on the first day of the Plan Year.
Further, this Section 4.06(b)(2) shall be
modified as provided in Section 9.03 for years
in which the Plan is top heavy under Article
9.
4.07. Time of Making Employer Contributions. The Employer
will pay its contribution for each Plan Year not later than
the time prescribed by law for filing the Employer's federal
income tax return for the fiscal (or taxable) year with or
within which such Plan Year ends (including extensions
thereof). The Trustee will have no authority to inquire
into the correctness of the amounts contributed and paid
over to the Trustee, to determine whether any contribution
is payable under this Article 4, or to enforce, by suit or
otherwise, the Employer's obligation, if any, to make a
contribution to the Trustee.
4.08. Return of Employer Contributions. The Trustee shall,
upon request by the Employer, return to the Employer the
amount (if any) determined under Section 14.22. Such amount
shall be reduced by amounts attributable thereto which have
been credited to the Accounts of Participants who have since
received distributions from the Trust, except to the extent
such amounts continue to be credited to such Participants'
Accounts at the time the amount is returned to the Employer.
Such amount shall also be reduced by the losses of the Trust
attributable thereto, if and to the extent such losses
exceed the gains and income attributable thereto, but will
not be increased by the gains and income of the Trust
attributable thereto, if and to the extent such gains and
income exceed the losses attributable thereto. In no event
will the return of a contribution hereunder cause the
balance of the individual Account of any Participant to be
reduced to less than the balance which would have been
credited to the Account had the mistaken amount not been
contributed.
4.09. Employee Contributions. If the Employer elected to
permit Deferral Contributions in Section 1.05(b) and if so
provided by the Employer in Section 1.05(d), each
Participant may elect to make Employee Contributions to the
Plan in accordance with the rules and procedures established
by the Employer and in an amount not less than one percent
(1%) and not greater than ten percent (10%) of such
Participant's Compensation for the Plan Year. Such
contributions and all Employee Contributions for Plan Years
beginning after December 31, 1986, shall be subject to the
nondiscrimination requirements of Section 401(m) of the Code
as set forth in Section 4.04.
For purposes of this Plan, "Employee Contributions"
shall mean any voluntary non-deductible contribution made to
a plan by or on behalf of a Participant that is or was
included in the Participant's gross income in the year in
which made and that is maintained under a separate account
to which applicable earnings and losses are allocated.
Excess Contributions may not be recharacterized as Employee
Contributions.
Employee Contributions shall be paid over to the Trustee
not later than thirty (30) days following the end of the
month in which the Participant makes the contribution. A
Participant shall have a fully vested 100% nonforfeitable
right to his Employee Contributions and the earnings or
losses allocated thereon. Distributions of Employee
Contributions shall be made in accordance with Section 7.10.
4.10. Rollover Contributions.
(a) Rollover of Eligible Rollover Distributions
(1) An Employee who is or was a distributee
of an "eligible rollover distribution"(as defined in
Section 402(c)(4) of the Code and the regulations
issued thereunder) from a qualified plan may directly
transfer all or any portion of such distribution to
the Trust or transfer all or any portion of such
distribution to the Trust within sixty (60) days of
payment. The transfer shall be made in the form of
cash or allowable Fund Shares only.
(2) The Employer may refuse to accept
rollover contributions or instruct the Trustee not to
accept rollover contributions under the Plan.
(b) Treatment of Rollover Amount.
(1) An account will be established for the
transferring Employee under Article 5, the rollover
amount will be credited to the account and such
amount will be subject to the terms of the Plan,
including Section 8.01, except as otherwise provided
in this Section 4.10.
(2) The rollover account will at all times be fully
vested in and nonforfeitable by the Employee.
(c) Entry into Plan by Transferring Employee. Although
an amount may be transferred to the Trust Fund under
this Section 4.10 by an Employee who has not yet become
a Participant in accordance with Article 3, and such
amount is subject to the terms of the Plan as described
in paragraph (b) above, the Employee will not become a
Participant entitled to share in Employer contributions
until he has satisfied such requirements.
(d) Monitoring of Rollovers.
(1) The Administrator shall develop such
procedures and require such information from
transferring Employees as it deems necessary to
insure that amounts transferred under this Section
4.10 meet the requirements for tax-free rollovers
established by such Section and by Section 402(c) of
the Code. No such amount may be transferred until
approved by the Administrator.
(2) If a transfer made under this Section 4.10
is later determined by the Administrator not to have
met the requirements of this Section or of the Code
or Treasury regulations, the Trustee shall, within a
reasonable time after such determination is made, and
on instructions from the Administrator, distribute to
the Employee the amounts then held in the Trust
attributable to the transferred amount.
4.11. Deductible Voluntary Employee Contributions. The
Administrator will not accept deductible Employee
Contributions which are made for a taxable year beginning
after December 31, 1986. Contributions made prior to that
date will be maintained in a separate Account which will be
nonforfeitable at all times and which will share in the
gains and losses of the trust in the same manner as
described in Section 5.02. No part of the deductible
voluntary contribution Account will be used to purchase life
insurance. Subject to Article 8, the Participant may
withdraw any part of the deductible voluntary contribution
Account upon request.
4.12. Additional Rules for Paired Plans. If the Employer
has adopted a qualified plan under Fidelity Basic Plan
Document No. 09 which is to be considered as a paired plan
with this Plan, the elections in Section 1.03 must be
identical to the Employer's corresponding elections for the
other plan. When the paired plans are top-heavy or are
deemed to be top-heavy as provided in Section 9.01, the plan
paired with this Plan will provide a minimum contribution to
each non-key Employee which is equal to 3 percent (or such
other percent elected by the Employer in Section 1.12(c)) of
such Employee's Compensation. Notwithstanding the preceding
sentence, the minimum contribution shall be provided by this
Plan if contributions under the other plan paired with this
Plan are frozen.
Article 5. Participants' Accounts.
5.01. Individual Accounts. The Administrator will
establish and maintain an Account for each Participant which
will reflect Employer and Employee Contributions made on
behalf of the Participant and earnings, expenses, gains and
losses attributable thereto, and investments made with
amounts in the Participant's Account. The Administrator
will establish and maintain such other accounts and records
as it decides in its discretion to be reasonably required or
appropriate in order to discharge its duties under the Plan.
5.02. Valuation of Accounts. Participant Accounts will be
valued at their fair market value at least annually as of a
date specified by the Administrator in accordance with a
method consistently followed and uniformly applied, and on
such date earnings, expenses, gains and losses on
investments made with amounts in each Participant's Account
will be allocated to such Account. Participants will be
furnished statements of their Account values at least once
each Plan Year.
5.03. Code Section 415 Limitations. Notwithstanding any
other provisions of the Plan:
Subsections (a)(1) through (a)(4)--(These subsections
apply to Employers who do not maintain any qualified plan,
including a Welfare Benefit Fund, an Individual Medical
Account, or a simplified employee pension in addition to
this Plan.)
(a)(1) If the Participant does not participate in, and
has never participated in any other qualified plan,
Welfare Benefit Fund, Individual Medical Account, or a
simplified employee pension, as defined in section
408(k) of the Code, maintained by the Employer, which
provides an annual addition as defined in Section
5.03(e)(1), the amount of Annual Additions to a
Participant's Account for a Limitation Year shall not
exceed the lesser of the Maximum Permissible Amount or
any other limitation contained in this Plan. If the
Employer contribution that would otherwise be
contributed or allocated to the Participant's Account
would cause the Annual Additions for the Limitation Year
to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the
Annual Additions for the Limitation Year will equal the
Maximum Permissible Amount.
(a)(2) Prior to the determination of the Participant's
actual Compensation for a Limitation Year, the Maximum
Permissible Amount may be determined on the basis of a
reasonable estimation of the Participant's compensation
for such Limitation Year, uniformly determined for all
Participants similarly situated. Any Employer
contributions based on estimated annual compensation
shall be reduced by any Excess Amounts carried over from
prior years.
(a)(3) As soon as is administratively feasible after
the end of the Limitation Year, the Maximum Permissible
Amount for such Limitation Year shall be determined on
the basis of the Participant's actual Compensation for
such Limitation Year.
(a)(4) If, pursuant to subsection (a)(3) or as a result
of the allocation of forfeitures or a reasonable error
in determining the total Elective Deferrals there is an
Excess Amount with respect to a Participant for a
Limitation Year, such Excess Amount shall be disposed of
as follows:
(A) Any nondeductible voluntary employee
contributions ("employee contributions") or Elective
Deferrals, to the extent they would reduce the Excess
Amount, will be returned to the Participant. Any gains
attributable to returned employee contributions will
also be returned or will be treated as additional
employee contributions for the Limitation Year in which
the employee contributions were made.
(B) If after the application of paragraph (A) an
Excess amount still exists and the Participant is in the
service of the Employer which is covered by the Plan at
the end of the Limitation Year, then such Excess Amount
shall be reapplied to reduce future Employer
contributions under this Plan for the next Limitation
Year (and for each succeeding year, as necessary) for
such Participant, so that in each such Year the sum of
actual Employer contributions plus the reapplied amount
shall equal the amount of Employer contributions which
would otherwise be made to such Participant's Account.
(C) If after the application of paragraph (A) an
Excess Amount still exists and the Participant is not in
the service of the Employer which is covered by the Plan
at the end of a Limitation Year, then such Excess Amount
will be held unallocated in a suspense account. The
suspense account will be applied to reduce future
Employer contributions for all remaining Participants in
the next Limitation Year and each succeeding Limitation
Year if necessary.
(D) If a suspense account is in existence at any
time during the Limitation Year pursuant to this
subsection, it will not participate in the allocation of
the Trust Fund's investment gains and losses. All
amounts in the suspense account must be allocated to the
Accounts of Participants before any Employer
contribution may be made for the Limitation Year.
Except as provided in paragraph (A), Excess Amounts may
not be distributed to Participants or former
Participants.
Subsections (b)(1) through (b)(6)--(These subsections
apply to Employers who, in addition to this Plan, maintain
one or more plans, all of which are qualified Master or
Prototype defined contribution Plans, any Welfare Benefit
Fund, any Individual Medical Account, or any simplified
employee pension.)
(b)(1) If, in addition to this Plan, the Participant is
covered under any other qualified defined contribution
plans (all of which are qualified Master or Prototype
Plans), Welfare Benefit Funds, Individual Medical
Accounts, or simplified employee pension Plans,
maintained by the Employer, that provide an annual
addition as defined in Section 5.03(e)(1), the amount of
Annual Additions to a Participant's Account for a
Limitation Year shall not exceed the lesser of
(A) the Maximum Permissible Amount, reduced by the
sum of any Annual Additions to the Participant's
accounts for the same Limitation Year under such other
qualified Master or Prototype defined contribution
plans, and Welfare Benefit Funds, Individual Medical
Accounts, and simplified employee pensions, or
(B) any other limitation contained in this Plan.
If the annual additions with respect to the Participant
under other qualified Master or Prototype defined
contribution Plans, Welfare Benefit Funds, Individual
Medical Accounts, and simplified employee pensions
maintained by the Employer are less than the maximum
permissible amount and the Employer contribution that
would otherwise be contributed or allocated to the
Participant's account under this plan would cause the
annual additions for the limitation year to exceed this
limitation, the amount contributed or allocated will be
reduced so that the annual additions under all such
plans and funds for the limitation year will equal the
maximum permissible amount. If the annual additions
with respect to the Participant under such other
qualified Master or Prototype defined contribution
Plans, Welfare Benefit Funds, Individual Medical
Accounts, and simplified employee pensions in the
aggregate are equal to or greater than the maximum
permissible amount, no amount will be contributed or
allocated to the Participant's account under this plan
for the limitation year.
(b)(2) Prior to the determination of the Participant's
actual Compensation for the Limitation Year, the amounts
referred to in (b)(1)(A) above may be determined on the
basis of a reasonable estimation of the Participant's
compensation for such Limitation Year, uniformly
determined for all Participants similarly situated. Any
Employer contribution based on estimated annual
compensation shall be reduced by any Excess Amounts
carried over from prior years.
(b)(3) As soon as is administratively feasible after
the end of the Limitation Year, the amounts referred to
in (b)(1)(A) shall be determined on the basis of the
Participant's actual Compensation for such Limitation
Year.
(b)(4) If a Participant's Annual Additions under this
Plan and all such other plans result in an Excess
Amount, such Excess Amount shall be deemed to consist of
the Annual Additions last allocated, except that Annual
Additions attributable to a simplified employee pension
will be deemed to have been allocated first, followed by
Annual Additions to a Welfare Benefit Fund or Individual
Medical Account regardless of the actual allocation
date.
(b)(5) If an Excess Amount was allocated to a
Participant on an allocation date of this Plan which
coincides with an allocation date of another plan, the
Excess Amount attributed to this Plan will be the
product of
(A) the total Excess Amount allocated as of such
date (including any amount which would have been
allocated but for the limitations of Section 415 of
the Code), and
(B) the ratio of (i) the Annual Additions allocated
to the Participant as of such date under this Plan,
and (ii) the Annual Additions allocated as of such
date under all qualified defined contribution plans
(determined without regard to the limitations of
Section 415 of the Code).
(b)(6) Any Excess Amounts attributed to this Plan shall
be disposed of as provided in subsection (a)(4).
Subsection (c)--(This subsection applies only to
Employers who, in addition to this Plan, maintain one or
more qualified plans which are qualified defined
contribution plans other than Master or Prototype Plans.)
(c) If the Employer also maintains another plan which
is a qualified defined contribution plan other than a
Master or Prototype Plan, Annual Additions allocated
under this Plan on behalf of any Participant shall be
limited in accordance with the provisions of (b)(1)
through (b)(6), as though the other plan were a Master
or Prototype Plan, unless the Employer provides other
limitations in the Adoption Agreement.
Subsection (d)--(This subsection applies only to
Employers who, in addition to this Plan, maintain or at any
time maintained a qualified defined benefit plan.)
(d) If the Employer maintains, or at any time
maintained, a qualified defined benefit plan, the sum of
any Participant's Defined Benefit Fraction and Defined
Contribution Fraction shall not exceed the combined plan
limitation of 1.0 in any Limitation Year. The combined
plan limitation will be met as provided by the Employer
in the Adoption Agreement.
Subsections (e)(1) through (e)(11)--(Definitions.)
(e)(1) "Annual Additions" means the sum of the
following amounts credited to a Participant for a
Limitation Year:
(A) all Employer contributions,
(B) all Employee Contributions,
(C) all forfeitures,
(D) amounts allocated, after March 31, 1984, to an
Individual Medical Account which is part of a
pension or annuity plan maintained by the Employer
are treated as Annual Additions to a defined
contribution plan. Also, amounts derived from
contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which
are attributable to post-retirement medical benefits
allocated to the separate account of a key employee,
as defined in Section 419A(d)(3) of the Code, under
a Welfare Benefit Fund maintained by the Employer
are treated as Annual Additions to a defined
contribution plan, and
(E) allocations under a simplified employee
pension.
For purposes of this Section 5.03, amounts reapplied
to reduce Employer contributions under subsection (a)(4)
shall also be included as Annual Additions.
(e)(2) "Compensation" means wages as defined in Section
3401(a) of the Code and all other payments of
compensation to an employee by the employer (in the
course of the employer's trade or business) for which
the employer is required to furnish the employee a
written statement under Sections 6041(d) and 6051(a)(3)
of the Code. Compensation must be determined without
regard to any rules under Section 3401(a) of the Code
that limit the remuneration included in wages based on
the nature or location of the employment or the services
performed (such as the exception for agricultural labor
in Section 3401(a)(2) of the Code.)
For any Self-Employed Individual compensation will mean
Earned Income.
For limitation years beginning after December 31, 1991,
for purposes of applying the limitations of this
article, compensation for a limitation year is the
compensation actually paid or made available during such
limitation year.
(e)(3) "Defined Benefit Fraction" means a fraction, the
numerator of which is the sum of the Participant's
annual benefits (adjusted to an actuarially equivalent
straight life annuity if such benefit is expressed in a
form other than a straight life annuity or qualified
joint and survivor annuity) under all the defined
benefit plans (whether or not terminated) maintained by
the Employer, each such annual benefit computed on the
assumptions that the Participant will remain in
employment until the normal retirement age under each
such plan (or the Participant's current age, if later)
and that all other factors used to determine benefits
under such plan will remain constant for all future
Limitation Years, and the denominator of which is the
lesser of 125 percent of the dollar limitation
determined for the Limitation Year under Sections
415(b)(1)(A) and 415(d) of the Code or 140 percent of
the Participant's highest average Compensation for 3
consecutive calendar years of service during which the
Participant was active in each such plan, including any
adjustments under Section 415(b) of the Code. However,
if the Participant was a participant as of the first day
of the first Limitation Year beginning after December
31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on
May 6, 1986 then the denominator of the Defined Benefit
Fraction shall not be less than 125 percent of the
Participant's total accrued benefit as of the close of
the last Limitation Year beginning before January 1,
1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986, under all such
defined benefit plans that met, individually and in the
aggregate, the requirements of Section 415 of the Code
for all Limitation Years beginning before January 1,
1987.
(e)(4) "Defined Contribution Fraction" means a
fraction, the numerator of which is the sum for the
current and all prior Limitation Years of (A) all
Annual Additions (if any) to the Participant's accounts
under each defined contribution plan (whether or not
terminated) maintained by the Employer and (B) all
Annual Additions attributable to the Participant's
nondeductible Employee Contributions to all defined
benefit plans (whether or not terminated) maintained by
the Employer, and the Participant's Annual Additions
attributable to all Welfare Benefit Funds, Individual
Medical Accounts, and simplified employee pensions,
maintained by the Employer, and the denominator of which
is the sum of the maximum aggregate amounts for the
current and all prior Limitation Years during which the
Participant was an Employee (regardless of whether the
Employer maintained a defined contribution plan in any
such year).
The maximum aggregate amount in any Limitation Year
is the lesser of 125 percent of the dollar limitation in
effect under Section 415(c)(1)(A) of the Code for each
such year or 35 percent of the Participant's
Compensation for each such year.
