SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1994 -- Commission File No.0-2251
___________________________________
SCI SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0583436
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35805
(Address of principal executive offices) (Zip Code)
_________________________________________
(302) 998-0592
(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, $.10 Par Value
5-5/8% Convertible Subordinated Debentures, due March 1, 2012
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes .X. No ....
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [....]
At August 29, 1994, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $499,094,000.
At August 29, 1994, there were 27,315,699 outstanding shares of the
registrant's Common Stock.
Documents Incorporated By Reference
Portions of the registrant's 1994 Annual Report to
Shareholders are incorporated by reference into Parts I and II.
Portions of the registrant's definitive Proxy Statement for
its October 28, 1994 Annual Meeting of Shareholders are
incorporated by reference into Part III.
PART I AND II
DOCUMENTS INCORPORATED BY REFERENCE
The following information required by Parts I and II is
incorporated herein by reference to the Company's 1994 Annual
Report to Shareholders, included herein as Exhibit 13:
Excerpts
from Form 10-K
(contained in
the 1994 Annual
Annual Report to
Report Shareholders)
Pages Page (s)
PART I.
ITEM 1. Business Inside Front 1 to 3
Cover
and 4 to 8
ITEM 2. Properties 3
ITEM 3. Legal Proceedings 3
ITEM 4. Submission of Matters to a
Vote of Security Holders 3
PART II.
ITEM 5. Market for Registrant's Common
Equity and Related Stockholder
Matters 3
ITEM 6. Selected Financial Data 1
ITEM 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 2 and 3 3 to 5
ITEM 8. Consolidated Financial Statements
and Supplementary Data 4 to 12
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure Not Applicable
PART III
DOCUMENT INCORPORATED BY REFERENCE
The following information required by Part III is incorporated herein
by reference to the Company's definitive Proxy Statement pursuant to
Regulation 14A for the October 28, 1994 Annual Meeting of Shareholders,
filed with The Securities and Exchange Commission within 120 days after
close of the fiscal year:
Proxy Statement
Page (s)
ITEM 10. Directors and Executive Officers of the Registrant 2, 3 and 6
ITEM 11. Executive Compensation 6 to 8
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management 1 and 2
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Index to exhibits, financial statements and schedules
(1) Financial Statements
The following consolidated financial statements of the registrant are
included in Item 8:
Excerpts from
Form 10-K
(contained in
the 1994 Annual
Report to
Shareholders)
Page (s)
Consolidated Balance Sheets as of June 30, 1994, 1993, and 6
1992
For the years ended June 30, 1994, 1993 and 1992:
Consolidated Statements of Income 7
Consolidated Statements of Shareholders' Equity 7
Consolidated Statements of Cash Flows 8
Notes to Consolidated Financial Statements 9 to 14
Report of Ernst & Young LLP, Independent Auditors 15
(2) Schedules
The following consolidated financial statement schedules of
the registrant are included hereafter:
Schedule V - Property, plant and equipment
Schedule VI - Accumulated depreciation and amortization of property,
plant and equipment.
Schedule VIII - Valuation and qualifying accounts
Schedule IX - Short-term borrowings
All other schedules are omitted as inapplicable or because the required
information is included in the Consolidated Financial Statements or notes
thereto.
(3) Exhibits
Number DESCRIPTION
3.1 Second Restated Certificate of Incorporation, as amended,
(incorporated herein by reference to Exhibit 4.1 to Registration
Statement on Form S-8, File No. 2-86230, as amended), and
Certificate of Amendment of the Second Restated Certificate of
Incorporation as filed with the Secretary of State of Delaware
on April 7, 1988, (incorporated by reference to Exhibit 3.1 to the
Registrant's Report on Form 10-K for fiscal year ended June 30, 1988).
3.2 By-laws of the Registrant, as amended (incorporated herein by
reference to Exhibit 4(e) to Registration Statement on Form S-3,
Registration Statement No. 33-12115, as amended).
4.1 Form of Indenture relating to $75,000,000, 5 5/8% Convertible
Subordinated Debentures due March 1, 2012, (incorporated herein by
reference to Exhibit 4(a) to Registration Statement on Form S-3,
Registration Statement No. 33-12115).
10(a)(1) Credit Agreement dated June 25, 1993, by and between the Registrant,
its Obligated Subsidiaries and its Lenders. (Incorporated herein by
reference to exhibit of the same number to the Registrant's Annual
Report on Form 10-K for the year ended June 30, 1993.)
(b)(1) Lease Agreement, dated June 1, 1988, between the Registrant and The
Industrial Development Board of the City of Huntsville (Alabama)
relating to a certain property in Huntsville, Alabama. (Incorporated
herein by reference to exhibit of the same number to the Registrant's
Annual Report on Form 10-K for the year ended June 30, 1989.)
(2) First Amendment, dated June 1, 1988, to the above referenced Lease
Agreement between the Registrant and The Industrial Development Board
of the City of Huntsville (Alabama). (Incorporated herein by reference
to exhibit of the same number to the Registrant's Annual Report on Form
10-K for the year ended June 30, 1989.)
(c)(1) Mortgage, Assignment of Leases and Security Agreement, dated
January 1,1989, between The Industrial Development Board of the
City of Decatur (Alabama) and Registrant relating to certain
properties in Lacey's Spring, Alabama refinanced with Industrial
Development Revenue Bonds. (Incorporated herein by reference to
Exhibit (10)(e)(1) to the Registrant's Annual Report on Form 10-K for
the year ended June 30, 1989.)
(2) Lease Agreement, dated as of January 1, 1989, between The Industrial
Development Board of the City of Decatur (Alabama) and the Registrant.
(Incorporated herein by reference to Exhibit (10) (e) (2) to the
Registrant's Annual Report on Form 10-K for the year ended
June 30, 1989.)
(d)(1) Mortgage, Assignment of Leases and Security Agreement, dated as of
January 1, 1989, from The Industrial Development Arab (Alabama) and the
Registrant to AmSouth Bank N.A. relating to certain properties in Lacey's
Spring, Alabama refinanced with Industrial Development Revenue Bonds.
(Incorporated herein by reference to Exhibit (10) (f) (1) to the
Registrant's Annual Report on Form 10-K for the year ended June 30, 1989.)
(2) Lease Agreement, dated as of January 1, 1989, between The Industrial
Development Board of the City of Arab (Alabama) and the Registrant.
(Incorporated herein by reference to Exhibit (10) (f) (2) to the
Registrant's Annual Report on Form 10-K for the year ended June 30, 1989.)
(e)(1) Directors and Officers Liability Insurance Policies
(f)(1) Incentive Stock Option Plan, as amended and restated December 1, 1988
(effective October 28, 1988). (Incorporated herein by reference to
Exhibit (10) (h) (1) to the Registrant's Annual Report on Form 10-K for
the year ended June 30, 1989.) (Management contracts or compensatory plan)
(g)(1) Non-Qualified Stock Option Plan, as amended and restated December 1,
1988 (effective October 28, 1988). (Incorporated herein by reference to
Exhibit (10) (i) (1) to the Registrant's Annual Report on Form 10-K for
the year ended June 30, 1989.) (Management contracts or compensatory plan)
(h)(1) Form of proposed SCI Systems, Inc. 1994 Stock Option Incentive Plan to
be voted on at October 28, 1994, Annual Meeting of Shareholders.
(Management contracts or compensatory plan)
(i)(1) Savings Plan of the SCI Systems, Inc. Employee Financial Security
Program, dated July 1, 1991. (Management contracts or compensatory plan)
(j)(1) Deferred Compensation Plan of SCI Systems Employee Financial Security
Program, as amended and restated January 1,1992.
(Management contracts or compensatory plan)
(k)(1) Supplemental Retirement Plan of the SCI Systems, Inc. Employee
Financial Security Program, as amended and restated April 1994.
(Management contracts or compensatory plan)
(l)(1) Mortgage and Security Agreement, dated July 20, 1989, by the
Registrant and First Union National Bank of North Carolina relating to
a certain property in Hooksett, New Hampshire financed with Industrial
Development Revenue Bonds. (Incorporated herein by reference to
Exhibit 10 (o)(1) to the Registrant's Report on Form 10-K for the
fiscal year ended June 30, 1989.)
