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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 October 31, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
COMMISSION FILE NUMBER 0-19056
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NORTHSTAR COMPUTER FORMS, INC.
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-0882640
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7130 NORTHLAND CIRCLE NORTH, BROOKLYN PARK, MINNESOTA 55428
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(612) 531-7340
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(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, PAR VALUE $.05 PER SHARE
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(TITLE OF CLASS)
[Cover page 1 of 2 pages]
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Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the past
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
----- -----
Check if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
State issuer's revenues for its most recent fiscal year:
$46,338,793
State the aggregate market value of the voting stock held by
non-affiliates of the issuer computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such stock, as of a
specified date within 60 days. (SEE definition of affiliate in Rule 12b-2 of
the Exchange Act.): $15,640,324
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
2,746,858 Shares of Common Stock as of December 31, 1999
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Registrant's Annual Report to Shareholders for
its fiscal year ended October 31, 1999 are incorporated by reference into
Part II of this Form 10-K.
[Cover page 2 of 2 pages]
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PART I
ITEM 1. BUSINESS.
GENERAL
Northstar Computer Forms, Inc. (the "Company"), incorporated in
1964, designs, manufactures and markets printed forms with an emphasis on
machine readable MICR (Magnetic Ink Character Recognition) printing. The
Company's two product specialties are custom negotiable documents and
internal bank forms. Sales are principally through distributors with the
remainder to other printers or on a direct retail basis. A majority of the
retail accounts are serviced by distributor "partners" whereby the
distributor acts as a manufacturer's representative. A sales/service force
provides communication between the customer and the manufacturing facilities.
The corporate headquarters and primary manufacturing facility of
the Company are located at 7130 Northland Circle North, Brooklyn Park,
Minnesota. The Company also maintains manufacturing facilities in Roseville,
Minnesota (Northstar Financial Forms), and Milwaukee, Wisconsin (Wisconsin
Business Forms), which operate as divisions of the Company. The Company also
operates, through its wholly-owned subsidiary, General Financial Supply, Inc.
("GFS"), manufacturing facilities in the cities of Nevada, Iowa, Bridgewater,
Virginia and Golden, Colorado. As of October 31, 1999, the Company employed
approximately 500 persons at its six manufacturing facilities, and the
Company anticipates a moderate increase in personnel for the 2000 fiscal year.
The Company serves most markets where business forms are used,
although its primary targeted customers are banks and other users of MICR
forms. During the past few years, the Company has continued to shift its
emphasis towards MICR form product lines, investing over a million dollars
each year in equipment and technology to produce various kinds of MICR
business, negotiable and internal bank forms.
BUSINESS HIGHLIGHTS - 1999
- - Record sales of $46.3 million.
- - Signed three major contracts for new business with existing customers.
- - Received Seal of Excellence Award from Appleton Paper Company.
- - A distributor reached $1.0 million in sales of General Financial Supply
products.
- - Completed installation of the Star Computer System in all four internal
bank form plants. All systems were Y2K compliant.
- - Invested nearly $2.0 million in capital equipment.
- - Established an e-commerce task force and implemented an electronic catalog
in a large financial institution.
- - Introduced complete new bank forms catalog for our distributors.
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BUSINESS FORMS
Business forms manufactured by the Company consist of unit-sets,
continuous forms and cut sheet forms.
Unit-sets, simply defined, are multiple part forms carbon
interleaved or carbonless forms whose parts can be easily separated.
Unit-sets are frequently referred to as snap apart or snap-out forms and are
used for a variety of business applications, such as invoices, purchase
orders, checks, vouchers, sales books and register forms.
Continuous forms are used for the same business applications as
unit-sets. They consist of strips of perforated sets of forms marginally
punched to facilitate high-speed feeding through electronic data processing
equipment. They are manufactured from a continuous web or roll of paper that
is not cut into separate units.
Cut sheet forms are forms produced in individual sheets or placed
together by padding or booking. Examples of cut sheets are internal bank
documents (general ledger debit/credit, cash tickets and process control
documents) and laser cut sheets (checks, statements and gift certificates).
The Company manufactures unit-sets and cut sheet forms in all of
its facilities. The Brooklyn Park, Minnesota and Milwaukee, Wisconsin plants
also produce continuous forms.
COMPANY PRODUCT SPECIALIZATION
Among the business forms which the Company produces, the Company
specializes in internal bank forms, secure and negotiable documents and
custom products. Approximately ninety percent (90%) of the forms produced by
the Company, including virtually all of the internal bank forms, are MICR
encoded. MICR encoded forms require special composition equipment and inks,
thus MICR encoding provides a value-added feature. The Company specializes in
such forms, enabling it to handle large and small volumes and create
operating efficiencies.
Internal bank forms produced by the Company are highly
specialized forms such as teller cash tickets, general ledger debit/credit
tickets, teller receipts, batch process control documents and
deposit/withdrawal forms. All of these products are MICR encoded for today's
high speed processing needs. The Company guarantees MICR readability on all
forms. Most internal bank forms products are produced on an extremely short
delivery cycle. This enables bank customers to enjoy lower costs by
alleviating the necessity to inventory products.
In addition to internal bank forms, the Company also focuses on
secure and negotiable documents, which are both MICR encoded and non-MICR
encoded. Examples of secure and negotiable MICR encoded documents are bank
official checks, business checks, gift certificates and money orders.
Examples of non-MICR encoded secure and negotiable documents are vehicle
certificates of title, gift certificates, birth certificates and death
certificates. Security features include security papers (watermark and
threads), security inks that react to ultraviolet
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light and temperature, and security printing features, such as void
pantographs and modulus numbering.
MARKETING
All of the Company's operating units service customers nationally
through distributors on a non-exclusive basis, and directly with respect to
other printers and commercial resellers. In addition, Northstar Financial
Forms sells through distributor "partners" and, along with one of the
Company's other plants, sells directly to certain bank customers on a retail
basis. The Company believes that it has a competitive advantage over other
form manufacturers through the use of its independent distributor, printer
and reseller network, because the network enables the Company to focus on
specialized products and produce them efficiently. The Company sells to over
1,500 customers in all 50 states. In 1999, one customer, Travelers Express
Company, Inc., accounted for 16% of consolidated sales.
The Company's distribution network enables it to save the expense
of supporting a direct sales force, sales offices and certain marketing
expenses in its plants. All major competitors of the Company distribute their
products through direct sales which typically account for expenses ranging
between 10% and 20% of revenues.
RAW MATERIALS AND ENVIRONMENTAL REGULATIONS
Raw materials utilized by the Company consist principally of a
wide variety of weights, widths, colors, sizes and qualities of paper. Other
raw materials include printing ink, lithographic plate material and
chemicals. The Company has a policy of purchasing its paper supplies from
several major paper mills. In 1995, bond paper prices, the principal paper
used by the Company, increased substantially. Since that time, selected bond
paper prices have decreased and subsequently increased to the level of 1996
prices. The Company anticipates that paper prices may begin to increase in
2000. The Company believes that paper and other raw materials will be
sufficiently available for the foreseeable future.
To the best of the Company's knowledge, it complies with all
applicable federal, state and local environmental regulations governing the
discharge of materials into the environment. Compliance with applicable
environmental regulations has not had and, it is anticipated, will not have a
material adverse effect on the Company's capital expenditures, earnings or
competitive position.
COMPETITION
The forms industry is highly competitive and fragmented. The
Company has a number of competitors with substantially larger resources. The
Company believes it is the 17th largest United States business forms
manufacturer. This position enables the Company to specialize in a smaller
product line. The ability to specialize allows the Company to focus its
capital and create economies of scale through more efficient production
techniques and significantly limit the number of its direct competitors. The
Company believes that the principal competitive factors in the form industry
are specialization, service, quality and price.
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The internal bank forms portion of the Company's market is very competitive
and especially price and service sensitive with the top 200 banks in the
country.
ITEM 2. PROPERTIES.
The Company operates manufacturing and warehousing facilities in
five states as follows:
<TABLE>
<CAPTION>
Square Feet
of Floor Space
--------------
Location Leased Owned
-------- ------ -----
<S> <C> <C>
Brooklyn Park, Minnesota 94,800
Nevada, Iowa 48,500
Roseville, Minnesota 42,500
Shoreview, Minnesota 24,000
Milwaukee, Wisconsin 10,000
Bridgewater, Virginia 25,000
Golden, Colorado 23,000
------- --------
TOTAL 124,500 143,300
======= =======
</TABLE>
The Company's general offices are located in Brooklyn Park,
Minnesota. All of the above properties are used for the production,
warehousing and shipping of forms. Production capacity fluctuates with the
ebb and flow of market demands. Equipment, substantially all of which is
owned by the Company, is added as existing machinery becomes obsolete or
irreparable, and as new equipment becomes necessary to meet market demands.
The Company may make material additions to property, plant and equipment,
with the expectation that such additions or replacements will increase a
plant's capacity and efficiency.
All of the above-discussed facilities are deemed to be in good
condition. The lease on the Bridgewater facility will expire on May 31, 2001.
The Company's Milwaukee property lease will expire on June 30, 2000 and the
Company is in the process of determining if that operation should be moved to
a larger facility. The lease of the Roseville property expires August 31,
2007. The Shoreview facility is used as warehousing space for the Roseville
facility and is leased until August 31, 2002. The Golden property lease will
expire on September 1, 2005. Management of the Company believes that each of
these facilities is adequately covered by insurance. These property locations
are expected to be adequate for operations during the
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remaining lease terms. No difficulty is presently foreseen in renewing the
leases or finding replacement facilities.
The Brooklyn Park, Minnesota and Nevada, Iowa plants are owned
outright by the Company, which is the only company occupying these
properties. The Brooklyn Park facility is financed by Variable Rate
Industrial and Development Bonds in the amount of $2,945,000, of which
$1,675,000 was outstanding at October 31, 1999. The bonds are collateralized
by a bank letter of credit and are payable in annual $335,000 installments
through fiscal year 2004. The bank letter of credit is collateralized by a
mortgage on the facility.
ITEM 3. LEGAL PROCEEDINGS.
There are presently no material claims, legal proceedings, or
litigation pending or threatened to which the Company or GFS is a party; and no
claims, litigation or legal proceedings which are expected to have a material
adverse effect on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY-HOLDERS.
No matters were submitted during the fourth quarter of the Company's
1999 fiscal year to a vote of security holders, through the solicitation of
proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The information required by this item is incorporated herein by
reference to page 8 of the Company's Annual Report to Shareholders for the
fiscal year ended October 31, 1999.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is incorporated herein by
reference to page 8 of the Company's Annual Report to Shareholders for the
fiscal year ended October 31, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information required by this item is incorporated herein by
reference to pages 9-12 of the Company's Annual Report to Shareholders for the
fiscal year ended October 31, 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is incorporated herein by
reference to pages 13-23 of the Company's Annual Report to Shareholders for the
fiscal year ended October 31, 1999.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The names, ages and positions of the Company's directors and executive
officers are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Roger T. Bredesen 73 Chairman of the Board and
Chief Executive Officer
John Mutschler 71 Director
J.S. Braun 67 Director
Roy W. Terwilliger 62 Director
Dr. Lester A Wanninger 62 Director
Kenneth E. Overstreet 58 President, Director
Mary Ann Morin 52 Treasurer and Chief Financial
Officer
Don E. Dearborn 59 Vice President (GFS)
Stanley J. Klarenbeek 46 Vice President Sales and
Marketing, Internal Bank
Forms
</TABLE>
The following is a list of each of the above person's principal
occupations or employment during the past five years. All directors have been
elected to serve until the next annual election of directors which is
expected to occur in April of 2000 at the annual meeting of the shareholders,
or until their earlier resignation or removal pursuant to the Bylaws of the
Company. Officers are appointed by the Board of Directors to serve until the
next annual election
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by the Board of Directors, which may be set in accordance with the Bylaws of
the Company at any time after the end of the fiscal year on October 31st of
each year, or until their earlier resignation or removal by the Board of
Directors.
ROGER T. BREDESEN. Mr. Bredesen is the founder and has been the
Chief Executive Officer and Chairman of the Board of Directors of the Company
since its incorporation in 1964.
JOHN MUTSCHLER. Mr. Mutschler has been a Director of the Company
since 1972. Mr. Mutschler is an attorney in Minnesota, and since 1958 has
been the President of John G. Mutschler & Associates, Inc., a firm which
designs and administers qualified pension and profit-sharing plans. He has
also been the President of JGM Agency, Inc., a firm engaged in the management
of real estate, since 1980.
J.S. BRAUN. Mr. Braun has been a Director of the Company since 1992.
Mr. Braun is the Chairman Emeritus of Braun Intertec Corporation, an
engineering and environmental consulting firm that he founded in 1957, and
Board member of Community Bank Group.
ROY W. TERWILLIGER. Mr. Terwilliger has been a director of the
Company since 1994. Since 1992, Mr. Terwilliger has been a Minnesota Senator
in District 42. Since 1989, Mr. Terwilliger has been President of Community
Bank Group, Inc. of Eden Prairie, Minnesota.
DR. LESTER A. WANNINGER. Dr. Wanninger has been a Director of the
Company since 1996. Since 1989, Dr. Wanninger has been a faculty member and
coordinator of extension classes in Information and Decision Sciences at the
Carlson School of Management of the University of Minnesota. Dr. Wanninger
has a Ph.D. in chemical engineering.
KENNETH E. OVERSTREET. Mr. Overstreet has been a director since
1993. Since December 1994, Mr. Overstreet has been the President of the
Company. From 1989 to 1994, he was the Executive Vice President of the
Company.
MARY ANN MORIN. Ms. Morin was elected as Chief Financial Officer of
the Company in 1996. She has been Treasurer since 1992 and Assistant
Treasurer and Controller of the Company since 1983. Ms. Morin is a certified
public accountant.
DON E. DEARBORN. Mr. Dearborn has been the general manager of GFS
since 1985, and a vice president since 1988.
STANLEY J. KLARENBEEK. Mr. Klarenbeek has been Vice President Sales
and Marketing of GFS since 1990. In December 1997, Mr. Klarenbeek was
appointed Vice President Sales and Marketing for Internal Bank Forms.
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ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION
The following table summarizes the cash and non-cash compensation
earned by the Company's Chief Executive Officer and its four other executive
officers during the past three fiscal years whose annual salary and bonus
exceeded $100,000 during the Company's fiscal year ended October 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
==================================================================================================================
NAME AND FISCAL ALL OTHER
PRINCIPAL YEAR ENDED COMPENSATION
POSITION OCTOBER 31, ANNUAL COMPENSATION LONG-TERM COMPENSATION ($)(1)
- ------------------------------------------------------------------------------------------------------------------
SALARY ($) BONUS ($) AWARDS OF OPTIONS (#)
==================================================================================================================
<S> <C> <C> <C> <C> <C>
1999 200,000 50,000 -0- 82,697(2)
------------------ ------------ ------------ --------------------------- -----------------
Roger T. Bredesen, 1998 200,000 25,000 -0- 86,987(2)
Chairman of
the Board and Chief
Executive Officer
------------------ ------------ ------------ --------------------------- -----------------
1997 200,000 50,000 -0- 87,799(2)
======================= ================== ============ ============ =========================== =================
1999 180,000 75,208 35,000 23,227(3)
------------------ ------------ ------------ --------------------------- -----------------
Kenneth E. 1998 180,000 38,924 -0- 28,429(3)
Overstreet,
President and
Director
------------------ ------------ ------------ --------------------------- -----------------
1997 160,000 64,382 -0- 20,573(3)
======================= ================== ============ ============ =========================== =================
1999 95,000 37,040 20,000 14,014
------------------ ------------ ------------ --------------------------- -----------------
Mary Ann Morin, 1998 90,000 17,060 -0- 13,853
Treasurer and Chief
Financial Officer
------------------ ------------ ------------ --------------------------- -----------------
1997 84,929 30,546 -0- 15,353
======================= ================== ============ ============ =========================== =================
1999 105,000 30,995 10,000 5,893
------------------ ------------ ------------ --------------------------- -----------------
Stanley Klarenbeek, 1998 105,000 11,766 -0- 7,171
Vice President, Sales
and Marketing
Internal Bank Forms
------------------ ------------ ------------ --------------------------- -----------------
1997 76,657 27,652 20,000 4,664
======================= ================== ============ ============ =========================== =================
1999 100,000 36,440 10,000 15,835
------------------ ------------ ------------ --------------------------- -----------------
Don E. Dearborn, Vice 1998 90,000 12,001 -0- 13,542
President (GFS)
------------------ ------------ ------------ --------------------------- -----------------
1997 78,231 33,861 -0- 20,459
======================= ================== ============ ============ =========================== =================
</TABLE>
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(1) Other compensation includes contributions under the Company's Profit
Sharing Plan and Trust ($8,089, $8,089, $5,589, $5,893 and $6,852 in
1999 to each of Messrs./Ms. Bredesen, Overstreet, Morin, Klarenbeek and
Dearborn, respectively) and the value of deferred compensation benefits
under the Company's Deferred Compensation Plan ($8,938, $8,425 and
$8,983 in 1999 for Mr. Overstreet, Ms. Morin and Mr. Dearborn,
respectively).
(2) Also includes amounts paid as deferred compensation pursuant to an
annual deferred compensation benefit established pursuant to Mr.
Bredesen's employment agreement with the Company ($68,408 in 1999,
$67,496 in 1998 and $65,786 in 1997) and directors' fees.
(3) Also includes amounts paid as directors' fees.
STOCK OPTIONS
The following table summarizes option grants made under the Company's
1994 Employees Incentive Stock Option Plan (the "1994 Plan") during the fiscal
year ended October 31, 1999 to the executive officers named in the Summary
Compensation table:
OPTION GRANTS IN 1999 FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants(1)
-------------------------------------------------------------------------------------------
Potential
Realizable Value of
Assumed Annual
Rates of Stock
Percentage of Price Appreciation
Number of Total Options for Option
Securities Granted to Exercise of Term(2)
Underlying Employees in Base Price Expiration ---------------------
Name Option Granted Fiscal Year ($/Share) Date 5%($) 10% ($)
- --------------------------- ------------------ ------------------ -------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth Overstreet 5,000 16.6% $ 8.00 February 2009 $194,405 $554,193
5,000 $12.00 August 2009
25,000(3) $10.75 October 2009
Mary Ann Morin 5,000 9.5% $ 8.00 February 2009 $130,496 $334,702
5,000 $12.00 August 2009
10,000(4) $10.75 October 2009
Stanley Klarenbeek 5,000 4.7% $ 8.00 February 2009 $ 62,889 $163,374
5,000 $12.00 August 2009
Don E. Dearborn 5,000 4.7% $ 8.00 February 2009 $ 62,889 $163,374
5,000 $12.00 August 2009
</TABLE>
(1) All options were granted at a price equal to the fair market value of
the Company's Common Stock on the date of grant. Except for the grants
referenced in footnotes (3) and (4) below, options become exercisable
30% on the third anniversary of the date of grant, 30% on the fourth
anniversary of the date of grant, and the remaining 40% on the fifth
anniversary of the date of grant.
(2) Amounts shown in these columns have been derived by multiplying the
exercise price by the annual appreciation rate shown (compounded for
the term of the options), multiplying the result by the number of
shares covered by the options, and subtracting the aggregate exercise
price of the options. The dollar amounts set forth under this heading
are the result of calculations at the 5% and 10% rates set by the
Securities and Exchange Commission, and therefore are not intended to
forecast possible future appreciation, if any, of the Company's stock
price.
(3) These options became exercisable as to 9,275 shares in April 2000,
9,275 shares in April 2001 and 6,450 shares in April 2002.
(4) These options became exercisable as to 7,800 shares in April 2000 and
2,200 shares in April 2001.
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The following table summarizes the value of the unexercised options
held by the executive officers named in the Summary Compensation table as of
October 31, 1999:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- --------------------------- --------------- ----------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Roger T. Bredesen N/A N/A 0/0 0/0
Kenneth Overstreet N/A N/A 70,000/35,000(2) $435,700/12,900
Mary Ann Morin N/A N/A 15,300/22,700(3) $90,153/26,157
Stanley Klarenbeek N/A N/A 6,300/42,700(3) $30,933/26,157
Don E. Dearborn N/A N/A 6,300/12,700(3) $30,933/26,157
</TABLE>
(1) Value of unexercised options is calculated by determining the
difference between the fair market value of the shares underlying the
options at October 31, 1999 and the exercise price of the options.
(2) Consists of options to purchase 10,000 shares for serving on the Board
of Directors, and 95,000 shares under the Company's Plan.
(3) Granted pursuant to the 1994 Plan.
DIRECTORS' COMPENSATION
Directors receive annual directors' fees of $3,000 plus $800 per
meeting attended (except for the Chairmen of the Compensation and Audit
Committees, who are paid $1,000 per meeting attended). In addition, directors
of the Company receive options to purchase an aggregate of 10,000 shares of
the Company's Common Stock at a purchase price equal to the closing price of
the Common Stock on the date of grant.
The options are granted on the date a director is elected to the
Board and vest and become exercisable over a five year period at the rate of
twenty percent (20%) per year commencing one year from the date of grant. Mr.
Terwilliger and Dr. Wanninger were granted their options under the Company's
Outside Directors Stock Option Plan (the "Directors Plan") which provides
formula grants of stock options to outside (non-employee) directors ("Outside
Directors"). Options granted under the Directors Plan expire at the earlier
of (i) ten years from the date of grant, or (ii) one year after the Outside
Director ceases to be a member of the Board.
In addition, on February 5, 1999, the four outside directors were
each granted an additional option to purchase 10,000 shares of Common Stock
at the average price of the Common Stock on the last trading day prior to the
date of grant.
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EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with Roger T.
Bredesen, its Chief Executive Officer, effective December 17, 1986, to serve
in such capacity until terminated by one of the parties upon 90 days' notice.
Mr. Bredesen's annual base salary under the Employment Agreement is adjusted
annually by the Compensation Committee of the Board of Directors (in 1999,
Mr. Bredesen's base salary was $200,000). The Employment Agreement also
establishes a ten-year deferred compensation arrangement under which Mr.
Bredesen began receiving payments in November 1996 and pursuant to which he
received $68,408 for 1999.
Effective January 1, 2000, the Company entered into new management
agreements (the "Agreements") with each of Kenneth Overstreet, Mary Ann
Morin, Don E. Dearborn and Stanley Klarenbeek (each an "Executive"), the
Company's four senior executive officers other than Roger T. Bredesen. Under
the Agreements, Mr. Overstreet is entitled to an annual base salary of
$200,000, Ms. Morin is entitled to an annual base salary of $110,000, and
Messrs. Dearborn and Klarenbeek are entitled to annual base salaries of
$112,000. In addition, each of the Executives is entitled to participate in
the Company's incentive compensation programs. Each Agreement has a term of
five years, subject to early termination in the event of the Executive's
death, disability, resignation or discharge by the Company. Upon the
Executive's discharge from employment by the Company for reasons other than
for cause (as defined in the Agreements), in the case of Mr. Overstreet and
Ms. Morin, the Company is obligated to pay the Executive a sum equal to two
times his or her average annual compensation for the five most recently
completed calendar years ending before the date of his or her termination,
and in the case of Messrs. Dearborn and Klarenbeek, one times their base
salary and bonus for the last completed calendar year prior to the date of
termination. In addition, each Executive would be entitled to the
acceleration of unvested stock options in the event of his or her discharge
from the Company. In the event of the Executives' voluntary resignation, they
will be entitled to one-times (in the case of Mr. Overstreet and Ms. Morin)
or one-half times (in the case of Messrs. Dearborn and Klarenbeek) their base
salary and bonus for the last completed calendar year prior to the date of
resignation.
In the event of a change in control of the Company (as defined in
the Agreements), the Executives will be entitled to share in a fund to be
established by the Company or its successor equal to one percent (1%) of the
change in control transaction price, payable one-half at closing of the
change in control transaction, and the remainder on the one year anniversary
of such date, provided the Executive is still employed with the Company or
its successor on such date. Each Executive's proportionate share of this
amount is calculated as the percentage by which each person's 1999 base
salary bears to all four Executives' 1999 base salary. In addition, upon an
Executive's termination from employment with the Company for any reason
(other than for cause) within the two years following a change in control,
the Executive will be entitled to certain severance payments ranging from two
times the Executive's average annual compensation for the previously
completed five calendar years to one times such average annual compensation,
depending on how long after the change in control the termination occurs.
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The Agreements also provide that the Executives will not compete
with the Company for a period of two years after termination of employment,
will not divulge confidential information and other customary matters.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW, PHILOSOPHY AND OBJECTIVES
The Compensation Committee of the Board of Directors, composed of
three non-employee directors, is responsible for determining and periodically
evaluating various levels and methods of compensating the Company's
employees, directors and officers. The Committee recommends, on an annual
basis, the compensation to be paid to the Chief Executive Officer and each of
the other executive officers of the Company. Such recommendations are then
discussed by the Board of Directors, which is ultimately responsible for
incentive compensation. The Committee also evaluates and oversees other, more
broadly based benefit programs of the Company. The objective of the
Compensation Committee is to establish a compensation program for executive
officers that will motivate and retain management, recognize and reward
individual performance, and align the financial interests of the executive
officers with the success of the Company.
EXECUTIVE OFFICER COMPENSATION
The Company's executive officer compensation, including that of the
Chief Executive Officer, consists of base salary, annual cash bonuses, long
term incentive compensation in the form of stock options and other long term
deferred compensation. Executive officers are also entitled to participate in
various benefits offered to all of the Company's employees such as profit
sharing plan contributions.
BASE SALARY. The Compensation Committee meets in December of each
year to recommend executive officer base salaries for the succeeding calendar
year. Base salary decisions are based on what the Committee believes is
reasonable in light of each executive's individual performance, the financial
results of the Company for the preceding fiscal year, compensation paid to
executive officers in prior years and compensation being paid to executive
officers of companies similar (in terms of size, type of business, etc.) to
the Company.
ANNUAL CASH BONUS. In addition to base compensation, the Committee
reviews an annual bonus pool pursuant to a formula (previously adopted by the
Board) based on return on shareholders' equity. For 1999, the pool consisted
of 4.625% of the Company's fiscal year net income before taxes, profit
sharing, bonus and deferred compensation up to 15% return on shareholders'
equity plus 14.5% of its net income above a 15% return on shareholders'
equity. After calculating this amount, which for fiscal 1999 was an aggregate
of $471,164, the Chief Executive Officer then divides this pool among the
executive officers and other employees over a specified seniority level
pursuant to a point system which allocates points among participants
according to their level of responsibility. The Chief Executive Officer adds
up the number of points assigned to all participants in the bonus pool and
divides that total into the amount of the
14
<PAGE>
bonus pool yielding a bonus amount per point. For example, Kenneth E.
Overstreet was allocated 2,880 points in fiscal 1999 and the least senior
employee in the pool was allocated 130 points. All employees participating in
the bonus program were allocated a total of 18,045 points, yielding a bonus
amount per point of $26.11, which, in Mr. Overstreet's case, translated to a
bonus of $75,208. The Committee has the discretion, which it has exercised in
prior years, to adjust the aggregate amount of the bonus pool upwards or
downwards.
STOCK OPTION PLAN. The Company also grants stock options under the
shareholder-approved 1994 Employees' Incentive Stock Option Plan to executive
officers, key personnel and other employees as long term incentive
compensation. Currently, 50,752 shares of common stock are reserved for
issuance upon exercise of options granted under the Stock Option Plan (out of
a total of 500,000 shares available under the Plan). Options are granted at
prices equal to the fair market value of the Company's Common Stock on the
date of grant. The Committee encourages the use of stock options as a
component of compensation because it believes that options most closely tie
executive officer compensation to the financial performance of the Company,
as evidenced by its stock price. In fiscal 1999, the Company awarded options
to Mr. Overstreet, Ms. Morin, Mr. Klarenbeek and Mr. Dearborn, to acquire
35,000 shares, 20,000 shares, 10,000 shares, and 10,000 shares, respectively,
under the Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
Roger Bredesen is the founder of the Company and has been its Chief
Executive Officer since its inception in 1962. Mr. Bredesen's base salary for
fiscal 1999 and 1998 was $200,000. Mr. Bredesen was granted a bonus of
$50,000 in fiscal 1999, which was subjectively determined and recommended by
the Committee and not based on the annual bonus formula specified above. Mr.
Bredesen also received an aggregate of $68,408 in deferred compensation
pursuant to his employment agreement with the Company, which provides for
payments to be paid over 10 years at a rate which is subject to adjustment
annually based upon changes in the Consumer Price Index. Mr. Bredesen began
receiving these payments in November, 1996.
The Compensation Committee will continue to evaluate the Company's
executive officer compensation program to ensure that it continues to be
reasonable, performance-based and consistent with the Company's overall
compensation objectives.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
John G. Mutschler, Chairman
J.S. Braun
Roy W. Terwilliger
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
As noted above, the Company's Compensation Committee consists of
John G. Mutschler, Chairman, J.S. Braun and Roy W. Terwilliger. No executive
officer of the Company is a member of the Compensation Committee.
No executive officer of the Company serves as a member of the
Compensation Committee or is a director of any other entity, one of whose
executive officers serves on the Compensation Committee or is a director of
the Company.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Company's Common Stock for the last five fiscal years with the cumulative total
return of the Dow Jones Publishing Index (consisting of a group of 12 companies)
(the "Industry Index") and the Nasdaq Stock Market (the "Nasdaq Index").
[GRAPH]
<TABLE>
<CAPTION>
10-94 10-95 10-96 10-97 10-98 10-99
<S> <C> <C> <C> <C> <C> <C>
Nasdaq $100 $135 $160 $210 $235 $393
NSCF $109 $123 $133 $293 $178 $279
Dow Jones
Publishing Index $ 99 $117 $141 $187 $209 $278
</TABLE>
Assumes $100 invested in close of trading on the last trading day preceding
the first day of the fifth preceding year in the Company's Common Stock, the
Industry Index, and the Nasdaq Index. The cumulative total return assumes the
reinvestment of dividends.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To the knowledge of the Company, based solely upon review of Forms 3
and 4 and amendments thereto furnished to the Company during the fiscal year
ended October 31, 1999,
16
<PAGE>
pursuant to Rule 16(a)-3(e) of the Rules and Regulations promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
forms 5 and amendments thereto furnished to the Company with respect to its
fiscal year ended October 31, 1999, no one failed to file, on a timely basis,
such filings for the Company's 1999 fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The following table sets forth as of January 1, 2000 the number of
shares of Common Stock beneficially owned by each person known to the Company
to be the beneficial owner of more than five percent (5%) of the outstanding
shares of the Company's capital stock, by each director and by all executive
officers and directors as a group. Except as otherwise indicated, the persons
listed possess all voting and investment power with respect to the shares
listed for them.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
<S> <C> <C>
Roger T. Bredesen 211,698 Shares (1) 7.7%
7130 Northland Circle North
Brooklyn Park, MN 55428
Roger T. Bredesen 214,800 Shares 7.8%
Income Trust A dated
June 29, 1990
E. Burke Hinds, Trustee
150 So. 5th Street, Suite 1800
Minneapolis, MN 55402
Roger T. Bredesen 214,800 Shares 7.8%
Income Trust B dated
June 29, 1990
Clarence J. Hynes, Trustee
1433 Utica Avenue So.
Minneapolis, MN 55416
E. Fay Bredesen Income Trust 223,105 Shares 8.1%
dated June 29, 1990
Wendall J. Davidson, Trustee
11931 54th Avenue So.
Minneapolis, MN 55442
17
<PAGE>
E. Fay Bredesen 1996 Annuity 142,065 Shares 5.2%
Trust U/A dated December 20, 1996
E. Fay Bredesen and E. Burke
Hinds, Trustees
150 So. Fifth Street, Suite 1800
Minneapolis, MN 55402
E. Burke Hinds, Trustee of 396,304 Shares (2) 14.4%
Various Bredesen Trusts
150 So. Fifth Street, Suite 1800
Minneapolis, MN 55402
John Mutschler 3,400 Shares (3) *
7130 Northland Circle North
Brooklyn Park, MN 55428
Kenneth E. Overstreet 113,216 Shares (4) 4.0%
7130 Northland Circle North
Brooklyn Park, MN 55428
J.S. Braun 13,999 Shares (5) *
7130 Northland Circle North
Brooklyn Park, MN 55428
Roy W. Terwilliger 8,000 Shares (6) *
7130 Northland Circle North
Brooklyn Park, MN 55428
Dr. Lester A. Wanninger 6,000 Shares (7) *
7130 Northland Circle North
Brooklyn Park, MN 55428
All executive officers (5)
and directors as a group
(9 individuals) 422,186 Shares (1, 3-8) 14.7%
</TABLE>
- --------------------------------
* Represents less than 1%
(1) Includes 39,439 shares held in an annuity trust, 13,060 shares in a
revocable trust and 14,199 shares held in the Company's Profit Sharing
Plan and Trust in a segregated directed account.
(2) Represents 214,800 shares beneficially owned by the Roger T. Bredesen
Income Trust A dated June 29, 1990, 142,065 shares beneficially owned
by the E. Fay Bredesen 1996 Annuity Trust U/A dated December 20, 1996
and 39,439 shares beneficially owned by the Roger T. Bredesen 1996
Annuity Trust U/A dated December 20, 1996, as to all of which trusts
Mr. Hinds serves as trustee.
(3) Includes 900 shares owned by a profit sharing trust of which Mr.
Mutschler is a co-trustee.
(4) Includes 70,000 shares issuable upon exercise of currently exercisable
options and 3,216 shares held in
the Company's Profit Sharing Plan in a segregated directed account.
(5) Includes 10,000 shares issuable upon exercise of currently exercisable
options.
18
<PAGE>
(6) Consists of 8,000 shares issuable under currently exercisable options.
(7) Consists of 6,000 shares issuable upon exercise of currently
exercisable options.
(8) Includes 27,900 shares issuable to three officers upon exercise of
currently exercisable options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective August 1997, the Company leased its Roseville, Minnesota
facility from two trusts controlled by Roger T. Bredesen and his spouse, E. Fay
Bredesen. The facility is rented at an annual rate of $191,000 (for the first
three Lease years and then escalates based on various price indices thereafter)
plus taxes, utilities, insurance, certain repair and maintenance obligations and
other operating costs for the property. The initial term of the Lease is 10
years with the Company having the right to extend the term for two additional
periods of five years each.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of the report:
1. Financial Statements:
All financial statements of the Company as set forth under Item
8 of this Report.
2. Financial Statement Schedules:
The following financial statement schedule and opinion thereon
are filed as a part of this Report:
Financial Statement Schedule II-Valuation and Qualifying
Accounts for the fiscal years ended October 31, 1999, 1998 and
1997, respectively.
19
<PAGE>
3. Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE METHOD OF FILING
------- ----- ----------------
<S> <C> <C>
3.1 Restated Articles of Incorporation (1)
of the Company, as amended
3.2 Restated and Amended Bylaws (4)
of the Company
4 Instruments defining rights of (1)
security holders
10.1 Employment Agreement of Roger (1)
Bredesen
10.6 Milwaukee, Wisconsin Lease (1)
10.6(a) Fifth and Sixth Addendums dated (3)
March 10, 1994 and December 13,
1994, respectively, to Milwaukee,
Wisconsin Lease
10.7 Bridgewater, Virginia Lease, (4)
dated March 10, 1997
10.12 1994 Employees' Incentive (2)
Stock Option Plan
10.12(a) First Amendment to 1994 Employees' (4)
Incentive Stock Option Plan
10.16 Loan Agreement between Brooklyn (3)
Park Economic Development Authority
and the Company dated August 1, 1994
10.17 Indenture of Trust between Brooklyn (3)
Park Economic Development Authority
and First Trust National Association
dated August 1, 1994
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE METHOD OF FILING
-------- ----- ----------------
<S> <C> <C>
10.18 Reimbursement Agreement between First (3)
Bank National Association and the
Company dated August 1, 1994
10.19 First Bank National Association (3)
Initial Letter of Credit dated
August 25, 1994
10.20(a) Northstar Computer Forms, Inc.
Amended and Restated Outside Filed herewith
Directors Stock Option Plan
10.22 Equipment Lease Agreement effective (4)
as of July 16, 1997 between Northstar
Computer Forms, Inc. and Deluxe
Financial Services, Inc.
10.24 Lease effective August 22, 1997, by and (4)
between Northstar Computer Forms, Inc.,
as tenant, and Roger T. Bredesen and
E. Fay Bredesen as trustees under certain
revocable trusts
10.28 Lease, dated May 1, 1998, by and between (5)
Sun River Properties, Inc., and Northstar
Computer Forms, Inc., relating to the
Company's Golden, Colorado, facility
10.29 Customer Alliance Agreement, dated (5)
November 5, 1998, by and between
Northstar Computer Forms, Inc.,
and NCR Corporation
10.30 Management Agreement effective
January 1, 2000, between Northstar
Computer Forms, Inc. and Kenneth Overstreet Filed herewith
10.31 Management Agreement effective
January 1, 2000, between Northstar
Computer Forms, Inc. and Mary Ann Morin Filed herewith
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE METHOD OF FILING
------- ----- ----------------
<S> <C> <C>
10.32 Management Agreement effective
January 1, 2000, between Northstar
Computer Forms, Inc. and Stan Klarenbeek Filed herewith
10.33 Management Agreement effective
January 1, 2000, between Northstar
Computer Forms, Inc. and Don Dearborn Filed herewith
10.34 Northstar Computer Forms, Inc. 401(k)
Profit Sharing Plan Trust Agreement
(1998 Restatement) Filed herewith
10.35 First Amendment of Northstar Computer
Forms, Inc. 401(k) Profit Sharing Plan
Trust Agreement (1998 Restatement) Filed herewith
10.36 MICR Forms Agreement between
Traveler's Express Company and
Northstar Computer Forms, Inc. dated
January 1, 1999 Filed herewith
10.37 Service Agreement dated October 15, 1999,
by and between USBancorp and Northstar
Computer Forms, Inc. Filed herewith
13 Portions of Annual Report to Shareholders Filed herewith
(only those portions specifically
incorporated by reference herein shall be
deemed filed with the Commission)
22 Subsidiaries of the Company (1)
23.1 Consent of PricewaterhouseCoopers LLP Filed herewith
27 1999 Fiscal Year End Financial Data Filed herewith
Schedules
99 Cautionary Statement Relating to Filed herewith
Forward-Looking Information
</TABLE>
- ---------------------------------
(1) Exhibits so marked were filed with the Securities and Exchange
Commission on May 7, 1991, as exhibits to the Form 10 of Northstar
Computer Forms, Inc., and are incorporated herein by reference and made
a part hereof.
22
<PAGE>
(2) Exhibits so marked were filed with the Securities and Exchange
Commission on January 25, 1994, as exhibits to the Form 10-KSB of
Northstar Computer Forms, Inc., and are incorporated herein by
reference and made a part hereof.
(3) Exhibits so marked were filed with the Securities and Exchange
Commission on January 27, 1995, as exhibits to the Form 10-KSB of
Northstar Computer Forms, Inc., and are incorporated herein by
reference and made a part hereof.
(4) Exhibits so marked were filed with the Securities and Exchange
Commission on January 29, 1998, as exhibits to the Form 10-KSB of
Northstar Computer Forms, Inc., and are incorporated herein by
reference and made a part hereof.
(5) Exhibits so marked were filed with the Securities and Exchange
Commission on January 23, 1999, as exhibits to the Form 10-K of
Northstar Computer Forms, Inc., and are incorporated herein by
reference and made a part hereof.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the
last quarter of the period covered by this report.
(d) FINANCIAL STATEMENT SCHEDULES.
(remainder of page left blank intentionally)
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
Financial Statement Schedule
To the Board of Directors
Northstar Computer Forms, Inc.:
Our audits of the consolidated financial statements referred to in our report
dated December 15, 1999, appearing in the Annual Report to Shareholders of
Northstar Computer Forms, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
December 15, 1999
24
<PAGE>
<TABLE>
<CAPTION>
COLUMN B COLUMN C - ADDITIONS COLUMN E
Balance at Charged to Charged to Balance at
COLUMN A beginning of costs and other COLUMN D end of
Descriptions period expenses accounts Deductions period
------------ ------ -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1997
Allowance for doubtful accounts $144,000 $167,437 $ --- $17,437 $294,000
Year ended October 31, 1998
Allowance for doubtful accounts 294,000 (70,586) $ --- 85,414 138,000
Year ended October 31, 1999
Allowance for doubtful accounts 138,000 55,451 $ --- 40,451 153,000
</TABLE>
25
<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.
NORTHSTAR COMPUTER FORMS, INC.
By: /s/ Mary Ann Morin
--------------------------------------
Mary Ann Morin, Treasurer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ Roger T. Bredesen 1/26/00
- ------------------------------------------ -------
Roger T. Bredesen, Chairman of the Board, Date
Chief Executive Officer
/s/ John Mutschler 1/26/00
- ------------------------------------------ -------
John Mutschler, Director Date
/s/ Kenneth E. Overstreet 1/26/00
- ------------------------------------------ -------
Kenneth E. Overstreet, Director, President Date
/s/ J. S. Braun 1/26/00
- ------------------------------------------ -------
J. S. Braun, Director Date
/s/ Roy W. Terwilliger 1/26/00
- ------------------------------------------ -------
Roy W. Terwilliger, Director Date
/s/ Dr. Lester A. Wanninger 1/26/00
- ------------------------------------------ -------
Dr. Lester A. Wanninger, Director Date
</TABLE>
26
<PAGE>
EXHIBITS
FORM 10-K
<PAGE>
NORTHSTAR COMPUTER FORMS, INC.
AMENDED AND RESTATED
OUTSIDE DIRECTORS STOCK OPTION PLAN
1. ESTABLISHMENT AND PURPOSE. Northstar Computer Forms, Inc. (the
"Company") established in 1995 a plan providing for the grant of stock
options to certain non-employee members of its Board of Directors who are
serving or will serve on the Board of the Company. This plan is known as the
Northstar Computer Forms, Inc. Outside Directors Stock Option Plan and is
hereby amended and restated effective February 5, 1999 (the "Plan"). The
purpose of the Plan is to advance the interests of the Company and its
shareholders by enhancing the Company's ability to attract and retain
qualified persons to serve on its Board of Directors.
2. DEFINITIONS. The following terms have the meanings set forth
below, unless the context otherwise requires:
2.1 "BOARD" means the Board of Directors of the Company.
2.2 "CODE" means the Internal Revenue Code of 1986, as amended.
2.3 "COMMON STOCK" means the common stock of the Company, par value
$.05 per share, or the number and kind of shares of stock or other securities
into which such Common Stock may be changed in accordance with Section 4.3 of
the Plan.
2.4 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.5 "FAIR MARKET VALUE" means, with respect to the Common Stock, the
following:
(a) If the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the Nasdaq
National Market, the last sale price of the Common Stock on such exchange
or reported by the Nasdaq National Market as of such date (or, if no shares
were traded on such day, as of the next preceding day on which there was
such a trade.).
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the Nasdaq National Market, and bid and
asked prices therefor in the over-the-counter market are reported by The
Nasdaq SmallCap Market-Registered Trademark- or the National Quotation
Bureau, Inc. (or any comparable reporting service), the mean of the closing
bid and asked prices as of such date, as so reported by the Nasdaq System,
or, if not so reported thereon, as reported by the National Quotation
Bureau, Inc. (or such comparable reporting service).
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the Nasdaq National Market, and such bid
and asked prices
<PAGE>
are not so reported, such price as the Board determines in good faith in
the exercise of its reasonable discretion.
2.6 "NASD" means the National Association of Securities Dealers, Inc.
2.7 "OPTION" means a right to purchase Common Stock granted to an
Outside Director under this Plan that does not qualify as an incentive stock
option under Section 422 of the Code. Options may be either Formula Options
or Discretionary Options.
2.8 "OUTSIDE DIRECTOR" means a member of the Board who is not an
employee of the Company or any Subsidiary.
2.9 "PERSON" means any individual, corporation, partnership, group,
association or other "person" (as such term is used in Section 14(d) of the
Exchange Act), other than the Company, a wholly owned subsidiary of the
Company or any employee benefit plan sponsored by the Company or a wholly
owned subsidiary of the Company.
2.10 "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that are
already owned by the Participant and shares of Common Stock that could be
acquired by the Participant pursuant to the exercise of an Option.
2.11 "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.12 "DISCRETIONARY OPTION" means an Option granted pursuant to Section
5A of the Plan, which is granted at the discretion of the Administrator.
2.13 "FORMULA OPTION" means an Option granted pursuant to Section 5 of
the Plan, as amended.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Company's Compensation Committee (the "Administrator"), who shall be
responsible for overseeing that the terms and conditions of the Plan are
complied with and that grants are made to Outside Directors at the proper
times and in the proper amounts as are required hereunder with respect to
Formula Options and properly implemented with respect to Discretionary
Options. The Administrator shall have the power and authority to make grants
of Discretionary Options to Outside Directors from time to time pursuant to
the terms of the Plan, including the power to determine the number of shares
to be covered by each such award granted hereunder and the terms and
conditions, not inconsistent with the terms of the Plan, of any award granted
hereunder (including, but not limited to, any vesting schedule or restriction
on any Option and/or the shares of Common Stock relating thereto). The
Administrator shall have no discretion with respect to Formula Options.
The Administrator shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration
of the
2
<PAGE>
Plan. The Administrator may delegate its authority to officers of the
Company for the purpose of implementing any aspect of the Plan.
4. COMMON STOCK SUBJECT TO THE PLAN.
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3
below, the maximum number of shares of Common Stock that shall be authorized
and reserved for issuance under the Plan shall be 150,000 shares of Common
Stock. The maximum number of shares authorized may also be increased from
time to time by approval of the Board and, if required pursuant to Rule 16b-3
under the Exchange Act or the applicable rules of any securities exchange or
the NASD, the shareholders of the Company.
4.2 SHARES AVAILABLE FOR USE. Shares of Common Stock that may be issued
upon exercise of Options shall be applied to reduce the maximum number of shares
of Common Stock remaining available for use under the Plan. Any shares of
Common Stock that are subject to an Option (or any portion thereof) that lapses,
expires or for any reason is terminated unexercised shall automatically again
become available for use under the Plan.
4.3 ADJUSTMENTS TO SHARES. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other change in the corporate
structure or shares of the Company, appropriate adjustment shall be made as to
the number and kind of securities subject to outstanding Options. Without
limiting the generality of the foregoing, in the event that any of such
transactions are effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities or assets, including cash, with respect to
or in exchange for such Common Stock, any Outside Director holding outstanding
Options shall upon the exercise of such Option receive, in lieu of any shares of
Common Stock he or she may be entitled to receive, such stock, securities or
assets, including cash, as have been issued to such Outside Directors if their
Options had been exercised and such Outside Directors had received Common Stock
prior to such transaction.
5. TERMS AND CONDITIONS OF FORMULA OPTIONS
5.1 GRANT. Subject to the terms and conditions of the Plan, the
Administrator shall grant Formula Options to each Outside Director who is not,
on the date such Option would be granted, the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act) of more than 5% of the outstanding Common
Stock, on the terms and conditions set forth in this Section 5. During the term
of the Plan and provided that sufficient shares of Common Stock are available
pursuant to Section 4:
(a) OUTSIDE DIRECTORS ELECTED PRIOR TO 1993. No Outside directors
elected to the Board prior to 1993 shall be eligible to participate in, or
receive Formula Options under, the Plan.
(b) OUTSIDE DIRECTORS ELECTED DURING OR AFTER 1993. Any Outside
Director elected during or after 1993 shall receive a Formula Option to
purchase 10,000
3
<PAGE>
shares of Common Stock, which Option shall be issued effective on the
date the Outside Director is elected to the Board (the "Grant Date").
5.2 EXERCISE PRICE. The exercise price for the Formula Options granted
hereunder shall be equal to the Fair Market Value of the Common Stock on the
Grant Date.
5.3 VESTING OF OPTIONS. Subject to the provisions of Section 5.4
hereof, Formula Options granted hereunder shall vest over a five year period
at the rate of 20% per year, commencing one year from the Grant Date.
5.4 DURATION. Each Formula Option granted to an Outside Director
pursuant to this Plan and all rights to purchase Common Stock thereunder
shall terminate on the earliest of:
(a) Ten years after the date such Option is granted; or
(b) The expiration of the period specified in Section 6, whichever is
applicable, after an Outside Director ceases to be a member of the
Board.
In no event shall a Formula Option be exercisable at any time after its
original expiration date.
5.5 MANNER OF EXERCISE. A Formula Option may be exercised by an
Outside Director in whole or in part from time to time, subject to the
conditions contained herein, by delivery, in person or through certified or
registered mail, of written notice of exercise to the Company at its
principal executive office (Attention: Chief Financial Officer), and by
paying in full the total Option exercise price for the shares of Common Stock
purchased. Such notice shall be in a form satisfactory to the Administrator
and shall specify the particular Option (or portion thereof) that is being
exercised and the number of shares with respect to which the Option is being
exercised. The exercise of the Option shall be deemed effective upon receipt
of such notice and payment complying with the terms of the Plan. As soon as
practicable after the effective exercise of the Option, the Outside Director
shall be recorded on the stock transfer books of the Company as the owner of
the shares purchased, and the Company shall deliver to the Outside Director
one or more duly issued stock certificates evidencing such ownership. If an
Outside Director exercises any Formula Option with respect to some, but not
all, of the shares of Common Stock subject to such Option, the right to
exercise such Option with respect to the remaining shares shall continue
until it expires or terminates in accordance with its terms. A Formula
Option shall only be exercisable with respect to whole shares.
5.6 PAYMENT OF EXERCISE PRICE. The total purchase price of the shares
to be purchased upon exercise of a Formula Option may be paid entirely in
cash (including check, bank draft or money order) or in whole or in part, by
transfer from the Outside Director to the Company of Previously Acquired
Shares. In the event the Outside Director pays the purchase price of a
Formula Option in whole or in part with Previously Acquired Shares, the value
of such shares shall be equal to their Fair Market Value on the date of
exercise of the Option.
5.7 RIGHTS AS A SHAREHOLDER. No Outside Directors shall have any
rights as a shareholder with respect to any shares of Common Stock covered by
a Formula Option until the
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Outside Director shall have become the holder of record of such shares, and
no adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date the Outside
Director becomes the holder of record of such shares.
5A. TERMS AND CONDITIONS OF DISCRETIONARY OPTIONS
5A.1 GRANT. Subject to the terms and conditions of the Plan, the
Administrator shall have the discretion and authority to grant Discretionary
Options to each Outside Director who is not, on the date such Option would be
granted, the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of more than 5% of the outstanding Common Stock, on the terms and
conditions set forth in this Section 5A. The terms and conditions of the
Discretionary Options shall be as specified in a resolution approved by the
Administrator or a stock option grant agreement entered into between an
authorized representative of the Administrator and an Outside Director and
may contain or vary any of the provisions specified in this Section 5A
(except for Section 5A.2).
5A.2 EXERCISE PRICE. The exercise price for all Discretionary Options
granted hereunder shall be equal to the Fair Market Value of the Common Stock
on the Grant Date.
5A.3 VESTING OF OPTIONS. Unless otherwise specified by the
Administrator, and subject to the provisions of Section 5A.4 hereof,
Discretionary Options granted hereunder shall vest over a five year period at
the rate of 20% per year, commencing one year from the Grant Date.
5A.4 DURATION. Unless otherwise specified by the Administrator, each
Discretionary Option granted to an Outside Director pursuant to this Plan and
all rights to purchase Common Stock thereunder shall terminate on the
earliest of:
(a) Ten years after the date such Option is granted; or
(b) The expiration of the period specified in Section 6, whichever is
applicable, after an Outside Director ceases to be a member of the Board.
In no event shall a Discretionary Option be exercisable at any time after its
original expiration date.
5A.5 MANNER OF EXERCISE. Unless otherwise specified by the
Administrator, a Discretionary Option may be exercised by an Outside Director
in whole or in part from time to time, subject to the conditions contained
herein, by delivery, in person or through certified or registered mail, of
written notice of exercise to the Company at its principal executive office
(Attention: Chief Financial Officer), and by paying in full the total Option
exercise price for the shares of Common Stock purchased. Such notice shall
be in a form satisfactory to the Administrator and shall specify the
particular Option (or portion thereof) that is being exercised and the number
of shares with respect to which the Option is being exercised. The exercise
of the Option shall be deemed effective upon receipt of such notice and
payment complying with the terms of the Plan. As soon as practicable after
the effective exercise of the Option, the Outside
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Director shall be recorded on the stock transfer books of the Company as the
owner of the shares purchased, and the Company shall deliver to the Outside
Director one or more duly issued stock certificates evidencing such
ownership. If an Outside Director exercises any Discretionary Option with
respect to some, but not all, of the shares of Common Stock subject to such
Option, the right to exercise such Option with respect to the remaining
shares shall continue until it expires or terminates in accordance with its
terms. A Discretionary Option shall only be exercisable with respect to
whole shares.
5A.6 PAYMENT OF EXERCISE PRICE. The total purchase price of the shares
to be purchased upon exercise of a Discretionary Option may be paid entirely
in cash (including check, bank draft or money order) or in whole or in part,
by transfer from the Outside Director to the Company of Previously Acquired
Shares. In the event the Outside Director pays the purchase price of a
Discretionary Option in whole or in part with Previously Acquired Shares, the
value of such shares shall be equal to their Fair Market Value on the date of
exercise of the Option.
5A.7 RIGHTS AS A SHAREHOLDER. No Outside Directors shall have any
rights as a shareholder with respect to any shares of Common Stock covered by
a Discretionary Option until the Outside Director shall have become the
holder of record of such shares, and no adjustments shall be made for
dividends or other distributions or other rights as to which there is a
record date preceding the date the Outside Director becomes the holder of
record of such shares.
6. TERMINATION OF SERVICE ON THE BOARD. An Option granted to an
Outside Director shall continue to be exercisable for a period of one year
after the date such Outside Director ceases to be a member of the Board, for
any reason, but only to the extent that the Option was exercisable
immediately prior to said Outside Director's ceasing to be a member of the
Board (and in no event beyond the date set forth in Section 5.4(a) or Section
5A.4(a), as the case may be).
7. CHANGE IN CONTROL. In the event of any Change in Control of the
Company, as defined herein, all Options held by Outside Directors pursuant to
this Plan shall immediately vest and become exercisable. For purposes of
this Section 7, a "Change in Control" of the Company shall mean (a) the sale,
lease, exchange or other transfer of all or substantially all of the assets
of the Company (in one transaction or in a series of related transactions) to
a corporation that is not controlled by the Company, (b) the approval by the
shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company, or (c) a change in control of the Company of a
nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of the Current Report on
Form 8-K, as in effect on the effective date of the Plan, pursuant to Section
13 or 15(d) of the Exchange Act, whether or not the Company is then subject
to such reporting requirement; provided, however, that, without limitation,
such a Change in Control shall be deemed to have occurred at such time as (i)
any Person becomes after the effective date of the Plan the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 20% or more of the combined voting power of the Company's
outstanding securities ordinarily having the right to vote at elections of
directors, or (ii) individuals who constitute the Board on the effective date
of the Plan cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the effective date
of the Plan whose election,
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or nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors comprising or deemed pursuant
hereto to comprise the Board on the effective date of the Plan (either by a
specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director) shall be, for purposes of
this clause (ii) and the following sentence, considered as though such person
were a member of the Board on the effective date of the Plan.
Notwithstanding anything in the foregoing to the contrary, no Change in
Control shall be deemed to have occurred for purposes of this Section 7 by
virtue of any transaction which shall have been approved by the affirmative
vote of at least a majority of the members of the Board on the effective date
of the Plan.
8. RESTRICTIONS ON TRANSFER. Other than pursuant to a qualified
domestic relations order (as defined by the Code), no right or interest of
any Outside Director in an Option prior to the exercise of such Options shall
be assignable or transferable, or subjected to any lien, during the lifetime
of the Outside Director, either voluntarily or involuntarily, directly or
indirectly, by operation of law or otherwise, including execution, levy,
garnishment, attachment, pledge, divorce or bankruptcy. In the event of an
Outside Director's death, such person's rights and interest in Options shall
be transferable by testamentary will or the laws of descent and distribution,
and payment of any amounts due under the Plan shall be made to, and exercise
of any Options (to the extent permitted pursuant to Section 6 of the Plan)
may be made by, the Outside Director's legal representatives, heirs or
legatees.
9. NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to amend, modify or rescind any previously approved compensation
plans or programs entered into by the Company. The Plan will be construed to
be in addition to any and all such other plans or programs. Neither the
adoption of the Plan nor the submission of the Plan to the shareholders of
the Company for approval will be construed as creating any limitations on the
power or authority of the Board to adopt such additional or other
compensation arrangements as the Board may deem necessary or desirable.
10. SECURITIES RESTRICTIONS. Shares of Common Stock issued pursuant to
Options granted under the Plan may not be sold, assigned, transferred,
pledged, encumbered or otherwise disposed of, whether voluntarily or
involuntarily, directly or indirectly, by operation of law or otherwise,
except pursuant to registration under the Securities Act and applicable state
securities laws or pursuant to exemptions from such registration. The
Company may condition the sale, assignment, transfer, pledge, encumbrance or
other disposition of such shares not issued pursuant to an effective and
current registration statement under the Securities Act and all applicable
state securities laws on the receipt from the party to whom the shares of
Common Stock are to be so transferred of any representations or agreement
requested by the Company in order to permit such transfer to be made pursuant
to exemptions from registration under the Securities Act and applicable state
securities laws.
11. PLAN AMENDMENT, MODIFICATION AND TERMINATION. The Board may
suspend or terminate the Plan or any portion thereof at any time, and may
amend the Plan from time to time in such respects as the Board may deem
advisable in order that Options under the Plan shall conform to any change in
applicable laws or regulations or in any other respect the Board may deem to
be in the best interests of the Company; provided, however, that no such
amendment
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shall be effective, without approval of the shareholders of the Company, if
shareholder approval of the amendment is then required pursuant to Rule 16b-3
under the Exchange Act or any successor rule or under the applicable rules or
regulations of any securities exchange or the NASD; and provided further that
this Plan shall not be amended more than once in any six month period, except
to comply with applicable rules and regulations of the Code, the Exchange
Act, any securities exchange or the NASD. No termination, suspension or
amendment of the Plan shall alter or impair any outstanding Option without
the consent of the Outside Director affected thereby.
12. GOVERNING LAW. This Plan shall be governed by and construed in
accordance with the laws of the State of Minnesota.
13. EFFECTIVE DATE. This Plan shall become effective on the date it
is adopted by the Shareholders of the Company.
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is entered into effective as of January 1,
2000 by and between NORTHSTAR COMPUTER FORMS, INC., a Minnesota corporation
(the "Company"), and KENNETH E. OVERSTREET ("Overstreet").
WITNESSETH:
WHEREAS, Overstreet is a key member of the management of the Company
and has heretofore devoted substantial skill and effort to the affairs of the
Company, and the Board of Directors of the Company (the "Board") desires to
recognize the significant personal contribution that Overstreet has made to
further the best interests of the Company and its shareholders;
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to continue to obtain the benefits of Overstreet's continued
services and attention to the affairs of the Company;
WHEREAS, Overstreet and the Company are parties to an Employment
Agreement dated as of May 10, 1989 (the "Existing Employment Agreement"), and
the parties desire that this Management Agreement terminate the Employment
Agreement and provide for the terms and conditions of Overstreet's continued
employment;
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to provide inducement for Overstreet (i) to remain in the
service of the Company in the event of any proposed or anticipated change in
control of the Company and (ii) to remain in the service of the Company in
order to facilitate an orderly transition in the event of a change in control
of the Company; and
WHEREAS, the parties acknowledge that the terms and provisions of this
Agreement, including the severance package, stock options and change in
control payments contained herein, provide separate and valuable
consideration for the Non-Compete Covenant contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and Overstreet agree
as follows:
1. EMPLOYMENT. Overstreet agrees to continue to serve as a full-time
employee of the Company in the capacity of President. Overstreet agrees to
faithfully and diligently perform the acts and duties of his office and
devote his best efforts on a full-time basis. Overstreet shall also perform
such other duties as are consistent with his position, as are reasonably
assigned to him by the Board of Directors of the Company (the "Board").
2. EMPLOYMENT PERIOD. The term of Overstreet's employment under this
Agreement will begin immediately and end on December 31, 2004, unless
extended by mutual
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agreement or sooner terminated by one of the parties pursuant to the
provisions of Section 4 hereof (the "Employment Period").
3. COMPENSATION AND RELATED MATTERS. The Company shall pay Overstreet
compensation and benefits as follows:
(a) BASE COMPENSATION. During the Employment Period, the Company shall
pay to Overstreet an annual base salary of $200,000. Overstreet's salary
may be further reviewed and adjusted periodically (upward, but not
downward) as determined by the Compensation Committee of the Board (the
"Compensation Committee") and adopted by the Board.
(b) BONUS. Overstreet shall also be entitled to a bonus from time to time
in the discretion of the Compensation Committee and/or the Board.
(c) STOCK OPTIONS. Overstreet shall also be entitled to receive stock
options (the "Options") pursuant to the Company's 1994 Employees' Incentive
Stock Option Plan (the "Plan") or otherwise in the discretion of the
Compensation Committee and/or the Board.
(d) PARTICIPATION IN BENEFITS. During the Employment Period, Overstreet
shall be entitled to participate in employee benefits offered generally by
the Company to its employees, to the extent that Overstreet's position,
tenure, salary, health, and other qualifications make him eligible to
participate. Overstreet's participation in such benefits shall be subject
to the terms of the applicable plans, as the same may be amended from time
to time. Following the termination of his employment, Overstreet (or any of
his dependents participating in such coverage) shall have the right to
purchase health care coverage through the Company's health benefit plan as
a retiree (or dependent of a retiree) at a rate equal to the average per
employee cost incurred by the Company until Overstreet (or such dependent)
reaches Medicare eligibility.
(e) EXPENSES. During the Employment Period, Overstreet shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by
Overstreet in performing services hereunder; provided, however, that
Overstreet complies with the Company's policies and procedures established
from time to time to document such expenses.
(f) VACATION AND OTHER BENEFITS. Overstreet shall be entitled to such
paid vacation and other benefits as shall be in effect from time to time
for senior executive officers of the Company.
4. TERMINATION AND COMPENSATION DUE ON TERMINATION. Overstreet's
employment hereunder may be terminated subject to the following provisions and
obligations:
(a) DEATH OR DISABILITY. Overstreet's employment hereunder shall
terminate upon his death, or in the event that Overstreet becomes disabled
by reason of a medical condition (physical or non-physical) pursuant to
which he cannot timely perform the material duties of his position with the
Company (such determination to be based on Overstreet's
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qualifying for disability benefits under his long-term disability insurance
policy with the Company), and no further payment of salary, any benefits
or other payment in connection with Overstreet's employment shall be due
from the Company to Overstreet or Overstreet's estate under this Agreement
thereafter, except for salary and bonus (if any) accrued, and Options
vested through the date of death or disability.
(b) CAUSE. The Company may terminate Overstreet's employment hereunder
for "Cause," which shall mean (i) fraud, dishonesty, gross negligence, or
willful malfeasance by Overstreet in connection with the performance of his
duties hereunder, (ii) conviction of Overstreet of a felony, (iii)
insubordination or other substantial failure, refusal or negligence by
Overstreet in fulfilling his duties and obligations hereunder, which breach
or failure Overstreet fails to remedy within ten (10) days after written
demand from the Board, or (iv) violation of the terms and conditions of
this Agreement, including without limitation, the Non-Compete Covenant
provided in Section 8 hereof. In the event that Overstreet's employment is
terminated hereunder for Cause, the Company shall have no further
obligations to Overstreet in connection with Overstreet's employment except
for salary accrued through the date of termination.
(c) VOLUNTARY TERMINATION. Until Overstreet reaches the age of 63, upon
any voluntary termination of employment by Overstreet, the Company shall
pay Overstreet a severance payment (the "Voluntary Termination Severance")
equal to Overstreet's base salary for the last completed calendar year
prior to the date of termination plus any bonus paid for such year and
shall have no further obligations to Overstreet except as provided by law.
After Overstreet reaches the age of 63, the Voluntary Termination Severance
shall end.
(d) WITHOUT CAUSE. The Company may terminate Overstreet's employment
hereunder at any time without "Cause" (as defined above), for any reason or
no reason. Upon any such termination of Overstreet, Overstreet shall be
entitled to receive a severance payment (the "Involuntary Termination
Severance") equal to two times Overstreet's average annual compensation
from the Company and included in his gross income for federal income tax
purposes for the period consisting of the five most recently completed
calendar years ending before the date of termination (the "Average Annual
Compensation"), and he shall immediately vest in all of the unvested
Options. The amount of the Involuntary Termination Severance shall remain
in effect until Overstreet reaches the age of 64; once Overstreet reaches
the age of 64, the amount of the Involuntary Termination Severance shall be
reduced to one times his Average Annual Compensation; and upon Overstreet
reaching the age of 65, he shall no longer be entitled to any Involuntary
Termination Severance.
(e) CHANGE IN CONTROL. The Company or its successor may terminate
Overstreet's employment hereunder or Overstreet may terminate his
employment with the Company under circumstances which would constitute a
"Constructive Involuntary Termination" (as defined in Section 5.1 below),
in the event of a change in control of the Company, in which case, in
addition to and not by way of limitation of the provisions contained in
this
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Section 4, but subject to the provisions of Section 5.2(f) below relating
to Parachute Payments, the provisions of Section 5 shall control.
5. CHANGE IN CONTROL. For a period commencing on the date of this
Agreement and ending on the later of (i) December 31, 2001, or (ii) if the
Commencement Date (as defined in Section 5.3(c)) occurs on or prior to
December 31, 2001 (or prior to the end of any extension of such date then in
effect as provided for in clause (i) hereof, which period may be
automatically extended for one year intervals from year to year thereafter by
agreement of Overstreet and the Board), the second anniversary of the
Commencement Date, (hereafter, the "Change in Control Term"), the provisions
of this Section 5 shall control in the event an Event (as herein defined)
shall occur during the Change in Control Term.
5.1 EVENTS. For purposes of this Agreement an "Event" shall be deemed to
have occurred if any of the following occur:
(a) Any "person" (as defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended, or any successor statute thereto (the "Exchange
Act")) acquires or becomes a "beneficial owner" (as defined in Rule 13d-3
or any successor rule under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors ("Voting Securities") or 30% or more
of the outstanding shares of common stock of the Company ("Common Stock"),
provided, however, that the following shall not constitute an Event
pursuant to this Section 5.1(a): (i) any acquisition of beneficial
ownership by the Company or a subsidiary of the Company; (ii) any
acquisition of beneficial ownership by any employee benefit plan (or
related trust) sponsored or maintained by the Company or one or more of its
subsidiaries; (iii) any acquisition of beneficial ownership by any
corporation (including without limitation an acquisition in a transaction
of the nature described in Section 5.1(c)) with respect to which,
immediately following such acquisition, more than 70%, respectively, of (x)
the combined voting power of the Company's then outstanding Voting
Securities and (y) the Common Stock is then beneficially owned, directly or
indirectly, by all or substantially all of the persons who beneficially
owned the Voting Securities and Common Stock, respectively, of the Company
immediately prior to such acquisition in substantially the same proportions
as their ownership of such Voting Securities and Common Stock, as the case
may be, immediately prior to such acquisition.
(b) Continuing Directors shall not constitute a majority of the members of
the Board. For purposes of this Section 5.1(b), "Continuing Directors"
shall mean: (i) individuals who, on the date hereof, are directors of the
Company, (ii) individuals elected as directors of the Company subsequent to
the date hereof for whose election proxies shall have been solicited by the
Board, or (iii) any individual elected or appointed by the Board to fill
vacancies on the Board caused by death or resignation (but not by removal)
or to fill newly-created directorships, provided that a "Continuing
Director" shall not include an individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the threatened election
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or removal of directors (or other actual or threatened solicitation of
proxies or consents) by or on behalf of any person other than the Board.
(c) Consummation of a reorganization, merger or consolidation of the
Company (other than a merger or consolidation with a subsidiary of the
Company) or a statutory exchange of outstanding Voting Securities or Common
Stock, unless immediately following such reorganization, merger,
consolidation or exchange, all or substantially all of the persons who were
the beneficial owners, respectively, of Voting Securities and Common Stock
immediately prior to such reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 70% of, respectively,
(i) the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors and (ii) the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger, consolidation or exchange in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger, consolidation or exchange, of the Voting Securities and Common
Stock, as the case may be.
(d) (i) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company (in
one or a series of transactions), other than to a corporation with respect
to which, immediately following such sale or other disposition, more than
70% of, respectively, (x) the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (y) the then outstanding shares of common stock
of such corporation is then beneficially owned, directly or indirectly, by
all or substantially all of the persons who were the beneficial owners,
respectively, of the Voting Securities and Common Stock immediately prior
to such sale or other disposition in substantially the same proportions as
their ownership, immediately prior to such sale or other disposition, of
the Voting Securities and Common Stock, as the case may be.
(e) The Company enters into a letter of intent, an agreement in principle
or a definitive agreement relating to an Event described in Section 5.1(a),
5.1(b), 5.1(c) or 5.1(d) hereof that ultimately results in such an Event,
or a tender or exchange offer or proxy contest is commenced which
ultimately results in an Event described in Section 5.1(a) or 5.1(b)
hereof.
(f) There shall be an involuntary termination or Constructive Involuntary
Termination (as defined in Section 5.2(d) hereof) of employment of
Overstreet, and Overstreet reasonably demonstrates that such event (i) was
requested by a party other than the Board that had previously taken other
steps reasonably calculated to result in an Event described in Section
5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof and which ultimately results in an
Event described in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof, or (ii)
otherwise arose in connection with or in anticipation of an Event described
in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof that ultimately occurs.
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Each of the foregoing Events (or combination thereof) is referred to herein
as a "Sale Transaction," and the aggregate amount received by either the
Company or its shareholders in the Sale Transaction is referred to herein as
the "Sale Transaction Price."
Notwithstanding anything stated in this Section 5.1, an Event shall not
be deemed to occur with respect to Overstreet if (x) the acquisition of
beneficial ownership of the 30% or greater interest referred to in Section
5.1(a) is by Overstreet or by a group, acting in concert, organized by and
including Overstreet or (y) a majority of the then combined voting power of
the then outstanding voting securities (or voting equity interests) of the
surviving corporation or of any corporation (or other entity) acquiring all
or substantially all of the assets of the Company shall, immediately after a
reorganization, merger, consolidation, statutory share exchange or
disposition of assets referred to in Section 5.1(c) or 5.1(d), is
beneficially owned, directly or indirectly, by Overstreet or by a group,
acting in concert, organized by and including Overstreet.
5.2 CHANGE IN CONTROL PAYMENTS AND BENEFITS. If any Event shall occur
during the Change in Control Term, then Overstreet shall be entitled to
receive from the Company or its successor (which term as used herein shall
include any person acquiring all or substantially all of the assets of the
Company) cash payments and other benefits on the following basis (unless
Overstreet's employment by the Company is terminated voluntarily or
involuntarily prior to the occurrence of the earliest Event to occur (the
"First Event"), in which case Overstreet shall be entitled to no payment or
benefits under this Section 5, but still may be entitled to payments and
benefits under Section 4 hereof):
(a) A cash payment payable in two installments (the "Transaction
Completion Bonus") equal to Overstreet's proportionate share (as described
below) of a fund to be established by the Company or its successor equal to
1% of the Sale Transaction Price (the "Fund"), payable one half at closing
or completion of an Event described in Section 5.1(a), 5.1(b), 5.1(c) or
5.1(d), and the remainder on the one year anniversary of such date (the
"Transaction Anniversary Date"), provided Overstreet's employment with the
Company or its successor is either (i) still in effect on the Transaction
Anniversary Date or (ii) not in effect on the Transaction Anniversary Date
as a result of a Constructive Involuntary Termination (as defined in
Section 5.1 hereof) or a termination by the Company or its successor for a
reason other than for Cause (as defined in Section 4(b) hereof).
Overstreet's proportionate share of the Fund shall be calculated as
follows: multiply the amount of the Fund by a fraction, the numerator of
which is Overstreet's 1999 base salary and the denominator of which is the
aggregate 1999 base salary paid by the Company to its four executive
officers other than its Chief Executive Officer.
(b) If at the time of, or at any time after, the occurrence of the First
Event and prior to the end of the Transition Period (as defined in Section
5.3(c)), the employment of Overstreet with the Company is voluntarily or
involuntarily terminated for any reason (unless such termination is a
voluntary termination by Overstreet other than a Constructive Involuntary
Termination or is on account of the death or Disability of Overstreet or is
a termination by the Company for Cause), Overstreet (or Overstreet's
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legal representative, as the case may be), subject to the limitations set
forth in Section 5.2(f), shall be entitled to receive from the Company or
its successor, upon such termination of employment with the Company or its
successor, a cash payment in an amount equal to a multiple of Overstreet's
Average Annual Compensation ending before the First Event (other than an
Event described in Section 5(e) or 5(f) unless Overstreet is terminated
prior to the occurrence of an Event described in Section 5(a), 5(b), 5(c)
or 5(d)), as described in the next sentence. If Overstreet's employment
with the Company or its successor is terminated at any time up to and
including the Transaction Anniversary Date, Overstreet shall be entitled to
receive 1.50 times the Average Annual Compensation; if terminated within
two calendar months thereafter, 1.42 times the Average Annual Compensation;
if terminated within two calendar months thereafter, 1.33 times the Average
Annual Compensation; if terminated within two calendar months thereafter,
1.25 times the Average Annual Compensation; if terminated within two
calendar months thereafter, 1.17 times the Average Annual Compensation; if
terminated within two calendar months thereafter, 1.08 times the Average
Annual Compensation; and, if terminated at any time after such date until
the end of the Transition Period, 1.00 times the Average Annual
Compensation. If Overstreet is terminated at any time after the conclusion
of the Transition Period, Overstreet shall not be entitled to any
compensation under this provision.
(c) The payments provided for in this Section 5.2 shall be in addition to
any other remuneration otherwise payable to Overstreet on account of
employment by the Company or one or more of its subsidiaries or its
successor (including any amounts received prior to such termination of
employment for personal services rendered after the occurrence of the First
Event) but shall be the aggregate amount payable to Overstreet under this
Agreement shall be subject to the limitations set forth in Section 5.2(f)
below relating to Parachute Payments.
(d) In the event that at any time from the date of the First Event until
the end of the Transition Period,
(i) Overstreet shall not be given substantially equivalent or
greater title, duties, responsibilities and authority or
substantially equivalent or greater salary and other
remuneration and fringe benefits (including paid vacation),
in each case as compared with Overstreet's status immediately
prior to the First Event other than for Cause or on account
of Disability,
(ii) the Company shall have failed to obtain assumption of this
Agreement by any successor as contemplated by Section 10(b)
hereof,
(iii) the Company shall require Overstreet to relocate to any place
other than a location within twenty-five miles of the location
at which Overstreet performed his duties immediately prior to
the First Event, or
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(iv) the Company shall require that Overstreet travel on Company
business to a substantially greater extent than required
immediately prior to the First Event,
a termination of employment with the Company by Overstreet thereafter shall
constitute a "Constructive Involuntary Termination."
(e) Overstreet shall not be required to mitigate the amount of any
payment or other benefit provided for in this Agreement by seeking other
employment or otherwise, nor (except as specifically provided in Section
5.2(f) below) shall the amount of any payment or other benefit provided for
in this Agreement be reduced by any compensation earned by Overstreet as
the result of employment by another employer after termination, or
otherwise.
(f) "PARACHUTE PAYMENTS". Notwithstanding any provision to the contrary
contained herein except the last sentence of this Section 5.2(f), if the
lump sum cash payment due and the other benefits to which Overstreet shall
become entitled under this Agreement, either alone or together with other
payments in the nature of compensation to Overstreet which are contingent
on a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company (a "Change
in Control Arrangement") or otherwise, would constitute a "parachute
payment" as defined in Section 28OG of the Internal Revenue Code of 1986
(the "Code") or any successor provision thereto, such lump sum payment
and/or such other benefits and payments shall be reduced (but not below
zero) to the largest aggregate amount as will result in no portion thereof
being subject to the excise tax imposed under Section 4999 of the Code (or
any successor provision thereto) or being non-deductible to the Company for
federal income tax purposes pursuant to Section 28OG of the Code (or any
successor provision thereto). Overstreet in good faith shall determine the
amount of any reduction to be made pursuant to this Section 5.2(f) and
shall select from among the foregoing benefits and payments those which
shall be reduced. No modification of, or successor provision to, Section
28OG or Section 4999 subsequent to the date of this Agreement shall,
however, reduce the benefits to which Overstreet would be entitled under
this Agreement in the absence of this Section 5.2(f) to a greater extent
than they would have been reduced if Section 28OG and Section 4999 had not
been modified or superseded subsequent to the date of this Agreement,
notwithstanding anything to the contrary provided in the first sentence of
this Section 5.2(f).
5.3 DEFINITION OF CERTAIN ADDITIONAL TERMS.
(a) As used herein, other than in Section 5(a) hereof, the term "person"
shall mean an individual, partnership, corporation, estate, trust or other
entity.
(b) As used herein, the term "Disability" shall mean a medical condition
(physical or non-physical) pursuant to which Overstreet cannot timely
perform the material duties of
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his position with the Company (such determination to be based on
Overstreet's qualifying for disability benefits under his long-term
disability insurance policy with the Company).
(c) As used herein, the term "Transition Period" shall mean the 2-year
period commencing on the date of the earliest to occur of an Event
described in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof (the
"Commencement Date"), and ending on the second anniversary of the
Commencement Date.
6. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Overstreet agrees that
he will not use or disclose, or permit others to use or disclose (other than
other employees or representatives of the Company), any trade secrets,
confidential information, data or records relating to the business,
techniques, operations and condition (financial or otherwise) of the Company
which is not generally known or available through other lawful sources.
7. PROPERTY RIGHTS. Subject to the last sentence in this Section,
the Company shall acquire exclusive right, title, and interest to all
inventions, discoveries, improvements, designs, ideas, know-how, technology
and the like developed, conceived, or invented by Overstreet, in whole or in
part, whether written or in some other form and whether or not patentable or
eligible for protection under any copyright law. Without limiting the
generality of the foregoing, Overstreet hereby assigns to the Company (i) all
rights to any inventions, or to improvements, and all rights to apply for
United States and/or foreign letters of patent granted upon such inventions;
and (ii) any copyrights Overstreet may have in materials created by
Overstreet or otherwise generated during the period in which Overstreet is
performing services for the Company, and the Company shall have the sole
right to apply for and obtain copyright protection for any materials for
which such protection can be obtained and to obtain such copyright renewals.
Despite any of the foregoing, nothing in this Section 7 shall apply to an
invention for which no equipment, supplies, facility or trade secret
information of the Company is used and which is developed entirely on
Overstreet's own time, and (i) does not relate (a) directly to the business
of the Company or (b) to the Company's actual or demonstrably anticipated
research or development, or (ii) which does not result from any work
performed by Overstreet for the Company.
8. NON-COMPETE COVENANT. During the Employment Period and for a
period of two years after the termination of employment for any reason,
Overstreet shall not (i) directly or indirectly, whether as a principal,
owner, agent or in any other capacity whatsoever, engage in the business of
manufacturing, marketing or designing internal bank forms, negotiable
documents and custom business forms anywhere within the United States, (ii)
solicit for employment or employ any employee or independent contractor of
the Company, or (iii) contact any present or contemplated customers of the
Company regarding the business of the Company.
9. REMEDIES FOR BREACH; DISPUTE RESOLUTION.
(a) REMEDIES FOR BREACH. Overstreet acknowledges that he has carefully
read and considered all of the terms and conditions of this Agreement and
has had the opportunity to consult counsel regarding the negotiation and
execution hereof. Overstreet further acknowledges that money damages would
not be a measurable or adequate remedy for
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Overstreet's breach of any of the covenants contained in this Agreement,
and, accordingly, in addition to and without limiting any other remedy
available to the Company in the event of such a breach, Overstreet
agrees, notwithstanding the provisions of Section 9(b) hereof, to submit
to the equitable jurisdiction of any court of competent personal and
subject matter jurisdiction in connection with any action to enjoin the
Overstreet from violating any such covenants.