If the Participant was a participant as of the first
day of the first Limitation Year beginning after
December 31, 1986, in one or more defined contribution
plans maintained by the Employer which were in existence
on May 6, 1986, then the numerator of the Defined
Contribution Fraction shall be adjusted if the sum of
this fraction and the Defined Benefit Fraction would
otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment an amount equal to the product of
(i) the excess of the sum of the fractions over 1.0 and
(ii) the denominator of this fraction will be
permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the
last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions
of the plan made after May 6, 1986, but using the
Section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987.
The annual addition for any limitation year beginning
before January 1, 1987 shall not be recomputed to treat
all employee contributions as annual additions.
(e)(5) "Employer" means the Employer and any Related
Employer that adopts this Plan. In the case of a group
of employers which constitutes a controlled group of
corporations (as defined in Section 414(b) of the Code
as modified by Section 415(h)) or which constitutes
trades or businesses (whether or not incorporated) which
are under common control (as defined in Section 414(c)
of the Code as modified by Section 415(h) of the Code)
or which constitutes an affiliated service group (as
defined in Section 414(m)of the Code) and any other
entity required to be aggregated with the Employer
pursuant to regulations issued under Section 414(o) of
the Code, all such employers shall be considered a
single employer for purposes of applying the limitations
of this Section 5.03.
(e)(6) "Excess Amount" means the excess of the
Participant's Annual Additions for the Limitation Year
over the Maximum Permissible Amount.
(e)(7) "Individual Medical Account" means an individual
medical account as defined in Section 415(l)(2) of the
Code.
(e)(8) "Limitation Year" means the Plan Year. All
qualified plans of the Employer must use the same
Limitation Year. If the Limitation Year is amended to a
different 12-consecutive month period, the new
Limitation Year must begin on a date within the
Limitation Year in which the amendment is made.
(e)(9) "Master or Prototype Plan" means a plan the form
of which is the subject of a favorable opinion letter
from the Internal Revenue Service.
(e)(10) "Maximum Permissible Amount" means for a
Limitation Year with respect to any Participant the
lesser of (A) $30,000 or, if greater, 25 percent of the
dollar limitation set forth in Section 415(b)(1) of the
Code, as in effect for the Limitation Year, or (B) 25
percent of the Participant's Compensation for the
Limitation Year. If a short Limitation Year is created
because of an amendment changing the Limitation Year to
a different 12-consecutive-month period, the Maximum
Permissible Amount will not exceed the limitation in
(e)(10)(A) multiplied by a fraction whose numerator is
the number of months in the short Limitation Year and
whose denominator is 12.
The compensation limitation referred to in subsection
(e)(10)(B) shall not apply to any contribution for
medical benefits within the meaning of Section 401(h) or
Section 419A(f)(2) of the Code after separation from
service which is otherwise treated as an Annual Addition
under Section 419A(d)(2) or Section 415(l)(1) of the
Code.
(e)(11) "Welfare Benefit Fund" means a welfare benefit
fund as defined in Section 419(e) of the Code.
Article 6. Investment of Contributions.
6.01. Manner of Investment. All contributions made to the
Accounts of Participants shall be held for investment by the
Trustee. The Accounts of Participants shall be invested and
reinvested only in eligible investments selected by the
Employer in Section 1.14(b), subject to Section 14.10.
6.02. Investment Decisions. Investments shall be directed
by the Employer or by each Participant or both, in
accordance with the Employer's election in Section 1.14(a).
Pursuant to Section 14.04, the Trustee shall have no
discretion or authority with respect to the investment of
the Trust Fund.
(a) With respect to those Participant Accounts for
which Employer investment direction is elected, the
Employer has the right to direct the Trustee in writing
with respect to the investment and reinvestment of
assets comprising the Trust Fund in the Fidelity Fund(s)
designated in Section 1.14(b) and as allowed by the
Trustee.
(b) If Participant investment direction is elected, each
Participant shall direct the investment of his Account
among the Fidelity Funds listed in Section 1.14(b). The
Participant shall file initial investment instructions
with the Administrator, on such form as the
Administrator may provide, selecting the Funds in which
amounts credited to his Account will be invested.
(1) Except as provided in this Section 6.02, only
authorized Plan contacts and the Participant shall
have access to a Participant's Account. While any
balance remains in the Account of a Participant after
his death, the Beneficiary of the Participant shall
make decisions as to the investment of the Account as
though the Beneficiary were the Participant. To the
extent required by a qualified domestic relations
order as defined in Section 414(p) of the Code, an
alternate payee shall make investment decisions with
respect to a Participant's Account as though such
alternate payee were the Participant.
(2) If the Trustee receives any contribution under
the Plan as to which investment instructions have not
been provided, the Trustee shall promptly notify the
Administrator and the Administrator shall take steps
to elicit instructions from the Participant. The
Trustee shall credit any such contribution to the
Participant's Account and such amount shall be
invested in the Fidelity Fund selected by the
Employer for such purposes or, absent Employer
selection, in the most conservative Fidelity Fund
listed in Section 1.14(b), until investment
instructions have been received by the Trustee.
(c) All dividends, interest, gains and distributions of
any nature received in respect of Fund Shares shall be
reinvested in additional shares of that Fidelity Fund.
(d) Expenses attributable to the acquisition of
investments shall be charged to the Account of the
Participant for which such investment is made.
6.03. Participant Directions to Trustee. All Participant
initial investment instructions filed with the Administrator
pursuant to the provisions of Section 6.02 shall be promptly
transmitted by the Administrator to the Trustee. A
Participant shall transmit subsequent investment
instructions directly to the Trustee by means of the
telephone exchange system maintained by the Trustee for such
purposes. The method and frequency for change of
investments will be determined under the (a) rules
applicable to the investments selected by the Employer in
Section 1.14(b) and (b) the additional rules of the
Employer, if any, limiting the frequency of investment
changes, which are included in a separate written
administrative procedure adopted by the Employer and
accepted by the Trustee. The Trustee shall have no duty to
inquire into the investment decisions of a Participant or to
advise him regarding the purchase, retention or sale of
assets credited to his Account.
Article 7. Right to Benefits.
7.01. Normal or Early Retirement. Each Participant who
attains his Normal Retirement Age or, if so provided by the
Employer in Section 1.06(b), Early Retirement Age, will have
a 100-percent nonforfeitable interest in his Account
regardless of any vesting schedule elected in Section 1.07.
If a Participant retires upon the attainment of Normal or
Early Retirement Age, such retirement is referred to as a
normal retirement. Upon his normal retirement the balance
of the Participant's Account, plus any amounts thereafter
credited to his Account, subject to the provisions of
Section 7.08, will be distributed to him in accordance with
Article 8.
If a Participant separates from service before satisfying
the age requirements for early retirement, but has satisfied
the service requirement, the Participant will be entitled to
elect an early retirement distribution upon satisfaction of
such age requirement.
7.02. Late Retirement. If a Participant continues in the
service of the Employer after attainment of Normal
Retirement Age, he will continue to have a 100-percent
nonforfeitable interest in his Account and will continue to
participate in the Plan until the date he establishes with
the Employer for his late retirement. Until he retires, he
has a continuing election to receive all or any portion of
his Account. Upon the earlier of his late retirement or the
distribution date required under Section 8.08, the balance
of his Account, plus any amounts thereafter credited to his
Account, subject to the provisions of Section 7.08, will be
distributed to him in accordance with Article 8 below.
7.03. Disability Retirement. If so provided by the
Employer in Section 1.06(c), a Participant who becomes
disabled will have a 100-percent nonforfeitable interest in
his Account, the balance of which Account, plus any amounts
thereafter credited to his Account, subject to the
provisions of Section 7.08, will be distributed to him in
accordance with Article 8 below. A Participant is
considered disabled if he cannot engage in any substantial,
gainful activity because of a medically determinable
physical or mental impairment likely to result in death or
to be of a continuous period of not less than 12 months, and
terminates his employment with the Employer. Such
termination of employment is referred to as a disability
retirement. Determinations with respect to disability shall
be made by the Administrator who may rely on the criteria
set forth in Section 1.06(c) as evidence that the
Participant is disabled.
7.04. Death. Subject, if applicable, to Section 8.04, if a
Participant dies before the distribution of his Account has
commenced, or before such distribution has been completed,
his Account shall become 100 percent vested and his
designated Beneficiary or Beneficiaries will be entitled to
receive the balance or remaining balance of his Account,
plus any amounts thereafter credited to his Account, subject
to the provisions of Section 7.08. Distribution to the
Beneficiary or Beneficiaries will be made in accordance with
Article 8.
A Participant may designate a Beneficiary or
Beneficiaries, or change any prior designation of
Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If
more than one person is designated as the Beneficiary, their
respective interests shall be as indicated on the
designation form. In the case of a married Participant, the
Participant's spouse shall be deemed to be the designated
Beneficiary unless the Participant's spouse has consented to
another designation in the manner described in Section
8.03(d).
A copy of the death notice or other sufficient
documentation must be filed with and approved by the
Administrator. If upon the death of the Participant there
is, in the opinion of the Administrator, no designated
Beneficiary for part or all of the Participant's Account,
such amount will be paid to his surviving spouse or, if
none, to his estate (such spouse or estate shall be deemed
to be the Beneficiary for purposes of the Plan). If a
Beneficiary dies after benefits to such Beneficiary have
commenced, but before they have been completed, and, in the
opinion of the Administrator, no person has been designated
to receive such remaining benefits, then such benefits shall
be paid in a lump sum to the deceased Beneficiary's estate.
7.05. Other Termination of Employment. If a Participant
terminates his employment for any reason other than death or
normal, late, or disability retirement, he will be entitled
to a termination benefit equal to the sum of (a) the vested
percentage(s) of the value of the Matching and/or
Fixed/Discretionary Contributions to his Account, as
adjusted for income, expense, gain, or loss, such
percentage(s) determined in accordance with the vesting
schedule(s) selected by the Employer in Section 1.07, and
(b) the value of the Deferral, Employee, Qualified
Discretionary and Rollover Contributions to his Account as
adjusted for income, expense, gain or loss. The amount
payable under this Section 7.05 will be subject to the
provisions of Section 7.08 and will be distributed in
accordance with Article 8 below.
7.06. Separate Account. If a distribution from a
Participant's Account has been made to him at a time when he
has a nonforfeitable right to less than 100 percent of his
Account, the vesting schedule in Section 1.07 will
thereafter apply only to amounts in his Account attributable
to Employer contributions allocated after such distribution.
The balance of his Account immediately after such
distribution will be transferred to a separate account which
will be maintained for the purpose of determining his
interest therein according to the following provisions.
At any relevant time prior to a forfeiture of any portion
thereof under Section 7.07, a Participant's nonforfeitable
interest in his Account held in a separate account described
in the preceding paragraph will be equal to P(AB + (RxD))-
(RxD), where P is the nonforfeitable percentage at the
relevant time determined under Section 7.05; AB is the
account balance of the separate account at the relevant
time; D is the amount of the distribution; and R is the
ratio of the account balance at the relevant time to the
account balance after distribution. Following a forfeiture
of any portion of such separate account under Section 7.07
below, any balance in the Participant's separate account
will remain fully vested and nonforfeitable.
7.07. Forfeitures. If a Participant terminates his
employment, any portion of his Account (including any
amounts credited after his termination of employment) not
payable to him under Section 7.05 will be forfeited by him
upon the complete distribution to him of the vested portion
of his Account, if any, subject to the possibility of
reinstatement as described in the following paragraph. For
purposes of this paragraph, if the value of an Employee's
vested Account balance is zero, the Employee shall be deemed
to have received a distribution of his vested interest
immediately following termination of employment. Such
forfeitures will be applied to reduce the contributions of
the Employer next payable under the Plan (or administrative
expenses of the Plan); the forfeitures shall be held in a
money market fund pending such application.
If a Participant forfeits any portion of his Account
under the preceding paragraph but again becomes an Employee
after such date, then the amount so forfeited, without any
adjustment for the earnings, expenses, or losses or gains of
the assets credited to his Account since the date forfeited,
will be recredited to his Account (or to a separate account
as described in Section 7.06, if applicable) but only if he
repays to the Plan before the earlier of five years after
the date of his reemployment or the date he incurs 5
consecutive 1-year breaks in service following the date of
the distribution the amount previously distributed to him,
without interest, under Section 7.05. If an Employee is
deemed to receive a distribution pursuant to this Section
7.07, and the Employee resumes employment before 5
consecutive 1-year breaks in service, the Employee shall be
deemed to have repaid such distribution on the date of his
reemployment. Upon such an actual or deemed repayment, the
provisions of the Plan (including Section 7.06) will
thereafter apply as if no forfeiture had occurred. The
amount to be recredited pursuant to this paragraph will be
derived first from the forfeitures, if any, which as of the
date of recrediting have yet to be applied as provided in
the preceding paragraph and, to the extent such forfeitures
are insufficient, from a special Employer contribution to be
made by the Employer.
If a Participant elects not to receive the
nonforfeitable portion of his Account following his
termination of employment, the non-vested portion of his
Account shall be forfeited after the Participant has
incurred five consecutive 1-year breaks in service as
defined in Section 2.01(a)(33).
No forfeitures will occur solely as a result of a
Participant's withdrawal of Employee contributions.
7.08. Adjustment for Investment Experience. If any
distribution under this Article 7 is not made in a single
payment, the amount retained by the Trustee after the
distribution will be subject to adjustment until distributed
to reflect the income and gain or loss on the investments in
which such amount is invested and any expenses properly
charged under the Plan and Trust to such amounts.
7.09. Participant Loans. If permitted under Section 1.09,
the Administrator shall allow Participants to apply for a
loan from the Plan, subject to the following:
(a) Loan Application. All Plan loans shall be
administered by the Administrator. Applications for
loans shall be made to the Administrator on forms
available from the Administrator. Loans shall be made
available to all Participants on a reasonably equivalent
basis. For this purpose, the term "Participant" means
any Participant or Beneficiary, including an alternate
payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, who is a party-in-
interest (as determined under ERISA Section 3(14)) with
respect to the Plan except no loans will be made to (1)
an Employee who makes a rollover contribution in
accordance with Section 4.10 who has not satisfied the
requirements of Section 3.01 or (2) a shareholder-
employee or Owner-Employee. For purposes of this
requirement, a shareholder-employee means an employee or
officer of an electing small business (Subchapter S)
corporation who owns (or is considered as owning within
the meaning of Section 318(a)(1) of the Code), on any
day during the taxable year of such corporation, more
than 5% of the outstanding stock of the corporation.
A Participant with an existing loan may not apply
for another loan until the existing loan is paid in full
and may not refinance an existing loan or attain a
second loan for the purpose of paying off the existing
loan. A Participant may not apply for more than one
loan during each Plan Year.
(b) Limitation of Loan Amount/Purpose of Loan. Loans
shall not be made available to Highly Compensated
Employees in an amount greater than the amount made
available to other Employees. No loan to any
Participant or Beneficiary can be made to the extent
that such loan when added to the outstanding balance of
all other loans to the Participant or Beneficiary would
exceed the lesser of (1) $50,000 reduced by the excess
(if any) of the highest outstanding balance of loans
during the one-year period ending on the day before the
loan is made over the outstanding balance of loans from
the plan on the date the loan is made, or (2) one-half
the present value of the nonforfeitable Account of the
Participant. For the purpose of the above limitation,
all loans from all plans of the Employer and Related
Employers are aggregated. A Participant may not request
a loan for less than $1,000. The Employer may provide
that loans only be made from certain contribution
sources within Participant Account(s) by notifying the
Trustee in writing of the restricted source.
Loans may be made for any purpose or if elected by
the Employer in Section 1.09(a), on account of hardship
only. A loan will be considered to be made on account
of hardship only if made on account of an immediate and
heavy financial need described in Section 7.10(b)(1).
(c) Terms of Loan. All loans shall bear a reasonable
rate of interest as determined by the Administrator
based on the prevailing interest rates charged by
persons in the business of lending money for loans which
would be made under similar circumstances. The
determination of a reasonable rate of interest must be
based on appropriate regional factors unless the Plan is
administered on a national basis in which case the
Administrator may establish a uniform reasonable rate of
interest applicable to all regions.
All loans shall by their terms require that
repayment (principal and interest) be amortized in level
payments, not less than quarterly, over a period not
extending beyond five years from the date of the loan
unless such loan is for the purchase of a Participant's
primary residence, in which case the repayment period
may not extend beyond ten years from the date of the
loan. A Participant may prepay the outstanding loan
balance prior to maturity without penalty.
(d) Security. Loans must be secured by the
Participant's Accounts not to exceed 50 percent of the
Participant's vested Account. A Participant must obtain
the consent of his or her spouse, if any, to use a
Participant Account as security for the loan, if the
provisions of Section 8.03 apply to the Participant.
Spousal consent shall be obtained no earlier than the
beginning of the 90-day period that ends on the date on
which the loan is to be so secured. The consent must be
in writing, must acknowledge the effect of the loan, and
must be witnessed by a Plan representative or notary
public. Such consent shall thereafter be binding with
respect to the consenting spouse or any subsequent
spouse with respect to that loan.
(e) Default. The Administrator shall treat a loan in
default if
(1)any scheduled repayment remains unpaid more than
90 days or
(2)there is an outstanding principal balance
existing on a loan after the last scheduled
repayment date.
Upon default or termination of employment, the
entire outstanding principal and accrued interest shall
be immediately due and payable. If a distributable
event (as defined by the Code) has occurred, the
Administrator shall direct the Trustee to foreclose on
the promissory note and offset the Participant's vested
Account by the outstanding balance of the loan. If a
distributable event has not occurred, the Administrator
shall direct the Trustee to foreclose on the promissory
note and offset the Participant's vested Account as soon
as a distributable event occurs.
(f) Pre-existing loans. The provision in paragraph (a)
of this Section 7.09 limiting a Participant to one
outstanding loan shall not apply to loans made before
the Employer adopted this prototype plan document. A
Participant may not apply for a new loan until all
outstanding loans made before the Employer adopted this
prototype plan have been paid in full. The Trustee may
accept any loans made before the Employer adopted this
prototype plan document except such loans which require
the Trustee to hold as security for the loan property
other than the Participant's vested Account.