(2) Promissory Note, dated July 1, 1989, between the Registrant and the
Industrial Development Authority of the State of New Hampshire.
(Incorporated herein by reference to Exhibit 10 (o)(2) to the
Registrant's Report on Form 10-K for the fiscal year ended June 30, 1989.)
(3) Loan Agreement, dated July 1, 1989, between the Industrial Development
Authority of New Hampshire and the Registrant. (incorporated herein by
reference to Exhibit 10 (o)(4) to the Registrant's Report on Form 10-K
for the fiscal year ended June 30, 1989.)
11 Computation of primary and fully diluted earnings per share for the
years ended June 30, 1994, 1993 and 1992.
13 1994 Annual Report to Shareholders. Except for the parts of the SCI
Systems, Inc. Annual Report expressly incorporated into this Form 10-K
by reference, the Annual Report is not to be deemed filed with the
Securities and Exchange Commission.
22 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
(b) One report on Form 8-K was filed by the Registrant for the period
March 28, 1994 through June 30, 1994. The report was filed on
April 18, 1994, concerning the Company's development of a plan that
involves the discontinuation of certain non core businesses with the
objective of future profit margin improvement. Further, the report
indicated this plan would result in a net loss for the March 1994 quarter.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(In thousands of dollars)
Balance Balance
Beginning Additions End
Classification of Year at Cost Retirements Other of Year
Year ended June 30, 1994
Land and improvements $ 15,017 $ 82 $ -0- $ 16 <F1> $ 15,115
Building and
improvements 76,631 2,804 -0- 3,652 <F2> 83,087
Equipment 267,209 43,874 (8,379) (1,692)<F3> 301,012
Construction
in progress 272 (272) -0- -0- -0-
-------------------------------------------------------
$359,129 $46,488 $ (8,379) $1,976 $399,214
=======================================================
Year ended June 30, 1993:
Land and improvements $ 13,784 $ 1,321 $ -0- $ (88)<F1> $ 15,017
Building and
improvements 69,516 8,815 (20) (1,680)<F1> 76,631
Equipment 226,168 74,809 (27,311) (6,457)<F1> 267,209
Construction
in progress 1,133 (861) -0- -0- 272
-------------------------------------------------------
$310,601 $84,084 $(27,331) $(8,225) $359,129
=======================================================
Year ended June 30, 1992:
Land and improvements $ 12,227 $ 1,506 $ -0- $ 51<F1> $ 13,784
Building and
improvements 61,222 7,592 (195) 897<F1> 69,516
Equipment 203,576 24,455 (4,844) 2,981<F1> 226,168
Construction
in progress 4,832 (3,731) -0- 32 1,133
--------------------------------------------------------
$281,857 $29,822 $ (5,039) $ 3,961 $310,601
========================================================
<F1> Represents the translation effect of foreign held property, plant and
equipment.
<F2> Represents $177 for the translation effect of foreign held property,
plant and equipment, and $3,475 reclassified from equipment.
<F3> Represents $1,783 for the translation effect of foreign held property,
plant and equipment, and ($3,475) reclassified to buildings and improvements.
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY,PLANT AND EQUIPMENT
(In thousands of dollars)
Balance Balance
Beginning End
Classification of Year Provision Retirements Other of Year
Year ended June 30, 1994
Land and improvements $ 811 $ 191 $ -0- $ -0- $ 1,002
Building and
improvements 22,581 6,068 -0- 2,018<F2> 30,667
Equipment 151,705 40,802 (7,691) (39)<F3> 184,777
-------------------------------------------------------
$175,097 $47,061 $ (7,691) $ 1,979 $216,446
========================================================
Year ended June 30, 1993:
Land and improvements $ 628 $ 183 $ -0- $ -0- $ 811
Building and
improvements 19,157 4,068 (19) (625)<F1> 22,581
Equipment 147,129 34,794 (26,337) (3,881)<F1> 151,705
--------------------------------------------------------
$166,914 $39,045 $(26,356) $(4,506) $175,097
========================================================
Year ended June 30, 1992:
Land and improvements $ 468 $ 160 $ -0- $ -0- $ 628
Building and
improvements 14,582 4,054 (187) 708<F1> 19,157
Equipment 118,565 31,910 (4,697) 1,351<F1> 147,129
--------------------------------------------------------
$133,615 $36,124 $ (4,884) $2,059 $166,914
========================================================
<F1> Other changes represent the translation effect of foreign held property,
plant and equipment.
<F2> Represents $99 for the translation effect of foreign held property, plant
and equipment, and $1,919 reclassified from equipment.
<F3> Represents $1,880 for the translation effect of foreign held property,
plant and equipment, and ($1,919) reclassified to buildings and improvements.
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)
<CAPTION>
<C> <C> <C> <C> <C>
Additions Additions
Balance Charged to Charged to Balance
Beginning Costs and Other Deductions End
of Year Expenses Accounts <F1> of Year
<S>
Description
Year ended June 30, 1994:
Allowance for
doubtful accounts $ 4,600 $ 4,192 $ -0- $ 4,525 $ 4,267
============================================================
Year ended June 30, 1993:
Allowance for
doubtful accounts $ 4,600 $ 2,621 $ -0- $ 2,621 $ 4,600
============================================================
Year ended June 30, 1992:
Allowance for
doubtful accounts $ 4,400 $ 867 $ -0- $ 667 $ 4,600
============================================================
<F1> Uncollectible accounts written off, net of recoveries
</TABLE>
<TABLE>
SCHEDULE IX - SHORT-TERM BORROWINGS
(In thousands of dollars)
<CAPTION>
<C> <C> <C> <C> <C>
<S>
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate End Interest During the During the During the
Short-term Borrowings <F1> of Year Rate Year Year<F2> Year<F3>
Year ended June 30, 1994:
Foreign Bank Overdraft Facilities $ 55 7.2% $ 5,579 $ 1,522 12.3%
Year ended June 30, 1993:
Foreign Bank Overdraft Facilities $ -0- 11.4% $ 16 $ 1 16.8%
Year ended June 30, 1992:
Foreign Bank Overdraft Facilities $ 1,470 14.3% $ 3,001 $ 624 3.7%
<F1> Foreign bank overdraft facilities are generally payable on demand with interest at the lending bank's prime rate.
Such borrowings are normally outstanding for brief periods of time.
<F2> The average amount of short-term borrowings was determined by using the average month-end balances.
<F3> The weighted average interest rate was computed by dividing the the total interest expense by the average
amount outstanding during the year.
</TABLE>
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.
Date: September 26, 1994 SCI SYSTEMS, INC.
By: Olin B. King/s/
----------------
Olin B. King
Chairman of the Board
and Chief Executive 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.
DATE SIGNATURE TITLE
September 26, 1994 Olin B. King /s/
----------------
Olin B. King Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
(Acting Principal Financial
and Accounting Officer)
September 26, 1994 A. Eugene Sapp, Jr /s/
---------------------
A. Eugene Sapp, Jr. Director, President, and
Chief Operating Officer
(Principal Operating Officer)
September 26, 1994 Howard H. Callaway /s/
----------------------
Howard H. Callaway Director
September 26, 1994 William E. Fruhan /s/
---------------------
William E. Fruhan Director
September 26, 1994 Joseph C. Moquin /s/
--------------------
Joseph C. Moquin Director
September 26, 1994 Wayne Shortridge /s/
--------------------
Wayne Shortridge Director
September 26, 1994 G. Robert Tod /s/
-----------------
G. Robert Tod Director
September 26, 1994 Jackie M. Ward /s/
------------------
Jackie M. Ward Director
Exhibit 10 (e) (1)
SUMMARY OF DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICIES
Primary Coverage:
Carrier: Fidelity and Casualty Insurance Company
Coverage: $5,000,000
Deductibles: None
Policy Number: CES 15110 (5/93) and CES 15112 (5/93)
Policy period: 8/01/94 to 8/01/95
Secondary Coverage:
Carrier: St Paul Surplus Lines Ins Co
Coverage: $5,000,000
Deductibles: $175,000
Policy Number: SE 05500608
Policy period: 8/01/94 to 8/01/95
(END OF EXHIBIT 10 (e) (1) )
EXHIBIT 10 (h) (1) TO FORM I0-K FOR THE FISCAL YEAR ENDED JUNE 30, 1994
SCI SYSTEMS, INC.