(b) PROCEDURE FOR ARBITRATION. Except as provided in Section 9(a) above,
any dispute arising out of or relating to this Agreement or the alleged
breach of it, or the making of this Agreement, including claims of fraud in
the inducement, or any dispute arising from or related in any way to
Overstreet's employment, including any statutory or tort claims, which has
not been settled through negotiation within a period of thirty (30) days
after the date on which either party shall first have notified the other
party in writing of the existence of a dispute, shall be settled by final
and binding arbitration pursuant to the provisions of this Agreement and
under the then applicable arbitration rules of the American Arbitration
Association ("AAA"), unless such rules are inconsistent with the provisions
of this Agreement. Any such arbitration shall be conducted by: (a) neutral
arbitrator appointed by mutual agreement of the parties; or (b) failing
such agreement, in accordance with said rules. An arbitrator's award may
be enforced in any court of competent jurisdiction. Each party shall be
permitted reasonable discovery, including the production of relevant
documents by the other party, the exchange of witness lists, and a limited
number of depositions, including depositions of any expert who will testify
at the arbitration. The summary judgment procedure applicable in Hennepin
County, Minnesota, District Court, shall be available and apply to any
arbitration conducted pursuant to this Agreement. Subject to the
provisions of Section 8(c) below, the arbitrator shall have the authority
to award to the prevailing party any remedy or relief that a court of the
State of Minnesota could order or grant, including costs and attorneys'
fees. Unless otherwise agreed by the parties, the place of any arbitration
proceeding shall be Minneapolis, Minnesota.
(c) RECOVERY OF LITIGATION COSTS. Notwithstanding the provisions of
Section 8(b) above, in the event that Overstreet is found to have breached
any of the terms and conditions of this Agreement, Overstreet hereby agrees
to pay all costs and expenses incurred by Northstar in enforcing the
provisions of this Agreement found to have been breached by Overstreet,
including Northstar's attorney's fees.
10. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the
successors, legal representatives and assigns of the parties hereto;
provided, however, that Overstreet shall not have any right to assign,
pledge or otherwise dispose of or transfer any interest in this Agreement
or any payments hereunder, whether directly or indirectly or in whole or in
part, without the written consent of the Company or its successor.
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(b) The Company will require any successor (whether direct or indirect by
purchase of a majority of the outstanding voting stock of the Company or
all or substantially all of the assets of the Company, or by merger,
consolidation or otherwise), by agreement in form and substance
satisfactory to Overstreet, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure
of the Company to obtain such agreement prior to the effectiveness of any
such succession (other than in the case of a merger or consolidation) shall
be a breach of this Agreement and shall entitle Overstreet to compensation
from the Company in the same amount and on the same terms as Overstreet
would be entitled hereunder if Overstreet terminated his employment on
account of a Constructive Involuntary Termination, except that for purposes
of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which is required to
execute and deliver the agreement provided for in this Section 10(b) or
which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
11. BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit
of and be enforceable by the Company, it's successors, assigns and affiliates.
12. WAIVER. The failure of the Company to insist on the strict
performance of any provision of this Agreement or to exercise any right,
power or remedy upon a breach by Overstreet shall not constitute a waiver of
that or any other provision of this Agreement. A waiver on any one occasion
shall not be deemed to be a waiver for subsequent occasions.
13. SURVIVAL AND SEVERABILITY. The terms and conditions of this
Agreement shall survive the termination of Overstreet's employment with the
Company to the full extent necessary for their enforcement and for the
protection of the Company, it's successors, assigns and affiliates. If for
any reason any portion of any provision of this Agreement is declared
invalid, void or unenforceable by a court of competent jurisdiction, the
validity and binding effect of any remaining provisions of this Agreement
shall remain in full force and effect to the fullest extent possible as if
this Agreement had been executed with the invalid, void or unenforceable
portion or provision eliminated. In the event that any provision of this
Agreement relating to time periods and/or areas of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum time
periods or areas such court deems reasonable and enforceable, said time
periods and/or areas of restriction shall be deemed to become and thereafter
be the maximum time periods and/or areas which such court deems reasonable
and enforceable.
14. PRIOR AGREEMENTS. This Agreement contains the entire agreement of
the parties relating to the employment of Overstreet by the Company and the
other matters discussed herein and supercedes all prior promises, contracts,
agreements, and understandings of any kind, whether express or implied, oral
or written, with respect to such subject matter (including, without
limitation, the Existing Employment Agreement, which is hereby terminated and
of no further force or effect) and the parties hereto have made no
agreements,
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representations, or warranties relating to the subject matter of this
Agreement which are not set forth herein.
15. WITHHOLDING TAXES. The Company may take such action as it deems
appropriate to ensure that all applicable federal, state, city, and other
payroll, withholding, income, or other taxes arising from any compensation,
benefits, or any other payments made pursuant to this Agreement, or any other
contract, agreement, or understanding which relates, in whole or in part, to
Overstreet's employment with the Company, are withheld or collected from
Overstreet
16. NOTICES. All notices, requests and demands given to or made
pursuant hereto shall be in writing and shall be delivered or mailed to any
such party at its address which:
(a) In the case of the Company shall be:
Northstar Computer Forms, Inc.
7130 Northland Circle North
Brooklyn Park, MN 55428
(b) In the case of Overstreet shall be:
5511 River Bluff Drive
Bloomington, MN 55437
Either party may, by notice hereunder, designate a changed address. Any notice,
if mailed properly addressed, postage prepaid, registered or certified mail,
shall be deemed to have been given on the registered date or that date stamped
on the certified mail receipt.
17. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NORTHSTAR COMPUTER FORMS, INC.
By
---------------------------------------
Its
--------------------------------------
-----------------------------------------
Kenneth Overstreet
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is entered into effective as of January 1,
2000 by and between NORTHSTAR COMPUTER FORMS, INC., a Minnesota corporation
(the "Company"), and MARY ANN MORIN ("Morin").
WITNESSETH:
WHEREAS, Morin is a key member of the management of the Company and
has heretofore devoted substantial skill and effort to the affairs of the
Company, and the Board of Directors of the Company (the "Board") desires to
recognize the significant personal contribution that Morin has made to
further the best interests of the Company and its shareholders;
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to continue to obtain the benefits of Morin's continued
services and attention to the affairs of the Company;
WHEREAS, Morin and the Company are parties to an Employment Agreement
dated as of January 3, 1989 (the "Existing Employment Agreement"), and the
parties desire that this Management Agreement terminate the Employment
Agreement and provide for the terms and conditions of Morin's continued
employment;
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to provide inducement for Morin (i) to remain in the service
of the Company in the event of any proposed or anticipated change in control
of the Company and (ii) to remain in the service of the Company in order to
facilitate an orderly transition in the event of a change in control of the
Company; and
WHEREAS, the parties acknowledge that the terms and provisions of this
Agreement, including the severance package, stock options and change in
control payments contained herein, provide separate and valuable
consideration for the Non-Compete Covenant contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and Morin agree as
follows:
1. EMPLOYMENT. Morin agrees to continue to serve as a full-time
employee of the Company in the capacity of Chief Financial Officer. Morin
agrees to faithfully and diligently perform the acts and duties of her office
and devote her best efforts on a full-time basis. Morin shall also perform
such other duties as are consistent with her position, as are reasonably
assigned to her by the Board of Directors of the Company (the "Board").
2. EMPLOYMENT PERIOD. The term of Morin's employment under this
Agreement will begin immediately and end on December 31, 2004, unless
extended by mutual agreement
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or sooner terminated by one of the parties pursuant to the provisions of
Section 4 hereof (the "Employment Period").
3. COMPENSATION AND RELATED MATTERS. The Company shall pay Morin
compensation and benefits as follows:
(a) BASE COMPENSATION. During the Employment Period, the Company shall
pay to Morin an annual base salary of $110,000. Morin's salary may be
further reviewed and adjusted periodically (upward, but not downward) as
determined by the Compensation Committee of the Board (the "Compensation
Committee") and adopted by the Board.
(b) BONUS. Morin shall also be entitled to a bonus from time to time in
the discretion of the Compensation Committee and/or the Board.
(c) STOCK OPTIONS. Morin shall also be entitled to receive stock options
(the "Options") pursuant to the Company's 1994 Employees' Incentive Stock
Option Plan (the "Plan") or otherwise in the discretion of the Compensation
Committee and/or the Board.
(d) PARTICIPATION IN BENEFITS. During the Employment Period, Morin shall
be entitled to participate in employee benefits offered generally by the
Company to its employees, to the extent that Morin's position, tenure,
salary, health, and other qualifications make her eligible to participate.
Morin's participation in such benefits shall be subject to the terms of the
applicable plans, as the same may be amended from time to time. Following
the termination of her employment, Morin (or any of her dependents
participating in such coverage) shall have the right to purchase health
care coverage through the Company's health benefit plan as a retiree (or
dependent of a retiree) at a rate equal to the average per employee cost
incurred by the Company until Morin (or such dependent) reaches Medicare
eligibility.
(e) EXPENSES. During the Employment Period, Morin shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by Morin
in performing services hereunder; provided, however, that Morin complies
with the Company's policies and procedures established from time to time to
document such expenses.
(f) VACATION AND OTHER BENEFITS. Morin shall be entitled to such paid
vacation and other benefits as shall be in effect from time to time for
senior executive officers of the Company.
4. TERMINATION AND COMPENSATION DUE ON TERMINATION. Morin's employment
hereunder may be terminated subject to the following provisions and obligations:
(a) DEATH OR DISABILITY. Morin's employment hereunder shall terminate
upon her death, or in the event that Morin becomes disabled by reason of a
medical condition (physical or non-physical) pursuant to which she cannot
timely perform the material duties of her position with the Company (such
determination to be based on Morin's qualifying for disability benefits
under her long-term disability insurance policy with the
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Company), and no further payment of salary, any benefits or other payment
in connection with Morin's employment shall be due from the Company to
Morin or Morin's estate under this Agreement thereafter, except for salary
and bonus (if any) accrued, and Options vested through the date of death
or disability.
(b) CAUSE. The Company may terminate Morin's employment hereunder for
"Cause," which shall mean (i) fraud, dishonesty, gross negligence, or
willful malfeasance by Morin in connection with the performance of her
duties hereunder, (ii) conviction of Morin of a felony, (iii)
insubordination or other substantial failure, refusal or negligence by
Morin in fulfilling her duties and obligations hereunder, which breach or
failure Morin fails to remedy within ten (10) days after written demand
from the Board, or (iv) violation of the terms and conditions of this
Agreement, including without limitation, the Non-Compete Covenant provided
in Section 8 hereof. In the event that Morin's employment is terminated
hereunder for Cause, the Company shall have no further obligations to Morin
in connection with Morin's employment except for salary accrued through the
date of termination.
(c) VOLUNTARY TERMINATION. Until Morin reaches the age of 63, upon any
voluntary termination of employment by Morin, the Company shall pay Morin a
severance payment (the "Voluntary Termination Severance") equal to Morin's
base salary for the last completed calendar year prior to the date of
termination plus any bonus paid for such year and shall have no further
obligations to Morin except as provided by law. After Morin reaches the
age of 63, the Voluntary Termination Severance shall end.
(d) WITHOUT CAUSE. The Company may terminate Morin's employment hereunder
at any time without "Cause" (as defined above), for any reason or no
reason. Upon any such termination of Morin, Morin shall be entitled to
receive a severance payment (the "Involuntary Termination Severance") equal
to two times Morin's average annual compensation from the Company and
included in her gross income for federal income tax purposes for the period
consisting of the five most recently completed calendar years ending before
the date of termination (the "Average Annual Compensation"), and she shall
immediately vest in all of the unvested Options. The amount of the
Involuntary Termination Severance shall remain in effect until Morin
reaches the age of 64; once Morin reaches the age of 64, the amount of the
Involuntary Termination Severance shall be reduced to one times her Average
Annual Compensation; and upon Morin reaching the age of 65, she shall no
longer be entitled to any Involuntary Termination Severance.
(e) CHANGE IN CONTROL. The Company or its successor may terminate Morin's
employment hereunder or Morin may terminate her employment with the Company
under circumstances which would constitute a "Constructive Involuntary
Termination" (as defined in Section 5.1 below), in the event of a change in
control of the Company, in which case, in addition to and not by way of
limitation of the provisions contained in this Section 4, but subject to
the provisions of Section 5.2(f) below relating to Parachute Payments, the
provisions of Section 5 shall control.
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5. CHANGE IN CONTROL. For a period commencing on the date of this
Agreement and ending on the later of (i) December 31, 2001, or (ii) if the
Commencement Date (as defined in Section 5.3(c)) occurs on or prior to
December 31, 2001 (or prior to the end of any extension of such date then in
effect as provided for in clause (i) hereof, which period may be
automatically extended for one year intervals from year to year thereafter by
agreement of Morin and the Board), the second anniversary of the Commencement
Date, (hereafter, the "Change in Control Term"), the provisions of this
Section 5 shall control in the event an Event (as herein defined) shall occur
during the Change in Control Term.
5.1 EVENTS. For purposes of this Agreement an "Event" shall be deemed to
have occurred if any of the following occur:
(a) Any "person" (as defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended, or any successor statute thereto (the "Exchange
Act")) acquires or becomes a "beneficial owner" (as defined in Rule 13d-3
or any successor rule under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors ("Voting Securities") or 30% or more
of the outstanding shares of common stock of the Company ("Common Stock"),
provided, however, that the following shall not constitute an Event
pursuant to this Section 5.1(a): (i) any acquisition of beneficial
ownership by the Company or a subsidiary of the Company; (ii) any
acquisition of beneficial ownership by any employee benefit plan (or
related trust) sponsored or maintained by the Company or one or more of its
subsidiaries; (iii) any acquisition of beneficial ownership by any
corporation (including without limitation an acquisition in a transaction
of the nature described in Section 5.1(c)) with respect to which,
immediately following such acquisition, more than 70%, respectively, of (x)
the combined voting power of the Company's then outstanding Voting
Securities and (y) the Common Stock is then beneficially owned, directly or
indirectly, by all or substantially all of the persons who beneficially
owned the Voting Securities and Common Stock, respectively, of the Company
immediately prior to such acquisition in substantially the same proportions
as their ownership of such Voting Securities and Common Stock, as the case
may be, immediately prior to such acquisition.
(b) Continuing Directors shall not constitute a majority of the members of
the Board. For purposes of this Section 5.1(b), "Continuing Directors"
shall mean: (i) individuals who, on the date hereof, are directors of the
Company, (ii) individuals elected as directors of the Company subsequent to
the date hereof for whose election proxies shall have been solicited by the
Board, or (iii) any individual elected or appointed by the Board to fill
vacancies on the Board caused by death or resignation (but not by removal)
or to fill newly-created directorships, provided that a "Continuing
Director" shall not include an individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the threatened election or removal of directors (or other actual
or threatened solicitation of proxies or consents) by or on behalf of any
person other than the Board.
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(c) Consummation of a reorganization, merger or consolidation of the
Company (other than a merger or consolidation with a subsidiary of the
Company) or a statutory exchange of outstanding Voting Securities or Common
Stock, unless immediately following such reorganization, merger,
consolidation or exchange, all or substantially all of the persons who were
the beneficial owners, respectively, of Voting Securities and Common Stock
immediately prior to such reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 70% of, respectively,
(i) the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors and (ii) the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger, consolidation or exchange in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger, consolidation or exchange, of the Voting Securities and Common
Stock, as the case may be.
(d) (i) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company (in
one or a series of transactions), other than to a corporation with respect
to which, immediately following such sale or other disposition, more than
70% of, respectively, (x) the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (y) the then outstanding shares of common stock
of such corporation is then beneficially owned, directly or indirectly, by
all or substantially all of the persons who were the beneficial owners,
respectively, of the Voting Securities and Common Stock immediately prior
to such sale or other disposition in substantially the same proportions as
their ownership, immediately prior to such sale or other disposition, of
the Voting Securities and Common Stock, as the case may be.
(e) The Company enters into a letter of intent, an agreement in principle
or a definitive agreement relating to an Event described in Section 5.1(a),
5.1(b), 5.1(c) or 5.1(d) hereof that ultimately results in such an Event,
or a tender or exchange offer or proxy contest is commenced which
ultimately results in an Event described in Section 5.1(a) or 5.1(b)
hereof.
(f) There shall be an involuntary termination or Constructive Involuntary
Termination (as defined in Section 5.2(d) hereof) of employment of Morin,
and Morin reasonably demonstrates that such event (i) was requested by a
party other than the Board that had previously taken other steps reasonably
calculated to result in an Event described in Section 5.1(a), 5.1(b),
5.1(c) or 5.1(d) hereof and which ultimately results in an Event described
in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof, or (ii) otherwise arose
in connection with or in anticipation of an Event described in Section
5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof that ultimately occurs.
Each of the foregoing Events (or combination thereof) is referred to herein
as a "Sale Transaction," and the aggregate amount received by either the
Company or its shareholders in the Sale Transaction is referred to herein as
the "Sale Transaction Price."
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Notwithstanding anything stated in this Section 5.1, an Event shall not
be deemed to occur with respect to Morin if (x) the acquisition of beneficial
ownership of the 30% or greater interest referred to in Section 5.1(a) is by
Morin or by a group, acting in concert, organized by and including Morin or
(y) a majority of the then combined voting power of the then outstanding
voting securities (or voting equity interests) of the surviving corporation
or of any corporation (or other entity) acquiring all or substantially all of
the assets of the Company shall, immediately after a reorganization, merger,
consolidation, statutory share exchange or disposition of assets referred to
in Section 5.1(c) or 5.1(d), is beneficially owned, directly or indirectly,
by Morin or by a group, acting in concert, organized by and including Morin.
5.2 CHANGE IN CONTROL PAYMENTS AND BENEFITS. If any Event shall occur
during the Change in Control Term, then Morin shall be entitled to receive
from the Company or its successor (which term as used herein shall include
any person acquiring all or substantially all of the assets of the Company)
cash payments and other benefits on the following basis (unless Morin's
employment by the Company is terminated voluntarily or involuntarily prior to
the occurrence of the earliest Event to occur (the "First Event"), in which
case Morin shall be entitled to no payment or benefits under this Section 5,
but still may be entitled to payments and benefits under Section 4 hereof):
(a) A cash payment payable in two installments (the "Transaction
Completion Bonus") equal to Morin's proportionate share (as described
below) of a fund to be established by the Company or its successor equal to
1% of the Sale Transaction Price (the "Fund"), payable one half at closing
or completion of an Event described in Section 5.1(a), 5.1(b), 5.1(c) or
5.1(d), and the remainder on the one year anniversary of such date (the
"Transaction Anniversary Date"), provided Morin's employment with the
Company or its successor is either (i) still in effect on the Transaction
Anniversary Date or (ii) not in effect on the Transaction Anniversary Date
as a result of a Constructive Involuntary Termination (as defined in
Section 5.1 hereof) or a termination by the Company or its successor for a
reason other than for Cause (as defined in Section 4(b) hereof). Morin's
proportionate share of the Fund shall be calculated as follows: multiply
the amount of the Fund by a fraction, the numerator of which is Morin's
1999 base salary and the denominator of which is the aggregate 1999 base
salary paid by the Company to its four executive officers other than its
Chief Executive Officer.
(b) If at the time of, or at any time after, the occurrence of the First
Event and prior to the end of the Transition Period (as defined in Section
5.3(c)), the employment of Morin with the Company is voluntarily or
involuntarily terminated for any reason (unless such termination is a
voluntary termination by Morin other than a Constructive Involuntary
Termination or is on account of the death or Disability of Morin or is a
termination by the Company for Cause), Morin (or Morin's legal
representative, as the case may be), subject to the limitations set forth
in Section 5.2(f), shall be entitled to receive from the Company or its
successor, upon such termination of employment with the Company or its
successor, a cash payment in an amount equal to a multiple of Morin's
Average Annual Compensation ending before the First Event (other than an
Event described in Section 5(e) or 5(f) unless Morin is terminated prior to
the
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occurrence of an Event described in Section 5(a), 5(b), 5(c) or 5(d)),
as described in the next sentence. If Morin's employment with the Company
or its successor is terminated at any time up to and including the
Transaction Anniversary Date, Morin shall be entitled to receive 1.50 times
the Average Annual Compensation; if terminated within two calendar months
thereafter, 1.42 times the Average Annual Compensation; if terminated
within two calendar months thereafter, 1.33 times the Average Annual
Compensation; if terminated within two calendar months thereafter, 1.25
times the Average Annual Compensation; if terminated within two calendar
months thereafter, 1.17 times the Average Annual Compensation; if
terminated within two calendar months thereafter, 1.08 times the Average
Annual Compensation; and, if terminated at any time after such date until
the end of the Transition Period, 1.00 times the Average Annual
Compensation. If Morin is terminated at any time after the conclusion of
the Transition Period, Morin shall not be entitled to any compensation
under this provision.
(c) The payments provided for in this Section 5.2 shall be in addition to
any other remuneration otherwise payable to Morin on account of employment
by the Company or one or more of its subsidiaries or its successor
(including any amounts received prior to such termination of employment for
personal services rendered after the occurrence of the First Event) but
shall be the aggregate amount payable to Morin under this Agreement shall
be subject to the limitations set forth in Section 5.2(f) below relating to
Parachute Payments.
(d) In the event that at any time from the date of the First Event until
the end of the Transition Period,
(i) Morin shall not be given substantially equivalent or greater
title, duties, responsibilities and authority or substantially
equivalent or greater salary and other remuneration and fringe
benefits (including paid vacation), in each case as compared
with Morin's status immediately prior to the First Event other
than for Cause or on account of Disability,
(ii) the Company shall have failed to obtain assumption of this
Agreement by any successor as contemplated by Section 10(b)
hereof,
(iii) the Company shall require Morin to relocate to any place
other than a location within twenty-five miles of the location
at which Morin performed her duties immediately prior to the
First Event, or
(iv) the Company shall require that Morin travel on Company
business to a substantially greater extent than required
immediately prior to the First Event,
a termination of employment with the Company by Morin thereafter shall
constitute a "Constructive Involuntary Termination."
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(e) Morin shall not be required to mitigate the amount of any payment or
other benefit provided for in this Agreement by seeking other employment or
otherwise, nor (except as specifically provided in Section 5.2(f) below)
shall the amount of any payment or other benefit provided for in this
Agreement be reduced by any compensation earned by Morin as the result of
employment by another employer after termination, or otherwise.
(f) "PARACHUTE PAYMENTS". Notwithstanding any provision to the contrary
contained herein except the last sentence of this Section 5.2(f), if the
lump sum cash payment due and the other benefits to which Morin shall
become entitled under this Agreement, either alone or together with other
payments in the nature of compensation to Morin which are contingent on a
change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company (a "Change
in Control Arrangement") or otherwise, would constitute a "parachute
payment" as defined in Section 28OG of the Internal Revenue Code of 1986
(the "Code") or any successor provision thereto, such lump sum payment
and/or such other benefits and payments shall be reduced (but not below
zero) to the largest aggregate amount as will result in no portion thereof
being subject to the excise tax imposed under Section 4999 of the Code (or
any successor provision thereto) or being non-deductible to the Company for
federal income tax purposes pursuant to Section 28OG of the Code (or any
successor provision thereto). Morin in good faith shall determine the
amount of any reduction to be made pursuant to this Section 5.2(f) and
shall select from among the foregoing benefits and payments those which
shall be reduced. No modification of, or successor provision to, Section
28OG or Section 4999 subsequent to the date of this Agreement shall,
however, reduce the benefits to which Morin would be entitled under this
Agreement in the absence of this Section 5.2(f) to a greater extent than
they would have been reduced if Section 28OG and Section 4999 had not been
modified or superseded subsequent to the date of this Agreement,
notwithstanding anything to the contrary provided in the first sentence of
this Section 5.2(f).
5.3 DEFINITION OF CERTAIN ADDITIONAL TERMS.
(a) As used herein, other than in Section 5(a) hereof, the term "person"
shall mean an individual, partnership, corporation, estate, trust or other
entity.
(b) As used herein, the term "Disability" shall mean a medical condition
(physical or non-physical) pursuant to which Morin cannot timely perform
the material duties of her position with the Company (such determination to
be based on Morin's qualifying for disability benefits under her long-term
disability insurance policy with the Company).
(c) As used herein, the term "Transition Period" shall mean the 2-year
period commencing on the date of the earliest to occur of an Event
described in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof (the
"Commencement Date"), and ending on the second anniversary of the
Commencement Date.
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6. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Morin agrees that she
will not use or disclose, or permit others to use or disclose (other than
other employees or representatives of the Company), any trade secrets,
confidential information, data or records relating to the business,
techniques, operations and condition (financial or otherwise) of the Company
which is not generally known or available through other lawful sources.
7. PROPERTY RIGHTS. Subject to the last sentence in this Section,
the Company shall acquire exclusive right, title, and interest to all
inventions, discoveries, improvements, designs, ideas, know-how, technology
and the like developed, conceived, or invented by Morin, in whole or in part,
whether written or in some other form and whether or not patentable or
eligible for protection under any copyright law. Without limiting the
generality of the foregoing, Morin hereby assigns to the Company (i) all
rights to any inventions, or to improvements, and all rights to apply for
United States and/or foreign letters of patent granted upon such inventions;
and (ii) any copyrights Morin may have in materials created by Morin or
otherwise generated during the period in which Morin is performing services
for the Company, and the Company shall have the sole right to apply for and
obtain copyright protection for any materials for which such protection can
be obtained and to obtain such copyright renewals. Despite any of the
foregoing, nothing in this Section 7 shall apply to an invention for which no
equipment, supplies, facility or trade secret information of the Company is
used and which is developed entirely on Morin's own time, and (i) does not
relate (a) directly to the business of the Company or (b) to the Company's
actual or demonstrably anticipated research or development, or (ii) which
does not result from any work performed by Morin for the Company.
8. NON-COMPETE COVENANT. During the Employment Period and for a
period of two years after the termination of employment for any reason, Morin
shall not (i) directly or indirectly, whether as a principal, owner, agent or
in any other capacity whatsoever, engage in the business of manufacturing,
marketing or designing internal bank forms, negotiable documents and custom
business forms anywhere within the United States, (ii) solicit for employment
or employ any employee or independent contractor of the Company, or (iii)
contact any present or contemplated customers of the Company regarding the
business of the Company.
9. REMEDIES FOR BREACH; DISPUTE RESOLUTION.
(a) REMEDIES FOR BREACH. Morin acknowledges that she has carefully read
and considered all of the terms and conditions of this Agreement and has
had the opportunity to consult counsel regarding the negotiation and
execution hereof. Morin further acknowledges that money damages would not
be a measurable or adequate remedy for Morin's breach of any of the
covenants contained in this Agreement, and, accordingly, in addition to and
without limiting any other remedy available to the Company in the event of
such a breach, Morin agrees, notwithstanding the provisions of Section 9(b)
hereof, to submit to the equitable jurisdiction of any court of competent
personal and subject matter jurisdiction in connection with any action to
enjoin the Morin from violating any such covenants.
(b) PROCEDURE FOR ARBITRATION. Except as provided in Section 9(a) above,
any dispute arising out of or relating to this Agreement or the alleged
breach of it, or the
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making of this Agreement, including claims of fraud in the inducement, or
any dispute arising from or related in any way to Morin's employment,
including any statutory or tort claims, which has not been settled through
negotiation within a period of thirty (30) days after the date on which
either party shall first have notified the other party in writing of the
existence of a dispute, shall be settled by final and binding arbitration
pursuant to the provisions of this Agreement and under the then applicable
arbitration rules of the American Arbitration Association ("AAA"), unless
such rules are inconsistent with the provisions of this Agreement. Any
such arbitration shall be conducted by: (a) neutral arbitrator appointed
by mutual agreement of the parties; or (b) failing such agreement, in
accordance with said rules. An arbitrator's award may be enforced in any
court of competent jurisdiction. Each party shall be permitted reasonable
discovery, including the production of relevant documents by the other
party, the exchange of witness lists, and a limited number of depositions,
including depositions of any expert who will testify at the arbitration.
The summary judgment procedure applicable in Hennepin County, Minnesota,
District Court, shall be available and apply to any arbitration conducted
pursuant to this Agreement. Subject to the provisions of Section 8(c)
below, the arbitrator shall have the authority to award to the prevailing
party any remedy or relief that a court of the State of Minnesota could
order or grant, including costs and attorneys' fees. Unless otherwise
agreed by the parties, the place of any arbitration proceeding shall be
Minneapolis, Minnesota.
(c) RECOVERY OF LITIGATION COSTS. Notwithstanding the provisions of
Section 8(b) above, in the event that Morin is found to have breached any
of the terms and conditions of this Agreement, Morin hereby agrees to pay
all costs and expenses incurred by Northstar in enforcing the provisions of
this Agreement found to have been breached by Morin, including Northstar's
attorney's fees.
10. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the
successors, legal representatives and assigns of the parties hereto;
provided, however, that Morin shall not have any right to assign, pledge
or otherwise dispose of or transfer any interest in this Agreement or any
payments hereunder, whether directly or indirectly or in whole or in part,
without the written consent of the Company or its successor.
(b) The Company will require any successor (whether direct or indirect by
purchase of a majority of the outstanding voting stock of the Company or
all or substantially all of the assets of the Company, or by merger,
consolidation or otherwise), by agreement in form and substance
satisfactory to Morin, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure
of the Company to obtain such agreement prior to the effectiveness of any
such succession (other than in the case of a merger or consolidation) shall
be a breach of this Agreement and shall entitle Morin to compensation from
the Company in the same amount and on the same terms as Morin would be
entitled hereunder if Morin terminated her employment on
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account of a Constructive Involuntary Termination, except that for purposes
of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which is required to
execute and deliver the agreement provided for in this Section 10(b) or
which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
11. BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by the Company, it's successors, assigns and affiliates.
12. WAIVER. The failure of the Company to insist on the strict
performance of any provision of this Agreement or to exercise any right, power
or remedy upon a breach by Morin shall not constitute a waiver of that or any
other provision of this Agreement. A waiver on any one occasion shall not be
deemed to be a waiver for subsequent occasions.
13. SURVIVAL AND SEVERABILITY. The terms and conditions of this
Agreement shall survive the termination of Morin's employment with the
Company to the full extent necessary for their enforcement and for the
protection of the Company, it's successors, assigns and affiliates. If for
any reason any portion of any provision of this Agreement is declared
invalid, void or unenforceable by a court of competent jurisdiction, the
validity and binding effect of any remaining provisions of this Agreement
shall remain in full force and effect to the fullest extent possible as if
this Agreement had been executed with the invalid, void or unenforceable
portion or provision eliminated. In the event that any provision of this
Agreement relating to time periods and/or areas of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum time
periods or areas such court deems reasonable and enforceable, said time
periods and/or areas of restriction shall be deemed to become and thereafter
be the maximum time periods and/or areas which such court deems reasonable
and enforceable.
14. PRIOR AGREEMENTS. This Agreement contains the entire agreement of
the parties relating to the employment of Morin by the Company and the other
matters discussed herein and supercedes all prior promises, contracts,
agreements, and understandings of any kind, whether express or implied, oral
or written, with respect to such subject matter (including, without
limitation, the Existing Employment Agreement, which is hereby terminated and
of no further force or effect) and the parties hereto have made no
agreements, representations, or warranties relating to the subject matter of
this Agreement which are not set forth herein.
15. WITHHOLDING TAXES. The Company may take such action as it deems
appropriate to ensure that all applicable federal, state, city, and other
payroll, withholding, income, or other taxes arising from any compensation,
benefits, or any other payments made pursuant to this Agreement, or any other
contract, agreement, or understanding which relates, in whole or in part, to
Morin's employment with the Company, are withheld or collected from Morin
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16. NOTICES. All notices, requests and demands given to or made
pursuant hereto shall be in writing and shall be delivered or mailed to any
such party at its address which:
(a) In the case of the Company shall be:
Northstar Computer Forms, Inc.
7130 Northland Circle North
Brooklyn Park, MN 55428
(b) In the case of Morin shall be:
7500 Edgewood Avenue North
Brooklyn Park, MN 55428
Either party may, by notice hereunder, designate a changed address. Any
notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed to have been given on the registered date or
that date stamped on the certified mail receipt.
17. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NORTHSTAR COMPUTER FORMS, INC.
By
---------------------------------------
Its
--------------------------------------
-----------------------------------------
Mary Ann Morin
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is entered into effective as of January 1,
2000 by and between NORTHSTAR COMPUTER FORMS, INC., a Minnesota corporation
(the "Company"), and STAN KLARENBEEK ("Klarenbeek").
WITNESSETH:
WHEREAS, Klarenbeek is a key member of the management of the Company
and has heretofore devoted substantial skill and effort to the affairs of the
Company, and the Board of Directors of the Company (the "Board") desires to
recognize the significant personal contribution that Klarenbeek has made to
further the best interests of the Company and its shareholders;
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to continue to obtain the benefits of Klarenbeek's continued
services and attention to the affairs of the Company;
WHEREAS, Klarenbeek and the Company are parties to an Employment
Agreement dated as of May 1, 1990 (the "Existing Employment Agreement"), and
the parties desire that this Management Agreement terminate the Employment
Agreement and provide for the terms and conditions of Klarenbeek's continued
employment;
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to provide inducement for Klarenbeek (i) to remain in the
service of the Company in the event of any proposed or anticipated change in
control of the Company and (ii) to remain in the service of the Company in
order to facilitate an orderly transition in the event of a change in control
of the Company; and
WHEREAS, the parties acknowledge that the terms and provisions of this
Agreement, including the severance package, stock options and change in
control payments contained herein, provide separate and valuable
consideration for the Non-Compete Covenant contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and Klarenbeek agree
as follows:
1. EMPLOYMENT. Klarenbeek agrees to continue to serve as a full-time
employee of the Company in the capacity of Vice President. Klarenbeek agrees
to faithfully and diligently perform the acts and duties of his office and
devote his best efforts on a full-time basis. Klarenbeek shall also perform
such other duties as are consistent with his position, as are reasonably
assigned to him by the President and/or Board of Directors of the Company
(the "Board").
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2. EMPLOYMENT PERIOD. The term of Klarenbeek's employment under this
Agreement will begin immediately and end on December 31, 2004, unless
extended by mutual agreement or sooner terminated by one of the parties
pursuant to the provisions of Section 4 hereof (the "Employment Period").
3. COMPENSATION AND RELATED MATTERS. The Company shall pay Klarenbeek
compensation and benefits as follows:
(a) BASE COMPENSATION. During the Employment Period, the Company shall
pay to Klarenbeek an annual base salary of $112,000. Klarenbeek's salary
may be further reviewed and adjusted periodically (upward, but not
downward) as determined by the Compensation Committee of the Board (the
"Compensation Committee") and adopted by the Board.
(b) BONUS. Klarenbeek shall also be entitled to a bonus from time to time
in the discretion of the Compensation Committee and/or the Board.
(c) STOCK OPTIONS. Klarenbeek shall also be entitled to receive stock
options (the "Options") pursuant to the Company's 1994 Employees' Incentive
Stock Option Plan (the "Plan") or otherwise in the discretion of the
Compensation Committee and/or the Board.
(d) PARTICIPATION IN BENEFITS. During the Employment Period, Klarenbeek
shall be entitled to participate in employee benefits offered generally by
the Company to its employees, to the extent that Klarenbeek's position,
tenure, salary, health, and other qualifications make him eligible to
participate. Klarenbeek's participation in such benefits shall be subject
to the terms of the applicable plans, as the same may be amended from time
to time. Following the termination of his employment, Klarenbeek (or any of
his dependents participating in such coverage) shall have the right to
purchase health care coverage through the Company's health benefit plan as
a retiree (or dependent of a retiree) at a rate equal to the average per
employee cost incurred by the Company until Klarenbeek (or such dependent)
reaches Medicare eligibility.
(e) EXPENSES. During the Employment Period, Klarenbeek shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by
Klarenbeek in performing services hereunder; provided, however, that
Klarenbeek complies with the Company's policies and procedures established
from time to time to document such expenses.
(f) VACATION AND OTHER BENEFITS. Klarenbeek shall be entitled to such
paid vacation and other benefits as shall be in effect from time to time
for senior executive officers of the Company.
4. TERMINATION AND COMPENSATION DUE ON TERMINATION. Klarenbeek's
employment hereunder may be terminated subject to the following provisions and
obligations:
(a) DEATH OR DISABILITY. Klarenbeek's employment hereunder shall
terminate upon his death, or in the event that Klarenbeek becomes disabled
by reason of a medical condition
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(physical or non-physical) pursuant to which he cannot timely perform the
material duties of his position with the Company (such determination to be
based on Klarenbeek's qualifying for disability benefits under his
long-term disability insurance policy with the Company), and no further
payment of salary, any benefits or other payment in connection with
Klarenbeek's employment shall be due from the Company to Klarenbeek or
Klarenbeek's estate under this Agreement thereafter, except for salary and
bonus (if any) accrued, and Options vested through the date of death or
disability.
(b) CAUSE. The Company may terminate Klarenbeek's employment hereunder
for "Cause," which shall mean (i) fraud, dishonesty, gross negligence, or
willful malfeasance by Klarenbeek in connection with the performance of his
duties hereunder, (ii) conviction of Klarenbeek of a felony, (iii)
insubordination or other substantial failure, refusal or negligence by
Klarenbeek in fulfilling his duties and obligations hereunder, which breach
or failure Klarenbeek fails to remedy within ten (10) days after written
demand from the Board, or (iv) violation of the terms and conditions of
this Agreement, including without limitation, the Non-Compete Covenant
provided in Section 8 hereof. In the event that Klarenbeek's employment is
terminated hereunder for Cause, the Company shall have no further
obligations to Klarenbeek in connection with Klarenbeek's employment except
for salary accrued through the date of termination.
(c) VOLUNTARY TERMINATION. Until Klarenbeek reaches the age of 63, upon
any voluntary termination of employment by Klarenbeek, the Company shall
pay Klarenbeek a severance payment (the "Voluntary Termination Severance")
equal to one-half of Klarenbeek's base salary for the last completed
calendar year prior to the date of termination plus any bonus paid for such
year and shall have no further obligations to Klarenbeek except as provided
by law. After Klarenbeek reaches the age of 63, the Voluntary Termination
Severance shall end.
(d) WITHOUT CAUSE. The Company may terminate Klarenbeek's employment
hereunder at any time without "Cause" (as defined above), for any reason or
no reason. Upon any such termination of Klarenbeek, Klarenbeek shall be
entitled to receive a severance payment (the "Involuntary Termination
Severance") equal to one times Klarenbeek's base salary for the last
completed calendar year prior to the date of termination plus any bonus
paid for such year, and he shall immediately vest in all of the unvested
Options. The amount of the Involuntary Termination Severance shall remain
in effect until Klarenbeek reaches the age of 64; once Klarenbeek reaches
the age of 64, the amount of the Involuntary Termination Severance shall be
reduced to the amount of the Voluntary Termination Severance; and upon
Klarenbeek reaching the age of 65, he shall no longer be entitled to any
Involuntary Termination Severance.
(e) CHANGE IN CONTROL. The Company or its successor may terminate
Klarenbeek's employment hereunder or Klarenbeek may terminate his
employment with the Company under circumstances which would constitute a
"Constructive Involuntary Termination" (as defined in Section 5.1 below),
in the event of a change in control of the Company, in which case, in
addition to and not by way of limitation of the provisions contained in
this
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Section 4, but subject to the provisions of Section 5.2(f) below relating
to Parachute Payments, the provisions of Section 5 shall control.
5. CHANGE IN CONTROL. For a period commencing on the date of this
Agreement and ending on the later of (i) December 31, 2001, or (ii) if the
Commencement Date (as defined in Section 5.3(c)) occurs on or prior to
December 31, 2001 (or prior to the end of any extension of such date then in
effect as provided for in clause (i) hereof, which period may be
automatically extended for one year intervals from year to year thereafter by
agreement of Klarenbeek and the Board), the second anniversary of the
Commencement Date, (hereafter, the "Change in Control Term"), the provisions
of this Section 5 shall control in the event an Event (as herein defined)
shall occur during the Change in Control Term.
5.1 EVENTS. For purposes of this Agreement an "Event" shall be deemed to
have occurred if any of the following occur:
(a) Any "person" (as defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended, or any successor statute thereto (the "Exchange
Act")) acquires or becomes a "beneficial owner" (as defined in Rule 13d-3
or any successor rule under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors ("Voting Securities") or 30% or more
of the outstanding shares of common stock of the Company ("Common Stock"),
provided, however, that the following shall not constitute an Event
pursuant to this Section 5.1(a): (i) any acquisition of beneficial
ownership by the Company or a subsidiary of the Company; (ii) any
acquisition of beneficial ownership by any employee benefit plan (or
related trust) sponsored or maintained by the Company or one or more of its
subsidiaries; (iii) any acquisition of beneficial ownership by any
corporation (including without limitation an acquisition in a transaction
of the nature described in Section 5.1(c)) with respect to which,
immediately following such acquisition, more than 70%, respectively, of (x)
the combined voting power of the Company's then outstanding Voting
Securities and (y) the Common Stock is then beneficially owned, directly or
indirectly, by all or substantially all of the persons who beneficially
owned the Voting Securities and Common Stock, respectively, of the Company
immediately prior to such acquisition in substantially the same proportions
as their ownership of such Voting Securities and Common Stock, as the case
may be, immediately prior to such acquisition.
(b) Continuing Directors shall not constitute a majority of the members of
the Board. For purposes of this Section 5.1(b), "Continuing Directors"
shall mean: (i) individuals who, on the date hereof, are directors of the
Company, (ii) individuals elected as directors of the Company subsequent to
the date hereof for whose election proxies shall have been solicited by the
Board, or (iii) any individual elected or appointed by the Board to fill
vacancies on the Board caused by death or resignation (but not by removal)
or to fill newly-created directorships, provided that a "Continuing
Director" shall not include an individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the threatened election
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or removal of directors (or other actual or threatened solicitation of
proxies or consents) by or on behalf of any person other than the Board.
(c) Consummation of a reorganization, merger or consolidation of the
Company (other than a merger or consolidation with a subsidiary of the
Company) or a statutory exchange of outstanding Voting Securities or Common
Stock, unless immediately following such reorganization, merger,
consolidation or exchange, all or substantially all of the persons who were
the beneficial owners, respectively, of Voting Securities and Common Stock
immediately prior to such reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 70% of, respectively,
(i) the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors and (ii) the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger, consolidation or exchange in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger, consolidation or exchange, of the Voting Securities and Common
Stock, as the case may be.
(d) (i) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company (in
one or a series of transactions), other than to a corporation with respect
to which, immediately following such sale or other disposition, more than
70% of, respectively, (x) the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (y) the then outstanding shares of common stock
of such corporation is then beneficially owned, directly or indirectly, by
all or substantially all of the persons who were the beneficial owners,
respectively, of the Voting Securities and Common Stock immediately prior
to such sale or other disposition in substantially the same proportions as
their ownership, immediately prior to such sale or other disposition, of
the Voting Securities and Common Stock, as the case may be.
(e) The Company enters into a letter of intent, an agreement in principle
or a definitive agreement relating to an Event described in Section 5.1(a),
5.1(b), 5.1(c) or 5.1(d) hereof that ultimately results in such an Event,
or a tender or exchange offer or proxy contest is commenced which
ultimately results in an Event described in Section 5.1(a) or 5.1(b)
hereof.
(f) There shall be an involuntary termination or Constructive Involuntary
Termination (as defined in Section 5.2(d) hereof) of employment of
Klarenbeek, and Klarenbeek reasonably demonstrates that such event (i) was
requested by a party other than the Board that had previously taken other
steps reasonably calculated to result in an Event described in Section
5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof and which ultimately results in an
Event described in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof, or (ii)
otherwise arose in connection with or in anticipation of an Event described
in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof that ultimately occurs.
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Each of the foregoing Events (or combination thereof) is referred to herein
as a "Sale Transaction," and the aggregate amount received by either the
Company or its shareholders in the Sale Transaction is referred to herein as
the "Sale Transaction Price."
Notwithstanding anything stated in this Section 5.1, an Event shall not
be deemed to occur with respect to Klarenbeek if (x) the acquisition of
beneficial ownership of the 30% or greater interest referred to in Section
5.1(a) is by Klarenbeek or by a group, acting in concert, organized by
present management of the Company and including Klarenbeek or (y) a majority
of the then combined voting power of the then outstanding voting securities
(or voting equity interests) of the surviving corporation or of any
corporation (or other entity) acquiring all or substantially all of the
assets of the Company shall, immediately after a reorganization, merger,
consolidation, statutory share exchange or disposition of assets referred to
in Section 5.1(c) or 5.1(d), is beneficially owned, directly or indirectly,
by Klarenbeek or by a group, acting in concert, organized by present
management of the Company and including Klarenbeek.
5.2 CHANGE IN CONTROL PAYMENTS AND BENEFITS. If any Event shall occur
during the Change in Control Term, then Klarenbeek shall be entitled to
receive from the Company or its successor (which term as used herein shall
include any person acquiring all or substantially all of the assets of the
Company) cash payments and other benefits on the following basis (unless
Klarenbeek's employment by the Company is terminated voluntarily or
involuntarily prior to the occurrence of the earliest Event to occur (the
"First Event"), in which case Klarenbeek shall be entitled to no payment or
benefits under this Section 5, but still may be entitled to payments and
benefits under Section 4 hereof):
(a) A cash payment payable in two installments (the "Transaction
Completion Bonus") equal to Klarenbeek's proportionate share (as described
below) of a fund to be established by the Company or its successor equal to
1% of the Sale Transaction Price (the "Fund"), payable one half at closing
or completion of an Event described in Section 5.1(a), 5.1(b), 5.1(c) or
5.1(d), and the remainder on the one year anniversary of such date (the
"Transaction Anniversary Date"), provided Klarenbeek's employment with the
Company or its successor is either (i) still in effect on the Transaction
Anniversary Date or (ii) not in effect on the Transaction Anniversary Date
as a result of a Constructive Involuntary Termination (as defined in
Section 5.1 hereof) or a termination by the Company or its successor for a
reason other than for Cause (as defined in Section 4(b) hereof).
Klarenbeek's proportionate share of the Fund shall be calculated as
follows: multiply the amount of the Fund by a fraction, the numerator of
which is Klarenbeek's 1999 base salary and the denominator of which is the
aggregate 1999 base salary paid by the Company to its four executive
officers other than its Chief Executive Officer.
(b) If at the time of, or at any time after, the occurrence of the First
Event and prior to the end of the Transition Period (as defined in Section
5.3(c)), the employment of Klarenbeek with the Company is voluntarily or
involuntarily terminated for any reason (unless such termination is a
voluntary termination by Klarenbeek other than a Constructive Involuntary
Termination or is on account of the death or Disability of
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Klarenbeek or is a termination by the Company for Cause), Klarenbeek (or
Klarenbeek's legal representative, as the case may be), subject to the
limitations set forth in Section 5.2(f), shall be entitled to receive from
the Company or its successor, upon such termination of employment with the
Company or its successor, a cash payment in an amount equal to a multiple
of Klarenbeek's "Average Annual Compensation" (as defined in the last
sentence of this paragraph) ending before the First Event (other than an
Event described in Section 5(e) or 5(f) unless Klarenbeek is terminated
prior to the occurrence of an Event described in Section 5(a), 5(b), 5(c)
or 5(d)), as described in the next sentence. If Klarenbeek's employment
with the Company or its successor is terminated at any time up to and
including the Transaction Anniversary Date, Klarenbeek shall be entitled to
receive 1.50 times the Average Annual Compensation; if terminated within
two calendar months thereafter, 1.42 times the Average Annual Compensation;
if terminated within two calendar months thereafter, 1.33 times the Average
Annual Compensation; if terminated within two calendar months thereafter,
1.25 times the Average Annual Compensation; if terminated within two
calendar months thereafter, 1.17 times the Average Annual Compensation; if
terminated within two calendar months thereafter, 1.08 times the Average
Annual Compensation; and, if terminated at any time after such date until
the end of the Transition Period, 1.00 times the Average Annual
Compensation. If Klarenbeek is terminated at any time after the conclusion
of the Transition Period, Klarenbeek shall not be entitled to any
compensation under this provision. For purposes of this Agreement,
"Average Annual Compensation" shall mean Klarenbeek's average annual
compensation from the Company included in his gross income for federal
income tax purposes for the period consisting of the five most recently
completed calendar years ending before the date of termination.
(c) The payments provided for in this Section 5.2 shall be in addition to
any other remuneration otherwise payable to Klarenbeek on account of
employment by the Company or one or more of its subsidiaries or its
successor (including any amounts received prior to such termination of
employment for personal services rendered after the occurrence of the First
Event) but shall be the aggregate amount payable to Klarenbeek under this
Agreement shall be subject to the limitations set forth in Section 5.2(f)
below relating to Parachute Payments.
(d) In the event that at any time from the date of the First Event until
the end of the Transition Period,
(i) Klarenbeek shall not be given substantially equivalent or
greater title, duties, responsibilities and authority or
substantially equivalent or greater salary and other
remuneration and fringe benefits (including paid vacation), in
each case as compared with Klarenbeek's status immediately prior
to the First Event other than for Cause or on account of
Disability,
(ii) the Company shall have failed to obtain assumption of this
Agreement by any successor as contemplated by Section 10(b)
hereof,
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(iii) the Company shall require Klarenbeek to relocate to any place
other than a location within twenty-five miles of the location
at which Klarenbeek performed his duties immediately prior to
the First Event, or
(iv) the Company shall require that Klarenbeek travel on Company
business to a substantially greater extent than required
immediately prior to the First Event,
a termination of employment with the Company by Klarenbeek thereafter shall
constitute a "Constructive Involuntary Termination."
(e) Klarenbeek shall not be required to mitigate the amount of any payment
or other benefit provided for in this Agreement by seeking other employment
or otherwise, nor (except as specifically provided in Section 5.2(f) below)
shall the amount of any payment or other benefit provided for in this
Agreement be reduced by any compensation earned by Klarenbeek as the result
of employment by another employer after termination, or otherwise.
(f) "PARACHUTE PAYMENTS". Notwithstanding any provision to the contrary
contained herein except the last sentence of this Section 5.2(f), if the
lump sum cash payment due and the other benefits to which Klarenbeek shall
become entitled under this Agreement, either alone or together with other
payments in the nature of compensation to Klarenbeek which are contingent
on a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company (a "Change
in Control Arrangement") or otherwise, would constitute a "parachute
payment" as defined in Section 28OG of the Internal Revenue Code of 1986
(the "Code") or any successor provision thereto, such lump sum payment
and/or such other benefits and payments shall be reduced (but not below
zero) to the largest aggregate amount as will result in no portion thereof
being subject to the excise tax imposed under Section 4999 of the Code (or
any successor provision thereto) or being non-deductible to the Company for
federal income tax purposes pursuant to Section 28OG of the Code (or any
successor provision thereto). Klarenbeek in good faith shall determine the
amount of any reduction to be made pursuant to this Section 5.2(f) and
shall select from among the foregoing benefits and payments those which
shall be reduced. No modification of, or successor provision to, Section
28OG or Section 4999 subsequent to the date of this Agreement shall,
however, reduce the benefits to which Klarenbeek would be entitled under
this Agreement in the absence of this Section 5.2(f) to a greater extent
than they would have been reduced if Section 28OG and Section 4999 had not
been modified or superseded subsequent to the date of this Agreement,
notwithstanding anything to the contrary provided in the first sentence of
this Section 5.2(f).
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5.3 DEFINITION OF CERTAIN ADDITIONAL TERMS.
(a) As used herein, other than in Section 5(a) hereof, the term "person"
shall mean an individual, partnership, corporation, estate, trust or other
entity.
(b) As used herein, the term "Disability" shall mean a medical condition
(physical or non-physical) pursuant to which Klarenbeek cannot timely
perform the material duties of his position with the Company (such
determination to be based on Klarenbeek's qualifying for disability
benefits under his long-term disability insurance policy with the Company).
(c) As used herein, the term "Transition Period" shall mean the 2-year
period commencing on the date of the earliest to occur of an Event
described in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof (the
"Commencement Date"), and ending on the second anniversary of the
Commencement Date.
6. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Klarenbeek agrees that
he will not use or disclose, or permit others to use or disclose (other than
other employees or representatives of the Company), any trade secrets,
confidential information, data or records relating to the business,
techniques, operations and condition (financial or otherwise) of the Company
which is not generally known or available through other lawful sources.
7. PROPERTY RIGHTS. Subject to the last sentence in this Section, the
Company shall acquire exclusive right, title, and interest to all inventions,
discoveries, improvements, designs, ideas, know-how, technology and the like
developed, conceived, or invented by Klarenbeek, in whole or in part, whether
written or in some other form and whether or not patentable or eligible for
protection under any copyright law. Without limiting the generality of the
foregoing, Klarenbeek hereby assigns to the Company (i) all rights to any
inventions, or to improvements, and all rights to apply for United States
and/or foreign letters of patent granted upon such inventions; and (ii) any
copyrights Klarenbeek may have in materials created by Klarenbeek or
otherwise generated during the period in which Klarenbeek is performing
services for the Company, and the Company shall have the sole right to apply
for and obtain copyright protection for any materials for which such
protection can be obtained and to obtain such copyright renewals. Despite
any of the foregoing, nothing in this Section 7 shall apply to an invention
for which no equipment, supplies, facility or trade secret information of the
Company is used and which is developed entirely on Klarenbeek's own time, and
(i) does not relate (a) directly to the business of the Company or (b) to the
Company's actual or demonstrably anticipated research or development, or (ii)
which does not result from any work performed by Klarenbeek for the Company.
8. NON-COMPETE COVENANT. During the Employment Period and for a
period of two years after the termination of employment for any reason,
Klarenbeek shall not (i) directly or indirectly, whether as a principal,
owner, agent or in any other capacity whatsoever, engage in the business of
manufacturing, marketing or designing internal bank forms anywhere within the
United States, (ii) solicit for employment or employ any employee or
independent contractor of
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the Company, or (iii) contact any present or contemplated customers of the
Company regarding the business of the Company. Notwithstanding the
foregoing, Klarenbeekshall bepermittedtoengage in the business of selling
internal bank forms during the two year period provided that he does so
solely as a customer or distributor of the Company.
9. REMEDIES FOR BREACH; DISPUTE RESOLUTION.
(a) REMEDIES FOR BREACH. Klarenbeek acknowledges that he has carefully
read and considered all of the terms and conditions of this Agreement and
has had the opportunity to consult counsel regarding the negotiation and
execution hereof. Klarenbeek further acknowledges that money damages would
not be a measurable or adequate remedy for Klarenbeek's breach of any of
the covenants contained in this Agreement, and, accordingly, in addition to
and without limiting any other remedy available to the Company in the event
of such a breach, Klarenbeek agrees, notwithstanding the provisions of
Section 9(b) hereof, to submit to the equitable jurisdiction of any court
of competent personal and subject matter jurisdiction in connection with
any action to enjoin the Klarenbeek from violating any such covenants.
(b) PROCEDURE FOR ARBITRATION. Except as provided in Section 9(a) above,
any dispute arising out of or relating to this Agreement or the alleged
breach of it, or the making of this Agreement, including claims of fraud in
the inducement, or any dispute arising from or related in any way to
Klarenbeek's employment, including any statutory or tort claims, which has
not been settled through negotiation within a period of thirty (30) days
after the date on which either party shall first have notified the other
party in writing of the existence of a dispute, shall be settled by final
and binding arbitration pursuant to the provisions of this Agreement and
under the then applicable arbitration rules of the American Arbitration
Association ("AAA"), unless such rules are inconsistent with the provisions
of this Agreement. Any such arbitration shall be conducted by: (a) neutral
arbitrator appointed by mutual agreement of the parties; or (b) failing
such agreement, in accordance with said rules. An arbitrator's award may
be enforced in any court of competent jurisdiction. Each party shall be
permitted reasonable discovery, including the production of relevant
documents by the other party, the exchange of witness lists, and a limited
number of depositions, including depositions of any expert who will testify
at the arbitration. The summary judgment procedure applicable in Hennepin
County, Minnesota, District Court, shall be available and apply to any
arbitration conducted pursuant to this Agreement. Subject to the
provisions of Section 8(c) below, the arbitrator shall have the authority
to award to the prevailing party any remedy or relief that a court of the
State of Minnesota could order or grant, including costs and attorneys'
fees. Unless otherwise agreed by the parties, the place of any arbitration
proceeding shall be Minneapolis, Minnesota.
(c) RECOVERY OF LITIGATION COSTS. Notwithstanding the provisions of
Section 8(b) above, in the event that Klarenbeek is found to have breached
any of the terms and conditions of this Agreement, Klarenbeek hereby agrees
to pay all costs and expenses incurred by Northstar in enforcing the
provisions of this Agreement found to have been breached by Klarenbeek,
including Northstar's attorney's fees.
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10. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the
successors, legal representatives and assigns of the parties hereto;
provided, however, that Klarenbeek shall not have any right to assign,
pledge or otherwise dispose of or transfer any interest in this
Agreement or any payments hereunder, whether directly or indirectly or
in whole or in part, without the written consent of the Company or its
successor.
(b) The Company will require any successor (whether direct or indirect by
purchase of a majority of the outstanding voting stock of the Company or
all or substantially all of the assets of the Company, or by merger,
consolidation or otherwise), by agreement in form and substance
satisfactory to Klarenbeek, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure
of the Company to obtain such agreement prior to the effectiveness of any
such succession (other than in the case of a merger or consolidation) shall
be a breach of this Agreement and shall entitle Klarenbeek to compensation
from the Company in the same amount and on the same terms as Klarenbeek
would be entitled hereunder if Klarenbeek terminated his employment on
account of a Constructive Involuntary Termination, except that for purposes
of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which is required to
execute and deliver the agreement provided for in this Section 10(b) or
which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
11. BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by the Company, it's successors, assigns and affiliates.
12. WAIVER. The failure of the Company to insist on the strict
performance of any provision of this Agreement or to exercise any right,
power or remedy upon a breach by Klarenbeek shall not constitute a waiver of
that or any other provision of this Agreement. A waiver on any one occasion
shall not be deemed to be a waiver for subsequent occasions.
13. SURVIVAL AND SEVERABILITY. The terms and conditions of this
Agreement shall survive the termination of Klarenbeek's employment with the
Company to the full extent necessary for their enforcement and for the
protection of the Company, it's successors, assigns and affiliates. If for
any reason any portion of any provision of this Agreement is declared
invalid, void or unenforceable by a court of competent jurisdiction, the
validity and binding effect of any remaining provisions of this Agreement
shall remain in full force and effect to the fullest extent possible as if
this Agreement had been executed with the invalid, void or unenforceable
portion or provision eliminated. In the event that any provision of this
Agreement relating to time periods and/or areas of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum time
periods or areas such court deems reasonable and enforceable, said
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time periods and/or areas of restriction shall be deemed to become and
thereafter be the maximum time periods and/or areas which such court deems
reasonable and enforceable.
14. PRIOR AGREEMENTS. This Agreement contains the entire agreement of
the parties relating to the employment of Klarenbeek by the Company and the
other matters discussed herein and supercedes all prior promises, contracts,
agreements, and understandings of any kind, whether express or implied, oral
or written, with respect to such subject matter (including, without
limitation, the Existing Employment Agreement, which is hereby terminated and
of no further force or effect) and the parties hereto have made no
agreements, representations, or warranties relating to the subject matter of
this Agreement which are not set forth herein.
15. WITHHOLDING TAXES. The Company may take such action as it deems
appropriate to ensure that all applicable federal, state, city, and other
payroll, withholding, income, or other taxes arising from any compensation,
benefits, or any other payments made pursuant to this Agreement, or any other
contract, agreement, or understanding which relates, in whole or in part, to
Klarenbeek's employment with the Company, are withheld or collected from
Klarenbeek
16. NOTICES. All notices, requests and demands given to or made
pursuant hereto shall be in writing and shall be delivered or mailed to any
such party at its address which:
(a) In the case of the Company shall be:
Northstar Computer Forms, Inc.
7130 Northland Circle North
Brooklyn Park, MN 55428
(b) In the case of Klarenbeek shall be:
13205 Fourth Street North
Stillwater, MN 55082
Either party may, by notice hereunder, designate a changed address. Any notice,
if mailed properly addressed, postage prepaid, registered or certified mail,
shall be deemed to have been given on the registered date or that date stamped
on the certified mail receipt.
17. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Minnesota.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NORTHSTAR COMPUTER FORMS, INC.
By
---------------------------------------
Its
--------------------------------------
-----------------------------------------
Stan Klarenbeek
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is entered into effective as of January 1,
2000 by and between NORTHSTAR COMPUTER FORMS, INC., a Minnesota corporation
(the "Company"), and DON DEARBORN ("Dearborn").
WITNESSETH:
WHEREAS, Dearborn is a key member of the management of the Company and
has heretofore devoted substantial skill and effort to the affairs of the
Company, and the Board of Directors of the Company (the "Board") desires to
recognize the significant personal contribution that Dearborn has made to
further the best interests of the Company and its shareholders;
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to continue to obtain the benefits of Dearborn's continued
services and attention to the affairs of the Company;
WHEREAS, Dearborn and the Company are parties to an Employment
Agreement dated as of _______________, 19___ (the "Existing Employment
Agreement"), and the parties desire that this Management Agreement terminate
the Employment Agreement and provide for the terms and conditions of
Dearborn's continued employment;
WHEREAS, it is desirable and in the best interests of the Company and
its shareholders to provide inducement for Dearborn (i) to remain in the
service of the Company in the event of any proposed or anticipated change in
control of the Company and (ii) to remain in the service of the Company in
order to facilitate an orderly transition in the event of a change in control
of the Company; and
WHEREAS, the parties acknowledge that the terms and provisions of this
Agreement, including the severance package, stock options and change in
control payments contained herein, provide separate and valuable
consideration for the Non-Compete Covenant contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and Dearborn agree as
follows:
1. EMPLOYMENT. Dearborn agrees to continue to serve as a full-time
employee of the Company in the capacity of Vice President. Dearborn agrees
to faithfully and diligently perform the acts and duties of his office and
devote his best efforts on a full-time basis. Dearborn shall also perform
such other duties as are consistent with his position, as are reasonably
assigned to him by the President and/or Board of Directors of the Company
(the "Board").
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2. EMPLOYMENT PERIOD. The term of Dearborn's employment under this
Agreement will begin immediately and end on December 31, 2004, unless
extended by mutual agreement or sooner terminated by one of the parties
pursuant to the provisions of Section 4 hereof (the "Employment Period").
3. COMPENSATION AND RELATED MATTERS. The Company shall pay Dearborn
compensation and benefits as follows:
(a) BASE COMPENSATION. During the Employment Period, the Company shall
pay to Dearborn an annual base salary of $112,000. Dearborn's salary may
be further reviewed and adjusted periodically (upward, but not downward) as
determined by the Compensation Committee of the Board (the "Compensation
Committee") and adopted by the Board.
(b) BONUS. Dearborn shall also be entitled to a bonus from time to time
in the discretion of the Compensation Committee and/or the Board.
(c) STOCK OPTIONS. Dearborn shall also be entitled to receive stock
options (the "Options") pursuant to the Company's 1994 Employees' Incentive
Stock Option Plan (the "Plan") or otherwise in the discretion of the
Compensation Committee and/or the Board.
(d) PARTICIPATION IN BENEFITS. During the Employment Period, Dearborn
shall be entitled to participate in employee benefits offered generally by
the Company to its employees, to the extent that Dearborn's position,
tenure, salary, health, and other qualifications make him eligible to
participate. Dearborn's participation in such benefits shall be subject to
the terms of the applicable plans, as the same may be amended from time to
time. Following the termination of his employment, Dearborn (or any of his
dependents participating in such coverage) shall have the right to purchase
health care coverage through the Company's health benefit plan as a retiree
(or dependent of a retiree) at a rate equal to the average per employee
cost incurred by the Company until Dearborn (or such dependent) reaches
Medicare eligibility.
(e) EXPENSES. During the Employment Period, Dearborn shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by
Dearborn in performing services hereunder; provided, however, that Dearborn
complies with the Company's policies and procedures established from time
to time to document such expenses.
(f) VACATION AND OTHER BENEFITS. Dearborn shall be entitled to such paid
vacation and other benefits as shall be in effect from time to time for
senior executive officers of the Company.
4. TERMINATION AND COMPENSATION DUE ON TERMINATION. Dearborn's
employment hereunder may be terminated subject to the following provisions and
obligations:
(a) DEATH OR DISABILITY. Dearborn's employment hereunder shall terminate
upon his death, or in the event that Dearborn becomes disabled by reason of
a medical condition
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(physical or non-physical) pursuant to which he cannot timely perform the
material duties of his position with the Company (such determination to be
based on Dearborn's qualifying for disability benefits under his long-term
disability insurance policy with the Company), and no further payment of
salary, any benefits or other payment in connection with Dearborn's
employment shall be due from the Company to Dearborn or Dearborn's estate
under this Agreement thereafter, except for salary and bonus (if any)
accrued, and Options vested through the date of death or disability.
(b) CAUSE. The Company may terminate Dearborn's employment hereunder for
"Cause," which shall mean (i) fraud, dishonesty, gross negligence, or
willful malfeasance by Dearborn in connection with the performance of his
duties hereunder, (ii) conviction of Dearborn of a felony, (iii)
insubordination or other substantial failure, refusal or negligence by
Dearborn in fulfilling his duties and obligations hereunder, which breach
or failure Dearborn fails to remedy within ten (10) days after written
demand from the Board, or (iv) violation of the terms and conditions of
this Agreement, including without limitation, the Non-Compete Covenant
provided in Section 8 hereof. In the event that Dearborn's employment is
terminated hereunder for Cause, the Company shall have no further
obligations to Dearborn in connection with Dearborn's employment except for
salary accrued through the date of termination.
(c) VOLUNTARY TERMINATION. Until Dearborn reaches the age of 63, upon any
voluntary termination of employment by Dearborn, the Company shall pay
Dearborn a severance payment (the "Voluntary Termination Severance") equal
to one-half of Dearborn's base salary for the last completed calendar year
prior to the date of termination plus any bonus paid for such year and
shall have no further obligations to Dearborn except as provided by law.
After Dearborn reaches the age of 63, the Voluntary Termination Severance
shall end.
(d) WITHOUT CAUSE. The Company may terminate Dearborn's employment
hereunder at any time without "Cause" (as defined above), for any reason or
no reason. Upon any such termination of Dearborn, Dearborn shall be
entitled to receive a severance payment (the "Involuntary Termination
Severance") equal to one times Dearborn's base salary for the last
completed calendar year prior to the date of termination plus any bonus
paid for such year, and he shall immediately vest in all of the unvested
Options. The amount of the Involuntary Termination Severance shall remain
in effect until Dearborn reaches the age of 64; once Dearborn reaches the
age of 64, the amount of the Involuntary Termination Severance shall be
reduced to the amount of the Voluntary Termination Severance; and upon
Dearborn reaching the age of 65, he shall no longer be entitled to any
Involuntary Termination Severance.
(e) CHANGE IN CONTROL. The Company or its successor may terminate
Dearborn's employment hereunder or Dearborn may terminate his employment
with the Company under circumstances which would constitute a "Constructive
Involuntary Termination" (as defined in Section 5.1 below), in the event of
a change in control of the Company, in which case, in addition to and not
by way of limitation of the provisions contained in this
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Section 4, but subject to the provisions of Section 5.2(f) below relating
to Parachute Payments, the provisions of Section 5 shall control.
5. CHANGE IN CONTROL. For a period commencing on the date of this
Agreement and ending on the later of (i) December 31, 2001, or (ii) if the
Commencement Date (as defined in Section 5.3(c)) occurs on or prior to
December 31, 2001 (or prior to the end of any extension of such date then in
effect as provided for in clause (i) hereof, which period may be
automatically extended for one year intervals from year to year thereafter by
agreement of Dearborn and the Board), the second anniversary of the
Commencement Date, (hereafter, the "Change in Control Term"), the provisions
of this Section 5 shall control in the event an Event (as herein defined)
shall occur during the Change in Control Term.
5.1 EVENTS. For purposes of this Agreement an "Event" shall be deemed to
have occurred if any of the following occur:
(a) Any "person" (as defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended, or any successor statute thereto (the "Exchange
Act")) acquires or becomes a "beneficial owner" (as defined in Rule 13d-3
or any successor rule under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors ("Voting Securities") or 30% or more
of the outstanding shares of common stock of the Company ("Common Stock"),
provided, however, that the following shall not constitute an Event
pursuant to this Section 5.1(a): (i) any acquisition of beneficial
ownership by the Company or a subsidiary of the Company; (ii) any
acquisition of beneficial ownership by any employee benefit plan (or
related trust) sponsored or maintained by the Company or one or more of its
subsidiaries; (iii) any acquisition of beneficial ownership by any
corporation (including without limitation an acquisition in a transaction
of the nature described in Section 5.1(c)) with respect to which,
immediately following such acquisition, more than 70%, respectively, of (x)
the combined voting power of the Company's then outstanding Voting
Securities and (y) the Common Stock is then beneficially owned, directly or
indirectly, by all or substantially all of the persons who beneficially
owned the Voting Securities and Common Stock, respectively, of the Company
immediately prior to such acquisition in substantially the same proportions
as their ownership of such Voting Securities and Common Stock, as the case
may be, immediately prior to such acquisition.
(b) Continuing Directors shall not constitute a majority of the members of
the Board. For purposes of this Section 5.1(b), "Continuing Directors"
shall mean: (i) individuals who, on the date hereof, are directors of the
Company, (ii) individuals elected as directors of the Company subsequent to
the date hereof for whose election proxies shall have been solicited by the
Board, or (iii) any individual elected or appointed by the Board to fill
vacancies on the Board caused by death or resignation (but not by removal)
or to fill newly-created directorships, provided that a "Continuing
Director" shall not include an individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the threatened election
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or removal of directors (or other actual or threatened solicitation of
proxies or consents) by or on behalf of any person other than the Board.
(c) Consummation of a reorganization, merger or consolidation of the
Company (other than a merger or consolidation with a subsidiary of the
Company) or a statutory exchange of outstanding Voting Securities or Common
Stock, unless immediately following such reorganization, merger,
consolidation or exchange, all or substantially all of the persons who were
the beneficial owners, respectively, of Voting Securities and Common Stock
immediately prior to such reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 70% of, respectively,
(i) the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors and (ii) the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger, consolidation or exchange in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger, consolidation or exchange, of the Voting Securities and Common
Stock, as the case may be.
(d) (i) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company (in
one or a series of transactions), other than to a corporation with respect
to which, immediately following such sale or other disposition, more than
70% of, respectively, (x) the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (y) the then outstanding shares of common stock
of such corporation is then beneficially owned, directly or indirectly, by
all or substantially all of the persons who were the beneficial owners,
respectively, of the Voting Securities and Common Stock immediately prior
to such sale or other disposition in substantially the same proportions as
their ownership, immediately prior to such sale or other disposition, of
the Voting Securities and Common Stock, as the case may be.
(e) The Company enters into a letter of intent, an agreement in principle
or a definitive agreement relating to an Event described in Section 5.1(a),
5.1(b), 5.1(c) or 5.1(d) hereof that ultimately results in such an Event,
or a tender or exchange offer or proxy contest is commenced which
ultimately results in an Event described in Section 5.1(a) or 5.1(b)
hereof.
(f) There shall be an involuntary termination or Constructive Involuntary
Termination (as defined in Section 5.2(d) hereof) of employment of
Dearborn, and Dearborn reasonably demonstrates that such event (i) was
requested by a party other than the Board that had previously taken other
steps reasonably calculated to result in an Event described in Section
5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof and which ultimately results in an
Event described in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof, or (ii)
otherwise arose in connection with or in anticipation of an Event described
in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof that ultimately occurs.
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Each of the foregoing Events (or combination thereof) is referred to herein
as a "Sale Transaction," and the aggregate amount received by either the
Company or its shareholders in the Sale Transaction is referred to herein as
the "Sale Transaction Price."
Notwithstanding anything stated in this Section 5.1, an Event shall not
be deemed to occur with respect to Dearborn if (x) the acquisition of
beneficial ownership of the 30% or greater interest referred to in Section
5.1(a) is by Dearborn or by a group, acting in concert, organized by present
management of the Company and including Dearborn or (y) a majority of the
then combined voting power of the then outstanding voting securities (or
voting equity interests) of the surviving corporation or of any corporation
(or other entity) acquiring all or substantially all of the assets of the
Company shall, immediately after a reorganization, merger, consolidation,
statutory share exchange or disposition of assets referred to in Section
5.1(c) or 5.1(d), is beneficially owned, directly or indirectly, by Dearborn
or by a group, acting in concert, organized by present management of the
Company and including Dearborn.
5.2 CHANGE IN CONTROL PAYMENTS AND BENEFITS. If any Event shall occur
during the Change in Control Term, then Dearborn shall be entitled to receive
from the Company or its successor (which term as used herein shall include
any person acquiring all or substantially all of the assets of the Company)
cash payments and other benefits on the following basis (unless Dearborn's
employment by the Company is terminated voluntarily or involuntarily prior to
the occurrence of the earliest Event to occur (the "First Event"), in which
case Dearborn shall be entitled to no payment or benefits under this Section
5, but still may be entitled to payments and benefits under Section 4 hereof):
(a) A cash payment payable in two installments (the "Transaction
Completion Bonus") equal to Dearborn's proportionate share (as described
below) of a fund to be established by the Company or its successor equal to
1% of the Sale Transaction Price (the "Fund"), payable one half at closing
or completion of an Event described in Section 5.1(a), 5.1(b), 5.1(c) or
5.1(d), and the remainder on the one year anniversary of such date (the
"Transaction Anniversary Date"), provided Dearborn's employment with the
Company or its successor is either (i) still in effect on the Transaction
Anniversary Date or (ii) not in effect on the Transaction Anniversary Date
as a result of a Constructive Involuntary Termination (as defined in
Section 5.1 hereof) or a termination by the Company or its successor for a
reason other than for Cause (as defined in Section 4(b) hereof).
Dearborn's proportionate share of the Fund shall be calculated as follows:
multiply the amount of the Fund by a fraction, the numerator of which is
Dearborn's 1999 base salary and the denominator of which is the aggregate
1999 base salary paid by the Company to its four executive officers other
than its Chief Executive Officer.
(b) If at the time of, or at any time after, the occurrence of the First
Event and prior to the end of the Transition Period (as defined in Section
5.3(c)), the employment of Dearborn with the Company is voluntarily or
involuntarily terminated for any reason (unless such termination is a
voluntary termination by Dearborn other than a Constructive Involuntary
Termination or is on account of the death or Disability of Dearborn or is a
termination by the Company for Cause), Dearborn (or Dearborn's
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legal representative, as the case may be), subject to the limitations set
forth in Section 5.2(f), shall be entitled to receive from the Company or
its successor, upon such termination of employment with the Company or its
successor, a cash payment in an amount equal to a multiple of Dearborn's
"Average Annual Compensation" (as defined in the last sentence of this
paragraph) ending before the First Event (other than an Event described in
Section 5(e) or 5(f) unless Dearborn is terminated prior to the occurrence
of an Event described in Section 5(a), 5(b), 5(c) or 5(d)), as described in
the next sentence. If Dearborn's employment with the Company or its
successor is terminated at any time up to and including the Transaction
Anniversary Date, Dearborn shall be entitled to receive 1.50 times the
Average Annual Compensation; if terminated within two calendar months
thereafter, 1.42 times the Average Annual Compensation; if terminated
within two calendar months thereafter, 1.33 times the Average Annual
Compensation; if terminated within two calendar months thereafter, 1.25
times the Average Annual Compensation; if terminated within two calendar
months thereafter, 1.17 times the Average Annual Compensation; if
terminated within two calendar months thereafter, 1.08 times the Average
Annual Compensation; and, if terminated at any time after such date until
the end of the Transition Period, 1.00 times the Average Annual
Compensation. If Dearborn is terminated at any time after the conclusion
of the Transition Period, Dearborn shall not be entitled to any
compensation under this provision. For purposes of this Agreement,
"Average Annual Compensation" shall mean Dearborn's average annual
compensation from the Company included in his gross income for federal
income tax purposes for the period consisting of the five most recently
completed calendar years ending before the date of termination.
(c) The payments provided for in this Section 5.2 shall be in addition to
any other remuneration otherwise payable to Dearborn on account of
employment by the Company or one or more of its subsidiaries or its
successor (including any amounts received prior to such termination of
employment for personal services rendered after the occurrence of the First
Event) but shall be the aggregate amount payable to Dearborn under this
Agreement shall be subject to the limitations set forth in Section 5.2(f)
below relating to Parachute Payments.
(d) In the event that at any time from the date of the First Event until
the end of the Transition Period,
(i) Dearborn shall not be given substantially equivalent or greater
title, duties, responsibilities and authority or substantially
equivalent or greater salary and other remuneration and fringe
benefits (including paid vacation), in each case as compared
with Dearborn's status immediately prior to the First Event
other than for Cause or on account of Disability,
(ii) the Company shall have failed to obtain assumption of this
Agreement by any successor as contemplated by Section 10(b)
hereof,
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(iii) the Company shall require Dearborn to relocate to any place
other than a location within twenty-five miles of the location
at which Dearborn performed his duties immediately prior to the
First Event, or
(iv) the Company shall require that Dearborn travel on Company
business to a substantially greater extent than required
immediately prior to the First Event,
a termination of employment with the Company by Dearborn thereafter shall
constitute a "Constructive Involuntary Termination."
(e) Dearborn shall not be required to mitigate the amount of any payment
or other benefit provided for in this Agreement by seeking other employment
or otherwise, nor (except as specifically provided in Section 5.2(f) below)
shall the amount of any payment or other benefit provided for in this
Agreement be reduced by any compensation earned by Dearborn as the result
of employment by another employer after termination, or otherwise.
(f) "PARACHUTE PAYMENTS". Notwithstanding any provision to the contrary
contained herein except the last sentence of this Section 5.2(f), if the
lump sum cash payment due and the other benefits to which Dearborn shall
become entitled under this Agreement, either alone or together with other
payments in the nature of compensation to Dearborn which are contingent on
a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company (a "Change
in Control Arrangement") or otherwise, would constitute a "parachute
payment" as defined in Section 28OG of the Internal Revenue Code of 1986
(the "Code") or any successor provision thereto, such lump sum payment
and/or such other benefits and payments shall be reduced (but not below
zero) to the largest aggregate amount as will result in no portion thereof
being subject to the excise tax imposed under Section 4999 of the Code (or
any successor provision thereto) or being non-deductible to the Company for
federal income tax purposes pursuant to Section 28OG of the Code (or any
successor provision thereto). Dearborn in good faith shall determine the
amount of any reduction to be made pursuant to this Section 5.2(f) and
shall select from among the foregoing benefits and payments those which
shall be reduced. No modification of, or successor provision to, Section
28OG or Section 4999 subsequent to the date of this Agreement shall,
however, reduce the benefits to which Dearborn would be entitled under this
Agreement in the absence of this Section 5.2(f) to a greater extent than
they would have been reduced if Section 28OG and Section 4999 had not been
modified or superseded subsequent to the date of this Agreement,
notwithstanding anything to the contrary provided in the first sentence of
this Section 5.2(f).
5.3 DEFINITION OF CERTAIN ADDITIONAL TERMS.
(a) As used herein, other than in Section 5(a) hereof, the term "person"
shall mean an individual, partnership, corporation, estate, trust or other
entity.
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(b) As used herein, the term "Disability" shall mean a medical condition
(physical or non-physical) pursuant to which Dearborn cannot timely perform
the material duties of his position with the Company (such determination to
be based on Dearborn's qualifying for disability benefits under his
long-term disability insurance policy with the Company).
(c) As used herein, the term "Transition Period" shall mean the 2-year
period commencing on the date of the earliest to occur of an Event
described in Section 5.1(a), 5.1(b), 5.1(c) or 5.1(d) hereof (the
"Commencement Date"), and ending on the second anniversary of the
Commencement Date.
6. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dearborn agrees that he
will not use or disclose, or permit others to use or disclose (other than
other employees or representatives of the Company), any trade secrets,
confidential information, data or records relating to the business,
techniques, operations and condition (financial or otherwise) of the Company
which is not generally known or available through other lawful sources.