As of the effective date of amendment of this Plan in
Section 1.01(g)(2), the Trustee shall have the right to
reamortize the outstanding principal balance of any
Participant loan that is delinquent. Such
reamortization shall be based upon the remaining life of
the loan and the original maturity date may not be
extended.
Notwithstanding any other provision of this Plan, the
portion of the Participant's vested Account used as a
security interest held by the plan by reason of a loan
outstanding to the Participant shall be taken into
account for purposes of determining the amount of the
Account payable at the time of death or distribution,
but only if the reduction is used as repayment of the
loan. If less than 100% of the Participant's vested
Account (determined without regard to the preceding
sentence) is payable to the surviving spouse, then the
Account shall be adjusted by first reducing the vested
Account by the amount of the security used as repayment
of the loan, and then determining the benefit payable to
the surviving spouse.
No loan to any Participant or Beneficiary can be made
to the extent that such loan when added to the
outstanding balance of all other loans to the
Participant or Beneficiary would exceed the lesser of
(1) $50,000 reduced by the excess (if any) of the
highest outstanding balance of loans during the one-year
period ending on the day before the loan is made over
the outstanding balance of loans from the plan on the
date the loan is made or (2) one-half the present value
of the nonforfeitable Account of the Participant. For
the purpose of the above limitation, all loans from all
plans of the Employer and Related Employers are
aggregated.
7.10. In-Service/Hardship Withdrawals. Subject to the
provisions of Article 8, a Participant shall not be
permitted to withdraw any Employer or Employee Contributions
(and earnings thereon) prior to retirement or termination of
employment, except as follows:
(a) Age 59 1/2. If permitted under Section 1.11(b), a
Participant who has attained the age of 59 1/2 is permitted
to withdraw upon request all or any portion of the Accounts
specified by the Employer in 1.11(b).
(b) Hardship. If permitted under Section 1.10, a
Participant may apply to the Administrator to withdraw some
or all of his Deferral Contributions (and earnings thereon
accrued as of December 31, 1988) and, if applicable,
Rollover Contributions and such other amounts allowed by a
predecessor plan, if such withdrawal is made on account of a
hardship. For purposes of this Section, a distribution is
made on account of hardship if made on account of an
immediate and heavy financial need of the Employee where
such Employee lacks other available resources.
Determinations with respect to hardship shall be made by the
Administrator and shall be conclusive for purposes of the
Plan, and shall be based on the following special rules:
(1)The following are the only financial needs
considered immediate and heavy: expenses incurred or
necessary for medical care (within the meaning of
Section 213(d) of the Code) of the Employee, the
Employee's spouse, children, or dependents; the
purchase (excluding mortgage payments) of a principal
residence for the Employee; payment of tuition and
related educational fees for the next twelve (12)
months of post-secondary education for the Employee,
the Employee's spouse, children or dependents; or the
need to prevent the eviction of the Employee from, or
a foreclosure on the mortgage of, the Employee's
principal residence.
(2)A distribution will be considered as necessary to
satisfy an immediate and heavy financial need of the
Employee only if:
(i) The Employee has obtained all distributions,
other than the hardship distributions, and all
nontaxable (at the time of the loan) loans
currently available under all plans maintained
by the Employer;
(ii) The Employee suspends Deferral Contributions
and Employee Contributions to the Plan for the 12-
month period following the date of his hardship
distribution. The suspension must also apply to
all elective contributions and Employee
Contributions to all other qualified plans and non-
qualified plans maintained by the Employer, other
than any mandatory employer contribution portion of
a defined benefit plan, including stock option,
stock purchase and other similar plans, but not
including health and welfare benefit plans (other
than the cash or deferred arrangement portion of a
cafeteria plan);
(iii) The distribution is not in excess of the
amount of an
immediate and heavy financial need (including
amounts necessary to pay any Federal, state or
local income taxes or penalties reasonably
anticipated to result from the distribution); and
(iv) The Employee agrees to limit Deferral
Contributions (elective contributions)to the Plan
and any other qualified plan maintained by the
Employer for the Employee's taxable year
immediately following the taxable year of the
hardship distribution to the applicable limit under
Section 402(g) of the Code for such taxable year
less the amount of such Employee's Deferral
Contributions for the taxable year of the hardship
distribution.
(3)A Participant must obtain the consent of his or
her spouse, if any, to obtain a hardship withdrawal,
if the provisions of Section 8.03 apply to the
Participant.
(c) Employee Contributions. A Participant may elect to
withdraw, in cash, up to one hundred percent of the
amount then credited to his Employee Contribution
Account. Such withdrawals shall be limited to one (1)
per Plan Year unless this prototype plan document is an
amendment of a prior plan document, in which case the
rules and restrictions governing Employee Contribution
withdrawals, if any, are incorporated herein by
reference.
7.11. Prior Plan In-Service Distribution Rules. If
designated by the Employer in Section 1.11(b), a Participant
shall be entitled to withdraw at anytime prior to his
termination of employment, subject to the provisions of
Article 8 and the prior plan, any vested Employer
Contributions maintained in a Participant's Account for the
specified period of time.
Article 8. Distribution of Benefits Payable After
Termination of Service.
8.01. Distribution of Benefits to Participants and
Beneficiaries.
(a) Distributions from the Trust to a Participant or to
the Beneficiary of the Participant shall be made in a
lump sum in cash or, if elected by the Employer in
Section 1.11, under a systematic withdrawal plan
(installment(s)) upon retirement, death, disability, or
other termination of employment, unless another form of
distribution is required or permitted in accordance with
paragraph (d) of this Section 8.01 or Sections 1.11(c),
8.02, 8.03, 8.04 or 11.02. A distribution may be made
in Fund Shares, at the election of the Participant,
pursuant to the qualifying rollover of such distribution
to a Fidelity Investments individual retirement account.
(b) Distributions under a systematic withdrawal plan
must be made in substantially equal annual, or more
frequent, installments, in cash, over a period certain
which does not extend beyond the life expectancy of the
Participant or the joint life expectancies of the
Participant and his Beneficiary, or, if the Participant
dies prior to the commencement of his benefits the life
expectancy of the Participant's Beneficiary, as further
described in Section 8.04.
(c) Notwithstanding the provisions of Section 8.01(b)
above, if a Participant's Account is, and at the time of
any prior distribution(s) was, $3,500 or less, the
balance of such Account shall be distributed in a lump
sum as soon as practicable following retirement,
disability, death or other termination of employment.
(d) This paragraph (d) applies to distributions made on
or after January 1, 1993. Notwithstanding any provision
of the Plan to the contrary that would otherwise limit a
distributee's election under this Article 8, a
distributee may elect, at the time and in the manner
prescribed by the Administrator, to have any portion of
an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in
a direct rollover. The following definitions shall
apply for purposes of this paragraph (d):
(1) Eligible rollover distribution: An eligible
rollover distribution is any distribution of all or
any portion of the balance to the credit of the
distributee, except that an eligible rollover
distribution does not include: any distribution that
is one of a series of substantially equal periodic
payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten years
or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of
the Code; and the portion of any distribution that is
not includable in gross income (determined without
regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(2) Eligible retirement plan: An eligible retirement
plan is an individual retirement account described in
Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code,
or a qualified trust described in Section 401(a) of
the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an
eligible rollover distribution to a surviving spouse,
an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) Distributee: A distributee includes an Employee
or former Employee. In addition, the Employee's or
former Employee's surviving spouse and the Employee's
or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of
the spouse or former spouse.
(4) Direct rollover: A direct rollover is a payment
by the plan to the eligible retirement plan specified
by the distributee.
8.02. Annuity Distributions. If so provided in Section
1.11(c), a Participant may elect distributions made in whole
or in part in the form of an annuity contract subject to the
provisions of Section 8.03.
(a) An annuity contract distributed under the Plan must
be purchased from an insurance company and must be
nontransferable. The terms of an annuity contract shall
comply with the requirements of the Plan and
distributions under such contract shall be made in
accordance with Section 401(a)(9) of the Code and the
regulations thereunder.
(b) The payment period of an annuity contract
distributed to the Participant pursuant to this Section
may be as long as the Participant lives. If the annuity
is payable to the Participant and his spouse or
designated Beneficiary, the payment period of an annuity
contract may be for as long as either the Participant or
his spouse or designated Beneficiary lives. Such an
annuity may provide for an annuity certain feature for a
period not exceeding the life expectancy of the
Participant. If the annuity is payable to the
Participant and his spouse such period may not exceed
the joint life and last survivor expectancy of the
Participant and his spouse, or, if the annuity is
payable to the Participant and a designated Beneficiary,
the joint life and last survivor expectancy of the
Participant and such Beneficiary. If the Participant
dies prior to the commencement of his benefits, the
payment period of an annuity contract distributed to the
Beneficiary of the Participant may be as long as the
Participant's Beneficiary lives, and may provide for an
annuity certain feature for a period not exceeding the
life expectancy of the Beneficiary. Any annuity
contract distributed under the Plan must provide for
nonincreasing payments.
8.03. Joint and Survivor Annuities/Preretirement Survivor
Annuities.
(a) Application. The provisions of this Section
supersede any conflicting provisions of the Plan;
however, paragraph (b) of this Section shall not apply
if the Participant's Account does not exceed or at the
time of any prior distribution did not exceed $3,500. A
Participant is described in this Section only if (i) the
Participant has elected distribution of his Account in
the form of an Annuity Contract in accordance with
Section 8.02, or (ii) the Trustee has directly or
indirectly received a transfer of assets from another
plan (including a predecessor plan) to which Section
401(a)(11) of the Code applies with respect to such
Participant.
(b) Retirement Annuity. Unless the Participant elects
to waive the application of this subsection in a manner
satisfying the requirements of subsection (d) below, to
the extent applicable to the Participant, within the 90-
day period preceding his Annuity Starting Date (which
election may be revoked, and if revoked, remade, at any
time in such period), the vested Account due any
Participant to whom this subsection (b) applies will be
paid to him by the purchase and delivery to him of an
annuity contract described in Section 8.02 providing a
life annuity only form of benefit or, if the Participant
is married as of his Annuity Starting Date, providing an
immediate annuity for the life of the Participant with a
survivor annuity for the life of the Participant's
spouse (determined as of the date of distribution of the
contract) which is 50 percent of the amount of the
annuity which is payable during the joint lives of the
Participant and such spouse. The Participant may elect
to receive distribution of his benefits in the form of
such annuity as of the earliest date on which he could
elect to receive retirement benefits under the Plan.
Within the period beginning 90 days prior to the
Participant's Annuity Starting Date and ending 30 days
prior to such Date, the Administrator will provide such
Participant with a written explanation of (1) the terms
and conditions of the annuity contract described herein,
(2) the Participant's
to make, and the effect of, an election to waive
application of this subsection, (3) the rights of the
Participant's spouse under subsection (d), and (4) the
right to revoke and the period of time necessary to
revoke the election to waive application of this
subsection.
(c) Annuity Death Benefit. Unless the Participant
elects to waive the application of this subsection in a
manner satisfying the requirements of subsection (d)
below at any time within the applicable election period
(which election may be revoked, and if revoked, remade,
at any time in such period), if a married Participant to
whom this Section applies dies before his Annuity
Starting Date, then notwithstanding any designation of a
Beneficiary to the contrary, 50 percent of his vested
Account will be applied to purchase an annuity contract
described in Section 8.02 providing an annuity for the
life of the Participant's surviving spouse, which
contract will then be promptly distributed to such
spouse. In lieu of the purchase of such an annuity
contract, the spouse may elect in writing to receive
distributions under the Plan as if he or she had been
designated by the Participant as his Beneficiary with
respect to 50 percent of his Account. For purposes of
this subsection, the applicable election period will
commence on the first day of the Plan Year in which the
Participant attains age 35 and will end on the date of
the Participant's death, provided that in the case of a
Participant who terminates his employment the applicable
election period with respect to benefits accrued prior
to the date of such termination will in no event
commence later than the date of his termination of
employment. A Participant may elect to waive the
application of this subsection prior to the Plan Year in
which he attains age 35, provided that any such waiver
will cease to be effective as of the first day of the
Plan Year in which the Participant attains age 35.
The Administrator will provide a Participant to whom
this subsection applies with a written explanation with
respect to the annuity death benefit described in this
subsection (c) comparable to that required under
subsection (b) above. Such explanation shall be
furnished within whichever of the following periods ends
last: (1) the period beginning with the first day of
the Plan Year in which the Participant reaches age 32
and ending with the end of the Plan Year preceding the
Plan Year in which he reaches age 35, (2) a reasonable
period ending after the Employee becomes a Participant,
(3) a reasonable period ending after this Section 8.04
first becomes applicable to the Participant in
accordance with Section 8.04(a), (4) in the case of a
Participant who separates from service before age 35, a
reasonable period of time ending after separation from
service. For purposes of the preceding sentence, the
two-year period beginning one year prior to the date of
the event described in clause (2), (3) or (4), whichever
is applicable, and ending one year after such date shall
be considered reasonable, provided, that in the case of
a Participant who separates from service under (4) above
and subsequently recommences employment with the
Employer, the applicable period for such Participant
shall be redetermined in accordance with this
subsection.
(d) Requirements of Elections. This subsection will be
satisfied with respect to a waiver or designation which
is required to satisfy this subsection if such waiver or
designation is in writing and either
(1) the Participant's spouse consents
thereto in writing, which consent must acknowledge
the effect of such waiver or designation and be
witnessed by a notary public or Plan representative,
or
(2) the Participant establishes to the
satisfaction of the Administrator that the consent of
the Participant's spouse cannot be obtained because
there is no spouse, because the spouse cannot be
located, or because of such other circumstances as
the Secretary of Treasury may prescribe.
Any consent by a spouse, or establishment that
the consent of a spouse may not be obtained, will be
effective only with respect to a specific Beneficiary
(including any class of Beneficiaries or any
contingent Beneficiaries) or form of benefits
identified in the Participant's waiver or
designation, unless the consent of the spouse
expressly permits designations by the Participant
without any requirement of further consent by the
spouse. A consent which permits such designations by
the Participant shall acknowledge that the spouse has
the right to limit consent to a specific Beneficiary
and form of benefits and that the spouse voluntarily
elects to relinquish both such rights. A consent by
a spouse shall be irrevocable once made. Any such
consent, or establishment that such consent may not
be obtained, will be effective only with respect to
such spouse. For purposes of subsections (b) and (c)
above, no consent of a spouse shall be valid unless
the notice required by whichever subsection is
applicable has been provided to the Participant.
(e) Former Spouse. For purposes of this Section 8.03,
a former spouse of a Participant will be treated as the
spouse or surviving spouse of the Participant, and a
current spouse will not be so treated, to the extent
required under a qualified domestic relations order, as
defined in Section 414(p) of the Code.
(f) Vested Account Balance. For purposes of this
Section, vested Account shall include the aggregate
value of the Participant's vested Account derived from
Employer and Employee Contributions (including
rollovers), whether vested before or upon death. The
provisions of this Section shall apply to a Participant
who is vested in amounts attributable to Employer
contributions, Employee Contributions, or both, upon
death or at the time of distribution.
8.04 Installment Distributions. This Section shall be
interpreted and applied in accordance with the regulations
under Section 401(a)(9) of the Code, including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the Proposed Treasury Regulations, or any
successor regulations of similar import.
(a) In General. If a Participant's benefit may be
distributed in accordance with Section 8.01(b), the
amount to be distributed for each calendar year for
which a minimum distribution is required shall be at
least an amount equal to the quotient obtained by
dividing the Participant's interest in his Account by
the life expectancy of the Participant or Beneficiary or
the joint life and last survivor expectancy of the
Participant and his Beneficiary, whichever is
applicable. For calendar years beginning before January
1, 1989, if a Participant's Beneficiary is not his
spouse, the method of distribution selected must insure
that at least 50 percent of the present value of the
amount available for distribution is paid within the
life expectancy of the Participant. For calendar years
beginning after December 31, 1988, the amount to be
distributed for each calendar year shall not be less
than an amount equal to the quotient obtained by
dividing the Participant's interest in his Account by
the lesser of (1) the applicable life expectancy under
Section 8.01(b), or (2) if a Participant's Beneficiary
is not his spouse, the applicable divisor determined
under Section 1.401(a)(9)-2, Q&A 4 of the Proposed
Treasury Regulations, or any successor regulations of
similar import. Distributions after the death of the
Participant shall be made using the applicable life
expectancy under (1) above, without regard to Section
1.401(a)(9)-2 of such regulations.
The minimum distribution required under this
subsection (a) for the calendar year immediately
preceding the calendar year in which the Participant's
required beginning date, as determined under Section
8.08(b), occurs shall be made on or before the
Participant's required beginning date, as so determined.
Minimum distributions for other calendar years shall be
made on or before the close of such calendar year.
(b) Additional Requirements for Distributions After
Death of Participant.
(1) Distribution beginning before Death. If
the Participant dies before distribution of his
benefits has begun, distributions shall be made in
accordance with the provisions of this paragraph.
Distributions under Section 8.01(a) shall be
completed by the close of the calendar year in which
the fifth anniversary of the death of the Participant
occurs. Distributions under Section 8.01(b) shall
commence, if the Beneficiary is not the Participant's
spouse, not later than the close of the calendar year
immediately following the calendar year in which the
death of the Participant occurs. Distributions under
Section 8.01(b) to a Beneficiary who is the
Participant's surviving spouse shall commence not
later than the close of the calendar year in which
the Participant would have attained age 70 1/2 or, if
later, the close of the calendar year immediately
following the calendar year in which the death of the
Participant occurs. In the event such spouse dies
prior to the date distribution to him or her
commences, he or she will be treated for purposes of
this subsection (other than the preceding sentence)
as if he or she were the Participant. If the
Participant has not designated a Beneficiary, or the
Participant or Beneficiary has not effectively
selected a method of distribution, distribution of
the Participant's benefit shall be completed by the
close of the calendar year in which the fifth
anniversary of the death of the Participant occurs.
Any amount paid to a child of the Participant will be
treated as if it had been paid to the surviving
spouse if the amount becomes payable to the surviving
spouse when the child reaches the age of majority.