1994 STOCK OPTION INCENTIVE PLAN
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS ....................................1
SECTION 2 THE STOCK INCENTIVE PLAN....................... 2
2.1 Purpose of the Plan .............................. 2
2.2 Stock Subject to the Plan.......................2
2.3 Administration of the Plan.........................2
2.4 Eligibility and Limits............................3
SECTION 3 TERMS OF STOCK OPTIONS GRANTED TO EMPLOYEES AND OFFICERS.....3
3.1 Terms and Conditions of Options Granted to Employees and Officers
(a) Number of Option Shares....................3
(b) Stock Option Agreement.................3
(c) Type of Option.........................4
(d) Option Price..........................4
(e) Option Term............................4
(f) Payment...............................4
(g) Conditions to the Exercise of an Option...........5
(h) Termination of Incentive StockOption..............5
(i) Special Provisions for Certain Substitute Options....5
(j) Date of Grant.....................5
(k) Nonassignability................6
3.2 Treatment of Awards Upon Termination of Employment......6
SECTION 4 TERMS OF STOCK OPTIONS GRANTED TO DIRECTORS...........6
4.1 Number of Option Shares.............................6
4.2 Stock Option Agreement..........6
4.3 Type of Option...............6
4.4 Option Price...................6
4.5 Option Term.....................6
4.6 Payment.......................7
4.7 Date of Grant......................7
4.8 Nonassignability..................7
4.9 Cessation of Board Membership...........7
4.10 Timing of Directions...............7
SECTION 5 RESTRICTIONS ON STOCK.................7
SECTION 6 GENERAL PROVISIONS....................7
6.1 Withholding..........................7
6.2 Changes in Capitalization; Merger; Liquidation....8
6.3 Cash Awards.....................9
6.4 Compliance with Code...............9
6.5 Right to Terminate Employment.........9
6.6 Non-alienation of Benefits..............9
6.7 Restrictions on Delivery and Sale of Shares; Legends........9
6.8 Termination and Amendment of the Plan...............9
6.9 Stockholder Approval........................10
6.10 Choice of Law....................10
6.11 Effective Date of Plan....................10
SCI SYSTEMS, INC
1994 STOCK OPTION INCENTIVE PLAN
SECTION 1 DEFINITIONS
Whenever used herein, the masculine pronoun shall be deemed to include the
feminine, and the singular to include the plural,
unless the context clearly indicates otherwise, and the
following capitalized words and phrases are used herein with the
meaning thereafter ascribed:
1.1 "Board" means the board of directors of the Company.
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Committee" means the committee appointed by the Board to
administer the Plan.
1.4 "Company" means SCI Systems, Inc., a Delaware corporation.
1.5 "Director Fee" means fees payable for the performance of
duties as a director of the Company, but shall not include
meeting or committee fees or expense reimbursements paid to a
director.
1.6 "Disposition" means any conveyance, sale, transfer,
assignment, pledge or hypothecation, whether outright or as
security, inter vivos or testamentary, with or without
consideration, voluntary or involuntary.
1.7 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
1.8 "Exercise Price" means the price per share of Stock
purchasable under any Option.
1.9 "Fair Market Value" with regard to a date means the closing
price at which Stock shall have been sold on the last trading
date prior to that date as reported by the Nasdaq National
Market System (or, if applicable, as reported by a national
securities exchange selected by the Committee on which the
shares of Stock are then actively traded) and published in The
Wall Street Journal; provided that, for purposes of granting
Options other than incentive stock options, Fair Market Value of
the shares of Stock may be determined by the Committee by
reference to the average market value determined over a period
certain or as of specified dates, to a tender offer price for
the shares of Stock (if settlement of an award is triggered by
such an event) or to any other reasonable measure of fair market
value.
1.10 "Option" means a non-qualified stock option or an incentive
stock option.
1.11 "Over 10% Owner" means an individual who at the time an
incentive stock option is granted owns Stock possessing more
than 10% of the total combined voting power of the Company or
one of its Subsidiaries, determined by applying the attribution
rules of Code Section 424(d).
1.12 "Participant" means an individual who receives an Option
hereunder.
1.13 "Plan" means the SCI Systems, Inc. 1994 Stock Option
Incentive Plan.
1.14 "Stock" means the Company's common stock, $0.10 par value.
1.15 "Stock Option Agreement" means an agreement between the
Company and a Participant or other documentation evidencing an
award of an Option.
1.16 "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company
if, with respect to incentive stock options, at the time of the
granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 Purpose of the Plan. The Plan is intended to (a) provide
incentive to selected employees, officers and directors of the
Company and its affiliates to stimulate their efforts toward the
continued success of the Company and to operate and manage the
business in a manner that will provide for the long-term growth
and profitability of the Company; (b) encourage stock ownership
by selected employees, officers and directors by providing them
with a means to acquire a proprietary interest in the Company,
acquire shares of Stock, or to receive compensation which is
based upon appreciation in the value of Stock; and (c) provide a
means of obtaining, rewarding and retaining select employees,
officers and directors.
2.2 Stock Subject to the Plan. Subject to adjustment in
accordance with Section 5.2, 1,300,000 shares of Stock (the
"Maximum Plan Shares", of which 302,974 shares are those which
were released from reservation under the SCI Systems, Inc.
Non-Qualified Stock Option Plan and the SCI Systems, Inc.
Incentive Stock Option Plan immediately prior to adoption of
this Plan), are hereby reserved exclusively for issuance
pursuant to Options. At no time shall the Company have
outstanding Options subject to Section 16 of the Exchange Act
and shares of Stock issued in respect of Options in excess of
the Maximum Plan Shares; for this purpose, the outstanding
Options and shares of Stock issued in respect of Options shall
be computed consistent with Rule 16b-3(a)(1) as promulgated
under the Exchange Act. To the extent permitted by Rule
16b-3(a)(1) as promulgated under the Exchange Act, the shares of
Stock attributable to the nonvested, unpaid, unexercised,
unconverted or otherwise unsettled portion of any Option that is
forfeited or cancelled or expires or terminates for any reason
without becoming vested, paid, exercised, converted or otherwise
settled in full shall again be available for purposes of the
Plan.
2.3 Administration of the Plan. The Plan shall be administered
by the Committee.
(a) With respect to awards under the Plan to key employees and
officers, the Committee shall be comprised solely of
"disinterested persons," as defined in Rule 16b-3 as promulgated
under the Exchange Act, who are then members of the Board. The
Committee shall have full authority in its discretion to
determine the key employees and officers of the Company or its
affiliates to whom Options shall be granted and the terms and
provisions of such Options.
(b) Subject to the provisions of the Plan, the Committee shall
have full and conclusive authority to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to
the Plan; to determine the terms and provisions of the
respective Stock Option Agreements and to make all other
determinations necessary or advisable for the proper
administration of the Plan. The Committee's determinations
under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are
similarly situated). The Committee's decisions shall be final
and binding on all Participants.
2.4 Eligibility and Limits. Options may be granted only to
employees, officers and directors of the Company, or any
affiliate of the Company; provided, however, that directors who
serve on the Committee shall not be eligible to receive awards
under Plan Section 3 that are subject to Section 16 of the
Exchange Act while they are members of the Committee and that an
incentive stock option may only be granted to an employee of the
Company or any Subsidiary. In the case of incentive stock
options, the aggregate Fair Market Value (determined as at the
date an incentive stock option is granted) of stock with respect
to which stock options intended to meet the requirements of Code
Section 422 become exercisable for the first time by an
individual during any calendar year under all plans of the
Company and its Subsidiaries shall not exceed $100,000; provided
further, that if the limitation is exceeded, the incentive stock
option(s) which cause the limitation to be exceeded shall be
treated as non-qualified stock option(s).
SECTION 3 TERMS OF STOCK OPTIONS GRANTED TO
EMPLOYEES AND OFFICERS
3.1 Terms and Conditions of Options Granted to Employees and
Officers. No more than 1,200,000 shares of Stock shall be
available for issuance as Options to employees and officers
under the Plan.