7. PROPERTY RIGHTS. Subject to the last sentence in this Section, the
Company shall acquire exclusive right, title, and interest to all inventions,
discoveries, improvements, designs, ideas, know-how, technology and the like
developed, conceived, or invented by Dearborn, in whole or in part, whether
written or in some other form and whether or not patentable or eligible for
protection under any copyright law. Without limiting the generality of the
foregoing, Dearborn hereby assigns to the Company (i) all rights to any
inventions, or to improvements, and all rights to apply for United States
and/or foreign letters of patent granted upon such inventions; and (ii) any
copyrights Dearborn may have in materials created by Dearborn or otherwise
generated during the period in which Dearborn is performing services for the
Company, and the Company shall have the sole right to apply for and obtain
copyright protection for any materials for which such protection can be
obtained and to obtain such copyright renewals. Despite any of the
foregoing, nothing in this Section 7 shall apply to an invention for which no
equipment, supplies, facility or trade secret information of the Company is
used and which is developed entirely on Dearborn's own time, and (i) does not
relate (a) directly to the business of the Company or (b) to the Company's
actual or demonstrably anticipated research or development, or (ii) which
does not result from any work performed by Dearborn for the Company.
8. NON-COMPETE COVENANT. During the Employment Period and for a
period of two years after the termination of employment for any reason,
Dearborn shall not (i) directly or indirectly, whether as a principal, owner,
agent or in any other capacity whatsoever, engage in the business of
manufacturing, marketing or designing internal bank forms, negotiable
documents and custom business forms anywhere within the United States, (ii)
solicit for employment or employ any employee or independent contractor of
the Company, or (iii) contact any present or contemplated customers of the
Company regarding the business of the Company.
9. REMEDIES FOR BREACH; DISPUTE RESOLUTION.
(a) REMEDIES FOR BREACH. Dearborn acknowledges that he has carefully read
and considered all of the terms and conditions of this Agreement and has
had the opportunity to consult counsel regarding the negotiation and
execution hereof. Dearborn further
9
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acknowledges that money damages would not be a measurable or adequate
remedy for Dearborn's breach of any of the covenants contained in this
Agreement, and, accordingly, in addition to and without limiting any other
remedy available to the Company in the event of such a breach, Dearborn
agrees, notwithstanding the provisions of Section 9(b) hereof, to submit
to the equitable jurisdiction of any court of competent personal and
subject matter jurisdiction in connection with any action to enjoin the
Dearborn from violating any such covenants.
(b) PROCEDURE FOR ARBITRATION. Except as provided in Section 9(a) above,
any dispute arising out of or relating to this Agreement or the alleged
breach of it, or the making of this Agreement, including claims of fraud in
the inducement, or any dispute arising from or related in any way to
Dearborn's employment, including any statutory or tort claims, which has
not been settled through negotiation within a period of thirty (30) days
after the date on which either party shall first have notified the other
party in writing of the existence of a dispute, shall be settled by final
and binding arbitration pursuant to the provisions of this Agreement and
under the then applicable arbitration rules of the American Arbitration
Association ("AAA"), unless such rules are inconsistent with the provisions
of this Agreement. Any such arbitration shall be conducted by: (a) neutral
arbitrator appointed by mutual agreement of the parties; or (b) failing
such agreement, in accordance with said rules. An arbitrator's award may
be enforced in any court of competent jurisdiction. Each party shall be
permitted reasonable discovery, including the production of relevant
documents by the other party, the exchange of witness lists, and a limited
number of depositions, including depositions of any expert who will testify
at the arbitration. The summary judgment procedure applicable in Hennepin
County, Minnesota, District Court, shall be available and apply to any
arbitration conducted pursuant to this Agreement. Subject to the
provisions of Section 8(c) below, the arbitrator shall have the authority
to award to the prevailing party any remedy or relief that a court of the
State of Minnesota could order or grant, including costs and attorneys'
fees. Unless otherwise agreed by the parties, the place of any arbitration
proceeding shall be Minneapolis, Minnesota.
(c) RECOVERY OF LITIGATION COSTS. Notwithstanding the provisions of
Section 8(b) above, in the event that Dearborn is found to have breached
any of the terms and conditions of this Agreement, Dearborn hereby agrees
to pay all costs and expenses incurred by Northstar in enforcing the
provisions of this Agreement found to have been breached by Dearborn,
including Northstar's attorney's fees.
10. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of
the successors, legal representatives and assigns of the parties hereto;
provided, however, that Dearborn shall not have any right to assign,
pledge or otherwise dispose of or transfer any interest in this Agreement
or any payments hereunder, whether directly or indirectly or in whole or in
part, without the written consent of the Company or its successor.
10
<PAGE>
(b) The Company will require any successor (whether direct or indirect by
purchase of a majority of the outstanding voting stock of the Company or
all or substantially all of the assets of the Company, or by merger,
consolidation or otherwise), by agreement in form and substance
satisfactory to Dearborn, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure
of the Company to obtain such agreement prior to the effectiveness of any
such succession (other than in the case of a merger or consolidation) shall
be a breach of this Agreement and shall entitle Dearborn to compensation
from the Company in the same amount and on the same terms as Dearborn would
be entitled hereunder if Dearborn terminated his employment on account of a
Constructive Involuntary Termination, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date of termination. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which is required to
execute and deliver the agreement provided for in this Section 10(b) or
which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
11. BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by the Company, it's successors, assigns and affiliates.
12. WAIVER. The failure of the Company to insist on the strict
performance of any provision of this Agreement or to exercise any right,
power or remedy upon a breach by Dearborn shall not constitute a waiver of
that or any other provision of this Agreement. A waiver on any one occasion
shall not be deemed to be a waiver for subsequent occasions.
13. SURVIVAL AND SEVERABILITY. The terms and conditions of this
Agreement shall survive the termination of Dearborn's employment with the
Company to the full extent necessary for their enforcement and for the
protection of the Company, it's successors, assigns and affiliates. If for
any reason any portion of any provision of this Agreement is declared
invalid, void or unenforceable by a court of competent jurisdiction, the
validity and binding effect of any remaining provisions of this Agreement
shall remain in full force and effect to the fullest extent possible as if
this Agreement had been executed with the invalid, void or unenforceable
portion or provision eliminated. In the event that any provision of this
Agreement relating to time periods and/or areas of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum time
periods or areas such court deems reasonable and enforceable, said time
periods and/or areas of restriction shall be deemed to become and thereafter
be the maximum time periods and/or areas which such court deems reasonable
and enforceable.
14. PRIOR AGREEMENTS. This Agreement contains the entire agreement of
the parties relating to the employment of Dearborn by the Company and the
other matters discussed herein and supercedes all prior promises, contracts,
agreements, and understandings of any kind, whether express or implied, oral
or written, with respect to such subject matter (including, without
limitation, the Existing Employment Agreement, which is hereby terminated and
of no further force or effect) and the parties hereto have made no
agreements,
11
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representations, or warranties relating to the subject matter of this
Agreement which are not set forth herein.
15. WITHHOLDING TAXES. The Company may take such action as it deems
appropriate to ensure that all applicable federal, state, city, and other
payroll, withholding, income, or other taxes arising from any compensation,
benefits, or any other payments made pursuant to this Agreement, or any other
contract, agreement, or understanding which relates, in whole or in part, to
Dearborn's employment with the Company, are withheld or collected from
Dearborn
16. NOTICES. All notices, requests and demands given to or made
pursuant hereto shall be in writing and shall be delivered or mailed to any
such party at its address which:
(a) In the case of the Company shall be:
Northstar Computer Forms, Inc.
7130 Northland Circle North
Brooklyn Park, MN 55428
(b) In the case of Dearborn shall be:
1336 M Avenue
Nevada, IA 50201
Either party may, by notice hereunder, designate a changed address. Any notice,
if mailed properly addressed, postage prepaid, registered or certified mail,
shall be deemed to have been given on the registered date or that date stamped
on the certified mail receipt.
17. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Minnesota.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NORTHSTAR COMPUTER FORMS, INC.
By
-----------------------------------------
Its
----------------------------------------
-------------------------------------------
Don Dearborn
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CERTIFICATION
I, _________________________, do hereby certify that I am the
____________________ of Northstar Computer Forms, Inc., a Minnesota corporation,
and that by action of the Board of Directors of said corporation taken on
_______________, 1998, the document entitled "NORTHSTAR COMPUTER FORMS, INC.
401(k) PROFIT SHARING PLAN TRUST AGREEMENT (1998 Restatement)" was approved and
adopted effective as of December 1, 1998. I further certify that the document
hereto attached is a true and correct copy of said document.
_______________, 1998 __________________________________
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NORTHSTAR COMPUTER FORMS, INC.
401(k) PROFIT SHARING PLAN TRUST AGREEMENT
(1998 RESTATEMENT)
First Effective November 1, 1964
As Amended and Restated Effective November 1, 1992
And
As Amended and Restated Effective December 1, 1998
2
<PAGE>
NORTHSTAR COMPUTER FORMS, INC.
401(k) PROFIT SHARING PLAN TRUST AGREEMENT
(1998 RESTATEMENT)
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
PREAMBLES.........................................................................................................1
SECTION 1 ..............................................................................2
1.1. DEFINITIONS ..............................................................................2
SECTION 2 ACCOUNTS..............................................................................2
(a) TOTAL ACCOUNT.................................................................2
(b) ELECTIVE ACCOUNT..............................................................2
(c) EMPLOYER CONTRIBUTIONS ACCOUNT................................................2
(d) DEDUCTIBLE VOLUNTARY ACCOUNT..................................................2
(e) NONDEDUCTIBLE VOLUNTARY ACCOUNT...............................................2
(f) ROLLOVER ACCOUNT..............................................................2
(g) TRANSFER ACCOUNT..............................................................3
SECTION 3 AFFILIATE.............................................................................3
SECTION 4 ANNUAL VALUATION DATE.................................................................3
SECTION 5 BENEFICIARY...........................................................................3
SECTION 6 CODE ..............................................................................3
SECTION 7 COMMITTEE.............................................................................3
SECTION 8 DISABILITY............................................................................3
SECTION 9 DISTRIBUTION DATE.....................................................................4
SECTION 10 EFFECTIVE DATE.......................................................................4
SECTION 11 ELIGIBILITY SERVICE..................................................................4
(a) COMPUTATION PERIODS.
The computation periods for determining Eligibility Service shall be the
twelve (12) consecutive month period beginning with the date the employee
first performs an Hour of Service and all Plan Years beginning after such
date (irrespective of any termination of employment and subsequent
reemployment).................................................................4
(b) COMPLETION.
A year of Eligibility Service shall be deemed completed only as of the
last day of the computation period (irrespective of the date in
such period that the employee completed one thousand Hours of
Service). (Fractional years of Eligibility Service shall not be
credited.)....................................................................4
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(c) PRE-EFFECTIVE DATE SERVICE. Eligibility Service shall be credited
for Hours of Service earned and computation periods completed before
the Effective Date as if this Plan Statement were then in effect..............4
SECTION 12 EMPLOYER.............................................................................4
SECTION 13 ENROLLMENT DATE......................................................................4
SECTION 14 ERISA ...............................................................................4
SECTION 15 EVENT OF MATURITY....................................................................5
SECTION 16 FUND ...............................................................................5
SECTION 17 HIGHLY COMPENSATED EMPLOYEE..........................................................5
SECTION 18 HOURS OF SERVICE.....................................................................5
(a) PAID DUTY.
An Hour of Service shall be credited for each hour for which the
employee is paid, or entitled to payment, for the performance of
duties for the Employer or an Affiliate. These hours shall be
credited to the employee for the computation period or periods in
which the duties are performed................................................5
(b) PAID NONDUTY.
An Hour of Service shall be credited for each hour for which the
employee is paid, or entitled to payment, by the Employer or an
Affiliate on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave of
absence; provided, however, that:.............................................5
(c) BACK PAY.
An Hour of Service shall be credited for each hour for which back pay,
irrespective of mitigation of damages, has been either awarded or
agreed to by the Employer or an Affiliate. The same Hours of Service
credited under paragraph (a) or (b) shall not be credited under this
paragraph (c). The crediting of Hours of Service under this paragraph (c)
for periods and payments described in paragraph (b) shall be subject to all
the limitations of that paragraph. These hours shall be credited to the
employee for the computation period or periods to which the award or
agreement pertains rather than the computation period in which the award,
agreement or payment is made..................................................6
(d) UNPAID ABSENCES...............................................................6
(e) SPECIAL RULES.
For periods prior to January 1, 1976, Hours of Service may be determined
using whatever records are reasonably accessible and by making whatever
calculations are necessary to determine the approximate number of Hours
of Service completed during such
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prior period. To the extent not inconsistent with other provisions hereof,
Department of Labor regulations 29 C.F.R. Section 2530.200b-2(b) and (c) are
hereby incorporated by reference herein. To the extent required under
section 414 of the Code, services of leased owners, leased managers,
shared employees, shared leased employees and other similar
classifications (excluding Leased Employees) by the Employer or an
Affiliate shall be taken into account as if such services were performed
as a common law employee of the Employer for the purposes of determining
Eligibility Service, Vesting Service and One-Year Breaks in Service as
applied to Vesting Service and Eligibility Service. Application of the
leased employee rules under section 414(n) of the Code shall be subject to
the following: (i) "contingent services" shall mean services performed by
a person for the Employer or an Affiliate during the period the person has
not performed the services on a substantially full time basis for a period
of at least twelve (12) consecutive months, (ii) except as provided in
(iii), contingent services shall not be taken into account for purposes of
determining Eligibility Service, Vesting Service and One Year Breaks in
Service as applied to Vesting Service and Eligibility Service, (iii)
contingent services performed by a person who has become a Leased Employee
shall be taken into account for purposes of determining Eligibility
Service, Vesting Service, and One-Year Breaks in Service as applied to
Vesting Service and Eligibility Service, and (iv) all service performed as
a Leased Employee (i.e, all service following the date an individual has
satisfied all three requirements for becoming a Leased Employee) shall be
taken into account for purposes of determining Eligibility Service,
Vesting Service and One-Year Breaks in Service as applied to Vesting
Service and Eligibility Service...............................................7
SECTION 19 INVESTMENT MANAGER...................................................................7
SECTION 20 LEASED EMPLOYEE......................................................................7
SECTION 21 NORMAL RETIREMENT AGE................................................................7
SECTION 22 ONE-YEAR BREAK IN SERVICE............................................................8
SECTION 23 PARTICIPANT..........................................................................8
SECTION 24 PLAN .............................................................................8
SECTION 25 PLAN STATEMENT.......................................................................8
SECTION 26 PLAN YEAR............................................................................8
SECTION 27 PRINCIPAL SPONSOR....................................................................8
SECTION 28 PRIOR PLAN STATEMENT.................................................................8
SECTION 29 RECOGNIZED COMPENSATION..............................................................9
(a) INCLUDED ITEMS.
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In determining a Participant's Recognized Compensation there shall be included
elective contributions made by the Employer on behalf of the Participant
that are not includible in gross income under sections 125, 402(e)(3),
402(h), 403(b), 414(h)(2) and 457 of the Code including elective
contributions authorized by the Participant under a Salary Reduction
Agreement, a cafeteria plan or any other qualified cash or deferred
arrangement under section 401(k) of the Code..................................9
(b) EXCLUDED ITEMS.
In determining a Participant's Recognized Compensation there shall be excluded
all of the following: (i) reimbursements or other expense allowances,
(ii) welfare and fringe benefits (both cash and noncash) including
third-party sick pay (I.E., short-term and long-term disability
insurance benefits), income imputed from insurance coverages and premiums,
employee discounts and other similar amounts, payments for vacation or
sick leave accrued but not taken, final payments on account of termination
of employment (I.E., severance payments) and settlement for accrued but
unused vacation and sick leave, (iii) moving expenses, and (iv) deferred
compensation (both when deferred and when received)...........................9
(c) PRE-PARTICIPATION EMPLOYMENT.
Remuneration paid by the Employer attributable to periods prior to the date
the Participant became a Participant in the Plan shall not be taken
into account in determining the Participant's Recognized
Compensation..................................................................9
(d) NON-RECOGNIZED EMPLOYMENT.
Remuneration paid by the Employer for employment that is not Recognized
Employment shall not be taken into account in determining a Participant's
Recognized Compensation.......................................................9
(e) ATTRIBUTION TO PERIODS.
A Participant's Recognized Compensation shall be considered attributable to
the period in which it is actually paid and not when earned or
accrued.......................................................................9
(f) EXCLUDED PERIODS.
Amounts received after the Participant's termination of employment shall not
be taken into account in determining a Participant's Recognized
Compensation..................................................................9
(g) MULTIPLE EMPLOYERS.
If a Participant is employed by more than one Employer in a Plan Year, a
separate amount of Recognized Compensation shall be determined for
each Employer.................................................................9
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(h) ANNUAL MAXIMUM.
A Participant's Recognized Compensation for a Plan Year shall not exceed the
annual compensation limit under section 401(a)(17) of the Code, which
is One Hundred Fifty Thousand Dollars ($150,000) (as adjusted under
the Code for cost of living increases)........................................9
SECTION 30 RECOGNIZED EMPLOYMENT................................................................9
(a) employment in a unit of employees whose terms and conditions of employment
are subject to a collective bargaining agreement between an Employer
and a union representing that unit of employees, unless (and to the
extent) such collective bargaining agreement provides for the
inclusion of those employees in the Plan,.....................................9
(b) employment of a nonresident alien who is not receiving any earned income
from an Employer which constitutes income from sources within the
United States,................................................................9
(c) employment in a division or facility of an Employer which is not in
existence on the Effective Date (that is, was acquired, established,
founded or produced by the liquidation or similar discontinuation of
a separate subsidiary after the Effective Date) unless and until the
Principal Sponsor shall declare such employment to be Recognized
Employment,..................................................................10
(d) employment of a United States citizen or a United States resident alien
outside the United States unless and until the Principal Sponsor
shall declare such employment to be Recognized Employment,...................10
(e) services of a person who is not a common law employee of an Employer
including, without limiting the generality of the foregoing, services
of a Leased Employee, leased owner, leased manager, shared employee,
shared leased employee, temporary employee, independent contractor,
contract worker, agency worker, freelance employee or other similar
classification, and..........................................................10
(f) employment of a Highly Compensated Employee to the extent agreed to in
writing by the employee......................................................10
SECTION 31 SALARY REDUCTION AGREEMENT..........................................................10
SECTION 32 SUBFUND.............................................................................10
SECTION 33 TRUSTEE.............................................................................10
SECTION 34 VALUATION DATE......................................................................10
SECTION 35 VESTED..............................................................................10
SECTION 36 VESTING SERVICE.....................................................................10
(a) COMPUTATION PERIODS.
The computation periods for determining Vesting Service shall be the Plan
Years........................................................................11
(b) COMPLETION.
A year of Vesting Service shall be deemed completed as of the date in the
computation period that the employee completes one thousand (1,000)
Hours of Service. (Fractional years of Vesting Service shall not
be credited.)................................................................11
(c) PRE-EFFECTIVE DATE SERVICE.
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Vesting Service shall be credited for Hours of Service earned and
computation periods completed before the Effective Date as
if this Plan Statement were then in effect...................................11
(d) BREAKS IN SERVICE.
Vesting Service cancelled before the Effective Date by operation of
the Plan's break in service rules as they existed before the
Effective Date shall continue to be cancelled on and after
the Effective Date...........................................................11
(e) VESTING IN PRE-BREAK ACCOUNTS.
If the employee has five (5) or more consecutive One-Year Breaks in
Service, the employee's service after such One-Year Breaks in
Service shall not be counted as years of Vesting Service for
the purpose of determining the Vested percentage of that
portion of the employee's Employer Contributions Account
derived from Employer contributions allocated with respect to
the employee's service before such One-Year Breaks in Service
and separately accounted for under Section 5.1.4.............................11
1.2. RULES OF INTERPRETATION........................................................................11
1.3. GENERAL ELIGIBILITY RULE.......................................................................13
1.4. SPECIAL RULE FOR FORMER PARTICIPANTS...........................................................13
1.5. ENROLLMENT.....................................................................................13
1.6. SALARY REDUCTION AGREEMENT.....................................................................13
1.7. Modifications of Salary Reduction Agreement....................................................14
SECTION 38 INCREASE OR DECREASE................................................................14
SECTION 39 CANCELLATION OF SALARY REDUCTION AGREEMENT..........................................14
SECTION 40 TERMINATION OF RECOGNIZED EMPLOYMENT................................................14
1.8. Section 401(k) Compliance......................................................................14
SECTION 41 SPECIAL DEFINITIONS.................................................................14
(a) AN ELIGIBLE EMPLOYEE
means an individual who is entitled to enter into a Salary Reduction
Agreement for all or a part of the Plan Year (whether or not
the individual does so)......................................................14
(b) AN ELIGIBLE HIGHLY COMPENSATED EMPLOYEE
means an eligible employee who is a Highly Compensated Employee.......................15
(c) DEFERRAL PERCENTAGE
means the ratio (calculated separately for each eligible employee) of:................15
(d) AVERAGE DEFERRAL PERCENTAGE
means, for a specified group of eligible employees for the Plan Year, the
average of the deferral percentages for all eligible employees in such
group........................................................................15
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SECTION 42 SPECIAL RULES.......................................................................15
(a) ROUNDING.
The deferral percentage of each eligible employee and the average deferral
percentage for each group of eligible employees shall be calculated
to the nearest one-hundredth of one percent..................................15
(b) HIGHLY COMPENSATED EMPLOYEES.
In the case of an eligible Highly Compensated Employee who participates in
any other plan of the Employer and Affiliates (other than an
employee stock ownership plan described in sections 409(a) and
4975(e)(7) of the Code) to which Employer contributions are made
on behalf of the eligible Highly Compensated Employee pursuant to
a salary reduction agreement, all such Employer contributions
shall be aggregated for purposes of determining the eligible
Highly Compensated Employee's deferral percentage; provided,
however, that such Employer contributions made under an employee
stock ownership plan shall not be aggregated.................................15
(c) PERMISSIVE AGGREGATION.
If the Plan satisfies the requirements of section 401(k), 401(a)(4) or
410(b) under the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of
such sections of the Code only if aggregated with this Plan, then
this Section 2.6 shall be applied by determining the average
deferral percentage of eligible employees as if all such plans
were a single plan. Plans satisfy section 401(k) of the Code only
if they have the same Plan Year..............................................15
SECTION 43 THE 401(k) TESTS....................................................................15
SECTION 44 PREVENTATIVE ACTION PRIOR TO PLAN YEAR END..........................................16
1.9. Employer Contributions.........................................................................17
SECTION 46 SOURCE OF EMPLOYER CONTRIBUTIONS....................................................17
SECTION 47 LIMITATION..........................................................................17
SECTION 48 FORM OF PAYMENT.....................................................................17
1.10. Salary Reduction Contributions.................................................................17
SECTION 49 AMOUNT .............................................................................17
SECTION 50 ALLOCATION..........................................................................17
1.11. Nondeductible Contributions....................................................................17
SECTION 51 CONTINGENT PROVISION................................................................17
SECTION 52 METHOD OF CONTRIBUTION..............................................................17
SECTION 53 PAYMENT TO TRUSTEE..................................................................18
1.12. DISCRETIONARY CURATIVE CONTRIBUTIONS...........................................................18
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1.13. Discretionary Contributions....................................................................18
SECTION 54 AMOUNT..............................................................................19
SECTION 55 INTEGRATED CONTRIBUTION FORMULA.....................................................19
(a) A dollar amount equal to 5.7% of the sum of each Participant's
Recognized Compensation plus "excess Recognized Compensation" (as defined
in (c) below) shall be allocated to each Participant's Employer
Contributions Account. If the Employer does not contribute such amount for
all Participants, each Participant will be allocated a share of the
Employer contribution in the same proportion that the Participant's total
Recognized Compensation plus excess Recognized Compensation for the Plan
Year bears to the total Recognized Compensation plus excess Recognized
Compensation of all Participants for the Plan
Year.........................................................................19
(b) The balance of the Employer's discretionary contribution over the
amount allocated above, if any, shall be allocated to each
Participant's Employer Contributions Account in the same proportion
that each Participant's total Recognized Compensation for the Plan
Year bears to the total Recognized Compensation for all Participants
for the Plan Year............................................................19
(c) For purposes of this Section 3.5, "excess Recognized Compensation"
means the amount by which an eligible Participant's Recognized
Compensation exceeds twenty percent (20%) of the amount in effect at
the beginning of the Plan Year which is considered to be wages for
the purpose of collecting payroll taxes and computing benefits for
federal social security (which amount is sometimes called the taxable
wage base)...................................................................19
SECTION 56 CREDITING TO ACCOUNTS...............................................................19
1.14. ELIGIBLE PARTICIPANTS..........................................................................19
(a) the Participant is on the last day of such Plan Year, an employee of
the Employer (including for this purpose any Participant who then is
on temporary layoff or authorized leave of absence or who, during
such Plan Year, was inducted into the Armed Forces of the United
States from employment with the Employer); or................................19
(b) the Participant terminates employment with the Employer within the
Plan Year by reason of death, retirement at or after the
Participant's Normal Retirement Age or Disability............................19
1.15. Adjustments .............................................................................19
SECTION 57 MAKE-UP CONTRIBUTIONS FOR OMITTED PARTICIPANTS......................................19
SECTION 58 MISTAKEN CONTRIBUTIONS..............................................................20
1.16. DEDUCTIBLE VOLUNTARY CONTRIBUTIONS.............................................................20
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1.17. Rollover Contributions.........................................................................20
SECTION 59 CONTINGENT PROVISION................................................................20
SECTION 60 ELIGIBLE CONTRIBUTIONS..............................................................20
SECTION 61 SPECIFIC REVIEW.....................................................................21
SECTION 62 ALLOCATION..........................................................................21
1.18. Section 401(m) Compliance......................................................................21
SECTION 63 SPECIAL DEFINITIONS.................................................................21
(a) AN ELIGIBLE EMPLOYEE means an individual who is eligible to make
nondeductible voluntary contributions to the Plan for any portion of
the Plan Year (whether or not the individual does so)........................21
(b) AN ELIGIBLE HIGHLY COMPENSATED EMPLOYEE means an eligible employee
who is a Highly Compensated Employee.........................................21
(c) CONTRIBUTION PERCENTAGE means the ratio (calculated separately for
each eligible employee) of:..................................................21
(d) AVERAGE CONTRIBUTION PERCENTAGE means, for a specified group of
eligible employees for the Plan Year, the average of the contribution
percentages for all eligible employees in such group.........................21
SECTION 64 SPECIAL RULES.......................................................................21
(a) ROUNDING. The contribution percentage of each eligible employee and
the average contribution percentage for each group of eligible
employees shall be calculated to the nearest one-hundredth of one
percent......................................................................21
(b) HIGHLY COMPENSATED EMPLOYEES. In the case of an eligible Highly
Compensated Employee who participates in any other plan of the
Employer and Affiliates (other than an employee stock ownership plan
described in sections 409(a) and 4975(e)(7) of the Code) to which
nondeductible voluntary contributions are made on behalf of the
eligible Highly Compensated Employee, all such nondeductible
voluntary contributions shall be aggregated for purposes of
determining the eligible Highly Compensated Employee's contribution
percentage; provided, however, that such Employer contributions made
under an employee stock ownership plan shall not be aggregated...............21
(c) PERMISSIVE AGGREGATION. If the Plan satisfies the requirements of
section 401(m), 401(a)(4) or 410(b) under the Code only if aggregated
with one or more plans, or if one or more plans satisfy the
requirements of such sections of the Code only if aggregated with
this Plan, then this Section 3.10 shall be applied by determining the
average contribution percentage of eligible employees as if all such
plans were a single plan. Plans satisfy section 401(m) of the Code
only if they have the same Plan Year.........................................21
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SECTION 65 THE 401(m) TESTS....................................................................22
(a) The sum of:..................................................................22
(b) The sum of:..................................................................23
SECTION 66 PREVENTATIVE ACTION PRIOR TO PLAN YEAR END..........................................23
1.19. LIMITATION ON ANNUAL ADDITIONS.................................................................23
1.20. EFFECT OF DISALLOWANCE OF DEDUCTION OR MISTAKE OF FACT.........................................23
1.21. USERRA CONTRIBUTIONS...........................................................................24
1.22. Establishment of Subfunds......................................................................25
SECTION 68 ESTABLISHING COMMINGLED SUBFUNDS....................................................25
SECTION 69 OPERATIONAL RULES...................................................................25
SECTION 70 REVISING SUBFUNDS...................................................................26
SECTION 71 ERISA SECTION 404(c) COMPLIANCE.....................................................26
(a) Participants and Beneficiaries may give investment instructions to
the Trustee at least once every three months;................................26
(b) the Trustee must follow the investment instructions of Participants
and Beneficiaries that comply with the Plan's operational rules,
provided that the Trustee may in any event decline to follow any
investment instructions that:................................................26
(c) Participants and Beneficiaries shall be periodically informed of
actual expenses to their Accounts which are imposed by the Plan and
which are related to their Plan investment decisions;........................27
(d) With respect to any Subfund consisting of Employer securities and
intended to satisfy the requirements of section 404(c) of ERISA, (i)
Participants and Beneficiaries shall be entitled to all voting,
tender and other rights appurtenant to the ownership of such
securities, (ii) procedures shall be established to ensure the
confidential exercise of such rights, except to the extent necessary
to comply with federal and state laws not preempted by ERISA, and
(iii) the Trustee shall ensure the sufficiency of and compliance with
such confidentiality procedures..............................................27
1.23. Valuation and Adjustment of Accounts...........................................................27
SECTION 72 VALUATION OF FUND...................................................................27
SECTION 73 ADJUSTMENT OF ACCOUNTS..............................................................27
SECTION 74 RULES...............................................................................28
1.24. MANAGEMENT AND INVESTMENT OF FUND..............................................................28
1.25. Employer Contributions Account.................................................................29
SECTION 76 PROGRESSIVE VESTING.................................................................29
SECTION 77 FULL VESTING........................................................................29
(a) the Participant's death,.....................................................29
(b) the Participant's attainment of Normal Retirement Age,.......................29
(c) the Participant's Disability,................................................29
(d) a partial termination of the Plan which is effective as to the
Participant, or..............................................................29
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(e) a complete termination of the Plan or a complete discontinuance of
Employer contributions hereto................................................29
SECTION 78 FORFEITURE EVENT....................................................................29
(a) the occurrence after an Event of Maturity of five (5) consecutive
One-Year Breaks in Service,..................................................29
(b) the Event of Maturity of a Participant who has no Vested interest in
the Participant's Total Account,.............................................29
(c) the distribution after an Event of Maturity, to (or with respect to)
a Participant of the entire Vested portion of the Total Account of
the Participant, or..........................................................30
(d) the death of the Participant at a time and under circumstances which
do not entitle the Participant to be fully (100%) Vested in the
Participant's Total Account..................................................30
SECTION 79 EFFECT OF BREAK ON VESTING..........................................................30
1.26. OTHER ACCOUNTS.................................................................................30
1.27. EVENTS OF MATURITY.............................................................................31
(a) the Participant's death;.....................................................31
(b) the Participant's separation from service, whether voluntary or
involuntary;.................................................................31
(c) the attainment of age seventy and one-half (70-1/2) years by a
Participant who is a five percent owner (as defined in Appendix B)
and the crediting of any amounts to such a Participant's Account
after such time;.............................................................31
(d) the Participant's Disability;................................................31
(e) the Participant's attainment of Normal Retirement Age;.......................31
(f) the disposition by the Employer (which is a corporation) to an
unrelated corporation of substantially all the assets (within the meaning
of section 409(d)(2) of the Code) used by the Employer in a trade or
business of the Employer, if such acquiring corporation continues to
maintain this Plan after the disposition, but only with respect to
employees who continue employment with the corporation acquiring such
assets and only if the purchase and sale agreement specifically authorizes
distribution of this Plan's assets in connection with such disposition;
or...........................................................................31
(g) the disposition by the Employer (which is a corporation) to an
unrelated corporation of the Employer's interest in a subsidiary
(within the meaning of section 409(d)(3) of the Code), if such
acquiring corporation continues to maintain this Plan after the
disposition, but only with respect to employees who continue
employment with such subsidiary and only if the purchase and sale
agreement specifically authorizes distribution of this Plan's assets
in connection with such disposition;.........................................31
1.28. DISPOSITION OF NON-VESTED PORTION OF ACCOUNT...................................................31
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1.29. USE OF FORFEITURES.............................................................................32
1.30. FORFEITURE DATE .............................................................................32
1.31. RESTORATION OF FORFEITURE IF REHIRED IN FIVE YEARS.............................................32
1.32. Application for Distribution...................................................................33
SECTION 82 APPLICATION REQUIRED................................................................33
SECTION 83 EXCEPTION FOR SMALL AMOUNTS.........................................................33
SECTION 84 EXCEPTION FOR REQUIRED DISTRIBUTIONS................................................33
SECTION 85 NOTICES.............................................................................33
(a) the Committee clearly informs the Distributee that the Distributee
has a right to a period of at least thirty (30) days after receiving
such notices to consider whether or not to elect distribution and, if
applicable, to elect a particular distribution option; and...................33
(b) the Distributee, after receiving the notice, affirmatively elects a
distribution; and............................................................33
(c) the Distributee may revoke an affirmative distribution election by
notifying the Committee of such revocation prior to the date as of
which such distribution is to be made; and...................................33
(d) the Distribution Date is at least seven (7) days after the date the
Distributee received the notice required under section 417(a)(3) of
the Code.....................................................................33
SECTION 86 DIRECT ROLLOVER.....................................................................34
(a) ELIGIBLE ROLLOVER DISTRIBUTION means any distribution of all or any
portion of a Total Account to a Distributee who is eligible to elect a
direct rollover except (i) any distribution that is one of a series of
substantially equal installments payable not less frequently than annually
over the life expectancy of such Distributee or the joint and last
survivor life expectancy of such Distributee and such Distributee's
"designated beneficiary" (within the meaning of Section 401(a)(9) of the
Internal Revenue Code), and (ii) any distribution that is one of a series
of substantially equal installments payable not less frequently than
annually over a specified period of ten (10) years or more, and (iii) any
distribution to the extent such distribution is required under section
401(a)(9) of the Code, and (iv) the portion of any distribution that is
not includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer
securities)..................................................................34
(b) ELIGIBLE RETIREMENT PLAN means (i) an individual retirement account
described in section 408(a) of the Code, or (ii) an individual
retirement annuity described in section 408(b) of the Code, or (iii)
an annuity plan described in section 403(a) of the Code, or (iv) a
qualified trust described in section 401(a) of the Code that accepts
the eligible rollover distribution.
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However, in the case of an eligible rollover distribution to a Beneficiary
who is the surviving spouse of a Participant, an eligible retirement plan
is only an individual retirement account or individual retirement annuity
as described in section 408 of the Code......................................34
(c) DIRECT ROLLOVER means the payment of an eligible rollover
distribution by the Plan to the eligible retirement plan specified by
the Distributee who is eligible to elect a direct rollover...................34
1.33. TIME OF DISTRIBUTION...........................................................................34
SECTION 87 EARLIEST BEGINNING DATE.............................................................34
(a) PARTICIPANT. If the Distributee is a Participant, the earliest
beginning date is the Distribution Date coincident with or next
following the date of the Participant's Event of Maturity....................34
(b) BENEFICIARY. If the Distributee is a Beneficiary of a Participant,
the earliest beginning date is the Distribution Date coincident with
or next following the date of such Participant's death.......................34
SECTION 88 REQUIRED BEGINNING DATE.............................................................35
(a) PARTICIPANT. If the Distributee is a Participant who is not a five
percent (5%) owner (as defined in Appendix B), the required beginning date
is the April 1 following the calendar year in which the Participant
attains age seventy and one-half (70-1/2) years or, if later, the April 1
following the calendar year in which the Participant's Event of Maturity
occurs.......................................................................35
(b) FIVE PERCENT OWNER. If the Distributee is a Participant who is a
five percent (5%) owner (as defined in Appendix B) at any time during
the Plan Year ending with or within the calendar year in which such
Participant attains age seventy and one-half (70-1/2) years, then the
required beginning date is the April 1 following the calendar year in
which the Participant attains age seventy and one-half (70-1/2) years........35
(c) BENEFICIARY-- PARTICIPANT DIES ON OR AFTER REQUIRED DISTRIBUTION
Date. If the Distributee is the Beneficiary of a Participant who
died on or after the Participant's required beginning date, the
Beneficiary's required beginning date is the date which provides for
distribution to such Beneficiary at a rate (considering both time and
amount) that is cumulatively at least as rapid as the rate of
distribution scheduled and commenced prior to the death of the
Participant..................................................................35
(d) BENEFICIARY-- PARTICIPANT DIES BEFORE REQUIRED DISTRIBUTION DATE. If
the Distributee is a Beneficiary of a Participant who died before the
Participant's required beginning date, the Beneficiary's required
beginning date is the December 31 of the calendar year in which
occurs the fifth (5th)
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anniversary of the Participant's death (and in this instance distribution
must be completed by such December 31); provided, however,
that:........................................................................36
SECTION 89 DISCONTINUANCE OF PAYMENTS..........................................................36
1.34. Forms of Distribution..........................................................................37
SECTION 90 FORMS AVAILABLE.....................................................................37
(a) LUMP SUM. If the Distributee is either a Participant or a
Beneficiary, in a single lump sum............................................37
(b) FIXED INSTALLMENTS. If the Distributee is a Participant or is the
Beneficiary of a Participant who died before the Participant's
required beginning date, in a series of substantially equal
installments payable monthly, quarterly, semiannually or annually
over a fixed period selected by the Distributee before the first
payment which does not exceed the life expectancy of the Distributee
or, if the Distributee is a Participant, the joint and last survivor
life expectancy of the Participant and the Participant's "designated
beneficiary" (within the meaning of section 401(a)(9) of the Internal
Revenue Code), determined as of the date of the first such
installment payment; provided, however, that if the Distributee is a
Participant and the fixed period is determined by the joint and last
survivor life expectancy of the Participant and the Participant's
"designated beneficiary" (within the meaning of section 401(a)(9) of
the Internal Revenue Code), then the remaining portion of such fixed
period shall be determined again as of the Participant's required
beginning date (see Section 7.2.2(a)) based on facts then in
existence, and shall be reduced (but not increased) if necessary to
comply with the requirements of section 401(a)(9) of the Internal
Revenue Code. The election to recalculate life expectancy described
in Section 7.3.3 does not apply to this form of distribution.................37
(c) ANNUITY CONTRACT. By the purchase and distribution of an annuity
contract to the Distributee. Such annuity contract may not be in
any form that will provide for payments over a period extending
beyond the life expectancy of the Distributee or, if the Distributee
is a Participant, the joint and last survivor life expectancy of the
Participant and the Participant's "designated beneficiary" (within
the meaning of section 401(a)(9) of the Internal Revenue Code). The
Committee will direct the Trustee as to the insurance company and
agent through which the Trustee is to purchase the annuity...................37
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SECTION 91 SUBSTANTIALLY EQUAL.................................................................37
(a) TERM CERTAIN INSTALLMENTS. If distributions are in the form of
installments payable over a term certain period, the amount of the
distribution required to be made for each calendar year (the "distribution
year") shall be determined by dividing the amount of the Vested Total
Account as of the last Distribution Date in the calendar year immediately
preceding the distribution year (such preceding calendar year being the
"valuation year") by the number of remaining installment payments to be
made (including the distribution being determined). The amount of the
Vested Total Account as of such Distribution Date shall be increased by
the amount of any contributions and forfeitures allocated to the Vested
Total Account during the valuation year and after such Distribution Date
(including contributions and forfeitures, if any, made after the end of
the valuation year which are allocated as of dates in the valuation year).
The amount of the Vested Total Account shall be decreased by the amount of
any distributions made in the valuation year and after such Distribution
Date.........................................................................37
(b) LIFETIME INSTALLMENTS. If distributions are in the form of
installments over the life expectancy of the recipient or the joint
and last survivor life expectancy of the Participant and the
Participant's "designated beneficiary" (within the meaning of Section
401(a)(9) of the Internal Revenue Code), the amount of the
distribution required to be made for each calendar year (the
"distribution year") shall be determined by dividing the amount of
the Vested Total Account as of the last Distribution Date in the
calendar year immediately preceding the distribution year (such
preceding calendar year being the "valuation year") by the remaining
life expectancy as of the distribution year. The amount of the
Vested Total Account as of the last Distribution Date in the
valuation year shall be increased by the amount of any contributions
and forfeitures allocated to the Vested Total Account during the
valuation year and after such Distribution Date (including
contributions and forfeitures, if any, made after the end of the
valuation year which are allocated as of dates in the valuation
year). The amount of the Vested Total Account shall be decreased by
distributions made in the valuation year and after such Distribution
Date.........................................................................37
SECTION 92 LIFE EXPECTANCY.....................................................................38
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(a) ELECTION TO RECALCULATE LIFE EXPECTANCY. A Participant may elect to
redetermine his or her life expectancy for each succeeding calendar
year that a distribution is required to be made. In the case of a
Participant who has designated his or her spouse as Beneficiary, the
Participant may elect to have life expectancy for the Participant and
the Participant's spouse, redetermined for each succeeding calendar
year that a distribution is required to be made. The election must
be made no later than the time of the first required distribution.
The election is irrevocable and must apply to all subsequent years...........38
(b) MINIMUM DISTRIBUTION INCIDENTAL BENEFIT REQUIREMENT. In the case of
a Participant who has not designated his or her spouse as
Beneficiary, the life expectancy factor used to compute the amount of
the substantially equal payment during the Participant's lifetime
shall not be greater than the factor determined under Regulation
1.401(a)(9)-2 of the Code (the minimum distribution incidental
benefit requirement).........................................................38
(c) LIFE ANNUITIES FOR PARTICIPANT AND SURVIVING SPOUSE. If the
Distributee is either a Participant or a Participant's surviving
spouse, by purchasing and distributing a single premium, immediate
(not deferred), fixed (not variable) annuity contract which shall be
nontransferable to anyone but the issuer, and which shall provide for
benefits which are hereinafter defined as a QJ&SA contract in the
case of a married Participant, or a Life Annuity contract in the case
of an unmarried Participant or the surviving spouse of a Participant.........38
SECTION 93 PRESUMPTIVE FORM....................................................................38
(a) REQUIRED LUMP SUM. As provided in Section 7.1.2, if the value of the
Participant's Vested Total Account has never
exceeded Five Thousand Dollars ($5,000), the
distribution shall be made in a single lump
sum..........................................................................38
(b) MARRIED PARTICIPANT. In the case of any distribution which is to be
made:........................................................................38
(c) UNMARRIED PARTICIPANT. In the case of any distribution which is to
be made:.....................................................................39
(d) SURVIVING SPOUSE. In the case of a distribution which is made:..............40
(e) QJ&SA CONTRACT. A QJ&SA contract is an immediate annuity contract
issued as an individual policy or under a master or group contract
which provides for a monthly annuity payable to and for the lifetime
of the Participant beginning as of the Distribution Date as of which
it is purchased with a survivor annuity payable monthly after the
death of the Participant to and for the lifetime of the surviving
spouse of the Participant
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(to whom the Participant was married on the date as of which the first
payment is due) in an amount equal to fifty percent (50%) of the amount
payable during the joint lives of the Participant and the surviving
spouse. The contract shall be a QJ&SA contract only if it is issued on a
premium basis which does not discriminate on the basis of the sex of the
Participant or the surviving spouse..........................................40
(f) LIFE ANNUITY CONTRACT. A Life Annuity contract is an immediate
annuity contract issued as an individual policy or under a group or
master contract which provides for a monthly annuity payable to and
for (i) the lifetime of an unmarried Participant beginning as of the
Distribution Date as of which it is purchased, or (ii) the lifetime
of the surviving spouse of a Participant beginning as of the
Distribution Date as of which it is purchased. The contract shall be
a Life Annuity contract only if it is issued on a premium basis which
does not discriminate on the basis of the sex of the Participant or
the surviving spouse.........................................................40
SECTION 94 EFFECT OF REEMPLOYMENT..............................................................40
SECTION 95 TEFRA SECTIONS 242(b) TRANSITIONAL RULES............................................41
1.35. Designation of Beneficiaries...................................................................41
SECTION 96 RIGHT TO DESIGNATE..................................................................41
SECTION 97 SPOUSAL CONSENT.....................................................................41
SECTION 98 FAILURE OF DESIGNATION..............................................................41
(a) fails to designate a Beneficiary,............................................42
(b) designates a Beneficiary and thereafter such designation is revoked
without another Beneficiary being named, or..................................42
(c) designates one or more Beneficiaries and all such Beneficiaries so
designated fail to survive the Participant,..................................42
SECTION 99 DISCLAIMERS BY BENEFICIARIES........................................................42
SECTION 100 DEFINITIONS........................................................................43
(a) a legally adopted child and the adopted child's lineal descendants
always shall be lineal descendants of each adoptive parent (and of
each adoptive parent's lineal ancestors);....................................43
(b) a legally adopted child and the adopted child's lineal descendants
never shall be lineal descendants of any former parent whose parental
rights were terminated by the adoption (or of that former parent's
lineal ancestors); except that if, after a child's parent has died,
the child is legally adopted by a stepparent who is the spouse of the
child's surviving parent, the child and the child's lineal
descendants shall remain lineal descendants of the deceased parent
(and the deceased parent's lineal ancestors);................................43
(c) if the person (or a lineal descendant of the person) whose issue are
referred to
-xix-
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is the parent of a child (or is treated as such under applicable law) but
never received the child into that parent's home and never openly held out
the child as that parent's child (unless doing so was precluded solely by
death), then neither the child nor the child's lineal descendants shall be
issue of the person..........................................................43
SECTION 101 SPECIAL RULES......................................................................43
(a) If there is not sufficient evidence that a Beneficiary was living at
the time of the death of the Participant, it shall be deemed that the
Beneficiary was not living at the time of the death of the
Participant..................................................................43
(b) The automatic Beneficiaries specified in Section 7.4.3 and the
Beneficiaries designated by the Participant shall become fixed at the
time of the Participant's death so that, if a Beneficiary survives
the Participant but dies before the receipt of all payments due such
Beneficiary hereunder, such remaining payments shall be payable to
the representative of such Beneficiary's estate..............................43
(c) If the Participant designates as a Beneficiary the person who is the
Participant's spouse on the date of the designation, either by name
or by relationship, or both, the dissolution, annulment or other
legal termination of the marriage between the Participant and such
person shall automatically revoke such designation. (The foregoing
shall not prevent the Participant from designating a former spouse as
a Beneficiary on a form executed by the Participant and received by
the Committee after the date of the legal termination of the marriage
between the Participant and such former spouse, and during the
Participant's lifetime.).....................................................43
(d) Any designation of a nonspouse Beneficiary by name that is
accompanied by a description of relationship to the Participant shall
be given effect without regard to whether the relationship to the
Participant exists either then or at the Participant's death.................43
(e) Any designation of a Beneficiary only by statement of relationship to
the Participant shall be effective only to designate the person or
persons standing in such relationship to the Participant at the
Participant's death..........................................................43
1.36. DEATH PRIOR TO FULL DISTRIBUTION...............................................................44
1.37. DISTRIBUTION IN CASH...........................................................................44
1.38. FACILITY OF PAYMENT............................................................................44
(f) to the duly appointed guardian, conservator or other legal
representative of such Participant, Beneficiary or Alternate Payee, or.......45
(g) to a person or institution entrusted with the care or maintenance of
the incompetent or disabled Participant, Beneficiary or Alternate Payee,
provided, however, such person or institution has satisfied the
-xx-
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Committee that the payment will be used for the best interest and assist
in the care of such Participant, Beneficiary or Alternate Payee, and
provided further, that no prior claim for said payment has been made by a
duly appointed guardian, conservator or other legal representative of such
Participant, Beneficiary or Alternate Payee..................................44
1.39. Hardship Distributions.........................................................................44
SECTION 102 WHEN AVAILABLE.....................................................................44
SECTION 103 PURPOSES...........................................................................45
(a) expenses for medical care described in section 213(d) of the Code
previously incurred by the Participant, the Participant's spouse or
any dependents of the Participant (as defined in section 152 of the
Code) or necessary for these persons to obtain medical care described
in section 213(d) of the Code,...............................................45
(b) costs directly related to the purchase of a principal residence for
the Participant (excluding mortgage payments),...............................45
(c) payment of tuition, related educational fees and room and board
expenses for the next twelve (12) months of post-secondary education
for the Participant, or the Participant's spouse, children or
dependents (as defined in section 152 of the Code), or.......................45
(d) payments necessary to prevent the eviction of the Participant from
the Participant's principal residence or foreclosure on the mortgage
of that principal residence..................................................45
SECTION 104 LIMITATIONS........................................................................45
SECTION 105 COORDINATION WITH OTHER PLANS......................................................45
SECTION 106 COORDINATION WITH SECTION 4.1......................................................46
1.40. Withdrawals From Voluntary Accounts............................................................46
SECTION 107 WHEN AVAILABLE.....................................................................46
SECTION 108 ACCOUNTING - NONDEDUCTIBLE VOLUNTARY ACCOUNT.......................................46
SECTION 109 LIMITATIONS........................................................................47
SECTION 110 COORDINATION WITH SECTION 4.1......................................................47
1.41. Age 59-1/2 Distributions.......................................................................47
SECTION 111 WHEN AVAILABLE.....................................................................47
SECTION 112 LIMITATIONS........................................................................48
SECTION 113 SEQUENCE OF ACCOUNTS...............................................................48
SECTION 114....................................................................................48
1.42. LOANS..........................................................................................48
1.43. Corrective Distributions.......................................................................49
SECTION 115 EXCESS DEFERRALS ($7,000 LIMIT)....................................................49
(a) IN GENERAL. A Participant may attribute to this Plan any excess
deferrals made during a taxable year of the
Participant by notifying the Committee in
writing not later than the March 1 following
-xxi-
<PAGE>
such taxable year of the amount of the excess deferral to be assigned to
the Plan. A Participant shall be deemed to have notified the Plan of
excess deferrals to the extent the Participant has excess deferrals for
the taxable year calculated by taking into account only the amount of
elective contributions allocated to the Participant's Elective Account and
to any other plan of the Employer and Affiliates. Notwithstanding any
other provision of the Plan Statement, a Participant's excess deferrals,
plus any income and minus any loss allocable thereto, shall be distributed
to the Participant no later than the first April 15 following the close of
the Participant's taxable year...............................................49
(b) DEFINITIONS. For purposes of this Section, "excess deferrals" shall
mean the amount of elective contributions allocated to the
Participant's Elective Account for a Participant's taxable year and
which the Participant or the Employer, where applicable, allocates to
this Plan pursuant to the claim procedure described below....................49
(c) CLAIMS. The Participant's claim shall be in writing; shall be
submitted to the Committee not later than March 1 with respect to the
immediately preceding taxable year; shall specify the amount of the
Participant's excess deferrals for the preceding taxable year; and
shall be accompanied by the Participant's written statement that if
such amounts are not distributed, such excess deferrals, when added
to amounts deferred under other plans or arrangements described in
sections 401(k), 408(k) or 403(b) of the Code, will exceed the limit
imposed on the Participant by section 402(g) of the Code for the
taxable year in which the deferral occurred. The Employer shall
notify the Plan on behalf of the Participant where the excess
deferrals occur in the Plan or the combined plans of the Employer and
Affiliates...................................................................49
(d) DETERMINATION OF INCOME OR LOSS. The excess deferrals shall be
adjusted for income or loss. Unless the Committee and the Trustee
agree otherwise in writing, the income or loss allocable to excess
deferrals shall be determined by multiplying the income or loss
allocable to the Participant's elective contributions for the Plan
Year ending within such preceding taxable year by a fraction, the
numerator of which is the excess deferrals on behalf of the
Participant for such preceding taxable year and the denominator of
which is the Participant's Elective Account balance
-xxii-
<PAGE>
attributable to elective contributions on the Valuation Date coincident
with or immediately before the last day of such preceding taxable year
without regard to any income or loss occurring during such taxable
year.........................................................................49
(e) ACCOUNTING FOR EXCESS DEFERRALS. Excess deferrals shall be
distributed from the Participant's Elective Account..........................49
SECTION 116 EXCESS CONTRIBUTIONS (SECTION 401(k) TEST).........................................49
(a) IN GENERAL. Notwithstanding any other provision of the Plan
Statement, excess contributions for a Plan Year, plus any income and
minus any loss allocable thereto, shall be distributed no later than
the last day of the following Plan Year, to eligible Highly
Compensated Employees as determined in this Section..........................50
(b) EXCESS CONTRIBUTIONS. For purposes of this Section, "excess
contributions" shall mean, with respect to any Plan Year, the excess
of:..........................................................................50
(c) DISTRIBUTION OF EXCESS CONTRIBUTIONS. Excess contributions, plus any
income and minus any loss allocable thereto, shall be distributed
from the Elective Account. The amount of excess contributions to be
distributed on behalf of each eligible Highly Compensated Employee
for the Plan Year shall be equal to the amount of reduction
determined as follows:.......................................................50
(d) DETERMINATION OF INCOME OR LOSS. The excess contributions to be
distributed to any eligible Highly Compensated Employee shall be
adjusted for income or loss. Unless the Committee and the Trustee
agree otherwise in writing, the income or loss allocable to excess
contributions to be distributed shall be determined by multiplying
the income or loss allocable to the eligible Highly Compensated
Employee's salary reduction contributions for the Plan Year by a
fraction, the numerator of which is the excess contributions to be
distributed to the eligible Highly Compensated Employee for the Plan
Year and the denominator of which is the eligible Highly Compensated
Employees's account balance attributable to salary reduction
contributions on the last day of the Plan Year, without regard to any
income or loss occurring during such Plan Year...............................51
SECTION 117 EXCESS AGGREGATE CONTRIBUTIONS (SECTION 401(m) TEST)...............................51
(a) IN GENERAL. Notwithstanding any other provision of the Plan
Statement, excess aggregate contributions, plus any income and minus
any loss allocable thereto, shall be distributed no later than the
last day of the following Plan Year to eligible Highly Compensated
Employees as determined in this Section......................................51
(b) EXCESS AGGREGATE CONTRIBUTIONS. For purposes of this Section,
"excess aggregate
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<PAGE>
contributions" shall mean, with respect to any Plan Year,
the excess of:...............................................................51
(c) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. Excess aggregate
contributions, plus any income and minus any loss allocable thereto,
shall be distributed from the Participant's Nondeductible Voluntary
Account for the Plan Year. The amount of excess aggregate
contributions to be distributed on behalf of each eligible Highly
Compensated Employee for the Plan Year shall be equal to the amount
of reduction determined as follows:..........................................52
(d) DETERMINATION OF INCOME OR LOSS. The excess aggregate contributions
to be distributed to any eligible Highly Compensated Employee shall
be adjusted for income or loss. Unless the Committee and the Trustee
agree otherwise in writing, the income or loss allocable to excess
aggregate contributions to be distributed shall be determined by
multiplying the income or loss allocable to the eligible Highly
Compensated Employee's nondeductible voluntary contributions for the
Plan Year by a fraction, the numerator of which is the excess
aggregate contributions to be distributed to the eligible Highly
Compensated Employee for the Plan Year and the denominator of which
is the eligible Highly Compensated Employees's Nondeductible
Voluntary Account balance on the last day of the Plan Year, without
regard to any income or loss occurring during such Plan Year.................52
SECTION 118 PRIORITY...........................................................................52
1.44. AMENDMENT......................................................................................55
1.45. DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION OF PLAN........................................55
1.46. Merger or Spinoff of Plans.....................................................................55
SECTION 121 IN GENERAL.........................................................................56
SECTION 122 LIMITATIONS........................................................................56
SECTION 123 BENEFICIARY DESIGNATIONS...........................................................56
1.47. Adoption by Other Employers....................................................................56
SECTION 124 ADOPTION BY CONSENT................................................................56
SECTION 125 PROCEDURE FOR ADOPTION.............................................................56
SECTION 126 EFFECT OF ADOPTION.................................................................57
1.48. Dealings with Trustee..........................................................................58
SECTION 128 NO DUTY TO INQUIRE.................................................................58
SECTION 129 ASSUMED AUTHORITY..................................................................58
1.49. COMPENSATION OF TRUSTEE........................................................................58
1.50. Resignation and Removal of Trustee.............................................................58
SECTION 130 RESIGNATION, REMOVAL AND APPOINTMENT...............................................59
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SECTION 131 AUTOMATIC REMOVAL..................................................................59
SECTION 132 SURVIVING TRUSTEES.................................................................59
SECTION 133 SUCCESSOR ORGANIZATIONS............................................................59
SECTION 134 CO-TRUSTEE RESPONSIBILITY..........................................................59
SECTION 135 ALLOCATION OF RESPONSIBILITY.......................................................59
SECTION 136 MAJORITY DECISIONS.................................................................60
1.51. Accountings by Trustee.........................................................................60
SECTION 137 PERIODIC REPORTS...................................................................60
SECTION 138 SPECIAL REPORTS....................................................................60
1.52. TRUSTEE'S POWER TO PROTECT ITSELF ON ACCOUNT OF TAXES..........................................60
1.53. OTHER TRUST POWERS.............................................................................61
(a) To invest and reinvest any Subfunds established pursuant to
Section 4.1 in accordance with the investment characteristics and
objectives determined therefor and to invest and reinvest the assets
of the Fund in any securities or properties in which an individual
could invest the individual's own funds and which it deems for the
best interest of the Fund, without limitation by any statute, rule of
law or regulation of any governmental body prescribing or limiting
the investment of trust assets by corporate or individual trustees,
in or to certain kinds, types or classes of investments or
prescribing or limiting the portion of the Fund which may be invested
in any one property or kind, type or class of investment.
Specifically and without limiting the generality of the foregoing,
the Trustee may invest and reinvest principal and accumulated income
of the Fund in any real or personal property; preferred or common
stocks of any kind or class of any corporation, including but not
limited to investment and small business investment companies of all
types; voting trust certificates; interests in investment trusts;
shares of mutual funds; interests in any limited or general
partnership or other business enterprise, however organized and for
whatever purpose; group or individual annuity contracts (which may
involve investment in the issuer's general account or any of its
separate accounts); interests in common or collective trusts,
variable interest notes or any other type of collective fund
maintained by a bank or similar institution (whether or not the
Trustee hereunder); bonds, notes and debentures, secured or
unsecured; mortgages, leases or other interests in real or personal
property; interests in mineral, gas, oil or timber properties or
other wasting assets; call options; put options; commodity or
financial
-xxv-
<PAGE>
futures contracts; foreign currency; interest-bearing certificates or
accounts in a bank or similar financial institution, including the Trustee
or an affiliate of the Trustee, provided such certificates, accounts or
instruments bear a reasonable rate of interest; insurance contracts on the
life of any "keyman" or shareholder of the Employer; or conditional sales
contracts. Prior to maturity and distribution of the Vested Total Accounts
of Participants, the Trustee shall commingle the Accounts of Participants
in each Subfund and invest, reinvest, control and manage each of the same
as a common trust fund.......................................................61
(b) To sell, exchange or otherwise dispose of any asset of whatsoever
character at any time held by the Trustee in trust hereunder.................61
(c) To segregate any part or portion of the Fund for the purpose of
administration or distribution thereof and, in its sole discretion,
to hold the Fund uninvested whenever and for so long as, in the
Trustee's discretion, the same is likely to be required for the
payment in cash of Accounts normally expected to become distributable
in the near future, or whenever, and for as long as, market
conditions are uncertain, or for any other reason which, in the
Trustee's discretion, requires such action or makes such action
advisable....................................................................61
(d) To hold uninvested reasonable amounts of cash whenever it is deemed
advisable to do so to facilitate disbursements or for other
operational reasons, and to deposit the same, with or without
interest, in the commercial or savings departments of the Trustee
serving hereunder or of any other bank, trust company or other
financial institution including those affiliated with the Trustee............62
(e) To register any investment held in the Fund in the name of the
Trustee, without trust designation, or in the name of a nominee or
nominees, and to hold any investment in bearer form, but the records
of the Trustee shall at all times show that all such investments are
part of the Fund, and the Trustee shall be as responsible for any act
or default of any such nominee as for its own................................62
(f) Subject to the prior approval of the Committee, to retain and employ
such attorneys, agents and servants as may be necessary or desirable,
in the opinion of the Trustee, in the administration of the Fund, and
to pay them such reasonable compensation for their services as may be
agreed upon as an expense of administration of the Fund, including
power to employ and retain counsel upon any matter of doubt as to the
meaning of or interpretation to be placed upon this Plan
-xxvi-
<PAGE>
Statement or any provisions thereof with reference to any question arising
in the administration of the Fund or pertaining to the distribution
thereof or pertaining to the rights and liabilities of the Trustee
hereunder or to the rights and claims of Participants and Beneficiaries.
The Trustee, in any such event, may act in reliance upon the advice,
opinions, records, statements and computations of any attorneys and agents
and on the records, statements and computations of any servants so
selected by it in good faith and shall be released and exonerated of and
from all liability to anyone in so doing (except to the extent that
liability is imposed under ERISA)............................................62
(g) Subject to the prior approval of the Committee, to institute,
prosecute and maintain, or to defend, any proceeding at law or in
equity concerning the Plan or the Fund or the assets thereof or any
claims thereto, or the interests of Participants and Beneficiaries
hereunder at the sole cost and expense of the Fund or at the sole
cost and expense of the Total Account of the Participant who may be
concerned therein or who may be affected thereby as, in the Trustee's
opinion, shall be fair and equitable in each case, and to compromise,
settle and adjust all claims and liabilities asserted by or against
the Plan or the Fund or asserted by or against the Trustee, on such
terms as the Trustee, in each such case, shall deem reasonable and
proper. The Trustee shall be under no duty or obligation to
institute, prosecute, maintain or defend any suit, action or other
legal proceeding unless it shall be indemnified to its satisfaction
against all expenses and liabilities which it may sustain or
anticipate by reason thereof.................................................62
(h) To institute, participate and join in any plan of reorganization,
readjustment, merger or consolidation with respect to the issuer of
any securities held by the Trustee hereunder, and to use any other
means of protecting and dealing with any of the assets of the Fund
which it believes reasonably necessary or proper and, in general, to
exercise each and every other power or right with respect to each
asset or investment held by it hereunder as individuals generally
have and enjoy with respect to their own assets and investment
(except that the right to vote upon any securities or other assets
having voting power which it may hold from time to time shall be
passed through to the Participants and Beneficiaries), and to deposit
assets or investments with any protective committee, or with trustees
or depositaries designated by
-xxvii-
<PAGE>
any such committee or by any such trustees or any court. Notwithstanding
the foregoing, an Investment Manager shall have any or all of such powers
and rights with respect to Plan assets for which it has investment
responsibility but only if (and only to the extent that) such powers and
rights are expressly given to such Investment Manager in a written
agreement signed by it and acknowledged in writing by the Trustee. In all
other cases, such powers and rights shall be exercised solely by the
Trustee. Furthermore, neither the Trustee, the Investment Manager nor the
Committee, as the case may be, shall take any actions with respect to any
security in which it may have an interest, direct or indirect. In such
case, the Trustee, Investment Manager or the Committee shall notify the
Principal Sponsor and the Principal Sponsor shall direct the Trustee, the
Investment Manager or the Committee with respect to such
action.......................................................................62
(i) In any matter of doubt affecting the meaning, purpose or intent of
any provision of this Plan Statement which directly affects its
duties, to determine such meaning, purpose or intent.........................62
(j) To require, as a condition to distribution of any Vested Total
Account, proof of identity or of authority of the person entitled to
receive the same, including power to require reasonable
indemnification on that account as a condition precedent to its
obligation to make distribution hereunder....................................62
(k) To collect, receive, receipt and give quittance for all payments that
may be or become due and payable on account of any asset in trust
hereunder which has not, by act of the Trustee taken pursuant
thereto, been made payable to others; and payment thereof by the
company issuing the same, or by the party obligated thereon, as the
case may be, when made to the Trustee hereunder or to any person or
persons designated by the Trustee, shall acquit, release and
discharge such company or obligated party from any and all liability
on account thereof...........................................................62
(l) To determine from time to time, as required for the purpose of
distribution or for the purpose of allocating trust income or for any
other purpose of the Plan, the then value of the Fund and the
Accounts in the Fund, the Trustee, in each such case, using and
employing for that purpose the fair market value of each of the
assets constituting the Fund. Each such determination so made by the
Trustee in good faith shall be binding and conclusive upon all
persons interested or becoming interested in the Plan or the Fund............63
-xxviii-
<PAGE>
(m) To receive and retain contributions made in a form other than cash in
the form in which the same are received until such time as the
Trustee, in its sole discretion, deems it advisable to sell or
otherwise dispose of such assets.............................................63
(n) To commingle, for investment purposes, the assets of the Fund with
the assets of any other qualified retirement plan trust fund of the
Employer, provided that the records of the Trustee shall reflect the
relative interests of the separate trusts in such commingled fund............63
(o) To grant options for the sale or other disposition of Fund assets; to
purchase options for the acquisition of assets of any type; and to
buy and sell (including short sales) call options, put options and
futures contracts............................................................63
(p) To have and to exercise such other and additional powers as may be
advisable or proper in its opinion for the effective and economical
administration of the Fund...................................................63
(q) The Plan and Declaration of Trust - U.S. Bank National Association
Collective and Pooled Investment Funds For Employee Retirement
Benefit Trusts, as amended from time to time, is hereby made a part
of this Plan Statement. Notwithstanding any other provision of this
Plan Statement to the contrary, the Trustee may cause any part or all
of the Fund, without limitation as to amount, to be commingled with
the money of trusts created by others, by causing such money to be
invested as a part of any or all of the funds created by the
aforementioned Declaration of Trust and the Fund so added to any of
said funds at any time shall be subject to all of the provisions of
said Declaration of Trust as it is amended from time to time.................63
(r) To deposit any part or all of the assets in any collective trust fund
which is now or hereafter maintained by the Trustee, an agent of the
Trustee or an Investment Manager as a medium for the collective
investment of funds of pension, profit sharing or other employee
benefit plans, and which is qualified under section 401(a) of the
Code and exempt from taxation under section 501(a) of the Code, and
to withdraw any part or all of the assets so deposited and any assets
deposited with the trustee of a collective trust fund shall be held
and invested by the trustee thereunder pursuant to all the terms and
conditions of the trust agreement or declaration of trust
establishing the fund, which are hereby incorporated herein by
reference and shall prevail over any contrary provisions of this Plan
Statement....................................................................63
(s) To deposit any part or all of the assets with the trustee of any master
investment
-xxix-
<PAGE>
trust maintained by the Principal Sponsor for the investment of assets
of qualified pension, profit sharing or stock bonus plans it or its
subsidiaries maintain and to withdraw any part or all of the assets so
deposited, and any assets deposited with the trustee of a master
investment trust shall be held and invested by that trustee pursuant to
the terms and conditions of the master investment trust document, which
is hereby incorporated herein by reference and shall prevail over any
contrary provision of this Plan Statement....................................63
1.54. Investment Managers............................................................................63
SECTION 139 APPOINTMENT AND QUALIFICATIONS.....................................................64
SECTION 140 REMOVAL............................................................................64
SECTION 141 RELATION TO OTHER FIDUCIARIES......................................................64
1.55. NO INVESTMENT IN EMPLOYER REAL PROPERTY........................................................64
1.56. INVESTMENT IN EMPLOYER SECURITIES..............................................................64
1.57. FIDUCIARY PRINCIPLES...........................................................................64
(a) for the exclusive purpose of:................................................65
(b) with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise
of a like character and with like aims,......................................65
(c) by diversifying the investments of the Plan so as to minimize the
risk of large losses, unless under the circumstances it is clearly
prudent not to do so, and....................................................65
(d) in accordance with the documents and instruments governing the Plan,
insofar as they are consistent with the provisions of ERISA..................65
1.58. PROHIBITED TRANSACTIONS........................................................................65
(e) sale, exchange or leasing of any property between the Plan and such
person,......................................................................65
(f) lending of money or other extension of credit between the Plan and
such person,.................................................................65
(g) furnishing of goods, services or facilities between the Plan and such
person,......................................................................65
(h) transfer to, or use by or for the benefit of, such person of the
income or assets of the Plan,................................................65
(i) act by such person who is a fiduciary hereunder whereby the fiduciary
deals with the income or assets of the Plan in the fiduciary's own
interest or for the fiduciary's own account, or..............................65
(j) receipt of any consideration for the fiduciary's own personal account
by such person who is a fiduciary from any party dealing with the
Plan in connection with a transaction involving the income or assets
of the Plan..................................................................65
1.59. INDEMNITY .............................................................................65
1.60. INVESTMENT IN INSURANCE........................................................................66
1.61. DETERMINATIONS .............................................................................67
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<PAGE>
1.62. RULES AND REGULATIONS..........................................................................67
1.63. Method of Executing Instruments................................................................67
SECTION 143 EMPLOYER OR COMMITTEE..............................................................67
SECTION 144 TRUSTEE............................................................................67
1.64. CLAIMS PROCEDURE .............................................................................67
SECTION 145 ORIGINAL CLAIM.....................................................................67
(a) the specific reasons for the denial,.........................................68
(b) the specific references to the pertinent provisions of this Plan
Statement on which the denial is based,......................................68
(c) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material or information is necessary, and....................................68
(d) an explanation of the claims review procedure set forth in this
Section......................................................................68
SECTION 146 CLAIMS REVIEW PROCEDURE............................................................68
SECTION 147 GENERAL RULES......................................................................68
(a) No inquiry or question shall be deemed to be a claim or a request for
a review of a denied claim unless made in accordance with the claims
procedure. The Committee may require that any claim for benefits and
any request for a review of a denied claim be filed on forms to be
furnished by the Committee upon request......................................68
(b) All decisions on claims and on requests for a review of denied claims
shall be made by the Committee unless delegated as provided in
Section 12.2.................................................................68
(c) The Committee may, in its discretion, hold one or more hearings on a
claim or a request for a review of a denied claim............................68
(d) Claimants may be represented by a lawyer or other representative at
their own expense, but the Committee reserves the right to require
the claimant to furnish written authorization. A claimant's
representative shall be entitled to copies of all notices given to
the claimant.................................................................68
(e) The decision of the Committee on a claim and on a request for a
review of a denied claim shall be served on the claimant in writing.
If a decision or notice is not received by a claimant within the time
specified, the claim or request for a review of a denied claim shall
be deemed to have been denied................................................68
(f) Prior to filing a claim or a request for a review of a denied claim,
the claimant or the claimant's representative shall have a reasonable
opportunity to review a copy of this Plan Statement and all other
pertinent documents in the possession of the Employer, the Committee
and the Trustee..............................................................69
(g) The Committee may, in its discretion, rely upon any applicable
statute of limitations as a basis for denial of any claims...................69
SECTION 148 EXHAUSTION OF ADMINISTRATIVE REMEDIES..............................................69
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1.65. INFORMATION FURNISHED BY PARTICIPANTS..........................................................69
1.66. Principal Sponsor..............................................................................70
SECTION 150 OFFICERS...........................................................................70
SECTION 151 CHIEF EXECUTIVE OFFICER............................................................70
SECTION 152 BOARD OF DIRECTORS.................................................................70
(a) to amend this Plan Statement; to terminate the Plan,.........................70
(b) to appoint or remove a Trustee or accept the resignation of a
Trustee; to appoint or remove members of the Committee; to appoint or
remove an Investment Manager,................................................70
(c) to reduce, suspend or discontinue contributions to the Plan,.................70
(d) to consent to the adoption of the Plan by other business entities; to
establish conditions and limitations upon such adoption of the Plan
by other business entities; to designate Affiliates, and.....................70
(e) to cause the Plan to be merged with another plan and to transfer
assets and liabilities between the Plan and another..........................70
1.67. Committee .............................................................................70
SECTION 153 APPOINTMENT AND REMOVAL............................................................70
SECTION 154 AUTOMATIC REMOVAL..................................................................70
SECTION 155 AUTHORITY..........................................................................71
(a) establish rules for the functioning of the Committee, including the
times and places for holding meetings, the notices to be given in
respect of such meetings and the number of members who shall
constitute a quorum for the transaction of business,.........................71
(b) organize and delegate to such of its members as it shall select
authority to execute or authenticate rules, advisory opinions or
instructions, and other instruments adopted or authorized by the
Committee; adopt such bylaws or regulations as it deems desirable for
the conduct of its affairs; appoint a secretary, who need not be a
member of the Committee, to keep its records and otherwise assist the
Committee in the performance of its duties; keep a record of all its
proceedings and acts and keep all books of account, records and other
data as may be necessary for the proper administration of the Plan;
notify the Employer and the Trustee of any action taken by the
Committee and, when required, notify any other interested person or
persons,.....................................................................71
(c) determine from the records of the Employer the compensation, service
records, status and other facts regarding Participants and other
employees,...................................................................71
(d) cause to be compiled at least annually, from the records of the
Committee and the reports and accountings of the Trustee, a report or
accounting of the status of the Plan and the Accounts of the
Participants, and make it available to each Participant who shall
have the right to examine that part of such report or accounting (or
a true and correct copy of such part) which
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<PAGE>
sets forth the Participant's benefits and ratable interest in the
Fund,........................................................................71
(e) prescribe forms to be used for applications for participation,
benefits, notifications, etc., as may be required in the
administration of the Plan,..................................................71
(f) set up such rules as are deemed necessary to carry out the terms of
this Plan Statement,.........................................................71
(g) resolve all questions of administration of the Plan not specifically
referred to in this Section,.................................................71
(h) delegate or redelegate to one or more persons, jointly or severally,
and whether or not such persons are members of the Committee or
employees of the Employer, such functions assigned to the Committee
hereunder as it may from time to time deem advisable, and....................71
(i) perform all other acts reasonably necessary for administering the
Plan and carrying out the provisions of this Plan Statement and
performing the duties imposed on it..........................................71
SECTION 156 MAJORITY DECISIONS.................................................................71
1.68. Limitation on Authority........................................................................71
SECTION 157 FIDUCIARIES GENERALLY..............................................................71
SECTION 158 TRUSTEE............................................................................72
1.69. CONFLICT OF INTEREST...........................................................................72
1.70. DUAL CAPACITY .............................................................................72
1.71. ADMINISTRATOR .............................................................................72
1.72. NAMED FIDUCIARIES .............................................................................72
1.73. SERVICE OF PROCESS.............................................................................73
1.74. ADMINISTRATIVE EXPENSES........................................................................73
1.75. IRS QUALIFICATION .............................................................................73
1.76. Disclaimers .............................................................................74
SECTION 160 EFFECT ON EMPLOYMENT...............................................................74
SECTION 161 SOLE SOURCE OF BENEFITS............................................................74
SECTION 162 CO-FIDUCIARY MATTERS...............................................................75
1.77. REVERSION OF FUND PROHIBITED...................................................................75
1.78. CONTINGENT TOP HEAVY PLAN RULES................................................................75
1.79. CONTINUITY .............................................................................75
1.80. EXECUTION IN COUNTERPARTS......................................................................75
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SIGNATURES ......................................................................................................82
SCHEDULE I.....................................................................................................SI-1
APPENDIX A -- LIMITATION ON ANNUAL ADDITIONS AND
ANNUAL BENEFITS...................................................................................A-1
APPENDIX B -- CONTINGENT TOP HEAVY PLAN RULES...................................................................B-1
APPENDIX C -- QUALIFIED DOMESTIC RELATION ORDERS................................................................C-1
APPENDIX D -- TEFRA Section 242(b) TRANSITIONAL RULES..........................................................D-1
</TABLE>
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<PAGE>
NORTHSTAR COMPUTER FORMS, INC.
401(k) PROFIT SHARING PLAN TRUST AGREEMENT
(1998 RESTATEMENT)
THIS AGREEMENT, Made and entered into as of _______________, 1998, by
and between NORTHSTAR COMPUTER FORMS, INC., a Minnesota corporation (the
"Principal Sponsor"), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association organized under the laws of the United States, as trustee (together
with its successors, the "Trustee");
WITNESSETH: That
WHEREAS, The Principal Sponsor has previously established and maintains
a profit sharing plan (the "Plan") which, in its most recent amended and
restated form, is embodied in a document dated September 9, 1994 and entitled
"Northstar Computer Forms, Inc. 401(k) Profit Sharing Plan"; and
WHEREAS, The Principal Sponsor has reserved to itself the power to
amend the Plan documents; and
WHEREAS, Effective December 1, 1998, U.S. Bank National Association
will have succeeded to all the duties, powers, rights, privileges and
discretions previously conferred upon Roger Bredesen and E. Faye Bredesen, as
trustees; and
WHEREAS, The Principal Sponsor desires to amend and restate the Plan
documents in a single document in the manner hereinafter set forth;
NOW, THEREFORE, The Plan documents are hereby amended and restated,
effective as of December 1, 1998, to read in full as follows:
<PAGE>
INTRODUCTION
DEFINITIONS. When the following terms are used herein with initial capital
letters, they shall have the following meanings:
ACCOUNTS -- the following Accounts will be maintained under the Plan for
Participants:
TOTAL ACCOUNT -- FOR CONVENIENCE OF REFERENCE, A PARTICIPANT'S ENTIRE INTEREST
IN THE FUND, INCLUDING THE PARTICIPANT'S ELECTIVE ACCOUNT, EMPLOYER
CONTRIBUTIONS ACCOUNT, DEDUCTIBLE VOLUNTARY ACCOUNT, NONDEDUCTIBLE VOLUNTARY
ACCOUNT, ROLLOVER ACCOUNT AND TRANSFER ACCOUNT.
ELECTIVE ACCOUNT -- THE ACCOUNT MAINTAINED FOR EACH PARTICIPANT TO WHICH ARE
CREDITED THE EMPLOYER CONTRIBUTIONS MADE IN CONSIDERATION OF SUCH PARTICIPANT'S
SALARY REDUCTION CONTRIBUTIONS PURSUANT TO SECTION 3.2 (OR COMPARABLE PROVISIONS
OF THE PRIOR PLAN STATEMENT, IF ANY), OR EMPLOYER CONTRIBUTIONS MADE PURSUANT TO
SECTION 3.4, TOGETHER WITH ANY INCREASE OR DECREASE THEREON.
EMPLOYER CONTRIBUTIONS ACCOUNT (FORMERLY KNOWN AS THE PARTICIPANT'S ACCOUNT) --
THE ACCOUNT MAINTAINED FOR EACH PARTICIPANT TO WHICH IS CREDITED THE
PARTICIPANT'S ALLOCABLE SHARE OF THE EMPLOYER CONTRIBUTIONS MADE PURSUANT TO
SECTION 3.5 (OR COMPARABLE PROVISIONS OF THE PRIOR PLAN STATEMENT, IF ANY),
TOGETHER WITH ANY INCREASE OR DECREASE THEREON.
DEDUCTIBLE VOLUNTARY ACCOUNT (FORMERLY KNOWN AS THE QUALIFIED VOLUNTARY EMPLOYEE
CONTRIBUTION ACCOUNT) -- THE ACCOUNT MAINTAINED FOR EACH PARTICIPANT TO WHICH
ARE CREDITED THE "QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS" MADE PURSUANT TO
THE PRIOR PLAN STATEMENT, IF ANY, TOGETHER WITH ANY INCREASE OR DECREASE
THEREON.
NONDEDUCTIBLE VOLUNTARY ACCOUNT (FORMERLY KNOWN AS THE VOLUNTARY CONTRIBUTION
ACCOUNT) -- THE ACCOUNT MAINTAINED FOR EACH PARTICIPANT TO WHICH ARE CREDITED
EACH PARTICIPANT'S NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS MADE PURSUANT TO
SECTION 3.3 (OR COMPARABLE PROVISIONS OF THE PRIOR PLAN STATEMENT), TOGETHER
WITH ANY INCREASE OR DECREASE THEREON.
ROLLOVER ACCOUNT (FORMERLY KNOWN AS THE PARTICIPANT'S ROLLOVER ACCOUNT) -- THE
ACCOUNT MAINTAINED FOR EACH PARTICIPANT TO WHICH ARE CREDITED THE PARTICIPANT'S
ROLLOVER CONTRIBUTIONS MADE PURSUANT TO SECTION 3.9 (OR COMPARABLE PROVISIONS OF
THE PRIOR PLAN STATEMENT, IF ANY), TOGETHER WITH ANY INCREASE OR DECREASE
THEREON.
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<PAGE>
TRANSFER ACCOUNT -- THE ACCOUNT MAINTAINED FOR EACH PARTICIPANT TO WHICH IS
CREDITED THE AMOUNT TRANSFERRED TO THE TRUSTEE PURSUANT TO SECTION 9.3, AND NOT
ALLOCATED TO ANY OTHER ACCOUNT PURSUANT TO THAT SECTION (OR COMPARABLE
PROVISIONS OF THE PRIOR PLAN STATEMENT, IF ANY), TOGETHER WITH ANY INCREASE OR
DECREASE THEREON.