For purposes of this subsection (b)(1), the life
expectancy of a Beneficiary who is the Participant's
surviving spouse shall be recalculated annually
unless the Participant's spouse irrevocably elects
otherwise prior to the time distributions are
required to begin. Life expectancy shall be computed
in accordance with the provisions of subsection (a)
above.
(2) Distribution beginning after Death. If the
Participant dies after distribution of his benefits
has begun, distributions to the Participant's
Beneficiary will be made at least as rapidly as under
the method of distribution being used as of the date
of the Participant's death.
For purposes of this Section 8.04(b), distribution
of a Participant's interest in his Account will be
considered to begin as of the Participant's required
beginning date, as determined under Section 8.08(b). If
distribution in the form of an annuity irrevocably
commences prior to such date, distribution will be
considered to begin as of the actual date distribution
commences.
(c) Life Expectancy. For purposes of this Section, life
expectancy shall be recalculated annually in the case of
the Participant or a Beneficiary who is the
Participant's spouse unless the Participant or
Beneficiary irrevocably elects otherwise prior to the
time distributions are required to begin. If not
recalculated in accordance with the foregoing, life
expectancy shall be calculated using the attained age of
the Participant or Beneficiary, whichever is applicable,
as of such individual's birth date in the first year for
which a minimum distribution is required reduced by one
for each elapsed calendar year since the date life
expectancy was first calculated. For purposes of this
Section, life expectancy and joint life and last
survivor expectancy shall be computed by use of the
expected return multiples in Table V and VI of section
1.72-9 of the income tax Regulations.
A Participant's interest in his Account for purposes
of this Section 8.04 shall be determined as of the last
valuation date in the calendar year immediately
preceding the calendar year for which a minimum
distribution is required, increased by the amount of any
contributions allocated to, and decreased by any
distributions from, such Account after the valuation
date. Any distribution for the first year for which a
minimum distribution is required made after the close of
such year shall be treated as if made prior to the close
of such year.
8.05. Immediate Distributions. If the Account
distributable to a Participant exceeds, or at the time of
any prior distribution exceeded, $3,500, no distribution
will be made to the Participant before he reaches his Normal
Retirement Age (or age 62, if later), unless the written
consent of the Participant has been obtained. Such consent
shall be made in writing within the 90-day period ending on
the Participant's Annuity Starting Date. Within the period
beginning 90 days before the Participant's Annuity Starting
Date and ending 30 days before such Date, the Administrator
will provide such Participant with written notice comparable
to the notice described in Section 8.03(b) containing a
general description of the material features and an
explanation of the relative values of the optional forms of
benefit available under the Plan and informing the
Participant of his right to defer receipt of the
distribution until his Normal Retirement Age (or age 62, if
later).
The consent of the Participant's spouse must also be
obtained if the Participant is subject to the provisions of
Section 8.03(a), unless the distribution will be made in the
form of the applicable retirement annuity contract described
in Section 8.03(b). A spouse's consent to early
distribution, if required, must satisfy the requirements of
Section 8.03(d).
Neither the consent of the Participant nor the
Participant's spouse shall be required to the extent that a
distribution is required to satisfy Section 401(a)(9) or
Section 415 of the Code. In addition, upon termination of
the Plan if it does not offer an annuity option (purchased
from a commercial provider) and if the Employer or any
Related Employer does not maintain another defined
contribution plan (other than an employee stock ownership
plan as defined in Code Section 4975(e)(7)) the
Participant's Account will, without the Participant's
consent, be distributed to the Participant. However, if any
Related Employer maintains another defined contribution plan
(other than an employee stock ownership plan as defined in
Section 4975(e)(7) of the Code) then the Participant's
Account will be transferred, without the Participant's
consent, to the other plan if the Participant does not
consent to an immediate distribution.
8.06. Determination of Method of Distribution. The
Participant will determine the method of distribution of
benefits to himself and may determine the method of
distribution to his Beneficiary. Such determination will be
made prior to the time benefits become payable under the
Plan. If the Participant does not determine the method of
distribution to his Beneficiary or if the Participant
permits his Beneficiary to override his determination, the
Beneficiary, in the event of the Participant's death, will
determine the method of distribution of benefits to himself
as if he were the Participant. A determination by the
Beneficiary must be made no later than the close of the
calendar year in which distribution would be required to
begin under Section 8.04(b) or, if earlier, the close of the
calendar year in which the fifth anniversary of the death of
the Participant occurs.
8.07. Notice to Trustee. The Administrator will notify the
Trustee in writing whenever any Participant or Beneficiary
is entitled to receive benefits under the Plan. The
Administrator's notice shall indicate the form of benefits
that such Participant or Beneficiary shall receive and (in
the case of distributions to a Participant) the name of any
designated Beneficiary or Beneficiaries.
8.08. Time of Distribution. In no event will distribution
to a Participant be made latest than the earlier of the
dates described in (a) and (b) below:
(a) Absent the consent of the Participant (and his
spouse, if appropriate), the 60th day after the close of
the Plan Year in which occurs the later of the date on
which the Participant attains age 65, the date on which
the Participant ceases to be employed by the Employer,
or the 10th anniversary of the year in which the
Participant commenced participation in the Plan; and
(b) April 1 of the calendar year first following the
calendar year in which the Participant attains age 70
1/2 or, in the case of a Participant who had attained
age 70 1/2 before January 1, 1988, the required
beginning date determined in accordance with (1) or (2)
below:
(1) The required beginning date of a
Participant who is not a 5-percent owner is the first
day of April of the calendar year following the
calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
(2) The required beginning date of a
Participant who is a 5-percent owner during any year
beginning after December 31, 1979, is the first day
of April following the later of
(A) the calendar year in which the
Participant attains age 70 1/2, or
(B) the earlier of the calendar year
with or within which ends the Plan Year in which
the Participant becomes a 5-percent owner, or the
calendar year in which the Participant retires.
Notwithstanding the foregoing, in the case of a
Participant who attained age 70 1/2 during 1988 and who had
not retired prior to January 1, 1989, the required beginning
date described in this paragraph shall be April 1, 1990.
Notwithstanding (a) above, the failure of a Participant
(and spouse) to consent to a distribution while a benefit is
immediately distributable, within the meaning of Section
8.05, shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy
(a) above.
Once distributions have begun to a 5-percent owner under
(b) above, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent
year.
For purposes of (b) above, a Participant is treated as a
5-percent owner if such Participant is a 5-percent owner as
defined in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year
ending with or within the calendar year in which such owner
attains age 66 1/2 or any subsequent Plan Year.
The Administrator shall notify the Trustee in writing
whenever a distribution is necessary in order to comply with
the minimum distribution rules set forth in this Section.
8.09. Whereabouts of Participants and Beneficiaries. The
Administrator will at all times be responsible for
determining the whereabouts of each Participant or
Beneficiary who may be entitled to benefits under the Plan
and will at all times be responsible for instructing the
Trustee in writing as to the current address of each such
Participant or Beneficiary. The Trustee will be entitled to
rely on the latest written statement received from the
Administrator as to such addresses. The Trustee will be
under no duty to make any distributions under the Plan
unless and until it has received written instructions from
the Administrator satisfactory to the Trustee containing the
name and address of the distributee, the time when the
distribution is to occur, and the form which the
distribution will take. Notwithstanding the foregoing, if
the Trustee attempts to make a distribution in accordance
with the Administrator's instructions but is unable to make
such distribution because the whereabouts of the distributee
is unknown, the Trustee will notify the Administrator of
such situation and thereafter the Trustee will be under no
duty to make any further distributions to such distributee
until it receives further written instructions from the
Administrator. If a benefit is forfeited because the
Administrator determines that the Participant or Beneficiary
cannot be found, such benefit will be reinstated by the
Sponsor if a claim is filed by the Participant or
Beneficiary with the Administrator and the Administrator
confirms the claim to the Sponsor.
Article 9. Top-Heavy Provisions.
9.01 Application. If the Plan is or becomes a Top-Heavy
Plan in any Plan Year or is automatically deemed to be Top-
Heavy in accordance with the Employer's election in Section
1.12(a)(1) of the Adoption Agreement, the provisions of this
Article 9 shall supersede any conflicting provision in the
Plan.
9.02 Definitions. For purposes of this Article 9, the
following terms have the meanings set forth below:
(a) Key Employee. Any Employee or former Employee (and
the Beneficiary of any such Employee) who at any time
during the determination period was (1) an officer of
the Employer whose annual Compensation exceeds 50
percent of the dollar limitation under Section
415(b)(1)(A) of the Code, (2) an owner (or considered an
owner under Section 318 of the Code) of one of the ten
largest interests in the Employer if such individual's
annual Compensation exceeds the dollar limitation under
Section 415(c)(1)(A) of the Code, (3) a 5-percent owner
of the Employer, or (4) a 1-percent owner of the
Employer who has annual Compensation of more than
$150,000. For purposes of this paragraph, the
determination period is the Plan Year containing the
Determination Date and the four preceding Plan Years.
The determination of who is a Key Employee shall be made
in accordance with Section 416(i)(1) of the Code and the
regulations thereunder. Annual Compensation means
compensation as defined in Section 5.03(e)(2), but
including amounts contributed by the Employer pursuant
to a salary reduction agreement which are excludable
from the employee's gross income under Section 125,
Section 402(a)(8), and Section 403(b) of the Code.
(b) Top-Heavy Plan. The Plan is a Top-Heavy Plan if any
of the following conditions exists:
(1) the Top-Heavy Ratio for the Plan
exceeds 60 percent and the Plan is not part of any
Required Aggregation Group or Permissive Aggregation
Group,
(2) the Plan is a part of a Required
Aggregation Group but not part of a Permissive
Aggregation Group and the Top-Heavy Ratio for the
Required Aggregation Group exceeds 60 percent, or
(3) the Plan is a part of a Required
Aggregation Group and a Permissive Aggregation Group
and the Top-Heavy Ratio for both Groups exceeds 60
percent.
(c) Top-Heavy Ratio.
(1) With respect to this Plan, or with respect
to any Required Aggregation Group or Permissive
Aggregation Group that consists solely of defined
contribution plans (including any simplified employee
pension plans) and the Employer has not maintained
any defined benefit plan which during the 5-year
period ending on the determination date(s) has or has
had accrued benefits, the Top-Heavy Ratio is a
fraction, the numerator of which is the sum of the
account balances of all Key Employees under the plans
as of the Determination Date (including any part of
any account balance distributed in the 5-year period
ending on the Determination Date), and the
denominator of which is the sum of all account
balances (including any part of any account balance
distributed in the 5-year period ending on the
Determination Date) of all participants under the
plans as of the Determination Date. Both the
numerator and denominator of the Top-Heavy Ratio
shall be increased, to the extent required by Section
416 of the Code, to reflect any contribution which is
due but unpaid as of the Determination Date.
(2) With respect to any Required Aggregation Group
or Permissive Aggregation Group that includes one or
more defined benefit plans which, during the 5-year
period ending on the Determination Date, has covered
or could cover a Participant in this Plan, the Top-
Heavy Ratio is a fraction, the numerator of which is
the sum of the account balances under the defined
contribution plans for all Key Employees and the
present value of accrued benefits under the defined
benefit plans for all Key Employees, and the
denominator of which is the sum of the account
balances under the defined contribution plans for all
participants and the present value of accrued
benefits under the defined benefit plans for all
participants. Both the numerator and denominator of
the Top-Heavy Ratio shall be increased for any
distribution of an account balance or an accrued
benefit made in the 5-year period ending on the
Determination Date and any contribution due but
unpaid as of the Determination Date.
(3) For purposes of (1) and (2) above, the value of
Accounts and the present value of accrued benefits
will be determined as of the most recent Valuation
Date that falls within or ends with the 12-month
period ending on the Determination Date, except as
provided in Section 416 of the Code and the
regulations thereunder for the first and second plan
years of a defined benefit plan. The Account and
accrued benefits of a Participant (A) who is not a
Key Employee but who was a Key Employee in a prior
year, or (B) who has not been credited with at least
one Hour of Service with the Employer at any time
during the 5-year period ending on the Determination
Date, will be disregarded. The calculation of the
Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken
into account, shall be made in accordance with
Section 416 of the Code and the regulations
thereunder. Deductible employee contributions shall
not be taken into account for purposes of computing
the Top-Heavy Ratio. When aggregating plans, the
value of Accounts and accrued benefits shall be
calculated with reference to the Determination Dates
that fall within the same calendar year.
For purposes of determining if the Plan,
or any other plan included in a Required Aggregation
Group of which this Plan is a part, is a Top-Heavy
Plan, the accrued benefit in a defined benefit plan
of an Employee other than a Key Employee shall be
determined under (i) the method, if any, that
uniformly applies for accrual purposes under all
plans maintained by the Employer, or (ii) if there is
no such method, as if such benefit accrued not more
rapidly than the slowest accrual rate permitted under
the fractional accrual rate of Section 411(b)(1)(C)
of the Code.
(d) Permissive Aggregation Group. The Required
Aggregation Group plus any other qualified plans of the
Employer or a Related Employer which, when considered as
a group with the Required Aggregation Group, would
continue to satisfy the requirements of Sections
401(a)(4) and 410 of the Code.
(e) Required Aggregation Group.
(1) Each qualified plan of the Employer or Related
Employer in which at least one Key Employee
participates, or has participated at any time during
the determination period (regardless of whether the
plan has terminated), and
(2) any other qualified plan of the Employer or
Related Employer which enables a plan described in
(1) above to meet the requirements of Sections
401(a)(4) or 410 of the Code.
(f) Determination Date. For any Plan Year of the Plan
subsequent to the first Plan Year, the last day of the
preceding Plan Year. For the first Plan Year of the
Plan, the last day of that Plan Year.
(g) Valuation Date. The Determination Date.
(h) Present Value. Present value shall be based only on
the interest rate and mortality table specified in the
Adoption Agreement.
9.03. Minimum Contribution.
(a) Except as otherwise provided in (b) and (c) below,
the Fixed/Discretionary Contributions made on behalf of
any Participant who is not a Key Employee shall not be
less than the lesser of 3 percent (or such other percent
elected by the Employer in Section 1.12(c)) of such
Participant's Compensation or, in the case where the
Employer has no defined benefit plan which designates
this Plan to satisfy Section 401 of the Code, the
largest percentage of Employer contributions, as a
percentage of the first $200,000 of the Key Employee's
Compensation, made on behalf of any Key Employee for
that year. If the Employer selected the Integrated
Formula in Section 1.05(a)(2), the minimum contribution
shall be determined under paragraph (e) of this Section
9.03. Further, the minimum contribution under this
Section 9.03 shall be made even though, under other Plan
provisions, the Participant would not otherwise be
entitled to receive a contribution, or would have
received a lesser contribution for the year, because (1)
the Participant failed to complete 1,000 Hours of
Service or any equivalent service requirement provided
in the Adoption Agreement; or (2) the Participant's
Compensation was less than a stated amount.
(b) The provisions of (a) above shall not apply to any
Participant who was not employed by the Employer on the
last day of the Plan Year.
(c) The Employer contributions for the Plan Year made on
behalf of each Participant who is not a Key Employee and
who is a participant in a defined benefit plan
maintained by the Employer shall not be less than 5
percent of such Participant's Compensation, unless the
Employer has provided in Section 1.12(c) that the
minimum contribution requirement will be met in the
other plan or plans of the Employer.
(d) The minimum contribution required under (a) above
(to the extent required to be nonforfeitable under
Section 416(b) of the Code) may not be forfeited under
Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
(e) If the Employer elected an Integrated Formula in
Section 1.05(a)(2), the allocation steps in Section
4.06(b)(2) shall be preceded by the following steps:
(1) The Discretionary Employer Contributions will
be allocated to each eligible Participant (as
determined under this Section 9.03) in the ratio that
the Participant's Compensation bears to all
Participants' Compensation, but not in excess of
3%(or such other percent elected by the Employer in
Section 1.12(c).
(2) Any Discretionary Employer Contributions
remaining after (e)(1) above will be allocated to
each eligible Participant in the ratio that the
Participant's Excess Compensation for the Plan Year
bears to the Excess Compensation of all eligible
Participants, but not in excess of 3%(or such other
percent elected by the Employer in Section 1.12(c)).
9.04. Adjustment to the Limitation on Contributions and
Benefits. If this Plan is in Top-Heavy status, the number
100 shall be substituted for the number 125 in subsections
(e)(3) and (e)(4) of Section 5.03. However, this
substitution shall not take effect with respect to this Plan
in any Plan Year in which the following requirements are
satisfied:
(a) The Employer contributions for such Plan Year made
on behalf of each Participant who is not a Key Employee
and who is a participant in a defined benefit plan
maintained by the Employer is not less than 7 1/2
percent of such Participant's Compensation.
(b) The sum of the present value as of the Determination
Date of (1) the aggregate accounts of all Key Employees
under all defined contribution plans of the Employer and
(2) the cumulative accrued benefits of all Key Employees
under all defined benefit plans of the Employer does not
exceed 90 percent of the same amounts determined for all
Participants under all plans of the Employer that are
Top-Heavy Plans, excluding Accounts and accrued benefits
for Employees who formerly were but are no longer Key
Employees.
The substitutions of the number 100 for 125 shall not
take effect in any Limitation Year with respect to any
Participant for
whom no benefits are accrued or contributions made for
such Year.
9.05. Minimum Vesting. For any Plan Year in which the Plan
is a Top-Heavy Plan and all Plan Years thereafter, the Top-
Heavy vesting schedule elected in Section 1.12(d) will
automatically apply to the Plan. The Top-Heavy vesting
schedule applies to all benefits within the meaning of
Section 411(a)(7) of the Code except those attributable to
Employee Contributions or those already subject to a vesting
schedule which vests at least as rapidly in all cases as the
schedule elected in Section 1.12(d), including benefits
accrued before the Plan becomes a Top-Heavy Plan. Further,
no decrease in a Participant's nonforfeitable percentage may
occur in the event the Plan's status as a Top-Heavy Plan
changes for any Plan Year. However, this Section 9.05 does
not apply to the Account of any Employee who does not have
an Hour of Service after the Plan has initially become a Top-
Heavy Plan and such Employee's Account attributable to
Employer Contributions will be determined without regard to
this Section 9.05.