(a) Number of Option Shares. The number of shares of Stock as
to which an Option shall be granted pursuant to this Section 3
shall be determined by the Committee in its sole discretion,
subject to the provisions of Section 2.2 as to the total number
of shares available for grants under the Plan. Notwithstanding
the preceding, to the extent required under Section 162(m) of
the Code and the regulations thereunder for compensation to be
treated as qualified performance-based compensation, the maximum
number of shares of Stock with respect to which Options may be
granted during any one year period to any employee shall not
exceed 100,000.
(b) Stock Option Agreement. Each Option granted pursuant to
this Section 3 shall either be evidenced by a Stock Option
Agreement in such form and containing such terms, conditions and
restrictions as the Committee may determine to be appropriate.
Each Stock Option Agreement shall be subject to the terms of the
Plan and any provisions contained in the Stock Option Agreement
that are inconsistent with the Plan shall be null and void.
(c) Type of Option. At the time any Option is granted pursuant
to this Section 3, the Committee shall determine whether the
Option is to be an incentive stock option described in Code
Section 422 or a non-qualified stock option, and the Option
shall be clearly identified as to its status as an incentive
stock option or a non-qualified stock option. At the time any
incentive stock option granted under the Plan is exercised, the
Company shall be entitled to legend the certificates
representing the shares of Stock purchased pursuant to the
Option to clearly identify them as representing the shares
purchased upon the exercise of an incentive stock option. An
incentive stock option may only be granted within 10 years from
the earlier of the date the Plan is adopted or approved by the
Company's stockholders.
(d) Option Price. Subject to adjustment in accordance with
Section 6.2 and the other provisions of this Section 3, the
Exercise Price under any Option shall be as set forth in the
applicable Stock Option Agreement. Notwithstanding the
preceding, the Exercise Price under any incentive stock option
shall not be less than the Fair Market Value on the date the
Option is granted, and with respect to each grant of an
incentive stock option to a ParticipantwhoisanOver 10% Owner,
the Exercise Price shall not be less than 110% of the Fair
Market Value on the date the Option is granted.
(e) Option Term. Any incentive stock option granted to a
Participant who is not an Over 10% Owner shall not be
exercisable after the expiration of 10 years after the date the
Option is granted. Any incentive stock option granted to a
Participant who is an Over 10% Owner shall not be exercisable
after the expiration of five years after the date the Option is
granted. The term of any non-qualified stock option shall be as
specified in the applicable Stock Option Agreement.
(f) Payment. Payment for all shares of Stock purchased pursuant
to the exercise of an Option granted pursuant to this Section 3
shall be made in any form or manner authorized by the Committee
in the Stock Option Agreement, including, but not limited to,
(i) cash, (ii) by delivery to the Company of a number of shares
of Stock which have been owned by the holder for at least six
months prior to the date of exercise having an aggregate Fair
Market Value of not less than the product of the Exercise Price
multiplied by the number of shares the Participant intends to
purchase upon exercise of the Option on the date of delivery;
(iii) in a cashless exercise through a broker; or (iv) by having
a number of shares of Stock withheld, the Fair Market Value of
which as of the date of exercise is sufficient to satisfy the
Exercise Price. In its discretion, the Committee also may
authorize (at the time an Option is granted or thereafter)
Company financing to assist the Participant as to payment of the
Exercise Price on such terms as may be offered by the Committee
in its discretion. Any such financing shall require the payment
by the Participant of interest on the amount financed at a rate
not less than the "applicable federal rate" under the Code. If
a Stock Option Agreement so provides, the Participant may be
granted a new Option to purchase a number of shares of Stock
equal to the number of previously owned shares of Stock tendered
in payment for each share of Stock purchased pursuant to the
terms of the Stock Option Agreement. Any such new Option shall
be subject to the terms and conditions of the Stock Option
Agreement pursuant to which such new Option is granted. Payment
of the Exercise Price shall be made at the time that the Option
or any part thereof is exercised, and no shares shall be issued
or delivered upon exercise of an Option until full payment has
been made by the Participant. The holder of an Option, as such,
shall have none of the rights of a stockholder.
(g) Conditions to the Exercise of an Option. Each Option
granted pursuant to this Section 3 shall be exercisable by whom,
at such time or times, or upon the occurrence of such event or
events, and in such amounts, as the Committee shall specify in
the Stock Option Agreement; provided, however, that subsequent
to the grant of an Option, the Committee, at any time before
complete termination of such Option, may accelerate the time or
times at which such Option may be exercised in whole or in part,
and may permit the Participant or any other designated person to
exercise the Option, or any portion thereof, for all or part of
the remaining Option term, notwithstanding any provision of the
Stock Option Agreement to the contrary.
(h) Termination of Incentive Stock Option. With respect to an
incentive stock option, in the event of termination of
employment of a Participant for any reason other than death or
disability, the Option or portion thereof held by the
Participant which is unexercised shall expire, terminate, and
become unexercisable no later than the expiration of three
months after the date of termination of employment; provided,
however, that in the case of a holder whose termination of
employment is due to death or disability, one year shall be
substituted for such three month period. For purposes of this
Subsection (h), termination of employment of the Participant
shall not be deemed to have occurred if the Participant is
employed by another corporation (or a parent or subsidiary
corporation of such other corporation) which has assumed the
incentive stock option of the Participant in a transaction to
which Code Section 424(a) is applicable.
(i) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3, any
Option issued in substitution for an option previously issued by
another entity, which substitution occurs in connection with a
transaction to which Code Section 424(a) is applicable, may
provide for an exercise price computed in accordance with such
Code Section and the regulations thereunder and may contain such
other terms and conditions as the Committee may prescribe to
cause such substitute Option to contain as nearly as possible
the same terms and conditions (including the applicable vesting
and termination provisions) as those contained in the previously
issued option being replaced thereby.
(j) Date of Grant. The date an Option is granted pursuant to
this Section 3 shall be the date on which the Committee has
approved the terms and conditions of the Option and has
determined the recipient of the Option and the number of shares
covered by the Option and has taken all such other action
necessary to complete the grant of the Option.
(k) Nonassignability. Options granted pursuant to this Section
3 shall not be transferable or assignable except by will or by
the laws of descent and distribution. Such Options shall be
exercisable, during the Participant's lifetime, only by the
Participant; or in the event of the death of the Participant, by
the legal representatives of the Participant's estate or if no
legal representative has been appointed, by the successor in
interest determined under the Participant's will.
3.2 Treatment of Awards Upon Termination of Employment. Except
as otherwise provided by Plan Section 3.1(h), any award pursuant
to this Section 3 to a Participant who has experienced a
termination of employment may be cancelled, accelerated, paid or
continued, as provided in the applicable Stock Option Agreement,
or, in the absence of such provision, as the Committee may
determine. The portion of any award exercisable in the event of
continuation or the amount of any payment due under a continued
award may be adjusted by the Committee to reflect the
Participant's period of service from the date of grant through
the date of the Participant's termination of employment or such
other factors as the Committee determines are relevant to its
decision to continue the award.
SECTION 4 TERMS OF STOCK OPTIONS GRANTED TO DIRECTORS
Each individual serving as a non-employee director of the
Company as of the effective date of the Plan may irrevocably
direct that all or a portion of his or her Director Fee for the
remainder of the term for which he or she is serving as a
director be allocated to the purchase of Options on his or her
behalf. The direction shall be effective with respect to those
Director Fees payable after the expiration of six months
following the Company's receipt of the direction and must be
made with respect to all or a portion (in 25% increments) of
each payment. Options granted under this Section 4 shall be
subject to the following terms and conditions:
4.1 Number of Option Shares. A Participant shall be granted an
Option to purchase that number of shares of Stock with an
aggregate Fair Market Value (determined as of the date of grant)
equal to four times the amount of the Director Fee which the
Participant allocated to the purchase of Options.
4.2 Stock Option Agreement. Each Option shall be evidenced by a
Stock Option Agreement which shall incorporate the terms of the
Plan.
4.3 Type of Option. Options shall be non-qualified stock
options.
4.4 Option Price. The Exercise Price for a share of Stock
subject to an Option shall be the Fair Market Value (determined
as of the date of grant) of a share of Stock.