AFFILIATE -- a business entity which is under "common control" with the Employer
or which is a member of an "affiliated service group" that includes the
Employer, as those terms are defined in section 414(b), (c) and (m) of the Code.
A business entity which is a predecessor to the Employer shall be treated as an
Affiliate if the Employer maintains a plan of such predecessor business entity
or if, and to the extent that, such treatment is otherwise required by
regulations under section 414(a) of the Code. A business entity shall also be
treated as an Affiliate if, and to the extent that, such treatment is required
by regulations under section 414(o) of the Code. In addition to said required
treatment, the Principal Sponsor may, in its discretion, designate as an
Affiliate any business entity which is not such a "common control," "affiliated
service group" or "predecessor" business entity but which is otherwise
affiliated with the Employer, subject to such limitations as the Principal
Sponsor may impose.
ANNUAL VALUATION DATE -- each October 31.
BENEFICIARY -- a person designated by a Participant (or automatically by
operation of this Plan Statement) to receive all or a part of the Participant's
Vested Total Account in the event of the Participant's death prior to full
distribution thereof. A person so designated shall not be considered a
Beneficiary until the death of the Participant.
CODE -- the Internal Revenue Code of 1986, including applicable regulations for
the specified section of the Code. Any reference in this Plan Statement to a
section of the Code, including the applicable regulation, shall be considered
also to mean and refer to any subsequent amendment or replacement of that
section or regulation.
COMMITTEE -- the Committee established in accordance with the provisions of
Section 12.2.
DISABILITY -- a medically determinable physical or mental impairment which: (i)
renders the individual incapable of performing any substantial gainful
employment, (ii) can be expected to be of long-continued and indefinite duration
or result in death, and (iii) is evidenced by a certification to this effect by
a doctor of medicine approved by the Committee. In lieu of such a certification,
the Committee may accept, as proof of Disability, the official written
determination that the individual will be eligible for disability benefits under
the federal Social Security Act as now enacted or hereinafter amended (when any
waiting period expires). Notwithstanding the foregoing, no Participant will be
considered to have a Disability unless such doctor's determination or official
Social Security determination is received by the Committee within twelve (12)
months after the
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<PAGE>
Participant's last day of active work with the Employer or an Affiliate. The
Committee shall determine the date on which the Disability shall have occurred
if such determination is necessary.
DISTRIBUTION DATE -- the Annual Valuation Date and each other Valuation Date
under the Plan. Distribution Dates are the Valuation Dates as of which
distributions may be made from the Plan.
EFFECTIVE DATE -- December 1, 1998.
ELIGIBILITY SERVICE -- a measure of an employee's service with an Employer and
all Affiliates (stated as a number of years) which is equal to the number of
computation periods for which the employee is credited with one thousand (1,000)
or more Hours of Service; subject, however, to the following rules:
COMPUTATION PERIODS. THE COMPUTATION PERIODS FOR DETERMINING ELIGIBILITY SERVICE
SHALL BE THE TWELVE (12) CONSECUTIVE MONTH PERIOD BEGINNING WITH THE DATE THE
EMPLOYEE FIRST PERFORMS AN HOUR OF SERVICE AND ALL PLAN YEARS BEGINNING AFTER
SUCH DATE (IRRESPECTIVE OF ANY TERMINATION OF EMPLOYMENT AND SUBSEQUENT
REEMPLOYMENT).
COMPLETION. A YEAR OF ELIGIBILITY SERVICE SHALL BE DEEMED COMPLETED ONLY AS OF
THE LAST DAY OF THE COMPUTATION PERIOD (IRRESPECTIVE OF THE DATE IN SUCH PERIOD
THAT THE EMPLOYEE COMPLETED ONE THOUSAND HOURS OF SERVICE). (FRACTIONAL YEARS OF
ELIGIBILITY SERVICE SHALL NOT BE CREDITED.)
PRE-EFFECTIVE DATE SERVICE. ELIGIBILITY SERVICE SHALL BE CREDITED FOR HOURS OF
SERVICE EARNED AND COMPUTATION PERIODS COMPLETED BEFORE THE EFFECTIVE DATE AS IF
THIS PLAN STATEMENT WERE THEN IN EFFECT.
EMPLOYER -- the Principal Sponsor, any business entity that adopts the Plan
pursuant to Section 9.4, and any successor thereof that adopts the Plan.
Schedule I to this Plan Statement is a list of participating Employers that have
adopted the Plan as of the Effective Date.
ENROLLMENT DATE -- (i) November 1 and May 1, (ii) the date upon which an
individual who had previously met the age and service requirements of Section
2.1 but who was not then in Recognized Employment is transferred to Recognized
Employment (applicable for such individual only), and (iii) the date upon which
an individual who had previously been a Participant is reemployed in Recognized
Employment (applicable for such individual only).
ERISA -- the Employee Retirement Income Security Act of 1974, including
applicable regulations for the specified section of ERISA. Any reference in this
Plan Statement to a section of ERISA, including the applicable regulation, shall
be considered also to mean and refer to any subsequent amendment or replacement
of that section or regulation.
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<PAGE>
EVENT OF MATURITY -- any of the occurrences described in Section 6 by reason of
which a Participant or Beneficiary may become entitled to a distribution from
the Plan.
FUND -- the assets of the Plan held by the Trustee from time to time, including
all contributions and the investments and reinvestments, earnings and profits
thereon, whether invested under the general investment authority of the Trustee
or under the terms applicable to any Subfund established pursuant to Section
4.1.
HIGHLY COMPENSATED EMPLOYEE -- any employee who (a) is a five percent (5%) owner
(as defined in Appendix B) at any time during the current Plan Year or the
preceding Plan Year; or (b) receives compensation from an Employer and all
Affiliates during the preceding Plan Year in excess of Eighty Thousand Dollars
($80,000) (as adjusted under the Code for cost of living increases); provided
however, the Committee may elect to limit the number of Highly Compensated
Employees to the top 20% of employees ranked on the basis of compensation in the
preceding Plan Year, excluding those employees described in section 414(q)(5) of
the Code. For this purpose, "compensation" means compensation within the meaning
of section 415(c)(3) of the Code. Compensation for any employee who performed
services for only part of a year is not annualized for this purpose.
HOURS OF SERVICE -- a measure of an employee's service with an Employer and all
Affiliates, determined for a given computation period and equal to the number of
hours credited to the employee according to the following rules:
PAID DUTY. AN HOUR OF SERVICE SHALL BE CREDITED FOR EACH HOUR FOR WHICH THE
EMPLOYEE IS PAID, OR ENTITLED TO PAYMENT, FOR THE PERFORMANCE OF DUTIES FOR THE
EMPLOYER OR AN AFFILIATE. THESE HOURS SHALL BE CREDITED TO THE EMPLOYEE FOR THE
COMPUTATION PERIOD OR PERIODS IN WHICH THE DUTIES ARE PERFORMED.
PAID NONDUTY. AN HOUR OF SERVICE SHALL BE CREDITED FOR EACH HOUR FOR WHICH THE
EMPLOYEE IS PAID, OR ENTITLED TO PAYMENT, BY THE EMPLOYER OR AN AFFILIATE ON
ACCOUNT OF A PERIOD OF TIME DURING WHICH NO DUTIES ARE PERFORMED (IRRESPECTIVE
OF WHETHER THE EMPLOYMENT RELATIONSHIP HAS TERMINATED) DUE TO VACATION, HOLIDAY,
ILLNESS, INCAPACITY (INCLUDING DISABILITY), LAYOFF, JURY DUTY, MILITARY DUTY OR
LEAVE OF ABSENCE; PROVIDED, HOWEVER, THAT:
NO MORE THAN FIVE HUNDRED ONE (501) HOURS OF SERVICE SHALL BE CREDITED ON
ACCOUNT OF A SINGLE CONTINUOUS PERIOD DURING WHICH THE EMPLOYEE PERFORMS NO
DUTIES (WHETHER OR NOT SUCH PERIOD OCCURS IN A SINGLE COMPUTATION PERIOD),
NO HOURS OF SERVICE SHALL BE CREDITED ON ACCOUNT OF PAYMENTS MADE UNDER A PLAN
MAINTAINED SOLELY FOR THE PURPOSE OF COMPLYING WITH APPLICABLE WORKERS'
COMPENSATION, UNEMPLOYMENT COMPENSATION OR DISABILITY INSURANCE LAWS,
NO HOURS OF SERVICE SHALL BE CREDITED ON ACCOUNT OF PAYMENTS WHICH SOLELY
REIMBURSE THE EMPLOYEE FOR MEDICAL OR MEDICALLY RELATED EXPENSES INCURRED BY THE
EMPLOYEE, AND
-5-
<PAGE>
PAYMENTS SHALL BE DEEMED MADE BY OR DUE FROM THE EMPLOYER OR AN AFFILIATE
WHETHER MADE DIRECTLY OR INDIRECTLY FROM A TRUST FUND OR AN INSURER TO WHICH THE
EMPLOYER OR AN AFFILIATE CONTRIBUTES OR PAYS PREMIUMS.
These hours shall be credited to the employee for the
computation period for which payment is made or, if
the payment is not computed by reference to units of
time, the hours shall be credited to the first
computation period in which the event, for which any
part of the payment is made, occurred.
BACK PAY. AN HOUR OF SERVICE SHALL BE CREDITED FOR EACH HOUR FOR WHICH BACK PAY,
IRRESPECTIVE OF MITIGATION OF DAMAGES, HAS BEEN EITHER AWARDED OR AGREED TO BY
THE EMPLOYER OR AN AFFILIATE. THE SAME HOURS OF SERVICE CREDITED UNDER PARAGRAPH
(a) OR (b) SHALL NOT BE CREDITED UNDER THIS PARAGRAPH (c). THE CREDITING OF
HOURS OF SERVICE UNDER THIS PARAGRAPH (c) FOR PERIODS AND PAYMENTS DESCRIBED IN
PARAGRAPH (b) SHALL BE SUBJECT TO ALL THE LIMITATIONS OF THAT PARAGRAPH. THESE
HOURS SHALL BE CREDITED TO THE EMPLOYEE FOR THE COMPUTATION PERIOD OR PERIODS TO
WHICH THE AWARD OR AGREEMENT PERTAINS RATHER THAN THE COMPUTATION PERIOD IN
WHICH THE AWARD, AGREEMENT OR PAYMENT IS MADE.
UNPAID ABSENCES.
MILITARY LEAVES. DURING SERVICE IN THE ARMED FORCES OF THE UNITED STATES, IF
THE EMPLOYEE BOTH ENTERED SUCH SERVICE AND RETURNED TO EMPLOYMENT WITH THE
EMPLOYER OR AN AFFILIATE FROM SUCH SERVICE UNDER CIRCUMSTANCES ENTITLING THE
EMPLOYEE TO REEMPLOYMENT RIGHTS GRANTED VETERANS UNDER FEDERAL LAW, THE EMPLOYEE
SHALL BE CREDITED WITH THE NUMBER OF HOURS OF SERVICE WHICH OTHERWISE WOULD
NORMALLY HAVE BEEN CREDITED TO SUCH EMPLOYEE BUT FOR SUCH ABSENCE; PROVIDED,
HOWEVER, THAT IF THE EMPLOYEE DOES NOT RETURN TO EMPLOYMENT FOR ANY REASON OTHER
THAN DEATH, DISABILITY OR ATTAINMENT OF NORMAL RETIREMENT AGE WITHIN THE TIME
PRESCRIBED BY LAW FOR THE RETENTION OF VETERAN'S REEMPLOYMENT RIGHTS, SUCH HOURS
OF SERVICE SHALL NOT BE CREDITED.
LEAVES OF ABSENCE. IF (AND TO THE EXTENT THAT) THE COMMITTEE SO PROVIDES IN
RULES, DURING EACH UNPAID LEAVE OF ABSENCE AUTHORIZED BY THE EMPLOYER OR AN
AFFILIATE FOR PLAN PURPOSES UNDER SUCH RULES, THE EMPLOYEE SHALL BE CREDITED
WITH THE NUMBER OF HOURS OF SERVICE WHICH OTHERWISE WOULD NORMALLY HAVE BEEN
CREDITED TO SUCH EMPLOYEE BUT FOR SUCH ABSENCE; PROVIDED, HOWEVER, THAT IF THE
EMPLOYEE DOES NOT RETURN TO EMPLOYMENT FOR ANY REASON OTHER THAN DEATH,
DISABILITY OR ATTAINMENT OF NORMAL RETIREMENT AGE AT THE EXPIRATION OF THE LEAVE
OF ABSENCE, SUCH HOURS OF SERVICE SHALL NOT BE CREDITED.
PARENTING LEAVES. TO THE EXTENT NOT OTHERWISE CREDITED AND SOLELY FOR THE
PURPOSE OF DETERMINING WHETHER A ONE-YEAR BREAK IN SERVICE HAS OCCURRED, HOURS
OF SERVICE SHALL BE CREDITED TO AN EMPLOYEE FOR ANY PERIOD OF ABSENCE FROM WORK
BEGINNING IN PLAN YEARS COMMENCING AFTER DECEMBER 31, 1984, DUE TO PREGNANCY OF
THE EMPLOYEE, THE BIRTH OF A CHILD OF THE EMPLOYEE, THE PLACEMENT OF A CHILD
WITH THE EMPLOYEE IN CONNECTION WITH THE ADOPTION OF SUCH CHILD BY THE EMPLOYEE
OR FOR THE PURPOSE OF CARING FOR SUCH CHILD FOR A PERIOD BEGINNING IMMEDIATELY
FOLLOWING SUCH BIRTH OR PLACEMENT. THE EMPLOYEE SHALL BE CREDITED WITH THE
NUMBER OF HOURS OF SERVICE WHICH OTHERWISE WOULD NORMALLY HAVE BEEN CREDITED TO
SUCH EMPLOYEE BUT FOR SUCH ABSENCE. IF IT IS IMPOSSIBLE TO DETERMINE THE NUMBER
OF HOURS OF SERVICE WHICH WOULD
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<PAGE>
OTHERWISE NORMALLY HAVE BEEN SO CREDITED, THE EMPLOYEE SHALL BE CREDITED WITH
EIGHT (8) HOURS OF SERVICE FOR EACH DAY OF SUCH ABSENCE. IN NO EVENT, HOWEVER,
SHALL THE NUMBER OF HOURS OF SERVICE CREDITED FOR ANY SUCH ABSENCE EXCEED FIVE
HUNDRED ONE (501) HOURS OF SERVICE. SUCH HOURS OF SERVICE SHALL BE CREDITED TO
THE COMPUTATION PERIOD IN WHICH SUCH ABSENCE FROM WORK BEGINS IF CREDITING ALL
OR ANY PORTION OF SUCH HOURS OF SERVICE IS NECESSARY TO PREVENT THE EMPLOYEE
FROM INCURRING A ONE-YEAR BREAK IN SERVICE IN SUCH COMPUTATION PERIOD. IF THE
CREDITING OF SUCH HOURS OF SERVICE IS NOT NECESSARY TO PREVENT THE OCCURRENCE OF
A ONE-YEAR BREAK IN SERVICE IN THAT COMPUTATION PERIOD, SUCH HOURS OF SERVICE
SHALL BE CREDITED IN THE IMMEDIATELY FOLLOWING COMPUTATION PERIOD (EVEN THOUGH
NO PART OF SUCH ABSENCE MAY HAVE OCCURRED IN SUCH SUBSEQUENT COMPUTATION
PERIOD). THESE HOURS OF SERVICE SHALL NOT BE CREDITED UNTIL THE EMPLOYEE
FURNISHES TIMELY INFORMATION WHICH MAY BE REASONABLY REQUIRED BY THE COMMITTEE
TO ESTABLISH THAT THE ABSENCE FROM WORK IS FOR A REASON FOR WHICH THESE HOURS OF
SERVICE MAY BE CREDITED.
SPECIAL RULES. FOR PERIODS PRIOR TO JANUARY 1, 1976, HOURS OF SERVICE MAY BE
DETERMINED USING WHATEVER RECORDS ARE REASONABLY ACCESSIBLE AND BY MAKING
WHATEVER CALCULATIONS ARE NECESSARY TO DETERMINE THE APPROXIMATE NUMBER OF HOURS
OF SERVICE COMPLETED DURING SUCH PRIOR PERIOD. TO THE EXTENT NOT INCONSISTENT
WITH OTHER PROVISIONS HEREOF, DEPARTMENT OF LABOR REGULATIONS 29 C.F.R. Sections
2530.200B-2(b) AND (c) ARE HEREBY INCORPORATED BY REFERENCE HEREIN. TO THE
EXTENT REQUIRED UNDER SECTION 414 OF THE CODE, SERVICES OF LEASED OWNERS, LEASED
MANAGERS, SHARED EMPLOYEES, SHARED LEASED EMPLOYEES AND OTHER SIMILAR
CLASSIFICATIONS (EXCLUDING LEASED EMPLOYEES) BY THE EMPLOYER OR AN AFFILIATE
SHALL BE TAKEN INTO ACCOUNT AS IF SUCH SERVICES WERE PERFORMED AS A COMMON LAW
EMPLOYEE OF THE EMPLOYER FOR THE PURPOSES OF DETERMINING ELIGIBILITY SERVICE,
VESTING SERVICE AND ONE-YEAR BREAKS IN SERVICE AS APPLIED TO VESTING SERVICE AND
ELIGIBILITY SERVICE. APPLICATION OF THE LEASED EMPLOYEE RULES UNDER SECTION
414(n) OF THE CODE SHALL BE SUBJECT TO THE FOLLOWING: (i) "CONTINGENT SERVICES"
SHALL MEAN SERVICES PERFORMED BY A PERSON FOR THE EMPLOYER OR AN AFFILIATE
DURING THE PERIOD THE PERSON HAS NOT PERFORMED THE SERVICES ON A SUBSTANTIALLY
FULL TIME BASIS FOR A PERIOD OF AT LEAST TWELVE (12) CONSECUTIVE MONTHS, (ii)
EXCEPT AS PROVIDED IN (iii), CONTINGENT SERVICES SHALL NOT BE TAKEN INTO ACCOUNT
FOR PURPOSES OF DETERMINING ELIGIBILITY SERVICE, VESTING SERVICE AND ONE YEAR
BREAKS IN SERVICE AS APPLIED TO VESTING SERVICE AND ELIGIBILITY SERVICE, (iii)
CONTINGENT SERVICES PERFORMED BY A PERSON WHO HAS BECOME A LEASED EMPLOYEE SHALL
BE TAKEN INTO ACCOUNT FOR PURPOSES OF DETERMINING ELIGIBILITY SERVICE, VESTING
SERVICE, AND ONE-YEAR BREAKS IN SERVICE AS APPLIED TO VESTING SERVICE AND
ELIGIBILITY SERVICE, AND (iv) ALL SERVICE PERFORMED AS A LEASED EMPLOYEE (I.E,
ALL SERVICE FOLLOWING THE DATE AN INDIVIDUAL HAS SATISFIED ALL THREE
REQUIREMENTS FOR BECOMING A LEASED EMPLOYEE) SHALL BE TAKEN INTO ACCOUNT FOR
PURPOSES OF DETERMINING ELIGIBILITY SERVICE, VESTING SERVICE AND ONE-YEAR BREAKS
IN SERVICE AS APPLIED TO VESTING SERVICE AND ELIGIBILITY SERVICE.
INVESTMENT MANAGER -- the person or persons, other than the Trustee, appointed
pursuant to Section 10.7 to manage all or a portion of the Fund or any Subfund.
LEASED EMPLOYEE -- any individual (other than an employee of the Employer or an
Affiliate) who performs services for the Employer or an Affiliate if (i)
services are performed under an agreement between the Employer or an Affiliate
and an individual or company, (ii) the individual performs services for the
Employer on a substantially full time basis for a period of at least twelve (12)
consecutive months, and (iii) the individual's services are performed under the
primary direction or control of the Employer or an Affiliate. In determining
whether an individual is a Leased Employee of the Employer or an Affiliate, all
prior service with the Employer or an Affiliate (including employment as a
common law employee) shall be used for purposes of satisfying (ii) above. No
individual shall be considered a Leased Employee unless and until all conditions
have been satisfied.
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NORMAL RETIREMENT AGE -- the date a Participant attains age sixty-two (62)
years.
ONE-YEAR BREAK IN SERVICE -- a Plan Year for which an employee is not credited
with more than five hundred (500) Hours of Service. (A One-Year Break in Service
shall be deemed to occur only on the last day of such Plan Year.)
PARTICIPANT -- an employee of the Employer who becomes a Participant in the Plan
in accordance with the provisions of Section 2 or any comparable provision of
the Prior Plan Statement. An employee who has become a Participant shall be
considered to continue as a Participant in the Plan until the date of the
Participant's death or, if earlier, the date when the Participant is no longer
employed in Recognized Employment and upon which the Participant no longer has
any Account under the Plan (that is, the Participant has both received a
distribution of all of the Participant's Vested Total Account, if any, and the
Participant's non-Vested Total Account, if any, has been forfeited as provided
in Section 6.2).
PLAN -- the tax-qualified profit sharing plan of the Employer established for
the benefit of employees eligible to participate therein, as first set forth in
the Prior Plan Statement and as amended and restated in this Plan Statement. (As
used herein, "Plan" refers to the legal entity established by the Employer and
not to the documents pursuant to which the Plan is maintained. Those documents
are referred to herein as the "Prior Plan Statement" and the "Plan Statement.")
The Plan shall be referred to as the "NORTHSTAR COMPUTER FORMS, INC. 401(k)
PROFIT SHARING PLAN."
PLAN STATEMENT -- this document entitled "NORTHSTAR COMPUTER FORMS, INC. 401(k)
PROFIT SHARING PLAN TRUST AGREEMENT (1998 Restatement)" as adopted by the
Principal Sponsor effective as of December 1, 1998, as the same may be amended
from time to time.
PLAN YEAR -- the twelve (12) consecutive month period ending on any Annual
Valuation Date.
PRINCIPAL SPONSOR -- Northstar Computer Forms, Inc., a Minnesota corporation.
PRIOR PLAN STATEMENT -- the series of documents pursuant to which the Plan was
established effective as of November 1, 1964, and operated thereafter until the
Effective Date.
RECOGNIZED COMPENSATION -- wages within the meaning of section 3401(a) of the
Code for purposes of federal income tax withholding at the source but determined
without regard to any rules 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
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agricultural labor in section 3401(a)(2) of the Code) and paid to the
Participant by the Employer for the applicable period; subject, however, to the
following:
INCLUDED ITEMS. IN DETERMINING A PARTICIPANT'S RECOGNIZED COMPENSATION THERE
SHALL BE INCLUDED ELECTIVE CONTRIBUTIONS MADE BY THE EMPLOYER ON BEHALF OF THE
PARTICIPANT THAT ARE NOT INCLUDIBLE IN GROSS INCOME UNDER SECTIONS 125,
402(e)(3), 402(h), 403(b), 414(h)(2) AND 457 OF THE CODE INCLUDING ELECTIVE
CONTRIBUTIONS AUTHORIZED BY THE PARTICIPANT UNDER A SALARY REDUCTION AGREEMENT,
A CAFETERIA PLAN OR ANY OTHER QUALIFIED CASH OR DEFERRED ARRANGEMENT UNDER
SECTION 401(k) OF THE CODE.
EXCLUDED ITEMS. IN DETERMINING A PARTICIPANT'S RECOGNIZED COMPENSATION THERE
SHALL BE EXCLUDED ALL OF THE FOLLOWING: (i) REIMBURSEMENTS OR OTHER EXPENSE
ALLOWANCES, (ii) WELFARE AND FRINGE BENEFITS (BOTH CASH AND NONCASH) INCLUDING
THIRD-PARTY SICK PAY (I.E., SHORT-TERM AND LONG-TERM DISABILITY INSURANCE
BENEFITS), INCOME IMPUTED FROM INSURANCE COVERAGES AND PREMIUMS, EMPLOYEE
DISCOUNTS AND OTHER SIMILAR AMOUNTS, PAYMENTS FOR VACATION OR SICK LEAVE ACCRUED
BUT NOT TAKEN, FINAL PAYMENTS ON ACCOUNT OF TERMINATION OF EMPLOYMENT (I.E.,
SEVERANCE PAYMENTS) AND SETTLEMENT FOR ACCRUED BUT UNUSED VACATION AND SICK
LEAVE, (iii) MOVING EXPENSES, AND (iv) DEFERRED COMPENSATION (BOTH WHEN DEFERRED
AND WHEN RECEIVED).
PRE-PARTICIPATION EMPLOYMENT. REMUNERATION PAID BY THE EMPLOYER ATTRIBUTABLE TO
PERIODS PRIOR TO THE DATE THE PARTICIPANT BECAME A PARTICIPANT IN THE PLAN SHALL
NOT BE TAKEN INTO ACCOUNT IN DETERMINING THE PARTICIPANT'S RECOGNIZED
COMPENSATION.
NON-RECOGNIZED EMPLOYMENT. REMUNERATION PAID BY THE EMPLOYER FOR EMPLOYMENT THAT
IS NOT RECOGNIZED EMPLOYMENT SHALL NOT BE TAKEN INTO ACCOUNT IN DETERMINING A
PARTICIPANT'S RECOGNIZED COMPENSATION.
ATTRIBUTION TO PERIODS. A PARTICIPANT'S RECOGNIZED COMPENSATION SHALL BE
CONSIDERED ATTRIBUTABLE TO THE PERIOD IN WHICH IT IS ACTUALLY PAID AND NOT WHEN
EARNED OR ACCRUED.
EXCLUDED PERIODS. AMOUNTS RECEIVED AFTER THE PARTICIPANT'S TERMINATION OF
EMPLOYMENT SHALL NOT BE TAKEN INTO ACCOUNT IN DETERMINING A PARTICIPANT'S
RECOGNIZED COMPENSATION.
MULTIPLE EMPLOYERS. IF A PARTICIPANT IS EMPLOYED BY MORE THAN ONE EMPLOYER IN A
PLAN YEAR, A SEPARATE AMOUNT OF RECOGNIZED COMPENSATION SHALL BE DETERMINED FOR
EACH EMPLOYER.
ANNUAL MAXIMUM. A PARTICIPANT'S RECOGNIZED COMPENSATION FOR A PLAN YEAR SHALL
NOT EXCEED THE ANNUAL COMPENSATION LIMIT UNDER SECTION 401(a)(17) OF THE CODE,
WHICH IS ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000) (AS ADJUSTED UNDER THE
CODE FOR COST OF LIVING INCREASES).
RECOGNIZED EMPLOYMENT -- all service with an Employer by persons classified by
an Employer as common law employees, excluding, however, employment classified
by an Employer as:
EMPLOYMENT IN A UNIT OF EMPLOYEES WHOSE TERMS AND CONDITIONS OF EMPLOYMENT ARE
SUBJECT TO A COLLECTIVE BARGAINING AGREEMENT BETWEEN AN EMPLOYER AND A UNION
REPRESENTING THAT UNIT OF EMPLOYEES, UNLESS (AND TO THE EXTENT) SUCH COLLECTIVE
BARGAINING AGREEMENT PROVIDES FOR THE INCLUSION OF THOSE EMPLOYEES IN THE PLAN,
EMPLOYMENT OF A NONRESIDENT ALIEN WHO IS NOT RECEIVING ANY EARNED INCOME FROM AN
EMPLOYER WHICH CONSTITUTES INCOME FROM SOURCES WITHIN THE UNITED STATES,
EMPLOYMENT IN A DIVISION OR FACILITY OF AN EMPLOYER WHICH IS NOT IN EXISTENCE ON
THE EFFECTIVE DATE (THAT IS, WAS ACQUIRED, ESTABLISHED, FOUNDED OR PRODUCED BY
THE LIQUIDATION OR SIMILAR DISCONTINUATION OF A SEPARATE SUBSIDIARY AFTER THE
EFFECTIVE DATE) UNLESS AND UNTIL THE PRINCIPAL SPONSOR SHALL DECLARE SUCH
EMPLOYMENT TO BE RECOGNIZED EMPLOYMENT,
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EMPLOYMENT OF A UNITED STATES CITIZEN OR A UNITED STATES RESIDENT ALIEN OUTSIDE
THE UNITED STATES UNLESS AND UNTIL THE PRINCIPAL SPONSOR SHALL DECLARE SUCH
EMPLOYMENT TO BE RECOGNIZED EMPLOYMENT,
SERVICES OF A PERSON WHO IS NOT A COMMON LAW EMPLOYEE OF AN EMPLOYER INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SERVICES OF A LEASED EMPLOYEE,
LEASED OWNER, LEASED MANAGER, SHARED EMPLOYEE, SHARED LEASED EMPLOYEE, TEMPORARY
EMPLOYEE, INDEPENDENT CONTRACTOR, CONTRACT WORKER, AGENCY WORKER, FREELANCE
EMPLOYEE OR OTHER SIMILAR CLASSIFICATION, AND
EMPLOYMENT OF A HIGHLY COMPENSATED EMPLOYEE TO THE EXTENT AGREED TO IN WRITING
BY THE EMPLOYEE.
An Employer's classification of a person at the time of inclusion or exclusion
in Recognized Employment shall be conclusive for the purpose of the foregoing
rules. No reclassification of a person's status with an Employer, for any
reason, without regard to whether it is initiated by a court, governmental
agency or otherwise and without regard to whether or not an Employer agrees to
such reclassification, shall result in the person being included in Recognized
Employment, either retroactively or prospectively. Notwithstanding anything to
the contrary in this provision, however, the Principal Sponsor may declare that
a reclassified person will be included in Recognized Employment, either
retroactively or prospectively. Any uncertainty concerning a person's
classification shall be resolved by excluding the person from Recognized
Employment.
SALARY REDUCTION AGREEMENT -- the agreement which may be entered into by a
Participant as provided in Section 2.4.
SUBFUND -- a separate pool of assets of the Fund set aside for investment
purposes under Section 4.1.
TRUSTEE -- the Trustee originally named hereunder and its successor or
successors in trust. Where the context requires, Trustee shall also mean and
refer to any one or more co-trustees serving hereunder.
VALUATION DATE -- the Annual Valuation Date and each other day that both the New
York Stock Exchange and the corporate Trustee, if any, are open and conducting
business.
VESTED -- nonforfeitable, I.E., a claim obtained by a Participant or the
Participant's Beneficiary to that part of an immediate or deferred benefit
hereunder which arises from the Participant's service, which is unconditional
and which is legally enforceable against the Plan.
VESTING SERVICE -- a measure of an employee's service with the Employer and all
Affiliates (stated as a number of years) which is equal to the number of
computation periods for which the employee is credited with one thousand (1,000)
or more Hours of Service; subject, however, to the following rules:
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COMPUTATION PERIODS. THE COMPUTATION PERIODS FOR DETERMINING VESTING SERVICE
SHALL BE THE PLAN YEARS.
COMPLETION. A YEAR OF VESTING SERVICE SHALL BE DEEMED COMPLETED AS OF THE DATE
IN THE COMPUTATION PERIOD THAT THE EMPLOYEE COMPLETES ONE THOUSAND (1,000) HOURS
OF SERVICE. (FRACTIONAL YEARS OF VESTING SERVICE SHALL NOT BE CREDITED.)
PRE-EFFECTIVE DATE SERVICE. VESTING SERVICE SHALL BE CREDITED FOR HOURS OF
SERVICE EARNED AND COMPUTATION PERIODS COMPLETED BEFORE THE EFFECTIVE DATE AS IF
THIS PLAN STATEMENT WERE THEN IN EFFECT.
BREAKS IN SERVICE. VESTING SERVICE CANCELLED BEFORE THE EFFECTIVE DATE BY
OPERATION OF THE PLAN'S BREAK IN SERVICE RULES AS THEY EXISTED BEFORE THE
EFFECTIVE DATE SHALL CONTINUE TO BE CANCELLED ON AND AFTER THE EFFECTIVE DATE.
VESTING IN PRE-BREAK ACCOUNTS. IF THE EMPLOYEE HAS FIVE (5) OR MORE CONSECUTIVE
ONE-YEAR BREAKS IN SERVICE, THE EMPLOYEE'S SERVICE AFTER SUCH ONE-YEAR BREAKS IN
SERVICE SHALL NOT BE COUNTED AS YEARS OF VESTING SERVICE FOR THE PURPOSE OF
DETERMINING THE VESTED PERCENTAGE OF THAT PORTION OF THE EMPLOYEE'S EMPLOYER
CONTRIBUTIONS ACCOUNT DERIVED FROM EMPLOYER CONTRIBUTIONS ALLOCATED WITH RESPECT
TO THE EMPLOYEE'S SERVICE BEFORE SUCH ONE-YEAR BREAKS IN SERVICE AND SEPARATELY
ACCOUNTED FOR UNDER SECTION 5.1.4.
RULES OF INTERPRETATION. An individual shall be considered to have attained a
given age on the individual's birthday for that age (and not on the day before).
The birthday of any individual born on a February 29 shall be deemed to be
February 28 in any year that is not a leap year. Notwithstanding any other
provision of this Plan Statement or any election or designation made under the
Plan, any individual who feloniously and intentionally kills a Participant or
Beneficiary shall be deemed for all purposes of this Plan and all elections and
designations made under this Plan to have died before such Participant or
Beneficiary. A final judgment of conviction of felonious and intentional killing
is conclusive for the purposes of this Section. In the absence of a conviction
of felonious and intentional killing, the Committee shall determine whether the
killing was felonious and intentional for the purposes of this Section. Whenever
appropriate, words used herein in the singular may be read in the plural, or
words used herein in the plural may be read in the singular; the masculine may
include the feminine and the feminine may include the masculine; and the words
"hereof," "herein" or "hereunder" or other similar compounds of the word "here"
shall mean and refer to this entire Plan Statement and not to any particular
paragraph or Section of this Plan Statement unless the context clearly indicates
to the contrary. The titles given to the various Sections of this Plan Statement
are inserted for convenience of reference only and are not part of this Plan
Statement, and they shall not be considered in determining the purpose, meaning
or intent of any provision hereof. Any reference in this Plan Statement to a
statute or regulation shall be considered also to mean and refer to any
subsequent amendment or replacement of that statute or regulation. This document
has been executed and delivered in the State of Minnesota and has been drawn in
conformity to the laws of that State and shall, except to the
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extent that federal law is controlling, be construed and enforced in accordance
with the laws of the State of Minnesota.
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ELIGIBILITY AND PARTICIPATION
GENERAL ELIGIBILITY RULE. Each employee shall become a Participant on the
Enrollment Date coincident with or next following the date as of which the
employee has completed one (1) year of Eligibility Service. If an employee is
not employed in Recognized Employment when the employee would otherwise be
eligible to become a Participant, the employee shall become a Participant on the
first date thereafter upon which the employee enters Recognized Employment.
SPECIAL RULE FOR FORMER PARTICIPANTS. A Participant whose employment with the
Employer terminates and who subsequently is reemployed by the Employer shall
immediately reenter the Plan as a Participant upon the Participant's return to
Recognized Employment.
ENROLLMENT. Each employee who is or will become a Participant as provided in
Section 2.1 may enroll for salary reduction contributions by completing a Salary
Reduction Agreement by voice response system (or as otherwise determined from
time to time by the Committee and agreed to by the Trustee) prior to the
Enrollment Date as of which the employee desires to make it effective. If an
employee does not enroll when first eligible to do so, the employee may enroll
as of any subsequent Enrollment Date by completing a Salary Reduction Agreement
by voice response system (or as otherwise determined from time to time by the
Committee and agreed to by the Trustee) prior to that Enrollment Date.
SALARY REDUCTION AGREEMENT. Subject to the following rules, the Salary
Reduction Agreement which each Participant may execute shall provide for salary
reduction contributions through a reduction in the amount of Recognized
Compensation which otherwise would be paid to the Participant by the Employer
each payday. The salary reduction contribution may not exceed the dollar limit
in effect for that taxable year under section 402(g) of the Code (which section
requires cost of living adjustments at the same time and in the same manner as
under section 415(d) of the Code). The Committee may, from time to time under
rules, change the minimum and maximum allowable salary reduction contributions.
The reductions in earnings for salary reduction contributions agreed to by the
Participant shall be made by the Employer from the Participant's remuneration
each payday on and after the date the employee enrolls for so long as the Salary
Reduction Agreement remains in effect. The Committee shall specify the method of
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entering into or modifying a Salary Reduction Agreement, the method of giving
any notices modifying the Salary Reduction Agreement and all procedures for the
delivery and acceptance of Salary Reduction Agreements and notices, including
requirements for advance notice.
MODIFICATIONS OF SALARY REDUCTION AGREEMENT. The Salary Reduction Agreement
of a Participant may be modified as follows:
INCREASE OR DECREASE. A Participant may, upon giving prior notice, amend the
Salary Reduction Agreement to increase or decrease the amount of reduction as of
the first payday on or after any quarter beginning date. The "quarter beginning
dates" are each November 1, February 1, May 1 and August 1. The notice must be
delivered by voice response system (or as otherwise determined from time to time
by the Committee and agreed to by the Trustee) prior to the quarter beginning
date as of which the Participant desires to make the increase or decrease
effective.
CANCELLATION OF SALARY REDUCTION AGREEMENT. A Participant who has a Salary
Reduction Agreement in effect may, upon giving prior notice, completely
terminate the Salary Reduction Agreement beginning with the payroll period for
the payday designated by the Participant. Thereafter, such Participant may, upon
giving prior notice, enter into a new Salary Reduction Agreement by voice
response system (or as otherwise determined from time to time by the Committee
and agreed to by the Trustee) to be effective as of the first payday on or after
any subsequent quarter beginning date if, on that quarter beginning date, the
Participant is employed in Recognized Employment.
TERMINATION OF RECOGNIZED EMPLOYMENT. The Salary Reduction Agreement of a
Participant who ceases to be employed in Recognized Employment shall be
terminated automatically as of the date the Participant ceases to be employed in
Recognized Employment. If such Participant returns to Recognized Employment, the
Participant may enter into a new Salary Reduction Agreement by voice response
system (or as otherwise determined from time to time by the Committee and agreed
to by the Trustee) to be effective as of the date of the Participant's return to
Recognized Employment or, upon giving prior notice, as of the first payday on or
after any subsequent quarter beginning date.
SECTION 401(k) COMPLIANCE.
SPECIAL DEFINITIONS. For purposes of this Section 2.6, the following special
definitions shall apply:
AN ELIGIBLE EMPLOYEE MEANS AN INDIVIDUAL WHO IS ENTITLED TO ENTER INTO A SALARY
REDUCTION AGREEMENT FOR ALL OR A PART OF THE PLAN YEAR (WHETHER OR NOT THE
INDIVIDUAL DOES SO).
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AN ELIGIBLE HIGHLY COMPENSATED EMPLOYEE MEANS AN ELIGIBLE EMPLOYEE WHO IS A
HIGHLY COMPENSATED EMPLOYEE.
DEFERRAL PERCENTAGE MEANS THE RATIO (CALCULATED SEPARATELY FOR EACH ELIGIBLE
EMPLOYEE) OF:
THE TOTAL AMOUNT, FOR THE PLAN YEAR, OF EMPLOYER CONTRIBUTIONS CREDITED TO THE
ELIGIBLE EMPLOYEE'S ELECTIVE ACCOUNT, TO
THE ELIGIBLE EMPLOYEE'S RECOGNIZED COMPENSATION FOR THE PORTION OF SUCH PLAN
YEAR THAT THE EMPLOYEE IS AN ELIGIBLE EMPLOYEE.
For this purpose, Employer contributions will be
considered made in the Plan Year if they are
allocated as of a date during such Plan Year and are
delivered to the Trustee within twelve (12) months
after the end of such Plan Year.
AVERAGE DEFERRAL PERCENTAGE MEANS, FOR A SPECIFIED GROUP OF ELIGIBLE EMPLOYEES
FOR THE PLAN YEAR, THE AVERAGE OF THE DEFERRAL PERCENTAGES FOR ALL ELIGIBLE
EMPLOYEES IN SUCH GROUP.
SPECIAL RULES. For purposes of this Section 2.6, the following special rules
apply:
ROUNDING. THE DEFERRAL PERCENTAGE OF EACH ELIGIBLE EMPLOYEE AND THE AVERAGE
DEFERRAL PERCENTAGE FOR EACH GROUP OF ELIGIBLE EMPLOYEES SHALL BE CALCULATED TO
THE NEAREST ONE-HUNDREDTH OF ONE PERCENT.
HIGHLY COMPENSATED EMPLOYEES. IN THE CASE OF AN ELIGIBLE HIGHLY COMPENSATED
EMPLOYEE WHO PARTICIPATES IN ANY OTHER PLAN OF THE EMPLOYER AND AFFILIATES
(OTHER THAN AN EMPLOYEE STOCK OWNERSHIP PLAN DESCRIBED IN SECTIONS 409(a) AND
4975(e)(7) OF THE CODE) TO WHICH EMPLOYER CONTRIBUTIONS ARE MADE ON BEHALF OF
THE ELIGIBLE HIGHLY COMPENSATED EMPLOYEE PURSUANT TO A SALARY REDUCTION
AGREEMENT, ALL SUCH EMPLOYER CONTRIBUTIONS SHALL BE AGGREGATED FOR PURPOSES OF
DETERMINING THE ELIGIBLE HIGHLY COMPENSATED EMPLOYEE'S DEFERRAL PERCENTAGE;
PROVIDED, HOWEVER, THAT SUCH EMPLOYER CONTRIBUTIONS MADE UNDER AN EMPLOYEE STOCK
OWNERSHIP PLAN SHALL NOT BE AGGREGATED.
PERMISSIVE AGGREGATION. IF THE PLAN SATISFIES THE REQUIREMENTS OF SECTION
401(k), 401(a)(4) OR 410(b) UNDER THE CODE ONLY IF AGGREGATED WITH ONE OR MORE
OTHER PLANS, OR IF ONE OR MORE OTHER PLANS SATISFY THE REQUIREMENTS OF SUCH
SECTIONS OF THE CODE ONLY IF AGGREGATED WITH THIS PLAN, THEN THIS SECTION 2.6
SHALL BE APPLIED BY DETERMINING THE AVERAGE DEFERRAL PERCENTAGE OF ELIGIBLE
EMPLOYEES AS IF ALL SUCH PLANS WERE A SINGLE PLAN. PLANS SATISFY SECTION 401(k)
OF THE CODE ONLY IF THEY HAVE THE SAME PLAN YEAR.
THE 401(k) TESTS. Notwithstanding the foregoing provisions, at least one of the
following two (2) tests must be satisfied for each Plan Year:
TEST 1: The average deferral percentage for the group of
eligible Highly Compensated Employees for the current
Plan Year is not more than the average deferral
percentage of all other eligible employees for the
current Plan Year multiplied by one and twenty-five
hundredths (1.25).
TEST 2: The excess of the average deferral percentage for
the group of eligible Highly Compensated Employees
for the current Plan Year over the average deferral
percentage of all other eligible employees for the
current Plan Year is not more than two (2) percentage
points, and the
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average deferral percentage for the group of
eligible Highly Compensated Employees for the
current Plan Year is not more than the average
deferral percentage of all other eligible
employees for the current Plan Year multiplied by
two (2).
The Committee may, however, elect in accordance with further guidance issued by
the Secretary of the Treasury to substitute the average deferral percentage of
all other eligible employees for the preceding Plan Year for the average
deferral percentage of all other eligible employees for the current Plan Year in
Tests 1 and 2 above. Any election made by the Committee to use the average
deferral percentage of all other eligible employees for the preceding Plan Year
in Tests 1 and 2 above, may only be changed in the manner prescribed by the
Secretary of the Treasury.
PREVENTATIVE ACTION PRIOR TO PLAN YEAR END. If the Committee determines that
neither of the tests described in Section 2.6.3 will be satisfied (or may not be
satisfied) for a Plan Year, then during such Plan Year, the Committee may from
time to time establish (and modify) a maximum amount of contributions that can
be made pursuant to a Salary Reduction Agreement by eligible Highly Compensated
Employees that is less than the amount that would otherwise be permitted. No
contributions shall be permitted to be made in excess of that maximum after the
date such maximum is effective. The Committee shall prescribe rules concerning
such modifications, including the frequency of applying the tests described in
Section 2.6.3 and the commencement and termination dates for any modifications.
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CONTRIBUTIONS AND ALLOCATION THEREOF
EMPLOYER CONTRIBUTIONS.
SOURCE OF EMPLOYER CONTRIBUTIONS. All Employer contributions to the Plan may be
made without regard to profits. Such contributions (and any forfeitures related
thereto) shall be allocated only to the Accounts of Participants who are
employed by that particular Employer.
LIMITATION. The contribution of an Employer to the Plan for any year, when
considered in light of its contribution for that year to all other tax-qualified
plans it maintains, shall, in no event, exceed the maximum amount deductible by
it for federal income tax purposes as a contribution to a tax-qualified profit
sharing plan under section 404 of the Code. Each such contribution to the Plan
is conditioned upon its deductibility for such purpose.
FORM OF PAYMENT. The appropriate contribution of an Employer to the Plan,
determined as herein provided, shall be paid to the Trustee in cash.
SALARY REDUCTION CONTRIBUTIONS.
AMOUNT. Within the time required by regulations of the United States Department
of Labor, the Employer shall contribute to the Trustee for deposit in the Fund
the reduction in Recognized Compensation which was agreed to by each Participant
pursuant to a Salary Reduction Agreement.
ALLOCATION. The portion of this contribution made with respect to each
Participant shall be allocated to that Participant's Elective Account for the
Plan Year with respect to which it is made and, for the purposes of Section 4,
shall be credited as soon as practicable after it is received by the Trustee.
NONDEDUCTIBLE CONTRIBUTIONS.
CONTINGENT PROVISION. The provisions of this Section 3.3 shall be subject to
such conditions and limitations as the Committee may prescribe from time to time
for administrative convenience and to preserve the tax-qualified status of the
Plan.
METHOD OF CONTRIBUTION. Each Participant may make nondeductible voluntary
contributions to the Plan for any Plan Year. A Participant electing to make
nondeductible voluntary contributions may do so at such
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times and subject to such limitations as the Committee may prescribe under
rules. All such contributions for a given Plan Year must be made not later than
the thirtieth (30th) day after the end of that Plan Year.
PAYMENT TO TRUSTEE. The nondeductible voluntary contributions made by a
Participant to the Plan shall be collected by the Employer by such means as the
Committee shall specify. The Employer shall remit such nondeductible voluntary
contributions to the Trustee to be allocated to the Participant's Nondeductible
Voluntary Account and, for the purposes of Section 4, shall be credited as soon
as practicable after it is received by the Trustee.
DISCRETIONARY CURATIVE CONTRIBUTIONS. The Principal Sponsor may (but shall not
be required to) make discretionary curative contributions from year to year
during the continuance of the Plan in such amounts as the Principal Sponsor
shall from time to time determine. Such curative contributions shall be
delivered to the Trustee for deposit in the Fund not later than the time
prescribed by federal law (including extensions) for filing the federal income
tax return of the Principal Sponsor for the taxable year in which the Plan Year
ends.
The discretionary curative contribution, if any, for a Plan Year
shall be allocated in the following manner. If neither of the section 401(k)
tests set forth in Section 2 has been satisfied and a distribution of "excess
contributions" has not been made pursuant to Section 7, then all or a portion of
the discretionary curative contribution for that Plan Year shall be allocated
only to those Participants who were not "eligible Highly Compensated Employees"
(as defined in Section 2) for that Plan Year and for whom some contribution was
made pursuant to Section 3.2 for such Plan Year. This allocation shall be made
first to the Participant with the least amount of Recognized Compensation and
then, in ascending order of Recognized Compensation, to other Participants. The
amount of the discretionary curative contribution to be so allocated shall be
that amount required to cause the Plan (taking into account only those employees
required under section 414 of the Code) to satisfy either of the section 401(k)
tests set forth in Section 2 for the Plan Year; provided, however, that in no
case shall amounts be so allocated to cause a Participant's deferral percentage
(as defined in Section 2) to exceed twenty percent (20%). Such section 401(k)
curative allocations shall be treated as salary reduction contributions subject
to section 1.401(k)-1(b)(5) of the Income Tax Regulations, which is incorporated
herein. The discretionary curative contribution which is so allocated to a
Participant shall be allocated to that Participant's Elective Account for the
Plan Year with respect to which it is made and, for the purposes of Section 4,
shall be credited as soon as practicable after it is received by the Trustee.
DISCRETIONARY CONTRIBUTIONS.
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AMOUNT. Each Employer may (but shall not be required to) make discretionary
contributions from year to year during the continuance of the Plan in such
amounts as each Employer shall from time to time determine. Such contributions
shall be delivered to the Trustee for deposit in the Fund not later than the
time prescribed by federal law (including extensions) for filing the federal
income tax return of the Employer for the taxable year in which the Plan Year
ends.
INTEGRATED CONTRIBUTION FORMULA. Each Employer's discretionary contribution for
a Plan Year shall be allocated among the Employer Contributions Accounts of
eligible Participants under Section 3.6 of that Employer in the following
manner:
A DOLLAR AMOUNT EQUAL TO 5.7% OF THE SUM OF EACH PARTICIPANT'S RECOGNIZED
COMPENSATION PLUS "EXCESS RECOGNIZED COMPENSATION" (AS DEFINED IN (c) BELOW)
SHALL BE ALLOCATED TO EACH PARTICIPANT'S EMPLOYER CONTRIBUTIONS ACCOUNT. IF THE
EMPLOYER DOES NOT CONTRIBUTE SUCH AMOUNT FOR ALL PARTICIPANTS, EACH PARTICIPANT
WILL BE ALLOCATED A SHARE OF THE EMPLOYER CONTRIBUTION IN THE SAME PROPORTION
THAT THE PARTICIPANT'S TOTAL RECOGNIZED COMPENSATION PLUS EXCESS RECOGNIZED
COMPENSATION FOR THE PLAN YEAR BEARS TO THE TOTAL RECOGNIZED COMPENSATION PLUS
EXCESS RECOGNIZED COMPENSATION OF ALL PARTICIPANTS FOR THE PLAN YEAR.
THE BALANCE OF THE EMPLOYER'S DISCRETIONARY CONTRIBUTION OVER THE AMOUNT
ALLOCATED ABOVE, IF ANY, SHALL BE ALLOCATED TO EACH PARTICIPANT'S EMPLOYER
CONTRIBUTIONS ACCOUNT IN THE SAME PROPORTION THAT EACH PARTICIPANT'S TOTAL
RECOGNIZED COMPENSATION FOR THE PLAN YEAR BEARS TO THE TOTAL RECOGNIZED
COMPENSATION FOR ALL PARTICIPANTS FOR THE PLAN YEAR.
FOR PURPOSES OF THIS SECTION 3.5, "EXCESS RECOGNIZED COMPENSATION" MEANS THE
AMOUNT BY WHICH AN ELIGIBLE PARTICIPANT'S RECOGNIZED COMPENSATION EXCEEDS TWENTY
PERCENT (20%) OF THE AMOUNT IN EFFECT AT THE BEGINNING OF THE PLAN YEAR WHICH IS
CONSIDERED TO BE WAGES FOR THE PURPOSE OF COLLECTING PAYROLL TAXES AND COMPUTING
BENEFITS FOR FEDERAL SOCIAL SECURITY (WHICH AMOUNT IS SOMETIMES CALLED THE
TAXABLE WAGE BASE).
CREDITING TO ACCOUNTS. The Employer discretionary contributions made for a
Participant shall be allocated to such Participant's Employer Contributions
Account for the Plan Year with respect to which it is made and, for the purposes
of Section 4, shall be credited as soon as practicable after it is received by
the Trustee.
ELIGIBLE PARTICIPANTS. For purposes of Section 3.5, a Participant shall be an
eligible Participant for a Plan Year only if such Participant has satisfied the
requirements of Section 2.1 and, in addition, satisfies the requirements in
either (a) or (b) below:
THE PARTICIPANT IS ON THE LAST DAY OF SUCH PLAN YEAR, AN EMPLOYEE OF THE
EMPLOYER (INCLUDING FOR THIS PURPOSE ANY PARTICIPANT WHO THEN IS ON TEMPORARY
LAYOFF OR AUTHORIZED LEAVE OF ABSENCE OR WHO, DURING SUCH PLAN YEAR, WAS
INDUCTED INTO THE ARMED FORCES OF THE UNITED STATES FROM EMPLOYMENT WITH THE
EMPLOYER); OR
THE PARTICIPANT TERMINATES EMPLOYMENT WITH THE EMPLOYER WITHIN THE PLAN YEAR BY
REASON OF DEATH, RETIREMENT AT OR AFTER THE PARTICIPANT'S NORMAL RETIREMENT AGE
OR DISABILITY.
No other Participant shall be an eligible Participant.
ADJUSTMENTS.
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MAKE-UP CONTRIBUTIONS FOR OMITTED PARTICIPANTS. If, after the Employer's
contribution for a Plan Year has been made and allocated, it should appear that,
through oversight or a mistake of fact or law, a Participant (or an employee who
should have been considered a Participant) who should have been entitled to
share in such contribution received no allocation or received an allocation
which was less than the Participant should have received, the Committee may, at
its election, and in lieu of reallocating such contribution, direct the Employer
to make a special make-up contribution for the Account of such Participant in an
amount adequate to provide the same addition to the Participant's Account for
such Plan Year as the Participant should have received.
MISTAKEN CONTRIBUTIONS. If, after the Employer's contribution for a Plan Year
has been made and allocated, it should appear that, through oversight or a
mistake of fact or law, a Participant (or an individual who was not a
Participant) received an allocation which was more than the Participant should
have received, the Committee may direct that the mistaken contribution, adjusted
for its pro rata share of any net loss or net gain in the value of the Fund
which accrued while such mistaken contribution was held therein, shall be
withdrawn from the Account of such individual and retained in the Fund and used
to reduce the amount of the next succeeding contribution of the Employer to the
Fund due after the determination that such mistaken contribution had occurred.
DEDUCTIBLE VOLUNTARY CONTRIBUTIONS. The Plan shall not accept deductible
voluntary contributions. All deductible voluntary contributions made pursuant to
the Prior Plan Statement shall be held in the Deductible Voluntary Account and
shall continue to share in any trust earnings or losses, and be distributed in
accordance with the provisions of Section 7.
ROLLOVER CONTRIBUTIONS.
CONTINGENT PROVISION. The provisions of this Section shall be subject to such
conditions and limitations as the Committee may prescribe from time to time for
administrative convenience and to preserve the tax-qualified status of the Plan.
ELIGIBLE CONTRIBUTIONS. Each employee may contribute to the Plan, within such
time and in such form and manner as may be prescribed by the Committee in
accordance with those provisions of federal law relating to rollover
contributions, cash (or the cash proceeds from distributed property) received by
the Participant in an eligible rollover distribution from a qualified plan or
from an individual retirement account or annuity established solely to hold such
eligible rollover distribution. Also, the Committee may establish rules and
conditions regarding the acceptance of direct rollovers under section 401(a)(31)
of the Code from trustees or custodians of other qualified pension, profit
sharing or stock bonus plans.
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SPECIFIC REVIEW. The Committee shall have the right to reject, or to direct the
Trustee to return, any such rollover contribution if, in the opinion of the
Committee, the acceptance thereof might jeopardize the tax-qualified status of
the Plan or unduly complicate its administration, but the acceptance of any such
rollover contribution shall not be regarded as an opinion or guarantee on the
part of the Employer, the Committee, the Trustee or the Plan as to the tax
consequences which may result to the contributing Participant thereby.
ALLOCATION. The rollover contribution made by a Participant to the Plan shall be
allocated to the Participant's Rollover Account and, for the purposes of Section
4, shall be credited as soon as practicable after it is received by the Trustee.
SECTION 401(m) COMPLIANCE.
SPECIAL DEFINITIONS. For purposes of this Section 3.10, the following special
definitions shall apply:
AN ELIGIBLE EMPLOYEE MEANS AN INDIVIDUAL WHO IS ELIGIBLE TO MAKE NONDEDUCTIBLE
VOLUNTARY CONTRIBUTIONS TO THE PLAN FOR ANY PORTION OF THE PLAN YEAR (WHETHER OR
NOT THE INDIVIDUAL DOES SO).
AN ELIGIBLE HIGHLY COMPENSATED EMPLOYEE MEANS AN ELIGIBLE EMPLOYEE WHO IS A
HIGHLY COMPENSATED EMPLOYEE.
CONTRIBUTION PERCENTAGE MEANS THE RATIO (CALCULATED SEPARATELY FOR EACH ELIGIBLE
EMPLOYEE) OF:
THE TOTAL AMOUNT, FOR THE PLAN YEAR, OF NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS
CREDITED TO THE ELIGIBLE EMPLOYEE'S NONDEDUCTIBLE VOLUNTARY ACCOUNT, TO
THE ELIGIBLE EMPLOYEE'S RECOGNIZED COMPENSATION FOR THE PORTION OF SUCH PLAN
YEAR THAT THE EMPLOYEE IS AN ELIGIBLE EMPLOYEE.
For this purpose, nondeductible voluntary
contributions are considered to have been made in the
Plan Year in which contributed to the Fund.
AVERAGE CONTRIBUTION PERCENTAGE MEANS, FOR A SPECIFIED GROUP OF ELIGIBLE
EMPLOYEES FOR THE PLAN YEAR, THE AVERAGE OF THE CONTRIBUTION PERCENTAGES FOR ALL
ELIGIBLE EMPLOYEES IN SUCH GROUP.
SPECIAL RULES. For purposes of this Section 3.10, the following special rules
apply:
ROUNDING. THE CONTRIBUTION PERCENTAGE OF EACH ELIGIBLE EMPLOYEE AND THE AVERAGE
CONTRIBUTION PERCENTAGE FOR EACH GROUP OF ELIGIBLE EMPLOYEES SHALL BE CALCULATED
TO THE NEAREST ONE-HUNDREDTH OF ONE PERCENT.
HIGHLY COMPENSATED EMPLOYEES. IN THE CASE OF AN ELIGIBLE HIGHLY COMPENSATED
EMPLOYEE WHO PARTICIPATES IN ANY OTHER PLAN OF THE EMPLOYER AND AFFILIATES
(OTHER THAN AN EMPLOYEE STOCK OWNERSHIP PLAN DESCRIBED IN SECTIONS 409(a) AND
4975(e)(7) OF THE CODE) TO WHICH NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS ARE MADE
ON BEHALF OF THE ELIGIBLE HIGHLY COMPENSATED EMPLOYEE, ALL SUCH NONDEDUCTIBLE
VOLUNTARY CONTRIBUTIONS SHALL BE AGGREGATED FOR PURPOSES OF DETERMINING THE
ELIGIBLE HIGHLY COMPENSATED EMPLOYEE'S
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CONTRIBUTION PERCENTAGE; PROVIDED, HOWEVER, THAT SUCH EMPLOYER CONTRIBUTIONS
MADE UNDER AN EMPLOYEE STOCK OWNERSHIP PLAN SHALL NOT BE AGGREGATED.
PERMISSIVE AGGREGATION. IF THE PLAN SATISFIES THE REQUIREMENTS OF SECTION
401(m), 401(a)(4) OR 410(b) UNDER THE CODE ONLY IF AGGREGATED WITH ONE OR MORE
PLANS, OR IF ONE OR MORE PLANS SATISFY THE REQUIREMENTS OF SUCH SECTIONS OF THE
CODE ONLY IF AGGREGATED WITH THIS PLAN, THEN THIS SECTION 3.10 SHALL BE APPLIED
BY DETERMINING THE AVERAGE CONTRIBUTION PERCENTAGE OF ELIGIBLE EMPLOYEES AS IF
ALL SUCH PLANS WERE A SINGLE PLAN. PLANS SATISFY SECTION 401(m) OF THE CODE ONLY
IF THEY HAVE THE SAME PLAN YEAR.
THE 401(m) TESTS. Notwithstanding the foregoing provisions, at least one of the
following two tests must be satisfied for each Plan Year:
TEST 1: The average contribution percentage for the group
of eligible Highly Compensated Employees for the
current Plan Year is not more than the average
contribution percentage of all other eligible
employees for the current Plan Year multiplied by one
and twenty-five hundredths (1.25).
TEST 2: The excess of the average contribution percentage
for the group of eligible Highly Compensated
Employees for the current Plan Year over the average
contribution percentage of all other eligible
employees for the current Plan Year is not more than
two (2) percentage points, and the average
contribution percentage for the group of eligible
Highly Compensated Employees for the current Plan
Year is not more than the average contribution
percentage of all other eligible employees for the
current Plan Year multiplied by two (2).
The Committee may, however, elect in accordance with further guidance issued by
the Secretary of the Treasury to substitute the average contribution percentage
of all other eligible employees for the preceding Plan Year for the average
contribution percentage of all other eligible employees for the current Plan
Year in Tests 1 and 2 above. Any election made by the Committee to use the
average contribution percentage of all other eligible employees for the
preceding Plan Year in Tests 1 and 2 above may only be changed in the manner
prescribed by the Secretary of the Treasury.
To the extent prescribed under regulations issued by the Secretary of
the Treasury, for a Plan Year in which Test 1 is not satisfied for the section
401(k) test in Section 2, nor is Test 1 satisfied for the 401(m) test in this
Section 3, the sum of the actual deferral percentage and the average
contribution percentage of the eligible Highly Compensated Employees must not
exceed the "aggregate limit" defined below.
"Aggregate limit" shall mean the greater of (a) or (b):
THE SUM OF:
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125 PERCENT OF THE GREATER OF THE AVERAGE DEFERRAL PERCENTAGE OR THE AVERAGE
CONTRIBUTION PERCENTAGE OF ELIGIBLE NON-HIGHLY COMPENSATED EMPLOYEES FOR THE
CURRENT PLAN YEAR, PLUS
TWO PERCENTAGE POINTS PLUS THE LESSER OF THE AVERAGE DEFERRAL PERCENTAGE OR THE
AVERAGE CONTRIBUTION PERCENTAGE OF ELIGIBLE NON-HIGHLY COMPENSATED EMPLOYEES FOR
THE CURRENT PLAN YEAR (IN NO EVENT, HOWEVER, SHALL THIS AMOUNT EXCEED TWO TIMES
THE LESSER OF SUCH AVERAGE DEFERRAL PERCENTAGE OR SUCH AVERAGE CONTRIBUTION
PERCENTAGE), OR
THE SUM OF:
125 PERCENT OF THE LESSER OF THE AVERAGE DEFERRAL PERCENTAGE OR THE AVERAGE
CONTRIBUTION PERCENTAGE OF ELIGIBLE NON-HIGHLY COMPENSATED EMPLOYEES FOR THE
CURRENT PLAN YEAR, PLUS
TWO PERCENTAGE POINTS PLUS THE GREATER OF THE AVERAGE DEFERRAL PERCENTAGE OR THE
AVERAGE CONTRIBUTION PERCENTAGE OF ELIGIBLE NON-HIGHLY COMPENSATED EMPLOYEES FOR
THE CURRENT PLAN YEAR (IN NO EVENT, HOWEVER, SHALL THIS AMOUNT EXCEED TWO TIMES
THE GREATER OF SUCH AVERAGE DEFERRAL PERCENTAGE OR SUCH AVERAGE CONTRIBUTION
PERCENTAGE).
PREVENTATIVE ACTION PRIOR TO PLAN YEAR END. If the Committee determines that
neither of the tests described in Section 3.10.3 will be satisfied (or may not
be satisfied) for a Plan Year, then during such Plan Year, the Committee may
from time to time establish (and modify) maximums for nondeductible voluntary
contributions of eligible Highly Compensated Employees that are less than the
contributions which would otherwise be permitted or provided. No nondeductible
voluntary contributions shall be permitted to be made in excess of such maximums
after the date such maximums are effective. The Committee shall prescribe rules
concerning such modifications, including the frequency of applying the tests
designed in Section 3.10.3 and the commencement and termination dates for any
modifications.
LIMITATION ON ANNUAL ADDITIONS. In no event shall amounts be allocated to
the Account of any Participant if, or to the extent, such amounts would exceed
the limitations set forth in Appendix A to this Plan Statement.
Effect of Disallowance of Deduction or Mistake of Fact. All Employer
contributions to the Plan are conditioned on their qualification for deduction
for federal income tax purposes under section 404 of the Code. If any such
deduction should be disallowed, in whole or in part, for any Employer
contribution to the Plan for any year, or if any Employer contribution to the
Plan is made by reason of a mistake of fact, then there shall be calculated the
excess of the amount contributed over the amount that would have been
contributed had there not occurred a mistake in determining the deduction or a
mistake of fact. The Principal Sponsor shall direct the Trustee to return such
excess, adjusted for its
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pro rata share of any net loss (but not any net gain) in the value of the Fund
which accrued while such excess was held therein, to the Employer within one (1)
year of the disallowance of the deduction or the mistaken payment of the
contribution, as the case may be. If the return of such amount would cause the
balance of any Account of any Participant to be reduced to less than the balance
which would have been in such Account had the mistaken amount not been
contributed, however, the amount to be returned to the Employer shall be limited
so as to avoid such reduction.
USERRA Contributions. Effective for each person who is or becomes a Participant,
has a period or periods of qualifying service in the uniformed services, is
reemployed by the Employer on or after December 12, 1994, and is reemployed
within the time prescribed by law (and notwithstanding anything apparently to
the contrary in other provisions of this Plan Statement):
(a) the Participant shall be treated as not having incurred a
break in service with the Employer by reason of such
Participant's period or periods of service in the uniformed
services, and
(b) each period served by the Participant in the uniformed
services shall, upon reemployment, be deemed to constitute
service with the Employer for the purpose of determining
Eligibility Service and Vesting Service under this Plan to the
same extent such period would have been but for the
Participant's service in the uniformed services, and
(c) the Participant shall be granted a special make-up period in
which the Participant shall be entitled to make salary
reduction contributions which could have been made by the
Participant but for the Participant's service in the uniformed
services (and the make-up period shall commence on the date of
reemployment and continue for a period whose duration is three
times the period of the Participant's absence in the uniformed
services, not to exceed five years), and
(d) the Participant shall be entitled to receive a special
Employer contribution equal to that contribution which the
Participant would have received but for the Participant's
service in the uniformed services (provided that any such
contribution that is contingent on the Participant's making
any salary reduction contribution shall be made only to the
extent that such salary reduction contribution is made as
provided above).
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The foregoing shall be construed in a manner that is consistent with the
Uniformed Services Employment and Reemployment Rights Act and other federal laws
governing employment rights following military service and shall be subject to
the restrictions and limitations which can be imposed in those laws (it being
the intent hereof to comply with those laws but not to grant benefits or
entitlements greater than required by such laws).
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<PAGE>
INVESTMENT AND ADJUSTMENT OF ACCOUNTS
ESTABLISHMENT OF SUBFUNDS.
ESTABLISHING COMMINGLED SUBFUNDS. At the direction of the Committee, the Trustee
shall divide the Fund into two (2) or more Subfunds, which shall serve as
vehicles for the investment of Participants' Accounts. The Committee shall
determine the general investment characteristics and objectives of each Subfund
and, with respect to each Subfund, shall either (i) designate that the Trustee
or an Investment Manager or the Committee has investment discretion over such
Subfund, or (ii) designate one or more selected pooled investment vehicles (such
as collective funds, group trusts, mutual funds and separate accounts under
insurance contracts) to constitute such Subfund. The Trustee, Investment Manager
or the Committee, as the case may be, shall have complete investment discretion
over each Subfund to which it has been assigned investment discretion, subject
only to the general investment characteristics and objectives established for
the particular Subfund.
OPERATIONAL RULES. In accordance with rules, the Committee shall determine the
circumstances under which a particular Subfund may be elected, or shall be
automatically utilized, the minimum or maximum amount or percentage of an
Account which may be invested in a particular Subfund, the procedures for making
or changing investment elections, the extent (if any) to which Beneficiaries of
deceased Participants may make investment elections and the effect of a
Participant's or Beneficiary's failure to make an effective election with
respect to all or any portion of an Account. If the Committee directs the
Trustee to create a Subfund to be invested in Employer stock, then, unless
otherwise agreed to in writing by the Committee and the Trustee, the following
rules shall apply:
(a) The Employer will make cash contributions to the Plan and the
Trustee, on behalf of the Plan, will purchase shares on the
open market or from another available source based upon the
direction of the Committee or Participant or Beneficiary
elections.
(b) The Subfund will be initially invested approximately eighty
percent (80%) in Employer stock and twenty percent (20%) in a
money market fund (or such other fund as directed by the
Committee and consented to by the Trustee). The Committee may
subsequently adjust such percentages as necessary or desirable
by directing the Trustee in writing. The Trustee is hereby
directed to account for the Subfund by the use of unit
accounting. Dividends paid on shares of Employer stock held in
the
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<PAGE>
Subfund will be retained in the Subfund and invested in
Employer stock. Dividends will not be passed through to
Participants or Beneficiaries.
(c) The Subfund will be available for in-service distributions and
Participant loans.
(d) Shares that are not voted or tendered by Participants and
Beneficiaries as provided in Section 4.1.4(d) will be voted or
tendered, as applicable, by the Trustee in the same proportion
as shares that are voted or tendered by Participants and
Beneficiaries, and the Committee shall disclose this
methodology to Participants and Beneficiaries.
REVISING SUBFUNDS. The Committee shall have the power, from time to time, to
dissolve Subfunds, to direct that additional Subfunds be established and, under
rules, to withdraw or limit participation in a particular Subfund. In connection
with the power to commingle reserved to the Trustee under Section 10.6, the
Committee shall also have the power to direct the Trustee to consolidate any
separate Subfunds hereunder with any other separate Subfunds having the same
investment objectives which are established under any other retirement plan
trust fund of the Employer or any business entity affiliated in ownership or
management with the Employer of which the Trustee is trustee and which are
managed by the Trustee or the same Investment Manager.
ERISA SECTION 404(c) COMPLIANCE. If the Committee and the Trustee agree, the
Committee may establish investment Subfunds and operational rules which are
intended to satisfy section 404(c) of ERISA and the regulations thereunder. Such
investment Subfunds shall permit Participants and Beneficiaries the opportunity
to choose from at least three investment alternatives, each of which is
diversified, each of which present materially different risk and return
characteristics, and which, in the aggregate, enable Participants and
Beneficiaries to achieve a portfolio with appropriate risk and return
characteristics consistent with minimizing risk through diversification. Such
operational rules shall provide the following, and shall otherwise comply with
section 404(c) of ERISA and the regulations and rules promulgated thereunder
from time to time:
PARTICIPANTS AND BENEFICIARIES MAY GIVE INVESTMENT INSTRUCTIONS TO THE TRUSTEE
AT LEAST ONCE EVERY THREE MONTHS;
THE TRUSTEE MUST FOLLOW THE INVESTMENT INSTRUCTIONS OF PARTICIPANTS AND
BENEFICIARIES THAT COMPLY WITH THE PLAN'S OPERATIONAL RULES, PROVIDED THAT THE
TRUSTEE MAY IN ANY EVENT DECLINE TO FOLLOW ANY INVESTMENT INSTRUCTIONS THAT:
WOULD RESULT IN A PROHIBITED TRANSACTION DESCRIBED IN SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE;
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<PAGE>
WOULD RESULT IN THE ACQUISITION OF AN ASSET THAT MIGHT GENERATE INCOME WHICH IS
TAXABLE TO THE PLAN;
WOULD NOT BE IN ACCORDANCE WITH THE DOCUMENTS AND INSTRUMENTS GOVERNING THE PLAN
INSOFAR AS THEY ARE CONSISTENT WITH TITLE I OF ERISA;
WOULD CAUSE A FIDUCIARY TO MAINTAIN INDICIA OF OWNERSHIP OF ANY ASSETS OF THE
PLAN OUTSIDE OF THE JURISDICTION OF THE DISTRICT COURTS OF THE UNITED STATES
OTHER THAN AS PERMITTED BY SECTION 404(b) OF ERISA AND DEPARTMENT OF LABOR
REGULATION SECTION 2050.404B-1;
WOULD JEOPARDIZE THE PLAN'S TAX STATUS UNDER THE CODE;
COULD RESULT IN A LOSS IN EXCESS OF A PARTICIPANT'S OR BENEFICIARY'S ACCOUNT
BALANCE;
(vii) would result in the acquisition or sale of
any Employer security unless such Employer
security acquisition satisfies the
conditions of section 408(e) of ERISA and
Department of Labor regulation section
2550.404c-1;
PARTICIPANTS AND BENEFICIARIES SHALL BE PERIODICALLY INFORMED OF ACTUAL EXPENSES
TO THEIR ACCOUNTS WHICH ARE IMPOSED BY THE PLAN AND WHICH ARE RELATED TO THEIR
PLAN INVESTMENT DECISIONS;
WITH RESPECT TO ANY SUBFUND CONSISTING OF EMPLOYER SECURITIES AND INTENDED TO
SATISFY THE REQUIREMENTS OF SECTION 404(c) OF ERISA, (i) PARTICIPANTS AND
BENEFICIARIES SHALL BE ENTITLED TO ALL VOTING, TENDER AND OTHER RIGHTS
APPURTENANT TO THE OWNERSHIP OF SUCH SECURITIES, (ii) PROCEDURES SHALL BE
ESTABLISHED TO ENSURE THE CONFIDENTIAL EXERCISE OF SUCH RIGHTS, EXCEPT TO THE
EXTENT NECESSARY TO COMPLY WITH FEDERAL AND STATE LAWS NOT PREEMPTED BY ERISA,
AND (iii) THE TRUSTEE SHALL ENSURE THE SUFFICIENCY OF AND COMPLIANCE WITH SUCH
CONFIDENTIALITY PROCEDURES.
VALUATION AND ADJUSTMENT OF ACCOUNTS.
VALUATION OF FUND. The Trustee shall value each subfund from time to time (but
not less frequently than each Annual Valuation Date), which valuation shall
reflect, as nearly as possible, the then fair market value of the assets
comprising such subfund (including income accumulations therein). In making such
valuations, the Trustee may rely upon information supplied by any Investment
Manager having investment responsibility over the particular Subfund.
ADJUSTMENT OF ACCOUNTS. The Committee shall cause the value of each Account or
portion of an Account invested in a particular Subfund (including undistributed
Total Accounts) to be increased (or decreased) from time to time for
distributions, contributions, investment gains (or losses) and expenses charged
to the Account.
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RULES. The Committee may establish additional rules for the adjustment of
Accounts including, the times when contributions shall be credited under Section
3 for the purposes of allocating gains or losses under this Section 4.
MANAGEMENT AND INVESTMENT OF FUND. The Fund in the hands of the Trustee,
together with all additional contributions made thereto and together with all
net income thereof, shall be controlled, managed, invested, reinvested and
ultimately paid and distributed to Participants and Beneficiaries by the Trustee
with all the powers, rights and discretions generally possessed by trustees, and
with all the additional powers, rights and discretions conferred upon the
Trustee under this Plan Statement. Except to the extent that the Trustee is
subject to the authorized and properly given investment directions of a
Participant, a Beneficiary, an Investment Manager or the Committee, and subject
to the directions of the Committee with respect to the payment of benefits
hereunder, the Trustee shall have the exclusive authority to manage and control
the assets of the Fund and shall not be subject to the direction of any person
in the discharge of its duties, nor shall its authority be subject to delegation
or modification except by formal amendment of this Plan Statement.
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VESTING
EMPLOYER CONTRIBUTIONS ACCOUNT.
PROGRESSIVE VESTING. Except as hereinafter provided, the Employer Contributions
Account of each Participant shall become Vested in accordance with the following
schedule:
<TABLE>
<CAPTION>
When the Participant Has The Vested Portion of the
Completed the Following Participant's Employer
Years of Vesting Service: Contributions Account Will Be:
------------------------ ------------------------------
<S> <C>
Less than 3 years 0%
3 years but less than 4 years 20%
4 years but less than 5 years 40%
5 years but less than 6 years 60%
6 years but less than 7 years 80%
7 years or more 100%
</TABLE>
FULL VESTING. Notwithstanding any of the foregoing provisions for progressive
vesting of Employer Contributions Accounts of Participants, the entire Employer
Contributions Account of each Participant shall be fully Vested upon the
earliest occurrence of any of the following events while in the employment of
the Employer or an Affiliate:
THE PARTICIPANT'S DEATH,
THE PARTICIPANT'S ATTAINMENT OF NORMAL RETIREMENT AGE,
THE PARTICIPANT'S DISABILITY,
A PARTIAL TERMINATION OF THE PLAN WHICH IS EFFECTIVE AS TO THE PARTICIPANT, OR
A COMPLETE TERMINATION OF THE PLAN OR A COMPLETE DISCONTINUANCE OF EMPLOYER
CONTRIBUTIONS HERETO.
FORFEITURE EVENT. A Participant who is not in the employment of the Employer or
an Affiliate upon a complete termination of the Plan or a complete
discontinuance of Employer contributions hereto, shall be fully Vested if, on
the date of such termination or discontinuance, such Participant has not had a
"forfeiture event" as described below:
THE OCCURRENCE AFTER AN EVENT OF MATURITY OF FIVE (5) CONSECUTIVE ONE-YEAR
BREAKS IN SERVICE,
THE EVENT OF MATURITY OF A PARTICIPANT WHO HAS NO VESTED INTEREST IN THE
PARTICIPANT'S TOTAL ACCOUNT,
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THE DISTRIBUTION AFTER AN EVENT OF MATURITY, TO (OR WITH RESPECT TO) A
PARTICIPANT OF THE ENTIRE VESTED PORTION OF THE TOTAL ACCOUNT OF THE
PARTICIPANT, OR
THE DEATH OF THE PARTICIPANT AT A TIME AND UNDER CIRCUMSTANCES WHICH DO NOT
ENTITLE THE PARTICIPANT TO BE FULLY (100%) VESTED IN THE PARTICIPANT'S TOTAL
ACCOUNT.
EFFECT OF BREAK ON VESTING. If a Participant who is not fully (100%) Vested
incurs five (5) or more consecutive One-Year Breaks in Service, returns to
Recognized Employment and is thereafter eligible for any additional allocation
of Employer contributions, the Participant's undistributed Employer
Contributions Account, if any, attributable to Employer contributions allocated
as of a date before such five (5) consecutive One-Year Breaks in Service and the
Participant's new Employer Contributions Account attributable to Employer
contributions allocated as of a date after such five (5) consecutive One-Year
Breaks in Service shall be separately maintained for vesting purposes until the
Participant is fully (100%) Vested.
OTHER ACCOUNTS. The Elective Account, Nondeductible Voluntary Account, Rollover
Account, Deductible Voluntary Account and Transfer Account of each Participant
shall be fully (100%) Vested at all times.
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MATURITY
EVENTS OF MATURITY. A Participant's Total Account shall mature and the Vested
portion shall become distributable in accordance with Section 7 upon the
earliest occurrence of any of the following events while in the employment of
the Employer or an Affiliate:
THE PARTICIPANT'S DEATH;
THE PARTICIPANT'S SEPARATION FROM SERVICE, WHETHER VOLUNTARY OR INVOLUNTARY;
THE ATTAINMENT OF AGE SEVENTY AND ONE-HALF (70-1/2) YEARS BY A PARTICIPANT WHO
IS A FIVE PERCENT OWNER (AS DEFINED IN APPENDIX B) AND THE CREDITING OF ANY
AMOUNTS TO SUCH A PARTICIPANT'S ACCOUNT AFTER SUCH TIME;
THE PARTICIPANT'S DISABILITY;
THE PARTICIPANT'S ATTAINMENT OF NORMAL RETIREMENT AGE;
THE DISPOSITION BY THE EMPLOYER (WHICH IS A CORPORATION) TO AN UNRELATED
CORPORATION OF SUBSTANTIALLY ALL THE ASSETS (WITHIN THE MEANING OF SECTION
409(d)(2) OF THE CODE) USED BY THE EMPLOYER IN A TRADE OR BUSINESS OF THE
EMPLOYER, IF SUCH ACQUIRING CORPORATION CONTINUES TO MAINTAIN THIS PLAN AFTER
THE DISPOSITION, BUT ONLY WITH RESPECT TO EMPLOYEES WHO CONTINUE EMPLOYMENT WITH
THE CORPORATION ACQUIRING SUCH ASSETS AND ONLY IF THE PURCHASE AND SALE
AGREEMENT SPECIFICALLY AUTHORIZES DISTRIBUTION OF THIS PLAN'S ASSETS IN
CONNECTION WITH SUCH DISPOSITION; OR
THE DISPOSITION BY THE EMPLOYER (WHICH IS A CORPORATION) TO AN UNRELATED
CORPORATION OF THE EMPLOYER'S INTEREST IN A SUBSIDIARY (WITHIN THE MEANING OF
SECTION 409(d)(3) OF THE CODE), IF SUCH ACQUIRING CORPORATION CONTINUES TO
MAINTAIN THIS PLAN AFTER THE DISPOSITION, BUT ONLY WITH RESPECT TO EMPLOYEES WHO
CONTINUE EMPLOYMENT WITH SUCH SUBSIDIARY AND ONLY IF THE PURCHASE AND SALE
AGREEMENT SPECIFICALLY AUTHORIZES DISTRIBUTION OF THIS PLAN'S ASSETS IN
CONNECTION WITH SUCH DISPOSITION;
provided, however, that a transfer from Recognized Employment to employment with
the Employer that is other than Recognized Employment or a transfer from the
employment of one Employer participating in the Plan to another such Employer or
to any Affiliate shall not constitute an Event of Maturity.