Article 10. Amendment and Termination.
10.01 Amendment by Employer. The Employer reserves the
authority, subject to the provisions of Article 1 and
Section 10.03, to amend the Plan:
(a) Changes to Elections Contained in the Adoption
Agreement. By filing with the Trustee an amended
Adoption Agreement, executed by the Employer only, on
which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are
to be effective on the effective date of such amended
Adoption Agreement except that retroactive changes to a
previous election or elections pursuant to the
regulations issued under Section 401(a)(4) of the Code
shall be permitted. Any such change notwithstanding, no
Participant's Account shall be reduced by such change
below the amount to which the Participant would have
been entitled if he had voluntarily left the employ of
the Employer immediately prior to the date of the
change. The Employer may from time to time make any
amendment to the Plan that may be necessary to satisfy
Sections 415 or 416 of the Code because of the required
aggregation of multiple plans by completing
overridingplan language in the Adoption Agreement. The
Employer may also add certain model amendments published
by the Internal Revenue Service which specifically
provide that their adoption will not cause the Plan to
be treated as an individually designed plan; or
(b) Other Changes. By amending any provision of the
Plan for any reason other than those specified in (a)
above. However, upon making such amendment, including a
waiver of the minimum funding requirement under Section
412(d) of the Code, the Employer may no longer
participate in this prototype plan arrangement and will
be deemed to have an individually designed plan.
Following such amendment, the Trustee may transfer the
assets of the Trust to the trust forming part of such
newly adopted plan upon receipt of sufficient evidence
(such as a determination letter or opinion letter from
the Internal Revenue Service or an opinion of counsel
satisfactory to the Trustee) that such trust will be a
qualified trust under the Code.
10.02. Amendment by Prototype Sponsor. The Prototype
Sponsor may in its discretion amend the Plan or the Adoption
Agreement at any time, subject to the provisions of Article
1 and Section 10.03, and provided that the Prototype Sponsor
mails a copy of such amendment to the Employer at its last
known address as shown on the books of the Prototype
Sponsor.
10.03. Amendments Affecting Vested and/or Accrued Benefits.
(a) Except as permitted by Section 10.04, no amendment
to the Plan shall be effective to the extent that it has
the effect of decreasing a Participant's Account or
eliminating an optional form of benefit with respect to
benefits attributable to service before the amendment.
Furthermore, if the vesting schedule of the Plan is
amended, the nonforfeitable interest of a Participant in
his Account, determined as of the later of the date the
amendment is adopted or the date it becomes effective,
will not be less than the Participant's nonforfeitable
interest in his Account determined without regard to
such amendment.
(b) If the Plan's vesting schedule is amended, including
any amendment resulting from a change to or from Top-
Heavy Plan status, or the Plan is amended in any way
that directly or indirectly affects the computation of a
Participant's nonforfeitable interest in his Account,
each Participant with at least three (3) Years of
Service for Vesting with the Employer may elect, within
a reasonable period after the adoption of the amendment,
to have the nonforfeitable percentage of his Account
computed under the Plan without regard to such
amendment. The Participant's election may be made
within 60 days from the latest of (1) the date the
amendment is adopted, (2) the date the amendment becomes
effective, or (3) the date the Participant is issued
written notice of the amendment by the Employer or the
Administrator.
10.04. Retroactive Amendments. An amendment made by the
Prototype Sponsor in accordance with Section 10.02 may be
made effective on a date prior to the first day of the Plan
Year in which it is adopted if such amendment is necessary
or appropriate to enable the Plan and Trust to satisfy the
applicable requirements of the Code or to conform the Plan
to any change in federal law, or to any regulations or
ruling thereunder. Any retroactive amendment by the
Employer shall be subject to the provisions of Section
10.01.
10.05. Termination. The Employer has adopted the Plan with
the intention and expectation that contributions will be
continued indefinitely. However, said Employer has no
obligation or liability whatsoever to maintain the Plan for
any length of time and may discontinue contributions under
the Plan or terminate the Plan at any time by written notice
delivered to the Trustee without any liability hereunder for
any such discontinuance or termination.
10.06. Distribution upon Termination of the Plan. Upon
termination or partial termination of the Plan or complete
discontinuance of contributions thereunder, each Participant
(including a terminated Participant with respect to amounts
not previously forfeited by him) who is affected by such
termination or partial termination or discontinuance will
have a fully vested interest in his Account, and, subject to
Section 4.05 and Article 8, the Trustee will distribute to
each Participant or other person entitled to distribution
the balance of the Participant's Account in a single lump
sum payment. In the absence of such instructions, the
Trustee will notify the Administrator of such situation and
the Trustee will be under no duty to make any distributions
under the Plan until it receives written instructions from
the Administrator. Upon the completion of such
distributions, the Trust will terminate, the Trustee will be
relieved from all liability under the Trust, and no
Participant or other person will have any claims thereunder,
except as required by applicable law.
10.07. Merger or Consolidation of Plan; Transfer of Plan
Assets. In case of any merger or consolidation of the Plan
with, or transfer of assets and liabilities of the Plan to,
any other plan, provision must be made so that each
Participant would, if the Plan then terminated, receive a
benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately before the
merger, consolidation or transfer if the Plan had then
terminated.
Article 11. Amendment and Continuation of Predecessor Plan;
Transfer of Funds to or from Other Qualified Plans.
11.01. Amendment and Continuation of Predecessor Plan. In
the event the Employer has previously established a plan
(the "predecessor plan") which is a defined contribution
plan under the Code and which on the date of adoption of the
Plan meets the applicable requirements of section 401(a) of
the Code, the Employer may, in accordance with the
provisions of the predecessor plan, amend and continue the
predecessor plan in the form of the Plan and become the
Employer hereunder, subject to the following:
(a) Subject to the provisions of the Plan, each
individual who was a Participant or former Participant
in the predecessor plan immediately prior to the
effective date of such amendment and continuation will
become a Participant or former Participant in the Plan;
(b) No election may be made under the vesting provisions
of the Adoption Agreement if such election would reduce
the benefits of a Participant under the Plan to less
than the benefits to which he would have been entitled
if he voluntarily separated from the service of the
Employer immediately prior to such amendment and
continuation;
(c) No amendment to the Plan shall decrease a
Participant's accrued benefit or eliminate an optional
form of benefit and if the amendment of the predecessor
plan in the form of the Plan results in a change in the
method of crediting service for vesting purposes between
the general method set forth in Section 2530.200b-2 of
the Department of Labor Regulations and the elapsed-time
method in Section 2.01(a)(33) of the Plan, each
Participant with respect to whom the method of crediting
vesting service is changed shall be treated in the
manner set forth by the provisions of Section 1.410(a)-
7(f)(1) of the Treasury Regulations which are
incorporated herein by reference;
(d) The amounts standing to the credit of a
Participant's Account immediately prior to such
amendment and continuation which represent the amounts
properly attributable to (1) contributions by the
Participant and (2) contributions by the Employer and
forfeitures will constitute the opening balance of his
Account or Accounts under the Plan;
(e) Amounts being paid to a former Participant or to a
Beneficiary in accordance with the provisions of the
predecessor plan will continue to be paid in accordance
with such provisions;
(f) Any election and waiver of the qualified pre-
retirement annuity in effect after August 23, 1984,
under the predecessor plan immediately before such
amendment and continuation will be deemed a valid
election and waiver of Beneficiary under Section 8.04 if
such designation satisfies the requirements of Section
8.04(d), unless and until the Participant revokes such
election and waiver under the Plan; and
(g) Unless the Employer and the Trustee agree otherwise,
all assets of the predecessor trust will be deemed to be
assets of the Trust as of the effective date of such
amendment. Such assets will be invested by the Trustee
as soon as reasonably practicable pursuant to Article 6.
The Employer agrees to assist the Trustee in any way
requested by the Trustee in order to facilitate the
transfer of assets from the predecessor trust to the
Trust Fund.
11.02. Transfer of Funds from an Existing Plan. The
Employer may from time to time direct the Trustee, in
accordance with such rules as the Trustee may establish, to
accept cash, allowable Fund Shares or participant loan
promissory notes transferred for the benefit of Participants
from a trust forming part of another qualified plan under
the Code, provided such plan is a defined contribution plan.
Such transferred assets will become assets of the Trust as
of the date they are received by the Trustee. Such
transferred assets will be credited to Participants'
Accounts in accordance with their respective interests
immediately upon receipt by the Trustee. A Participant's
interest under the Plan in transferred assets which were
fully vested and nonforfeitable under the transferring plan
will be fully vested and nonforfeitable at all times. Such
transferred assets will be invested by the Trustee in
accordance with the provisions of paragraph (g) of Section
11.01 as if such assets were transferred from a predecessor
plan. No transfer of assets in accordance with this Section
may cause a loss of an accrued or optional form of benefit
protected by Section 411(d)(6) of the Code.
11.03. Acceptance of Assets by Trustee. The Trustee will
not accept assets which are not either in a medium proper
for investment under the Plan, as set forth in Section
1.14(b), or in cash. Such assets shall be accompanied by
written instructions showing separately the respective
contributions by the prior employer and by the Employee, and
identifying the assets attributable to such contributions.
The Trustee shall establish such accounts as may be
necessary or appropriate to reflect such contributions under
the Plan. The Trustee shall hold such assets for investment
in accordance with the provisions of Article 6, and shall in
accordance with the written instructions of the Employer
make appropriate credits to the Accounts of the Participants
for whose benefit assets have been transferred.
11.04. Transfer of Assets from Trust. The Employer may
direct the Trustee to transfer all or a specified portion of
the Trust assets to any other plan or plans maintained by
the Employer or the employer or employers of a former
Participant or Participants, provided that the Trustee has
received evidence satisfactory to it that such other plan
meets all applicable requirements of the Code. The assets
so transferred shall be accompanied by written instructions
from the Employer naming the persons for whose benefit such
assets have been transferred, showing separately the
respective contributions by the Employer and by each
Participant, if any, and identifying the assets
attributable to the various contributions. The Trustee
shall have no further liabilities with respect to assets so
transferred.
Article 12. Miscellaneous.
12.01. Communication to Participants. The Plan will be
communicated to all Participants by the Employer promptly
after the Plan is adopted.
12.02. Limitation of Rights. Neither the establishment of
the Plan and the Trust, nor any amendment thereof, nor the
creation of any fund or account, nor the payment of any
benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the
Employer, Administrator or Trustee, except as provided
herein; and in no event will the terms of employment or
service of any Participant be modified or in any way
affected hereby. It is a condition of the Plan, and each
Participant expressly agrees by his participation herein,
that each Participant will look solely to the assets held in
the Trust for the payment of any benefit to which he is
entitled under the Plan.
12.03. Nonalienability of Benefits and Qualified Domestic
Relations Orders. The benefits provided hereunder will not
be subject to alienation, assignment, garnishment,
attachment, execution or levy of any kind, either
voluntarily or involuntarily, and any attempt to cause such
benefits to be so subjected will not be recognized, except
to such extent as may be required by law. The preceding
sentence shall also apply to the creation, assignment, or
recognition of a right to any benefit payable with respect
to a Participant pursuant to a domestic relations order,
unless such order is determined by the Plan Administrator to
be a qualified domestic relations order, as defined in
Section 414(p) of the Code, or any domestic relations order
entered before January 1, 1985. The Administrator must
establish reasonable procedures to determine the qualified
status of a domestic relations order. Upon receiving a
domestic relations order, the Administrator will promptly
notify the Participant and any alternate payee named in the
order, in writing, of the receipt of the order and the
Plan's procedures for determining the qualified status of
the order. Within a reasonable period of time after
receiving the domestic relations order, the Administrator
must determine the qualified status of the order and must
notify the Participant and each alternate payee, in writing,
of its determination. The Administrator must provide notice
under this paragraph by mailing to the individual's address
specified in the domestic relations order, or in a manner
consistent with the Department of Labor regulations.
If any portion of the Participant's Account is payable
during the period the Administrator is making its
determination of the qualified status of the domestic
relations order, the Administrator must make a separate
accounting of the amounts payable. If the Administrator
determines the order is a qualified domestic relations order
within 18 months of the date amounts first are payable
following receipt of the order, the Administrator will
direct the Trustee to distribute the payable amounts in
accordance with the order. If the Administrator does not
make his determination of the qualified status of the order
within the 18-month determination period, the Administrator
will direct the Trustee to distribute the payable amounts in
the manner the Plan would distribute if the order did not
exist and will apply the order prospectively if the
Administrator later determines the order is a qualified
domestic relations order.
A domestic relations order will not fail to be deemed a
qualified domestic relations order merely because it
requires the distribution or segregation of all or part of a
Participant's Account with respect to an alternate payee
prior to the Participant's earliest retirement age (as
defined in Section 414(p) of the Code) under the Plan. A
distribution to an alternate payee prior to the
Participant's attainment of the earliest retirement age is
available only if (a) the order specifies distribution at
that time and (b) if the present value of the alternate
payee's benefits under the Plan exceeds $3,500, and the
order requires, and the alternate payee consents to, a
distribution occurring prior to the Participant's attainment
of earliest retirement age.
12.04. Facility of Payment. In the event the Administrator
determines, on the basis of medical reports or other
evidence satisfactory to the Administrator, that the
recipient of any benefit payments under the Plan is
incapable of handling his affairs by reason of minority,
illness, infirmity or other incapacity, the Administrator
may direct the Trustee to disburse such payments to a person
or institution designated by a court which has jurisdiction
over such recipient or a person or institution otherwise
having the legal authority under state law for the care and
control of such recipient. The receipt by such person or
institution of any such payments shall be complete
acquittance therefore, and any such payment to the extent
thereof, shall discharge the liability of the Trust for the
payment of benefits hereunder to such recipient.
12.05. Information between Employer and Trustee. The
Employer agrees to furnish the Trustee, and the Trustee
agrees to furnish the Employer, with such information
relating to the Plan and Trust as may be required by the
other in order to carry out their respective duties
hereunder, including without limitation information required
under the Code and any regulations issued or forms adopted
by the Treasury Department thereunder or under the
provisions of ERISA and any regulations issued or forms
adopted by the Labor Department thereunder.
12.06. Effect of Failure to Qualify Under Code.
Notwithstanding any other provision contained herein, if the
Employer fails to obtain or retain approval of the Plan by
the Internal Revenue Service as a qualified Plan under the
Code, the Employer may no longer participate in this
prototype Plan arrangement and will be deemed to have an
individually designed plan.
12.07. Notices. Any notice or other communication in
connection with this Plan shall be deemed delivered in
writing if addressed as provided below and if either
actually delivered at said address or, in the case of a
letter, three business days shall have elapsed after the
same shall have been deposited in the United States mails,
first-class postage prepaid and registered or certified:
(a) If to the Employer or Administrator, to it at the
address set forth in the Adoption Agreement, to the
attention of the person specified to receive notice in
the Adoption Agreement;
(b) If to the Trustee, to it at the address set forth in
the Adoption Agreement;
or, in each case at such other address as the addressee
shall have specified by written notice delivered in
accordance with the foregoing to the addressor's then
effective notice address.
12.08. Governing Law. The Plan and the accompanying
Adoption Agreement will be construed, administered and
enforced according to ERISA, and to the extent not preempted
thereby, the laws of the Commonwealth of Massachusetts.
Article 13. Plan Administration.
13.01. Powers and Responsibilities of the Administrator.
The Administrator has the full power and the full
responsibility to administer the Plan in all of its details,
subject, however, to the requirements of ERISA. The
Administrator's powers and responsibilities include, but are
not limited to, the following:
(a) To make and enforce such rules and regulations as it
deems necessary or proper for the efficient
administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in
good faith to be final and conclusive on all persons
claiming benefits under the Plan;
(c) To decide all questions concerning the Plan and the
eligibility of any person to participate in the Plan;
(d) To administer the claims and review procedures
specified in Section 13.03;
(e) To compute the amount of benefits which will be
payable to any Participant, former Participant or
Beneficiary in accordance with the provisions of the
Plan;
(f) To determine the person or persons to whom such
benefits will be paid;
(g) To authorize the payment of benefits and provide for
the distribution of Code Section 402(f) notices;
(h) To comply with the reporting and disclosure
requirements of Part 1 of Subtitle B of Title I of
ERISA;
(i) To appoint such agents, counsel, accountants, and
consultants as may be required to assist in
administering the Plan;
(j) By written instrument, to allocate and delegate its
fiduciary responsibilities in accordance with Section
405 of ERISA including the formation of an
Administrative Committee to administer the Plan;
(k) To provide bonding coverage as required under
Section 412 of ERISA.
13.02. Nondiscriminatory Exercise of Authority. Whenever,
in the administration of the Plan, any discretionary action
by the Administrator is required, the Administrator shall
exercise its authority in a nondiscriminatory manner so that
all persons similarly situated will receive substantially
the same treatment.
13.03. Claims and Review Procedures.
(a) Claims Procedure. If any person believes he is
being denied any rights or benefits under the Plan, such
person may file a claim in writing with the
Administrator. If any such claim is wholly or partially
denied, the Administrator will notify such person of its
decision in writing. Such notification will contain (1)
specific reasons for the denial, (2) specific reference
to pertinent Plan provisions, (3) a description of any
additional material or information necessary for such
person to perfect such claim and an explanation of why
such material or information is necessary, and (4)
information as to the steps to be taken if the person
wishes to submit a request for review. Such
notification will be given within 90 days after the
claim is received by the Administrator (or within 180
days, if special circumstances require an extension of
time for processing the claim, and if written notice of
such extension and circumstances is given to such person
within the initial 90-day period). If such notification
is not given within such period, the claim will be
considered denied as of the last day of such period and
such person may request a review of his claim.