4.5 Option Term. Each Option may be exercised for that
percentage of shares of Stock subject to the Option as to which
the Option has become vested, reduced by that number of shares
of Stock subject to the Option which have been previously
exercised. The Option shall vest in equal portions on each
"Vesting Date," provided that the Participant is still a
director on the Vesting Date. For purpose of this Section 4,
the term Vesting Date shall mean the date of grant and each
Board meeting at which Director Fees are payable during the
remainder of the director's term, provided that Director Fees
are paid on a semi-annual basis. If Director Fees are no longer
payable on a semi-annual basis, then the term Vesting Date shall
mean the date of grant and thereafter any annual meeting of the
Company's shareholders or any six month anniversary of an annual
meeting of the Company's shareholders occuring during the
director's term; provided that the next vesting date is no less
than four months from any other vesting date. Once exercisable,
each Option granted hereunder shall remain exercisable until the
tenth anniversary of the date of grant; provided, however, that
in the event of a Participant's death prior to the expiration of
any such Option term, the Option may continue to be exercised by
the Participant's legal representative until the expiration of
such Option term.
4.6 Payment. Payment for all shares of Stock purchased pursuant
to the exercise of an Option shall be made (i) in cash, (ii) by
delivery to the Company of a number of shares of Stock which
have been owned by the holder for at least six months prior to
the date of exercise having an aggregate Fair Market Value of
not less than the product of the Exercise Price multiplied by
the number of shares the Participant intends to purchase upon
exercise of the Option on the date of delivery; or (iii) in a
cashless exercise through a broker. The holder of an Option, as
such, shall have none of the rights of a stockholder.
4.7 Date of Grant. An Option shall be granted as of the date on
which the Director Fee is payable for which a direction is
applicable.
4.8 Nonassignability. Options shall not be transferable or
assignable except by will or by the laws of descent and
distribution. Such Options shall be exercisable, during the
Participant's lifetime, only by the Participant; or in the event
of the death of the Participant, by the legal representatives of
the Participant's estate or if no legal representative has been
appointed, by the successor in interest determined under the
Participant's will.
4.9 Timing of Directions. Each non-employee director shall make
a direction pursuant to this Section 4 no later than 30 days
following his or her election, reelection or appointment to the
Board; provided, however, that any non-employee director who is
a member of the Board as of the Plan's effective date shall make
such a direction no later than 30 days following the Plan's
effective date.
SECTION 5 RESTRICTIONS ON STOCK
The Participant shall not have the right to make or permit to
exist any Disposition of the shares of Stock issued pursuant to
the Plan except as provided in the Plan or the Stock Option
Agreement. Any Disposition of the shares of Stock issued under
the Plan by the Participant not made in accordance with the Plan
or the Stock Option Agreement shall be void. The Company shall
not recognize, or have the duty to recognize, any Disposition
not made in accordance with the Plan and the Stock Option
Agreement, and the shares so transferred shall continue to be
bound by the Plan and the Stock Option Agreement.
SECTION 6 GENERAL PROVISIONS
6.1 Withholding. The Company shall deduct from all cash
distributions under the Plan any taxes required to be withheld
by federal, state or local government. Whenever the Company
proposes or is required to issue or transfer shares of Stock
under the Plan, the Company shall have the right to require the
recipient to remit to the Company an amount sufficient to
satisfy any federal, state and local withholding tax
requirements prior to the delivery of any certificate or
certificates for such shares. A Participant may pay the
withholding tax in cash, or, if the Stock Option Agreement
provides, a Participant may elect to have the number of shares
of Stock he is to receive reduced by the smallest number of
whole shares of Stock which, when multiplied by the Fair Market
Value of the shares of Stock determined as of the Tax Date
(defined below), is sufficient to satisfy federal, state and
local, if any, withholding taxes arising from exercise of an
Option (a "Withholding Election"). A Participant may make a
Withholding Election only if both of the following conditions
are met: (a) The Withholding Election must be made on or prior
to the date on which the amount of tax required to be withheld
is determined (the "Tax Date") by executing and delivering to
the Company a properly completed notice of Withholding Election
as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable except on
six months advance written notice delivered to the Company;
however, the Committee may in its sole discretion disapprove and
give no effect to the Withholding Election.
6.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the grant of
Options; the number of shares of Stock reserved for issuance
upon the exercise or payment, as applicable, of each outstanding
Option; and the Exercise Price of each outstanding Option shall
be proportionately adjusted for any increase or decrease in the
number of issued shares of Stock resulting from a subdivision or
combination of shares or the payment of a stock dividend in
shares of Stock to holders of outstanding shares of Stock or any
other increase or decrease in the number of shares of Stock
outstanding effected without receipt of consideration by the
Company.
(b) In the event of or anticipation of a merger, consolidation
or other reorganization of the Company or tender offer for
shares of Stock, the Committee may make such adjustments with
respect to awards and take such other action as it deems
necessary or appropriate to reflect or such merger,
consolidation, reorganization or tender offer, including,
without limitation, the substitution of new awards, the
termination or adjustment of outstanding awards, the
acceleration of awards or the removal of restrictions on
outstanding awards. Any adjustment pursuant to this Section 6.2
may provide, in the Committee's discretion, for the elimination
without payment therefor of any fractional shares that might
otherwise become subject to any Option, but shall not otherwise
diminish the then value of the Option.
(c) The existence of the Plan and the Options granted pursuant
to the Plan shall not affect in any way the right or power of
the Company to make or authorize any adjustment,
reclassification, reorganization or other change in its capital
or business structure, any merger or consolidation of the
Company, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof,
the dissolution or liquidation of the Company, any sale or
transfer of all or any part of its business or assets, or any
other corporate act or proceeding.
6.3 Cash Awards. The Committee may, at any time and in its
discretion, grant to any holder of an Option the right to
receive, at such times and in such amounts as determined by the
Committee in its discretion, a cash amount which is intended to
reimburse such person for all or a portion of the federal, state
and local income taxes imposed upon such person as a consequence
of the receipt of the Option or the exercise of rights
thereunder.
6.4 Compliance with Code. All incentive stock options to be
granted hereunder are intended to comply with Code Section 422,
and all provisions of the Plan and all incentive stock options
granted hereunder shall be construed in such manner as to
effectuate that intent.
6.5 Right to Terminate Employment. Nothing in the Plan or in
any Option shall confer upon any Participant the right to
continue as an employee, officer or director of the Company or
any of its affiliates or affect the right of the Company or any
of its affiliates to terminate the Participant's employment or
other relationship with the Company at any time.
6.6 Non-alienation of Benefits. Other than as specifically
provided with regard to the death of a Participant, no benefit
under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge; and any attempt to do so shall be void. No such benefit
shall, prior to receipt by the Participant, be in any manner
liable for or subject to the debts, contracts, liabilities,
engagements or torts of the Participant.
6.7 Restrictions on Delivery and Sale of Shares; Legends. Each
Option is subject to the condition that if at any time the
Committee, in its discretion, shall determine that the listing,
registration or qualification of the shares covered by such
Option upon any securities exchange or under any state or
federal law is necessary or desirable as a condition of or in
connection with the granting of such Option or the purchase or
delivery of shares thereunder, the delivery of any or all shares
pursuant to such Option may be withheld unless and until such
listing, registration or qualification shall have been effected.
If a registration statement is not in effect under the
Securities Act of 1933 or any applicable state securities laws
with respect to the shares of Stock purchasable or otherwise
deliverable under Options then outstanding, the Committee may
require, as a condition of exercise of any Option or as a
condition to any other delivery of Stock pursuant to an Option,
that the Participant or other recipient of an Option represent,
in writing, that the shares received pursuant to the Option are
being acquired for investment and not with a view to
distribution and agree that the shares will not be disposed of
except pursuant to an effective registration statement, unless
the Company shall have received an opinion of counsel that such
disposition is exempt from such requirement under the Securities
Act of 1933 and any applicable state securities laws. The
Company may include on certificates representing shares
delivered pursuant to an Option such legends referring to the
foregoing representations or restrictions or any other
applicable restrictions on resale as the Company, in its
discretion, shall deem appropriate.