Disposition of Non-Vested Portion of Account. Upon the occurrence of a
Participant's Event of Maturity, any portion of the Participant's Employer
Contributions Account which is not Vested shall remain in the Participant's
Employer Contributions Account until the Participant's "forfeiture date" (as
defined in Section 6.4). If such former Participant is not reemployed by the
Employer or an Affiliate on or before the Participant's forfeiture date, the
entire portion of the Participant's Employer Contributions Account which was not
Vested upon the Participant's Event of Maturity shall be forfeited as soon as
administratively practicable coincident with or following such forfeiture date.
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USE OF FORFEITURES. Forfeitures shall first be used to restore any
forfeitures for rehired Participants of any Employer. Any remaining forfeitures
from Employer Contributions Accounts shall then be allocated to the Employer
Contribution Accounts of all Participants, regardless of which Employer they
were employed by during the Plan Year as additional non-integrated Employer
contributions. Any forfeitures remaining at the termination of the Plan shall be
allocated as provided above.
FORFEITURE DATE. For the purpose of the foregoing, a Participant's
forfeiture date shall be the date (following the Participant's Event of
Maturity) as of which occurred the earliest of:
(i) the Participant's fifth (5th) consecutive
One-Year Break in Service following the
Participant's Event of Maturity,
(ii) the distribution of the Participant's entire
Vested Total Account,
(iii) the Participant's Event of Maturity if the
Participant has no Vested interest in the
Total Account (that is, the Participant's
Vested interest, consisting of zero, will be
deemed to be distributed), or
(iv) the death of the Participant at a time and
under circumstances which do not entitle the
Participant to be fully (100%) Vested in the
Participant's Total Account.
RESTORATION OF FORFEITURE IF REHIRED IN FIVE YEARS. If such Participant
again becomes an employee of the Employer or an Affiliate before the Participant
has five (5) consecutive One-Year Breaks in Service following the Participant's
Event of Maturity, then there shall be restored to the Participant's Employer
Contributions Account the amount which was forfeited (without adjustment for
gains or losses after the date of forfeiture). This restoration shall occur as
of the Annual Valuation Date next following the Participant's return and shall
be conditioned upon the Participant remaining in employment with the Employer or
an Affiliate until that Annual Valuation Date. The rehiring Employer shall make
a contribution to the Plan adequate to make such restoration (in addition to any
contributions made under Section 3), even if the rehiring Employer is different
from the Employer for which the Participant worked at the time of the
Participant's most recent separation from service. The amount so restored shall
be held in a separate account and shall become Vested in accordance with the
rules of Section 5.1.4.
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DISTRIBUTION
APPLICATION FOR DISTRIBUTION.
APPLICATION REQUIRED. No distribution shall be made from the Plan until an
application for distribution has been received from the Participant or the
Beneficiary entitled to receive distribution (the "Distributee"). The Committee
may prescribe rules regarding the form of such application, the manner of filing
such application and the information required to be furnished in connection with
such application.
EXCEPTION FOR SMALL AMOUNTS. A Vested Total Account which does not exceed (and
has never exceeded) Five Thousand Dollars ($5,000) as of the Distribution Date
coincident with or next following the occurrence of an Event of Maturity
effective as to a Participant, shall be distributed automatically in a single
lump sum as of that date without an application for distribution.
EXCEPTION FOR REQUIRED DISTRIBUTIONS. Any Vested Total Account for which no
application has been received on the required beginning date effective as to a
Distributee under Section 7.2.2, shall be distributed automatically as of that
date without an application for distribution.
NOTICES. The Committee will issue such notices as may be required under sections
402(f), 411(a)(11), 417(a)(3) and other sections of the Code in connection with
distributions from the Plan, and no distribution will be made unless it is
consistent with such notice requirements. Generally, distributions may not
commence as of a Distribution Date that is more than ninety (90) days or less
than thirty (30) days after such notices are given to the Participant.
Distribution may commence less than thirty (30) days after the notice required
under section 1.411(a)-11(c) of the Income Tax Regulations or the notice
required under section 1.402(f)-2T of the Income Tax Regulations is given,
provided however, that:
THE COMMITTEE CLEARLY INFORMS THE DISTRIBUTEE THAT THE DISTRIBUTEE HAS A RIGHT
TO A PERIOD OF AT LEAST THIRTY (30) DAYS AFTER RECEIVING SUCH NOTICES TO
CONSIDER WHETHER OR NOT TO ELECT DISTRIBUTION AND, IF APPLICABLE, TO ELECT A
PARTICULAR DISTRIBUTION OPTION; AND
THE DISTRIBUTEE, AFTER RECEIVING THE NOTICE, AFFIRMATIVELY ELECTS A
DISTRIBUTION; AND
THE DISTRIBUTEE MAY REVOKE AN AFFIRMATIVE DISTRIBUTION ELECTION BY NOTIFYING THE
COMMITTEE OF SUCH REVOCATION PRIOR TO THE DATE AS OF WHICH SUCH DISTRIBUTION IS
TO BE MADE; AND
THE DISTRIBUTION DATE IS AT LEAST SEVEN (7) DAYS AFTER THE DATE THE DISTRIBUTEE
RECEIVED THE NOTICE REQUIRED UNDER SECTION 417(a)(3) OF THE CODE.
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DIRECT ROLLOVER. A Distributee who is eligible to elect a direct rollover may
elect, at the time and in the manner prescribed by the Committee, to have all or
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the Distributee in a direct rollover. A Distributee
who is eligible to elect a direct rollover includes only a Participant, a
Beneficiary who is the surviving spouse of a Participant and a Participant's
spouse or former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Appendix C.
ELIGIBLE ROLLOVER DISTRIBUTION MEANS ANY DISTRIBUTION OF ALL OR ANY PORTION OF A
TOTAL ACCOUNT TO A DISTRIBUTEE WHO IS ELIGIBLE TO ELECT A DIRECT ROLLOVER EXCEPT
(i) ANY DISTRIBUTION THAT IS ONE OF A SERIES OF SUBSTANTIALLY EQUAL INSTALLMENTS
PAYABLE NOT LESS FREQUENTLY THAN ANNUALLY OVER THE LIFE EXPECTANCY OF SUCH
DISTRIBUTEE OR THE JOINT AND LAST SURVIVOR LIFE EXPECTANCY OF SUCH DISTRIBUTEE
AND SUCH DISTRIBUTEE'S "DESIGNATED BENEFICIARY" (WITHIN THE MEANING OF SECTION
401(a)(9) OF THE INTERNAL REVENUE CODE), AND (ii) ANY DISTRIBUTION THAT IS ONE
OF A SERIES OF SUBSTANTIALLY EQUAL INSTALLMENTS PAYABLE NOT LESS FREQUENTLY THAN
ANNUALLY OVER A SPECIFIED PERIOD OF TEN (10) YEARS OR MORE, AND (iii) ANY
DISTRIBUTION TO THE EXTENT SUCH DISTRIBUTION IS REQUIRED UNDER SECTION 401(a)(9)
OF THE CODE, AND (iv) THE PORTION OF ANY DISTRIBUTION THAT IS NOT INCLUDIBLE IN
GROSS INCOME (DETERMINED WITHOUT REGARD TO THE EXCLUSION FOR NET UNREALIZED
APPRECIATION WITH RESPECT TO EMPLOYER SECURITIES).
ELIGIBLE RETIREMENT PLAN MEANS (i) AN INDIVIDUAL RETIREMENT ACCOUNT DESCRIBED IN
SECTION 408(a) OF THE CODE, OR (ii) AN INDIVIDUAL RETIREMENT ANNUITY DESCRIBED
IN SECTION 408(b) OF THE CODE, OR (iii) AN ANNUITY PLAN DESCRIBED IN SECTION
403(a) OF THE CODE, OR (iv) A QUALIFIED TRUST DESCRIBED IN SECTION 401(a) OF THE
CODE THAT ACCEPTS THE ELIGIBLE ROLLOVER DISTRIBUTION. HOWEVER, IN THE CASE OF AN
ELIGIBLE ROLLOVER DISTRIBUTION TO A BENEFICIARY WHO IS THE SURVIVING SPOUSE OF A
PARTICIPANT, AN ELIGIBLE RETIREMENT PLAN IS ONLY AN INDIVIDUAL RETIREMENT
ACCOUNT OR INDIVIDUAL RETIREMENT ANNUITY AS DESCRIBED IN SECTION 408 OF THE
CODE.
DIRECT ROLLOVER MEANS THE PAYMENT OF AN ELIGIBLE ROLLOVER DISTRIBUTION BY THE
PLAN TO THE ELIGIBLE RETIREMENT PLAN SPECIFIED BY THE DISTRIBUTEE WHO IS
ELIGIBLE TO ELECT A DIRECT ROLLOVER.
TIME OF DISTRIBUTION. Subject to the provisions of Section 7.1.2, upon the
receipt of a proper application for distribution from the Distributee after the
occurrence of an Event of Maturity effective as to a Participant, and after the
Participant's Vested Total Account has been determined and the right of the
Distributee to receive a distribution has been established, the Committee shall
cause the Trustee to make distribution of such Vested Total Account as soon as
administratively practicable, provided that distribution shall not be made as of
a date that is earlier than or later than the dates specified below.
EARLIEST BEGINNING DATE. Distribution shall not be made as of a Distribution
Date which is earlier than the earliest beginning date.
PARTICIPANT. IF THE DISTRIBUTEE IS A PARTICIPANT, THE EARLIEST BEGINNING DATE IS
THE DISTRIBUTION DATE COINCIDENT WITH OR NEXT FOLLOWING THE DATE OF THE
PARTICIPANT'S EVENT OF MATURITY.
BENEFICIARY. IF THE DISTRIBUTEE IS A BENEFICIARY OF A PARTICIPANT, THE EARLIEST
BEGINNING DATE IS THE DISTRIBUTION DATE COINCIDENT WITH OR NEXT FOLLOWING THE
DATE OF SUCH PARTICIPANT'S DEATH.
Distribution shall not be made, however, as of a Distribution Date which is
earlier than the date any required application for distribution is received and
any required notice period has expired.
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REQUIRED BEGINNING DATE. Distribution shall be commenced not later than the
December 31 immediately preceding the required beginning date applicable to the
Distributee and the amount received before such date shall not be less than the
amount determined under Section 7.3.2.
PARTICIPANT. IF THE DISTRIBUTEE IS A PARTICIPANT WHO IS NOT A FIVE PERCENT (5%)
OWNER (AS DEFINED IN APPENDIX B), THE REQUIRED BEGINNING DATE IS THE APRIL 1
FOLLOWING THE CALENDAR YEAR IN WHICH THE PARTICIPANT ATTAINS AGE SEVENTY AND
ONE-HALF (70-1/2) YEARS OR, IF LATER, THE APRIL 1 FOLLOWING THE CALENDAR YEAR IN
WHICH THE PARTICIPANT'S EVENT OF MATURITY OCCURS.
FIVE PERCENT OWNER. IF THE DISTRIBUTEE IS A PARTICIPANT WHO IS A FIVE PERCENT
(5%) OWNER (AS DEFINED IN APPENDIX B) AT ANY TIME DURING THE PLAN YEAR ENDING
WITH OR WITHIN THE CALENDAR YEAR IN WHICH SUCH PARTICIPANT ATTAINS AGE SEVENTY
AND ONE-HALF (70-1/2) YEARS, THEN THE REQUIRED BEGINNING DATE IS THE APRIL 1
FOLLOWING THE CALENDAR YEAR IN WHICH THE PARTICIPANT ATTAINS AGE SEVENTY AND
ONE-HALF (70-1/2) YEARS.
BENEFICIARY -- PARTICIPANT DIES ON OR AFTER REQUIRED DISTRIBUTION DATE. IF THE
DISTRIBUTEE IS THE BENEFICIARY OF A PARTICIPANT WHO DIED ON OR AFTER THE
PARTICIPANT'S REQUIRED BEGINNING DATE, THE BENEFICIARY'S REQUIRED BEGINNING DATE
IS THE DATE WHICH PROVIDES FOR DISTRIBUTION TO SUCH BENEFICIARY AT A RATE
(CONSIDERING BOTH TIME AND AMOUNT) THAT IS CUMULATIVELY AT LEAST AS RAPID AS THE
RATE OF DISTRIBUTION SCHEDULED AND COMMENCED PRIOR TO THE DEATH OF THE
PARTICIPANT.
BENEFICIARY -- PARTICIPANT DIES BEFORE REQUIRED DISTRIBUTION DATE. IF THE
DISTRIBUTEE IS A BENEFICIARY OF A PARTICIPANT WHO DIED BEFORE THE PARTICIPANT'S
REQUIRED BEGINNING DATE, THE BENEFICIARY'S REQUIRED BEGINNING DATE IS THE
DECEMBER 31 OF THE CALENDAR YEAR IN WHICH OCCURS THE FIFTH (5TH) ANNIVERSARY OF
THE PARTICIPANT'S DEATH (AND IN THIS INSTANCE DISTRIBUTION MUST BE COMPLETED BY
SUCH DECEMBER 31); PROVIDED, HOWEVER, THAT:
IF THE BENEFICIARY IS AN INDIVIDUAL WHO IS NOT THE SURVIVING SPOUSE OF THE
PARTICIPANT AND IF DISTRIBUTIONS WILL BE MADE TO SUCH INDIVIDUAL BENEFICIARY IN
SUBSTANTIALLY EQUAL AMOUNTS PAYABLE MONTHLY, QUARTERLY OR ANNUALLY OVER A PERIOD
OF TIME NOT EXTENDING BEYOND THE LIFE EXPECTANCY OF SUCH BENEFICIARY, THE
REQUIRED BEGINNING DATE IS DECEMBER 31 OF THE YEAR FOLLOWING THE YEAR OF THE
PARTICIPANT'S DEATH, OR
IF THE BENEFICIARY IS THE SURVIVING SPOUSE OF THE PARTICIPANT AND IF
DISTRIBUTIONS WILL BE MADE TO SUCH SURVIVING SPOUSE IN SUBSTANTIALLY EQUAL
AMOUNTS PAYABLE MONTHLY, QUARTERLY, OR ANNUALLY OVER A PERIOD OF TIME NOT
EXTENDING BEYOND THE LIFE EXPECTANCY OF THE SURVIVING SPOUSE, THE REQUIRED
BEGINNING DATE IS THE DATE SPECIFIED IN PARAGRAPH (I) ABOVE, OR IF LATER,
DECEMBER 31 OF THE CALENDAR YEAR IN WHICH THE PARTICIPANT WOULD HAVE ATTAINED
AGE SEVENTY AND ONE-HALF (70-1/2) YEARS.
DISCONTINUANCE OF PAYMENTS. The Committee may permit a Participant who is
receiving payments under the Plan, who is actively employed in Recognized
Employment, who attained age seventy and one-half (70-1/2) years before January
1, 1997, and who is not a five percent (5%) owner (as defined in Appendix B) to
elect to discontinue payments until the occurrence of an Event of Maturity as
described in Section 6.1. If payments are discontinued pursuant to this Section
7.2.3, the Participant's required beginning date shall be determined under
Section 7.2.2 and the spousal consent rules under sections 401(a)(11) and 417 of
the Code are complied with.
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FORMS OF DISTRIBUTION.
FORMS AVAILABLE. Subject to the presumptive form of payment provisions of
Section 7.3.4, at the direction of the Committee, the Trustee shall make
distribution of the Participant's Vested Total Account to the Distributee in one
of the following ways as the Distributee shall designate in writing:
LUMP SUM. IF THE DISTRIBUTEE IS EITHER A PARTICIPANT OR A BENEFICIARY, IN A
SINGLE LUMP SUM.
FIXED INSTALLMENTS. IF THE DISTRIBUTEE IS A PARTICIPANT OR IS THE BENEFICIARY OF
A PARTICIPANT WHO DIED BEFORE THE PARTICIPANT'S REQUIRED BEGINNING DATE, IN A
SERIES OF SUBSTANTIALLY EQUAL INSTALLMENTS PAYABLE MONTHLY, QUARTERLY,
SEMIANNUALLY OR ANNUALLY OVER A FIXED PERIOD SELECTED BY THE DISTRIBUTEE BEFORE
THE FIRST PAYMENT WHICH DOES NOT EXCEED THE LIFE EXPECTANCY OF THE DISTRIBUTEE
OR, IF THE DISTRIBUTEE IS A PARTICIPANT, THE JOINT AND LAST SURVIVOR LIFE
EXPECTANCY OF THE PARTICIPANT AND THE PARTICIPANT'S "DESIGNATED BENEFICIARY"
(WITHIN THE MEANING OF SECTION 401(a)(9) OF THE INTERNAL REVENUE CODE),
DETERMINED AS OF THE DATE OF THE FIRST SUCH INSTALLMENT PAYMENT; PROVIDED,
HOWEVER, THAT IF THE DISTRIBUTEE IS A PARTICIPANT AND THE FIXED PERIOD IS
DETERMINED BY THE JOINT AND LAST SURVIVOR LIFE EXPECTANCY OF THE PARTICIPANT AND
THE PARTICIPANT'S "DESIGNATED BENEFICIARY" (WITHIN THE MEANING OF SECTION
401(a)(9) OF THE INTERNAL REVENUE CODE), THEN THE REMAINING PORTION OF SUCH
FIXED PERIOD SHALL BE DETERMINED AGAIN AS OF THE PARTICIPANT'S REQUIRED
BEGINNING DATE (SEE SECTION 7.2.2(a)) BASED ON FACTS THEN IN EXISTENCE, AND
SHALL BE REDUCED (BUT NOT INCREASED) IF NECESSARY TO COMPLY WITH THE
REQUIREMENTS OF SECTION 401(a)(9) OF THE INTERNAL REVENUE CODE. THE ELECTION TO
RECALCULATE LIFE EXPECTANCY DESCRIBED IN SECTION 7.3.3 DOES NOT APPLY TO THIS
FORM OF DISTRIBUTION.
ANNUITY CONTRACT. BY THE PURCHASE AND DISTRIBUTION OF AN ANNUITY CONTRACT TO THE
DISTRIBUTEE. SUCH ANNUITY CONTRACT MAY NOT BE IN ANY FORM THAT WILL PROVIDE FOR
PAYMENTS OVER A PERIOD EXTENDING BEYOND THE LIFE EXPECTANCY OF THE DISTRIBUTEE
OR, IF THE DISTRIBUTEE IS A PARTICIPANT, THE JOINT AND LAST SURVIVOR LIFE
EXPECTANCY OF THE PARTICIPANT AND THE PARTICIPANT'S "DESIGNATED BENEFICIARY"
(WITHIN THE MEANING OF SECTION 401(a)(9) OF THE INTERNAL REVENUE CODE). THE
COMMITTEE WILL DIRECT THE TRUSTEE AS TO THE INSURANCE COMPANY AND AGENT THROUGH
WHICH THE TRUSTEE IS TO PURCHASE THE ANNUITY.
SUBSTANTIALLY EQUAL. Distributions shall be considered to be substantially equal
if the distributions are determined in whichever of the following manners is
applicable:
TERM CERTAIN INSTALLMENTS. IF DISTRIBUTIONS ARE IN THE FORM OF INSTALLMENTS
PAYABLE OVER A TERM CERTAIN PERIOD, THE AMOUNT OF THE DISTRIBUTION REQUIRED TO
BE MADE FOR EACH CALENDAR YEAR (THE "DISTRIBUTION YEAR") SHALL BE DETERMINED BY
DIVIDING THE AMOUNT OF THE VESTED TOTAL ACCOUNT AS OF THE LAST DISTRIBUTION DATE
IN THE CALENDAR YEAR IMMEDIATELY PRECEDING THE DISTRIBUTION YEAR (SUCH PRECEDING
CALENDAR YEAR BEING THE "VALUATION YEAR") BY THE NUMBER OF REMAINING INSTALLMENT
PAYMENTS TO BE MADE (INCLUDING THE DISTRIBUTION BEING DETERMINED). THE AMOUNT OF
THE VESTED TOTAL ACCOUNT AS OF SUCH DISTRIBUTION DATE SHALL BE INCREASED BY THE
AMOUNT OF ANY CONTRIBUTIONS AND FORFEITURES ALLOCATED TO THE VESTED TOTAL
ACCOUNT DURING THE VALUATION YEAR AND AFTER SUCH DISTRIBUTION DATE (INCLUDING
CONTRIBUTIONS AND FORFEITURES, IF ANY, MADE AFTER THE END OF THE VALUATION YEAR
WHICH ARE ALLOCATED AS OF DATES IN THE VALUATION YEAR). THE AMOUNT OF THE VESTED
TOTAL ACCOUNT SHALL BE DECREASED BY THE AMOUNT OF ANY DISTRIBUTIONS MADE IN THE
VALUATION YEAR AND AFTER SUCH DISTRIBUTION DATE.
LIFETIME INSTALLMENTS. IF DISTRIBUTIONS ARE IN THE FORM OF INSTALLMENTS OVER THE
LIFE EXPECTANCY OF THE RECIPIENT OR THE JOINT AND LAST SURVIVOR LIFE EXPECTANCY
OF THE PARTICIPANT AND THE PARTICIPANT'S "DESIGNATED BENEFICIARY" (WITHIN THE
MEANING OF SECTION 401(a)(9) OF THE INTERNAL REVENUE CODE), THE AMOUNT OF THE
DISTRIBUTION REQUIRED TO BE MADE FOR EACH CALENDAR YEAR (THE "DISTRIBUTION
YEAR") SHALL BE DETERMINED BY DIVIDING THE AMOUNT OF THE VESTED TOTAL ACCOUNT AS
OF THE LAST DISTRIBUTION DATE IN THE CALENDAR YEAR IMMEDIATELY PRECEDING THE
DISTRIBUTION YEAR (SUCH PRECEDING CALENDAR YEAR BEING THE "VALUATION YEAR") BY
THE REMAINING LIFE EXPECTANCY AS OF THE DISTRIBUTION YEAR. THE AMOUNT OF THE
VESTED TOTAL ACCOUNT AS OF THE LAST DISTRIBUTION DATE IN THE VALUATION YEAR
SHALL BE INCREASED BY THE AMOUNT OF ANY CONTRIBUTIONS AND FORFEITURES ALLOCATED
TO THE VESTED TOTAL ACCOUNT DURING THE VALUATION YEAR AND AFTER SUCH
DISTRIBUTION DATE (INCLUDING CONTRIBUTIONS AND FORFEITURES, IF ANY, MADE AFTER
THE END OF THE VALUATION YEAR WHICH ARE ALLOCATED AS OF DATES IN THE VALUATION
YEAR). THE AMOUNT OF THE VESTED TOTAL ACCOUNT SHALL BE DECREASED BY
DISTRIBUTIONS MADE IN THE VALUATION YEAR AND AFTER SUCH DISTRIBUTION DATE.
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LIFE EXPECTANCY. Life expectancy shall be determined from the tables published
under section 72 of the Code (except as provided in (b) below). Life expectancy
shall be based upon attained age on the individual's birthday in the calendar
year for which life expectancy is being determined and, in the absence of an
election as provided below, shall be reduced by one (1) year in each succeeding
calendar year.
ELECTION TO RECALCULATE LIFE EXPECTANCY. A PARTICIPANT MAY ELECT TO REDETERMINE
HIS OR HER LIFE EXPECTANCY FOR EACH SUCCEEDING CALENDAR YEAR THAT A DISTRIBUTION
IS REQUIRED TO BE MADE. IN THE CASE OF A PARTICIPANT WHO HAS DESIGNATED HIS OR
HER SPOUSE AS BENEFICIARY, THE PARTICIPANT MAY ELECT TO HAVE LIFE EXPECTANCY FOR
THE PARTICIPANT AND THE PARTICIPANT'S SPOUSE, REDETERMINED FOR EACH SUCCEEDING
CALENDAR YEAR THAT A DISTRIBUTION IS REQUIRED TO BE MADE. THE ELECTION MUST BE
MADE NO LATER THAN THE TIME OF THE FIRST REQUIRED DISTRIBUTION. THE ELECTION IS
IRREVOCABLE AND MUST APPLY TO ALL SUBSEQUENT YEARS.
MINIMUM DISTRIBUTION INCIDENTAL BENEFIT REQUIREMENT. IN THE CASE OF A
PARTICIPANT WHO HAS NOT DESIGNATED HIS OR HER SPOUSE AS BENEFICIARY, THE LIFE
EXPECTANCY FACTOR USED TO COMPUTE THE AMOUNT OF THE SUBSTANTIALLY EQUAL PAYMENT
DURING THE PARTICIPANT'S LIFETIME SHALL NOT BE GREATER THAN THE FACTOR
DETERMINED UNDER REGULATION 1.401(a)(9)-2 OF THE CODE (THE MINIMUM DISTRIBUTION
INCIDENTAL BENEFIT REQUIREMENT).
LIFE ANNUITIES FOR PARTICIPANT AND SURVIVING SPOUSE. IF THE DISTRIBUTEE IS
EITHER A PARTICIPANT OR A PARTICIPANT'S SURVIVING SPOUSE, BY PURCHASING AND
DISTRIBUTING A SINGLE PREMIUM, IMMEDIATE (NOT DEFERRED), FIXED (NOT VARIABLE)
ANNUITY CONTRACT WHICH SHALL BE NONTRANSFERABLE TO ANYONE BUT THE ISSUER, AND
WHICH SHALL PROVIDE FOR BENEFITS WHICH ARE HEREINAFTER DEFINED AS A QJ&SA
CONTRACT IN THE CASE OF A MARRIED PARTICIPANT, OR A LIFE ANNUITY CONTRACT IN THE
CASE OF AN UNMARRIED PARTICIPANT OR THE SURVIVING SPOUSE OF A PARTICIPANT.
PRESUMPTIVE FORM. The selection of a form of distribution shall be subject,
however, to the following rules:
REQUIRED LUMP SUM. AS PROVIDED IN SECTION 7.1.2, IF THE VALUE OF THE
PARTICIPANT'S VESTED TOTAL ACCOUNT HAS NEVER EXCEEDED FIVE THOUSAND DOLLARS
($5,000), THE DISTRIBUTION SHALL BE MADE IN A SINGLE LUMP SUM.
MARRIED PARTICIPANT. IN THE CASE OF ANY DISTRIBUTION WHICH IS TO BE MADE:
WHEN PARAGRAPH (a) ABOVE IS NOT APPLICABLE, AND
TO A PARTICIPANT WHO IS MARRIED ON THE DATE WHEN SUCH DISTRIBUTION IS TO BE
MADE, AND
TO A PARTICIPANT WHO HAS NOT REJECTED DISTRIBUTION IN THE FORM OF A QJ&SA
CONTRACT,
distribution shall be effected for such Participant by
applying the entire Vested Total Account to purchase and
distribute to such Participant a QJ&SA contract. A Participant
may reject distribution in the form of a QJ&SA contract by
filing an affirmative written rejection of distribution in
that form and an election of any form of distribution
permitted by the Plan not more than ninety (90) days before
the Distribution Date as of which the distribution is made.
Such a rejection may be made or revoked at any time and any
number of times until the Distribution Date as of which the
distribution to the Participant is made. A rejection shall not
be effective unless the Participant's spouse consents. To be
valid, the consent of the spouse must be in writing, must
acknowledge the
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effect of the distribution, must be witnessed by a notary
public, must be given during the ninety (90) day period
before the Distribution Date as of which the distribution is
made and must relate to that specific distribution. The
consent of the spouse must be to any form of distribution
permitted by the Plan. The Participant may elect to change
the form of distribution to the QJ&SA contract without any
requirement of further spousal consent. The consent of the
spouse shall be irrevocable and shall be effective only with
respect to that spouse. Distributions may not commence more
than ninety (90) days after nor, subject to Section 7.1.4,
less than thirty (30) days after the date the Participant is
furnished a written explanation of the terms and conditions
of the QJ&SA contract, the Participant's right to reject, and
the effect of rejecting, distribution in the form of the
QJ&SA contract, the requirement for the consent of the
Participant's spouse, the right to revoke a prior rejection
of distribution in the form of a QJ&SA contract, and the
right to make any number of further revocations or rejections
until the Distribution Date as of which distribution is made.
UNMARRIED PARTICIPANT. IN THE CASE OF ANY DISTRIBUTION WHICH IS TO BE MADE:
WHEN PARAGRAPH (a) ABOVE IS NOT APPLICABLE, AND
TO A PARTICIPANT WHO IS NOT MARRIED ON THE DATE WHEN SUCH DISTRIBUTION IS TO BE
MADE, AND
TO A PARTICIPANT WHO HAS NOT REJECTED DISTRIBUTION IN THE FORM OF A LIFE ANNUITY
CONTRACT,
distribution shall be effected for such Participant by
applying the entire Vested Total Account to purchase and
distribute to such Participant a Life Annuity contract. A
Participant may reject distribution in the form of a Life
Annuity contract by filing an affirmative written rejection of
distribution in that form and an election of any form of
distribution permitted by the Plan not more than ninety (90)
days before the Distribution Date as of which the distribution
is made. Such a rejection may be made or revoked at any time
and any number of times until the Distribution Date as of
which the distribution to the Participant is made.
Distributions may not commence more than ninety (90) days
after nor, subject to Section 7.1.4, less than thirty (30)
days after the date the Participant is furnished a written
explanation of the terms and conditions of the Life Annuity
contract, the Participant's right to reject, and the effect of
rejecting, distribution in the form of the Life Annuity
contract, the right to revoke a prior rejection of
distribution in the form of a Life Annuity contract, and the
right to make any number of further revocations or rejections
until the Distribution Date as of which distribution is made.
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SURVIVING SPOUSE. IN THE CASE OF A DISTRIBUTION WHICH IS MADE:
WHEN PARAGRAPH (a) ABOVE IS NOT APPLICABLE, AND
TO THE SURVIVING SPOUSE OF A PARTICIPANT, AND
WHEN SUCH SURVIVING SPOUSE HAS NOT REJECTED DISTRIBUTION IN THE FORM OF A LIFE
ANNUITY CONTRACT,
distribution shall be effected for such surviving spouse by
applying the entire Vested Total Account to purchase and
distribute to such surviving spouse a Life Annuity contract. A
surviving spouse may reject distribution in the form of a Life
Annuity contract by filing an affirmative written rejection of
distribution in that form and an election of any form of
distribution permitted by the Plan not more than ninety (90)
days before the Distribution Date as of which the distribution
is made. Such a rejection may be made or revoked at any time
and any number of times until the Distribution Date as of
which distribution to the surviving spouse is made.
Distributions may not commence more than ninety (90) days
after nor, subject to Section 7.1.4, less than thirty (30)
days after the date the surviving spouse is furnished a
written explanation of the terms and conditions of the Life
Annuity contract, the surviving spouse's right to reject, and
the effect of a rejection of, distribution in the form of the
Life Annuity contract, the right to revoke a prior rejection
of distribution in the form of a Life Annuity contract, and
the right to make any number of further revocations or
rejections until the Distribution Date as of which
distribution is made.
QJ&SA CONTRACT. A QJ&SA CONTRACT IS AN IMMEDIATE ANNUITY CONTRACT ISSUED AS AN
INDIVIDUAL POLICY OR UNDER A MASTER OR GROUP CONTRACT WHICH PROVIDES FOR A
MONTHLY ANNUITY PAYABLE TO AND FOR THE LIFETIME OF THE PARTICIPANT BEGINNING AS
OF THE DISTRIBUTION DATE AS OF WHICH IT IS PURCHASED WITH A SURVIVOR ANNUITY
PAYABLE MONTHLY AFTER THE DEATH OF THE PARTICIPANT TO AND FOR THE LIFETIME OF
THE SURVIVING SPOUSE OF THE PARTICIPANT (TO WHOM THE PARTICIPANT WAS MARRIED ON
THE DATE AS OF WHICH THE FIRST PAYMENT IS DUE) IN AN AMOUNT EQUAL TO FIFTY
PERCENT (50%) OF THE AMOUNT PAYABLE DURING THE JOINT LIVES OF THE PARTICIPANT
AND THE SURVIVING SPOUSE. THE CONTRACT SHALL BE A QJ&SA CONTRACT ONLY IF IT IS
ISSUED ON A PREMIUM BASIS WHICH DOES NOT DISCRIMINATE ON THE BASIS OF THE SEX OF
THE PARTICIPANT OR THE SURVIVING SPOUSE.
LIFE ANNUITY CONTRACT. A LIFE ANNUITY CONTRACT IS AN IMMEDIATE ANNUITY CONTRACT
ISSUED AS AN INDIVIDUAL POLICY OR UNDER A GROUP OR MASTER CONTRACT WHICH
PROVIDES FOR A MONTHLY ANNUITY PAYABLE TO AND FOR (i) THE LIFETIME OF AN
UNMARRIED PARTICIPANT BEGINNING AS OF THE DISTRIBUTION DATE AS OF WHICH IT IS
PURCHASED, OR (ii) THE LIFETIME OF THE SURVIVING SPOUSE OF A PARTICIPANT
BEGINNING AS OF THE DISTRIBUTION DATE AS OF WHICH IT IS PURCHASED. THE CONTRACT
SHALL BE A LIFE ANNUITY CONTRACT ONLY IF IT IS ISSUED ON A PREMIUM BASIS WHICH
DOES NOT DISCRIMINATE ON THE BASIS OF THE SEX OF THE PARTICIPANT OR THE
SURVIVING SPOUSE.
EFFECT OF REEMPLOYMENT. If a Participant is reemployed by any Employer
participating in the Plan or an Affiliate after distribution has been scheduled
to be made but before the Participant attains Normal Retirement Age and before
actual distribution, distribution of the Participant's Vested Total Account
shall be suspended and the Vested Total Account shall continue to be held in the
Fund until another Event of Maturity effective
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as to the Participant shall occur after the Participant's reemployment. It is
the general intent of this Plan that no distributions shall be made before the
Normal Retirement Age of a Participant while a Participant is employed by an
Employer or an Affiliate.
TEFRA SECTION 242(b) TRANSITIONAL RULES. Notwithstanding the other provisions of
this Section 7, distributions to or with respect to each individual eligible to
make a designation (before January 1, 1984) of a method of distribution pursuant
to section 242(b) of the Tax Equity and Fiscal Responsibility Act of 1982 shall
be made on and after the first day of the Plan Year beginning in 1984 in
accordance with the provisions set forth in Appendix D to this Plan Statement;
provided, however, that the QJ&SA contract or Life Annuity contract has been
rejected as described in Section 7.3.4.
DESIGNATION OF BENEFICIARIES.
RIGHT TO DESIGNATE. Each Participant may designate, upon forms to be furnished
by and filed with the Committee, one or more primary Beneficiaries or
alternative Beneficiaries to receive all or a specified part of the
Participant's Vested Total Account in the event of the Participant's death. The
Participant may change or revoke any such designation from time to time without
notice to or consent from any Beneficiary or spouse. No such designation, change
or revocation shall be effective unless executed by the Participant and received
by the Committee during the Participant's lifetime.
SPOUSAL CONSENT. Notwithstanding the foregoing, a designation will not be valid
for the purpose of paying benefits from the Plan to anyone other than a
surviving spouse of the Participant (if there is a surviving spouse) unless that
surviving spouse consents in writing to the designation of another person as
Beneficiary. To be valid, the consent of such spouse must be in writing, must
acknowledge the effect of the designation of the Beneficiary and must be
witnessed by a notary public. The consent of the spouse must be to the
designation of a specific named Beneficiary which may not be changed without
further spousal consent, or alternatively, the consent of the spouse must
expressly permit the Participant to make and to change the designation of
Beneficiaries without any requirement of further spousal consent. The consent of
the spouse to a Beneficiary is a waiver of the spouse's rights to death benefits
under the Plan (otherwise sometimes known as the qualified preretirement
survivor annuity). The consent of the surviving spouse need not be given at the
time the designation is made. The consent of the surviving spouse need not be
given before the death of the Participant. The consent of the surviving spouse
will be required, however, before benefits can be paid to any person other than
the surviving spouse. The consent of a spouse shall be irrevocable and shall be
effective only with respect to that spouse.
FAILURE OF DESIGNATION. If a Participant:
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FAILS TO DESIGNATE A BENEFICIARY,
DESIGNATES A BENEFICIARY AND THEREAFTER SUCH DESIGNATION IS REVOKED WITHOUT
ANOTHER BENEFICIARY BEING NAMED, OR
DESIGNATES ONE OR MORE BENEFICIARIES AND ALL SUCH BENEFICIARIES SO DESIGNATED
FAIL TO SURVIVE THE PARTICIPANT,
such Participant's Vested Total Account, or the part thereof as to which such
Participant's designation fails, as the case may be, shall be payable to the
first class of the following classes of automatic Beneficiaries with a member
surviving the Participant and (except in the case of the Participant's surviving
issue) in equal shares if there is more than one member in such class surviving
the Participant:
Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a distribution of all or
a portion of a deceased Participant's Vested Total Account may disclaim his or
her interest therein subject to the following requirements. To be eligible to
disclaim, a Beneficiary must be a natural person, must not have received a
distribution of all or any portion of a Vested Total Account at the time such
disclaimer is executed and delivered, and must have attained at least age
twenty-one (21) years as of the date of the Participant's death. Any disclaimer
must be in writing and must be executed personally by the Beneficiary before a
notary public. A disclaimer shall state that the Beneficiary's entire interest
in the undistributed Vested Total Account is disclaimed or shall specify what
portion thereof is disclaimed. To be effective, duplicate original executed
copies of the disclaimer must be both executed and actually delivered to both
the Committee and to the Trustee after the date of the Participant's death but
not later than nine (9) months after the date of the Participant's death. A
disclaimer shall be irrevocable when delivered to both the Committee and the
Trustee. A disclaimer shall be considered to be delivered to the Committee or
the Trustee only when actually received by the Committee or the Trustee (and in
the case of a corporate Trustee, shall be considered to be delivered only when
actually received by a trust officer familiar with the affairs of the Plan). The
Committee (and not the Trustee) shall be the sole judge of the content,
interpretation and validity of a purported disclaimer. Upon the filing of a
valid disclaimer, the Beneficiary shall be considered not to have survived the
Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall
not be considered to be a transfer of an interest in violation of the provisions
of Section 8 and shall not be considered to be an assignment or alienation of
benefits in violation of federal law prohibiting the assignment or alienation of
benefits under this Plan. No other form of attempted disclaimer shall be
recognized by either the Committee or the Trustee.
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DEFINITIONS. When used herein and, unless the Participant has otherwise
specified in the Participant's beneficiary designation, when used in a
beneficiary designation, "issue" means all persons who are lineal descendants of
the person whose issue are referred to, subject to the following:
A LEGALLY ADOPTED CHILD AND THE ADOPTED CHILD'S LINEAL DESCENDANTS ALWAYS SHALL
BE LINEAL DESCENDANTS OF EACH ADOPTIVE PARENT (AND OF EACH ADOPTIVE PARENT'S
LINEAL ANCESTORS);
A LEGALLY ADOPTED CHILD AND THE ADOPTED CHILD'S LINEAL DESCENDANTS NEVER SHALL
BE LINEAL DESCENDANTS OF ANY FORMER PARENT WHOSE PARENTAL RIGHTS WERE TERMINATED
BY THE ADOPTION (OR OF THAT FORMER PARENT'S LINEAL ANCESTORS); EXCEPT THAT IF,
AFTER A CHILD'S PARENT HAS DIED, THE CHILD IS LEGALLY ADOPTED BY A STEPPARENT
WHO IS THE SPOUSE OF THE CHILD'S SURVIVING PARENT, THE CHILD AND THE CHILD'S
LINEAL DESCENDANTS SHALL REMAIN LINEAL DESCENDANTS OF THE DECEASED PARENT (AND
THE DECEASED PARENT'S LINEAL ANCESTORS);
IF THE PERSON (OR A LINEAL DESCENDANT OF THE PERSON) WHOSE ISSUE ARE REFERRED TO
IS THE PARENT OF A CHILD (OR IS TREATED AS SUCH UNDER APPLICABLE LAW) BUT NEVER
RECEIVED THE CHILD INTO THAT PARENT'S HOME AND NEVER OPENLY HELD OUT THE CHILD
AS THAT PARENT'S CHILD (UNLESS DOING SO WAS PRECLUDED SOLELY BY DEATH), THEN
NEITHER THE CHILD NOR THE CHILD'S LINEAL DESCENDANTS SHALL BE ISSUE OF THE
PERSON.
"Child" means an issue of the first generation; "per stirpes" means in equal
shares among living children of the person whose issue are referred to and the
issue (taken collectively) of each deceased child of such person, with such
issue taking by right of representation of such deceased child; and "survive"
and "surviving" mean living after the death of the Participant.
SPECIAL RULES. Unless the Participant has otherwise specified in the
Participant's Beneficiary designation, the following rules shall apply:
IF THERE IS NOT SUFFICIENT EVIDENCE THAT A BENEFICIARY WAS LIVING AT THE TIME OF
THE DEATH OF THE PARTICIPANT, IT SHALL BE DEEMED THAT THE BENEFICIARY WAS NOT
LIVING AT THE TIME OF THE DEATH OF THE PARTICIPANT.
THE AUTOMATIC BENEFICIARIES SPECIFIED IN SECTION 7.4.3 AND THE BENEFICIARIES
DESIGNATED BY THE PARTICIPANT SHALL BECOME FIXED AT THE TIME OF THE
PARTICIPANT'S DEATH SO THAT, IF A BENEFICIARY SURVIVES THE PARTICIPANT BUT DIES
BEFORE THE RECEIPT OF ALL PAYMENTS DUE SUCH BENEFICIARY HEREUNDER, SUCH
REMAINING PAYMENTS SHALL BE PAYABLE TO THE REPRESENTATIVE OF SUCH BENEFICIARY'S
ESTATE.
IF THE PARTICIPANT DESIGNATES AS A BENEFICIARY THE PERSON WHO IS THE
PARTICIPANT'S SPOUSE ON THE DATE OF THE DESIGNATION, EITHER BY NAME OR BY
RELATIONSHIP, OR BOTH, THE DISSOLUTION, ANNULMENT OR OTHER LEGAL TERMINATION OF
THE MARRIAGE BETWEEN THE PARTICIPANT AND SUCH PERSON SHALL AUTOMATICALLY REVOKE
SUCH DESIGNATION. (THE FOREGOING SHALL NOT PREVENT THE PARTICIPANT FROM
DESIGNATING A FORMER SPOUSE AS A BENEFICIARY ON A FORM EXECUTED BY THE
PARTICIPANT AND RECEIVED BY THE COMMITTEE AFTER THE DATE OF THE LEGAL
TERMINATION OF THE MARRIAGE BETWEEN THE PARTICIPANT AND SUCH FORMER SPOUSE, AND
DURING THE PARTICIPANT'S LIFETIME.)
ANY DESIGNATION OF A NONSPOUSE BENEFICIARY BY NAME THAT IS ACCOMPANIED BY A
DESCRIPTION OF RELATIONSHIP TO THE PARTICIPANT SHALL BE GIVEN EFFECT WITHOUT
REGARD TO WHETHER THE RELATIONSHIP TO THE PARTICIPANT EXISTS EITHER THEN OR AT
THE PARTICIPANT'S DEATH.
ANY DESIGNATION OF A BENEFICIARY ONLY BY STATEMENT OF RELATIONSHIP TO THE
PARTICIPANT SHALL BE EFFECTIVE ONLY TO DESIGNATE THE PERSON OR PERSONS STANDING
IN SUCH RELATIONSHIP TO THE PARTICIPANT AT THE PARTICIPANT'S DEATH.
A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of the Participant's legal residence. The
Committee (and not the Trustee) shall be the sole judge of the content,
interpretation and validity of a purported Beneficiary designation.
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DEATH PRIOR TO FULL DISTRIBUTION. If a Participant dies after the
Participant's Event of Maturity but before distribution of the Participant's
Vested Total Account has been completed, the remainder of the undistributed
Vested Total Account shall be distributed in the same manner as hereinbefore
provided in the Event of Maturity by reason of death. If, at the death of the
Participant, any payment to the Participant was due or otherwise pending but not
actually paid, the amount of such payment shall be included in the Vested Total
Account which is payable to the Beneficiary (and shall not be paid to the
Participant's estate).
DISTRIBUTION IN CASH. Subject to the requirements of Section 7.3,
distribution of a Participant's Vested Total Account shall be made in cash. If,
however,
(a) the Vested Total Account to be distributed consists in whole
or in part of a Participant's unpaid promissory note, the
Trustee shall cause distribution of that portion of the Vested
Total Account to be made in the form of that unpaid promissory
note, or
(b) the Vested Total Account is to be distributed in a single lump
sum, the Trustee, at the election of the Distributee, shall
cause distribution to be made in the form of the assets held
in the Vested Total Account, or
(c) the Vested Total Account consists in whole or in part of
Employer stock, the Trustee, at the election of the
Distributee, shall cause that portion of the Account invested
in Employer stock to be made in Employer stock, or
(d) if the Vested Total Account to be distributed consists in
whole or in part of shares of any regulated investment company
(mutual funds) including First American Funds, Inc., First
American Investment Funds, Inc., First American Strategy
Funds, Inc. and such other mutual funds for which the Trustee
or its affiliates acts as an investment advisor or other
service provider, the Trustee, at the direction of the
Distributee, shall cause distribution of that portion of the
Vested Total Account to be converted to and distributed in the
class of shares permitted to be held by the Distributee.
FACILITY OF PAYMENT. In case of the legal disability, including minority, of
a Participant, Beneficiary or Alternate Payee entitled to receive any
distribution under the Plan, payment shall be made, if the Committee shall be
advised of the existence of such condition:
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TO THE DULY APPOINTED GUARDIAN, CONSERVATOR OR OTHER LEGAL REPRESENTATIVE OF
SUCH PARTICIPANT, BENEFICIARY OR ALTERNATE PAYEE, OR
TO A PERSON OR INSTITUTION ENTRUSTED WITH THE CARE OR MAINTENANCE OF THE
INCOMPETENT OR DISABLED PARTICIPANT, BENEFICIARY OR ALTERNATE PAYEE, PROVIDED,
HOWEVER, SUCH PERSON OR INSTITUTION HAS SATISFIED THE COMMITTEE THAT THE PAYMENT
WILL BE USED FOR THE BEST INTEREST AND ASSIST IN THE CARE OF SUCH PARTICIPANT,
BENEFICIARY OR ALTERNATE PAYEE, AND PROVIDED FURTHER, THAT NO PRIOR CLAIM FOR
SAID PAYMENT HAS BEEN MADE BY A DULY APPOINTED GUARDIAN, CONSERVATOR OR OTHER
LEGAL REPRESENTATIVE OF SUCH PARTICIPANT, BENEFICIARY OR ALTERNATE PAYEE.
Any payment made in accordance with the foregoing provisions of this Section
shall constitute a complete discharge of any liability or obligation of the
Employer, the Committee, the Trustee and the Fund therefor.
HARDSHIP DISTRIBUTIONS.
WHEN AVAILABLE. A Participant may receive an in-service hardship distribution
while employed from his or her Elective Account if the Committee determines that
such hardship distribution is for one of the purposes described in Section 7.8.2
and the conditions in Section 7.8.3 and Section 7.8.4 have been fulfilled. To
receive such a distribution, the Participant must file a hardship distribution
application with the Committee. In the application, the Participant shall
specify the dollar amount to be distributed. Such hardship distribution shall be
approved by the Committee and such hardship distribution shall be made, unless
otherwise elected by the Participant, in a lump sum cash payment as soon as
administratively feasible following the approval of a completed application by
the Committee.
PURPOSES. In-service hardship distributions shall be allowed under Section 7.8.1
only if the Participant establishes that the in-service hardship distribution is
to be made for one of the following purposes:
EXPENSES FOR MEDICAL CARE DESCRIBED IN SECTION 213(d) OF THE CODE PREVIOUSLY
INCURRED BY THE PARTICIPANT, THE PARTICIPANT'S SPOUSE OR ANY DEPENDENTS OF THE
PARTICIPANT (AS DEFINED IN SECTION 152 OF THE CODE) OR NECESSARY FOR THESE
PERSONS TO OBTAIN MEDICAL CARE DESCRIBED IN SECTION 213(d) OF THE CODE,
COSTS DIRECTLY RELATED TO THE PURCHASE OF A PRINCIPAL RESIDENCE FOR THE
PARTICIPANT (EXCLUDING MORTGAGE PAYMENTS),
PAYMENT OF TUITION, RELATED EDUCATIONAL FEES AND ROOM AND BOARD EXPENSES FOR THE
NEXT TWELVE (12) MONTHS OF POST-SECONDARY EDUCATION FOR THE PARTICIPANT, OR THE
PARTICIPANT'S SPOUSE, CHILDREN OR DEPENDENTS (AS DEFINED IN SECTION 152 OF THE
CODE), OR
PAYMENTS NECESSARY TO PREVENT THE EVICTION OF THE PARTICIPANT FROM THE
PARTICIPANT'S PRINCIPAL RESIDENCE OR FORECLOSURE ON THE MORTGAGE OF THAT
PRINCIPAL RESIDENCE.
Such purposes shall be considered to be an immediate and heavy financial need of
the Participant.
LIMITATIONS. In no event shall the cumulative amount of hardship distributions
withdrawn from a Participant's Elective Account exceed the amount of
contributions to that Account made pursuant to Section 3.2 (I.E., hardship
distributions from that Account
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shall not include any earnings on such contributions or any curative allocations
or earnings on curative allocations made pursuant to Section 3.4). The amount of
the hardship distribution shall not exceed the amount of the Participant's
immediate and heavy financial need; provided, however, that the amount of the
immediate and heavy financial need may include amounts necessary to pay any
federal, state, or local income taxes or penalties reasonably anticipated to
result from the distribution. In addition, a hardship distribution shall not be
allowed unless the Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans (at the time of the loan)
currently available under all plans maintained by the Employer and Affiliates.
Other funds are not currently available unless the funds are available prior to
or coincidently with the date the hardship distribution is available.
Notwithstanding the foregoing, no distribution shall be made pursuant
to this Section 7.8 unless the spouse of the Participant, if any, consents in
writing to the distribution. To be valid, the consent of the spouse must be in
writing, must acknowledge the effect of the distribution and must be witnessed
by a notary public. The consent of the spouse must be given within ninety (90)
days prior to the date as of which the distribution is made and must relate to
the specific distribution. The consent of the spouse shall be irrevocable and
shall be effective only with respect to that spouse.
COORDINATION WITH OTHER PLANS. The Participant's Salary Reduction Agreement and
elective contributions and employee contributions under all other plans
maintained by the Employer and any other Employer participating in the Plan and
Affiliates shall be canceled for twelve (12) months after receipt of a hardship
distribution and shall not be automatically reinstated. Thereafter, the
Participant may, upon giving prior notice to the Committee, enter into a new
Salary Reduction Agreement effective as of the payday on or after any subsequent
Enrollment Date following such twelve (12) month period, provided the
Participant is in Recognized Employment on that date. In addition, the
Participant shall not be allowed to make salary reduction contributions under
this Plan and all other plans maintained by the Employer and any other Employer
participating in the Plan and Affiliates for the Participant's taxable year
immediately following the taxable year of the hardship distribution which exceed
the adjusted limit under section 402(g) of the Code (as described in Section
2.5) for the next taxable year less the amount of such Participant's elective
contributions for the taxable year of the hardship distribution. For the
purposes of this Section 7.8, all other plans maintained by the Employer and any
other Employer participating in the Plan and Affiliates shall mean all qualified
and nonqualified plans of deferred compensation maintained by such Employer and
Affiliates (including stock option, stock purchase or similar plans).
Additionally, the Participant shall not be allowed to make
nondeductible voluntary contributions under this Plan and all other plans
maintained by the Employer and any other Employer participating in the Plan and
Affiliates for the twelve (12) consecutive month period immediately following
the hardship distribution. For the purpose of this Section 7.8, all other plans
maintained by the Employer and any other Employer participating in the Plan and
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Affiliates shall mean all qualified and nonqualified plans of deferred
compensation maintained by such Employer and Affiliates (including stock option,
stock purchase or similar plans).
COORDINATION WITH SECTION 4.1. If the hardship distribution is made from an
Elective Account which is invested in more than one (1) Subfund authorized and
established under Section 4.1, the amount withdrawn shall be charged to each
Subfund in the same proportions as the Elective Account is invested in each
Subfund.
WITHDRAWALS FROM VOLUNTARY ACCOUNTS.
WHEN AVAILABLE. A Participant may make withdrawals while employed from time to
time from the Participant's Nondeductible Voluntary Account and Deductible
Voluntary Account. To receive such a withdrawal, the Participant must file a
request with the Committee. In the request, the Participant shall specify the
dollar amount to be withdrawn. Such withdrawal request shall be approved by the
Committee to be made as of the Distribution Date coincident with or next
following the approval of a completed application by the Committee and shall be
made, unless otherwise elected by the Participant, in a lump sum cash payment as
soon as administratively feasible after such Distribution Date.
ACCOUNTING - NONDEDUCTIBLE VOLUNTARY ACCOUNT. The amount of such withdrawals
from the Participant's Nondeductible Voluntary Account shall be deemed to have
been first taken from the Participant's nondeductible voluntary contributions
made prior to January 1, 1987, to the extent of the aggregate amount not
previously withdrawn. Thereafter, withdrawals shall be deemed to have been taken
from a combination of (i) the Participant's nondeductible voluntary
contributions made after December 31, 1986, to the extent of the aggregate
amount thereof not previously withdrawn, and (ii) a portion of the earnings in
the Nondeductible Voluntary Account. The portion of each such withdrawal that is
deemed to be earnings will be in the same ratio as the total earnings of the
Nondeductible Voluntary Account bear to the total Nondeductible Voluntary
Account.
LIMITATIONS. Notwithstanding the foregoing, no withdrawal shall be made pursuant
to this Section 7.9 unless the spouse of the Participant, if any, consents in
writing to the withdrawal. To be valid, the consent of such spouse must be in
writing, must acknowledge the effect of the withdrawal and must be witnessed by
a notary public. The consent of the spouse must be given within ninety (90) days
prior to the Distribution Date as of which the withdrawal is made and must
relate to that specific withdrawal. The consent of the spouse shall be
irrevocable and shall be effective only with respect to that spouse.
If a withdrawal is made pursuant to this Section 7.9, the Participant
shall not be allowed to make nondeductible voluntary contributions under this
Plan and all other plans
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maintained by the Employer and any other Employer participating in the Plan and
all Affiliates for the twelve (12) consecutive month period following such
withdrawal.
COORDINATION WITH SECTION 4.1. If the Nondeductible Voluntary Account and
Deductible Voluntary Account are invested in more than one (1) Subfund
authorized and established under Section 4.1, the amount withdrawn shall be
charged to each Subfund in the same proportions as the Nondeductible Voluntary
Account and Deductible Voluntary Account are invested in each Subfund.
AGE 59-1/2 DISTRIBUTIONS.
WHEN AVAILABLE. A Participant may receive an in-service distribution while
employed from his or her vested Total Account if the Participant has attained
age fifty-nine and one-half (59-1/2) years. To receive such a distribution, the
Participant must file an in-service distribution request with the Committee. In
the request, the Participant shall specify the dollar amount to be distributed.
Such in-service distribution shall be approved by the Committee to be made as of
the Distribution Date coincident with or next following the approval of the
request by the Committee and shall be made, unless otherwise elected by the
Participant, in a lump sum cash payment as soon as administratively feasible
after such Distribution Date.
LIMITATIONS. Notwithstanding the foregoing, no distribution shall be made
pursuant to this Section 7.10 unless the spouse of the Participant, if any,
consents in writing to the distribution. To be valid, the consent of such spouse
must be in writing, must acknowledge the effect of the distribution and must be
witnessed by a notary public. The consent of the spouse must be given within
ninety (90) days prior to the Distribution Date as of which the distribution is
made and must relate to that specific distribution. The consent of the spouse
shall be irrevocable and shall be effective only with respect to that spouse.
SEQUENCE OF ACCOUNTS. Each in-service distribution made pursuant to this Section
7.10 shall first be taken from and charged to the Participant's Accounts in the
following sequence:
Nondeductible Voluntary Account
Deductible Voluntary Account
Rollover Account
Transfer Account
Employer Contributions Account
Elective Account.
Distributions from the Participant's Nondeductible Voluntary Account shall be
distributed in the sequence described in Section 7.9.
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COORDINATION WITH SECTION 4.1. If an in-service distribution is made from an
Account which is invested in more than one (1) Subfund authorized and
established under Section 4.1, the amount distributed shall be charged to each
Subfund in the same proportions as the Account is invested in each Subfund.
LOANS. Loans shall be made available to all Participants who are actively
employed and all other Participants and all Beneficiaries who are parties in
interest (as defined in Section 3(14) of ERISA) subject to limitations and
conditions established by the Committee with the consent of the Trustee. Loans
shall be made available on a reasonably equivalent basis and shall not be made
available to Highly Compensated Employees in an amount (expressed as a
percentage of the Vested Total Account) greater than is made available to other
employees. An Alternate Payee shall be considered a Beneficiary for this purpose
only after the domestic relation order has been finally determined to be a
qualified domestic relations order as defined in Appendix C to the Plan
Statement.
Notwithstanding the foregoing, no loan shall be made pursuant to this
Section 7.11 unless the spouse of the Participant, if any, consents in writing
to the loan. To be valid, the consent of such spouse must be in writing, must
acknowledge the effect of the loan and the use of the Account as security for
the loan and must be witnessed by a notary public. The consent of the spouse
must be given within ninety (90) days prior to the date the loan is made and
must relate to that specific loan. The consent given by the spouse to whom the
Participant was married at the time the loan was made shall be effective with
respect to that spouse and each subsequent spouse of the Participant. A new
consent shall be required if the Account is used for renegotiation, extension,
renewal or other revision of the loan.
All loans shall be subject to the rules established and agreed to in writing
between the Principal Sponsor and the Trustee. This Plan shall make all
disclosures required under federal truth-in-lending regulations (Regulation Z
issued by the Board of Governors of the Federal Reserve System).
CORRECTIVE DISTRIBUTIONS.
EXCESS DEFERRALS ($7,000 LIMIT).
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IN GENERAL. A PARTICIPANT MAY ATTRIBUTE TO THIS PLAN ANY EXCESS DEFERRALS MADE
DURING A TAXABLE YEAR OF THE PARTICIPANT BY NOTIFYING THE COMMITTEE IN WRITING
NOT LATER THAN THE MARCH 1 FOLLOWING SUCH TAXABLE YEAR OF THE AMOUNT OF THE
EXCESS DEFERRAL TO BE ASSIGNED TO THE PLAN. A PARTICIPANT SHALL BE DEEMED TO
HAVE NOTIFIED THE PLAN OF EXCESS DEFERRALS TO THE EXTENT THE PARTICIPANT HAS
EXCESS DEFERRALS FOR THE TAXABLE YEAR CALCULATED BY TAKING INTO ACCOUNT ONLY THE
AMOUNT OF ELECTIVE CONTRIBUTIONS ALLOCATED TO THE PARTICIPANT'S ELECTIVE ACCOUNT
AND TO ANY OTHER PLAN OF THE EMPLOYER AND AFFILIATES. NOTWITHSTANDING ANY OTHER
PROVISION OF THE PLAN STATEMENT, A PARTICIPANT'S EXCESS DEFERRALS, PLUS ANY
INCOME AND MINUS ANY LOSS ALLOCABLE THERETO, SHALL BE DISTRIBUTED TO THE
PARTICIPANT NO LATER THAN THE FIRST APRIL 15 FOLLOWING THE CLOSE OF THE
PARTICIPANT'S TAXABLE YEAR.
DEFINITIONS. FOR PURPOSES OF THIS SECTION, "EXCESS DEFERRALS" SHALL MEAN THE
AMOUNT OF ELECTIVE CONTRIBUTIONS ALLOCATED TO THE PARTICIPANT'S ELECTIVE ACCOUNT
FOR A PARTICIPANT'S TAXABLE YEAR AND WHICH THE PARTICIPANT OR THE EMPLOYER,
WHERE APPLICABLE, ALLOCATES TO THIS PLAN PURSUANT TO THE CLAIM PROCEDURE
DESCRIBED BELOW.
CLAIMS. THE PARTICIPANT'S CLAIM SHALL BE IN WRITING; SHALL BE SUBMITTED TO THE
COMMITTEE NOT LATER THAN MARCH 1 WITH RESPECT TO THE IMMEDIATELY PRECEDING
TAXABLE YEAR; SHALL SPECIFY THE AMOUNT OF THE PARTICIPANT'S EXCESS DEFERRALS FOR
THE PRECEDING TAXABLE YEAR; AND SHALL BE ACCOMPANIED BY THE PARTICIPANT'S
WRITTEN STATEMENT THAT IF SUCH AMOUNTS ARE NOT DISTRIBUTED, SUCH EXCESS
DEFERRALS, WHEN ADDED TO AMOUNTS DEFERRED UNDER OTHER PLANS OR ARRANGEMENTS
DESCRIBED IN SECTIONS 401(k), 408(k) OR 403(b) OF THE CODE, WILL EXCEED THE
LIMIT IMPOSED ON THE PARTICIPANT BY SECTION 402(g) OF THE CODE FOR THE TAXABLE
YEAR IN WHICH THE DEFERRAL OCCURRED. THE EMPLOYER SHALL NOTIFY THE PLAN ON
BEHALF OF THE PARTICIPANT WHERE THE EXCESS DEFERRALS OCCUR IN THE PLAN OR THE
COMBINED PLANS OF THE EMPLOYER AND AFFILIATES.
DETERMINATION OF INCOME OR LOSS. THE EXCESS DEFERRALS SHALL BE ADJUSTED FOR
INCOME OR LOSS. UNLESS THE COMMITTEE AND THE TRUSTEE AGREE OTHERWISE IN WRITING,
THE INCOME OR LOSS ALLOCABLE TO EXCESS DEFERRALS SHALL BE DETERMINED BY
MULTIPLYING THE INCOME OR LOSS ALLOCABLE TO THE PARTICIPANT'S ELECTIVE
CONTRIBUTIONS FOR THE PLAN YEAR ENDING WITHIN SUCH PRECEDING TAXABLE YEAR BY A
FRACTION, THE NUMERATOR OF WHICH IS THE EXCESS DEFERRALS ON BEHALF OF THE
PARTICIPANT FOR SUCH PRECEDING TAXABLE YEAR AND THE DENOMINATOR OF WHICH IS THE
PARTICIPANT'S ELECTIVE ACCOUNT BALANCE ATTRIBUTABLE TO ELECTIVE CONTRIBUTIONS ON
THE VALUATION DATE COINCIDENT WITH OR IMMEDIATELY BEFORE THE LAST DAY OF SUCH
PRECEDING TAXABLE YEAR WITHOUT REGARD TO ANY INCOME OR LOSS OCCURRING DURING
SUCH TAXABLE YEAR.
ACCOUNTING FOR EXCESS DEFERRALS. EXCESS DEFERRALS SHALL BE DISTRIBUTED FROM THE
PARTICIPANT'S ELECTIVE ACCOUNT.
EXCESS CONTRIBUTIONS (SECTION 401(k) TEST).
IN GENERAL. NOTWITHSTANDING ANY OTHER PROVISION OF THE PLAN STATEMENT, EXCESS
CONTRIBUTIONS FOR A PLAN YEAR, PLUS ANY INCOME AND MINUS ANY LOSS ALLOCABLE
THERETO, SHALL BE DISTRIBUTED NO LATER THAN THE LAST DAY OF THE FOLLOWING PLAN
YEAR, TO ELIGIBLE HIGHLY COMPENSATED EMPLOYEES AS DETERMINED IN THIS SECTION.
EXCESS CONTRIBUTIONS. FOR PURPOSES OF THIS SECTION, "EXCESS CONTRIBUTIONS" SHALL
MEAN, WITH RESPECT TO ANY PLAN YEAR, THE EXCESS OF:
THE AGGREGATE AMOUNT OF EMPLOYER CONTRIBUTIONS TAKEN INTO ACCOUNT IN COMPUTING
THE AVERAGE DEFERRAL PERCENTAGE (AS DEFINED IN SECTION 2) OF ELIGIBLE HIGHLY
COMPENSATED EMPLOYEES (AS DEFINED IN SECTION 2) FOR SUCH PLAN YEAR, OVER
THE MAXIMUM AMOUNT OF SUCH CONTRIBUTIONS PERMITTED BY THE SECTION 401(K) TESTS
DESCRIBED IN SECTION 2. SUCH MAXIMUM AMOUNT OF CONTRIBUTIONS SHALL BE DETERMINED
BY REDUCING (BUT NOT DISTRIBUTING) ELIGIBLE HIGHLY COMPENSATED EMPLOYEES'
CONTRIBUTIONS AS FOLLOWS:
THE CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT OF THE ELIGIBLE
HIGHLY COMPENSATED EMPLOYEE WHO HAS THE HIGHEST DEFERRAL PERCENTAGE (AS DEFINED
IN SECTION 2) SHALL BE REDUCED BY THE AMOUNT REQUIRED TO CAUSE SUCH ELIGIBLE
HIGHLY COMPENSATED EMPLOYEE'S
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DEFERRAL PERCENTAGE TO EQUAL THE NEXT HIGHEST DEFERRAL PERCENTAGE OF AN ELIGIBLE
HIGHLY COMPENSATED EMPLOYEE.
IF NEITHER OF THE TESTS IS SATISFIED AFTER SUCH REDUCTION, THE CONTRIBUTIONS
MADE PURSUANT TO A SALARY REDUCTION AGREEMENT OF THE ELIGIBLE HIGHLY COMPENSATED
EMPLOYEES WHO THEN HAVE THE HIGHEST DEFERRAL PERCENTAGE (INCLUDING THOSE
ELIGIBLE HIGHLY COMPENSATED EMPLOYEES WHOSE CONTRIBUTIONS WERE REDUCED UNDER (A)
ABOVE) SHALL BE REDUCED BY THE AMOUNT REQUIRED TO CAUSE SUCH ELIGIBLE HIGHLY
COMPENSATED EMPLOYEES' DEFERRAL PERCENTAGE TO EQUAL THE NEXT HIGHEST DEFERRAL
PERCENTAGE OF AN ELIGIBLE HIGHLY COMPENSATED EMPLOYEE.
IF NEITHER OF THE TESTS IS SATISFIED AFTER SUCH REDUCTION, THIS METHOD OF
REDUCTION SHALL BE REPEATED ONE OR MORE ADDITIONAL TIMES UNTIL ONE OF THE TESTS
IS SATISFIED.
DISTRIBUTION OF EXCESS CONTRIBUTIONS. EXCESS CONTRIBUTIONS, PLUS ANY INCOME AND
MINUS ANY LOSS ALLOCABLE THERETO, SHALL BE DISTRIBUTED FROM THE ELECTIVE
ACCOUNT. THE AMOUNT OF EXCESS CONTRIBUTIONS TO BE DISTRIBUTED ON BEHALF OF EACH
ELIGIBLE HIGHLY COMPENSATED EMPLOYEE FOR THE PLAN YEAR SHALL BE EQUAL TO THE
AMOUNT OF REDUCTION DETERMINED AS FOLLOWS:
THE CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT OF THE ELIGIBLE
HIGHLY COMPENSATED EMPLOYEE WHO HAS THE HIGHEST DOLLAR AMOUNT OF SUCH
CONTRIBUTIONS SHALL BE REDUCED BY THE AMOUNT REQUIRED TO CAUSE SUCH ELIGIBLE
HIGHLY COMPENSATED EMPLOYEE'S CONTRIBUTIONS TO EQUAL THE NEXT HIGHEST DOLLAR
AMOUNT CONTRIBUTED BY ELIGIBLE HIGHLY COMPENSATED EMPLOYEES (AND THE AMOUNT
CREDITED PURSUANT TO SECTION 3.3 SHALL BE REDUCED ACCORDINGLY).
IF ANY EXCESS CONTRIBUTIONS REMAIN AFTER PERFORMING (i), THEN THE ELIGIBLE
HIGHLY COMPENSATED EMPLOYEES WHO HAVE THE NEXT HIGHEST DOLLAR AMOUNT OF
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT (INCLUDING THOSE
ELIGIBLE HIGHLY COMPENSATED EMPLOYEES REDUCED UNDER (i) ABOVE) SHALL BE REDUCED
BY THE AMOUNT REQUIRED TO CAUSE SUCH ELIGIBLE HIGHLY COMPENSATED EMPLOYEES'
CONTRIBUTIONS TO EQUAL THE NEXT HIGHEST DOLLAR AMOUNT CONTRIBUTED BY ELIGIBLE
HIGHLY COMPENSATED EMPLOYEES (AND THE AMOUNT CREDITED PURSUANT TO SECTION 3.3
SHALL BE REDUCED ACCORDINGLY).
IF ANY EXCESS CONTRIBUTIONS REMAIN AFTER PERFORMING (i) AND (ii), THIS METHOD OF
REDUCTION SHALL BE REPEATED ONE OR MORE ADDITIONAL TIMES UNTIL NO EXCESS
CONTRIBUTIONS REMAIN.
Provided, however, if the total amount of reduction
determined in (i), (ii) and (iii) would be greater
than the amount of excess contributions, then the
final reduction amount shall be decreased so that the
total amount of reductions equals the amount of
excess contributions.
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DETERMINATION OF INCOME OR LOSS. THE EXCESS CONTRIBUTIONS TO BE DISTRIBUTED TO
ANY ELIGIBLE HIGHLY COMPENSATED EMPLOYEE SHALL BE ADJUSTED FOR INCOME OR LOSS.
UNLESS THE COMMITTEE AND THE TRUSTEE AGREE OTHERWISE IN WRITING, THE INCOME OR
LOSS ALLOCABLE TO EXCESS CONTRIBUTIONS TO BE DISTRIBUTED SHALL BE DETERMINED BY
MULTIPLYING THE INCOME OR LOSS ALLOCABLE TO THE ELIGIBLE HIGHLY COMPENSATED
EMPLOYEE'S SALARY REDUCTION CONTRIBUTIONS FOR THE PLAN YEAR BY A FRACTION, THE
NUMERATOR OF WHICH IS THE EXCESS CONTRIBUTIONS TO BE DISTRIBUTED TO THE ELIGIBLE
HIGHLY COMPENSATED EMPLOYEE FOR THE PLAN YEAR AND THE DENOMINATOR OF WHICH IS
THE ELIGIBLE HIGHLY COMPENSATED EMPLOYEES'S ACCOUNT BALANCE ATTRIBUTABLE TO
SALARY REDUCTION CONTRIBUTIONS ON THE LAST DAY OF THE PLAN YEAR, WITHOUT REGARD
TO ANY INCOME OR LOSS OCCURRING DURING SUCH PLAN YEAR.
EXCESS AGGREGATE CONTRIBUTIONS (SECTION 401(m) TEST).
IN GENERAL. NOTWITHSTANDING ANY OTHER PROVISION OF THE PLAN STATEMENT, EXCESS
AGGREGATE CONTRIBUTIONS, PLUS ANY INCOME AND MINUS ANY LOSS ALLOCABLE THERETO,
SHALL BE DISTRIBUTED NO LATER THAN THE LAST DAY OF THE FOLLOWING PLAN YEAR TO
ELIGIBLE HIGHLY COMPENSATED EMPLOYEES AS DETERMINED IN THIS SECTION.
EXCESS AGGREGATE CONTRIBUTIONS. FOR PURPOSES OF THIS SECTION, "EXCESS AGGREGATE
CONTRIBUTIONS" SHALL MEAN, WITH RESPECT TO ANY PLAN YEAR, THE EXCESS OF:
THE AGGREGATE AMOUNT OF CONTRIBUTIONS TAKEN INTO ACCOUNT IN COMPUTING THE
AVERAGE CONTRIBUTION PERCENTAGE (AS DEFINED IN SECTION 3) OF ELIGIBLE HIGHLY
COMPENSATED EMPLOYEES FOR SUCH PLAN YEAR, OVER
THE MAXIMUM AMOUNT OF SUCH CONTRIBUTIONS PERMITTED BY THE SECTION 401(m) TESTS
DESCRIBED IN SECTION 3. SUCH MAXIMUM AMOUNT OF CONTRIBUTIONS SHALL BE DETERMINED
BY REDUCING (BUT NOT DISTRIBUTING) ELIGIBLE HIGHLY COMPENSATED EMPLOYEES'
CONTRIBUTIONS AS FOLLOWS:
THE NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS FOR THE ELIGIBLE HIGHLY COMPENSATED
EMPLOYEE WHO HAS THE HIGHEST CONTRIBUTION PERCENTAGE SHALL BE REDUCED BY THE
AMOUNT REQUIRED TO CAUSE SUCH ELIGIBLE HIGHLY COMPENSATED EMPLOYEE'S
CONTRIBUTION PERCENTAGE TO EQUAL THE NEXT HIGHEST CONTRIBUTION PERCENTAGE OF AN
ELIGIBLE HIGHLY COMPENSATED EMPLOYEE.
IF NEITHER OF THE TESTS IS SATISFIED AFTER SUCH REDUCTION, THE NONDEDUCTIBLE
VOLUNTARY CONTRIBUTIONS FOR ELIGIBLE HIGHLY COMPENSATED EMPLOYEES WHO THEN HAVE
THE HIGHEST CONTRIBUTION PERCENTAGE (INCLUDING THOSE REDUCED UNDER (A) ABOVE)
SHALL BE REDUCED BY THE AMOUNT REQUIRED TO CAUSE SUCH ELIGIBLE HIGHLY
COMPENSATED EMPLOYEES' CONTRIBUTION PERCENTAGE TO EQUAL THE NEXT HIGHEST
CONTRIBUTION PERCENTAGE OF AN ELIGIBLE HIGHLY COMPENSATED EMPLOYEE.
IF NEITHER OF THE TESTS IS SATISFIED AFTER SUCH REDUCTIONS, THIS METHOD OF
REDUCTION SHALL BE REPEATED ONE OR MORE ADDITIONAL TIMES UNTIL ONE OF THE TESTS
IS SATISFIED.
DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. EXCESS AGGREGATE CONTRIBUTIONS,
PLUS ANY INCOME AND MINUS ANY LOSS ALLOCABLE THERETO, SHALL BE DISTRIBUTED FROM
THE PARTICIPANT'S NONDEDUCTIBLE VOLUNTARY ACCOUNT FOR THE PLAN YEAR. THE AMOUNT
OF EXCESS AGGREGATE CONTRIBUTIONS TO BE DISTRIBUTED ON BEHALF OF EACH ELIGIBLE
HIGHLY COMPENSATED EMPLOYEE FOR THE PLAN YEAR SHALL BE EQUAL TO THE AMOUNT OF
REDUCTION DETERMINED AS FOLLOWS:
THE NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS OF THE ELIGIBLE HIGHLY COMPENSATED
EMPLOYEE WHO HAS THE HIGHEST DOLLAR AMOUNT OF SUCH CONTRIBUTIONS SHALL BE
REDUCED BY THE AMOUNT REQUIRED TO
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CAUSE SUCH ELIGIBLE HIGHLY COMPENSATED EMPLOYEE'S CONTRIBUTIONS TO EQUAL THE
NEXT HIGHEST DOLLAR AMOUNT RECEIVED BY ELIGIBLE HIGHLY COMPENSATED EMPLOYEES.
IF ANY EXCESS AGGREGATE CONTRIBUTIONS REMAIN AFTER PERFORMING (i), THEN THE
ELIGIBLE HIGHLY COMPENSATED EMPLOYEES WHO HAVE THE NEXT HIGHEST DOLLAR AMOUNT OF
NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS (INCLUDING THOSE REDUCED UNDER (i) ABOVE)
SHALL BE REDUCED BY THE AMOUNT REQUIRED TO CAUSE SUCH ELIGIBLE HIGHLY
COMPENSATED EMPLOYEES' CONTRIBUTIONS TO EQUAL THE NEXT HIGHEST DOLLAR AMOUNT
RECEIVED BY ELIGIBLE HIGHLY COMPENSATED EMPLOYEES.
IF ANY EXCESS AGGREGATE CONTRIBUTIONS REMAIN AFTER PERFORMING (i) AND (ii), THIS
METHOD OF REDUCTION SHALL BE REPEATED ONE OR MORE ADDITIONAL TIMES UNTIL NO
EXCESS AGGREGATE CONTRIBUTIONS REMAIN.
Provided, however, if the total amount of reduction
determined in (i) through (iii) would be greater than
the amount of excess aggregate contributions, then
the final reduction amount shall be decreased so that
the total amount of reductions equals the amount of
excess aggregate contributions.
DETERMINATION OF INCOME OR LOSS. THE EXCESS AGGREGATE CONTRIBUTIONS TO BE
DISTRIBUTED TO ANY ELIGIBLE HIGHLY COMPENSATED EMPLOYEE SHALL BE ADJUSTED FOR
INCOME OR LOSS. UNLESS THE COMMITTEE AND THE TRUSTEE AGREE OTHERWISE IN WRITING,
THE INCOME OR LOSS ALLOCABLE TO EXCESS AGGREGATE CONTRIBUTIONS TO BE DISTRIBUTED
SHALL BE DETERMINED BY MULTIPLYING THE INCOME OR LOSS ALLOCABLE TO THE ELIGIBLE
HIGHLY COMPENSATED EMPLOYEE'S NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS FOR THE PLAN
YEAR BY A FRACTION, THE NUMERATOR OF WHICH IS THE EXCESS AGGREGATE CONTRIBUTIONS
TO BE DISTRIBUTED TO THE ELIGIBLE HIGHLY COMPENSATED EMPLOYEE FOR THE PLAN YEAR
AND THE DENOMINATOR OF WHICH IS THE ELIGIBLE HIGHLY COMPENSATED EMPLOYEES'S
NONDEDUCTIBLE VOLUNTARY ACCOUNT BALANCE ON THE LAST DAY OF THE PLAN YEAR,
WITHOUT REGARD TO ANY INCOME OR LOSS OCCURRING DURING SUCH PLAN YEAR.
PRIORITY. The determination of the excess aggregate contributions shall be made
after first determining the excess deferrals, and then determining the excess
contributions. The amount of excess contributions shall be reduced by excess
deferrals previously distributed to such Participant for the Participant's
taxable year ending with or within such Plan Year.
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SPENDTHRIFT PROVISIONS
No Participant or Beneficiary shall have any transmissible interest in any
Account nor shall any Participant or Beneficiary have any power to anticipate,
alienate, dispose of, pledge or encumber the same while in the possession or
control of the Trustee, nor shall the Trustee, the Employer or the Committee
recognize any assignment thereof, either in whole or in part, nor shall any
Account be subject to attachment, garnishment, execution following judgment or
other legal process while in the possession or control of the Trustee.
The power to designate Beneficiaries to receive the Vested Total Account of a
Participant in the event of death shall not permit or be construed to permit
such power or right to be exercised by the Participant so as thereby to
anticipate, pledge, mortgage or encumber the Participant's Account or any part
thereof, and any attempt of a Participant so to exercise said power in violation
of this provision shall be of no force and effect and shall be disregarded by
the Employer, the Committee and the Trustee.