(b) Review Procedure. Within 60 days after the date on
which a person receives a written notice of a denied
claim (or, if applicable, within 60 days after the date
on which such denial is considered to have occurred),
such person (or his duly authorized representative) may
(1) file a written request with the Administrator for a
review of his denied claim and of pertinent documents
and (2) submit written issues and comments to the
Administrator. The Administrator will notify such
person of its decision in writing. Such notification
will be written in a manner calculated to be understood
by such person and will contain specific reasons for the
decision as well as specific references to pertinent
Plan provisions. The decision on review will be made
within 60 days after the request for review is received
by the Administrator (or within 120 days, if special
circumstances require an extension of time for
processing the request, such as an election by the
Administrator to hold a hearing, and if written notice
of such extension and circumstances is given to such
person within the initial 60-day period). If the
decision on review is not made within such period, the
claim will be considered denied.
13.04. Named Fiduciary. The Administrator is a "named
fiduciary" for purposes of Section 402(a)(1) of ERISA and
has the powers and responsibilities with respect to the
management and operation of the Plan described herein.
13.05. Costs of Administration. Unless some or all are
paid by the Employer, all reasonable costs and expenses
(including legal, accounting, and employee communication
fees) incurred by the Administrator and the Trustee in
administering the Plan and Trust will be paid first from the
forfeitures (if any) resulting under Section 7.07, then from
the remaining Trust Fund. All such costs and expenses paid
from the Trust Fund will, unless allocable to the Accounts
of particular Participants, be charged against the Accounts
of all Participants on a prorata basis or in such other
reasonable manner as may be directed by the Employer.
Article 14. Trust Agreement.
14.01. Acceptance of Trust Responsibilities. By executing
the Adoption Agreement, the Employer establishes a trust to
hold the assets of the Plan. By executing the Adoption
Agreement, the Trustee agrees to accept the rights, duties
and responsibilities set forth in this Article 14.
14.02. Establishment of Trust Fund. A trust is hereby
established under the Plan and the Trustee will open and
maintain a trust account for the Plan and, as part thereof,
Participants' Accounts for such individuals as the Employer
shall from time to time give written notice to the Trustee
are Participants in the Plan. The Trustee will accept and
hold in the Trust Fund such contributions on behalf of
Participants as it may receive from time to time from the
Employer. The Trust Fund shall be fully invested and
reinvested in accordance with the applicable provisions of
the Plan in Fund Shares or as otherwise provided in Section
14.10.
14.03. Exclusive Benefit. The Trustee shall hold the
assets of the Trust Fund for the exclusive purpose of
providing benefits to Participants and Beneficiaries and
defraying the reasonable expenses of administering the Plan.
No assets of the Plan shall revert to the Employer except as
specifically permitted by the terms of the Plan.
14.04. Powers of Trustee. The Trustee shall have no
discretion or authority with respect to the investment of
the Trust Fund but shall act solely as a directed trustee of
the funds contributed to it. In addition to and not in
limitation of such powers as the Trustee has by law or under
any other provisions of the Plan, the Trustee will have the
following powers, each of which the Trustee exercises solely
as directed Trustee in accordance with the written direction
of the Employer except to the extent a Plan asset is subject
to Participant direction of investment and provided that no
such power shall be exercised in any manner inconsistent
with the provisions of ERlSA:
(a) to deal with all or any part of the Trust Fund and
to invest all or a part of the Trust Fund in investments
available under the Plan, without regard to the law of any
state regarding proper investment;
(b) to retain uninvested such cash as it may deem
necessary or advisable, without liability for interest
thereon, for the administration of the Trust;
(c) to sell, convert, redeem, exchange, or otherwise
dispose of all or any part of the assets constituting the
Trust Fund;
(d) to enforce by suit or otherwise, or to waive, its
rights on behalf of the Trust, and to defend claims asserted
against it or the Trust, provided that the Trustee is
indemnified to its satisfaction against liability and
expenses;
(e) to employ such agents and counsel as may be
reasonably necessary in collecting, managing, administering,
investing, distributing and protecting the Trust Fund or the
assets thereof and to pay them reasonable compensation;
(f) to compromise, adjust and settle any and all claims
against or in favor of it or the Trust;
(g) to oppose, or participate in and consent to the
reorganization, merger, consolidation, or readjustment of
the finances of any enterprise, to pay assessments and
expenses in connection therewith, and to deposit securities
under deposit agreements;
(h) to apply for or purchase annuity contracts in
accordance with Section 8.02;
(i) to hold securities unregistered, or to register them
in its own name or in the name of nominees;
(j) to appoint custodians to hold investments within the
jurisdiction of the district courts of the United States and
to deposit securities with stock clearing corporations or
depositories or similar organizations;
(k) to make, execute, acknowledge and deliver any and
all instruments that it deems necessary or appropriate to
carry out the powers herein granted; and
(l) generally to exercise any of the powers of an owner
with respect to all or any part of the Trust Fund.
The Employer specifically acknowledges and authorizes
that affiliates of the Trustee may act as its agent in the
performance of ministerial, nonfiduciary duties under the
Trust. The expenses and compensation of such agent shall be
paid by the Trustee.
The Trustee shall provide the Employer with reasonable
notice of any claim filed against the Plan or Trust or with
regard to any related matter, or of any claim filed by the
Trustee on behalf of the Plan or Trust or with regard to any
related matter.
14.05. Accounts. The Trustee will keep full accounts of
all receipts and disbursements and other transactions
hereunder. Within 60 days after the close of each Plan
Year, within 60 days after termination of the Trust, and at
such other times as may be appropriate, the Trustee will
determine the then net fair market value of the Trust Fund
as of the close of the Plan Year, as of the termination of
the Trust, or as of such other time, whichever is
applicable, and will render to the Employer and
Administrator an account of its administration of the Trust
during the period since the last such accounting, including
all allocations made by it during such period.
14.06. Approving of Accounts. To the extent permitted by
law, the written approval of any account by the Employer or
Administrator will be final and binding, as to all matters
and transactions stated or shown therein, upon the Employer,
Administrator, Participants and all persons who then are or
thereafter become interested in the Trust. The failure of
the Employer or Administrator to notify the Trustee within
six (6) months after the receipt of any account of its
objection to the account will, to the extent permitted by
law, be the equivalent of written approval. If the Employer
or Administrator files any objections within such six (6)
month period with respect to any matters or transactions
stated or shown in the account, and the Employer or
Administrator and the Trustee cannot amicably settle the
question raised by such objections, the Trustee will have
the right to have such questions settled by judicial
proceedings. Nothing herein contained will be construed so
as to deprive the Trustee of the right to have judicial
settlement of its accounts. In any proceeding for a
judicial settlement of any account or for instructions, the
only necessary parties will be the Trustee, the Employer and
the Administrator.
14.07. Distribution from Trust Fund. The Trustee shall
make such distribution from the Trust Fund as the Employer
or Administrator may in writing direct, as provided by the
terms of the Plan, upon certification by the Employer or
Administrator that the same is for the exclusive benefit of
Participants or their Beneficiaries, or for the payment of
expenses of administering the Plan.
14.08. Transfer of Amounts from Qualified Plan. If the
Plan provides that amounts may be transferred to the Plan
from another qualified plan or trust under Section 401(a) of
the Code, such transfer shall be made in accordance with the
provisions of the Plan and with such rules as may be
established by the Trustee. The Trustee will only accept
assets which are in a medium proper for investment under
this agreement or in cash. Such amounts shall be
accompanied by written instructions showing separately the
respective contributions by the prior employer and the
transferring Employee, and identifying the assets
attributable to such contributions. The Trustee shall hold
such assets for investment in accordance with the provisions
of this agreement.
14.09. Transfer of Assets from Trust. Subject to the
provisions of the Plan, the Employer may direct the Trustee
to transfer all or a specified portion of the Trust assets
to any other plan or plans maintained by the Employer or the
employer or employers of a former Participant or
Participants, provided that the Trustee has received
evidence satisfactory to it that such other plan meets all
applicable requirements of the Code. The assets so
transferred shall be accompanied by written instructions
from the Employer naming the persons for whose benefit such
assets have been transferred, showing separately the
respective contributions by the Employer and by each
Participant, if any, and identifying the assets attributable
to the various contributions. The Trustee shall have no
further liabilities with respect to assets so transferred.
14.10. Separate Trust or Fund for Existing Plan Assets.
With the consent of the Trustee, the Employer may maintain a
trust or fund (including a group annuity contract) under
this prototype plan document separate from the Trust Fund
for Plan assets purchased prior to the adoption of this
prototype plan document which are not Fidelity Funds listed
in Section 1.14(b). The Trustee shall have no authority and
no responsibility for the Plan assets held in such separate
trust or fund. The duties and responsibilities of the
trustee of a separate trust shall be provided by a separate
trust agreement, between the Employer and the trustee.
Notwithstanding the preceding paragraph, the Trustee or
an affiliate of the Trustee may agree in writing to provide
ministerial recordkeeping services for guaranteed investment
contracts held in the separate trust or fund. The
guaranteed investment contract(s) shall be valued as
directed by the Employer or the Trustee of the separate
trust.
The trustee of the separate trust (hereafter referred to
as "trustee") will be the owner of any insurance contract
purchased prior to the adoption of this prototype plan
document. The insurance contract(s) must provide that
proceeds will be payable to the trustee; however the trustee
shall be required to pay over all proceeds of the
contract(s) to the Participant's designated Beneficiary in
accordance with the distribution provisions of this plan. A
Participant's spouse will be the designated Beneficiary of
the proceeds in all circumstances unless a qualified
election has been made in accordance with Article 8. Under
no circumstances shall the trust retain any part of the
proceeds. In the event of any conflict between the terms of
this plan and the terms of any insurance contract purchased
hereunder, the plan provisions shall control.
Any life insurance contracts held in the Trust Fund or
in the separate trust are subject to the following limits:
(a) Ordinary life - For purposes of these incidental
insurance provisions, ordinary life insurance contracts
are contracts with both nondecreasing death benefits and
nonincreasing premiums. If such contracts are held,
less than 1/2 of the aggregate employer contributions
allocated to any Participant will be used to pay the
premiums attributable to them.
(b) Term and universal life - No more than 1/4 of the
aggregate employer contributions allocated to any
participant will be used to pay the premiums on term
life insurance contracts, universal life insurance
contracts, and all other life insurance contracts which
are not ordinary life.
(c) Combination - The sum of 1/2 of the ordinary life
insurance premiums and all other life insurance premiums
will not exceed 1/4 of the aggregate employer
contributions allocated to any Participant.
14.11. Voting; Delivery of Information. The Trustee shall
deliver, or cause to be executed and delivered, to the
Employer or Plan Administrator all notices, prospectuses,
financial statements, proxies and proxy soliciting materials
received by the Trustee relating to securities held by the
Trust or, if applicable, deliver these materials to the
appropriate Participant or the Beneficiary of a deceased
Participant. The Trustee shall not vote any securities held
by the Trust except in accordance with the written
instructions of the Employer, Participant or the Beneficiary
of the Participant, if the Participant is deceased; however,
the Trustee may, in the absence of instructions, vote
"present" for the sole purpose of allowing such shares to be
counted for establishment of a quorum at a shareholders'
meeting. The Trustee shall have no duty to solicit
instructions from Participants, Beneficiaries, or the
Employer.
14.12. Compensation and Expenses of Trustee. The Trustee's
fee for performing its duties hereunder will be such
reasonable amounts as the Trustee may from time to time
specify by written agreement with the Employer. Such fee,
any taxes of any kind which may be levied or assessed upon
or with respect to the Trust Fund, and any and all expenses,
including without limitation legal fees and expenses of
administrative and judicial proceedings, reasonably incurred
by the Trustee in connection with its duties and
responsibilities hereunder will, unless some or all have
been paid by said Employer, be paid first from forfeitures
resulting under Section 7.07, then from the remaining Trust
Fund and will, unless allocable to the Accounts of
particular Participants, be charged against the respective
Accounts of all Participants, in such reasonable manner as
the Trustee may determine.
14.13. Reliance by Trustee on Other Persons. The Trustee
may rely upon and act upon any writing from any person
authorized by the Employer or Administrator to give
instructions concerning the Plan and may conclusively rely
upon and be protected in acting upon any written order from
the Employer or Administrator or upon any other notice,
request, consent, certificate, or other instructions or
paper reasonably believed by it to have been executed by a
duly authorized person, so long as it acts in good faith in
taking or omitting to take any such action. The Trustee
need not inquire as to the basis in fact of any statement in
writing received from the Employer or Administrator.
The Trustee will be entitled to rely on the latest
certificate it has received from the Employer or
Administrator as to any person or persons authorized to act
for the Employer or Administrator hereunder and to sign on
behalf of the Employer or Administrator any directions or
instructions, until it receives from the Employer or
Administrator written notice that such authority has been
revoked.
Notwithstanding any provision contained herein, the
Trustee will be under no duty to take any action with
respect to any Participant's Account (other than as
specified herein) unless and until the Employer or
Administrator furnishes the Trustee with written
instructions on a form acceptable to the Trustee, and the
Trustee agrees thereto in writing. The Trustee will not be
liable for any action taken pursuant to the Employer's or
Administrator's written instructions (nor for the collection
of contributions under the Plan, nor the purpose or
propriety of any distribution made thereunder).
14.14. Indemnification by Employer. The Employer shall
indemnify and save harmless the Trustee from and against any
and all liability to which the Trustee may be subjected by
reason of any act or conduct (except willful misconduct or
negligence) in its capacity as Trustee, including all
expenses reasonably incurred in its defense.
14.15. Consultation by Trustee with Counsel. The Trustee
may consult with legal counsel (who may be but need not be
counsel for the Employer or the Administrator) concerning
any question which may arise with respect to its rights and
duties under the Plan and Trust, and the opinion of such
counsel will, to the extent permitted by law, be full and
complete protection in respect of any action taken or
omitted by the Trustee hereunder in good faith and in
accordance with the opinion of such counsel.
14.16. Persons Dealing with the Trustee. No person dealing
with the Trustee will be bound to see to the application of
any money or property paid or delivered to the Trustee or to
inquire into the validity or propriety of any transactions.
14.17. Resignation or Removal of Trustee. The Trustee may
resign at any time by written notice to the Employer, which
resignation shall be effective 60 days after delivery to the
Employer. The Trustee may be removed by the Employer by
written notice to the Trustee, which removal shall be
effective 60 days after delivery to the Trustee.
Upon resignation or removal of the Trustee, the Employer
may appoint a successor trustee. Any such successor trustee
will, upon written acceptance of his appointment, become
vested with the estate, rights, powers, discretion, duties
and obligations of the Trustee hereunder as if he had been
originally named as Trustee in this Agreement.
Upon resignation or removal of the Trustee, the Employer
will no longer participate in this prototype plan and will
be deemed to have adopted an individually designed plan. In
such event, the Employer shall appoint a successor trustee
within said 60-day period and the Trustee will transfer the
assets of the Trust to the successor trustee upon receipt of
sufficient evidence (such as a determination letter or
opinion letter from the Internal Revenue Service or an
opinion of counsel satisfactory to the Trustee) that such
trust will be a qualified trust under the Code.
The appointment of a successor trustee shall be
accomplished by delivery to the Trustee of written notice
that the Employer has appointed such successor trustee, and
written acceptance of such appointment by the successor
trustee. The Trustee may, upon transfer and delivery of the
Trust Fund to a successor trustee, reserve such reasonable
amount as it shall deem necessary to provide for its fees,
compensation, costs and expenses, or for the payment of any
other liabilities chargeable against the Trust Fund for
which it may be liable. The Trustee shall not be liable for
the acts or omissions of any successor trustee.
14.18. Fiscal Year of the Trust. The fiscal year of the
Trust will coincide with the Plan Year.
14.19. Discharge of Duties by Fiduciaries. The Trustee and
the Employer and any other fiduciary shall discharge their
duties under the Plan and this Trust Agreement solely in the
interests of Participants and their Beneficiaries in
accordance with the requirements of ERISA.
14.20. Amendment. In accordance with provisions of the
Plan, and subject to the limitations set forth therein, this
Trust Agreement may be amended by an instrument in writing
signed by the Employer and the Trustee. No amendment to
this Trust Agreement shall divert any part of the Trust Fund
to any purpose other than as provided in Section 2 hereof.
14.21. Plan Termination. Upon termination or partial
termination of the Plan or complete discontinuance of
contributions thereunder, the Trustee will make
distributions to the Participants or other persons entitled
to distributions as the Employer or Administrator directs in
accordance with the provisions of the Plan. In the absence
of such instructions and unless the Plan otherwise provides,
the Trustee will notify the Employer or Administrator of
such situation and the Trustee will be under no duty to make
any distributions under the Plan until it receives written
instructions from the Employer or Administrator. Upon the
completion of such distributions, the Trust will terminate,
the Trustee will be relieved from all liability under the
Trust, and no Participant or other person will have any
claims thereunder, except as required by applicable law.
14.22. Permitted Reversion of Funds to Employer. If it is
determined by the Internal Revenue Service that the Plan
does not initially qualify under Section 401 of the Code,
all assets then held under the Plan will be returned by the
Trustee, as directed by the Administrator, to the Employer,
but only if the application for determination is made by the
time prescribed by law for filing the Employer's return for
the taxable year in which the Plan was adopted or such later
date as may be prescribed by regulations. Such distribution
will be made within one year after the date the initial
qualification is denied. Upon such distribution the Plan
will be considered to be rescinded and to be of no force or
effect.
Contributions under the Plan are conditioned upon their
deductibility under Section 404 of the Code. In the event
the deduction of a contribution made by the Employer is
disallowed under Section 404 of the Code, such contribution
(to the extent disallowed) must be returned to the Employer
within one year of the disallowance of the deduction.
Any contribution made by the Employer because of a
mistake of fact must be returned to the Employer within one
year of the contribution.
14.23. Governing Law. This Trust Agreement will be
construed, administered and enforced according to ERISA and,
to the extent not preempted thereby, the laws of the
Commonwealth of Massachusetts.
CORPORATEplan for RetirementSM
Profit Sharing/401(k) Plan
Fidelity Basic Plan Document No. 07
Amendment One
Section 2.01(a)(7) "Compensation" is amended to include:
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the
contrary, for plan years beginning on or after January 1, 1994,
the annual compensation of each Employee taken into account under
the plan shall not exceed the OBRA '93 annual compensation limit.