6.8 Termination and Amendment of the Plan. The Board at any
time may amend or terminate the Plan without stockholder
approval; provided, however, that the Board may condition any
amendment on the approval of stockholders of the Company if such
approval is necessary or advisable with respect to tax,
securities or other applicable laws. No such termination or
amendment without the consent of the holder of an Option shall
adversely affect the rights of the Participant under such Option.
6.9 Stockholder Approval. The Plan shall be submitted to the
stockholders of the Company for their approval within 12 months
before or after the adoption of the Plan by the Board. If such
approval is not obtained, any Option granted hereunder shall be
void.
6.10 Choice of Law. The laws of the State of Alabama shall
govern the Plan, to the extent not preempted by federal law.
6.11 Effective Date of Plan. The Plan shall become effective as
of the date of its approval by the Board, subject, however, to
the approval of the Plan by the Company's shareholders at their
next annual meeting. Options granted hereunder prior to such
shareholder approval shall be conditioned upon such shareholder
approval. Unless such shareholder approval is obtained by the
first anniversary of the Board's approval, this Plan and any
Options awarded hereunder shall become void thereafter.
SCI SYSTEMS, INC.
By:
Title:
ATTEST:
____ Secretary
[CORPORATE SEAL]
(End of Exhibit 10 (h) (1) )
EXHIBIT 10 (i) (1) TO FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1994
(BEGINNING OF SAVINGS PLAN EXHIBIT)
SAVINGS PLAN
OF THE SCI SYSTEMS, INC.
EMPLOYEE FINANCIAL SECURITY PROGRAM
THIS INDENTURE made as of the 1st day of July, 1991, by SCI
Systems (Alabama), Inc., a corporation duly organized and
existing under the laws of the State of Alabama (hereinafter
called the "Primary Sponsor");
W I T N E S S E T H:
WHEREAS, SCI Systems, Inc. by indenture dated November 23, 1973,
established the Savings Plan of the SCI Systems, Inc. Employee
Financial Security Program (the "Plan") for the benefit of its
employees, which plan from time to time has been amended and
restated; and
WHEREAS, the Primary Sponsor now wishes to amend and restate the
Plan to comply with the Tax Reform Act of 1986, subsequent
legislation and various regulations and rulings, and to merge
the TRASOP/PAYSOP Plan of the SCI Systems, Inc. Employee
Financial Security Program into the Plan; and
WHEREAS, the Plan is intended to be a profit sharing plan within
the meaning of Treasury Regulations Section 1.401-1(b)(1)(ii)
and also contains a cash or deferred arrangement as described in
Section 401(k) of the Internal Revenue Code of 1986; and
NOW, THEREFORE, the Primary Sponsor does hereby amend and
restate the Plan in its entirety, effective as of July 1, 1991
(except to the extent the provisions are required to apply at
another date or to any other members to comply with applicable
law), to read as follows:
SAVINGS PLAN
OF THE SCI SYSTEMS, INC.
EMPLOYEE FINANCIAL SECURITY PROGAM
SECTION 1 DEFINITIONS................3
SECTION 2 ELIGIBILITY ..........12
SECTION 3 CONTRIBUTIONS............12
SECTION 4 ALLOCATIONS ............... 15
SECTION 5 WITHDRAWALS DURING EMPLOYMENT ........ 17
SECTION 6 INDIVIDUAL FUNDS AND INVESTMENT OF TRUST ASSETS......19
SECTION 7 PLAN LOANS ............................22
SECTION 8 DEATH BENEFITS................... 25
SECTION 9 PAYMENT OF BENEFITS ON RETIREMENT OR DEATH.......25
SECTION 10 PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT...27
SECTION 11 ADMINISTRATION OF THE PLAN.............29
SECTION 12 CLAIM REVIEW PROCEDURE...............31
SECTION 13 LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS.... 33
SECTION 14 PROHIBITION AGAINST DIVERSION ...................33
SECTION 15 LIMITATION OF RIGHTS..............................34
SECTION 16 AMENDMENT TO OR TERMINATION OF THE PLAN AND THE TRUST.......34
SECTION 17 ADOPTION OF PLAN BY AFFILIATES.......................35
SECTION 18 QUALIFICATION AND RETURN OF CONTRIBUTIONS.............36
SECTION 19 INCORPORATION OF SPECIAL LIMITATIONS..............37
APPENDIX A SPECIAL NONDISCRIMINATION RULES...................A-1
APPENDIX B LIMITATION ON ALLOCATIONS.........................B-1
APPENDIX C TOP-HEAVY PROVISIONS.........................C-1
APPENDIX D PAYSOP PLAN..............................D-1
SECTION 1
DEFINITIONS
Wherever used herein, the masculine pronoun shall be deemed to
include the feminine, and the singular to include the plural,
unless the context clearly indicates otherwise and the following
words and phrases shall, when used herein, have the meanings set
forth below:
1.1 "Account" means the account established and maintained by
the Plan Administrator to reflect the interest of each Member in
the Fund. In addition to any other accounts as the Plan
Administrator may establish and maintain, the Plan Administrator
shall establish and maintain separate accounts (each of which
shall be adjusted pursuant to the Plan to reflect income, gains,
losses and other credits or charges attributable thereto) for
each Member to be designated as follows:
(a) "Employee Deferral Account" which shall reflect a Member's
interest in contributions made by a Plan Sponsor under Plan
Section 3.1.
(b) "Company Contribution Account" which shall reflect a
Member's interest in contributions made by a Plan Sponsor under
Plan Sections 3.2 and 3.4.
(c) "Non-Deductible Voluntary Contribution Account" which
shall reflect a Member's interest in Voluntary Contributions
made by a Member to the Fund pursuant to Plan Section 3.3.
(d) "Rollover Account" which shall reflect a Member's interest
in Rollover Amounts.
(e) "Direct Transfer Account" which shall reflect the Member's
interest in all assets transferred to the Fund on his behalf in
a trust-to-trust transfer directly from a tax qualified
retirement plan not subject to the survivor annuity requirements
of Code Section 401(a)(11).
(f) "Company Stock Account" which shall reflect a Member's
accrued benefit under the PAYSOP Plan.
The Employee Deferral Account, Non-Deductible Voluntary
Contribution Account and Rollover Account of a Member are
sometimes hereinafter collectively referred to as the
"Contribution Account" of the Member. The Contribution Account
of a Member shall also include his Mandatory Contribution
Account and Qualified Voluntary Contribution Account (as these
terms were defined in versions of the Plan prior to August 30,
1988).
1.2 "Accrued Benefit" means the balance of a Member's Account.
1.3 "Affiliate" means (a) any corporation which is a member of
the same controlled group of corporations (within the meaning of
Code Section 414(b)) as is a Plan Sponsor, (b) any other trade
or business (whether or not incorporated) under common control
(within the meaning of Code Section 414(c)) with a Plan Sponsor,
(c) any other corporation, partnership or other organization
which is a member of an affiliated service group (within the
meaning of Code Section 414(m)) with a Plan Sponsor, and (d) any
other entity required to be aggregated with a Plan Sponsor
pursuant to regulations under Code Section 414(o).
1.4 "Annual Compensation" means the amount paid to an Employee
by a Plan Sponsor (and Affiliates for purposes of Appendices A
and C) during a Plan Year as compensation that would be subject
to income tax withholding under Code Section 3401(a) (but
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 agricultural
labor in Code Section 3401(a)(2)), to the extent not in excess
of the Annual Compensation Limit. Notwithstanding the above,
Annual Compensation shall be determined as follows:
(a) (1) in determining with respect to each Plan Sponsor the
amount of contributions under Plan Section 3 and allocations
under Plan Section 4 made by or on behalf of an Employee, (2)
for purposes of applying the provisions of Appendix A hereto for
such Plan Years as the Secretary of the Treasury may allow,
Annual Compensation shall only include amounts received for the
portion of the Plan Year during which the Employee was a Member;
and
(b) for purposes of applying the Annual Compensation Limit, as
adjusted, with respect to Plan Sections 3 and 4 and Appendix A,
the rules contained in Subsection (b) of the Plan Section
containing the definition of the term "Highly Compensated
Employee" shall apply, except that in applying the rules, the
term "family" shall include only the spouse of the Member and
any lineal descendants of the Member who have not attained age
19 before the close of the Plan Year; and
(c) for all purposes under the Plan except Appendices B and C
hereto, Annual Compensation shall include any amount contributed
by a Plan Sponsor on behalf of an Employee pursuant to a salary
reduction agreement which is not includable in the gross income
of the Employee under Section 125, 402(a)(8), or 402(h) of the
Code; and
(d) for purposes of determining the amount of contributions
under Plan Section 3 and allocations under Plan Section 4 made
by or on behalf of an Employee, Annual Compensation shall
exclude overtime, shift premiums, bonus payments, commissions
and other supplemental remuneration, and shall include any
Deferral Amounts (as that term is defined in the Deferred
Compensation Plan) made on behalf of an Employee to the Deferred
Compensation Plan.