This Section shall not prevent the Employer, the Committee or the Trustee from
exercising, in their discretion, any of the applicable powers and options
granted to them upon the occurrence of an Event of Maturity, as such powers may
be conferred upon them by any applicable provision hereof, nor prevent the Plan
from foreclosing on the lien granted to secure any and all loans made to a
Participant or Beneficiary from the Fund. (In the event of a default on a loan
made to a Participant or a Beneficiary, foreclosure on the promissory note and
the attachment of the security interest in the Account will not occur until an
Event of Maturity occurs with respect to such Participant.) This Section shall
not prevent the Employer, the Committee or the Trustee from observing the terms
of a qualified domestic relations order as provided in Appendix C to this Plan
Statement.
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AMENDMENT AND TERMINATION
AMENDMENT. The Principal Sponsor reserves the power to amend this Plan
Statement either prospectively or retroactively or both and in any respect by
resolution of its Board of Directors; provided that no amendment shall be
effective to reduce or divest the Total Account of any Participant unless the
same shall have been adopted with the consent of the Secretary of Labor pursuant
to the provisions of ERISA, or in order to comply with the provisions of the
Code and the regulations and rulings thereunder affecting the tax-qualified
status of the Plan and the deductibility of Employer contributions thereto.
Notwithstanding the foregoing, no amendment shall be effective to increase the
duties of the Trustee without its consent. No oral or written statement shall be
effective to amend the Plan Statement unless it is duly authorized by the Board
of Directors. The power to amend the Plan Statement may not be delegated.
DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION OF PLAN. The Principal
Sponsor reserves the right to reduce, suspend or discontinue its contributions
to the Plan and to terminate the Plan herein embodied in its entirety.
Notwithstanding anything in this Plan Statement to the contrary, if the
Principal Sponsor applies to the Internal Revenue Service for a ruling that the
termination of the Plan does not adversely affect its qualified status, then all
distributions (other than required distributions under Section 7.2.2 and the
making of new loans) shall be suspended upon termination of the Plan pending the
receipt of a favorable determination.
MERGER OR SPINOFF OF PLANS.
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IN GENERAL. The Principal Sponsor may cause all or a part of this Plan to be
merged with all or a part of any other plan and may cause all or a part of the
assets and liabilities to be transferred from this Plan to another plan. In the
case of merger or consolidation of this Plan with, or transfer of assets and
liabilities of this Plan to, any other plan, each Participant shall (if such
other plan were then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is not less than the benefit the Participant
would have been entitled to receive immediately before the merger, consolidation
or transfer (if this Plan had then terminated). If the Principal Sponsor agrees
to a transfer of assets and liabilities to or from another plan, the agreement
under which such transfer is concluded (or an amendment of or appendix to this
Plan Statement) shall specify the Accounts to which the transferred amounts are
to be credited.
LIMITATIONS. In no event shall assets be transferred from any other plan to this
Plan unless this Plan complies (or has been amended to comply) with the optional
form of benefit requirements of section 411(d)(6)(B)(ii) of the Internal Revenue
Code (or, where applicable, the distribution rules of section 401(k) of the
Internal Revenue Code) with respect to such transferred assets. In no event
shall assets be transferred from this Plan to any other plan unless such other
plan complies (or has been amended to comply) with the optional form of benefit
requirements of section 411(d)(6)(B)(ii) of the Internal Revenue Code and the
distribution rules of section 401(k) of the Internal Revenue Code with respect
to such transferred assets.
BENEFICIARY DESIGNATIONS. If assets and liabilities are transferred from another
plan to this Plan, Beneficiary designations made under that plan shall become
void with respect to deaths occurring on or after the date as of which such
transfer is made and the Beneficiary designation rules of this Plan Statement
shall apply beginning on such date.
ADOPTION BY OTHER EMPLOYERS.
ADOPTION BY CONSENT. The Principal Sponsor may consent to the adoption of the
Plan by any business entity subject to such conditions as the Principal Sponsor
may impose.
PROCEDURE FOR ADOPTION. Any such adopting business entity shall initiate its
adoption of the Plan by delivery of a certified copy of the resolutions of its
board of directors (or other authorized body or individual) adopting this Plan
Statement to the Principal Sponsor. Upon the consent by the Principal Sponsor to
the adoption by the adopting business entity, and the delivery to the Trustee of
written evidence of the Principal Sponsor's consent, the adoption of the Plan by
the adopting business entity shall be effective as of the date specified by the
Principal Sponsor. If such adopting business entity is not a corporation, any
reference in the Plan Statement to its board of directors shall be deemed to
refer to such entity's governing body or other authorized individual.
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EFFECT OF ADOPTION. Upon the adoption of the Plan by an adopting business entity
as heretofore provided, the adopting business entity shall be an Employer
hereunder in all respects. Each adopting business entity, as a condition of
continued participation in the Plan, delegates to the Principal Sponsor the sole
power and authority over all Plan matters except that the board of directors of
each adopting business entity shall have the power to amend this Plan Statement
as applied to it by establishing a successor plan to which assets and
liabilities may be transferred as provided in Section 9.3 and to terminate the
Plan as applied to it. Each reference herein to the Employer shall include the
Principal Sponsor and all adopting business entities unless the context clearly
requires otherwise.
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CONCERNING THE TRUSTEE
DEALINGS WITH TRUSTEE.
NO DUTY TO INQUIRE. No person, firm or corporation dealing with the Trustee
shall be required to take cognizance of the provisions of this Plan Statement or
be required to make inquiry as to the authority of the Trustee to do any act
which the Trustee shall do hereunder. No person, firm or corporation dealing
with the Trustee shall be required to see either to the administration of the
Plan or the Fund or to the faithful performance by the Trustee of its duties
hereunder (except to the extent otherwise provided by ERISA). Any such person,
firm or corporation shall be entitled to assume conclusively that the Trustee is
properly authorized to do any act which it shall do hereunder. Any such person,
firm or corporation shall be under no liability to anyone whomsoever for any act
done hereunder pursuant to the written direction of the Trustee.
ASSUMED AUTHORITY. Any such person, firm or corporation may conclusively assume
that the Trustee has full power and authority to receive and receipt for any
money or property becoming due and payable to the Trustee. No such person shall
be bound to inquire as to the disposition or application of any money or
property paid to the Trustee or paid in accordance with the written directions
of the Trustee.
COMPENSATION OF TRUSTEE. If a corporate Trustee shall be acting hereunder,
the corporate Trustee shall be entitled to receive compensation for its services
as Trustee hereunder as may be agreed upon from time to time by the Principal
Sponsor and the Trustee. Any individual Trustee who already receives full-time
pay from the Employer shall receive no compensation for services hereunder.
Other individual Trustees shall likewise serve without compensation unless they
shall otherwise specifically agree with the Principal Sponsor to the contrary.
In any event, however, the Trustee (whether corporate or individual Trustees be
acting) shall be entitled to receive reimbursement for reasonable expenses,
fees, costs and other charges incurred by it or payable by it on account of the
administration of the Plan and the Fund to the extent approved by the Principal
Sponsor. Such items of expense and compensation shall be payable out of the Fund
in a fair and equitable manner as determined by the Trustee, except to the
extent that the Employer, in its discretion, directly pays the Trustee.
RESIGNATION AND REMOVAL OF TRUSTEE.
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RESIGNATION, REMOVAL AND APPOINTMENT. The Trustee (or in the event two or more
co-trustees are acting, any such co-trustee) may resign by giving thirty (30)
days' notice of intention so to do to the Principal Sponsor or such shorter
notice as the Principal Sponsor may approve. The Principal Sponsor may remove
any Trustee or successor Trustee hereunder by giving such Trustee (or any
co-trustee) thirty (30) days' written notice of removal by certified mail. The
Principal Sponsor shall have the power to appoint one or more individual or
corporate Trustees, or both, as additional or successor Trustees.
AUTOMATIC REMOVAL. If any individual who is a Trustee is a director, officer or
employee when appointed as a Trustee, then such individual shall be
automatically removed as a Trustee at the earliest time such individual ceases
to be a director, officer or employee. This removal shall occur automatically
and without any requirement for action by the Principal Sponsor or any notice to
the individual so removed.
SURVIVING TRUSTEES. When any person appointed, qualified and serving as a
Trustee hereunder shall cease to be a Trustee of the Fund, the remaining Trustee
or Trustees then serving hereunder, or the successor Trustee or Trustees
appointed hereunder, as the case may be, shall thereupon be and become vested
with full title and right to possession of all assets and records of the Plan
and the Fund in the possession or control of such prior Trustee, and the prior
Trustee shall forthwith account for and deliver the same to such remaining or
successor Trustee or Trustees.
SUCCESSOR ORGANIZATIONS. By designating a corporate Trustee, original or
successor, hereunder, there is included in such designation and as a part
thereof any other corporation possessing trust powers and authorized by law to
accept the Plan and the Fund into which or with which the designated corporate
Trustee, original or successor, shall be converted, consolidated or merged, and
the corporation into which or with which any corporate Trustee hereunder shall
be so converted, consolidated or merged shall continue to be the corporate
Trustee of the Plan and the Fund.
CO-TRUSTEE RESPONSIBILITY. No Trustee shall be or become liable for any act or
omission of a co-trustee serving hereunder with the Trustee (except to the
extent that liability is imposed under ERISA) or of a prior Trustee hereunder,
it being the purpose and intent that each Trustee shall be liable only for the
Trustee's own acts or omissions during the Trustee's term of service as Trustee
hereunder.
ALLOCATION OF RESPONSIBILITY. If there shall at any time be two (2) or more
co-trustees serving hereunder, such Trustees, in addition to all other powers
and authorities vested in them by law or conferred upon them by any provision of
this Plan Statement, shall have power to allocate and reallocate from time to
time to any one or more of their number specific responsibilities, obligations
or duties and may delegate and redelegate from time to time to any one or more
of their number the exercise of any right, power or
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discretion vested in the Trustees by law or conferred upon them by any provision
of this Plan Statement, and any person, firm or corporation dealing with the
co-trustees with respect to the Plan or the Fund may assume conclusively that
any action taken or instrument executed by any one of such co-trustees is the
action of all the co-trustees serving hereunder, and that authority for the
doing of such act or the execution of such instrument has been conferred upon
and delegated to the Trustee doing such act or executing such instrument. If any
responsibility, obligation, duty, right, power or discretion vested in the
Trustee is allocated or delegated to one or more co-trustees, the remaining
co-trustees shall not be or become liable for an act or omission by the
co-trustees to whom a right, power or discretion was delegated while such
co-trustees were acting pursuant to such delegation.
MAJORITY DECISIONS. If there shall at any time be three (3) or more co-trustees
serving hereunder who are qualified to perform a particular act, the same may be
performed, on behalf of all, by a majority of those qualified, with or without
the concurrence of the minority. No person who failed to join or concur in such
act shall be held liable for the consequences thereof, except to the extent that
liability is imposed under ERISA.
ACCOUNTINGS BY TRUSTEE.
PERIODIC REPORTS. The Trustee shall render to the Principal Sponsor and to the
Committee an account and report as soon as practicable after each Annual
Valuation Date (and as soon as may be practicable after each other Valuation
Date) showing all transactions affecting the administration of the Plan and the
Fund, including, but not necessarily limited to, such information concerning the
Plan and the Fund and the administration thereof by the Trustee as shall be
requested in writing by the Principal Sponsor or the Committee.
SPECIAL REPORTS. The Trustee shall also render such further reports from time to
time as may be requested by the Principal Sponsor and shall submit its final
report and account to the Principal Sponsor when it shall cease to be Trustee
hereunder, whether by resignation or other cause.
Trustee's Power to Protect Itself on Account of Taxes. As a condition to making
the distribution of a Participant's Vested Total Account during the
Participant's lifetime, the Trustee may require the Participant (or the person
or persons entitled to receive the Participant's Vested Total Account in the
event of the Participant's death) to furnish the Trustee with proof of payment
of all income, inheritance, estate, transfer, legacy and succession taxes and
all other taxes of any different type or kind that may be imposed under or by
virtue of any state or federal statute or law upon the payment, transfer,
descent or distribution of such Vested Total Account and for the payment of
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which the Trustee may, in its judgment, be directly or indirectly liable. In
lieu of the foregoing, the Trustee may deduct, withhold and transmit to the
proper taxing authorities any such tax which it may be permitted or required to
deduct and withhold and the Vested Total Account to be distributed in such case
shall be correspondingly reduced. Unless the Principal Sponsor and the Trustee
agree otherwise in writing, the Trustee shall be responsible for withholding
federal income taxes and for providing all required notices and elections
concerning such withholding to all Participants and Beneficiaries.
OTHER TRUST POWERS. Except to the extent that the Trustee is subject to the
authorized and properly given investment directions of a Participant,
Beneficiary, Investment Manager or the Committee (and in extension, but not in
limitation, of the rights, powers and discretions conferred upon the Trustee
herein), the Trustee shall have and may exercise from time to time in the
administration of the Plan and the Fund, for the purpose of distribution after
the termination thereof, and for the purpose of distribution of Vested Total
Accounts, without order or license of any court, any one or more or all of the
following rights, powers and discretions:
TO INVEST AND REINVEST ANY SUBFUNDS ESTABLISHED PURSUANT TO SECTION 4.1 IN
ACCORDANCE WITH THE INVESTMENT CHARACTERISTICS AND OBJECTIVES DETERMINED
THEREFOR AND TO INVEST AND REINVEST THE ASSETS OF THE FUND IN ANY SECURITIES OR
PROPERTIES IN WHICH AN INDIVIDUAL COULD INVEST THE INDIVIDUAL'S OWN FUNDS AND
WHICH IT DEEMS FOR THE BEST INTEREST OF THE FUND, WITHOUT LIMITATION BY ANY
STATUTE, RULE OF LAW OR REGULATION OF ANY GOVERNMENTAL BODY PRESCRIBING OR
LIMITING THE INVESTMENT OF TRUST ASSETS BY CORPORATE OR INDIVIDUAL TRUSTEES, IN
OR TO CERTAIN KINDS, TYPES OR CLASSES OF INVESTMENTS OR PRESCRIBING OR LIMITING
THE PORTION OF THE FUND WHICH MAY BE INVESTED IN ANY ONE PROPERTY OR KIND, TYPE
OR CLASS OF INVESTMENT. SPECIFICALLY AND WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE TRUSTEE MAY INVEST AND REINVEST PRINCIPAL AND ACCUMULATED INCOME
OF THE FUND IN ANY REAL OR PERSONAL PROPERTY; PREFERRED OR COMMON STOCKS OF ANY
KIND OR CLASS OF ANY CORPORATION, INCLUDING BUT NOT LIMITED TO INVESTMENT AND
SMALL BUSINESS INVESTMENT COMPANIES OF ALL TYPES; VOTING TRUST CERTIFICATES;
INTERESTS IN INVESTMENT TRUSTS; SHARES OF MUTUAL FUNDS; INTERESTS IN ANY LIMITED
OR GENERAL PARTNERSHIP OR OTHER BUSINESS ENTERPRISE, HOWEVER ORGANIZED AND FOR
WHATEVER PURPOSE; GROUP OR INDIVIDUAL ANNUITY CONTRACTS (WHICH MAY INVOLVE
INVESTMENT IN THE ISSUER'S GENERAL ACCOUNT OR ANY OF ITS SEPARATE ACCOUNTS);
INTERESTS IN COMMON OR COLLECTIVE TRUSTS, VARIABLE INTEREST NOTES OR ANY OTHER
TYPE OF COLLECTIVE FUND MAINTAINED BY A BANK OR SIMILAR INSTITUTION (WHETHER OR
NOT THE TRUSTEE HEREUNDER); BONDS, NOTES AND DEBENTURES, SECURED OR UNSECURED;
MORTGAGES, LEASES OR OTHER INTERESTS IN REAL OR PERSONAL PROPERTY; INTERESTS IN
MINERAL, GAS, OIL OR TIMBER PROPERTIES OR OTHER WASTING ASSETS; CALL OPTIONS;
PUT OPTIONS; COMMODITY OR FINANCIAL FUTURES CONTRACTS; FOREIGN CURRENCY;
INTEREST-BEARING CERTIFICATES OR ACCOUNTS IN A BANK OR SIMILAR FINANCIAL
INSTITUTION, INCLUDING THE TRUSTEE OR AN AFFILIATE OF THE TRUSTEE, PROVIDED SUCH
CERTIFICATES, ACCOUNTS OR INSTRUMENTS BEAR A REASONABLE RATE OF INTEREST;
INSURANCE CONTRACTS ON THE LIFE OF ANY "KEYMAN" OR SHAREHOLDER OF THE EMPLOYER;
OR CONDITIONAL SALES CONTRACTS. PRIOR TO MATURITY AND DISTRIBUTION OF THE VESTED
TOTAL ACCOUNTS OF PARTICIPANTS, THE TRUSTEE SHALL COMMINGLE THE ACCOUNTS OF
PARTICIPANTS IN EACH SUBFUND AND INVEST, REINVEST, CONTROL AND MANAGE EACH OF
THE SAME AS A COMMON TRUST FUND.
TO SELL, EXCHANGE OR OTHERWISE DISPOSE OF ANY ASSET OF WHATSOEVER CHARACTER AT
ANY TIME HELD BY THE TRUSTEE IN TRUST HEREUNDER.
TO SEGREGATE ANY PART OR PORTION OF THE FUND FOR THE PURPOSE OF ADMINISTRATION
OR DISTRIBUTION THEREOF AND, IN ITS SOLE DISCRETION, TO HOLD THE FUND UNINVESTED
WHENEVER AND FOR SO LONG AS, IN THE TRUSTEE'S DISCRETION, THE SAME IS LIKELY TO
BE REQUIRED FOR THE PAYMENT IN CASH OF ACCOUNTS NORMALLY EXPECTED TO BECOME
DISTRIBUTABLE IN THE NEAR FUTURE, OR WHENEVER, AND FOR AS LONG AS, MARKET
CONDITIONS ARE UNCERTAIN, OR FOR ANY OTHER REASON WHICH, IN THE TRUSTEE'S
DISCRETION, REQUIRES SUCH ACTION OR MAKES SUCH ACTION ADVISABLE.
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TO HOLD UNINVESTED REASONABLE AMOUNTS OF CASH WHENEVER IT IS DEEMED ADVISABLE TO
DO SO TO FACILITATE DISBURSEMENTS OR FOR OTHER OPERATIONAL REASONS, AND TO
DEPOSIT THE SAME, WITH OR WITHOUT INTEREST, IN THE COMMERCIAL OR SAVINGS
DEPARTMENTS OF THE TRUSTEE SERVING HEREUNDER OR OF ANY OTHER BANK, TRUST COMPANY
OR OTHER FINANCIAL INSTITUTION INCLUDING THOSE AFFILIATED WITH THE TRUSTEE.
TO REGISTER ANY INVESTMENT HELD IN THE FUND IN THE NAME OF THE TRUSTEE, WITHOUT
TRUST DESIGNATION, OR IN THE NAME OF A NOMINEE OR NOMINEES, AND TO HOLD ANY
INVESTMENT IN BEARER FORM, BUT THE RECORDS OF THE TRUSTEE SHALL AT ALL TIMES
SHOW THAT ALL SUCH INVESTMENTS ARE PART OF THE FUND, AND THE TRUSTEE SHALL BE AS
RESPONSIBLE FOR ANY ACT OR DEFAULT OF ANY SUCH NOMINEE AS FOR ITS OWN.
SUBJECT TO THE PRIOR APPROVAL OF THE COMMITTEE, TO RETAIN AND EMPLOY SUCH
ATTORNEYS, AGENTS AND SERVANTS AS MAY BE NECESSARY OR DESIRABLE, IN THE OPINION
OF THE TRUSTEE, IN THE ADMINISTRATION OF THE FUND, AND TO PAY THEM SUCH
REASONABLE COMPENSATION FOR THEIR SERVICES AS MAY BE AGREED UPON AS AN EXPENSE
OF ADMINISTRATION OF THE FUND, INCLUDING POWER TO EMPLOY AND RETAIN COUNSEL UPON
ANY MATTER OF DOUBT AS TO THE MEANING OF OR INTERPRETATION TO BE PLACED UPON
THIS PLAN STATEMENT OR ANY PROVISIONS THEREOF WITH REFERENCE TO ANY QUESTION
ARISING IN THE ADMINISTRATION OF THE FUND OR PERTAINING TO THE DISTRIBUTION
THEREOF OR PERTAINING TO THE RIGHTS AND LIABILITIES OF THE TRUSTEE HEREUNDER OR
TO THE RIGHTS AND CLAIMS OF PARTICIPANTS AND BENEFICIARIES. THE TRUSTEE, IN ANY
SUCH EVENT, MAY ACT IN RELIANCE UPON THE ADVICE, OPINIONS, RECORDS, STATEMENTS
AND COMPUTATIONS OF ANY ATTORNEYS AND AGENTS AND ON THE RECORDS, STATEMENTS AND
COMPUTATIONS OF ANY SERVANTS SO SELECTED BY IT IN GOOD FAITH AND SHALL BE
RELEASED AND EXONERATED OF AND FROM ALL LIABILITY TO ANYONE IN SO DOING (EXCEPT
TO THE EXTENT THAT LIABILITY IS IMPOSED UNDER ERISA).
SUBJECT TO THE PRIOR APPROVAL OF THE COMMITTEE, TO INSTITUTE, PROSECUTE AND
MAINTAIN, OR TO DEFEND, ANY PROCEEDING AT LAW OR IN EQUITY CONCERNING THE PLAN
OR THE FUND OR THE ASSETS THEREOF OR ANY CLAIMS THERETO, OR THE INTERESTS OF
PARTICIPANTS AND BENEFICIARIES HEREUNDER AT THE SOLE COST AND EXPENSE OF THE
FUND OR AT THE SOLE COST AND EXPENSE OF THE TOTAL ACCOUNT OF THE PARTICIPANT WHO
MAY BE CONCERNED THEREIN OR WHO MAY BE AFFECTED THEREBY AS, IN THE TRUSTEE'S
OPINION, SHALL BE FAIR AND EQUITABLE IN EACH CASE, AND TO COMPROMISE, SETTLE AND
ADJUST ALL CLAIMS AND LIABILITIES ASSERTED BY OR AGAINST THE PLAN OR THE FUND OR
ASSERTED BY OR AGAINST THE TRUSTEE, ON SUCH TERMS AS THE TRUSTEE, IN EACH SUCH
CASE, SHALL DEEM REASONABLE AND PROPER. THE TRUSTEE SHALL BE UNDER NO DUTY OR
OBLIGATION TO INSTITUTE, PROSECUTE, MAINTAIN OR DEFEND ANY SUIT, ACTION OR OTHER
LEGAL PROCEEDING UNLESS IT SHALL BE INDEMNIFIED TO ITS SATISFACTION AGAINST ALL
EXPENSES AND LIABILITIES WHICH IT MAY SUSTAIN OR ANTICIPATE BY REASON THEREOF.
TO INSTITUTE, PARTICIPATE AND JOIN IN ANY PLAN OF REORGANIZATION, READJUSTMENT,
MERGER OR CONSOLIDATION WITH RESPECT TO THE ISSUER OF ANY SECURITIES HELD BY THE
TRUSTEE HEREUNDER, AND TO USE ANY OTHER MEANS OF PROTECTING AND DEALING WITH ANY
OF THE ASSETS OF THE FUND WHICH IT BELIEVES REASONABLY NECESSARY OR PROPER AND,
IN GENERAL, TO EXERCISE EACH AND EVERY OTHER POWER OR RIGHT WITH RESPECT TO EACH
ASSET OR INVESTMENT HELD BY IT HEREUNDER AS INDIVIDUALS GENERALLY HAVE AND ENJOY
WITH RESPECT TO THEIR OWN ASSETS AND INVESTMENT (EXCEPT THAT THE RIGHT TO VOTE
UPON ANY SECURITIES OR OTHER ASSETS HAVING VOTING POWER WHICH IT MAY HOLD FROM
TIME TO TIME SHALL BE PASSED THROUGH TO THE PARTICIPANTS AND BENEFICIARIES), AND
TO DEPOSIT ASSETS OR INVESTMENTS WITH ANY PROTECTIVE COMMITTEE, OR WITH TRUSTEES
OR DEPOSITARIES DESIGNATED BY ANY SUCH COMMITTEE OR BY ANY SUCH TRUSTEES OR ANY
COURT. NOTWITHSTANDING THE FOREGOING, AN INVESTMENT MANAGER SHALL HAVE ANY OR
ALL OF SUCH POWERS AND RIGHTS WITH RESPECT TO PLAN ASSETS FOR WHICH IT HAS
INVESTMENT RESPONSIBILITY BUT ONLY IF (AND ONLY TO THE EXTENT THAT) SUCH POWERS
AND RIGHTS ARE EXPRESSLY GIVEN TO SUCH INVESTMENT MANAGER IN A WRITTEN AGREEMENT
SIGNED BY IT AND ACKNOWLEDGED IN WRITING BY THE TRUSTEE. IN ALL OTHER CASES,
SUCH POWERS AND RIGHTS SHALL BE EXERCISED SOLELY BY THE TRUSTEE. FURTHERMORE,
NEITHER THE TRUSTEE, THE INVESTMENT MANAGER NOR THE COMMITTEE, AS THE CASE MAY
BE, SHALL TAKE ANY ACTIONS WITH RESPECT TO ANY SECURITY IN WHICH IT MAY HAVE AN
INTEREST, DIRECT OR INDIRECT. IN SUCH CASE, THE TRUSTEE, INVESTMENT MANAGER OR
THE COMMITTEE SHALL NOTIFY THE PRINCIPAL SPONSOR AND THE PRINCIPAL SPONSOR SHALL
DIRECT THE TRUSTEE, THE INVESTMENT MANAGER OR THE COMMITTEE WITH RESPECT TO SUCH
ACTION.
IN ANY MATTER OF DOUBT AFFECTING THE MEANING, PURPOSE OR INTENT OF ANY PROVISION
OF THIS PLAN STATEMENT WHICH DIRECTLY AFFECTS ITS DUTIES, TO DETERMINE SUCH
MEANING, PURPOSE OR INTENT.
TO REQUIRE, AS A CONDITION TO DISTRIBUTION OF ANY VESTED TOTAL ACCOUNT, PROOF OF
IDENTITY OR OF AUTHORITY OF THE PERSON ENTITLED TO RECEIVE THE SAME, INCLUDING
POWER TO REQUIRE REASONABLE INDEMNIFICATION ON THAT ACCOUNT AS A CONDITION
PRECEDENT TO ITS OBLIGATION TO MAKE DISTRIBUTION HEREUNDER.
TO COLLECT, RECEIVE, RECEIPT AND GIVE QUITTANCE FOR ALL PAYMENTS THAT MAY BE OR
BECOME DUE AND PAYABLE ON ACCOUNT OF ANY ASSET IN TRUST HEREUNDER WHICH HAS NOT,
BY ACT OF THE TRUSTEE TAKEN PURSUANT THERETO, BEEN MADE PAYABLE TO OTHERS; AND
PAYMENT THEREOF BY THE COMPANY ISSUING THE SAME, OR BY THE PARTY OBLIGATED
THEREON, AS THE CASE MAY BE, WHEN MADE TO THE TRUSTEE HEREUNDER OR TO ANY PERSON
OR PERSONS DESIGNATED BY THE TRUSTEE, SHALL ACQUIT, RELEASE AND DISCHARGE SUCH
COMPANY OR OBLIGATED PARTY FROM ANY AND ALL LIABILITY ON ACCOUNT THEREOF.
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TO DETERMINE FROM TIME TO TIME, AS REQUIRED FOR THE PURPOSE OF DISTRIBUTION OR
FOR THE PURPOSE OF ALLOCATING TRUST INCOME OR FOR ANY OTHER PURPOSE OF THE PLAN,
THE THEN VALUE OF THE FUND AND THE ACCOUNTS IN THE FUND, THE TRUSTEE, IN EACH
SUCH CASE, USING AND EMPLOYING FOR THAT PURPOSE THE FAIR MARKET VALUE OF EACH OF
THE ASSETS CONSTITUTING THE FUND. EACH SUCH DETERMINATION SO MADE BY THE TRUSTEE
IN GOOD FAITH SHALL BE BINDING AND CONCLUSIVE UPON ALL PERSONS INTERESTED OR
BECOMING INTERESTED IN THE PLAN OR THE FUND.
TO RECEIVE AND RETAIN CONTRIBUTIONS MADE IN A FORM OTHER THAN CASH IN THE FORM
IN WHICH THE SAME ARE RECEIVED UNTIL SUCH TIME AS THE TRUSTEE, IN ITS SOLE
DISCRETION, DEEMS IT ADVISABLE TO SELL OR OTHERWISE DISPOSE OF SUCH ASSETS.
TO COMMINGLE, FOR INVESTMENT PURPOSES, THE ASSETS OF THE FUND WITH THE ASSETS OF
ANY OTHER QUALIFIED RETIREMENT PLAN TRUST FUND OF THE EMPLOYER, PROVIDED THAT
THE RECORDS OF THE TRUSTEE SHALL REFLECT THE RELATIVE INTERESTS OF THE SEPARATE
TRUSTS IN SUCH COMMINGLED FUND.
TO GRANT OPTIONS FOR THE SALE OR OTHER DISPOSITION OF FUND ASSETS; TO PURCHASE
OPTIONS FOR THE ACQUISITION OF ASSETS OF ANY TYPE; AND TO BUY AND SELL
(INCLUDING SHORT SALES) CALL OPTIONS, PUT OPTIONS AND FUTURES CONTRACTS.
TO HAVE AND TO EXERCISE SUCH OTHER AND ADDITIONAL POWERS AS MAY BE ADVISABLE OR
PROPER IN ITS OPINION FOR THE EFFECTIVE AND ECONOMICAL ADMINISTRATION OF THE
FUND.
THE PLAN AND DECLARATION OF TRUST - U.S. BANK NATIONAL ASSOCIATION COLLECTIVE
AND POOLED INVESTMENT FUNDS FOR EMPLOYEE RETIREMENT BENEFIT TRUSTS, AS AMENDED
FROM TIME TO TIME, IS HEREBY MADE A PART OF THIS PLAN STATEMENT. NOTWITHSTANDING
ANY OTHER PROVISION OF THIS PLAN STATEMENT TO THE CONTRARY, THE TRUSTEE MAY
CAUSE ANY PART OR ALL OF THE FUND, WITHOUT LIMITATION AS TO AMOUNT, TO BE
COMMINGLED WITH THE MONEY OF TRUSTS CREATED BY OTHERS, BY CAUSING SUCH MONEY TO
BE INVESTED AS A PART OF ANY OR ALL OF THE FUNDS CREATED BY THE AFOREMENTIONED
DECLARATION OF TRUST AND THE FUND SO ADDED TO ANY OF SAID FUNDS AT ANY TIME
SHALL BE SUBJECT TO ALL OF THE PROVISIONS OF SAID DECLARATION OF TRUST AS IT IS
AMENDED FROM TIME TO TIME.
TO DEPOSIT ANY PART OR ALL OF THE ASSETS IN ANY COLLECTIVE TRUST FUND WHICH IS
NOW OR HEREAFTER MAINTAINED BY THE TRUSTEE, AN AGENT OF THE TRUSTEE OR AN
INVESTMENT MANAGER AS A MEDIUM FOR THE COLLECTIVE INVESTMENT OF FUNDS OF
PENSION, PROFIT SHARING OR OTHER EMPLOYEE BENEFIT PLANS, AND WHICH IS QUALIFIED
UNDER SECTION 401(a) OF THE CODE AND EXEMPT FROM TAXATION UNDER SECTION 501(a)
OF THE CODE, AND TO WITHDRAW ANY PART OR ALL OF THE ASSETS SO DEPOSITED AND ANY
ASSETS DEPOSITED WITH THE TRUSTEE OF A COLLECTIVE TRUST FUND SHALL BE HELD AND
INVESTED BY THE TRUSTEE THEREUNDER PURSUANT TO ALL THE TERMS AND CONDITIONS OF
THE TRUST AGREEMENT OR DECLARATION OF TRUST ESTABLISHING THE FUND, WHICH ARE
HEREBY INCORPORATED HEREIN BY REFERENCE AND SHALL PREVAIL OVER ANY CONTRARY
PROVISIONS OF THIS PLAN STATEMENT.
TO DEPOSIT ANY PART OR ALL OF THE ASSETS WITH THE TRUSTEE OF ANY MASTER
INVESTMENT TRUST MAINTAINED BY THE PRINCIPAL SPONSOR FOR THE INVESTMENT OF
ASSETS OF QUALIFIED PENSION, PROFIT SHARING OR STOCK BONUS PLANS IT OR ITS
SUBSIDIARIES MAINTAIN AND TO WITHDRAW ANY PART OR ALL OF THE ASSETS SO
DEPOSITED, AND ANY ASSETS DEPOSITED WITH THE TRUSTEE OF A MASTER INVESTMENT
TRUST SHALL BE HELD AND INVESTED BY THAT TRUSTEE PURSUANT TO THE TERMS AND
CONDITIONS OF THE MASTER INVESTMENT TRUST DOCUMENT, WHICH IS HEREBY INCORPORATED
HEREIN BY REFERENCE AND SHALL PREVAIL OVER ANY CONTRARY PROVISION OF THIS PLAN
STATEMENT.
INVESTMENT MANAGERS.
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APPOINTMENT AND QUALIFICATIONS. The Principal Sponsor shall have the power to
appoint from time to time one or more Investment Managers to direct the Trustee
in the investment of, or to assume complete investment responsibility over, all
or any portion of the Fund. An Investment Manager may be any person or firm (a)
which is either (1) registered as an investment adviser under the Investment
Advisers Act of 1940, (2) a bank, or (3) an insurance company which is qualified
to perform the services of an Investment Manager under the laws of more than one
state; and (b) which acknowledges in writing that it is a fiduciary with respect
to the Plan. The conditions prescribed in the preceding sentence shall apply to
the issuer of any group annuity contract hereunder only if, and to the extent
that, such issuer would otherwise be considered a "fiduciary" with respect to
the Plan, within the meaning of ERISA.
REMOVAL. The Principal Sponsor may remove any such Investment Manager and shall
have the power to appoint a successor or successors from time to time in
succession to any Investment Manager who shall be removed, shall resign or shall
otherwise cease to serve hereunder.
RELATION TO OTHER FIDUCIARIES. The Trustee shall comply with all investment
directions given to the Trustee with respect to the designated portion of the
Fund, and the Trustee shall be released and exonerated of and from all liability
for or on account of any action taken or not taken by it pursuant to the
directions of such Investment Manager, except to the extent that liability is
imposed under ERISA. Neither the Employer or any of its officers, directors or
employees nor any member of the Committee shall be liable for the acts or
omissions of the Trustee or of any Investment Manager appointed hereunder. The
fees and expenses of any Investment Manager, as agreed upon from time to time
between the Investment Manager and the Employer, shall be charged to and paid
from the Fund in a fair and equitable manner, except to the extent that the
Employer, in its discretion, may pay such directly to the Investment Manager.
NO INVESTMENT IN EMPLOYER REAL PROPERTY. Notwithstanding any other provision
of this Plan Statement, the Plan may not acquire or hold any "employer real
property" as that term is defined in section 407(d) of ERISA.
INVESTMENT IN EMPLOYER SECURITIES. Notwithstanding any other provision of this
Plan Statement, the Plan may not acquire or hold any Employer security which is
not a "qualifying employer security" (within the meaning of section 407(d)(5) of
ERISA).
FIDUCIARY PRINCIPLES. The Trustee and each other fiduciary hereunder, in the
exercise of each and every power or discretion vested in them by the provisions
of this Plan Statement, shall (subject to the provisions of ERISA) discharge
their duties with respect to
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the Plan solely in the interest of the Participants and Beneficiaries:
FOR THE EXCLUSIVE PURPOSE OF:
(i) providing benefits to Participants and
Beneficiaries, and
(ii) defraying reasonable expenses of
administering the Plan,
WITH THE CARE, SKILL, PRUDENCE AND DILIGENCE UNDER THE CIRCUMSTANCES THEN
PREVAILING THAT A PRUDENT PERSON ACTING IN A LIKE CAPACITY AND FAMILIAR WITH
SUCH MATTERS WOULD USE IN THE CONDUCT OF AN ENTERPRISE OF A LIKE CHARACTER AND
WITH LIKE AIMS,
BY DIVERSIFYING THE INVESTMENTS OF THE PLAN SO AS TO MINIMIZE THE RISK OF LARGE
LOSSES, UNLESS UNDER THE CIRCUMSTANCES IT IS CLEARLY PRUDENT NOT TO DO SO, AND
IN ACCORDANCE WITH THE DOCUMENTS AND INSTRUMENTS GOVERNING THE PLAN, INSOFAR AS
THEY ARE CONSISTENT WITH THE PROVISIONS OF ERISA.
Notwithstanding anything in this Plan Statement to the contrary, any provision
hereof which purports to relieve a fiduciary from responsibility or liability
for any responsibility, obligation or duty under Part 4 of Subtitle B of Title I
of ERISA shall, to the extent the same is inconsistent with said Part 4, be
deemed void.
PROHIBITED TRANSACTIONS. Except as may be permitted by law, no Trustee or other
fiduciary hereunder shall permit the Plan to engage, directly or indirectly, in
any of the following transactions with a person who is a "disqualified person"
(as defined in section 4975 of the Code) or a "party in interest" (as defined in
section 3(14) of ERISA):
SALE, EXCHANGE OR LEASING OF ANY PROPERTY BETWEEN THE PLAN AND SUCH PERSON,
LENDING OF MONEY OR OTHER EXTENSION OF CREDIT BETWEEN THE PLAN AND SUCH PERSON,
FURNISHING OF GOODS, SERVICES OR FACILITIES BETWEEN THE PLAN AND SUCH PERSON,
TRANSFER TO, OR USE BY OR FOR THE BENEFIT OF, SUCH PERSON OF THE INCOME OR
ASSETS OF THE PLAN,
ACT BY SUCH PERSON WHO IS A FIDUCIARY HEREUNDER WHEREBY THE FIDUCIARY DEALS WITH
THE INCOME OR ASSETS OF THE PLAN IN THE FIDUCIARY'S OWN INTEREST OR FOR THE
FIDUCIARY'S OWN ACCOUNT, OR
RECEIPT OF ANY CONSIDERATION FOR THE FIDUCIARY'S OWN PERSONAL ACCOUNT BY SUCH
PERSON WHO IS A FIDUCIARY FROM ANY PARTY DEALING WITH THE PLAN IN CONNECTION
WITH A TRANSACTION INVOLVING THE INCOME OR ASSETS OF THE PLAN.
INDEMNITY. Each individual (as distinguished from corporate) trustee of the Plan
or officer, director or employee of the Employer shall, except as prohibited by
law, be indemnified and held harmless by the Employer from any and all
liabilities, costs and expenses (including legal fees), to the extent not
covered by
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liability insurance, arising out of any action taken by such individual with
respect to the Plan, whether imposed under ERISA or otherwise. No such
indemnification, however, shall be required or provided if such liability arises
(i) from the individual's claim for his own benefit, or (ii) from the proven
gross negligence or the bad faith of the individual, or (iii) from the criminal
misconduct of such individual if the individual had reason to believe the
conduct was unlawful. This indemnification shall continue as to an individual
who has ceased to be a trustee of the Plan or officer, director or employee of
the Employer and shall inure to the benefit of the heirs, executors and
administrators of such an individual.
INVESTMENT IN INSURANCE. Investment in insurance under the Plan is not
permitted.
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DETERMINATIONS -- RULES AND REGULATIONS
DETERMINATIONS. The Committee shall make such determinations as may be required
from time to time in the administration of the Plan. The Committee shall have
the sole discretion, authority and responsibility to interpret and construe the
Plan Statement and to determine all factual and legal questions under the Plan,
including but not limited to the entitlement of employees, Participants and
Beneficiaries and the amounts of their respective interests. The Trustee and
other interested parties may act and rely upon all information reported to them
hereunder and need not inquire into the accuracy thereof, nor be charged with
any notice to the contrary.
RULES AND REGULATIONS. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the Committee.
METHOD OF EXECUTING INSTRUMENTS.
EMPLOYER OR COMMITTEE. Information to be supplied or written notices to be made
or consents to be given by the Principal Sponsor, the Employer or the Committee
pursuant to any provision of this Plan Statement may be signed in the name of
the Principal Sponsor or Employer by any officer or by any employee who has been
authorized to make such certification or to give such notices or consents or by
any Committee member.
TRUSTEE. Any instrument or written notice required, necessary or advisable to be
made or given by the Trustee may be signed by any Trustee, if all Trustees
serving hereunder are individuals, or by any authorized officer or employee of
the Trustee, if a corporate Trustee shall be acting hereunder as sole Trustee,
or by any such officer or employee of the corporate Trustee or by an individual
Trustee acting hereunder, if corporate and individual Trustees shall be serving
as co-trustees hereunder.
CLAIMS PROCEDURE. Until modified by the Committee, the claims procedure set
forth in this Section 11.4 shall be the claims procedure for the resolution of
disputes and disposition of claims arising under the Plan. An application for a
distribution under Section 7 shall be considered as a claim for the purposes of
this Section.
ORIGINAL CLAIM. Any employee, former employee, or Beneficiary of such employee
or former employee may, if the employee, former employee or Beneficiary so
desires, file with the Committee a written claim for benefits under the Plan.
Within ninety (90) days
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after the filing of such a claim, the Committee shall notify the claimant in
writing whether the claim is upheld or denied in whole or in part or shall
furnish the claimant a written notice describing specific special circumstances
requiring a specified amount of additional time (but not more than one hundred
eighty days from the date the claim was filed) to reach a decision on the claim.
If the claim is denied in whole or in part, the Committee shall state in
writing:
THE SPECIFIC REASONS FOR THE DENIAL,
THE SPECIFIC REFERENCES TO THE PERTINENT PROVISIONS OF THIS PLAN STATEMENT ON
WHICH THE DENIAL IS BASED,
A DESCRIPTION OF ANY ADDITIONAL MATERIAL OR INFORMATION NECESSARY FOR THE
CLAIMANT TO PERFECT THE CLAIM AND AN EXPLANATION OF WHY SUCH MATERIAL OR
INFORMATION IS NECESSARY, AND
AN EXPLANATION OF THE CLAIMS REVIEW PROCEDURE SET FORTH IN THIS SECTION.
CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of notice that the
claim has been denied in whole or in part, the claimant may file with the
Committee a written request for a review and may, in conjunction therewith,
submit written issues and comments. Within sixty (60) days after the filing of
such a request for review, the Committee shall notify the claimant in writing
whether, upon review, the claim was upheld or denied in whole or in part or
shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred twenty days from the date the request for review was filed) to reach
a decision on the request for review.
GENERAL RULES.
NO INQUIRY OR QUESTION SHALL BE DEEMED TO BE A CLAIM OR A REQUEST FOR A REVIEW
OF A DENIED CLAIM UNLESS MADE IN ACCORDANCE WITH THE CLAIMS PROCEDURE. THE
COMMITTEE MAY REQUIRE THAT ANY CLAIM FOR BENEFITS AND ANY REQUEST FOR A REVIEW
OF A DENIED CLAIM BE FILED ON FORMS TO BE FURNISHED BY THE COMMITTEE UPON
REQUEST.
ALL DECISIONS ON CLAIMS AND ON REQUESTS FOR A REVIEW OF DENIED CLAIMS SHALL BE
MADE BY THE COMMITTEE UNLESS DELEGATED AS PROVIDED IN SECTION 12.2.
THE COMMITTEE MAY, IN ITS DISCRETION, HOLD ONE OR MORE HEARINGS ON A CLAIM OR A
REQUEST FOR A REVIEW OF A DENIED CLAIM.
CLAIMANTS MAY BE REPRESENTED BY A LAWYER OR OTHER REPRESENTATIVE AT THEIR OWN
EXPENSE, BUT THE COMMITTEE RESERVES THE RIGHT TO REQUIRE THE CLAIMANT TO FURNISH
WRITTEN AUTHORIZATION. A CLAIMANT'S REPRESENTATIVE SHALL BE ENTITLED TO COPIES
OF ALL NOTICES GIVEN TO THE CLAIMANT.
THE DECISION OF THE COMMITTEE ON A CLAIM AND ON A REQUEST FOR A REVIEW OF A
DENIED CLAIM SHALL BE SERVED ON THE CLAIMANT IN WRITING. IF A DECISION OR NOTICE
IS NOT RECEIVED BY A CLAIMANT WITHIN THE TIME SPECIFIED, THE CLAIM OR REQUEST
FOR A REVIEW OF A DENIED CLAIM SHALL BE DEEMED TO HAVE BEEN DENIED.
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PRIOR TO FILING A CLAIM OR A REQUEST FOR A REVIEW OF A DENIED CLAIM, THE
CLAIMANT OR THE CLAIMANT'S REPRESENTATIVE SHALL HAVE A REASONABLE OPPORTUNITY TO
REVIEW A COPY OF THIS PLAN STATEMENT AND ALL OTHER PERTINENT DOCUMENTS IN THE
POSSESSION OF THE EMPLOYER, THE COMMITTEE AND THE TRUSTEE.
THE COMMITTEE MAY, IN ITS DISCRETION, RELY UPON ANY APPLICABLE STATUTE OF
LIMITATIONS AS A BASIS FOR DENIAL OF ANY CLAIMS.
EXHAUSTION OF ADMINISTRATIVE REMEDIES. No employee, former employee or
Beneficiary of such employee or former employee shall commence any legal action
to recover Plan benefits or to enforce or clarify rights under the Plan under
section 502 or section 510 of ERISA, or under any other provision of law,
whether or not statutory, until the claims and review procedures set forth
herein have been exhausted in their entirety
INFORMATION FURNISHED BY PARTICIPANTS. Neither the Employer nor the
Committee nor the Trustee shall be liable or responsible for any error in the
computation of the Account of a Participant resulting from any misstatement of
fact made by the Participant, directly or indirectly, to the Employer, the
Committee or the Trustee and used by them in determining the Participant's
Account. Neither the Employer nor the Committee nor the Trustee shall be
obligated or required to increase the Account of such Participant which, on
discovery of the misstatement, is found to be understated as a result of such
misstatement of the Participant. However, the Account of any Participant which
is overstated by reason of any such misstatement shall be reduced to the amount
appropriate for the Participant in view of the truth. Any refund received upon
reduction of an Account so made shall be used to reduce the next succeeding
contribution of the Employer to the Plan.
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PLAN ADMINISTRATION
PRINCIPAL SPONSOR.
OFFICERS. Except as hereinafter provided, functions generally assigned to the
Principal Sponsor shall be discharged by its officers or delegated and allocated
as provided herein.
CHIEF EXECUTIVE OFFICER. Except as hereinafter provided, the Chief Executive
Officer of the Principal Sponsor may delegate or redelegate and allocate and
reallocate to one or more persons or to a committee of persons jointly or
severally, and whether or not such persons are directors, officers or employees,
such functions assigned to the Principal Sponsor hereunder as the Chief
Executive Officer may from time to time deem advisable.
BOARD OF DIRECTORS. Notwithstanding the foregoing, the Board of Directors of the
Principal Sponsor shall have the exclusive authority, which may not be
delegated, to act for the Principal Sponsor:
TO AMEND THIS PLAN STATEMENT; TO TERMINATE THE PLAN,
TO APPOINT OR REMOVE A TRUSTEE OR ACCEPT THE RESIGNATION OF A TRUSTEE; TO
APPOINT OR REMOVE MEMBERS OF THE COMMITTEE; TO APPOINT OR REMOVE AN INVESTMENT
MANAGER,
TO REDUCE, SUSPEND OR DISCONTINUE CONTRIBUTIONS TO THE PLAN,
TO CONSENT TO THE ADOPTION OF THE PLAN BY OTHER BUSINESS ENTITIES; TO ESTABLISH
CONDITIONS AND LIMITATIONS UPON SUCH ADOPTION OF THE PLAN BY OTHER BUSINESS
ENTITIES; TO DESIGNATE AFFILIATES, AND
TO CAUSE THE PLAN TO BE MERGED WITH ANOTHER PLAN AND TO TRANSFER ASSETS AND
LIABILITIES BETWEEN THE PLAN AND ANOTHER.
COMMITTEE.
APPOINTMENT AND REMOVAL. The Committee shall consist of such members as may be
determined and appointed from time to time by the Principal Sponsor and they
shall serve at the pleasure of such Principal Sponsor. Members of the Committee
shall serve without compensation, but their reasonable expenses shall be an
expense of the administration of the Fund and shall be paid by the Trustee from
and out of the Fund except to the extent the Employer, in its discretion,
directly pays such expenses.
AUTOMATIC REMOVAL. If any individual who is a member of the Committee is a
director, officer or employee when appointed as a member of the Committee, then
such individual shall be automatically removed as a member of the Committee at
the earliest
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time such individual ceases to be a director, officer or employee. This removal
shall occur automatically and without any requirement for action by the
Principal Sponsor or any notice to the individual so removed.
AUTHORITY. The Committee may elect such officers as the Committee may decide
upon. The Committee shall:
ESTABLISH RULES FOR THE FUNCTIONING OF THE COMMITTEE, INCLUDING THE TIMES AND
PLACES FOR HOLDING MEETINGS, THE NOTICES TO BE GIVEN IN RESPECT OF SUCH MEETINGS
AND THE NUMBER OF MEMBERS WHO SHALL CONSTITUTE A QUORUM FOR THE TRANSACTION OF
BUSINESS,
ORGANIZE AND DELEGATE TO SUCH OF ITS MEMBERS AS IT SHALL SELECT AUTHORITY TO
EXECUTE OR AUTHENTICATE RULES, ADVISORY OPINIONS OR INSTRUCTIONS, AND OTHER
INSTRUMENTS ADOPTED OR AUTHORIZED BY THE COMMITTEE; ADOPT SUCH BYLAWS OR
REGULATIONS AS IT DEEMS DESIRABLE FOR THE CONDUCT OF ITS AFFAIRS; APPOINT A
SECRETARY, WHO NEED NOT BE A MEMBER OF THE COMMITTEE, TO KEEP ITS RECORDS AND
OTHERWISE ASSIST THE COMMITTEE IN THE PERFORMANCE OF ITS DUTIES; KEEP A RECORD
OF ALL ITS PROCEEDINGS AND ACTS AND KEEP ALL BOOKS OF ACCOUNT, RECORDS AND OTHER
DATA AS MAY BE NECESSARY FOR THE PROPER ADMINISTRATION OF THE PLAN; NOTIFY THE
EMPLOYER AND THE TRUSTEE OF ANY ACTION TAKEN BY THE COMMITTEE AND, WHEN
REQUIRED, NOTIFY ANY OTHER INTERESTED PERSON OR PERSONS,
DETERMINE FROM THE RECORDS OF THE EMPLOYER THE COMPENSATION, SERVICE RECORDS,
STATUS AND OTHER FACTS REGARDING PARTICIPANTS AND OTHER EMPLOYEES,
CAUSE TO BE COMPILED AT LEAST ANNUALLY, FROM THE RECORDS OF THE COMMITTEE AND
THE REPORTS AND ACCOUNTINGS OF THE TRUSTEE, A REPORT OR ACCOUNTING OF THE STATUS
OF THE PLAN AND THE ACCOUNTS OF THE PARTICIPANTS, AND MAKE IT AVAILABLE TO EACH
PARTICIPANT WHO SHALL HAVE THE RIGHT TO EXAMINE THAT PART OF SUCH REPORT OR
ACCOUNTING (OR A TRUE AND CORRECT COPY OF SUCH PART) WHICH SETS FORTH THE
PARTICIPANT'S BENEFITS AND RATABLE INTEREST IN THE FUND,
PRESCRIBE FORMS TO BE USED FOR APPLICATIONS FOR PARTICIPATION, BENEFITS,
NOTIFICATIONS, ETC., AS MAY BE REQUIRED IN THE ADMINISTRATION OF THE PLAN,
SET UP SUCH RULES AS ARE DEEMED NECESSARY TO CARRY OUT THE TERMS OF THIS PLAN
STATEMENT,
RESOLVE ALL QUESTIONS OF ADMINISTRATION OF THE PLAN NOT SPECIFICALLY REFERRED TO
IN THIS SECTION,
DELEGATE OR REDELEGATE TO ONE OR MORE PERSONS, JOINTLY OR SEVERALLY, AND WHETHER
OR NOT SUCH PERSONS ARE MEMBERS OF THE COMMITTEE OR EMPLOYEES OF THE EMPLOYER,
SUCH FUNCTIONS ASSIGNED TO THE COMMITTEE HEREUNDER AS IT MAY FROM TIME TO TIME
DEEM ADVISABLE, AND
PERFORM ALL OTHER ACTS REASONABLY NECESSARY FOR ADMINISTERING THE PLAN AND
CARRYING OUT THE PROVISIONS OF THIS PLAN STATEMENT AND PERFORMING THE DUTIES
IMPOSED ON IT.
MAJORITY DECISIONS. If there shall at any time be three (3) or more members of
the Committee serving hereunder who are qualified to perform a particular act,
the same may be performed, on behalf of all, by a majority of those qualified,
with or without the concurrence of the minority. No person who failed to join or
concur in such act shall be held liable for the consequences thereof, except to
the extent that liability is imposed under ERISA.
LIMITATION ON AUTHORITY.
-71-
<PAGE>
FIDUCIARIES GENERALLY. No action taken by any fiduciary, if authority to take
such action has been delegated or redelegated to it, shall be the responsibility
of any other fiduciary except as may be required by the provisions of ERISA.
Except to the extent imposed by ERISA, no fiduciary shall have the duty to
question whether any other fiduciary is fulfilling all of the responsibility
imposed upon such other fiduciary by the Plan Statement or by ERISA.
TRUSTEE. The responsibilities and obligations of the Trustee shall be strictly
limited to those set forth in this Plan Statement. The Trustee shall have no
authority or duty to determine or enforce payment of any Employer contribution
under the Plan or to determine the existence, nature or extent of any
individual's rights in the Fund or under the Plan or question any determination
made by the Principal Sponsor or the Committee regarding the same. Nor shall the
Trustee be responsible in any way for the manner in which the Principal Sponsor,
the Employer or the Committee carries out its responsibilities under this Plan
Statement or, more generally, under the Plan. The Trustee shall give the
Principal Sponsor notice of (and tender to the Principal Sponsor) the
prosecution or defense of any litigation involving the Plan, the Fund or other
fiduciaries of the Plan.
CONFLICT OF INTEREST. If any officer or employee of the Employer, any member
of the board of directors of the Principal Sponsor, any member of the Committee
or any Trustee to whom authority has been delegated or redelegated hereunder
shall also be a Participant or Beneficiary in the Plan, the individual shall
have no authority as such officer, employee, member or Trustee with respect to
any matter specially affecting his or her individual interest hereunder (as
distinguished from the interests of all Participants and Beneficiaries or a
broad class of Participants and Beneficiaries), all such authority being
reserved exclusively to the other officers, employees, members or Trustees as
the case may be, to the exclusion of such Participant or Beneficiary, and such
Participant or Beneficiary shall act only in his or her individual capacity in
connection with any such matter.
DUAL CAPACITY. Individuals, firms, corporations or partnerships identified
herein or delegated or allocated authority or responsibility hereunder may serve
in more than one fiduciary capacity.
ADMINISTRATOR. The Principal Sponsor shall be the administrator for purposes of
section 3(16)(A) of ERISA.
-72-
<PAGE>
NAMED FIDUCIARIES. The Principal Sponsor, the Committee and the Trustee
shall be named fiduciaries for the purpose of section 402(a) of ERISA.
SERVICE OF PROCESS. In the absence of any designation to the contrary by the
Principal Sponsor, the President of the Principal Sponsor is designated as the
appropriate and exclusive agent for the receipt of service of process directed
to the Plan in any legal proceeding, including arbitration, involving the Plan.
ADMINISTRATIVE EXPENSES. The reasonable expenses of administering the Plan shall
be payable out of the Fund except to the extent that the Employer, in its
discretion, directly pays the expenses.
IRS QUALIFICATION. This Plan is intended to qualify under section 401(a) of
the Code as a defined contribution profit sharing plan (and not as a defined
contribution stock bonus plan or money purchase pension plan or a defined
benefit pension plan).
-73-
<PAGE>
IN GENERAL
DISCLAIMERS.
EFFECT ON EMPLOYMENT. Neither the terms of this Plan Statement nor the benefits
hereunder nor the continuance thereof shall be a term of the employment of any
employee, and the Employer shall not be obligated to continue the Plan. The
terms of this Plan Statement shall not give any employee the right to be
retained in the employment of the Employer.
SOLE SOURCE OF BENEFITS. Neither the Employer nor any of its officers nor any
member of its board of directors nor any member of the Committee nor the Trustee
in any way guarantee the Fund against loss or depreciation, nor do they
guarantee the payment of any benefit or amount which may become due and payable
hereunder to any Participant, Beneficiary or other person. Each Participant,
Beneficiary or other person entitled at any time to payments hereunder shall
look solely to the assets of the Fund for such payments. If a Vested Total
Account shall have been distributed to a former Participant, Beneficiary or any
other person entitled jointly to the receipt thereof (or shall have been
transferred to the Trustee of another tax-qualified deferred compensation plan),
such former Participant, Beneficiary or other person, as the case may be, shall
have no further right or interest in the other assets of the Fund.
-74-
<PAGE>
CO-FIDUCIARY MATTERS. Neither the Employer nor any of its officers nor any
member of its board of directors nor any member of the Committee shall in any
manner be liable to any Participant, Beneficiary or other person for any act or
omission of the Trustee (except to the extent that liability is imposed under
ERISA). Neither the Employer nor any of its officers nor any member of its board
of directors nor any member of the Committee nor the Trustee shall be under any
liability or responsibility (except to the extent that liability is imposed
under ERISA) for failure to effect any of the objectives or purposes of the Plan
by reason of loss or fluctuation in the value of Fund or for the form,
genuineness, validity, sufficiency or effect of any Fund asset at any time held
hereunder, or for the failure of any person, firm or corporation indebted to the
Fund to pay such indebtedness as and when the same shall become due or for any
delay occasioned by reason of any applicable law, order or regulation or by
reason of any restriction or provision contained in any security or other asset
held by the Fund. Except as is otherwise provided in ERISA, the Employer and its
officers, the members of its board of directors, the members of the Committee,
the Trustee and other fiduciaries shall not be liable for an act or omission of
another person with regard to a fiduciary responsibility that has been allocated
to or delegated in whole or in part to such other person pursuant to the terms
of this Plan Statement or pursuant to procedures set forth in this Plan
Statement.
REVERSION OF FUND PROHIBITED. The Fund from time to time hereunder shall at all
times be a trust fund separate and apart from the assets of the Employer, and no
part thereof shall be or become available to the Employer or to creditors of the
Employer under any circumstances other than those specified in Section 3.12 and
Appendix A to this Plan Statement. It shall be impossible for any part of the
corpus or income of the Fund to be used for, or diverted to, purposes other than
for the exclusive benefit of Participants and Beneficiaries (except as
hereinbefore provided).
CONTINGENT TOP HEAVY PLAN RULES. The rules set forth in Appendix B to this Plan
Statement (concerning additional provisions that apply if the Plan becomes top
heavy) are incorporated herein.
CONTINUITY. The tenure and membership of any committee previously appointed, the
rules of administration adopted and the Beneficiary designations in effect under
the Prior Plan Statement shall, to the extent not inconsistent with this Plan
Statement, continue in full force and effect until altered as provided herein.
EXECUTION IN COUNTERPARTS. This Plan Statement may be executed in any number of
counterparts, each of which, without production of the others, shall be deemed
to be an original.
-75-
<PAGE>
IN WITNESS WHEREOF, Each of the parties hereto has caused these
presents to be executed, all as of the day and year first above written.
U.S. BANK NATIONAL NORTHSTAR COMPUTER FORMS, INC.
ASSOCIATION
By By
--------------------------------- ---------------------------------
Its Its
--------------------------- --------------------------
And And
-------------------------------- --------------------------------
Its Its
------------------------- -------------------------
-76-
<PAGE>
SCHEDULE I
PARTICIPATING EMPLOYERS
AS OF DECEMBER 1, 1998
<TABLE>
<CAPTION>
Name Employer Identification No.
---- ---------------------------
<S> <C>
Northstar Computer Forms, Inc. 41-0882640
General Financial Supply, Inc. 42-0864409
</TABLE>
SI-2
<PAGE>
APPENDIX D
TEFRA Section 242(B) TRANSITIONAL RULES
Section 1. IN GENERAL. Prior to January 1, 1984, each individual
who was either:
(a) an actively employed Participant having an Account (or a
contribution accrued to an Account) as of December 31,
1983,
(b) a Participant not actively employed but having an
Account (or a contribution accrued to an Account) as of
December 31, 1983, or
(c) a Beneficiary of a deceased Participant having an
Account (or a contribution accrued to an Account) as of
December 31, 1983
was given the opportunity to make a designation (before January 1, 1984) of a
method of distribution pursuant to Secion 242(b) of the Tax Equity and Fiscal
Responsibility Act of 1982 (hereinafter a "Section 242(b) designation"). Some
of those individuals elected to make a Section 242(b) designation and some
did not. The distribution rules set forth in this Appendix shall,
notwithstanding any provisions of Section 7 of the Plan Statement to the
contrary, determine the distributions made with respect to all individuals
entitled to make a Section 242(b) designation, provided that any required
qualified joint and survivor annuity contract or life annuity contract has
been rejected as described in Section 7 of the Plan Statement. Distributions
made with respect to individuals not entitled to make a Section 242(b)
designation shall be governed solely by Section 7 of the Plan Statement.
Section 2. NO DESIGNATION. In the case of distributions to an
individual where no Section 242(b) designation was made, distributions after
December 31, 1983 shall be made as follows:
(a) If such individual is a Participant whose benefits were
in pay status on December 31, 1983, and the method of
distribution in effect for such Participant was
consistent with the provisions of the Plan Statement at
the time such distribution commenced, then distribution
shall continue to be made to such Participant in
accordance with the method of distribution in effect on
December 31, 1983, notwithstanding that distribution
could not have commenced under such method after
December 31, 1983.
(b) If such individual is a Beneficiary whose benefits were
in pay status on December 31, 1983, and the method of
distribution in effect for such Beneficiary was
consistent with the provisions of the Plan Statement at
D-3
<PAGE>
the time such distribution commenced, then distribution
shall continue to be made to such Beneficiary in
accordance with the method of distribution in effect on
December 31, 1983, notwithstanding that distribution
could not have commenced under such method after
December 31, 1983.
(c) If such individual is a Participant or a Beneficiary
whose benefits were not in pay status on December 31,
1983, distribution shall be made in accordance with
Section 7 of the Plan Statement and, to the extent
distribution cannot then be made upon terms which are
consistent with the provisions of Section 7 of the Plan
Statement, distribution shall be made as soon as
practicable after December 31, 1983 in a single lump
sum.
(d) For the purpose of the foregoing, benefits shall be
considered to have been in pay status on December 31,
1983 if distribution had commenced on or prior to that
date and was being made under a written instrument which
fixed the person to whom such benefits were payable, the
time or times at which distributions would be made and
the amount (or formula pursuant to which the amount
would be determined) of each distribution and was not
subject to variation at the discretion of the
Participant or the Committee unless such variation would
cause the acceleration of distributions.
(e) Examples of circumstances in which distribution could
not be made upon terms consistent with the provisions of
Section 7 of the Plan Statement (and therefore would
have to be made in a single lump sum) include, but are
not be limited to, distribution to a Participant who was
a key employee in a top heavy plan and who had attained
age seventy and one-half (70-1/2) years before 1984,
distribution to a Beneficiary who was not the surviving
spouse of the Participant if the Participant died prior
to 1979, and distribution to a Beneficiary who is the
surviving spouse of a Participant who dies after
December 31, 1983 at a time when distributions were
being made to such Participant for a term certain which
extended beyond the life expectancy of such Participant
and surviving spouse.
Section 3. DESIGNATION MADE. In the case of distributions to an
individual where a Section 242(b) designation was made before January 1, 1984
in a form substantially equivalent to that set forth in this Appendix, the
Committee shall honor such Section 242(b) designation in making distributions
hereunder to all individuals identified in such Section 242(b) designation.
For this purpose:
D-4
<PAGE>
(a) A Section 242(b) designation shall, to the extent
necessary, be deemed to incorporate by reference either
the written beneficiary designation filed by the
Participant prior to or coincident with the filing of a
Section 242(b) designation or, if no such written
beneficiary designation has been filed, the automatic
sequence of Beneficiaries provided under the Plan
document in effect on December 31, 1983.
(b) An individual who made a Section 242(b) designation
shall have the right to revoke any Section 242(b)
designation filed by him at any time by a written
instrument delivered to the Employer. Upon such
revocation, distribution shall be made in accordance
with the provisions of Section 7 of the Plan Statement.
To the extent that distribution cannot then be made upon
terms consistent with the provisions of Section 7 of the
Plan Statement, distribution shall be made, as soon as
practicable after such revocation, in a single lump sum.
(c) A Beneficiary entitled to distribution under this Plan
shall have the right to revoke the Section 242(b)
designation insofar as it applies to such Beneficiary.
Upon such revocation, distribution shall be made in
accordance with the provisions of Section 7 of the Plan
Statement. To the extent that distribution cannot then
be made upon terms which are consistent with the
provisions of Section 7 of the Plan Statement,
distribution shall be made, as soon as practicable after
such revocation, in a single lump sum.
(d) If a Participant shall have filed a Section 242(b)
designation and shall subsequently file (or amend) a
written beneficiary designation under the Plan, the
Section 242(b) designation shall not be deemed to be
revoked and the relevant measuring life or lives for
purposes of the Section 242(b) designation shall
continue to be determined as described in paragraph (a)
above, without regard to any subsequent filing (or
amendment) of a written beneficiary designation or any
subsequent amendment of the automatic sequence of
Beneficiaries under the Plan Statement.
Section 4. FORM OF DESIGNATION. The Section 242(b) designation
referred to in this Appendix is as follows:
D-5
<PAGE>
DESIGNATION OF A METHOD OF DISTRIBUTION
UNDER TEFRA SECTION 242(b)
TO: Plan Administrator
RE:
Pursuant to the authority granted me under TEFRA Section
242(b) and the plan documents governing the above-referenced plan, I hereby
designate a method of distribution as follows:
(i) distribution shall be commenced to me as of the first
day of the plan year beginning after my normal
retirement age or, if later, my separation from
service;
(ii) the amount of each annual installment distribution to
be made to me shall be equal to the amount (rounded
to the next higher $100) which is required to be
distributed in order that the present value of
distributions scheduled to be made to me during my
lifetime will be equal to at least fifty-one percent
(51%) of the present value of distributions expected
to be made to me and my beneficiaries; and
(iii) if I should die before distribution is completed,
distribution shall be made to my beneficiary in
substantially equal annual installments (rounded to
the next higher $100) over the life expectancy
(redetermined annually) of the beneficiary. If the
beneficiary is not a natural person, distributions
shall be made in substantially equal annual
installments (rounded to the next higher $100) over a
period of 10 years.
Dated: ____________, 1983 -------------------------------------
Employee's Printed Name
-------------------------------------
Employee's Signature
TO BE EFFECTIVE, THIS FORM MUST BE EXECUTED AND DELIVERED TO THE FOLLOWING
ADDRESS NOT LATER THAN DECEMBER 31, 1983:
- --------------------------------------------------------------------------------
To be completed by Plan Administrator: This form was received on ____________,
1983.
-------------------------------------
Authorized Signature
D-6
<PAGE>
SUGGESTED RESOLUTIONS
FOR MEETING OF
BOARD OF DIRECTORS
OF
NORTHSTAR COMPUTER FORMS, INC.
I.
ADOPTION OF PLAN DOCUMENT
RESOLVED, That the document entitled "NORTHSTAR COMPUTER FORMS, INC.
401(k) PROFIT SHARING PLAN TRUST AGREEMENT (1998 Restatement)" is hereby
approved and adopted effective as of December 1, 1998.
RESOLVED FURTHER, That the officers of this corporation are authorized
and directed to take all actions necessary or desirable to carry said document
into full force and effect and to cause said document to be presented, together
with such supporting data as may be necessary, to any agency or agencies of the
government for ruling as to whether the same complies with the pertinent
provisions of the Internal Revenue Code and, in particular, sections 401(a),
401(k) and 501(a) thereof, and other applicable provisions of law with authority
to make any changes thereof which may be necessary or desirable, in their
opinion, in order to obtain a favorable ruling from said agency or agencies.
II.
ACCEPTANCE OF RESIGNATION OF TRUSTEE
RESOLVED, That, pursuant to Section 7.9 of the "NORTHSTAR COMPUTER
FORMS, INC. 401(k) PROFIT SHARING PLAN," the Board hereby accepts the
resignation of Roger Bredesen and E. Faye Bredesen as Trustees of the Trust
effective November 30, 1998.
III.
APPOINTMENT OF SUCCESSOR TRUSTEE
RESOLVED, That pursuant to Section 7.9 of the Plan, the Board appoints
U.S. Bank National Association as successor Trustee of the Trust to assume all
of the duties, powers, rights, privileges and discretions conferred upon the
original Trustees of the Trust effective December 1, 1998.
<PAGE>
IV.
INDEMNIFICATION
RESOLVED FINALLY, That, except as prohibited by applicable law, the
corporation shall indemnify, to the extent not covered by insurance, any
director, officer or employee of the corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether under the terms of the Employee Retirement Income
Security Act of 1974 ("ERISA") or otherwise, wherever brought, whether civil,
criminal, administrative or investigative by reason of the fact that the
individual is or was a fiduciary or administrator of any employee welfare
benefit plan or employee pension benefit plan as defined in ERISA, or by reason
of acting in any other capacity in connection with such plans, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by the individual in connection with such
action, suit or proceeding if the individual acted in good faith, was not
grossly negligent, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the individual's conduct was unlawful. In no
event shall this indemnification apply to liability which arises from the
individual's claim for his or her own benefit. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of
no lo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith, was grossly negligent and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that the individual's conduct was unlawful. The indemnification provided by this
resolution shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
-2-
<PAGE>
CERTIFICATION
I, _________________________, do hereby certify that I am the
____________________ of Northstar Computer Forms, Inc., a Minnesota corporation,
and that by action of the Board of Directors of said corporation taken on
_______________, 1999, the document entitled "FIRST AMENDMENT OF NORTHSTAR
COMPUTER FORMS, INC. 401(k) PROFIT SHARING PLAN TRUST AGREEMENT (1998
Restatement)" was approved and adopted effective as of January 1, 1999. I
further certify that the document hereto attached is a true and correct copy of
said document.
_______________, 1999 __________________________
<PAGE>
FIRST AMENDMENT
OF
NORTHSTAR COMPUTER FORMS, INC.
401(k) PROFIT SHARING PLAN TRUST AGREEMENT
(1998 RESTATEMENT)
THIS AGREEMENT, Made and entered into as of _______________, 1999, by and
between NORTHSTAR COMPUTER FORMS, INC., a Minnesota corporation (the "Principal
Sponsor"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association
organized under the laws of the United States, as trustee (together with its
successors, the "Trustee");
WITNESSETH: That
WHEREAS, The Principal Sponsor has previously established and maintains a
profit sharing plan (the "Plan") which, in its most recent amended and restated
form, is embodied in a document dated December 15, 1998 and entitled "Northstar
Computer Forms, Inc. 401(k) Profit Sharing Plan (1998 Restatement)" (the "Plan
Statement"); and
WHEREAS, The Principal Sponsor has reserved to itself the power to amend
the Plan Statement; and
WHEREAS, The Principal Sponsor desires to amend the Plan Statement in the
manner hereinafter set forth;
NOW, THEREFORE, The Plan Statement is hereby amended as follows:
1. QUALIFYING FOR EMPLOYER CONTRIBUTIONS. EFFECTIVE NOVEMBER 1, 1998,
SECTION 3.6 OF THE PLAN STATEMENT SHALL BE AMENDED TO READ IN FULL AS FOLLOWS:
1.1 ELIGIBLE PARTICIPANTS. For purposes of Section 3.5, a Participant shall be
an eligible Participant for a Plan Year only if such Participant has satisfied
the requirements of Section 2.1 and, in addition, satisfies the requirements in
either (a) or (b) below:
(a) the Participant:
(i) is credited with at least one thousand (1,000) Hours of Service
for such Plan Year, and
<PAGE>
(ii) is on the last day of such Plan Year, an employee of the Employer
(including for this purpose any Participant who then is on
temporary layoff or authorized leave of absence or who, during
such Plan Year, was inducted into the Armed Forces of the United
States from employment with the Employer); or
(b) the Participant:
(i) is credited with at least one thousand (1,000) Hours of Service
for such Plan Year, and
(ii) terminates employment with the Employer within the Plan Year by
reason of death, retirement at or after the Participant's Normal
Retirement Age or Disability.
No other Participant shall be an eligible Participant.
2. SAVINGS CLAUSE. SAVE AND EXCEPT AS HEREIN EXPRESSLY AMENDED, THE PLAN
STATEMENT SHALL CONTINUE IN FULL FORCE AND EFFECT.
IN WITNESS WHEREOF, Each of the parties hereto has caused these presents to
be executed, all as of the day and year first above written.
U.S. BANK NATIONAL ASSOCIATION NORTHSTAR COMPUTER FORMS,
INC.
By
-----------------------------
By
Its ------------------------------
------------------------ Its
-------------------------
And
---------------------------- And
Its -----------------------------
----------------------
Its
-------------------------------
-2-
<PAGE>
WRITING IN LIEU
OF MEETING OF
BOARD OF DIRECTORS
OF
NORTHSTAR COMPUTER FORMS, INC.
The undersigned, being all the directors of Northstar Computer Forms, Inc.,
a Minnesota corporation, by this Writing in Lieu of Meeting of Board of
Directors, do hereby adopt the following resolutions:
RESOLVED, That the document entitled "FIRST AMENDMENT OF
NORTHSTAR COMPUTER FORMS, INC. 401(k) PROFIT SHARING PLAN TRUST
AGREEMENT (1998 Restatement)" is hereby approved and adopted.
RESOLVED FURTHER, That the officers of this corporation are
authorized and directed to take all actions necessary or desirable to
carry said document into full force and effect and to cause said
document to be presented, together with such supporting data as may be
necessary, to any agency or agencies of the government for ruling as
to whether the same complies with the pertinent provisions of the
Internal Revenue Code and, in particular, sections 401(a) and 501(a)
thereof, and other applicable provisions of law with authority to make
any changes thereof which may be necessary or desirable, in their
opinion, in order to obtain a favorable ruling from said agency or
agencies.
Dated: _______________, 1999 _________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
<PAGE>
AGREEMENT NUMBER 010199
MICR FORMS AGREEMENT
BETWEEN
TRAVELERS EXPRESS COMPANY, INC.
AND
NORTHSTAR COMPUTER FORMS, INC.
THIS AGREEMENT IS ENTERED INTO AS OF THE 1ST DAY OF JANUARY 1999, BY AND
BETWEEN TRAVELERS EXPRESS COMPANY, INC. (BUYER OR TECI) AND NORTHSTAR COMPUTER
FORMS, INC. (SELLER OR NORTHSTAR).
THE PARTIES AGREE TO THE FOLLOWING TERMS FOR THE PURCHASE BY BUYER OF ITEMS
LISTED IN ATTACHED EXHIBIT A FROM SELLER:
I. Scope
In consideration of Buyer's first purchase order under this Agreement,
Seller agrees to sell to Buyer, and hereby extends to Buyer, a Purchase
Agreement to purchase MICR forms as listed in EXHIBIT A at the stated
prices; and (ii) to accept purchase orders as may be released by Buyer
which comply with this Agreement. MICR forms are: money orders, gift
certificates, official checks, process control documents, LASER CUT SHEETS,
AND OTHER CUSTOM MICR DOCUMENTS. It is further understood and agreed that
Seller will accept such complying purchase orders from Buyer at the
specified prices for the period commencing with the date first above
written and ending DECEMBER 31, 2002, (Agreement period) provided, however,
that orders placed within this period may call for delivery through APRIL
30, 2003 (DELIVERY PERIOD).
II. Pricing
2.1 ALL PRICES STATED IN Exhibit A ARE F.O.B. MANUFACTURING PLANT. TITLE
OF THE DOCUMENTS PASSES TO BUYER UPON THE EARLIER EVENT OF SHIPMENT OR
PASSAGE TO SELLER'S WAREHOUSE FOR INVENTORY PURPOSES.
2.2 IN ADDITION TO THE INVOICE TERMS AND CONDITIONS, SELLER AGREES THAT:
(1) NO MATERIAL WILL BE INVOICED AGAINST THIS AGREEMENT NUMBER AS IT
IS INTENDED FOR USE BY BUYER AS A CONTROL NUMBER ONLY; (2) ALL CHARGES
WITH RESPECT TO PURCHASE ORDERS ISSUED HEREUNDER SHALL BE INVOICED
WEEKLY IN SUMMARY BILLING FORMAT; AND (3) PAYMENT TERMS SHALL BE 2%
TEN DAYS, NET THIRTY (30) DAYS (2/10N30) AFTER RECEIPT OF INVOICE.
ANY AMOUNT OWED UNDER THIS AGREEMENT BY ONE PARTY TO THE OTHER WHICH
IS NOT PAID ON OR BEFORE THE 15TH DAY AFTER THE DUE DATE OF THE
INVOICE WILL REQUIRE THE INVOICING PARTY TO PROVIDE COPIES OF THE
ORIGINAL INVOICE TO THE OWING PARTY FOR PAYMENT. ALL AMOUNTS DUE AFTER
90 DAYS OF THE ORIGINAL DUE DATE, UNLESS AND EXCEPT THERE
1
<PAGE>
IS A BONA FIDE DISPUTE OR A MUTUALLY AGREED EXTENSION, SHALL BEAR
INTEREST UNTIL PAID AT THE RATE OF 18% PER ANNUM (1.5% PER MONTH), BUT
IN NO EVENT EXCEED THE MAXIMUM LAWFUL RATE OF INTEREST PERMITTED BY
APPLICABLE LAW.
2.3 All unbilled balances on existing orders which are not subject to
other purchase agreements as of the date first written above shall
receive the benefit of the pricing as set forth in EXHIBIT A.
2.4. If at any time during the Agreement period Seller shall:
(i) Offer for sale any of the items to be purchased hereunder at a lower
price for similar or lesser quantities; or
(ii) IF SELLER SHALL OFFER FOR SALE AT A LOWER PRICE FOR SIMILAR OR
LESSER QUANTITIES ITEMS DESIGNED TO BASICALLY THE SAME
SPECIFICATIONS, BUT WITH A PRICE DIFFERENTIAL WHICH IS GREATER
THAN THAT WHICH WOULD REASONABLY BE WARRANTED BY THE DIFFERENCE
IN COST OF MANUFACTURE (BASED UPON THE DIFFERENCE IN
SPECIFICATIONS);
then, commencing with the effective date of the price referenced in
(i) or (ii) above, this Agreement and its stated prices shall be
considered amended to reflect such lower prices for similar or lesser
quantities (or the excess over said warranted price differential).
The amended price shall not apply to units required by Buyer's
purchase orders to be delivered prior to its effective date. Seller
shall promptly notify buyer of any such price reduction which would
serve to reduce the price payable by Buyer under this Agreement.
Section 2.4 will be specifically covered twice each year (Section 7.4)
during the term of this Agreement.
2.5 PRICING WILL REMAIN FIRM IN THE ABSENCE OF MATERIALS COST
FLUCTUATIONS. IF MATERIAL COSTS INCREASE, SELLER MAY INCREASE PRICES
BY THE AMOUNT OF THE MATERIALS COST INCREASE, BUT NO MORE THAN SIX
PERCENT (6%) OF THE COST PER YEAR PER 1000 DOCUMENTS BEFORE THE
INCREASE. IF MATERIAL COSTS DECREASE, THE REDUCTION WILL BE PASSED
THROUGH TO BUYER UPON SELLER RECEIVING SAID PRICE REDUCTION. PRICES
WILL BE REVIEWED AT THE BUSINESS REVIEW MEETINGS PROVIDED FOR IN
SECTION 7.4. BUYER REQUIRES SUITABLE JUSTIFICATION (IE. MILL INVOICES,
PPI INDEXES, ETC.) AND 30 DAY PRIOR WRITTEN NOTICE OF CHANGE IN BID
PRICE.