The OBRA '93 annual compensation limit is $150,000, as adjusted
by the Commissioner for increases in the cost of living in
accordance with section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in
such calendar year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual compensation will be
multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which
is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under section 401(a)(17)
of the Code shall mean the OBRA '93 annual compensation limit set
forth in this provision. Notwithstanding 2.01(a)(7)(A), for
purpose of Section 4.02 (Additional Limit on Deferral
Contributions) and Section 4.04 (Limit on Matching
Contributions), the Employer may use Compensation as defined in
Section 5.03(e)(2) excluding reimbursements or other expense
allowances, fringe benefits (cash and non-cash), moving expenses,
deferred compensation and welfare benefits, but including amounts
that are not includable in the gross income of the Participant
under a salary reduction agreement by reason of the application
of Section 125, 402(a)(8), 402(h) or 403(b) of the Code.
If compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in
the current plan year, the compensation for that prior
determination period is subject to the OBRA '93 annual
compensation limit in effect for that prior determination period.
For this purpose, for determination periods beginning before the
first day of the first plan year beginning on or after January 1,
1994, the OBRA '93 annual compensation limit is $150,000.
Section 8.01(d) "Distribution of Benefits to Participants and
Beneficiaries" is amended to include:
(5) If a distribution is one to which sections 401(a)(11)
and 417 of the Internal Revenue Code do not apply, such
distribution may commence less than 30 days after the notice
required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the administrator clearly informs the Participant
that the Participant has a right to a period of at least 30
days after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
Exhibit 10.28
July 2, 1997
Smith Corona Corporation
839 Route 13 South
Cortland, New York 13045-0990
Re: Loan and Security Agreement by and between Smith
Corona Corporation ("Borrower") and Congress
Financial Corporation ("Lender"), dated
February 28, 1997 (as from time to time amended
and supplemented, the "Loan Agreement")
Gentlemen:
This will confirm the agreement between Borrower and Lender
that the Loan Agreement shall be and is hereby amended as
follows:
1. Section 1.31 (definition of "Letter of Credit
Accommodations") is amended by adding, after the word "issuer" at
the end thereof, the words "or (c) with respect to which Lender
has issued or guaranteed drafts and acceptances relating to the
foregoing or otherwise ("Acceptances")".
2. Section 2.2(a) is amended by deleting the parenthetical
reference to "(including both documentary and standby letters of
credit) and replacing it with "(including documentary letters of
credit, standby letters of credit and Acceptances)".
3. Section 2.2(b) is amended to provide that the
references in the first sentence thereof to the "daily
outstanding balance" of the Letter of Credit Accommodations shall
mean, only for purposes of the first sentence of Section 2.2(b),
exclusive of the daily outstanding balance of the Acceptances.
4. Section 2.2(b) is further amended by adding the
following at the end thereof:
"(b) In addition to any charges, fees or expenses
charged by any bank or issuer in connection with the Acceptances
included in the Letter of Credit Accommodations, Borrower shall
pay to Lender an Acceptance fee at a rate equal to two and one-half (2.5%)
percent per annum on the daily outstanding balance of
the Acceptances for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each
succeeding month, except that Borrower shall pay to Lender such
Acceptance fee, at Lender's option, without notice, at a rate
equal to four and one half (4.5%) percent per annum or such daily
outstanding balance for: (i) the period from and after the date
of termination or non-renewal hereof until Lender has received
full and final payment of all Obligations (notwithstanding entry
of a judgment against Borrower) and (ii) the period from and
after the date of the occurrence of an Event of Default for so
long as such Event of Default is continuing as determined by
Lender. Such Acceptance fee shall be calculated on the basis of
a three hundred sixty (360) day year and actual days elapsed and
the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement."
5. Section 2.2(c) is amended to provide that Section
2.2(c)(i) is not applicable to Acceptances and that Section
2.2(c)(ii) shall be applicable to Acceptances.
6. Section 2.2(d) is amended to add the following sentence
immediately after the first sentence thereof:
"The amount of all outstanding Acceptances shall be
included in such Letter of Credit Accommodations and,
except in Lender's sole discretion, shall not at any
time exceed $3,000,000."
Except as hereinabove specifically provided, the Loan
Agreement and all other Financing Agreements (as such term is
defined in the Loan Agreement) are ratified and confirmed.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By:/s/ Ken Holler
Title: Assistant Vice President
Accepted and Agreed to:
SMITH CORONA CORPORATION
By:/s/ John A. Piontkowski
Title: Executive Vice President and
Chief Financial Officer
Exhibit 10.29
EMPLOYMENT AGREEMENT
Agreement made as of the 14th day of October, 1996,
between Smith Corona Corporation, a Delaware corporation (the
"Company"), and W. Michael Driscoll (the "Executive").
WHEREAS, on July 5, 1995, the Company filed a voluntary
petition for relief under Chapter 11 of Title 11 of the United
States Code, 11 U.S.C. 101 et. seq. (the "Bankruptcy Code"),
with the Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court");
WHEREAS, pursuant to the Bankruptcy Code, the Company
is continuing to operate its business and manage its properties
and assets as debtor-in-possession;
WHEREAS, the Company is soliciting acceptances from its
creditors with respect to its Third Amended Second Joint Plan of
Reorganization Under Chapter 11 of the United States Bankruptcy
Code (as such plan may be amended from time to time, the "Plan"),
which Plan is subject to certain conditions precedent to
confirmation (as set forth in Section 13.1 of the Plan) and to
effectiveness (as set forth in Section 13.2 of the Plan); and
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to accept employment with the Company,
but only on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. The Company shall employ the Executive, and the
Executive shall serve the Company, for the period beginning on
October 14, 1996 and expiring on the date three (3) years from
the Effective Date (as that term is defined in the Plan), unless
sooner terminated pursuant to the provisions of Section 4 hereof
(the "Employment Period").
2. For the period beginning on October 14, 1996 and
ending on the Effective Date, the Executive shall serve the
Company as a Consultant. During the remainder of the Employment
Period, the Executive shall serve the Company as its President
and Chief Executive Officer. During the Employment Period, the
Executive shall, except during vacation or sick leave, devote the
whole of his time, attention and skill during usual business
hours (and outside those hours when reasonably necessary to his
duties hereunder) to his duties hereunder; faithfully and
diligently perform such duties and exercise such powers as may be
from time to time assigned to or vested in him by the Company's
Board of Directors (the "Board") or, prior to the Effective Date,
by the Company's Chief Executive Officer; obey the directions of
the Board and, prior to the Effective Date, of the Company's
Chief Executive Officer; and use his best efforts to promote the
interests of the Company. The Executive may be required in
pursuit of his duties hereunder to perform services for any
company controlling (assuming the Executive declines to exercise
any resignation right pursuant to Section 4(d) hereof),
controlled by or under common control with the Company (such
companies hereinafter collectively called "Affiliates") and to
accept such offices in any Affiliates as the Board may require.
The Executive shall obey all policies of the Company and
applicable policies of its Affiliates.
3. a. During the Employment Period, the Company
shall pay the Executive a salary at an annual rate of $250,000,
subject to increase by the Board in its sole discretion, which
shall be payable periodically in accordance with the Company's
then prevailing payroll practices.
b. The Company, at such time subsequent to the
Effective Date as it (in its sole discretion) is reasonably able
to do so, shall award the Executive NewSCC Common Stock (as
defined in the Plan) pursuant to Section 6.3 of the Plan in an
aggregate amount which shall at all times constitute 2% of the
total shares of NewSCC Common Stock which are issued pursuant to
the Plan, determined on a fully-diluted basis, not including the
effect of the exercise of any of the NewSCC Warrants (as defined
in the Plan). The Executive's rights to such shares shall vest
on the second anniversary of the Effective Date; provided,
however, that the Company hereby agrees to file a motion with the
Bankruptcy Court to amend the Plan to allow for earlier vesting
of such shares at the time of a Change in Control (as defined in
Section 4(d) hereof). The Executive shall be eligible to
participate in the employee stock incentive or other similar plan
described in Section 6.2 of the Plan in accordance with the
provisions thereof. The Executive also shall be eligible to
participate in such other incentive compensation programs as may
be established by the Board that the Company generally provides
to its employees having rank and seniority at the Company
comparable to the Executive.
c. The Executive shall be entitled to four (4)
weeks of vacation per calendar year with any unused vacation time
carried over to the next calendar year.
d. The Executive shall be entitled to such
expense accounts, sick leave, perquisites of office, fringe
benefits, insurance coverage (including the Company's Executive
Medical and Life Insurance Programs), and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive. In addition, the Executive shall have annual
physical examinations at the Company's expense.
4. Unless terminated in accordance with the following
provisions of this Section 4, the Company shall continue to
employ the Executive and the Executive shall continue to work for
the Company, during the Employment Period.
a. This Agreement shall terminate automatically
upon the death of the Executive.
b. The Company may terminate the Executive's
employment if the Executive suffers from a physical or mental
disability to an extent that renders it impracticable for the
Executive to continue performing his duties hereunder. The
Executive shall be deemed to be so disabled if (i) a physician
selected by the Company advises the Company that the Executive's
physical or mental condition will render the Executive unable to
perform his duties for a period exceeding three consecutive
months, or (ii) due to a physical or mental condition, the
Executive has not substantially performed his duties hereunder
for a period of three consecutive months. The Company will
provide the Executive with long-term disability insurance.
c. The Company may terminate the Executive's
employment at any time for cause; cause shall mean (i) a default
or other breach by the Executive of his obligations under
Sections 1, 2, 5, 6, 8 and 17 of this Agreement, (ii) misconduct,
dishonesty, insubordination or other act by the Executive
detrimental to the good will of the Company or damaging to the
Company's relationships with its customers, suppliers or
employees, (iii) the conviction of a felony, or (iv) any act of
disloyalty or breach of trust by the Executive.
d. The Company may terminate the Executive's
employment at any time without cause. The Executive may resign
from his employment at any time. In the event that the Executive
is terminated without cause, or resigns within thirty (30) days
following a Change of Control (as hereinafter defined), (i) the
Company shall continue to pay the Executive at a rate equivalent
to his regular base salary until the date one (1) year from the
date of termination or resignation; (ii) the Company shall
continue to provide medical insurance to the Executive until the
date one (1) year from the date of termination or resignation;
and (iii) the Company shall pay the Executive any accrued but
unused vacation time for the current year and any accrued but
unused vacation time carried over from any prior year. Such
payments to the Executive by the Company will be in full and
complete satisfaction (except as provided in subsection (e)
below) of any and all obligations owing to the Executive pursuant
to this Agreement. "Change of Control" shall mean (i) a stock
purchase by any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities and Exchange Act of 1934, as
amended) who then owns or by virtue of such purchase becomes the
beneficial owner of, directly or indirectly, voting securities of
the Company representing 51% or more of the combined voting power
of the Company's then outstanding voting securities or (ii) any
change in the composition of the Company's Board of Directors in
any one year which involves a majority of such directors and
which is not recommended by the Board.
e. Upon termination pursuant to (a), (b), (c) or
(d), above, the Company shall pay the Executive or his estate any
salary earned and unpaid to the date of termination, and any
outstanding funds advanced by the Company to or on behalf of the
Executive shall become immediately due and payable.
5. The Executive shall not divulge or communicate to
any person (except in performing his duties under this Agreement)
or use for his own purposes trade secrets, confidential
commercial information, or any other information, knowledge or
data of the Company or of any of its Affiliates which is not
generally known to the public and shall use his best efforts to
prevent the publication or disclosure by any other person of any
such secret, information, knowledge or data. All documents and
objects made, compiled, received, held or used by the Executive
while employed by the Company in connection with the business of
the Company shall be and remain the Company's property and shall
be delivered by the Executive to the Company upon the termination
of the Employment Period or at any earlier time requested by the
Company.
6. The Executive agrees that during the Employment
Period and for a period of two years after the termination of the
Employment Period (except for a termination without cause or
resignation upon a Change of Control pursuant to Section 4(d)
above), he will not directly or indirectly, whether or not for
compensation and whether or not as an employee, be engaged in or
have any financial interest in any business competing with or
which may compete with the business of the Company (or with any
business of any Affiliate for which the Executive performed
services hereunder) within any state, region or locality in which
the Company or such Affiliate is then doing business or marketing
its products, as the business of the Company or such Affiliate
may then be constituted. For purposes of this Agreement, the
Executive shall be deemed to be engaged in or to have a financial
interest in such a business if he is an employee, officer,
director, or partner, of any person, partnership, corporation,
trust or other entity which is engaged in such a business, or if
he directly or indirectly performs services for such entity or if
he or any member of his immediate family beneficially owns an
equity interest, or interest convertible into equity, in any such
entity; provided, however, that the foregoing shall not prohibit
the Executive from continuing to be a member of the board of
directors of IPC Holdings, Inc. for so long as such company, in
the sole discretion of the Board, does not compete with the
business of the Company (or with any business of any Affiliate
for which the Executive performed services hereunder), unless the
Board otherwise approves, and shall not prohibit the Executive or
a member of his immediate family from owning, for the purpose of
passive investment, less than 5% of any class of securities of a
publicly held corporation.
7. The Executive agrees that he shall not, for a
period of two years after the Employment Period, employ any
person who was employed by the Company or any of its Affiliates
or induce such person to accept employment other than with the
Company and its Affiliates.
8. The Executive hereby agrees that any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Product") within the
scope of any business of the Company or any Affiliate which the
Executive may conceive or make or have conceived or made during
his employment with the Company shall be and are the sole and
exclusive property of the Company, and that the Executive shall,
whenever requested to do so by the Company, at its expense,
execute and sign any and all applications, assignments or other
instruments and do all other things which the Company may deem
necessary or appropriate (i) in order to apply for, obtain,
maintain, enforce, or defend letters patent of the United States
or any foreign country for any Work Product, or (ii) in order to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
9. The Company and the Executive each agree to waive
trial by jury in any action arising under or in connection with
this Agreement or the employment relationship between the Company
and the Executive.
10. Any notice or other communication required or
permitted under this Agreement shall be effective only if it is
in writing and delivered personally or sent by registered or
certified mail, postage prepaid, addressed as follows:
If to the Company:
Smith Corona Corporation
P.O. Box 2090
839 Route 13
Cortland, NY 13045-0990
If to the Executive:
Mr. W. Michael Driscoll
529 Cayuga Heights Road
Ithaca, NY 14850
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
11. This Agreement constitutes the entire agreement
between the parties hereto with respect to the Executive's
employment by the Company, and supersedes and is in full
substitution for any and all prior understandings or agreements
with respect to the Executive's employment with the Company.
12. This Agreement may be amended only by an
instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
13. This Agreement is binding on and is for the
benefit of the parties hereto and their respective successors,
heirs, executors, administrators and other legal representatives.
Neither this Agreement nor any right or obligation hereunder may
be assigned by the Company (except to an Affiliate) or by the
Executive.
14. If any provision of this Agreement, or portion
thereof, is so broad, in scope or duration, so as to be
unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
15. a. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
b. Any judicial proceeding brought with respect
to this Agreement must be brought in any state or federal court
of competent jurisdiction located in the State of New York, and,
by execution and delivery of this Agreement, each party (i)
accepts, generally and unconditionally, the exclusive
jurisdiction of such courts and any related appellate courts, and
irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement and (ii) irrevocably waives any
objection it may now or hereafter have as to the venue of any
such suit, action or proceeding brought in such a court or that
such court is an inconvenient forum. THE PARTIES HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH
PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT.
16. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
17. The Executive represents and warrants that he is
not a party to any agreement which would prohibit him from
entering into this Agreement or performing fully his obligations
hereunder.
18. The obligations of the Executive set forth in
paragraphs 5, 6, 7, 8 and 9 represent independent covenants by
which the Executive is and will remain bound notwithstanding any
breach by the Company, and shall survive the termination of this
Agreement.
19. The Executive recognizes that a breach or
threatened breach by him of his obligations under Sections 5, 6,
7 or 8 would cause irreparable injury to the Company, and the
Company shall be entitled to preliminary and permanent
injunctions enjoining him from violating Sections 5, 6, 7 or 8 in
addition to any other remedies which may be available.
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
SMITH CORONA CORPORATION
By: /s/ Ronald F. Stengel
Name: Ronald F. Stengel
Title: President and CEO
/s/ W. Michael Driscoll
W. Michael Driscoll
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement ("Amendment"),
made as of the 2nd day of June, 1997, between SMITH CORONA
CORPORATION, a Delaware corporation (the "Company"), and W.
Michael Driscoll (the "Executive").
WHEREAS, the Company and Executive have entered into an
employment agreement dated as of October 14, 1996 (the
"Employment Agreement") and
WHEREAS, the Company and Executive desire to amend the
Employment Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. Section 2 of the Employment Agreement shall be
deleted in its entirety and replaced with the following:
2. During the Employment Period, the Executive shall
serve the Company as its President and Chief Executive
Officer. During the Employment Period, the Executive shall,
except during vacation or sick leave, devote the whole of
his time, attention and skill during usual business hours
(and outside those hours when reasonably necessary to his
duties hereunder) to his duties hereunder; faithfully and
diligently perform such duties and exercise such powers as
may be from time to time assigned to or vested in him by the
Company's Board of Directors (the "Board"); obey the
directions of the Board; and use his best efforts to promote
the interests of the Company. The Executive may be required
in pursuit of his duties hereunder to perform services for
any company controlling (assuming the Executive declines to
exercise any resignation right pursuant to Section 4(d)
hereof), controlled by or under common control with the
Company (such companies hereinafter collectively called
"Affiliates") and to accept such offices in any Affiliates
as the Board may require. The Executive shall obey all
policies of the Company and applicable policies of its
Affiliates.
2. Section 3(b) of the Employment Agreement shall be
deleted in its entirety and replaced with the following:
b. The Company shall award the Executive NewSCC
Common Stock (as defined in the Plan) pursuant to Section
6.3 of the Plan in an aggregate amount which shall at all
times constitute 2% of the total shares of NewSCC Common
Stock which are issued pursuant to the Plan, determined on a
fully-diluted basis, not including the effect of the
exercise of any of the NewSCC Warrants (as defined in the
Plan). The Executive's rights to such shares shall vest on
the second anniversary of the Effective Date; provided,
however, at the Executive's option, that such shares may
vest earlier at the time of a Change in Control (as defined
in Section 4(d) hereof). The Executive shall be eligible to
participate in the employee stock incentive or other similar
plan described in Section 6.2 of the Plan in accordance with
the provisions thereof. The Executive also shall be
eligible to participate in such other incentive compensation
programs as may be established by the Board that the Company
generally provides to its employees having rank and
seniority at the Company comparable to the Executive.