1.5 "Annual Compensation Limit" means (1) $200,000 for the Plan
Year beginning on January 1, 1989, which amount may be adjusted
in subsequent Plan Years through the Plan Year beginning in
1993, based on changes in the cost of living as announced by the
Secretary of the Treasury, and (2) $150,000 for the Plan Year
beginning on January 1, 1994, which amount may be adjusted in
subsequent Plan Years based on changes in the cost of living as
announced by the Secretary of the Treasury.
1.6 "Beneficiary" means the person or trust that a Member
designated most recently in writing to the Plan Administrator;
provided, however, that if the Member has failed to make a
designation, no person designated is alive, no trust has been
established, or no successor Beneficiary has been designated who
is alive, the term "Beneficiary" means (a) the Member's spouse
or (b) if no spouse is alive, the Member's surviving children,
or (c) if no children are alive, the Member's parent or parents,
or (d) if no parent is alive, the legal representative of the
deceased Member's estate. Notwithstanding the preceding
sentence, the spouse of a married Member shall be his
Beneficiary unless that spouse has consented in writing to the
designation by the Member of some other person or trust and the
spouse's consent acknowledges the effect of the designation and
is witnessed by a notary public. A Member may change his
designation at any time. However, a Member may not change his
designation without further consent of his spouse under the
terms of the preceding sentence unless the spouse's consent
permits designation of another person or trust without further
spousal consent and acknowledges that the spouse has the right
to limit consent to a specific beneficiary and that the spouse
voluntarily relinquishes this right. Notwithstanding the above,
the spouse's consent shall not be required if the Member
establishes to the satisfaction of the Plan Administrator that
the spouse cannot be located, if the Member has a court order
indicating that he is legally separated or has been abandoned
(within the meaning of local law) unless a "qualified domestic
relations order" (as defined in Code Section 414(p)) provides
otherwise, or if there are other circumstances as the Secretary
of the Treasury prescribes. If the spouse is legally
incompetent to give consent, consent by the spouse's legal
guardian shall be deemed to be consent by the spouse.
1.7 "Board of Directors" means the Board of Directors of the
Primary Sponsor.
1.8 "Break in Service" means the failure of an Employee, in
connection with a termination of employment other than by reason
of death or attainment of a Retirement Date, to complete more
than 500 Hours of Service in any Plan Year.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Deferral Amount" means a contribution of a Plan Sponsor
on behalf of a Member pursuant to Plan Section 3.1.
1.11 "Deferred Compensation Plan" means the "Deferred
Compensation Plan of the SCI Systems, Inc. Employee Financial
Security Program," most recently amended and restated effective
January 1, 1992, and as from time to time amended.
1.12 "Direct Rollover" means a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
1.13 "Disability" means a disability of a Member within the
meaning of Code Section 72(m)(7), to the extent that the Member
is, or would be, entitled to disability retirement benefits
under the federal Social Security Act or to the extent that the
Member is entitled to recover benefits under any long term
disability plan or policy maintained by the Plan Sponsor. The
determination of whether or not a Disability exists shall be
determined by the Plan Administrator and shall be substantiated
by competent medical evidence.
1.14 "Distributee" means an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p), are Distributees with
regard to the interest of the spouse or former spouse.
1.15 "Elective Deferrals" means, with respect to any taxable
year of the Member, the sum of
(a) any Deferral Amounts;
(b) any contributions made by or on behalf of a Member under any
other qualified cash or deferred arrangement as defined in Code
Section 401(k), whether or not maintained by a Plan Sponsor, to
the extent such contributions are not or would not, but for Code
Section 402(g)(1) be included in the Member's gross income for
the taxable year; and
(c) any other contributions made by or on behalf of a Member
pursuant to Code Section 402(g)(3).
1.16 "Eligibility Service" means a six-consecutive-month period
during which the Employee completes no less than 500 Hours of
Service beginning on the date on which the Employee first
performs an Hour of Service upon his employment or reemployment
or, in the event the Employee fails to complete 500 Hours of
Service in that six-consecutive-month period, any
six-consecutive-month period thereafter during which the
Employee completes no less than 500 Hours of Service.
1.17 "Eligible Employee" means any Employee of a Plan Sponsor
other than an Employee who is (a) covered by a collective
bargaining agreement between a union and a Plan Sponsor,
provided that retirement benefits were the subject of good faith
bargaining, unless the collective bargaining agreement provides
for participation in the Plan, (b) a leased employee within the
meaning of Code Section 414(n)(2), or (c) deemed to be an
Employee of a Plan Sponsor pursuant to regulations under Code
Section 414(o).
1.18 "Eligible Retirement Plan" means an individual retirement
account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity
plan described in Code Section 403(a) or a qualified trust
described in Code Section 401(a) that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
1.19 "Eligible Rollover Distribution" means any distribution of
all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does
not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated Beneficiary, or
for a specified period of ten years or more; any distribution to
the extent such distribution is required under Code Section
401(a)(9); and 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).
1.20 "Employee" means any person who is (a) employed by a Plan
Sponsor or an Affiliate for purposes of the Federal Insurance
Contributions Act, (b) a leased employee within the meaning of
Code Section 414(n)(2) with respect to a Plan Sponsor, or (c)
deemed to be an employee of a Plan Sponsor pursuant to
regulations under Code Section 414(o).
1.21 "Entry Date" means each January 1, April 1, July 1, and
October 1.
1.22 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
1.23 "Fiduciary" means each Named Fiduciary and any other
person who exercises or has any discretionary authority or
control regarding management or administration of the Plan, any
other person who renders investment advice for a fee or has any
authority or responsibility to do so with respect to any assets
of the Plan, or any other person who exercises or has any
authority or control respecting management or disposition of
assets of the Plan
1.24 "Fund" means the amount at any given time of cash and
other property held by the Trustee pursuant to the Plan.
1.25 "Highly Compensated Employee" means each Employee who is
described in Subsection (a), unless the Plan Sponsor makes an
election pursuant to Subsection (b).
(a) (1) The Employee during the Plan Year immediately preceding
the Plan Year in question:
(A) was at any time an owner of more than five percent (5%) of
the outstanding stock of a Plan Sponsor or Affiliate or more
than five percent (5%) of the total combined voting power of all
stock of a Plan Sponsor or Affiliate; or
(B) received Annual Compensation in excess of $90,803 (for the
Plan Year beginning in 1991) which amount shall be adjusted for
changes in the cost of living as provided in regulations issued
by the Secretary of the Treasury; or
(C) received Annual Compensation in excess of $60,535 (for the
Plan Year beginning in 1991) which amount shall be adjusted for
changes in the cost of living as provided in regulations issued
by the Secretary of the Treasury, and who was in the group
consisting of the most highly compensated twenty percent (20%)
of the Employees; or
(D) was at any time an officer of the Plan Sponsor or of any
Affiliate whose Annual Compensation was greater than fifty
percent (50%) of the amount in effect under Code Section
415(b)(1)(A) for the calendar year in which the Plan Year ends,
where the term "officer" means an administrative executive in
regular and continual service to the Plan Sponsor or Affiliate;
provided, however, that in no event shall the number of officers
exceed the lesser of Clause (i) or (ii) of this Subparagraph
(D), where:
(i) equals fifty (50) Employees; and
(ii) equals the greater of (I) three (3) Employees or (II) ten
percent (10%) of the number of Employees during the Plan Year,
with any non-integer being increased to the next integer.