2.6 IN EXCHANGE FOR BUYER'S PROMISE TO PURCHASE NINETY PERCENT (90%) OF
ITS MICR FORMS REQUIREMENTS OF THE TYPES LISTED IN Exhibit A FROM
SELLER, SELLER AGREES TO PAY CASH REBATES (SEE Exhibit E) TO BUYER
BASED ON BILLING LEVELS FOR ALL FORMS (MONEY ORDERS AND OTHER FORMS)
AS PROVIDED IN EXHIBIT A. ESTIMATED ANNUAL MONEY ORDER VOLUMES FOR
1999 ARE 284,000,000 ITEMS.
2
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ESTIMATED ANNUAL OFFICIAL CHECK VOLUMES FOR 1999 ARE 36, 000,000
ITEMS. REBATES WILL BE EFFECTIVE ON PURCHASES BEGINNING JANUARY 1,
1999.
2.7 SELLER SHALL PROVIDE ONGOING CONSULTATION TO BUYER REGARDING HOW TO
REDUCE COSTS. THIS CONSULTATION SHALL INCLUDE, BUT IS NOT LIMITED TO,
PRODUCT MIX, AND COMPOSITION, APPLICABLE "BEST PRACTICES" USED WITH
OTHER CUSTOMERS, CONTINUOUS PROCESS AND PRODUCTION EFFICIENCY
IMPROVEMENTS, ETC. THIS CONSULTATION IS INTENDED TO HELP BUYER REDUCE
OFFICIAL CHECK PER UNIT COSTS TO LESS THAN $.08 PER ITEM, AND SHALL BE
FORMALLY DOCUMENTED AT EACH SEMI-ANNUAL REVIEW (SECTION 7.4).
III. Quantities
3.1 Buyer agrees to purchase ninety percent (90%) of its MICR forms annual
dollar requirements from Seller pursuant to this Agreement. Nothing
in this Agreement shall preclude Buyer from procuring like or
comparable items from other sources.
IV. Lead Times
4.1 ALL PROOFS: BUYER WILL RECEIVE A FIRST PROOF ON NEW ORDERS WITHIN 48
HOURS OF THE TIME THE COMPLETED PURCHASE ORDER IS RECEIVED BY SELLER.
BUYER WILL RECEIVE ANY SUBSEQUENT PROOF WITHIN 24 HOURS AFTER RECEIPT
BY SELLER. ALL APPROPRIATE LOGO'S, ARTWORK, DRAWING, DISKS, AND
SPECIFICATIONS WILL BE PROVIDED WITH ORDERS. PROOF UNDER SECTION 4.1
REFERS TO STANDARD BASE ITEMS (E.G. COMMON FORMATS AND SIZES).
COMPLEX DESIGN, PROCESS COLORS, BACKGROUNDS, AND INTRICATE LOGOS MAY
TAKE AN ADDITIONAL 24 HOURS.
4.2 MONEY ORDER FORMS: ALL CUSTOM LOGO STANDARD SIZE MANUAL MONEY ORDER
FORMS OF EXACT REPEAT OR RETURNED PROOF APPROVAL RECEIVED BY THE 1ST
OF EACH MONTH WILL BE PRINTED ON THE 15TH OF EACH MONTH OR RECEIVED BY
THE 15TH OF EACH MONTH WILL BE PRINTED ON THE 30TH OF EACH MONTH.
ALL GENERIC STANDARD SIZE MANUAL MONEY ORDER FORMS WILL BE SCHEDULED
WITH A MINIMUM OF TWENTY TO THIRTY DAYS PRIOR TO AGREED UPON INVENTORY
REPLENISHMENT DATES.
ALL GENERIC OR CUSTOM LOGO AUTOMATED MONEY ORDER FORMS WILL BE
SCHEDULED WITH A MINIMUM OF TWENTY TO THIRTY DAYS PRIOR TO AGREED UPON
INVENTORY REPLENISHMENT DATES.
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DELIVERY REQUIREMENTS LESS THAN STATED ABOVE MUST HAVE PRE-AUTHORIZED
APPROVAL AND WILL BE SUBJECT TO PRINT UPCHARGES. BUYER RESERVES THE
RIGHT TO PRIORITIZE THE SEQUENCE OF THE BUYER'S ORDERS FOR PRINT
PRODUCTION.
4.3 OFFICIAL CHECKS: SELLER IS REQUIRED TO TRANSMIT PROOFS
ELECTRONICALLY. ALL ORDERS PRINTED FOUR COLOR OR LESS ON STANDARD
WHITE OFFICIAL CHECK STOCK WITH QUANTITIES UP TO 20,000 TO SHIP WITH
10 WORKING DAYS AFTER PROOF APPROVAL OR ELECTRONIC ENTRY OF EXACT
REPEATS. BUYER RESERVES THE RIGHT TO PRIORITIZE THE SEQUENCE OF
BUYER'S ORDERS.
ALL ORDERS PRINTED FOR FOUR COLOR OR LESS ON STANDARD WHITE OFFICIAL
CHECK STOCK WITH QUANTITIES OVER 20,000 BUT LESS THAN 50,000 WILL SHIP
WITHIN 15 WORKING DAYS AFTER PROOF APPROVAL OR ELECTRONIC ENTRY OF
EXACT REPEATS. BUYER RESERVES THE RIGHT TO PRIORITIZE THE SEQUENCE OF
BUYER'S ORDERS FOR PRINT PRODUCTION.
ALL ORDERS PRINTED FOR FOUR COLORS OR LESS ON STANDARD WHITE OFFICIAL
CHECK STOCK WITH QUANTITIES OVER 50,000 AND/OR EXTRA WIDE FORMS IN
OC-7 CLASSIFICATION MAY REQUIRE ADDITIONAL LEAD TIMES NOT EXCEED
LONGER THAN 20 WORKING DAYS.
ALL ORDERS PRINTED PROCESS COLOR, MORE THAN FOUR COLOR, OR NON
STANDARD PAPERS MAY REQUIRE ADDITIONAL LEAD TIMES, NOT TO EXCEED
LONGER THAN 20 WORKING DAYS.
DELIVERY REQUIREMENTS OF LESS THAN 10 WORKING DAYS MUST HAVE
PRE-AUTHORIZATION APPROVAL AND WILL BE SUBJECT TO PRINT UPCHARGES.
BOTH NEW AND REPEAT ORDERS WILL BE TRANSMITTED TO SELLER VIA AN
ELECTRONIC ORDER ENTRY SYSTEM SUPPLIED BY BUYER'S AUTOMATED SYSTEMS.
V. Qualification Testing
5.1. WITHOUT IN ANY WAY LIMITING ITS WARRANTY OR INCOMING INSPECTION
TESTING RIGHTS UNDER THIS AGREEMENT, BUYER, FROM TIME TO TIME, INTENDS
TO SUBJECT SAMPLES OF THE PURCHASED ITEMS TO QUALIFICATION TESTS. THE
TESTS WILL BE SUFFICIENT TO ASSURE THAT THE ITEMS MEET ALL THE
SPECIFICATION REQUIREMENTS DESCRIBED IN EXHIBIT C IF ANY, AS WELL AS
APPLICABLE DRAWINGS, SAMPLES AND OTHER DESCRIPTIONS. BUYER SHALL
NOTIFY SELLER OF ANY DEFICIENCIES INDICATED BY THE TESTING. SELLER
SHALL AT ITS OWN EXPENSE REPLACE, ALTER, OR MODIFY THE REMAINING
TO-BE-DELIVERED ITEMS SO THAT THEY WILL PASS SUBSEQUENT QUALIFICATION
TESTS, UNLESS BUYER ELECTS, IN WRITING, TO WAIVE A DEFICIENCY.
5.2. SHOULD SELLER FAIL TO SATISFACTORILY CORRECT, AT ITS OWN EXPENSE, ANY
AND ALL DEFICIENCIES DISCOVERED IN BUYER'S QUALIFICATION TESTING
WITHIN A REASONABLE TIME PERIOD AFTER RECEIVING BUYER'S NOTICE, THEN
BUYER, AT ITS SOLE OPTION,
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SHALL HAVE THE RIGHT (i) TO CANCEL ALL OR ANY PORTION OF THE
OUTSTANDING ITEM ORDERS WITHOUT CHARGE, AND RECEIVE FULL CREDIT AT
SELLER'S RISK AND EXPENSE ALL ITEMS WHICH SELLER PREVIOUSLY DELIVERED
TO BUYER.
5.4. SELLER AGREES THAT WITH RESPECT TO PRESENT OR FUTURE ITEMS SUBJECT TO
THIS AGREEMENT, IT WILL MAKE AVAILABLE TO BUYER AT NO CHARGE, RESULTS
OF SELLER'S INTERNAL QUALIFICATION TESTS, WHETHER OR NOT DEALING WITH
TESTING AGAINST BUYER'S SPECIFICATIONS.
VI. Specifications and Production Process Changes
6.1 SELLER AGREES THAT ALL ITEMS TO BE DELIVERED UNDER THIS AGREEMENT
SHALL MEET THE SPECIFICATIONS DESCRIBED IN EXHIBIT C, IF ANY, AS WELL
AS APPLICABLE DRAWINGS, BUYER APPROVED SAMPLES, AND OTHER DOCUMENTED
DESCRIPTIONS. SELLER FURTHER AGREES THAT IN ADDITION TO AND NOT
LIMITING THE FOREGOING REQUIREMENT, IT WILL NOT MAKE ANY CHANGE IN A
ITEM TO BE DELIVERED HEREUNDER WHICH WOULD EFFECT THE ITEM'S FORM,
FIT, FUNCTION, APPEARANCE OR PERFORMANCE WITHOUT FIRST HAVING RECEIVED
BUYER'S PRIOR WRITTEN CONSENT.
VII. REPORTING
7.1 MONEY ORDERS: SELLER WILL SUPPLY BUYER WITH MONTHLY STATEMENTS
ITEMIZING QUANTITIES ORDERED BY BUYER DURING THE TERM OF THIS
AGREEMENT. THIS REPORT SHALL BE IN AN BUYER DEFINED PC FORMAT AND
SHALL INCLUDE, BUT NOT BE LIMITED TO, (1) MONTHLY VOLUME BY MONEY
ORDERS TYPE, (2) MONTHLY INVOICE BY MONEY ORDERS TYPE AND FOR NON-
STANDARD MONEY ORDERS AS A WHOLE, (3) AVERAGE TURN AROUND TIME, AND
(4) TOTAL DOLLARS COMMITTED TO DATE.
7.2 OFFICIAL CHECKS: SELLER WILL PROVIDE ACCURATE AND TIMELY REPORTING.
REPORTS OF THE OFFICIAL CHECK PROGRAM ARE REQUIRED TO BE IN BUYER
DEFINED PC FORMAT. REQUIRED REPORTS INCLUDE, BUT ARE NOT LIMITED TO,
THE FOLLOWING:
- MONTHLY SUMMARY ANALYSIS
- ORDER ANALYSIS REPORT
- OFFICIAL CHECK BREAKDOWN REPORT
- PRICES VS. QUANTITY REPORT
- STATUS REPORTS ON ALL ORDERS TO DATE AND PRICING
- DAILY REPORT OF RUSH ORDERS AND THEIR STATUS
- HISTORICAL REPORTS BY TYPE, QUANTITY AND DATE PRODUCED
- SERVICE LEVEL REPORTS AS REQUESTED BY BUYER
7.3 OTHER PRODUCTS: SUCH REPORTS AS BUYER MAY REQUEST (E.G. GIFT
CERTIFICATES)
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7.4 SELLER AND BUYER WILL MUTUALLY AGREE TO SET A SCHEDULE FOR BUSINESS
REVIEWS IN WHICH AT LEAST TWO MEETINGS WILL BE SCHEDULED AT THE
BEGINNING OF JANUARY AND JULY OF EACH CONTRACT YEAR.
VIII. ADDITIONAL ITEMS
8.1 DURING THE TERM OF THIS AGREEMENT, BUYER MAY HAVE A NEED FOR ITEMS
BEING COMMERCIALLY PRODUCED BY SELLER, WHICH ALTHOUGH NOT THEN LISTED
IN EXHIBIT A ARE IN THE SAME GENERAL PRODUCT LINE AS ITEMS LISTED IN
EXHIBIT "A". IN SUCH A CIRCUMSTANCE, BUYER SHALL HAVE A RIGHT, UPON
TEN (10) DAYS PRIOR WRITTEN NOTICE TO SELLER, TO HAVE THE UNLISTED
ITEMS ADDED TO THIS AGREEMENT. THESE ADDED ITEMS CAN THEN BE
PURCHASED UNDER THIS AGREEMENT, AT SELLER'S THEN PREVAILING PRICES FOR
THESE ITEMS, AT THE SAME QUANTITY LEVELS AT WHICH THE ITEMS LISTED IN
EXHIBIT A ARE PRICED; HOWEVER, THE PRICING SHALL AT ALL TIMES REFLECT
SELLER'S EXTENDING ITS "MOST FAVORED CUSTOMER" STATUS TO BUYER FOR
COMPARABLE SPECIFICATIONS.
IX. Rescheduling and Cancellation
9.1. BUYER MAY AT ITS OWN ELECTION AND CONVENIENCE, BEFORE SELLER
DELIVERS THE APPLICABLE UNITS UNDER ONE OR MORE OF ITS PURCHASE
ORDERS, (i) CANCEL THIS AGREEMENT IN WHOLE AS PROVIDED IN ARTICLE XII,
OR (ii) CANCEL PARTICULAR PURCHASE ORDERS, OR ANY PORTION THEREOF,
PROVIDED THAT:
(a) BUYER SHALL GIVE NOTICE TO SELLER OF SUCH CANCELLATION INDICATING
ITS SCOPE AND EXTENT.
(b) Such notice is received by Seller at least thirty (30) days in
advance in the case of SECTION (i) above or five (5) days
depending on "agreed to" lead time in SECTION (ii) before the
scheduled delivery date.
(c) Buyer is responsible for all costs incurred as it relates to
Buyer's orders in production including all material as it relates
to Buyer's orders in production.
X. Other Terms and Conditions
10.1 IT IS UNDERSTOOD AND AGREED THAT THE TERMS AND CONDITIONS CONTAINED
IN THIS AGREEMENT IN ADDITION TO THE STANDARD PURCHASE ORDER TERMS
AND CONDITIONS CONTAINED ON THE REVERSE SIDE OF BUYER'S PURCHASE
ORDERS, A COPY
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OF WHICH IS HERETO ATTACHED AS EXHIBIT D, SHALL BE THE SOLE TERMS
AND CONDITIONS GOVERNING THIS AGREEMENT AND EACH AND EVERY ORDER
ISSUED UNDER IT. ANY CONFLICTS WHICH MIGHT EXIST BETWEEN THIS
AGREEMENT AND SAID STANDARD PURCHASE ORDER TERMS AND CONDITIONS
WHICH ARE NOT SPECIFICALLY RESOLVED IN THIS AGREEMENT SHALL BE
RESOLVED IN FAVOR OF THIS AGREEMENT.
10.2 IF SELLER, UPON RECEIPT PER ARTICLE IV OF THIS AGREEMENT AND
BUYER'S PURCHASE ORDER, INCLUDING BUT LIMITED TO THE STATED
IN-HOUSE DELIVERY DATE, CANNOT SUBSEQUENTLY MEET THE MUTUALLY
AGREED TO SHIP DATE, WILL SHIP VIA OVERNIGHT AIR FREIGHT F.O.B.
ORIGIN, FREIGHT PREPAID. IF DELAY IS CAUSED BY SELLER AFTER
MISSING THE MUTUALLY AGREED SHIP DATE, ENOUGH PRODUCT WILL BE
SHIPPED NEXT-DAY AIR TO PREVENT STOCK-OUTS AND PAID BY SELLER.
THE REMAINDER OF THE ORDER WILL BE SHIPPED UNDER NORMAL TERMS.
10.3 SELLER, UPON RECEIPT OF BUYER'S PURCHASE ORDER, WILL ACKNOWLEDGE SUCH
PURCHASE ORDER AS TO CORRECT QUANTITY, IN-HOUSE DATE, AND PRICE, AND
RETURN A COPY TO BUYER WITH THE PROPER AUTHORIZATION.
10.4 SELLER IS TO PROVIDE A COST REDUCTION PROGRAM/SCHEDULE EACH YEAR BY
July 15.
10.5 MONEY ORDERS: SELLER AND BUYER ARE TO MUTUALLY AGREE ON A TEST
PROCEDURE AND IN THE EVENT THAT SELLER SHIPS DEFECTIVE PRODUCT AND
SUCH PRODUCT IS VERIFIED AS DEFECTIVE AT BUYER'S TEST INSPECTION,
BUYER WILL BE ENTITLED TO A $.05/ITEM CREDIT FROM SELLER FOR EACH
ITEM FOUND DEFECTIVE, AS WELL AS $250 PER ORDER CHARGE. THE CREDIT
WILL ONLY APPLY TO DEFECTIVE ITEMS OVER 1000 (MINIMUM) ITEMS AND
LIMITED TO 30,000 (MAXIMUM) ITEMS PER ORDER. DEFECTIVE PRODUCT AS
DESCRIBED ABOVE IS DEFINED AS PRODUCT WHICH HAS FAILED CRITERIA FOUND
IN ARTICLE V AND IN EXHIBIT C AS DESCRIBED IN THE MUTUALLY AGREED
TEST PROCEDURE.
OFFICIAL CHECKS: SELLER AND BUYER ARE TO MUTUALLY AGREE ON A TEST
PROCEDURE AND IN THE EVENT THAT SELLER SHIPS DEFECTIVE PRODUCT AND
SUCH PRODUCT IS VERIFIED AS DEFECTIVE AT BUYER'S TEST INSPECTION,
BUYER WILL BE ENTITLED TO A $.05/ITEM CREDIT FROM SELLER FOR EACH
ITEM FOUND DEFECTIVE, AS WELL AS $50 PER ORDER CHARGE. THE CREDIT
WILL ONLY APPLY TO DEFECTIVE ITEMS OVER 3000 (MINIMUM) ITEMS AND
LIMITED TO 20,000 (MAXIMUM) ITEMS PER ORDER. IN THE EVENT THE SELLER
SHIPS DEFECTIVE PRODUCT, AND IN DOING SO CAUSES A TECI CUSTOMER A
BREAK IN SERVICE, SELLER WILL HAVE 3 DAYS FROM THE DATE SELLER
RECEIVES NOTIFICATION TO REPLACE THE DEFECTIVE PRODUCT. FOR ANY
ORDER DELAYED LONGER THAN THE 3 DAY TIME PERIOD, THE SELLER WILL
CREDIT THE BUYER $250.00 PER DAY FOR EACH DAY THE CUSTOMER IS
DELAYED. DEFECTIVE
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PRODUCTS DESCRIBED ABOVE IS DEFINED AS PRODUCT WHICH HAS FAILED
CRITERIA FOUND IN SECTION V AND IN EXHIBIT "C" AS DESCRIBED IN
THE MUTUALLY AGREED TEST PROCEDURE.
10.6 Seller agrees to employ a full time MICR Quality Assurance person for
each program (money orders and official checks). These people will
have had training in Statistical Process Control (SPC), Total Quality
Management (TQM) and forty hours or more in Total Quality Improvement
(TQI). These people will report directly to the Seller's VP of
Operations OR OPERATIONS MANAGER.
10.7 SELLER WILL PROVIDE BUYER WITH AN INFORMED CONTACT PERSON FOR EACH
PROGRAM (MONEY ORDERS AND OTHER MICR FORMS) AT EACH PLANT AND
WAREHOUSE WHO WILL BE AVAILABLE VIA PAGER THROUGHOUT THE FULL
BUSINESS DAY (7:00 AM TO 5:00 PM). SELLER WILL PROVIDE A LIST OF
CONTACT PERSONS, LOCATIONS AND TELEPHONE NUMBERS AS EXHIBIT F TO THIS
AGREEMENT AND WILL KEEP THE LIST CURRENT.
10.8 NON-STANDARD MICR FORMS: NON-STANDARD MICR FORMS WILL BE PRICED
SEPARATELY AND SUBJECT TO THE SAME MICR FORMS SPECIFICATIONS AS
STANDARD MICR FORMS, UNLESS OTHERWISE STATED ON THE PURCHASE ORDER.
10.9 OUTSOURCED MICR FORMS: MICR FORMS THAT SELLER ELECTS TO OUTSOURCE TO
ANOTHER SELLER WILL CONFORM TO THE SAME SPECIFICATIONS AND PRICE
CONSTRAINTS AS IN-HOUSE NON-STANDARD MICR FORMS. PRICING ON
OUTSOURCED MICR FORMS WILL BE QUOTED WITHIN 48 HOURS OF RECEIPT OF
THE PURCHASE ORDER, WHICH AT THAT TIME BUYER CAN PROCEED OR CANCEL
SAID ORDER. NOTWITHSTANDING ANY OUTSOURCING, SELLER REMAINS
RESPONSIBLE TO BUYER FOR THE PERFORMANCE OF THIS AGREEMENT.
10.10 PURCHASE OF PAPER: BUYER RESERVES THE RIGHT TO PURCHASE ITS OWN PAPER
TO PRODUCE THE MICR FORMS UPON SIXTY (60) DAYS WRITTEN NOTICE TO THE
SELLER. PAPER SPECIFICATIONS AND QUALITY MUST MEET SELLER'S
REQUIREMENTS BASED ON SELLER'S PAST PRACTICES.
10.11 FREIGHT COSTS:
SELLER WILL DELIVER THE MONEY ORDER FORMS DIRECTLY TO BUYER'S
DESIGNATED WAREHOUSE USING THE MOST ECONOMICAL TRANSPORTATION GIVEN
THE DELIVERY REQUIREMENTS. ALL DISCOUNTS, OR REBATES, RECEIVED BY
SELLER WILL BE PASSED ON TO THE BUYER. BUYER RESERVES THE RIGHT TO
SELECT SHIPPER FOR ITS PRODUCTS IF DISCOUNTS AND/OR REBATES ARE MORE
ADVANTAGEOUS TO BUYER.
SELLER WILL DELIVER THE OFFICIAL CHECK FORMS DIRECTLY TO THE BUYER'S
DESIGNATED WAREHOUSE USING THE MOST ECONOMICAL TRANSPORTATION GIVEN
THE
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DELIVERY REQUIREMENTS. SELLER AND BUYER AGREE THAT THE 1ST YEAR
OF THE AGREEMENT BUYER SHALL RECEIVE A DISCOUNT OF 16% OF FREIGHT
COSTS. AFTER THE FIRST YEAR, BUYER WILL RECEIVE A GUARANTEED MINIMUM
RATE OF 16% DISCOUNT. IN THE EVENT THE SELLER'S DISCOUNTS ARE LESS
THAN 16%, BUYER WILL RECEIVE 100% OF THE FREIGHT DISCOUNT. BUYER
RESERVES THE RIGHT TO SELECT SHIPPER FOR ITS PRODUCTS IF DISCOUNTS
ARE MORE ADVANTAGEOUS TO BUYER.
REBATE (DISCOUNT) ON FREIGHT DOES NOT INCLUDE MONEY ORDERS/PICK PACK
PRODUCTS FOR WHICH NORHTSTAR DOES NOT RECEIVE A DISCOUNT.
DISCOUNTS WILL BE DISCUSSED AND ADJUSTED AT THE ANNUAL REVIEWS OF THE
PROGRAM.
10.12 GOVERNING LAW: THIS AGREEMENT IS GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH MINNESOTA LAW AND IT IS THE ENTIRE AGREEMENT BETWEEN
THE PARTIES. THIS AGREEMENT MAY BE AMENDED OR ASSIGNED ONLY BY THE
WRITTEN AGREEMENT OF BOTH PARTIES.
10.13 OWNERSHIP: ALL PROOFS, PRINTS, NEGATIVES, SEPARATIONS, ENHANCEMENTS,
DISKS, ELECTRONIC FILES, DIGITAL INFORMATION, ETC., THAT ARE PROVIDED
BY BUYER OR DEVELOPED OR CREATED BY SELLER IN CONNECTION WITH THIS
AGREEMENT, BOTH THE PHYSICAL MEDIUM AND THE INTELLECTUAL PROPERTY
RIGHTS, ARE THE EXCLUSIVE PROPERTY OF BUYER AND MUST BE RETURNED TO
BUYER UPON REQUEST OR WITHIN TEN (10) DAYS OF THE TERMINATION OF THIS
CONTRACT IN A FORM USED BY SELLER OR AVAILABLE TO SELLER WITHOUT
ADDITIONAL EXPENSE. NOTE THAT SELLER FILES DIGITAL INFORMATION ON AN
AMGRAF MECCA SYSTEM.
10.14 PRODUCT SPECIFICATIONS: SELLER AGREES TO MANUFACTURE ALL PRODUCTS IN
SPECIFICATION WITH ANSI STANDARDS IN REGARDS TO SIZE, MICR AND PAPER.
EXHIBIT "C" LISTS AUTOMATED MICR FORMS SPECIFICATIONS. ALL MICR
FORMS SHOULD BE CREATED TO THESE SPECIFICATIONS UNLESS THE PURCHASE
ORDER SPECIFICALLY STATES OTHERWISE. EXCEPTIONS WILL BE SIGNED BY
BOTH PARTIES AT AUTHORIZED LEVELS
10.15 CONFORMANCE REQUIREMENTS: CONFORMANCE REQUIREMENTS FOR MICR FORMS IS
ADDRESSED IN EXHIBIT C.
10.16 SECURITY REQUIREMENTS: SELLER AGREES TO INSTALL AND MAINTAIN
SECURITY REQUIREMENTS FOUND IN EXHIBIT B FOR THE DURATION OF THIS
AGREEMENT AND ANY EXTENSIONS. BUYER SHALL ALSO HAVE THE RIGHT TO
INSPECT THE RECORDS, WHEREVER MAINTAINED, UPON REASONABLE NOTICE,
DURING REGULAR BUSINESS HOURS.
XI. Amendments
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11.1 THIS AGREEMENT SHALL NOT BE DEEMED OR CONSTRUED TO HAVE BEEN
MODIFIED, AMENDED, RESCINDED, CANCELED OR WAIVED IN WHOLE OR IN PART,
EXCEPT BY WRITTEN INSTRUMENTS SIGNED BY THE PARTIES HERETO; FURTHER,
IT IS EXPRESSLY AGREED THAT MATTERS AFFECTING THIS AGREEMENT IN
GENERAL MUST BE SIGNED BY BOTH PARTIES.
XII. Right of Termination
12.1 IF EITHER BUYER OR SELLER FAILS TO PERFORM ANY OF ITS COVENANTS OR
OBLIGATIONS UNDER THIS AGREEMENT (OTHER THAN AS EXPRESSLY SET FORTH
IN SECTION 12.3), AND SUCH FAILURE IS, OR IN THE AGGREGATE SUCH
FAILURES ARE, MATERIAL, THEN THE PARTY NOT IN DEFAULT UNDER THIS
AGREEMENT MAY PROVIDE WRITTEN NOTICE OF ITS INTENT TO TERMINATE THIS
AGREEMENT AND IF SUCH DEFAULT IS NOT CURED WITHIN TEN (10) BUSINESS
DAYS FROM THE DATE OF WRITTEN NOTICE TO THE DEFAULTING PARTY OR, IF
SUCH DEFAULT CANNOT REASONABLY BE CURED WITHIN SUCH TEN (10) BUSINESS
DAY PERIOD, IF CURE IS NOT COMMENCED WITHIN SUCH PERIOD AND
THEREAFTER DILIGENTLY PURSUED, THEN THE NONDEFAULTING PARTY MAY
TERMINATE THIS AGREEMENT IMMEDIATELY.
12.2. IF THE PARTY NOT IN DEFAULT UNDER THIS AGREEMENT ELECTS TO TERMINATE
THIS AGREEMENT PURSUANT TO SECTION 12.1., THEN, IN ADDITION TO SUCH
TERMINATION AND SUBJECT TO THE TERMS OF THIS AGREEMENT, THE PARTY NOT
IN DEFAULT SHALL BE ENTITLED TO ANY AND ALL OTHER REMEDIES PROVIDED
BY LAW OR EQUITY FOR THE OTHER PARTY'S FAILURE TO FULFILL ITS
OBLIGATIONS UNDER THIS AGREEMENT.
12.3. IF EITHER BUYER OR SELLER BECOMES OR IS DECLARED INSOLVENT OR
BANKRUPT, THEN THIS AGREEMENT SHALL BE IMMEDIATELY TERMINATED,
WITHOUT THE REQUIREMENT OF ANY NOTICE TO THE INSOLVENT OR BANKRUPT
PARTY. A PARTY SHALL BE DEEMED INSOLVENT OR BANKRUPT FOR PURPOSES OF
THIS SECTION IN THE EVENT THAT:
(a) A RECEIVER, LIQUIDATOR OR TRUSTEE OF A PARTY IS APPOINTED BY
COURT ORDER AND SUCH ORDER REMAINS IN EFFECT FOR MORE THAN THIRTY
(30) DAYS; OR A CASE IS COMMENCED OR A PETITION IS FILED AGAINST
A PARTY UNDER ANY APPLICABLE LIQUIDATION, CONSERVATORSHIP,
BANKRUPTCY, MORATORIUM INSOLVENCY, REORGANIZATION OR SIMILAR LAWS
FOR THE RELIEF OF DEBTORS FROM TIME TO TIME IN EFFECT AND
GENERALLY AFFECTING THE RIGHTS OF CREDITORS (A "DEBTOR RELIEF
LAW"); OR
(b) A PARTY VOLUNTARILY SEEKS, CONSENTS TO, OR ACQUIESCES IN THE
BENEFIT OR BENEFITS OF ANY PROVISION OF ANY DEBTOR RELIEF LAW;
CONSENTS TO THE FILING OF ANY ASSIGNMENT FOR THE BENEFIT OF ITS
CREDITORS; ADMITS IN WRITING ITS INABILITY TO PAY ITS DEBTS
GENERALLY AS THEY BECOME DUE; OR
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CONSENTS TO THE APPOINTMENT OF A RECEIVER, TRUSTEE, LIQUIDATOR OR
CONSERVATOR FOR IT OR ANY PART OF ITS PROPERTY.
12.4. If Seller fails to deliver to
Buyer the CFO report as required by SECTION 21.1, or if the
report is not reasonably satisfactory to Buyer because of
declining financial condition, the Buyer shall have the right to
terminate this Agreement upon sixty (60) days prior written
notice to Seller.
12.5 CHANGE OF OWNERSHIP OR CONTROL: SELLER AGREES THAT A CHANGE IN ITS
OWNERSHIP OR CONTROL DURING THE TERM OF THIS AGREEMENT SHALL HAVE NO
EFFECT ON THE AGREEMENT WITH THE EXCEPTION THAT BUYER MAY TERMINATE
THE AGREEMENT UPON WRITTEN NOTICE TO SELLER. FOR PURPOSES OF THIS
AGREEMENT, A CHANGE IN OWNERSHIP OR CONTROL OCCURS WHEN THIRTY
PERCENT (30%) OR MORE OF SELLER'S SHARES OR ASSETS ARE TRANSFERRED.
SELLER WILL PROVIDE BUYER NECESSARY INFORMATION AT THE EARLIEST
OPPORTUNITY. CHANGE OF OWNERSHIP DOES NOT INCLUDE SELLER'S BUYBACK
OF ITS OWN STOCK.
12.6 TERMINATION TRANSITION: BUYER AGREES TO TRANSITION VOLUME IN SIX
MONTH INTERVALS AT THE CONCLUSION OF THIS AGREEMENT SO AS TO EFFECT A
SMOOTH TRANSITION FOR BOTH PARTIES. MONEY ORDERS WILL FORM ONE
PRODUCT GROUP, OFFICIAL CHECKS WILL FORM A SECOND PRODUCT GROUP AND
ALL OTHER ITEMS WILL FORM THE REMAINING PRODUCT GROUP.
12.7 DISPUTE RESOLUTION PROCEDURE:
a. NOTICE AND CURE. EXCEPT AS OTHERWISE SPECIFIED IN THIS
AGREEMENT, IN THE EVENT OF A BREACH OF THE AGREEMENT THE NONBREACHING
PARTY SHALL GIVE THE BREACHING PARTY WRITTEN NOTICE OF THE BREACH AND
THIRTY (30) DAYS TO CURE IT.
b. NEGOTIATION. THE PARTIES AGREE TO USE THEIR BEST EFFORTS TO
NEGOTIATE A RESOLUTION OF THE PROBLEM WITHIN THE THIRTY (30) DAY CURE
PERIOD.
c. EXECUTIVE REPRESENTATIVES. IF THE PARTIES ARE UNABLE TO RESOLVE
THE PROBLEM AS PROVIDED ABOVE, THEY WILL EACH PROMPTLY DESIGNATE IN
WRITING ONE EXECUTIVE REPRESENTATIVE FROM EACH PARTY. THE EXECUTIVE
REPRESENTATIVES WILL USE THEIR BEST EFFORTS TO NEGOTIATE A RESOLUTION
OF THE PROBLEM WITHIN THIRTY (30) DAYS.
d. MEDIATION. IF THE PARTIES ARE UNABLE TO RESOLVE THE DISPUTE AS
PROVIDED ABOVE, THEY WILL SUBMIT THE DISPUTE TO NONBINDING MEDIATION
WITH A NEUTRAL MEDIATOR IN MINNEAPOLIS, MINNESOTA. EACH PARTY WILL
PAY ITS OWN EXPENSES, AND THE PARTIES WILL SHARE EQUALLY THE FEES AND
EXPENSES OF THE MEDIATOR.
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E. ARBITRATION. IF MEDIATION FAILS TO RESOLVE THE DISPUTE WITHIN
NINETY (90) DAYS FROM THE DATE OF SUBMISSION, THE PARTIES SHALL
SUBMIT THE DISPUTE TO BINDING ARBITRATION IN MINNEAPOLIS, MINNESOTA.
F. TERMINATION AND OTHER REMEDIES. NOTHING IN THIS DISPUTE
RESOLUTION PROCEDURE PREVENTS A PARTY FROM TERMINATING THIS AGREEMENT
ACCORDING TO ITS PROVISIONS OR INSTITUTING FORMAL PROCEEDINGS AT ANY
TIME TO AVOID THE EXPIRATION OF ANY APPLICABLE LIMITATIONS PERIOD, OR
TO PRESERVE THOSE RIGHTS REGARDING CONFIDENTIALITY, OR WHERE A PARTY
IN GOOD FAITH OTHERWISE DETERMINES THAT A BREACH OF THIS AGREEMENT BY
THE OTHER PARTY MAY CAUSE IRREPARABLE HARM AND RELIEF IN THE FORM OF
A RESTRAINING ORDER, INJUNCTIVE ORDER OR OTHER EQUITABLE REMEDY IS
THE ONLY ADEQUATE REMEDY.
XIII. Insurance Coverage
13.1. MINIMUM INSURANCE COVERAGE. THROUGHOUT THE TERM, SELLER WILL
MAINTAIN INSURANCE COVERAGE REASONABLY SATISFACTORY TO BUYER.
(a) COMPREHENSIVE GENERAL LIABILITY, LEGAL LIABILITY COVERAGE,
COVERING THE LIABILITY ASSUMED UNDER THIS AGREEMENT, SUBJECT TO A
MINIMUM COMBINED SINGLE LIMIT OF $2,000,000.00 FOR BODILY INJURY
AND PROPERTY DAMAGE PER ANY ONE OCCURRENCE. THE FOREGOING CAN BE
FULFILLED BY AN UMBRELLA INSURANCE POLICY.
(b) COMPREHENSIVE AUTOMOBILE LIABILITY INSURANCE, INCLUDING LIABILITY
COVERING VEHICLES HIRED BY THE INSURED, AND VEHICLES OWNED BY THE
INSURED'S EMPLOYEES AND AGENTS AND USED IN THE INSURED'S
BUSINESS, AS WELL AS THOSE OWNED BY THE INSURED (SOMETIMES KNOWN
AS OWNED, COMBINED SINGLE LIMIT OF $2,000,000.00 FOR BODILY
INJURY AND PROPERTY DAMAGE PER ANY ONE OCCURRENCE. THE FOREGOING
CAN BE FULFILLED BY AN UMBRELLA INSURANCE POLICY.
(c) WORKMEN'S COMPENSATION INSURANCE TO THE FULL EXTENT REQUIRED BY
APPLICABLE STATE LAW.
(d) CRIME AND PREMISES INSURANCE, INCLUDING, BUT NOT LIMITED TO,
COVERAGE FOR EMPLOYEE DISHONESTY AND AGENT DISHONESTY COVERING
FOR NEGOTIABLE SECURITIES OF OTHERS WITH A MINIMUM LIMIT OF
$1,000,000.00
13.2. ADDITIONAL INSURED. SELLER FURTHER AGREES TO NAME BUYER AS AN
ADDITIONAL INSURED, WITH RESPECT TO THIS AGREEMENT AS IT RELATES TO
BUYER'S EMPLOYEES, AGENTS, DIRECTORS AND AFFILIATES ON THE
COMPREHENSIVE GENERAL LIABILITY AND COMPREHENSIVE AUTOMOBILE
LIABILITY POLICIES REFERRED TO IN THE ABOVE SECTION
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13.1. SELLER WILL PROVIDE BUYER WITH A COPY OF COVERAGE'S WITH
BUYER NAMED AS AN ADDITIONAL INSURED ON THE COMPREHENSIVE GENERAL
LIABILITY AND COMPREHENSIVE AUTOMOBILE LIABILITY POLICIES WITHIN
TEN (10) DAYS OF THE DATE THIS AGREEMENT IS FULLY EXECUTED BY THE
PARTIES HERETO.
13.3. CERTIFICATES OF INSURANCE. BEFORE COMMENCING SERVICES HEREUNDER,
SELLER SHALL DELIVER TO BUYER CERTIFICATES OF INSURANCE EVIDENCING
THE FOREGOING COVERAGE'S ISSUED BY THE ACCEPTABLE INSURANCE CARRIER
(s), PROVIDING THAT NOT LESS THAN THIRTY (30) DAYS WRITTEN NOTICE
SHALL BE GIVEN TO BUYER PRIOR TO ANY CHANGE IN THE TERMS AND
CONDITIONS OF ANY SUCH INSURANCE COVERAGE OR THE CANCELLATION,
TERMINATION OR EXPIRATION OF ANY SUCH INSURANCE COVERAGE.
XIV. Indemnification By Third Party Claims And Limitation Of Liability.
14.1 SELLER AGREES TO INDEMNIFY AND HOLD HARMLESS BUYER, ITS DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LOSSES, DAMAGES,
CLAIMS, LIABILITIES AND CAUSES OF ACTION OF EVERY KIND, INCLUDING
CLAIMS FOR THE PAYMENT OF NEGOTIABLE INSTRUMENTS (AS WELL AS COSTS
AND EXPENSES INCIDENT THERETO, INCLUDING ATTORNEYS' FEES) CAUSED BY
THE FAULT OR NEGLIGENCE OF SELLER OR ITS EMPLOYEES ARISING OUT OF
THIS AGREEMENT OR RELATED TO THE INVENTORY ENTRUSTED TO SELLER,
EXCEPT ANY LOSSES TO THE EXTENT CAUSED BY THE FAULT OR NEGLIGENCE OF
BUYER OR ITS EMPLOYEES. SELLER SHALL GIVE THE BUYER PROMPT AND
REASONABLE NOTICE OF ANY SUCH CLAIMS OR ACTIONS, AND BUYER SHALL HAVE
THE RIGHT TO INVESTIGATE, COMPROMISE AND DEFEND THE SAME TO THE
EXTENT OF ITS OWN INTERESTS.
14.2 BUYER AGREES TO INDEMNIFY AND HOLD HARMLESS SELLER, ITS DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LOSSES, DAMAGES,
CLAIMS, LIABILITIES AND CAUSES OF ACTION OF EVERY KIND, INCLUDING
CLAIMS FOR THE PAYMENT OF NEGOTIABLE INSTRUMENTS (AS WELL AS COSTS
AND EXPENSES INCIDENT THERETO, INCLUDING ATTORNEYS' FEES) CAUSED BY
THE FAULT OR NEGLIGENCE OF BUYER OR ITS EMPLOYEES ARISING OUT OF THIS
AGREEMENT, EXCEPT ANY LOSSES TO THE EXTENT CAUSED BY THE FAULT OR
NEGLIGENCE OF SELLER OR ITS EMPLOYEES. BUYER SHALL GIVE SELLER
PROMPT AND REASONABLE NOTICE OF ANY SUCH CLAIMS OR ACTIONS, AND
SELLER SHALL HAVE THE RIGHT TO INVESTIGATE, COMPROMISE AND DEFEND THE
SAME TO THE EXTENT OF ITS OWN INTERESTS.
14.3. REMEDIES CUMULATIVE; DAMAGES. ALL REMEDIES ARE CUMULATIVE. FAILURE
TO EXERCISE A RIGHT OR REMEDY IS NOT A WAIVER. EXCEPT WHEN DUE TO A
CLAIM OR ACTION PURSUANT TO Section 14.1. (c), NEITHER PARTY IS
LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
14.4. SURVIVAL. THIS ARTICLE XIV SHALL SURVIVE THE EXPIRATION OR
TERMINATION OF THIS AGREEMENT.
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XV. Relationship Of Parties.
15.1 IN CONNECTION WITH THIS AGREEMENT, EACH PARTY IS AN INDEPENDENT
CONTRACTOR, AND NEITHER PARTY HAS ANY AUTHORITY TO BIND OR COMMIT THE
OTHER. NOTHING HEREIN SHALL BE DEEMED OR CONSTRUED TO CREATE A JOINT
VENTURE, PARTNERSHIP OR AGENCY RELATIONSHIP BETWEEN THE PARTIES FOR
ANY PURPOSE.
XVI. Severability
16.1 IF ANY TERM OR PROVISION OF THIS AGREEMENT SHALL BE FOUND BY A COURT
OF COMPETENT JURISDICTION TO BE INVALID, ILLEGAL OR OTHERWISE
UNENFORCEABLE, THE SAME SHALL NOT AFFECT THE OTHER TERMS OR
PROVISIONS HEREOF OR THE WHOLE OF THIS AGREEMENT, BUT SUCH TERM OR
PROVISION SHALL BE DEEMED MODIFIED TO THE EXTENT NECESSARY IN THE
COURT'S OPINION TO RENDER SUCH TERM OR PROVISION ENFORCEABLE, AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES SHALL BE CONSTRUED AND ENFORCED
ACCORDINGLY, PRESERVING TO THE FULLEST PERMISSIBLE EXTENT THE INTENT
AND AGREEMENTS OF THE PARTIES HEREIN SET FORTH.
IX. NOTICE
17.1 ANY NOTICE PROVIDED FOR IN, OR PERMITTED UNDER, THIS AGREEMENT SHALL
BE MADE IN WRITING AND MAY BE GIVEN OR SERVED BY (a) DELIVERING THE
SAME IN PERSON OR BY PREPAID MESSENGER SERVICE TO THE PARTY TO BE
NOTIFIED, (b) DEPOSITING THE SAME IN THE MAIL, POSTAGE PREPAID,
REGISTERED OR CERTIFIED WITH RETURN RECEIPT REQUESTED, AND ADDRESSED
TO THE PARTY TO BE NOTIFIED AT THE ADDRESS HEREIN SPECIFIED, OR (c)
TELEX, TELEGRAPH, FACSIMILE, OR OTHER WRITTEN TELECOMMUNICATION
MEDIUM. IF NOTICE IS DEPOSITED IN THE UNITED STATES MAIL PURSUANT TO
CLAUSE (b) OF THIS SECTION 17.1, IT WILL BE EFFECTIVE FROM AND AFTER
THREE (3) DAYS FOLLOWING THE DATE THAT IT IS SO DEPOSITED. NOTICE
GIVEN IN ANY OTHER MANNER SHALL BE EFFECTIVE ONLY IN AND WHEN
RECEIVED AT THE ADDRESS OF THE PARTY TO BE NOTIFIED. FOR THE PURPOSE
OF NOTICE, THE ADDRESSES AND FACSIMILE NUMBERS ARE AS FOLLOWS:
IF TO SELLER:
NORTHSTAR COMPUTER FORMS, INC.
7130 NORTHLAND CIRCLE NORTH
BROOKLYN PARK, MINNESOTA 55428
ATTN: PRESIDENT
FACSIMILE: 612/535-5671
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IF TO BUYER:
TRAVELERS EXPRESS COMPANY, INC.
1550 UTICA AVENUE SOUTH
ST. LOUIS PARK, MINNESOTA 55416
ATTN: DIRECTOR OF CORPORATE SERVICES
FACSIMILE: 612/591-3121
WITH A COPY TO (EXCEPT FOR COMMUNICATIONS REQUIRED FOR THE DAILY PERFORMANCE OF
SERVICES):
TRAVELERS EXPRESS COMPANY, INC.
1550 UTICA AVENUE SOUTH
ST. LOUIS PARK, MINNESOTA 55416
ATTN: LEGAL DEPARTMENT
FACSIMILE: 612/591-3859
XVIII. Force Majeure.
18.1 NEITHER PARTY SHALL BE LIABLE FOR ANY DELAYS OR FAILURES IN
PERFORMANCE DUE TO FIRE OR TO LABOR OR MATERIAL SHORTAGES, OR TO
STRIKES, WALKOUTS, PUBLIC ENEMY, ACTS OF GOD OR TO CAUSES BEYOND THE
PARTY'S CONTROL THAT ARE NOT DUE TO ITS NEGLIGENCE, GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. THE PARTY WHOSE PERFORMANCE IS TO BE EXCUSED
AS PROVIDED IN THE PREVIOUS SENTENCE MUST ADVISE THE OTHER PARTY OF
SUCH DELAY OR FAILURE IN PERFORMANCE AS SOON AS SUCH PARTY HAS, OR
SHOULD HAVE, KNOWLEDGE THAT AN EVENT HAS OCCURRED WHICH WILL CAUSE
SAME. WITHIN FIVE DAYS, THE PARTY MUST CONFIRM THE ADVICE BY WRITTEN
NOTICE AND FURNISH AS MUCH DETAIL AS IS REASONABLE AVAILABLE. IF ANY
INTERRUPTION OF PERFORMANCE CONTINUES LONGER THAN THIRTY DAYS, THE
OTHER PARTY MAY TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO THE
PARTY WHOSE PERFORMANCE IS INTERRUPTED UNLESS A COURSE OF CORRECTIVE
ACTION IS APPROVED BY BOTH PARTIES.
XIX. Environmental Liability.
19.1 SELLER AND BUYER ACKNOWLEDGE TO EACH OTHER THAT EACH RECOGNIZES THAT
CERTAIN FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS IMPOSE
LIABILITY UPON
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MULTIPLE PARTIES CONSIDERED RESPONSIBLE FOR ANY HAZARDOUS, TOXIC,
RADIOACTIVE, POLLUTANT, OR IRRITANT CONDITION ("CONDITION") UNDER
THE DOCTRINE OF JOINT AND SEVERAL LIABILITY, OR STRICT LIABILITY.
BUYER AND SELLER EACH ACKNOWLEDGE AND AGREE THAT IT IS NOT THE
PURPOSE OF THIS AGREEMENT THAT EITHER SHALL BE EXPOSED TO ANY
LIABILITY ARISING OUT OF ANY CONDITION AT THE OTHER'S FACILITIES,
OR THE ACTIVITIES OF THE OTHER. ACCORDINGLY, EACH PARTY HERETO
(AN "INDEMNIFYING PARTY") DOES WAIVE ANY AND ALL CLAIMS, AND
AGREES TO INDEMNIFY, DEFEND, AND SAVE HARMLESS THE OTHER PARTY,
ITS AGENTS, EMPLOYEES, AND SUBCONTRACTORS (INDIVIDUALLY AND
COLLECTIVELY, AN "INDEMNIFIED PARTY"), FOR, FROM AND AGAINST ANY
SUITS, JUDGMENTS OR EXPENSES, AND REASONABLE ATTORNEYS FEES, BY
REASON OF ANY INJURY TO PERSONS, DEATH, DAMAGE TO PROPERTY, OR
VIOLATION OF ANY LAW, OR REGULATION ARISING IN CONNECTION WITH
ANY CONDITION AT THE INDEMNIFYING PARTY'S FACILITIES, OR ANY
CONDITION ARISING IN CONNECTION WITH THE INDEMNIFYING PARTY'S
ACTIVITIES IN THE MANUFACTURING, WAREHOUSING AND DEPLOYMENT OF
THE INSTRUMENTS AND OTHER BUYER PROPERTY. THE OBLIGATION SET
FORTH HEREIN SHALL CONTINUE IN FULL FORCE AND EFFECT, WHETHER OR
NOT THIS AGREEMENT IS TERMINATED FOR ANY REASON WHATSOEVER.
XX. Right To Inspect And Maintenance Of Books And Records.
20.1 BUYER, AFTER GIVING REASONABLE NOTICE TO SELLER, SHALL HAVE THE RIGHT
AT REASONABLE INTERVALS TO HAVE ITS EMPLOYEES, AGENTS OR
REPRESENTATIVES INSPECT THE FACILITIES DURING REGULAR BUSINESS HOURS
FOR THE SOLE PURPOSE OF CONFIRMING ADHERENCE TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT. SUCH RIGHT OF INSPECTION SHALL NOT
INTERFERE WITH THE NORMAL CONDUCT OF SELLER'S BUSINESS OR THE
OPERATIONS OF ITS FACILITIES.
20.2 ALL SUPPLIES AND SERVICES PROVIDED HEREUNDER BY SELLER SHALL BE
SUBJECT TO FINAL INSPECTION AND APPROVAL BY BUYER. IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT THE MERE FACT THAT BUYER MADE PAYMENT FOR
SAME DOES NOT CONSTITUTE FINAL ACCEPTANCE OR A WAIVER OF ANY RIGHTS.
20.3 THROUGHOUT THE TERM, SELLER SHALL MAINTAIN REASONABLY FULL AND
ACCURATE ACCOUNTS, RECORDS, BOOKS, JOURNALS, LEDGERS, AND DATA
(COLLECTIVELY, "RECORDS") REGARDING THE SERVICES RENDERED HEREUNDER,
ALL IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. UPON
TWO (2) DAYS ADVANCE NOTICE, BUYER, ITS EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL HAVE THE RIGHT AT REASONABLE INTERVALS DURING
NORMAL BUSINESS HOURS TO INSPECT THE RECORDS, AND SUCH OTHER RECORDS
AS MAY BE REASONABLY NECESSARY, FOR THE SOLE PURPOSE OF VERIFYING
PERFORMANCE BY SELLER OF THE SERVICES AND TO CONFIRM THE SERVICE FEES.
SELLER SHALL MAINTAIN ALL RECORDS RELATED TO INVOICES, SERVICES AND
BACKUP DOCUMENTATION ASSOCIATED THEREWITH FOR A PERIOD OF AT LEAST
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THREE (3) YEARS AFTER THE TERMINATION OR EXPIRATION OF THIS AGREEMENT.
SELLER SHALL ALSO MAKE THE RECORDS AVAILABLE TO BUYER, ITS EMPLOYEES,
AGENTS OR REPRESENTATIVES WITHIN THE MINNEAPOLIS, MINNESOTA,
METROPOLITAN AREA WITHIN TEN (10) DAYS AFTER RECEIPT OF A REASONABLE
REQUEST FOR SUCH RECORDS FROM BUYER. FURTHER, BUYER SHALL HAVE THE
RIGHT TO INSPECT THE RECORDS AT REASONABLE INTERVALS WHEREVER
MAINTAINED, UPON REASONABLE NOTICE, DURING REGULAR BUSINESS HOURS.
XXI. Financial Statements And Reports.
21.1 DURING THE TERM, UPON BUYER'S REQUEST, SELLER WILL FURNISH OR CAUSE
TO BE FURNISHED TO BUYER, AS SOON AS THE SAME ARE AVAILABLE, AND IN
ANY EVENT WITHIN ONE HUNDRED TWENTY (120) DAYS OF THE END OF EACH
FISCAL YEAR A COPY OF SELLER'S CHIEF FINANCIAL OFFICER'S REPORT OF
KEY FINANCIAL INFORMATION ("CFO REPORT"). THE CFO REPORT IS AN
ANNUAL AUDITED COMPILATION OF SELLER'S INCOME STATEMENT, BALANCE
SHEET AND STATEMENT OF CASH FLOWS. BUYER SHALL SIGN THE
CONFIDENTIALITY AGREEMENT WHICH SHALL ACCOMPANY THE CFO REPORT,
PROVIDED THAT SUCH AGREEMENT CONTAINS LANGUAGE MATERIALLY CONSISTENT
WITH THE BUYER'S MUTUAL CONFIDENTIALITY AGREEMENT.
XXII. Publicity.
22.1 WITHOUT THE PRIOR WRITTEN APPROVAL OF BUYER, SELLER IS PROHIBITED
FROM ANY MEDIA RELEASES, PUBLIC ANNOUNCEMENTS AND PUBLIC DISCLOSURES
RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER OF THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, PROMOTIONAL OR MARKETING MATERIALS,
BUT NOT INCLUDING ANY ANNOUNCEMENT INTENDED SOLELY FOR INTERNAL
DISTRIBUTION OR ANY DISCLOSURE REQUIRED BY LEGAL, ACCOUNTING OR
REGULATORY REQUIREMENTS.
XXIII. Third Party Beneficiaries.
23.1 BUYER AND SELLER AGREE THAT THIS AGREEMENT IS FOR THEIR BENEFIT AND
IS NOT INTENDED TO CONFER ANY RIGHTS OR BENEFITS ON ANY THIRD
PARTIES, INCLUDING WITHOUT LIMITATION, ANY EMPLOYEES OF BUYER OR
SELLER.
XXIV. Captions.
24.1 CAPTIONS APPEARING IN THIS AGREEMENT ARE FOR CONVENIENCE ONLY AND
SHALL NOT BE DEEMED TO EXPLAIN, LIMIT OR AMPLIFY THE PROVISIONS
HEREOF.
XXV. Assignment Or Delegation Of Duties.
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25.1 EXCEPT AS PROVIDED IN SECTION 10.9 OF THIS AGREEMENT, SELLER SHALL
NOT ASSIGN, SUBCONTRACT, OR OTHERWISE CONVEY OR DELEGATE ITS RIGHTS
OR DUTIES HEREUNDER TO ANY OTHER PARTY WITHOUT THE PRIOR WRITTEN
CONSENT OF BUYER, WHICH SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED
AND WHICH CONSENT, IF GIVEN, SHALL PROVIDE THAT IT IS SUBJECT TO ALL
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
XXVI.Disaster Recovery. SELLER AGREES TO MAINTAIN A DISASTER RECOVERY PLAN
SATISFACTORY TO BUYER AND TO PROVIDE BUYER WITH A DESCRIPTION OF THE PLAN
AS EXHIBIT G TO THIS AGREEMENT. THE DESCRIPTION PROVIDED AS EXHIBIT G IS A
BRIEF SUMMARY. THE PLAN IS AVAILABLE IN ITS ENTIRETY AT SELLER'S CORPORATE
OFFICES.
XXVII. Year 2000 Readiness. SELLER WARRANTS THAT IN PERFORMING THIS
CONTRACT IT WILL ACCURATELY PROCESS DATE/TIME DATA FROM, INTO, AND BETWEEN
THE TWENTIETH AND TWENTY-FIRST CENTURIES, THE YEARS 1999 AND 2000, AND LEAP
YEAR CALCULATIONS.
Buyer warrants that in performing this contract if will accurately process
date/time data from, into and between the twentieth and twenty -first
centuries, the years 1999 and 2000, and leap year calculations.
XXVIII Attachments. THIS AGREEMENT, TOGETHER WITH THE FOLLOWING EXHIBITS, IS
THE ENTIRE AGREEMENT BETWEEN THE PARTIES:
EXHIBIT A, PRICING
EXHIBIT B, SECURITY REQUIREMENTS
EXHIBIT C, SPECIFICATIONS
EXHIBIT D, GENERAL TECI TERMS AND CONDITIONS
EXHIBIT E, REBATE SCHEDULE
EXHIBIT F, CONTACT PEOPLE
EXHIBIT G, SELLER'S DISASTER RECOVERY PLAN
In the event of any inconsistency between this Agreement and the exhibits,
this Agreement controls.
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In Witness Whereof, THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT AS OF THE
DAY AND YEAR FIRST ABOVE WRITTEN.
SELLER: BUYER:
NORTHSTAR COMPUTER FORMS, INC., TRAVELERS EXPRESS COMPANY, INC.,
A MINNESOTA CORPORATION A MINNESOTA CORPORATION
BY: ___________________________ BY: _______________________
NAME: _________________________ NAME: _____________________
TITLE: ___________________________ TITLE: _______________________
DATE: ___________________________ DATE: _______________________
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SERVICE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this October 15,
1999, by and between U.S. Bancorp-Registered Trademark-, having its principal
place of business at 601 2nd Avenue South, Minneapolis, MN 55402 ("Customer")
and Northstar Computer Forms, Inc., having principal place of business at 7130
Northland Circle North, Brookly Park, MN 55428, ("Supplier"), collectively the
"Parties".
INDUCEMENTS
A WHEREAS, SUPPLIER IS AN EXPERIENCED PROVIDER OF CERTAIN FINANCIAL FORMS
PRODUCTS; AND
WHEREAS, Customer has submitted to Supplier a Request For Proposal dated April
15, 1999 which is attached as Exhibit D (the "RFP") setting forth certain
information regarding (I) services related to the production of Customer's
financial forms printing requirements, (ii) Customer's desire to add value and
to improve its capability for delivering effective business transaction through
such documents, and (iii) certain requirements to fulfill the present and future
needs of Customer over the next two (2) years; and
WHEREAS, based on the results of Supplier's review and analysis of the RFP,
Supplier has prepared and delivered to Customer a Proposal dated May 11, 1999
which is attached as Exhibit E (the "Proposal") setting forth representations
including conclusions, recommendations, and benefits regarding the appropriate
products required to provide Customer with certain financial forms requirements
as specified in the RFP's criteria; and to further provide Customer with the
capability and the flexibility sufficient to handle its current and reasonable
anticipated growth in the next two (2) years in an economical and commercially
reasonable manner; and
WHEREAS, on the basis of the representations contained in Supplier's proposal,
presentations, other printed material, correspondence and in reliance upon the
expertise of Supplier as an experienced provider of certain financial forms
products for companies such as Customer; and
WHEREAS, Customer has a need for such products and desires to have Supplier
provide such products as described herein; and
NOW, THEREFORE, in consideration of the foregoing and the mutual promises set
forth below, the sufficiency of which are hereby acknowledged, the Parties agree
as follows:
1. DEFINITIONS. For the purposes of this Agreement, in addition to the
definitions set forth above, the following terms will be defined as
follows:
a) "Customer" shall include all agents, officers, directors,
representatives and employees of U.S. Bancorp.
b) "Customer Designated Personnel shall include the appropriate
procurement analyst and the document originator.
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c) "MICR Form" shall mean magnetic ink character recognition encoded
financial forms.
d) "Products" shall mean the products to be provided to Customer by
Supplier as described in all Statement of Work Exhibits to this
Agreement or as deemed necessary in order to provide the products
described therein.
e) "Rush Orders" shall mean such orders as identified in all
Statement of Work Exhibits to this Agreement.
f) "Standard Orders" shall mean such orders as identified in all
Statement of Work Exhibits to this Agreement.
g) "Supplier" shall include all agents, officers, directors,
representatives and employees of Northstar Computuer Forms, Inc.
h) "Start-up Date" shall mean January 01,2000-the date the supplier
will begin filling orders.
I) "Performance Standards" shall mean such performance criteria as
defined in all Statement of Work Exhibits to this Agreement.
2. SCOPE OF WORK
a) Supplier shall provide the Products described in any Statement of
Work Exhibits to this Agreement which shall be attached hereto
and incorporated herein by reference (the "Products").
b) Supplier shall take all necessary steps, shall procure, order and
furnish all of the required tools, materials, labor and equipment
to complete all of the Products as described in this Agreement.
c) The Parties agree that all Products provided by Supplier to
Customer during the term of this Agreement shall be provided in
accordance with the provisions of this Agreement, which shall
supersede and take precedence over any contrary or additional
terms stated in Supplier's acknowledgment, invoice or other
document unless the Parties expressly agree by written
modification to this Agreement, signed by the individuals who
executed this Agreement or their respective successors or
superiors, that the provisions of this Agreement shall not apply.
d) Customer will purchase its requirements of the Products from
Supplier. Notwithstanding the foregoing, in the event that
Supplier is unable to perform its obligations under this
Agreement Customer shall have the right to purchase the Products
elsewhere. In addition, in the event of an acquisition by
Customer of another entity Customer will not be obligated to
purchase such entities' requirements of Products from Supplier if
i) such entity is expressly prohibited from purchasing Products
elsewhere, ii) such Products are being purchased under superior
economic terms. In the case of a merger of Customer with another
entity, the surviving entity will not be obligated to purchase
the requirements of the Products of the entity with which it
merged if i) such entity is expressly prohibited from purchasing
Products elsewhere, ii) such Products are being purchased under
superior economic terms. In these instances Customer expressly
reserves the right to request Products from alternate sources
which are identical or similar to the Products described herein.
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e) Supplier will furnish Customer, in a timely manner, any and all
information and materials that Customer may from time to time,
request in connection with all matters contemplated by this
Agreement. Supplier warrants and represents that it is a
corporation in good standing and duly authorized to do business
and perform its obligations under this Agreement. Supplier will
comply with all applicable federal, state and local laws.
3. TERM
Subject to the rights of termination provided for elsewhere herein, the initial
term of this Agreement will be for a period commencing January 01, 2000 and
remaining in full force and effect through December 31, 2001, inclusive, at
which time it shall automatically renew for one (1) year renewal periods until
Customer or Supplier provides written notice of termination to the other party
no later than one-hundred twenty (120) days prior to the end of the original
term or any renewal period.
4. TERMINATION
a) Customer may terminate this Agreement immediately, in whole or in
part, in the event Supplier:
i) upon thirty (30) days prior written notice from Customer to
Supplier of a breach by Supplier in the performance of its
respective obligations under this Agreement, which breach is
not cured or a plan for cure is not accepted in writing by
nondefaulting party within such thirty (30) days.
ii) upon the happening of any event or condition which may, in
Customer's good faith judgment, impair Supplier's ability to
perform hereunder, Customer may demand, in writing, adequate
assurance of Supplier's ability to continue performance of
this Agreement. If Supplier does not provide adequate
written assurance within forty-eight (48) hours of receipt
of Customer's demand, Supplier shall be deemed to have
rejected continued performance hereunder and to have
materially breached this Agreement. In such event, Customer
shall have no further liability hereunder.
b) Either party may terminate this Agreement at any time after the
filing of any petition of bankruptcy or for reorganization or debt
consolidation under the federal bankruptcy laws or under any
comparable law by or against the other party, or upon the other
party's making of an assignment of any of its assets for the
benefit of creditors, or upon the application by the other party
for the appointment of a receiver or trustee of its assets.
c) Customer may terminate this Agreement at any time in the event
Supplier is acquired by a third party. Customer may also terminate
this Agreement in the event Supplier is merged with a third party
in which either Supplier is not the surviving entity of the merger
or Senior Management of the Supplier does not remain the Senior
Management of the surviving entity after the merger. Customer may
also terminate this Agreement if Supplier forms an alliance with an
unrelated third party that performs services and/or sells products
similar to those of Customer or that is considered a competitor of
Customer. In anysuch an event, Customer shall provide Supplier
notice of its intention to terminate
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this Agreement in writing at least one-hundred twenty (120) days
prior to the date of such termination.
d) Customer may, at its sole and complete discretion, terminate this
Agreement at any time in the event Customer is acquired by a third
party organization. In addition, in the event of an acquisition by
Customer of another entity Customer will not be obligated to
purchase such entities requirements of Products from Supplier if
i) such entity is expressly prohibited from purchasing Products
elsewhere, ii) such Products are being purchased under superior
economic terms. In the case of a merger of Customer with another
entity, the surviving entity will not be obligated to purchase the
requirements of the Products of the entity with which it merged if
i) such entity is expressly prohibited from purchasing Products
elsewhere, ii) such Products are being purchased under superior
economic terms. In such an event, Customer shall provide Supplier
notice of its intention to terminate this Agreement in writing at
least one-hundred twenty (120) days prior to the date of such
termination.
e) In the event of termination pursuant to Section 4.b, Customer's
sole responsibility to Supplier shall be to purchase within ninety
(90) days of termination of this Agreement, any inventory of the
Products so long as the inventory of Products meets all of the
following criteria:
i) The Products are in compliance with all quality standards;
ii) The inventory of Products is not in excess of any quantities
approved in writing by Customer to be produced and entered
into inventory.
f) In the event of termination pursuant to Section 3, 4.a.,, 4.c.,
4.d. . Customer's sole responsibility to Supplier shall be to
purchase within ninety (90) days of termination of this Agreement,
any inventory of the Products so long as the inventory of Products
meets all of the following criteria:
i) The Products are in compliance with all quality standards;
The inventory of Products is not in excess of any quantities
approved in writing by Customer to be produced and entered
into inventory.
g) In the event of termination pursuant to Section 3, 4.a., 4.b.,
4.c., 4.d. . Supplier's responsibilities to Customer shall
include, but not be limited to, the following:
i) Supplier shall continue to provide Services to Customer in a
professional and businesslike manner as described herein and
in accordance with the Performance Standards contained herein
until the termination date.
ii) Supplier shall use its best efforts provide to Customer all
information and data regarding the provision and management of
the Services in a timely manner and in a format and upon such
media as requested by Customer.
iii) Supplier shall use its best efforts to cooperate fully with
Customer and any alternative supplier which may be a
successor to Supplier in performing the Services for
Customer.
iv) Supplier shall stop work on the termination date of the
Agreement or before, if mutually agreed upon by both Parties.
5. PRICING
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a) Except as expressly provided for herein, prices shall remain firm
throughout the initiall term of this Agreement pursuant to the pricing
identified in Exhibit B and incorporated herein by reference.
b) Notwithstanding the foregoing, if pricing for raw materials for the
Products of the nature contemplated herein is increased/decreased by
more than 10% throughout the term of this Agreement, Supplier and
Customer shall negotiate in good faith an increase/reduction in
pricing in this Agreement. Supplier is limited to exercising this
option to two (2) times per year after the first 12 (twelve) months
of the Agreement effective date. It is agreed that prices will never
increase in aggregate more than 15% during the initial term of this
Agreement. Per Section 15, Customer has the right to perform an audit
and require sufficient evidence of Supplier's increased cost of raw
materials.
c) Prices for renewal periods shall be as mutually agreed upon by the
parties which agreement must be reached no less than one hundred
thirty (130) days prior to the end of the initial term or the current
renewal period.
d) In the event Customer acquires a third party that has an existing
agreement with Supplier to provide substantially the same Products or
a portion thereof, the most favorable clauses from Customer's
perspective in either this Agreement or the acquired entity's
agreement shall become part of a new Agreement. In no way shall the
resulting terms and conditions be more onerous to either party than
the original terms and conditions for the same type, frequency and
quality of products in either Agreement.
e) Supplier shall pay to Customer on a quarterly basis 2.5% of the
previous quarter's sales. In the event Customer's purchases during
the first year of the contract or any subsequent year exceed two
million five hundred thousand dollars ($2,500,000.00), subsequent to
paper price increase pursuant to 5b, Supplier shall pay to Customer at
the end of each contract year or subsequent year, an amount equal to
0.5% of Customer's purchases for such year which are in excess of two
million five hundred thousand dollars ($2,500,000.00), pursuant to
Section 3 renewal prices will increase proportionately due to paper
price increases negotiated by both parties. All such payment shall be
made in the form of a check and received by Customer no later than the
tenth (10th) business day of each quarter. Upon the termination of
this Agreement, any such refund due and owing Customer at the
termination of this Agreement shall survive the termination of this
Agreement so long as Customer's total purchases during the term of
this Agreement were in excess of $2,500,000.00. Accordingly,
Supplier's obligation to pay the 2.5% refund shall apply to Products
purchased pursuant to this Agreement after termination of this
Agreement so long as Customer's total purchases during the term of
this Agreement were in excess of $2,500,000.00.
6. SALES TAX.
Supplier shall collect, report and remit all applicable local, county and state
sales and use taxes assessed on all sales of products made pursuant to this
Agreement. Customer agrees to reimburse
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Supplier for all such taxes, except any taxes based on the income of the
Supplier, so long as such amounts are included in the normal billing process.
7. INVOICING
a) Supplier shall submit charges for all Products plus any allowable
shipping charges and sales and/or use taxes via Visa-Registered
Trademark- account numbers provided by Customer to Supplier for
each company/cost center receiving Products. Such charges shall
not be submitted until Product has shipped to Customer. Supplier
shall submit such charges to Visa-Registered Trademark- at least
monthly for all charges for that month. Supplier shall not
prepare or submit paper invoices to Customer unless otherwise
agreed upon in writing by Customer. The service fee and/or
discount amounts, if any, associated with billing Visa-Registered
Trademark- accounts are not reimbursable to Supplier by Customer
but rather have already been acknowledged by Supplier and
included in the pricing agreed upon in this Agreement. If
Customer disputes any charges Supplier has submitted to
Visa-Registered Trademark-, such issues shall be resolved to the
mutual agreement of Customer and Supplier and any corrective
transactions shall occur during the next billing cycle. In the
event the Visa-Registered Trademark- system is not available for
charging and collection of fees, for no fault of Supplier,
Supplier shall submit standard invoices for the billable
activities at the same frequency as noted above and Customer
shall pay such undisputed invoices within thirty (30) days of
receipt thereof.
b) In no event, shall any charges be due and owing by Customer when
such charges are for Products provided more than ninety (90) days
prior to the submission of charges to VISA-Registered Trademark-
or receipt of invoice by Customer. In the event Supplier
identifies charges which are for Products provided more than
ninety (90) days prior to the current date and for which no
VISA-Registered Trademark- charges were submitted and for which
no invoice was submitted to Customer, notwithstanding any other
provisions of this Agreement, Supplier shall waive all such
charges and Customer shall have no obligation to pay such
charges.
8. PERFORMANCE.
If Supplier does not provide the Products on or before the time specified or
within the performance standards stated here in at least ninety-two (92)
percent of the time for two consecutive months, Customer reserves the right,
subject to paragraph 4.a.i., to terminate the entire Agreement or any part
thereof, and to purchase the Products elsewhere. In such event, Supplier shall
pay to Customer an amount equal to the five percent (5%) of the total charges
for the previous month. Supplier shall not make any material commitment or
production arrangement in excess of the amounts necessary to meet the
performance schedule for Products covered by this Agreement. Any excess
commitments or arrangements without Customer approval shall be made at
Supplier's own risk and Customer will not be liable for payment of such
Products.
9. INSPECTION AND ACCEPTANCE
All Products produced pursuant to this Agreement shall exceed existing and
prospective ANSI/ABA standards for printing of such financial forms, including
but not limited to, MICR documents. All Products shall be subject to inspection
and acceptance by Customer when
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Product is used by Customer. Customer shall have the right to reject and have
defective Products replaced. Such defective Products shall be replaced with
acceptable Products, at Supplier's sole expense within five (5) business days
of notification to Supplier by Customer, however, the quantity of such
replacement Product replaced within the five (5) day period shall not be
greater than Supplier's equipment physical capacities. Any remaining
replacement Products, if any, shall be produced as quickly as possible by
Supplier.
10. EMPLOYMENT TAXES AND BENEFITS
To the extent required under applicable law, Supplier shall report as income all
compensation received by Supplier pursuant to this Agreement and pay all taxes
due on such compensation. Supplier shall indemnify and hold harmless Customer
and its employees, officers, directors, representatives and agents, and their
respective heirs, personal representatives, successors and assigns, from any and
all claims, actions, causes of action, demands, liability, losses, costs and
expenses (including court costs and reasonable fees of attorneys and other
professionals) arising from any obligation imposed on Customer to pay any
withholding taxes, social security, unemployment insurance, workers'
compensation insurance, disability insurance or similar items, including
interest and penalties therefrom, in connection with any payments made to
Supplier by Customer pursuant to this Agreement.
11. DATA/INFORMATION OWNERSHIP
All data, information, reports, and records created as a result of the provision
of Products by Supplier under this Agreement shall be deemed property of
Customer including any ideas generated by Customer or Customer and Supplier but
as may be carried out and/or implemented by Supplier during its provision of
Products hereunder so long as such information is unique or proprietary to the
Customer or the Customer's operations. Ideas generated jointly by Supplier and
Customer which simply relate to efficiencies and cost savings with respect to
the provision of products shall be deemed part of the public domain and Supplier
shall be free to use such information with the understanding that Supplier will
also share with Customer such general information regarding efficiencies and
cost savings that it learns or develops from its relationship with other of
Supplier's customers. Supplier agrees to, and hereby grants, conveys, and
assigns to Customer, all ownership rights to any such proprietary ideas, data,
information, reports, and records to Customer. The data, information, reports
and records shall be the sole and exclusive property of Customer and Customer
shall own all rights therein, including without limitation, the copyright
therein, throughout the world. Supplier may not publish or in any way disclose
or use the data collected under this agreement without the prior written
approval of Customer.
12. DATA/INFORMATION EXCHANGE
Throughout the term of this Agreement, any and all hardware and software
applications where the resulting files and information created or stored by such
application is intended to be shared and/or transferred between the Parties will
be in compliance with and/or compatible to Customer's systems, hardware and
software applications. Such applications include, but are not limited to,
e-mail, word processing, spreadsheet, database and others.
13. REPRESENTATIONS AND WARRANTIES
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a) The Parties represent to each other that each party has all
necessary right, title, license and authority to enter into this
Agreement, and the persons signing this Agreement have full
authority to bind the respective parties they represent to the
terms and conditions hereof. The Parties represent that each:
i) is within its authorized powers;
ii) has been duly authorized by all necessary board and
management action;
iii) is not currently in violation and will not violate any
provision of its articles of incorporation; articles of
association or by-laws, or any amendment thereof; and
iv) is not currently in violation of and will not take any
action or fail to take any action which would constitute or
result in a violation or breach under, or conflict with, any
local, state, and/or federal statutes or other laws, any
orders or rulings of any court or tribunal, or any rules or
regulations thereof; and
v) is not currently in violation of and will not violate any
provision of, nor constitute or result in, a violation or
default under, or conflict with, any indenture , contract,
agreement, lease, instrument or other undertaking to which
it is a party or by which it or any of its properties or
assets may be bound or affected.
b) Supplier represents that it is not a party to any pending
litigation the resolution of which is reasonably likely to affect
adversely the ability of Customer or Supplier to fully perform
their respective obligations hereunder, nor is any such
litigation reasonably contemplated. Supplier agrees to inform
Customer in the event any such litigation occurs or becomes
reasonably contemplated during the Term of the Agreement.
c) Throughout the term of this Agreement and any applicable statute
of limitations thereafter, Supplier hereby
i) indemnifies and holds harmless Customer from and against all
loss or damage arising out of or in connection with the
breach of the foregoing representations, and
ii agrees on notice from Customer to promptly remedy and cure
any such breach at the sole cost and expense of Supplier.
d) Supplier warrants that the work performed hereunder does not
and will not infringe any third party patent, copyright,
trademark, trade secret or other proprietary right ("Intellectual
Property"). Supplier agrees to defend, indemnify and hold
harmless Customer, its officers, directors, employees, agents and
affiliates from all liabilities, obligations, costs and expenses
(including reasonable attorneys' fees and costs), claims or
demands for actual or alleged infringement of any Intellectual
Property arising from the purchase, use or sale of goods required
by this Agreement, except to the extent that infringement or
alleged infringement arises by reason of design for such work
furnished to Supplier by Customer.
e) Supplier agrees to treat Customer as a "Most Favored
Customer." Supplier represents that any fees, costs, or expenses
charged to Customer are, and will continue to be, equal to, or
better than, the fees, costs, or expenses
8
<PAGE>
charged to similar customers for similar Products. If requested
by Customer, Supplier shall submit documentation to Customer's
reasonable satisfaction, of Supplier's compliance hereto. If
non-compliance is discovered, a penalty as follows will become
due and owing to the Customer:
i. the amount calculated as the difference between Customer
pricing and any reduced pricing, applied retroactively to
the date of any lower fees, costs, or expenses,
ii. any expenses incurred by Customer in determining compliance
hereto, and
iii. an additional 5% of any difference calculated.
f) Supplier shall comply with all Customer's brand identity
standards as identified in the Graphic Standards Manual provided
by Customer. Customer shall be responsible for ensuring that all
subsequent updates to this manual are distributed to the Supplier
in a timely manner.
14.YEAR 2000 COMPLIANCE
a) Definitions. As used in this Section, these terms shall
have the following meaning:
i) "Products" means products which Supplier provides to
Customer.
ii) "Program" means Supplier's program to ensure that the
Products and Systems are or become Year 2000 Compliant by
assessing and remediating Year 2000 issues associated with
the Products and Systems, including functions provided by
third parties.
iii) "Systems" means Supplier's computer systems and
equipment and such systems maintained by Supplier's third
party service providers which are material to Supplier's
performance of this Agreement.
iv) "Year 2000 Compliant" means that the Products and
Systems:
a) will function accurately, completely, without
error, and without interruption before, during, and
after January 1, 2000 (including, without limitation,
on the "Critical Test Dates" listed in the FFIEC
Interagency Statement dated April 10, 1998), without
any change in operations associated with the year 2000
and any leap years,
b) will process all information before, during and
after January 1, 2000, including, but not limited to
accepting date input, providing date output, and
performing accurate calculations involving dates or
portions of dates,
c) will respond to two digit year dates in a way that
resolves the ambiguity as to century in a disclosed,
defined, and predetermined manner, and
d) will store and provide output of date information
in ways that are unambiguous as to century.
b) Commitments. Supplier represents and warrants that the
Products and Systems are Year 2000 Compliant except where lack of
compliance will not have a
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<PAGE>
material adverse effect on performance of this Agreement.
Customer may test the Products and Systems using such tests as
Customer reasonably requires in Customer's sole discretion, and
if Customer does so Supplier will cooperate with Customer in
such testing, including in scheduling such tests during periods
which are convenient for Customer and in making Supplier's
resources available for such tests. Upon five (5) days advance
written notice to Supplier, Supplier shall allow Customer and
Customer's agents to inspect and conduct an audit of the
Program. Any actions or omissions by Customer under this
Section shall not relieve Supplier of any responsibility or
liability under this Agreement. Any breach by Supplier arising
under this Section is a default under this Agreement and shall
allow Customer to immediately terminate this Agreement, obtain
reimbursement for any amounts paid by Customer to Supplier but
not earned by Supplier's performance, and exercise any other
remedies permitted by law or this Agreement.
c). Reports. Supplier must immediately notify Customer in
writing if Supplier becomes aware of facts or circumstances that
may adversely affect Supplier's obligations under this Section,
in order that Customer and Supplier may make mutually agreed upon
contingency plans. Also, as reasonably requested by the
Customer, Supplier will promptly deliver to Customer in writing
information pertaining to this Section, including without
limitation a complete description of the Program and any changes,
updates, or amendment thereto, copies of any assessments, audits,
or public statements concerning the Program, costs data and
estimates concerning the Program, and Supplier's contingency
plans in the event the Program fails.
d) Supplier agrees to provide adequate and reasonable staffing
levels on December 31, 1999, January 1, 2000 and January 2, 2000
and also to have additional staff prepared and on call to work on
a twenty-four hour basis during those days in the event it
becomes necessary due to unforeseen and unplanned events
resulting from the change in year date regardless of whether such
an event is related to Supplier's Products, Systems or Products
or Customer's system or products.
15. RIGHT TO AUDIT
Customer will have the right at all times during the term of this Agreement and
for twelve (12) months after termination of the Agreement to audit the books,
records, information, personnel, facilities and operations of Supplier insofar
as may be necessary or desirable, in Customer's judgment, to determine
Supplier's compliance with the terms and conditions of this Agreement and with
any applicable laws and regulations. Such information shall be accessed without
breaching the confidentiality that Supplier may have with other parties. In
such an event, Customer will accept redacted information that has been gathered
by a third party auditor. Customer and Customer's independent auditors will have
access, no more than once every six months, unless Customer has reasonable
business purposes for doing so, to Supplier's books, records and operations at
all reasonable times, with at least 24 hours prior notice and Supplier agrees to
cooperate in all respects necessary to enable Customer and its independent
auditors to carry out the intent and purposes of this section. Customer and its
representatives must comply with all reasonable security and confidentiality
procedures established by Supplier at any facility to which access is granted,
and
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<PAGE>
audits or inspections will not unreasonably interfere with Supplier's normal
business operation. Supplier agrees to provide Customer, upon written request,
a copy of Supplier's annual audit results of its products.