3. Section 3(c) of the Employment Agreement shall be
deleted in its entirety and replaced with the following:
c. The Executive shall be entitled to four (4)
weeks of vacation per calendar year with any unused vacation
time carried over to the first quarter of the next calendar
year. If the prior year's vacation time is not used by the
end of said first quarter, the Company shall pay the
Executive for the unused time at his regular annual rate
thereby discharging its obligation with respect to the
unused time.
4. The Employment Agreement shall be amended by
adding a new Section 3(e) as follows:
e. The Executive shall have the sole discretion
to designate the recipient or recipients of such number of
shares of NewSCC Common Stock to be issued by the Company
pursuant to Section 6.3 of the Plan that in the aggregate
shall at all times constitute 1% of the total shares of
NewSCC Common Stock which are issued pursuant to the Plan,
determined on a fully-diluted basis, not including the
effect of the exercise of any of the NewSCC Warrants;
provided, that if such grant is (i) to the Executive, then
prior written notice shall have been given to the Board and
(ii) to any officer of the Company, then such grant can be
in the form of either shares of NewSCC Common Stock or
options to acquire such shares. The rights to such shares
shall not vest prior to the second anniversary of the
Effective Date or shall vest earlier at the time of a Change
in Control as provided in the Technical Modifications to the
Plan.
5. Section 6 of the Employment Agreement shall be
deleted in its entirety and replaced with the following:
6. The Executive agrees that during the Employment
Period and for a period of two years after the termination
of the Employment Period (except for a termination without
cause or resignation upon a Change of Control pursuant to
Section 4(d) above), he will not directly or indirectly,
whether or not for compensation and whether or not as an
employee, be engaged in or have any financial interest in
any of the entities set forth on Exhibit A hereto or in any
business competing with or which may compete with the
business of the Company (or with any business of any
Affiliate for which the Executive performed services
hereunder) within any state, region or locality in which the
Company or such Affiliate is then doing business or
marketing its products, as the business of the Company or
such Affiliate may then be constituted. For purposes of
this Agreement, the Executive shall be deemed to be engaged
in or to have a financial interest in such a business if he
is an employee, officer, director, or partner, of any
person, partnership, corporation, trust or other entity
which is engaged in such a business, or if he directly or
indirectly performs services for such entity or if he or any
member of his immediate family beneficially owns an equity
interest, or interest convertible into equity, in any such
entity; provided, however, that the foregoing shall not
prohibit the Executive from continuing to be a member of the
board of directors of IPC Holdings, Inc. for so long as such
company, in the sole discretion of the Board, does not
compete with the business of the Company (or with any
business of any Affiliate for which the Executive performed
services hereunder), unless the Board otherwise approves,
and shall not prohibit the Executive or a member of his
immediate family from owning, for the purpose of passive
investment, less than 5% of any class of securities of a
publicly held corporation.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Amendment as of the date first written above.
SMITH CORONA CORPORATION
By:/s/ John A. Piontkowski
Name:John A. Piontkowski
Title:Executive Vice President and
Chief Financial Officer
/s/ W. Michael Driscoll_
W. Michael Driscoll
Exhibit 10.30
EMPLOYMENT AGREEMENT
Agreement made as of the 5th day of May, 1997, between
SMITH CORONA CORPORATION, a Delaware corporation (the "Company"),
and John A. Piontkowski (the "Executive").
WHEREAS, the Company has confirmed its Third Amended
Second Joint Plan of Reorganization Under Chapter 11 of the
United States Bankruptcy Code, as modified by the Technical
Amendments to the Debtors' Third Amended Second Joint Plan of
Reorganization (the "Plan").
WHEREAS, the Company desires to continue to employ the
Executive, and the Executive desires to accept continued
employment with the Company, but only on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. The Company shall employ the Executive, and the
Executive shall serve the Company, for the period beginning on
March 1, 1997 and expiring on March 1, 2000, unless sooner
terminated pursuant to the provisions of Section 4 hereof (the
"Employment Period").
2. During the Employment Period, the Executive shall
serve the Company as its Executive Vice President and Chief
Financial Officer. During the Employment Period, the Executive
shall, except during vacation or sick leave, devote the whole of
his time, attention and skill during usual business hours (and
outside those hours when reasonably necessary to his duties
hereunder) to his duties hereunder; faithfully and diligently
perform such duties and exercise such powers as may be from time
to time assigned to or vested in him by the Company's Board of
Directors (the "Board"); obey the directions of the Board; and
use his best efforts to promote the interests of the Company.
The Executive may be required in pursuit of his duties hereunder
to perform services for any company controlling (assuming the
Executive declines to exercise any resignation right pursuant to
Section 4(d) hereof), controlled by or under common control with
the Company (such companies hereinafter collectively called
"Affiliates") and to accept such offices in any Affiliates as the
Board may require. The Executive shall obey all policies of the
Company and applicable policies of its Affiliates.
3. a. During the Employment Period, the Company
shall pay the Executive a salary at an annual rate of $_______
subject to increase by the Board in its sole discretion, which
shall be payable periodically in accordance with the Company's
then prevailing payroll practices.
b. The Company shall award the Executive NewSCC
Common Stock (as defined in the Plan) pursuant to Section 6.3 of
the Plan in an aggregate amount which shall at all times
constitute 1% of the total shares of NewSCC Common Stock which
are issued pursuant to the Plan, determined on a fully-diluted
basis, not including the effect of the exercise of any of the
NewSCC Warrants (as defined in the Plan). The Executive's rights
to such shares shall vest on the second anniversary of the
Effective Date; provided, however, at the Executive's option,
that such shares may vest earlier at the time of a Change in
Control (as defined in Section 4(d) hereof). The Executive shall
be eligible to participate in the employee stock incentive or
other similar plan described in Section 6.2 of the Plan in
accordance with the provisions thereof. The Executive also shall
be eligible to participate in such other incentive compensation
programs as may be established by the Board that the Company
generally provides to its employees having rank and seniority at
the Company comparable to the Executive.
c. The Executive shall be entitled to four (4)
weeks of vacation per calendar year with any unused vacation time
carried over to the first quarter of the next calendar year. If
the prior year's vacation time is not used by the end of said
first quarter, the Company shall pay the Executive for the unused
time at his regular annual rate thereby discharging its
obligation with respect to the unused time.
d. The Executive shall be entitled to such
expense accounts, sick leave, perquisites of office, fringe
benefits, insurance coverage (including the Company's Executive
Medical and Life Insurance Programs), and other terms and
conditions of employment as the Company generally provides to its
employees having rank and seniority at the Company comparable to
the Executive. In addition, the Executive shall have annual
physical examinations at the Company's expense.
4. Unless terminated in accordance with the following
provisions of this Section 4, the Company shall continue to
employ the Executive and the Executive shall continue to work for
the Company, during the Employment Period.
a. This Agreement shall terminate automatically
upon the death of the Executive.
b. The Company may terminate the Executive's
employment if the Executive suffers from a physical or mental
disability to an extent that renders it impracticable for the
Executive to continue performing his duties hereunder. The
Executive shall be deemed to be so disabled if (i) a physician
selected by the Company advises the Company that the Executive's
physical or mental condition will render the Executive unable to
perform his duties for a period exceeding three consecutive
months, or (ii) due to a physical or mental condition, the
Executive has not substantially performed his duties hereunder
for a period of three consecutive months. The Company will
provide the Executive with long-term disability insurance.
c. The Company may terminate the Executive's
employment at any time for cause; cause shall mean (i) a default
or other breach by the Executive of his obligations under
Sections 1, 2, 5, 6, 8 and 17 of this Agreement, (ii) misconduct,
dishonesty, insubordination or other act by the Executive
detrimental to the good will of the Company or damaging to the
Company's relationships with its customers, suppliers or
employees, (iii) the conviction of a felony, or (iv) any act of
disloyalty or breach of trust by the Executive.
d. The Company may terminate the Executive's
employment at any time without cause. The Executive may resign
from his employment at any time. In the event that the Executive
is terminated without cause, or resigns within thirty (30) days
following a Change of Control (as hereinafter defined), (i) the
Company shall continue to pay the Executive at a rate equivalent
to his regular base salary until the date one (1) year from the
date of termination or resignation; (ii) the Company shall
continue to provide medical insurance to the Executive until the
date one (1) year from the date of termination or resignation;
and (iii) the Company shall pay the Executive any accrued but
unused vacation time for the current year and any accrued but
unused vacation time carried over from any prior year. Such
payments to the Executive by the Company will be in full and
complete satisfaction (except as provided in subsection (e)
below) of any and all obligations owing to the Executive pursuant
to this Agreement. "Change of Control" shall mean (i) a stock
purchase by any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities and Exchange Act of 1934, as
amended) who then owns or by virtue of such purchase becomes the
beneficial owner of, directly or indirectly, voting securities of
the Company representing 51% or more of the combined voting power
of the Company's then outstanding voting securities or (ii) any
change in the composition of the Company's Board in any one year
which involves a majority of such directors and which is not
recommended by the Board.
e. Upon termination pursuant to (a), (b), (c) or
(d), above, the Company shall pay the Executive or his estate any
salary earned and unpaid to the date of termination, and any
outstanding funds advanced by the Company to or on behalf of the
Executive shall become immediately due and payable.
5. The Executive shall not divulge or communicate to
any person (except in performing his duties under this Agreement)
or use for his own purposes trade secrets, confidential
commercial information, or any other information, knowledge or
data of the Company or of any of its Affiliates which is not
generally known to the public and shall use his best efforts to
prevent the publication or disclosure by any other person of any
such secret, information, knowledge or data. All documents and
objects made, compiled, received, held or used by the Executive
while employed by the Company in connection with the business of
the Company shall be and remain the Company's property and shall
be delivered by the Executive to the Company upon the termination
of the Employment Period or at any earlier time requested by the
Company.
6. The Executive agrees that during the Employment
Period and for a period of two years after the termination of the
Employment Period (except for a termination without cause or
resignation upon a Change of Control pursuant to Section 4(d)
above), he will not directly or indirectly, whether or not for
compensation and whether or not as an employee, be engaged in or
have any financial interest in any of the entities set forth on
Exhibit A hereto or in any business competing with or which may
compete with the business of the Company (or with any business of
any Affiliate for which the Executive performed services
hereunder) within any state, region or locality in which the
Company or such Affiliate is then doing business or marketing its
products, as the business of the Company or such Affiliate may
then be constituted. For purposes of this Agreement, the
Executive shall be deemed to be engaged in or to have a financial
interest in such a business if he is an employee, officer,
director, or partner, of any person, partnership, corporation,
trust or other entity which is engaged in such a business, or if
he directly or indirectly performs services for such entity or if
he or any member of his immediate family beneficially owns an
equity interest, or interest convertible into equity, in any such
entity; provided, however, that the foregoing shall not prohibit
the Executive or a member of his immediate family from owning,
for the purpose of passive investment, less than 5% of any class
of securities of a publicly held corporation.
7. The Executive agrees that he shall not, for a
period of two years after the Employment Period, employ any
person who was employed by the Company or any of its Affiliates
or induce such person to accept employment other than with the
Company and its Affiliates.
8. The Executive hereby agrees that any and all
improvements, inventions, discoveries, formulae, processes,
methods, know-how, confidential data, trade secrets and other
proprietary information (collectively, "Work Product") within the
scope of any business of the Company or any Affiliate which the
Executive may conceive or make or have conceived or made during
his employment with the Company shall be and are the sole and
exclusive property of the Company, and that the Executive shall,
whenever requested to do so by the Company, at its expense,
execute and sign any and all applications, assignments or other
instruments and do all other things which the Company may deem
necessary or appropriate (i) in order to apply for, obtain,
maintain, enforce, or defend letters patent of the United States
or any foreign country for any Work Product, or (ii) in order to
assign, transfer, convey or otherwise make available to the
Company the sole and exclusive right, title and interest in and
to any Work Product.
9. The Company and the Executive each agree to waive
trial by jury in any action arising under or in connection with
this Agreement or the employment relationship between the Company
and the Executive.
10. Any notice or other communication required or
permitted under this Agreement shall be effective only if it is
in writing and delivered personally or sent by registered or
certified mail, postage prepaid, addressed as follows:
If to the Company:
Smith Corona Corporation
P.O. Box 2090
839 Route 13
Cortland, NY 13045-0990
Attention: President
If to the Executive:
Mr. John A. Piontkowski
Six November Trail
Weston, CT 06883
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
11. This Agreement constitutes the entire agreement
between the parties hereto with respect to the Executive's
employment by the Company, and supersedes and is in full
substitution for any and all prior understandings or agreements
with respect to the Executive's employment with the Company.
12. This Agreement may be amended only by an
instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
13. This Agreement is binding on and is for the
benefit of the parties hereto and their respective successors,
heirs, executors, administrators and other legal representatives.
Neither this Agreement nor any right or obligation hereunder may
be assigned by the Company (except to an Affiliate) or by the
Executive.
14. If any provision of this Agreement, or portion
thereof, is so broad, in scope or duration, so as to be
unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
15. a. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
b. Any judicial proceeding brought with respect
to this Agreement must be brought in any state or federal court
of competent jurisdiction located in the State of New York, and,
by execution and delivery of this Agreement, each party (i)
accepts, generally and unconditionally, the exclusive
jurisdiction of such courts and any related appellate courts, and
irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement and (ii) irrevocably waives any
objection it may now or hereafter have as to the venue of any
such suit, action or proceeding brought in such a court or that
such court is an inconvenient forum. THE PARTIES HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH
PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT.
16. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
17. The Executive represents and warrants that he is
not a party to any agreement which would prohibit him from
entering into this Agreement or performing fully his obligations
hereunder.
18. The obligations of the Executive set forth in
paragraphs 5, 6, 7, 8 and 9 represent independent covenants by
which the Executive is and will remain bound notwithstanding any
breach by the Company, and shall survive the termination of this
Agreement.
19. The Executive recognizes that a breach or
threatened breach by him of his obligations under Sections 5, 6,
7 or 8 would cause irreparable injury to the Company, and the
Company shall be entitled to preliminary and permanent
injunctions enjoining him from violating Sections 5, 6, 7 or 8 in
addition to any other remedies which may be available.
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
SMITH CORONA CORPORATION
By: /s/ W. Michael Driscoll
Name: W. Michael Driscoll
Title: President and CEO
/s/ John A. Piontkowski
John A. Piontkowski
Exhibit 11
SMITH CORONA CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS)
PER COMMON AND COMMON EQUIVALENT SHARE
Three months ended Twelve months ended
June 30, 1997 June 30, 1997
PrimaryFully Diluted PrimaryFully Diluted
<TABLE>
<S> <C> <C> <C> <C>
Net income
available to common:
Income (loss) before
extraordinary gain $ 4,942,000 $ 4,942,000 $(795,000) $(795,000)
Adjustments:
(1) Assumed exercise of
warrants (a) (a) (a) (a)
Total income (loss)
before extraordinary gain 4,942,000 4,942,000 (795,000) (795,000)
Extraordinary gain - - 8,122,000 8,122,000
Net Income $ 4,942,000 $ 4,942,000 $7,327,000$ 7,327,000
Shares:
Weighted average common
shares outstanding 2,551,335 2,551,335 2,471,336 2,471,336
Adjustments:
(1) Assumed exercise of
restricted stock awards 58,816 59,922 52,790 54,106
(2) Assumed exercise of
warrants (a) (a) (a) (a)
Total Shares 2,610,151 2,611,258 2,524,126 2,525,442
Income (loss) per
common and common
equivalent share:
Income (loss) before
extraordinary gain $ 1.89 $ 1.89 $ (.32) $ (.32)
Extraordinary gain - - 3.22 3.22
Net income per common
and common equivalent
share $ 1.89 $ 1.89 $2.90 $2.90
(a) Warrants are not reflected in per share calculations
because exercise price of warrants exceed market price of
Common Stock. Additionally, warrants do not become
execrable until August 28, 1997
</TABLE>
Exhibit 21
SUBSIDIARIES OF
SMITH CORONA CORPORATION
<TABLE>
<S> <C> <C>
Jurisdiction Name Doing
Name of Incorporation Business Under
Smith Corona Private Republic of Smith Corona Private
Ltd. Singapore Ltd.
Smith Corona United Kingdom Smith Corona
(UK) Holdings Limited (UK) Holdings Limited
Smith Corona Ontario, Canada Smith Corona
(Canada) Limited (Canada) Limited
Smith Corona (France) Paris, France Smith Corona (France)
S.A.R.L. S.A.R.L.
Smith Corona GmbH Dusseldorf, Germany Smith Corona GmbH
Smith Corona S.A. Waterloo, Belgium Smith Corona S.A.
Smith Corona de Mexico Tijuana, B.C., Mexico Smith Corona de Mexico
S.A. de C.V. S.A. de C.V.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 21985
<SECURITIES> 0
<RECEIVABLES> 12169
<ALLOWANCES> 931
<INVENTORY> 12627
<CURRENT-ASSETS> 47958
<PP&E> 65279
<DEPRECIATION> 53187
<TOTAL-ASSETS> 60629
<CURRENT-LIABILITIES> 20913
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> 26387
<TOTAL-LIABILITY-AND-EQUITY> 60629
<SALES> 77313
<TOTAL-REVENUES> 77313
<CGS> 59403
<TOTAL-COSTS> 59403
<OTHER-EXPENSES> 150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (326)
<INCOME-PRETAX> (532)
<INCOME-TAX> 263
<INCOME-CONTINUING> (795)
<DISCONTINUED> 0
<EXTRAORDINARY> 8122
<CHANGES> 0
<NET-INCOME> 7327
<EPS-PRIMARY> 2.90
<EPS-DILUTED> 2.90
</TABLE>