16. LIMITATION OF LIABILITY.
a) Supplier's liability hereunder for any claim of whatever nature
shall be limited to:
i) a maximum of the insurance amounts stated in Section 22 of
the Agreement if such claim is covered by insurance;
ii) a maximum aggregate limit of two million dollars
($2,000,000.00) if such claim is not covered by insurance
and such claim is for or relating to the provision of
Products under this Agreement;
iii) a maximum per occurrence limit of five hundred thousand
dollars ($500,000.00) if such claim is not covered by
insurance.
17. INDEMNIFICATION BY SUPPLIER.
Notwithstanding any provisions herein to the contrary, but subject to the limits
of liability set forth in Section 16 above, Supplier does hereby agree to
indemnify and hold Customer harmless from all losses, claims of losses, damages,
fines, costs and expenses (including without limitation court costs and
attorneys' fees) ("Losses") incurred by Customer or asserted against Customer by
third parties and directly and proximately caused by the negligent acts or
omissions or misconduct or breach of this Agreement by Supplier, its officers,
agents, employees, or authorized representatives. Subject to the limitations of
liability set forth in Section 16 above, this indemnification provision
includes, but is not limited to Losses relating to the following matters:
a) Any loss relating to or arising out of the installation,
maintenance, or operation of equipment at Customer's facilities
by Supplier;
b) Any Losses arising out of the hiring, termination, supervision,
and maintenance of Supplier's employees, including, but not
limited to, claims that Customer is an employer or co-employer
of any of Supplier's employees, agents, or authorized
representatives. Indemnification under this Section 17.b. shall
be unlimited in dollar amount except to the extent any such
Losses are caused by the acts or omissions of Customer
18. INDEMNIFICATION BY CUSTOMER
Customer will indemnify Supplier and hold Supplier harmless from any action or
claim and will defend at its expense any action brought against Supplier to the
extent that it is based on a claim that materials provided by Customer to
Supplier infringe a United States patent or copyright or the trade secret or
other proprietary rights of a third party ("Infringement"). Customer will pay
any costs, direct damages, and reasonable attorneys' fees finally awarded
against Supplier in such action which are attributable to such claim, provided
that Supplier notifies Customer promptly in writing of the claim and Customer
may fully participate in the defense and/or agrees to any settlement of such
claim.
19. DEFAULT AND REMEDIES.
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Subject to Section 17 above in the event that Supplier or any of its
Representatives breach the covenants contained in this Agreement or in the event
of the occurrence of an event entitling Customer to indemnification, Supplier
recognizes that irreparable injury will result to Customer or third parties and
that Customer's remedy at law for damages will be inadequate. In such event,
Customer shall further be entitled to recover from Supplier:
a) actual damages to Customer or its directors, officers,
employees or agents;
b) any costs, losses or damages associated with any claims by
third parties against
Customer;
c) reasonable attorneys' and other professionals' fees and
all other costs and expenses incurred in connection
with the enforcement of this Agreement, and any
other rights and remedies which Customer may have
at law or in equity.
CONFIDENTIALITY
a) DEFINITION OF CONFIDENTIAL INFORMATION. The term "Confidential
Information" as used in this Agreement, shall include all
confidential commercial or financial information of Customer or
its affiliates, now in existence or hereafter created, including
without limitation, the following:
i) All customer related information of the Customer, including,
but not limited to, customer account numbers and account
balances;
ii) All information marked as "confidential" or with similar
designation;
iii) All information protected by rights embodied in copyrights,
whether registered or unregistered, patents or pending
patent applications, "know how," trade secrets, and any
other intellectual property rights of Customer, and
iv) All proprietary business, financial or technical information
of Customer or its affiliates and any of their respective
customers or vendors (including, but not limited to account
numbers, general ledger numbers and software licensed from
third parties or owned by Customer).
b) EXCLUSION TO CONFIDENTIAL INFORMATION. Notwithstanding the
foregoing, the term "Confidential Information" shall not include
any portion of such information which Supplier can establish by
clear and convincing evidence to have become publicly known
without breach of an Agreement.
c) USE OF CONFIDENTIAL INFORMATION. Supplier may use the
Confidential Information only for the purpose of rendering the
Products to Customer. Unless otherwise agreed to in writing
between Customer and Supplier, from and after the date of this
Agreement, Supplier shall:
i) not reproduce, copy, duplicate, divulge or use any
Confidential Information, or allow any Confidential
Information to be reproduced, copied, duplicated, divulged
or used, except as expressly permitted above;
ii) require that all persons, employees, agents, partners,
consultants, contractors, representatives and any other
third parties (collectively, the "Representatives") who are
permitted access to any Confidential
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Information to agree to assume all of the same obligations
regarding the protection of the Confidential Information
assumed by Supplier under this Agreement; and
iii) keep all Confidential Information in a physically secure
place which will prevent anyone, except the Representatives
who are permitted access to the Confidential Information to
satisfy the purposes of this Agreement, from using or
disclosing any Confidential Information.
d) DEFAULT AND REMEDIES. In the event that Supplier or any of its
officers, agents, employees, or representatives breaches the
covenants contained in this section, Supplier recognizes that
irreparable injury will result to Customer or third parties
entrusting Confidential Information to Customer, that Customer's
remedy at law for damages will be inadequate, and that Customer
will be entitled to an injunction to restraint by continuing
breach by Supplier and Supplier's Representatives, or any other
persons or entities acting for or with Supplier. In such event,
Customer shall further be entitled to recover from Supplier:
i) actual damages to Customer or its directors, officers,
employees or agents;
ii) any costs, losses or damages associated with any claims by
third parties against Customer;
reasonable attorneys' and other professionals' fees and all other
costs and expenses incurred in connection with the
enforcement of this Agreement, and any other rights and
remedies which Customer may have at law or in equity.
21. DISASTER RECOVERY.
Supplier shall establish, maintain and test from time to time, but not less than
annually, a disaster recovery plan, and if necessary, shall implement the
provisions thereof applicable to any Supplier site at which the Products
contemplated by this Agreement are then being performed. Such plan will include
details pertaining to Supplier's alternative production and/or distribution
facilities in order for Supplier to be operating as near normal as possible but
not less than twenty four (24) hours from the time of the disaster. Supplier
shall make such disaster recovery plan available to Customer for Customer's
review at any time as requested by Customer. If, for any reason, the Supplier's
disaster recovery plan is implemented, the implementation of such plan shall be
at no cost or expense to Customer.
22. ACCOUNTING PRINCIPLES.
Where the character or amount of any item of income, revenue, costs, expenses
or similar monetary calculation is required to be determined or other accounting
computation is required to be made for purposes of this Agreement, this will be
done in accordance with generally accepted accounting principles consistently
applied. The provision of this section will survive any termination of this
Agreement.
23. INSURANCE.
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Supplier agrees to maintain the following indicated types and levels of
insurance during the term of this Agreement with carriers that maintain:
a) Workers' compensation and employers liability insurance and to
the extent required by law covering all persons employed by
Supplier in performance of Products to be rendered under this
Agreement;
b) Public liability insurance with broad form coverage covering,
liability for bodily and personal injury, damage to property,
false arrest, false imprisonment, malicious prosecution,
defamation, liable, slander, legal liability caused by any act of
Supplier or its employees or agents, and contractual liability
coverage. The amount of this insurance must not be less than the
amount reasonably prudent and necessary to carry out Supplier's
obligations under this Agreement but in no event less than $1
million per occurrence plus an $2 million umbrella policy for a
total aggregate limit of not less than $3 million.
c) After execution of this Agreement and before beginning work under
this Agreement, Supplier will deliver to Customer and attach to
this Agreement as Exhibit C a Certificate of Insurance showing
the coverage specified above, which names Customer as an
additional insured, and which provides a thirty (30) day notice
period for cancellation or reduction in coverage or limits.
d) Fidelity bonding of at least $1,000,000 aggregate for claims
arising from fraudulent or dishonest acts, thefts or other acts,
covered by its Fidelity Bond, on the part of Supplier or its
officers, agents, employees, or representatives.
e) Errors and Omissions insurance of at least $2,000,000 per
occurrence.
c) Supplier will immediately notify Customer in the event any
insurance required under this section is not in force at any
time during the term of this Agreement. Supplier will not take
any action that would invalidate or reduce coverage and will
take all action necessary to prevent coverage from being
invalidated or reduced.
24. FORCE MAJEURE.
Neither party shall be liable for performing service where cause for such
failure to perform service is directly or indirectly beyond the control of such
party. Any delay hereunder will be excused to the extent approved in writing by
the other party. Neither party will be considered to have breached its
obligations under this Agreement as a consequence of delays or failures in
performance resulting from occurrences beyond the parties control, provided the
party has taken reasonable measures to prevent loss from any such reasonably
foreseeable occurrence. Such occurrence will include, without limitation; acts
of God; riots; acts of war; epidemics; governmental regulations imposed after
the fact; earthquakes or other disasters; provided that written notice thereof
must be given by such party to the other party within three (3) days of the
occurrence of such cause or event, and best efforts are made to restore
performance to its obligations under this Agreement or delay will be considered
a breach of the Agreement. In the event the Force Majeure event causes a delay
that lasts more than five (5) business days, Customer has the right to
terminate this Agreement without further obligation, financial or otherwise,
except for non-financial obligations which expressly survive the termination of
this Agreement. In addition, Supplier shall return any monies paid by Customer
for products or services not delivered.
25. WAIVER.
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Failure of either party to complain of any act or omission of the other party,
no matter how long the same may continue, shall not be deemed to be a waiver by
such party of any of its rights hereunder. No waiver by any party at any time
of any other provision of this Agreement shall be deemed a waiver or breach of
any other provision of this Agreement or consent to any subsequent breach of the
same of any other provision hereunder. If any act or omission by any party
shall require the consent or approval of another party, such consent or approval
of such act or omission on any one occasion shall not be deemed a consent to or
approval of said act or omission on any subsequent occasion or consent to or
approval of any other act or omission on the same or any subsequent occasion.
Waiver of any rights or remedies must be in a signed writing by the waiving
party.
26. SEVERABILITY.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws effective during the term hereof,
such provision shall be fully severable; this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof; and the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of each such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
27. GOVERNING LAW.
This Agreement will be construed and enforced in accordance with and governed
by the substantive laws of the state of Minnesota; provided, that laws regarding
conflicts of laws will not defeat application of the substantive laws of the
state of Minnesota. The provisions of this section will survive any termination
of this Agreement.
28. JURISDICTION.
Supplier hereby irrevocably submits to the nonexclusive jurisdiction of any
court of the State of Minnesota or the United States of America sitting in
Minneapolis, Minnesota, in any action or proceeding arising out of or relating
to this Agreement, and the Supplier hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in any such
court. Supplier hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding.
29. ASSIGNMENT.
Neither party may assign this Agreement without the prior written consent of
the other, and any non-approved attempted assignment shall be null and void,
except that Customer may assign this Agreement without such approval to any
parent, subsidiary or affiliate. This Agreement shall be binding upon, and inure
to benefit of, the successors and permitted assigns of the parties hereto.
30.USE OF NAME.
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Except as otherwise required by law, Supplier agrees not to refer to Customer
directly or indirectly in any promotion or advertisement, any metatag, any news
release or release to any general or trade publication or any other media,
without the prior written consent of Customer, which consent may be withheld at
Customer's sole and complete discretion.
31. RELATIONSHIP OF THE PARTIES.
No joint venture, partnership, agency, employment relationship or other joint
enterprise is contemplated by this Agreement. No employee or representative of
Supplier shall be considered an employee of Customer. Supplier shall take all
actions and do all things which are necessary ensure that it has complied with
all laws respecting its position as provider of the Products pursuant to this
Agreement. In making and performing this Agreement, the Parties shall act at
all times as independent contractors, and at no time shall either party make any
commitments or incur any charges or expenses for or in the name of the other
party.
32. NOTICES.
Any notice permitted or required by this Agreement must be in writing and shall
be deemed given when sent by registered or certified mail, return receipt
requested, or overnight delivery and addressed as follows:
<TABLE>
<S> <C>
If to Supplier: (insert information)
If to Customer: U.S. Bancorp-Registered Trademark-
MNRB0175/Contract Services
2751 Shepard Road
St. Paul, MN 55116
</TABLE>
33. COUNTERPARTS.
This Agreement may be executed simultaneously in multiple counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
34. HEADINGS.
The paragraph headings contained in this Agreement are for convenient reference
only, and shall not in any way affect the meaning or interpretation of this
Agreement.
35. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the Parties with respect to
the subject matter hereof and supersedes all prior agreements relating thereto,
written or oral, between the Parties. Amendments to this Agreement must be in
writing, signed by the duly authorized agents of the Parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement the date
first above written.
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<TABLE>
<CAPTION>
U.S. Bancorp-Registered Trademark- (INSERT INFORMATION)
<S> <C>
__________________________________ _____________________________
Signature Signature
__________________________________ _____________________________
By: Name By: Name
__________________________________ _____________________________
Its: Title Its: Title
__________________________________ _____________________________
Date Date
</TABLE>
17
<PAGE>
EXHIBIT A
STATEMENT OF WORK
SUPPLIER AGREES TO PROVIDE PRODUCTS TO CUSTOMER IN ACCORDANCE WITH THE
PERFORMANCE STANDARDS DESCRIBED IN THE STATEMENT OF WORK ATTACHED HERETO
AND MADE PART OF THE AGREEMENT AND INCORPORATED HEREIN AS EXHIBIT A.
Services to be provided:
CHANGES TO THE STATEMENT OF WORK
- - The Statement of Work may not be changed or amended except by an agreement
in writing signed by the parties hereto.
BUSINESS CONTINUATION AND RECOVERY
- - Supplier will maintain a viable Business Continuation Plan throughout the
term of this agreement in conjunction with Customer's corporate Business
Continuation Plan, which will contain planning for uninterrupted service
during work stoppages longer than six (6) hours, of Supplier's provision of
Services to Customer.
- - Supplier will maintain a viable Business Recovery Plan throughout term of
this agreement in conjunction with Customer's corporate Business Recovery
Plan, which will provide for business resumption and continuation of
service within twenty-four (24) hours of such occurrence.
IMPLEMENTATION
- - Supplier shall, timely complete all tasks, included but not limited to, the
Implementation plan set forth in Attachment A.
- - In the event such task will not be completed on the date noted in the
Implementation plan, Supplier shall notify Customer on such date, in
writing and Customer, in it's sole discretion, shall advise if the delay is
acceptable or unacceptable to Customer.
- - In the event that such delay is acceptable to Customer, in writing,
Supplier and Customer shall mutually agree to a new date, for the task to
be completed.
- - In the event that such delay is unacceptable, Supplier shall be responsible
for all additional costs associated with, Customer having the Products
provided by alternative sources plus such costs incorporated as a result of
such provision of alternative sources.
PACKAGING OF PRODUCTS
Suppliers responsibility shall be, including but not limited to:
- Provide packaging to facilitate the handling of product from one point
to another. Sufficient packaging methodology used must be compatible
with the physical facilities of the receiving location to ensure
receipt of product in an unaltered condition.
- Batch, Block and Tracer tickets packaged in cartons that will prevent
curl to the product. Customer, in it's sole discretion, may required
these product to be shrink wrapped, if requested by Customer.
18
<PAGE>
- Package Products using pallets that comply with recommended guidelines
for standard pallet size of 40" x 48" with no overhang. The maximum
height is 48". Plastic shrink-wrap must be used for protection and to
fasten the load to the pallet.
- Package Official Receipts such that inner cartons contain 2500
receipts and a total of 20,000 Official Receipts will be in a carton.
- When shipping negotiable documents, ensure product name is not
identified on the outside of the carton, when packaging product.
- Delivery of Products that are sequentially numbered must be packaged
in a manner that will keep items in the sequential order during
shipping.
- Establish parameters, upon mutual agreement, for packaging
requirements on all Products and have procedures within 60 days after
execution of the agreement.
ORDERING PROCESS
- - Supplier shall accept orders on Customer's purchase requisition form unless
both Supplier and Customer mutually agree upon an alternative process for
efficient ordering.
- - Supplier shall provide toll free fax number, at no charge to the Customer,
for requisitions.
PRODUCTION
- - Supplier and Customer shall establish approved quantities for printing
Products that are cost effective for Customer, within 30 days after
execution of the agreement.
- - Supplier shall not print quantities outside established parameter without
written approval from Customer. If approval for Product outside parameters
is not received in writing, cost of Product will be refunded to Customer.
RELEASE QUANTITIES
- - Supplier and Customer shall establish quantities for release of Products
from warehouse, within 30 days after execution of the agreement. These
parameters will vary according to product and will be released in
quantities that are cost effective for Customer.
- - Any Product released outside the set parameters must receive approval from
Customer. If Supplier has released Product that is not in compliance with
such parameters, the cost of Product will be refunded to Customer and
unused product returned to Supplier..
WAREHOUSED PRODUCTS
Suppliers responsibility shall be, including but not limited to:
- Supplier will warehouse certain products per Customer's request.
These products will be billed upon release. Such Products will not
exceed a three-month usage level.
- Supplier will notify Customer when an individual Product on-hand
inventory level reaches a 6-week supply based on usage levels during
the most previous six month period.
- Re-order notice will include a summary of the most recent 12-month
usage history of Product.
- No Product will be replenished without prior written approval by
Customer designated personnel
19
<PAGE>
- All negotiable instruments will be stored in a secure, locked area
with limited access by mutually approved personnel.
- Provide Customer access upon demand for unannounced random audits of
warehousing locations.
- Provide quarterly, audit of all Products held in warehouse.
Adjustments to inventory levels shall be reported to Customer within
forty-eight (48) hours of such audit. Accuracy level must be
maintained at 90%.
- All warehouse locations shall be secured; climate controlled, and
reasonable and prudent measures are taken to ensure risk against
rodent, fire and water damage.
- Supplier shall assume ownership of all Products until such Products
are released from Supplier inventory and shipped to Customer.
NON-STOCK PRODUCTS
- - Any item not included on the product list in Exhibit B, must be approved in
writing by Customer's Designated Personnel, for pricing and product
requirements prior to manufacturing. Product sold without such prior
written Customer approval will be fully refunded to Customer.
Production Time
Suppliers responsibility shall be, including but not limited to:
- Release and shipment of Product from Warehouse for shipment within 24
hours from receipt of requisition.
- Print on Demand Production ("PODP") will within ten (10) business days
of receipt of requisition, except for PODP orders for bank conversion
purposes only which shall be shipped before a deadline specified by
Customer.
- Exact reprints on warehoused Product not to exceed 45 business days
upon written approval by Customer.
Any order that requires fulfillment outside the above mentioned time frames
(Standard Order) will be considered a Rush Order and will be accepted on an
individualized priority basis at no additional cost to the Customer so long
as the quantity of Rush Orders does not exceed four percent (4%) of the
total number of orders per month. If Customer's Rush Orders exceed four
percent (4%) of Customer's total orders for the month, Customer's price for
any such Rush Orders shall incur a Rush Order penalty fee of thirty percent
(30%) of the order total. Any such Rush Order penalty fees shall be
deducted from Customer's quarterly rebate, as defined in Section 5.e.
NEGOTIABLE DOCUMENTS
- - Supplier shall hold all negotiable instruments in a secured location in
Supplier's warehouse with limited access to only mutually approved
personnel.
- - Supplier will shred all, including but not limited to, negatives, film,
direct to plate material used for manufacturing Products.
CUSTOMER SERVICE
- - Supplier shall provide a toll free customer service number that will be
staffed Monday through Friday between the hours of 8:00 AM CST and 7:00 PM
CST.
20
<PAGE>
- - Supplier will provide at a minimum three (3) full-time, dedicated Customer
Service Representatives. The Customer Service Representative's
responsibilities include, but are not limited to, providing the following
services:
- Pricing and product information to requesters
- Order status upon request
- Response to Customer's inquires within twenty four (24) hours of
receipt.
- Problem solving and documentation; reporting all account issues
to Supplier Account Manager
- - Supplier will provide a dedicated Account Manager based in Minnesota with
assigned back up for Customer. The Account Manager's responsibilities
include, but are not limited to, the following:
- Primary contact with Customer Designated Personnel.
- Primary contact for implementing new forms.
- Managing Product release during Customer's acquisitions and
conversions
- Escalation contact for issue resolution by Customer designated
personnel.
- Scheduling monthly and quarterly account performance reviews.
- Propose cost savings initiatives pursuant to customer's Products
and implement such initiatives upon the written approval of
Customer.
PRODUCT SHIPMENT
Customer's Product will be shipped using the most economical and efficient
method with sufficient tracking capabilities. In no event shall the cost to
Customer exceed the current Zone 2 rate as defined by United Parcel Service
(UPS). Zone 2 rate will be based on location of production plant Supplier
shall absorb all costs incurred above the Zone 2 rate.
QUALITY PERFORMANCE
Suppliers responsibility shall be, including but not limited to:
- Supplier shall perform, without error, encoding of customer data on
Product as received by Customer
- Monthly review and report of performance standards for Products
purchased during the previous month, including but not limited to:
- On time delivery status
- Percent of orders on back order status
- Number of orders returned for quality issues - brief explanation
of returned item.
- Accuracy of Orders
- Accuracy of Documents
- Number of Rush Orders
- MICR Readability Rates: MICR documents shall have a readability rate
of no less than 98.5% during each monthly period. If MICR readability
rate is less than 98.5% for two (2) consecutive months, Supplier shall
rebate to Customer an amount equal to 5% of all MICR purchased made by
Customer pursuant to this Agreement during such monthly period. A
21
<PAGE>
rebate check shall be issued to Customer within 5 business days of
receipt of 3rd party analysis.
- In order to obtain MICR readability rate information, Supplier shall
provide, to an unrelated third party, one sample document for each
MICR order produced. Samples will be tested by the third party on a
weekly basis. If MICR is found defective, that order shall be
replaced within forty eight hours of discovery and shipped overnight
at no expense to the Customer. Test results must be provided to
Customer on monthly basis for the previous months work.
SAMPLE TEST DOCUMENTS
Supplier's responsibilities include, but are not limited to:
- - Provision of MICR test documents, of no less than 10 samples per document
type, to Customer's Document Quality Department for each new branch and
with each Customer's acquisition, at no charge to the customer. Test
documents will be based on Products requisitioned. Test Documents will be
shipped within timeframes requested.
- - If MICR read rate falls below 98.5%, one sample test document for each MICR
production order for 30 prospective days will be provided, at no charge to
Customer.
Customer has the option of requesting MICR test samples for one (1) week's
worth of production no more than four (4) times a year. One MICR document
will be provided to customer for each MICR order filled, at no charge to
the customer.
PROCESS IMPROVEMENT
- - Supplier shall provide ongoing information to Customer, in a timely manner
on cost savings opportunities, quality and process improvement, and service
enhancements.
- - Supplier shall provide ongoing information to Customer for technology
enhancements and improvements in manufacturing MICR Documents. Such
opportunities will be analyzed and presented to the Customer designated
personnel for decisions on implementation.
- - Supplier shall develop and, upon Customer's approval, implement program(s)
for controlling costs and educating Customer employees and representatives
of the Financial Forms Program.
SUPPLIER'S TRAINING
- - Supplier shall provide at a minimum, annual education to Customer personnel
through various formats, including fliers, open houses, service guides, and
presentations, on all Financial Forms related topics. All materials must
be approved by Customer.
REPORTS
SUPPLIER'S RESPONSIBILITY SHALL BE TO PROVIDE:
- - No later than the fifth working day of each month the following reports:
- - TOTAL DOLLARS SPENT FOR THE PREVIOUS CALENDAR MONTH WITH BREAKDOWN OF
FREIGHT CHARGES AND SALES TAX.
- - Inventory Report on Warehoused Product including but not limited to:
- Last Months Usage
- Six month average usage of each Product
22
<PAGE>
- Twelve month total usage of each Product
- On Hand Quantity of each Product
- Sell Price of each Product
- Inventory Value of each Product
- - Must have the capability of issuing monthly usage reports for requesting
company/cost centers.
- - Total dollars of approved cost savings
- - Customer Service response time, including but not limited to, number or
calls received, average hold time statistics on a monthly basis.
23
<PAGE>
EXHIBIT B
PRICE GRID
EXHIBIT C
INSURANCE CERTIFICATES
[To be incorporated upon Supplier selection]
24
<PAGE>
EXHIBIT D
CUSTOMER'S REQUEST FOR PROPOSAL
[To be incorporated upon Supplier selection]
25
<PAGE>
EXHIBIT D
SUPPLIER PROPOSAL TO CUSTOMER'S REQUEST FOR PROPOSAL
[To be incorporated upon Supplier selection]
26
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 % CHANGE Various
Graphs
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS (IN THOUSANDS)
Net Sales $46,339 $41,810 11
Operating Income 4,407 3,479 27
Net Earnings 2,668 1,783 50
- -----------------------------------------------------------------------------------
FINANCIAL CONDITION (IN THOUSANDS)
Total Assets $28,876 $29,452 (2)
Stockholders' Equity 21,061 18,611 13
Working Capital 8,595 7,658 12
Weighted Average Shares 2,731 2,655 3
- -----------------------------------------------------------------------------------
PER SHARE DATA
Net Earnings (diluted) $0.93 $0.62 50
Dividends Declared 0.15 0.14 7
Stockholders' Equity 7.71 7.00 10
- -----------------------------------------------------------------------------------
KEY RATIOS AND OTHER DATA
Current Ratio 3.0 2.7
Long-Term Debt-to-
Capitalization 6.0% 17.5%
Gross Profit on Sales 27.6% 27.2%
Return on Average Equity 13.4% 10.1%
Return on Net Sales, Pretax 9.4% 7.2%
Number of Employees 500 435
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31:
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net Sales $46,338,793 $41,809,938 $46,277,461 $28,903,158 $24,215,962 $22,633,951
- ------------------------------------------------------------------------------------------------------------------------------
Gross Profit 12,807,059 11,356,506 15,417,187 6,748,180 4,975,894 5,177,970
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income 4,407,158 3,478,686 7,298,492 2,375,086 1,902,976 2,135,223
- ------------------------------------------------------------------------------------------------------------------------------
Net Earnings 2,667,748 1,782,941 4,135,922 1,263,056 1,363,410 1,285,835
- ------------------------------------------------------------------------------------------------------------------------------
Cash Flow/Ops 5,289,232 5,183,231 5,833,641 2,872,187 1,376,858 2,322,240
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $28,876,224 $29,451,672 $33,324,874 $29,401,432 $17,523,364 $16,499,238
- ------------------------------------------------------------------------------------------------------------------------------
Working Capital 8,595,033 7,658,171 7,214,439 5,381,223 4,545,734 3,357,561
- ------------------------------------------------------------------------------------------------------------------------------
Current Ratio 3.0 2.7 2.0 2.2 3.3 2.6
- ------------------------------------------------------------------------------------------------------------------------------
Long Term Debt 1,340,000 3,945,550 7,330,550 10,565,175 2,535,000 2,795,000
- ------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity 21,060,804 18,611,095 16,765,854 12,638,535 11,587,122 10,399,485
- ------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS
- ------------------------------------------------------------------------------------------------------------------------------
Gross Profit 27.6% 27.2% 33.3% 23.3% 20.6% 22.9%
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income 9.5% 8.3% 15.8% 8.2% 7.9% 9.4%
- ------------------------------------------------------------------------------------------------------------------------------
Net Earnings 5.8% 4.3% 8.9% 4.4% 5.6% 5.7%
- ------------------------------------------------------------------------------------------------------------------------------
Return on Equity 13.4% 10.1% 28.1% 10.4% 12.4% 13.0%
- ------------------------------------------------------------------------------------------------------------------------------
L-T Debt to Capitalization 6.0% 17.5% 30.4% 45.5% 18.0% 21.2%
- ------------------------------------------------------------------------------------------------------------------------------
BOOK VALUE
- ------------------------------------------------------------------------------------------------------------------------------
Book Value $7.71 $7.00 $6.45 $4.91 $4.41 $3.93
- ------------------------------------------------------------------------------------------------------------------------------
Net Earnings (diluted) 0.93 0.62 1.48 0.48 0.52 0.49
- ------------------------------------------------------------------------------------------------------------------------------
Dividends 0.15 0.14 0.12 0.09 0.08 0.08
- ------------------------------------------------------------------------------------------------------------------------------
Weighted Average
- ------------------------------------------------------------------------------------------------------------------------------
Outstanding Shares 2,730,877 2,655,096 2,598,093 2,572,658 2,626,094 2,642,549
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STOCK INFORMATION/REGISTER 1999 Quarter High Low Close
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2
<PAGE>
The Company's common stock is traded under the symbol 1st $9.50 $6.00 $8.50
- ----------------------------------------------------------------------------------------------------------------------------
NSCF on the Nasdaq National Market. As of January 18, 2000, 2nd $9.63 $7.00 $7.25
- ----------------------------------------------------------------------------------------------------------------------------
the approximate number of stockholders was 900 and holders 3rd $14.38 $7.25 $12.00
- ----------------------------------------------------------------------------------------------------------------------------
of record, 230. The following table sets forth the range of high 4th $12.50 $9.50 $10.58
- ----------------------------------------------------------------------------------------------------------------------------
and low quotations per share for 1999 and 1998. In 1999 and Present-1-13-2000 $9.88 $9.88 $9.88
- ----------------------------------------------------------------------------------------------------------------------------
1998 the Company declared dividends of $0.15 per share and
- ----------------------------------------------------------------------------------------------------------------------------
$0.14 per share, respectively. 1998 Quarter High Low Close
- ----------------------------------------------------------------------------------------------------------------------------
1st $10.88 $7.61 $9.72
- ----------------------------------------------------------------------------------------------------------------------------
Future dividends are restricted to a maximum of 20 percent 2nd $10.16 $7.78 $9.67
- ----------------------------------------------------------------------------------------------------------------------------
of consolidated net income under the Company's debt 3rd $10.00 $7.75 $8.00
- ----------------------------------------------------------------------------------------------------------------------------
agreements. (See Note 6 to Consolidated Financial Statements.) 4th $9.50 $6.25 $6.88
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
INTRODUCTION
The following discussion and analysis provides information that the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion
should be read in conjunction with the financial statements and footnotes
which appear elsewhere in this Annual Report.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions readers that statements
contained herein, other than historical data, may be forward-looking and
subject to risks and uncertainties. The following important factors could
cause the Company's actual results to differ materially from those projected
in forward-looking statements made by, or on behalf of, the Company:
- - Loss of one or more major customers due to bank consolidations or other
reasons,
- - Rise in paper prices which outpaces the Company's ability to pass the
increase through to its customers,
- - Inability to extend existing contracts or successfully negotiate new
contracts,
- - Technological obsolescence of the Company's products or manufacturing
equipment,
- - Contracting market for traditional business forms products,
- - Competition from large national manufacturers of internal bank forms and
custom business forms.
These factors are discussed in more detail in Exhibit 99 to the Company's Form
10-K.
4
<PAGE>
The following table sets forth, for the years indicated, certain items in the
Company's consolidated statement of earnings as a percentage of net sales and
the percentage changes of the dollar amounts of such items as compared with
the prior year.
<TABLE>
<CAPTION>
1999 1998
COMPARED COMPARED
1999 1998 1997 TO 1998 TO 1997
- ------------------------- ----------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 10.8% (9.7%)
- ------------------------- ----------- ----------------- ----------------- ----------------- -----------------
Cost of
Goods Sold 72.4 72.8 66.7 10.1 (1.3)
- ------------------------- ----------- ----------------- ----------------- ----------------- -----------------
Gross Profit 27.6 27.2 33.3 12.8 (26.3)
- ------------------------- ----------- ----------------- ----------------- ----------------- -----------------
Selling General and
Administrative Expenses 18.1 18.8 17.5 6.6 (3.0)
- ------------------------- ----------- ----------------- ----------------- ----------------- -----------------
Operating Income 9.5 8.3 15.8 26.7 (52.3)
- ------------------------- ----------- ----------------- ----------------- ----------------- -----------------
Net Earnings 5.8 4.3 8.9 49.6 (56.9)
- ------------------------- ----------- ----------------- ----------------- ----------------- -----------------
</TABLE>
5
<PAGE>
RESULTS OF OPERATIONS
NET SALES
Net sales in 1999 increased $4,528,855 from $41,809,938 in 1998 to
$46,388,793 in 1999. In 1998 net sales decreased $4,467,523 from 1997 sales
of $46,277,461. The Company's business forms products consist of two product
specialties -internal bank forms and negotiable documents - as well as
standard custom business forms.
PERCENTAGE OF TOTAL SALES
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Internal Bank Forms 63 65 69
Negotiable Documents 22 17 16
Standard Business Forms 15 18 15
</TABLE>
Sales of internal bank forms increased $2.2 million from $27 million in 1998
to $29.2 million in 1999, an increase of 8.1 percent. In 1998, internal bank
forms sales decreased $4.8 million, a 15.1 percent decrease from the 1997
sales of $31.8 million. During 1998, competition in the internal bank forms
industry became more intense, particularly in contract negotiations with
larger banks. This increased competition resulted in non-renewal of three
internal bank forms contracts in 1998. The non-renewal of the three internal
bank forms contracts accounted for approximately $2.6 million of the sales
reduction in internal bank forms in 1998 and negatively affected 1999 sales
by an additional $1.1 million. In 1999, the Company successfully renewed
6
<PAGE>
all expiring internal bank forms contracts and increased product sales to
existing distributor resellers by approximately $3 million.
Negotiable documents, which includes gift certificates, money orders,
certificates of title, and bank official checks, are the Company's other
principal custom business forms specialty. The sales of these products and
related services accounted for $10.2 million in sales in 1999, an increase of
$3.4 million or 50.0 percent over 1998 sales of $6.8 million. 1998 sales of
negotiable documents decreased $0.8 million from 1997 sales of $7.6 million.
In 1999, sales to existing customers accounted for $4.9 million in increased
sales. However, in 1998, a two-year contract for approximately $3 million in
annual sales of negotiable documents was not renewed, reducing negotiable
document sales $1.4 million in 1998 and 1999 by $1.5 million.
Standard custom business forms sales remained relatively flat at $7 million
to $7.5 million each year. This product line is sold to various
distributors/printers for resale. During the three years ended October 31,
1999, there has been no significant change in the customer base for this
product.
7
<PAGE>
GROSS PROFIT
Gross Profit was $12,807,059 (27.6 percent of net sales) in 1999 compared to
$11,356,506 (27.2 percent of net sales) in 1998 and $15,417,187 (33.3 percent
of net sales) in 1997.
Paper price changes, sales mix changes, and sales volume changes are the
three factors with the largest impact on the Company's gross profit. Bond
paper prices increased in February and June 1999, with a total increase of
approximately 9.0 percent for the year. Carbonless paper prices increased 4.0
percent in September 1999. Generally, the Company has been able to pass these
price increases through to its customers. In addition, the Company has taken
a strong initiative to reduce paper waste and spsoilage. Therefore, although
paper costs increased during the year, the Company was able to maintain
material costs at 30 percent of sales for both 1999 and 1998. In 1998, due to
paper price increases that could not be recovered, the material costs
increased 1.0 percent from the 1997 level of 29 percent of sales.
In 1999, direct labor increased 24.8 percent or a 1.8 percent increase as a
percentage of sales. A change in sales mix to more labor intensive products,
as well as higher labor rates due to the extremely tight labor market,
increased labor costs for the fiscal year. In 1998, direct labor costs
actually decreased 4.5 percent, but the ratio of direct labor to sales
increased 0.8 percent as a percentage of sales as direct labor reductions
lagged the 1998 reduction in sales.
Sales volume changes have a significant impact on the absorption of fixed
costs such as depreciation and building occupancy costs and semi-fixed costs
such as indirect labor. In
8
<PAGE>
1999, these costs remained relatively constant. However, due to the increased
sales volume, these costs accounted for 16.7 percent of sales in 1999
compared to 22.2 percent of sales in 1998. In 1998, due to the decreased
sales volume compared to 1997, these fixed and semi-fixed costs accounted for
4.0 percent decrease in gross profit.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE
Selling, general, and administrative expenses increased $522,080 in 1999
compared to 1998. In 1998, these costs decreased $240,875 compared to 1997.
Contributions to employee benefit plans, principally bonuses and profit
sharing, are determined by a formula based upon Company profits for the year.
In 1999, contributions to these plans increased approximately $0.5 million
compared to 1998 when contributions to these plans decreased $0.4 million
compared to 1997. Other selling, general, and administrative costs were
relatively consistent from 1998 to 1999. In 1998, sales commissions to
distributor/partners were restructured to provide additional incentives to
increase new business. These restructured commissions increased costs for
1998 by approximately $0.6 million compared to 1997. In 1999, commissions
were relatively consistent with 1998.
OTHER INCOME AND EXPENSE
Other income and expense consists principally of interest expense which
decreased $401,305 in 1999 and $250,347 in 1998 due to debt repayment.
9
<PAGE>
PROVISION FOR INCOME TAXES
The provision for income taxes decreased to 38.8 percent of pre-tax income in
1999 compared to 40.5 percent in 1998 and 37.4 percent in 1997.
NET EARNINGS
Net earnings were $2,667,748 ($0.93 per diluted share) in 1999 compared to
$1,782,941 ($0.62 per diluted share) in 1998 and $4,135,922 ($1.48 per
diluted share) in 1997. Return on average assets was 9.1 percent in 1999
compared to 5.7 percent in 1998 and 13.2 percent in 1997. Return on average
stockholders' equity was 13.4 percent in 1999 compared to 10.1 percent in
1998 and 28.1 percent in 1997.
FINANCIAL CONDITION
CAPITAL EXPENDITURES
In July 1996, the Company acquired $7.3 million in manufacturing equipment
with the purchase of the financial forms division of Deluxe Corporation.
Since that time, the Company continues to replace and modernize equipment and
computer systems, as well as expand its manufacturing capacity. Capital
expenditures for 1999 were $1.9 million compared to $1.8 million for 1998,
and $2.0 million for 1997. The Company's working capital was $8.6 million as
of October 31, 1999, compared to $7.7 million as of October 31, 1998.
Since 1996, the Company has had a $1.5 million line of credit at an interest
rate equal to the bank's reference rate. The Company has never had to utilize
this line of credit. The Company
10
<PAGE>
believes its existing financial resources are adequate to fund its fiscal
year 2000 operations, including projected capital expenditures of $2.0
million and dividend payments, and foresees no events or uncertainties that
are likely to have a material impact on its liquidity.
LONG-TERM DEBT
The Company's long-term debt consists of Industrial Development Revenue
Bonds. The bonds require annual principal payments and interest at a variable
rate based upon comparable tax-exempt issues. The bonds specify limits on
capital expenditures and dividends as well as specify net worth and certain
financial ratios that the Company must maintain.
During the year the Company fully repaid its term loan. The original
repayment terms of the term loan specified quarterly installments through
July 31, 2003.
LIQUIDITY
Cash provided by operations remained relatively constant at $5.3 million
compared to $5.2 million in 1998 and $5.8 million in 1997. During 1999 and
1998, the changes in net earnings were offset by the changes in current
assets and current liabilities so the cash provided by operations remained
relatively constant.
OUTLOOK
Merger and acquisition activity in the banking industry, which was previously
very strong, slowed in 1999 as the industry dedicated its resources to
ensuring year 2000 readiness.
11
<PAGE>
Therefore, after January 1, 2000, the merger and acquisition activity in this
industry may again increase. Banks generally consolidate their purchasing of
internal bank forms with one supplier. Therefore, the Company could obtain or
lose a significant customer or numerous smaller customers as part of this
consolidation activity. The Company continues to work to stabilize and
increase its customer base. During the fourth quarter of 1999, the Company
was able to extend and expand its contract with one major bank customer. The
new two-year contract which begins January 1, 2000, is expected to increase
internal bank forms sales to this customer by $1.5 million annually. In 1998,
to increase and improve market penetration in the internal bank forms market,
in 1998 the Company developed additional distribution channels by forming two
new strategic alliances with other companies in the financial forms industry.
Sales with one of these partners increased significantly in 1999. Sales with
the second alliance were insignificant in 1999. However, the Company is still
working with the second alliance to develop these sales which depend on the
partner's ability to sell internal bank forms as ancillary products used in
the equipment it sells to the banking industry.
In negotiable documents, the Company's other custom business forms specialty,
the Company and its largest customer agreed to extend and expand the contract
for the manufacture and distribution of its products. The new four year
contract which began January 1, 1999, increased annual sales of these
products by $3.5 million.
The three factors with the largest impact on the Company's gross profit are
paper price changes, sales volume changes, and sales mix changes. The Company
expects the paper
12
<PAGE>
industry to increase prices in 2000. At this time, the Company expects to be
able to pass these paper price increases through to its customers. In 2000,
sales volumes are expected to increase in both internal bank forms and
negotiable documents with no significant change in sales mix. Based upon
these expectations, the Company expects the 2000 gross profit to exceed the
1999 gross profit in total and as a percentage of sales.
The Company does not anticipate significant changes in selling, general, and
administrative costs for 2000. Based on the projected increase in sales
volume, these costs are expected to decrease as a percentage of sales in
2000. In addition, the outlook for the Company has been positively affected
by the internal bank forms computer system which the Company developed and
installed in the first location in the last quarter of 1997. This system
which has been continuously enhanced, is installed in all four of the
Company's internal bank forms production facilities. The integrated computer
system is already increasing operating efficiencies within the plants by
streamlining order processing, enhancing equipment utilization, and improving
billing and reporting capabilities.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," a new standard for reporting information
about business segments in financial statements. Effective with its fiscal
year 1999 financial statements, the Company adopted SFAS No. 131, which
requires disclosure of segment data in a manner consistent with
13
<PAGE>
that used by an enterprise for internal management reporting and decision
making. Accordingly, the Company reports its operations as a single segment
under SFAS No. 131.
In March 1998, the Accounting Standards Executive Committee issued Statement
of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." The Company is reviewing the
requirements of the SOP and does not expect it to significantly change its
current accounting for software costs. SOP 98-1 is required to be adopted by
the Company for its fiscal year 2000.
YEAR 2000 READINESS
The Company's Y2K Plan focused on assessing and ensuring compliance of its
hardware, operating systems, software applications, and custom applications.
Additionally, the Company reviewed the year 2000 compliance status of its
customers, vendors, and other service providers. Based upon the assessment of
its hardware, operating systems, and software applications, the Company's
hardware, operating systems, and software applications were upgraded for Y2K
compliance. The Company communicated with vendors, customers, and other
business partners to determine their Y2K compliance. The costs of the Y2K
assessment and the required upgrades were not material and were included in
the costs of current operations.
14
<PAGE>
The Company did not experience any problems in its operating systems in
connection with the Y2K date change. At this time, the Company has not
incurred and does not anticipate any interruption of services from its
vendors, customers, or other business partners.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Northstar Computer Forms, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, changes in stockholders' equity, and
cash flows present fairly, in all material respects, the financial position
of Northstar Computer Forms, Inc. and Subsidiary as of October 31, 1999 and
1998, and the results of their operations and their cash flows for each of
the three years in the period ended October 31, 1999, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Northstar Computer Forms, Inc.'s management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audits 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
December 15, 1999
16
<PAGE>
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,878,447 $ 4,162,845
Accounts receivable, net 5,958,522 4,936,112
Inventories 2,294,119 2,245,338
Deferred income taxes 261,656 255,656
Other current assets 442,743 687,769
------------ ------------
Total current assets 12,835,487 12,287,720
------------ ------------
Property, plant and equipment, net 13,368,676 14,153,269
Notes receivable, less current portion 60,634 161,573
Goodwill, net 1,354,786 1,556,293
Other assets, net 1,256,641 1,292,817
------------ ------------
Total assets $28,876,224 $29,451,672
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 335,000 1,385,000
Accounts payable 1,296,485 1,316,878
Accrued liabilities 2,608,969 1,927,671
------------ ------------
Total current liabilities 4,240,454 4,629,549
------------ ------------
Long-term debt, less current portion 1,340,000 3,945,550
Deferred compensation 773,333 738,845
Deferred income taxes 1,461,633 1,526,633
Commitments (Notes 6 and 7)
Stockholders' equity:
Common shares; $.05 par value, authorized 5,000,000 shares;
17
<PAGE>
issued and outstanding, 1999: 2,744,708; 1998: 2,714,436 137,235 135,722
Additional paid-in capital 2,862,678 2,671,492
Retained earnings 18,060,891 15,803,881
------------ ------------
Total stockholders' equity 21,060,804 18,611,095
------------ ------------
Total liabilities and stockholders' equity $28,876,224 $29,451,672
============ ============
</TABLE>
18
<PAGE>
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net sales $46,338,793 $41,809,938 $46,277,461
Cost of goods sold 33,531,734 30,453,432 30,860,274
------------ ------------ ------------
Gross profit 12,807,059 11,356,506 15,417,187
Selling, general and administrative expenses 8,399,901 7,877,820 8,118,695
------------ ------------ ------------
Operating income 4,407,158 3,478,686 7,298,492
------------ ------------ ------------
Other income (expense):
Interest expense (240,864) (642,169) (892,516)
Other, net, principally interest income 191,454 158,424 196,946
------------ ------------ ------------
(49,410) (483,745) (695,570)
------------ ------------ ------------
Earnings before provision for income taxes 4,357,748 2,994,941 6,602,922
Provision for income taxes 1,690,000 1,212,000 2,467,000
------------ ------------ ------------
Net earnings $ 2,667,748 $ 1,782,941 $ 4,135,922
============ ============ ============
Net earnings per common share:
Basic $ 0.98 $ 0.67 $ 1.59
============ ============ ============
Diluted $ 0.93 $ 0.62 $ 1.48
============ ============ ============
</TABLE>
19
<PAGE>
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ADDITIONAL
STATED PAID-IN RETAINED
SHARES CAPITAL CAPITAL EARNINGS
<S> <C> <C> <C> <C>
Balances at October 31, 1996 1,716,571 $ 85,828 $1,995,177 $10,557,530
Stock options exercised 44,900 2,245 294,590
Cash dividends, $.175 per share (305,438)
Comprehensive income:
Net earnings 4,135,922
----------- --------- ----------- ------------
Balances at October 31, 1997 1,761,471 88,073 2,289,767 14,388,014
Stock split 880,690 44,035 (46,269)
Stock options exercised 72,275 3,614 257,994
Cash dividends, $.137 per share (367,074)
Tax benefit from stock options exercised 170,000
Comprehensive income:
Net earnings 1,782,941
----------- --------- ----------- ------------
Balances at October 31, 1998 2,714,436 135,722 2,671,492 15,803,881
Stock options exercised 30,275 1,513 147,217
Repurchase of common stock (3) (31)
Cash dividends, $.150 per share (410,738)
Tax benefit from stock options exercised 44,000
20
<PAGE>
Comprehensive income:
Net earnings 2,667,748
----------- --------- ----------- ------------
Balances at October 31, 1999 2,744,708 $137,235 $2,862,678 $18,060,891
=========== ========= =========== ============
</TABLE>
21
<PAGE>
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,667,748 $ 1,782,941 $ 4,135,922
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 2,608,725 2,517,552 2,458,399
Amortization 382,359 344,274 271,519
Provision for doubtful accounts 55,451 (70,586) 167,437
Deferred income taxes (71,000) 405,000 (25,000)
(Gain) loss on sale of land and equipment (61,009) 50,286 (5,576)
Changes in certain operating assets and
liabilities (293,042) 153,764 (1,169,060)
------------ ------------ ------------
Net cash provided by operating activities 5,289,232 5,183,231 5,833,641
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures and equipment deposits (1,851,678) (1,577,203) (1,465,679)
Capitalized computer software costs (236,405) (584,321)
Proceeds from sale of land and equipment 88,555 67,239 12,400
Notes receivable repayments 77,530 736,932 117,219
------------ ------------ ------------
Net cash used in investing activities (1,685,593) (1,009,437) (1,920,381)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (3,655,550) (5,235,000) (1,029,450)
Dividends paid (381,186) (353,204) (240,869)
Stock options exercised 148,730 261,608 296,835
Other, net (31) (2,234)
------------ ------------ ------------
Net cash used in financing activities (3,888,037) (5,328,830) (973,484)
------------ ------------ ------------
22
<PAGE>
Net (decrease) increase in cash and
cash equivalents (284,398) (1,155,036) 2,939,776
Cash and cash equivalents at beginning of year 4,162,845 5,317,881 2,378,105
------------ ------------ ------------
Cash and cash equivalents at end of year $ 3,878,447 $ 4,162,845 $ 5,317,881
============ ============ ============
</TABLE>
23
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF THE BUSINESS:
Northstar Computer Forms, Inc. and Subsidiary (the Company) designs,
manufactures and markets printed forms with an emphasis on MICR
(Magnetic Ink Character Recognition) printing. The Company's custom
business forms concentrations are negotiable documents and internal bank
forms which are marketed nationally. Sales are principally made through
distributors, with the remainder directly to end-user customers.
CONSOLIDATION:
The consolidated financial statements include the accounts of Northstar
Computer Forms (Northstar) and General Financial Supply, Inc. (General
Financial), its wholly-owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
INVENTORIES:
Inventories are stated at the lower of cost or market using the last-in,
first-out (LIFO) method. As of October 31, 1999 and 1998, consolidated
inventories, stated at LIFO, exceeds the cost of consolidated
inventories using the first-in, first-out (FIFO) method by approximately
$67,000 and $13,000 at October 31, 1999 and 1998, respectively.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost and are depreciated
using the straight-line method. The estimated useful lives are 15 - 40
years for buildings, 5 - 10 years for machinery and equipment, and 3 - 8
years for furniture and fixtures and automobiles. Leasehold improvements
are amortized on a straight-line basis generally over the term of the
respective leases. Gains or losses on dispositions are included in
current earnings. Major renewals or betterments are capitalized while
repairs and maintenance are charged to current operations when incurred.
24
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
COMPUTER SOFTWARE COSTS:
The Company capitalizes costs incurred for developing and obtaining
computer software, primarily relating to modifying and installing new
information technology systems for internal use. These costs are
amortized on a straight-line basis over five years, the estimated useful
lives of the underlying assets.
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." The Company is
reviewing the requirements of the SOP and does not expect it to
significantly change its current accounting for software costs. SOP 98-1
is required to be adopted by the Company for its fiscal year 2000.
GOODWILL:
Goodwill represents the excess of the purchase price over the estimated
fair value of the identifiable assets acquired and is being amortized on
a straight-line basis over 10 years.
LONG-LIVED ASSETS:
The recoverability of long-lived assets, including goodwill, is assessed
annually or whenever adverse events or changes in circumstances or
business climate indicate that the expected cash flows previously
anticipated warrant reassessment. When such reassessments indicate the
potential of impairment, all business factors are considered and, if the
carrying values of long-lived assets are not likely to be recovered from
future net operating cash flows, they will be written down for financial
reporting purposes.
REVENUE RECOGNITION:
The Company recognizes revenue on product sales when title transfers to
customer.
INCOME TAXES:
Deferred income taxes are recorded to reflect the tax consequences on
future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. The income tax
provision is the tax payable or refundable for the period and the change
during the period in deferred tax assets and liabilities.
25
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
EARNINGS PER SHARE:
Net earnings per share (EPS) for all periods presented have been
computed by dividing net earnings by the weighted average number of
common shares outstanding (basic EPS) and by the weighted average number
of common and common equivalent shares outstanding (diluted EPS). The
Company's common equivalent shares consist of stock options when their
effect is not antidilutive.
The computations of basic and diluted weighted average common shares
outstanding are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Weighted average common shares outstanding 2,730,877 2,655,096 2,598,093
Common equivalent shares outstanding:
Option equivalents 137,865 199,387 187,860
--------------- --------------- ---------------
Weighted average common and common
equivalent shares outstanding 2,868,742 2,854,483 2,785,953
=============== =============== ===============
</TABLE>
At October 31, 1999, 1998 and 1997, 150,000, 9,000 and 30,000
outstanding options were excluded from the computation of diluted
earnings per share for the year then ended because the options' exercise
price was greater than the average market price of the Company's common
shares during the respective year.
COMPREHENSIVE INCOME:
The Company's comprehensive income consists solely of net earnings. In
fiscal years 1999, 1998 and 1997, the Company did not have any changes
in stockholders' equity from nonowner sources.
BUSINESS SEGMENTS:
Effective with its year end 1999 financial statements, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosure About Segments of an Enterprise and Related Information,"
which requires disclosure of segment data in a manner consistent with
that used by an enterprise for internal management reporting and
decision making. Accordingly, the Company reports its operations as a
single segment under SFAS No. 131.
26
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
USE OF 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 disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. SELECTED BALANCE SHEET INFORMATION:
The following provides additional information concerning selected
balance sheet accounts at October 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Accounts receivable, net:
Accounts receivable $ 6,111,522 $ 5,074,112
Allowance for doubtful accounts (153,000) (138,000)
------------- -------------
$ 5,958,522 $ 4,936,112
============= =============
Inventories:
Raw material 1,503,444 1,394,156
Work in process 573,993 598,846
Finished goods 216,682 252,336
------------- -------------
$ 2,294,119 $ 2,245,338
============= =============
Property, plant and equipment, net:
Land 109,626 109,626
Buildings 4,004,111 3,993,073
Machinery and equipment 25,400,896 24,124,637
Furniture and fixtures 1,937,239 1,804,043
Automobiles 440,756 335,322
Leasehold improvements 78,156 66,313
------------- -------------
31,970,784 30,433,014
Accumulated depreciation (18,535,203) (16,213,432)
Accumulated amortization (66,905) (66,313)
------------- -------------
$ 13,368,676 $ 14,153,269
============= =============
27
<PAGE>
2. SELECTED BALANCE SHEET INFORMATION, CONTINUED:
1999 1998
Goodwill, net:
Goodwill $ 2,015,065 $ 2,015,065
Accumulated amortization (660,279) (458,772)
------------- -------------
$ 1,354,786 $ 1,556,293
============= =============
Other assets, net:
Computer software costs, net of accumulated amortization
of $335,830 and $171,683 at October 31, 1999 and
1998, respectively 484,896 649,043
Cash value of life insurance, net of outstanding loans
of $165,778 and $166,857 at October 31, 1999 and
1998, respectively 402,488 359,918
Other 369,257 283,856
------------- -------------
$ 1,256,641 $ 1,292,817
------------- -------------
Accrued liabilities:
Payroll and bonuses 850,707 504,888
Vacation 377,270 345,471
Profit sharing 527,180 301,125
Real estate taxes 236,706 195,454
Dividends 219,569 190,017
Other 397,537 390,716
------------- -------------
$ 2,608,969 $ 1,927,671
============= =============
</TABLE>
3. SUPPLEMENTAL CASH FLOW INFORMATION:
Changes in certain operating assets and liabilities are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Accounts receivable $(1,077,861) $1,748,683 $(2,052,911)
Inventories (48,781) (332,692) 379,411
Other assets 123,759 (592,914) (111,704)
Accounts payable (20,393) (56,927) (729,732)
Accrued liabilities 695,746 (612,825) 1,293,928
Deferred compensation 34,488 439 51,948
------------ ----------- ------------
$ (293,042) $ 153,764 $(1,169,060)
============ =========== ============
Cash paid during the year for:
Interest $ 244,471 $ 699,308 $ 834,348
28
<PAGE>
Income taxes 1,487,500 1,456,894 2,222,243
</TABLE>
4. NOTES RECEIVABLE:
Notes receivable consisted of the following at October 31, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Brooklyn Park Economic Development Authority Tax Increment Financing
Note, interest at 9.5%, payable in semi-annual installments of
$48,889, with remaining principal and
interest due August 2001. $143,775 $204,250
Other, mainly customers, with various terms 16,040 33,095
--------- ---------
159,815 237,345
Less current portion, included in "Other current assets" (99,181) (75,772)
--------- ---------
$ 60,634 $161,573
========= =========
</TABLE>
Management believes that the carrying values of its notes receivable as
of October 31, 1999, approximate their fair value.
5. BANK LINE OF CREDIT:
The Company has a Revolving Credit agreement (Agreement) with a bank
under which the Company may borrow up to $1,500,000 with interest
accruing at the prime interest rate. Collateral for borrowings under
this Agreement, as well as the related covenants, are the same as the
term loan the Company entered into during July 1996. There were no
borrowings under this Agreement during fiscal years 1999 or 1998.
6. LONG-TERM DEBT:
Long-term debt consists of the following at October 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Revenue Bonds $1,675,000 $ 2,010,000
Term Loan 3,320,550
------------ -------------
1,675,000 5,330,550
29
<PAGE>
Less current portion (335,000) (1,385,000)
------------ -------------
$1,340,000 $ 3,945,550
============ =============
</TABLE>
30
<PAGE>
6. LONG-TERM DEBT, CONTINUED:
REVENUE BONDS:
In August 1994, the Company received proceeds of $2,945,000 from the
issuance of Variable Rate Demand Industrial Development Revenue Bonds
(Revenue Bonds) in connection with the construction of the Company's
corporate headquarters and manufacturing facility. The Revenue Bonds
require annual principal payments of $335,000 through fiscal year 2004
and bear interest at a rate which varies based upon comparable
tax-exempt issues, but not to exceed 12%. The interest rate at October
31, 1999, was 3.75%. The Company has an option to convert the variable
interest rate on these bonds to a fixed interest rate determinable at
the date of conversion upon notification to the bond trustee. The
Revenue Bonds are collateralized by an outstanding irrevocable
direct-pay letter of credit with a financial institution equal to the
outstanding principal amount of the Revenue Bonds.
The letter of credit is renewable upon mutual agreement of the Company
and the financial institution. If the letter of credit is not renewed
and the Company is unable to obtain a similar letter of credit with
another financial institution, the Revenue Bonds may be callable at the
option of the bond trustee.
The Company's outstanding letter of credit expires in August 2002 and is
collateralized by its corporate headquarters and manufacturing facility,
inventories and accounts receivable. The letter of credit agreement,
among other things, requires the Company to not exceed annual capital
expenditures limits, maintain certain minimum net worth requirements,
meet certain leverage and cash flow ratios, as well as limits cash
dividends. The letter of credit agreement also allows for the lender to
call the debt upon any "material change in the nature of the business."
TERM LOAN:
In July 1996, the Company entered into a term loan (Term Loan) with a
bank for $9,000,000 in connection with the purchase of substantially all
of the assets of the Financial Forms Division of Deluxe Corporation
(Acquisition). The Term Loan was collateralized by substantially all the
Company's assets and required quarterly principal payments of $262,500
through October 2001, with the remaining principal amount to be paid in
January 2002. The Company had an option, upon written notice to the
bank, to accrue interest on its outstanding Term Loan balance based on
the prime interest rate or the Eurodollar rate. During fiscal year 1998,
the Company made additional principal payments of $2,000,000 in excess
of its scheduled principal payments. During fiscal year 1999, the
Company fully repaid its Term Loan by making additional principal
payments of $2,533,050 in excess of its scheduled principal payments due
under the Term Loan.
31
<PAGE>
6. LONG-TERM DEBT, CONTINUED:
TERM LOAN, CONTINUED:
Aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
<S> <C>
2000 $ 335,000
2001 335,000
2002 335,000
2003 335,000
2004 335,000
------------
$1,675,000
============
</TABLE>
Management believes that the carrying value of its long-term debt as of
October 31, 1999, approximates its fair value.
7. OPERATING LEASES, INCLUDING RELATED PARTY LEASE:
The Company leases certain buildings and equipment under five separate
operating lease agreements expiring through 2007 and requiring monthly
payments in addition to real estate taxes, insurance and maintenance
costs. The Company has the option to extend the lease term upon
expiration of one of the leases.
In August 1997, the Company began leasing one of the Company's
manufacturing facilities from the Company's Chairman and Chief Executive
Officer under an operating lease agreement expiring in fiscal year 2007,
with two additional five-year extensions available at the option of the
Company. This operating lease agreement requires monthly payments,
subject to increase every three years based on that period's average
price index, as defined in the lease agreement, in addition to real
estate taxes, utilities, assessments, insurance and maintenance costs.
32
<PAGE>
7. OPERATING LEASES, INCLUDING RELATED PARTY LEASE, CONTINUED:
Future minimum payments, excluding real estate taxes, utilities,
assessments, insurance and maintenance costs, under operating lease
agreements with noncancellable terms are as follows:
<TABLE>
<CAPTION>
NON-
RELATED RELATED
FISCAL YEAR PARTY PARTY TOTAL
<S> <C> <C> <C>
2000 $ 433,420 $ 191,000 $ 624,420
2001 254,686 191,000 445,686
2002 197,969 191,000 388,969
2003 110,141 191,000 301,141
2004 110,141 191,000 301,141
Thereafter 100,963 541,167 642,130
------------ ------------ ------------
$1,207,320 $1,496,167 $2,703,487
============ ============ ============
</TABLE>
Total rent expense was $668,811, $695,062 and $774,372 in fiscal years
1999, 1998 and 1997, respectively, exclusive of real estate taxes,
insurance and maintenance costs. Rent expense related to the related
party lease, exclusive of real estate taxes, insurance and maintenance
costs, was $191,000 in fiscal years 1999 and 1998.
8. INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEARS
------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Currently payable:
Federal $1,495,000 $ 684,000 $2,153,000
State 266,000 123,000 339,000
----------- ----------- -----------
1,761,000 807,000 2,492,000
----------- ----------- -----------
Deferred provision (benefit):
Federal (17,000) 343,000 (21,000)
State (54,000) 62,000 (4,000)
----------- ----------- -----------
(71,000) 405,000 (25,000)
----------- ----------- -----------
33
<PAGE>
$1,690,000 $1,212,000 $2,467,000
=========== =========== ===========
</TABLE>
34
<PAGE>
8. INCOME TAXES, CONTINUED:
The actual provision for income taxes differed from the "expected"
amounts computed by applying the U.S. federal corporate tax rate of 34%
to earnings before provision for income taxes for the fiscal years ended
October 31, 1999, 1998 and 1997, respectively, as follows:
<TABLE>
<CAPTION>
FISCAL YEARS
-----------------------------------
1999 1998 1997
<S> <C> <C> <C>
Computed "expected" provision for income taxes $1,482,000 $1,018,000 $2,245,000
State income taxes, net of federal tax effect 256,000 148,000 221,000
Other, net (48,000) 46,000 1,000
----------- ----------- -----------
Actual provision for income taxes $1,690,000 $1,212,000 $2,467,000
=========== =========== ===========
</TABLE>
The approximate effects of temporary differences that gave rise to
deferred tax balances at October 31, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax assets:
Accounts receivable allowance for doubtful accounts $ 61,200 $ 55,200
Inventories 41,500 40,851
Accrued liabilities 122,908 124,188
Deferred compensation 345,596 331,034
Goodwill 84,991 58,124
------------ ------------
Total deferred tax assets 656,195 609,397
------------ ------------
Deferred tax liabilities:
Property, plant and equipment (1,644,618) (1,669,331)
Investment in limited partnership (211,554) (211,043)
------------ ------------
Total deferred tax liabilities (1,856,172) (1,880,374)
------------ ------------
Net deferred tax liabilities $(1,199,977) $(1,270,977)
============ ============
</TABLE>
35
<PAGE>
The Company has not recorded a valuation allowance as of October 31,
1999 and 1998, related to its deferred tax assets as management does not
believe an allowance is necessary.
36
<PAGE>
9. PROFIT-SHARING AND BONUS PLANS:
The Company has a profit-sharing and 401(k) plan (the Plan) covering
substantially all full-time employees of the Company. Company
contributions are determined based upon a profitability formula approved
by the Company's Board of Directors, but are not to exceed 15% of the
salary and wages paid to the participants for the year. Vesting of
benefits occurs at a rate of 20% for each year of service, commencing
after the second full year of service. Vested benefits allocated to the
employees' accounts are payable upon retirement, death or earlier
termination in a lump sum or installments. The Company recognized
expense related to the Plan of $527,180, $301,125 and $540,000 in fiscal
years 1999, 1998 and 1997, respectively.
The Company also has a bonus plan for certain key salaried employees.
Bonuses are determined, in part, based on a profitability formula
approved by the Company's Board of Directors and, in part, at the
discretion of the Board of Directors. Company expense under the bonus
plan was $521,164, $203,805 and $408,440 in fiscal years 1999, 1998 and
1997, respectively.
10. DEFERRED COMPENSATION:
The Company has deferred compensation plans covering four current
officers and one former officer of the Company. The plans for one
current and the former officer call for periodic payments ranging from
10 to 15 years at retirement or death of such employees. The plans for
the remaining three officers call for contributions to a "rabbi trust"
to maintain benefits to be paid upon retirement or termination. Deferred
compensation expense was $30,064, $78,882 and $51,397 in fiscal years
1999, 1998 and 1997, respectively.
11. STOCK OPTIONS:
The Company has an incentive stock option plan for option grants to
employees (ISO Plan) and a nonqualified stock option plan for option
grants to the Company's Outside Board of Directors (BOD Plan). As of
October 31, 1999, the Company has reserved 500,000 and 150,000 shares of
its common stock for grant under the ISO Plan and BOD Plan,
respectively. During fiscal year 1998, the Company amended its ISO Plan
to increase the maximum number of shares reserved for issuance under
that plan to 500,000. During fiscal year 1999, the Company amended its
BOD Plan to add 100,000 shares for issuance under that plan. Options
granted under the ISO Plan and BOD Plan have exercise prices not less
than the fair market value of the Company's common stock at the date of
grant and become exercisable generally over a five-year period or based
on the discretion of the Company's Board of Directors. Options granted
under the ISO and BOD Plans expire 10 years from the date of grant.
37
<PAGE>
11. STOCK OPTIONS, CONTINUED:
In addition, the Company has a nonqualified stock option plan for option
grants to the Company's Board of Directors (Non-Active Plan). At October
31, 1999, 20,000 of these options are outstanding and have a weighted
average exercise price of $3.88. All of these options are exercisable at
October 31, 1999. These options expire through 2003.
The following is a summary of the stock option activity with respect to
the ISO, BOD and Non-Active Plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE OPTIONS
EXERCISE PRICE AVAILABLE
PER SHARE OPTIONS FOR GRANT
<S> <C> <C> <C>
Balance at October 31, 1996 4.39 394,300 75,602
Exercised 4.41 (67,350)
Cancelled 5.58 (8,550) 8,550
Granted 7.17 96,000 (96,000)
Expired 3.87 (14,000)
------------ ---------------
Balance at October 31, 1997 5.13 355,400 (11,848)
Authorization of additional stock options 300,000
Exercised 3.62 (72,275)
Cancelled 4.28 (3,300) 3,300
Granted 12.67 9,000 (9,000)
Expired 4.42 (250)
Balance at October 31, 1998 5.75 288,575 282,452
Authorization of additional stock options 100,000
Exercised 4.91 (30,275)
Cancelled 6.98 (9,700) 9,700
Granted 9.48 251,400 (251,400)
------------ ---------------
Balance at October 31, 1999 7.65 500,000 140,752
============ ===============
</TABLE>
The Company may grant nonqualified stock options outside of the ISO and
BOD Plans to other parties at the discretion of the Company's Board of
Directors. The terms of these options, including the exercise price,
vesting provision and expiration of the options, are
38
<PAGE>
determined by the Company's Board of Directors prior to the granting of
the options. During fiscal year 1995, the Company granted 30,000 of these
options to a vendor. At October 31, 1999, all of these options are
outstanding and have a weighted average exercise price of $5.09. These
options expire in November 2003.
39
<PAGE>
11. STOCK OPTIONS, CONTINUED:
The following table summarizes information about all stock options
outstanding and exercisable at October 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------------------------- ------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$3.75 - $6.17 245,900 3.79 $ 4.94 206,600 $ 4.82
$8.00 134,100 9.33 8.00 40,100 8.00
$10.58 - $12.67 150,000 8.35 11.28 7,500 10.58
--------------------- ------------------ ---------------- ------------------ ---------------
530,000 6.48 $ 7.51 254,200 $ 5.50
===================== ================== ================ ================== ===============
</TABLE>
The Company accounts for stock-based compensation using the intrinsic
value method. Accordingly, compensation cost for stock options granted
to employees is measured as the excess, if any, of the fair value of the
Company's common stock at the date of the grant over the amount an
employee must pay to acquire the stock. The Company accounts for
stock-based compensation to nonemployees using the fair value method.
Such compensation costs are amortized on a straight-line basis over the
underlying option vesting terms.
If the Company had elected to recognize compensation expense for options
granted in fiscal years 1999, 1998 and 1997 based on the fair value of
the options granted at the date of grant, the Company's net earnings and
diluted net earnings per share for fiscal years 1999, 1998 and 1997
would have been as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net earnings:
As reported $2,667,748 $1,782,941 $4,135,922
Pro forma 2,443,958 1,708,430 4,021,562
40
<PAGE>
Diluted net earnings per share:
As reported $ 0.93 $ 0.62 $ 1.48
Pro forma $ 0.85 $ 0.60 $ 1.44
</TABLE>
41
<PAGE>
11. STOCK OPTIONS, CONTINUED:
The weighted average fair value of options at the date of grant was $4.50,
$5.45 and $3.26 per option during fiscal years 1999, 1998 and 1997,
respectively.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model and the following key
assumptions:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Risk-free interest rates 5.5% 5.5%
Expected life 7 years 5 years
Expected volatility 44.54% 46.20%
Expected dividend yield 1.48% 1.26%
</TABLE>
12. STOCK SPLIT:
On May 31, 1998, the common stock of the Company was split 3 for 2. All
per share and number of share data have been retroactively restated to
reflect the stock split, except for those presented in the Consolidated
Statements of Changes in Stockholders' Equity.
13. PREFERRED STOCK:
The Company has 200,000 shares of authorized, nonvoting preferred stock
that to date have not been issued. The terms of the preferred stock will
be finalized and approved by the Board of Directors prior to issuance.
14. CONCENTRATIONS OF CREDIT RISK:
Approximately 23%, 34% and 37% of the Company's net sales were directly
to financial institutions in fiscal years 1999, 1998 and 1997,
respectively.
At October 31, 1999 and 1998, cash and cash equivalents totaling
approximately $3,700,000 and $3,400,000, respectively, were concentrated
in one financial institution. At October 31, 1999, 13% of the Company's
accounts receivable were from one customer. Revenues from the same
customer represent approximately $7.4 million of the Company's
consolidated revenues. The Company generally requires no collateral from
its customers to support their accounts receivable.
42
<PAGE>
15. FOURTH QUARTER ADJUSTMENTS:
In the fourth quarter of fiscal year 1997, the Company recorded certain
adjustments to reflect changes in accounting estimates to amounts
reported in previous interim periods of the fiscal year. The adjustments
were related to the estimation of gross profit on net sales from the
Company's financial forms division and the interim income tax rate used
in previous interim periods of fiscal year 1997. These adjustments
increased fourth quarter net earnings by approximately $207,000 and
diluted net earnings per common share by $0.07.
43
<PAGE>
INVESTOR INFORMATION
ANNUAL MEETING
The annual meeting of the shareholders of CORPORATE OFFICES
Northstar ComputerForms, Inc. will be held 7130 Northland Circle North
Tuesday, April 11, 2000 at 3:30 P.M. at Brooklyn Park, MN 55428-1530
the Radisson Plaza Hotel, 35 South (612) 531-7340
7th Street, Minneapolis, MN 55402.
FORM 10-K TRANSFER AGENT
A copy of the Form 10-K Report filed with the Norwest Bank Minnesota
Securities and Exchange Commission by the Stock Transfer
Company may be obtained without charge by P.O. Box 64854
written request to: Mary Ann Morin, Northstar St. Paul, MN 55164-0854
Computer Forms, Inc., 7130 Northland (800) 468-9716
Circle North, BrooklynPark, MN 55428-1530
INDEPENDENT ACCOUNTANTS LEGAL COUNSEL
PricewaterhouseCoopers LLP Parsinen Kaplan Rosberg &
650 Third Avenue South Gotlieb, P.A.
Minneapolis, MN 55402 100 South Fifth Street
Suite 1100
Minneapolis, MN 55402
QUARTERLY FINANCIAL INFORMATION
(Unaudited and not reviewed)
<TABLE>
<CAPTION>
FISCAL YEAR 1999 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
JAN. '99 APR. '99 JULY '99 OCT. '99
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $10,643,618 $11,878,269 $11,804,045 $12,012,861
Earnings before taxes 760,498 1,188,826 1,257,904 1,150,520
Provision for income taxes 289,000 491,500 502,500 407,000
Net earnings 471,498 697,326 755,404 743,520
Earnings per share (diluted) 0.17 0.25 0.26 0.25
Depreciation and amortization 742,174 756,654 749,388 742,868
FISCAL YEAR 1998 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
JAN. '98 APR. '98 JULY '98 OCT. '98
- -------------------------------------------------------------------------------------------------------------------
44
<PAGE>
Net Sales $10,608,027 $10,753,943 $10,358,271 $10,089,697
Earnings before taxes 791,575 719,173 589,912 894,281
Provision for income taxes 297,000 277,000 225,000 413,000
Net earnings 494,575 442,173 364,912 481,281
Earnings per share (diluted) 0.18 0.15 0.12 0.17
Depreciation and amortization 715,290 726,930 678,818 740,788
</TABLE>
45
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 of Northstar Computer Forms, Inc. and Subsidiary (File Nos. 33-83846,
333-60357 and 333-69417) of our reports dated December 15, 1999 on our audits of
the consolidated financial statements and the related financial statement
schedule of Northstar Computer Forms, Inc. and Subsidiary as of October 31, 1999
and 1998, and for the years ended October 31, 1999, 1998 and 1997, which reports
are included or incorporated by reference in this Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
January 27, 2000
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD INDICATED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 3,878,447
<SECURITIES> 0
<RECEIVABLES> 6,111,522
<ALLOWANCES> (153,000)
<INVENTORY> 2,294,119
<CURRENT-ASSETS> 12,835,487
<PP&E> 31,970,784
<DEPRECIATION> 18,602,108
<TOTAL-ASSETS> 28,876,224
<CURRENT-LIABILITIES> 4,240,454
<BONDS> 1,340,000
0
0
<COMMON> 137,235
<OTHER-SE> 20,923,569
<TOTAL-LIABILITY-AND-EQUITY> 28,876,224
<SALES> 46,338,793
<TOTAL-REVENUES> 46,338,793
<CGS> 33,531,734
<TOTAL-COSTS> 41,876,184
<OTHER-EXPENSES> (191,454)
<LOSS-PROVISION> 55,451
<INTEREST-EXPENSE> 240,864
<INCOME-PRETAX> 4,357,748
<INCOME-TAX> 1,690,000
<INCOME-CONTINUING> 2,667,748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,667,748
<EPS-BASIC> .98
<EPS-DILUTED> .93
</TABLE>
<PAGE>
EXHIBIT 99
CAUTIONARY STATEMENT RELATING
TO FORWARD-LOOKING INFORMATION
The Company and its representatives may, from time to time, make written or
verbal forward-looking statements. Those statements relate to developments,
results, conditions or other events the Company expects or anticipates will
occur in the future. Such statements are based on management's then current
views and assumptions and, as a result, are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected. Such statements must therefore be evaluated in the context of a
number of factors that may materially affect the Company's business. Disclosure
of these factors is intended to permit the Company to take advantage of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Although the Company has attempted to list the factors that it is currently
aware may have an impact on its business and operations, other factors may in
the future prove to be important and the following list should not necessarily
be considered comprehensive.
RISKS RELATING TO BANK CONSOLIDATIONS. For the past few years, the banking
industry has undergone considerable consolidation. As a result of such
transactions, banks generally consolidate their purchasing of forms with one
supplier, so bank mergers could cause the Company to lose (or gain) significant
customers. The loss of one or more significant bank customers could have a
material adverse effect on the Company's business and operations.
RISKS RELATING TO COST AND AVAILABILITY OF PAPER. The cost of paper represents a
significant portion of the Company's cost of materials. Increases in paper costs
could have a material adverse effect on the Company's results of operations and
financial condition. The Company attempts to maintain gross profit margins when
paper prices increase by passing such increases on to its customers. There can
be no assurance, however, that it will be able to pass on increases in the cost
of paper in the future or be able to do so at the same rate at which prices are
increasing. In addition, when paper prices decrease materially, market forces
could require that such lower costs be passed on to customers in the form of
lower prices which, in turn, could decrease the Company's gross profit margins
from paper inventory purchased when prices were higher. The failure to pass on
paper price increases, or to offset paper price reductions passed on to
customers, could have a material adverse effect on the Company's operating
results.
Due to the significance of paper in the manufacture of the Company's products,
it is dependent upon the availability of paper. During periods of tight paper
supply, many paper producers allocate shipments of paper based on the historical
purchase levels of customers. As a result of the Company's large volume paper
purchases from several paper producers, it generally has not experienced
difficulty in obtaining adequate quantities of paper, although occasionally it
has experienced minor delays in delivery. Although the Company believes
<PAGE>
that its large volume paper purchases and strong relationships with vendors
will continue to enable it to receive adequate supplies of paper in the future,
there can be no assurance in this regard.
RISKS RELATING TO INABILITY TO EXTEND EXISTING CONTRACTS OR SUCCESSFULLY
NEGOTIATE NEW CONTRACTS. The Company has contracts with many of its major
customers to provide some or all of their business and/or internal bank forms
needs. Typically, these contracts are competitively bid and the Company has been
successful in winning these contracts on the basis of price, quality and/or
service. There can be no assurance that the Company will be able to successfully
extend existing contracts or successfully negotiate new ones.
RISKS RELATING TO TECHNOLOGICAL OBSOLESCENCE. The Company budgets approximately
$2 Million per year for capital expenditures. Significant changes or
improvements in printing technology could require the Company to accelerate its
capital spending in order to remain competitive. Unanticipated capital expenses
can have a significant impact on the Company's results of operations and
financial condition, and could make it difficult to continue to compete
effectively with companies with substantially greater resources.
Another factor related to advancement in technology, though deemed remote at
this time, is the continuing trend toward paperless commerce. Advancements in
automated banking and other services provided by customers of the Company could
significantly decrease the use of business forms in niche markets served by the
Company. A significant decrease in the use of business forms in markets serviced
by the Company could require a major shift in the Company's business direction.
RISKS RELATING TO COMPETITION. The markets for the Company's products are highly
competitive and relatively fragmented, with a large number of competitors. Many
of the Company's competitors are larger and have greater financial, marketing
and technical resources. Although the Company has invested significant resources
in computer technology, capital equipment and project specialization in an
attempt to differentiate itself from certain of its competitors, there can be no
assurance that competitors will not take actions, including developing new
technologies, products and services, which could adversely affect the Company's
sales and operating results.
RISKS RELATED TO ACQUISITIONS. A component of the Company's business strategy
includes growth through the acquisition of businesses complimentary to its
current business. The Company has been successful in integrating recent
acquisitions into its operations. There can be no assurance, however, that the
Company will be able to locate or successfully integrate future acquisitions.
RISKS RELATED TO DISRUPTIONS IN OPERATING SYSTEMS. The Company has become
increasingly dependent upon its manufacturing, administrative and computer
processing infrastructure and operations to process its orders on an efficient,
cost competitive
<PAGE>
and profitable basis. The Company has implemented commercially reasonable
safeguards to reduce the likelihood of property loss or service disruptions
and has secured property and business interruption insurance to minimize the
adverse financial consequences arising from a select group of risks. However,
the Company can make no assurances that its infrastructure and operations are
not susceptible to loss or disruption, whether caused by intentional or
unintentional acts of Company personnel or third party service providers or
natural disasters such as earthquakes, fires or severe storms. In addition,
the Company can make no assurance that its insurance coverage will adequately
respond to all potential causes of property loss or service disruption. In
the event that any such acts or disasters lead to property loss or operating
system disruption for which property and business interruption insurance
coverage is unavailable or insufficient, the Company's financial performance
and long term prospects could be materially adversely affected.
RISKS RELATING TO YEAR 2000. A description of the relative risks in the
Company's readiness for the Year 2000 is set forth in Management's Discussion
and Analysis of Results of Operations and Financial Condition in its Annual
Report.
RISKS RELATING TO KEY PERSONNEL. The Company's success is highly dependent on
the efforts of its senior management, including Roger T. Bredesen, its Chief
Executive Officer, Kenneth E. Overstreet, its President, Mary Ann Morin, its
Chief Financial Officer and Don Dearborn and Stan Klarenbeek, both Vice
Presidents. The loss of the services of one or more of these individuals could
adversely affect the Company.