If for any year no officer of the Plan Sponsor meets the
requirements of this Subparagraph (D), the highest paid officer
of the Plan Sponsor for the Plan Year shall be considered an
officer for purposes of this Subparagraph (D).
(2) The Employee during the Plan Year in question (A) is
described in Subsection (a)(1)(A), or (B) is both (i) described
in Subsection (a)(1)(B), (a)(1)(C), or (a)(1)(D), and (ii) one
of the 100 Employees who received the most Annual Compensation
during that Plan Year.
The Plan Administrator may make an election to substitute
$60,535 (as adjusted) for $90,803 (as adjusted) in Subparagraph
(B) of Subsection (a)(1) provided that at all times during the
Plan Year the Plan Sponsor and its Affiliates maintain
significant business activities and have Employees in at least
two significantly separate geographic areas and satisfy such
other conditions as the Secretary of the Treasury prescribes.
For purposes of Subparagraphs (C) and (D) of Subsection (a)(1),
the following shall be excluded when determining the number of
Employees in the most highly compensated twenty percent (20%) of
the Employees and the number of officers:
(i )Employees who have not completed six (6) months of service,
(ii) Employees who normally work less than 17-1/2 hours per
week,
(iii) Employees who normally work during not more than six (6)
months during any Plan Year,
(iv) Employees who have not attained age 21,
(v) Employees who are included in a unit of employees covered
by an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee representatives
and the Plan Sponsor or its Affiliates, provided 90% or more of
the Employees are covered under collective bargaining agreements
and the Plan only covers Employees who are not covered under the
collective bargaining agreements.
(b) Notwithstanding the provisions of Subsection (a), the
Primary Sponsor may elect to determine each Highly Compensated
Employee to be each Employee who during the Plan Year in
question is described in Subsection (a), pursuant to the
provisions of Treas. Reg. Section 1.414(q)-1T, Q&A-14(b).
(c) For purposes of this Section, if any Employee is a member
of the family of a five percent (5%) owner as defined in
Subsection (a)(1) of this Section or of a Highly Compensated
Employee whose Annual Compensation is such that he is among the
ten (10) Highly Compensated Employees receiving the greatest
amount of Annual Compensation during the Plan Year, then (1) the
Employee shall not be considered a separate Employee, and (2)
any Annual Compensation paid to the Employee, and any applicable
contribution or benefit on behalf of the Employee, shall be
treated as if it were paid to, or on behalf of, the five percent
(5%) owner or the Employee who is among the ten (10) Highly
Compensated Employees receiving the greatest amount of Annual
Compensation during the Plan Year. For purposes of this Section
(b), the term "family" means with respect to any Employee, the
Employee's spouse and lineal descendants or ascendants and the
spouses of lineal descendants or ascendants.
(d) For purposes of this Section, a former Employee shall be
treated as a Highly Compensated Employee if (1) the former
Employee was a Highly Compensated Employee at the time the
former Employee separated from service with the Plan Sponsor or
Affiliate or (2) the former Employee was a Highly Compensated
Employee at any time after the former Employee attained age 55.
(e) For purposes of this Section, Employees who are nonresident
aliens and who receive no earned income from the Plan Sponsor or
an Affiliate from sources within the United States shall not be
treated as Employees.
(f) For purposes of this Section, Annual Compensation shall
include amounts paid by Affiliates and shall be determined
without regard to the Annual Compensation Limit, as adjusted.
1.26 "Hour of Service" means:
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for a Plan Sponsor or any
Affiliate during the applicable computation period, and such
hours shall be credited to the computation period in which the
duties are performed;
(b) Each hour for which an Employee is paid, or entitled to
payment, by a Plan Sponsor or any 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;
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by a Plan Sponsor or any
Affiliate, and such hours shall be credited to the computation
period or periods to which the award or agreement for back pay
pertains rather than to the computation period in which the
award, agreement or payment is made; provided, that the
crediting of Hours of Service for back pay awarded or agreed to
with respect to periods described in Subsection (b) of this
Section shall be subject to the limitations set forth in
Subsection (f);
(d) Solely for purposes of determining whether a Break in
Service has occurred, each hour during any period that the
Employee is absent from work (1) by reason of the pregnancy of
the Employee, (2) by reason of the birth of a child of the
Employee, (3) by reason of the placement of a child with the
Employee in connection with the adoption of the child by the
Employee, or (4) for purposes of caring for such child for a
period immediately following its birth or placement. The hours
described in this Subsection (d) shall be credited (A) only in
the computation period in which the absence from work begins, if
the Employee would be prevented from incurring a Break in
Service in that year solely because of that credit, or (B), in
any other case, in the next following computation period;
(e) Without duplication of the Hours of Service counted
pursuant to Subsection (d) hereof and solely for such purposes
as required pursuant to the Family and Medical Leave Act of 1993
and the regulations thereunder (the "Act"), each hour (as
determined pursuant to the Act) for which an Employee is granted
leave under the Act (1) for the birth of a child, (2) for
placement with the Employee of a child for adoption or foster
case, (3) to care for the Employee's spouse, child or parent
with a serious health condition, or (4) for a serious health
condition that makes the Employee unable to perform the
functions of the Employee's job;
(f) The Plan Administrator shall credit Hours of Service in
accordance with the provisions of Section 2530.200b-2(b) and (c)
of the U.S. Department of Labor Regulations or such other
federal regulations as may from time to time be applicable and
determine Hours of Service from the employment records of a Plan
Sponsor or in any other manner consistent with regulations
promulgated by the Secretary of Labor, and shall construe any
ambiguities in favor of crediting Employees with Hours of
Service. Notwithstanding any other provision of this Section,
in no event shall an Employee be credited with more than 501
Hours of Service during any single continuous period during
which he performs no duties for the Plan Sponsor or Affiliate;
and
(g) In the event that a Plan Sponsor or an Affiliate acquires
substantially all of the assets of another corporation or entity
or a controlling interest of the stock of another corporation or
merges with another corporation or entity and is the surviving
entity, then service of an Employee who was employed by the
prior corporation or entity and who is employed by the Plan
Sponsor or an Affiliate at the time of the acquisition or merger
shall be credited from the effective date of the acquisition or
merger unless the Plan Administrator otherwise specifies.
1.27 "Individual Funds" means such subfunds of the Fund as may
be established by the Plan Administrator with the consent of the
Trustee for the investment of Accounts.
1.28 "Investment Committee" means a committee which may be
established to direct the Trustee with respect to investments of
the Fund.
1.29 "Investment Manager" means a Fiduciary, other than the
Trustee, the Plan Administrator, or a Plan Sponsor, who may be
appointed by the Primary Sponsor:
(a) who has the power to manage, acquire, or dispose of any
assets of the Fund or a portion thereof; and
(b) who (1) is registered as an investment adviser under the
Investment Advisers Act of 1940; (2) is a bank as defined in
that Act; or (3) is an insurance company qualified to perform
services described in Subsection (a) above under the laws of
more than one state; and
(c) who has acknowledged in writing that he is a Fiduciary with
respect to the Plan.
1.30 "Member" means any Employee or former Employee who has
become a participant in the Plan for so long as his vested
Accrued Benefit has not been fully distributed pursuant to the
Plan.
1.31 "Named Fiduciary" means only the following:
(a) The Plan Administrator;
(b) The Trustee;
(c) The Board of Directors;
(d) The Investment Committee; and
(e) The Investment Manager.
1.32 "Non-Deductible Voluntary Contribution" means a
contribution to the Fund by a Member pursuant to Plan Section
3.3 and which is not deductible by the Member.
1.33 "Normal Retirement Age" means age 65.
1.34 "Old Plan" means the Savings Plan of the SCI Systems, Inc.
Employee Financial Security Program established by indenture
dated November 23, 1973.
1.35 "Plan Administrator" means the organization or person
designated to administer the Plan.
1.36 "Plan Sponsor" means individually the Primary Sponsor and
any Affiliate or other entity which has adopted the Plan and
Trust.
1.37 "Plan Year" means the six month period commencing on July
1, 1973, and ending on December 31, 1973, and each calendar year
thereafter.
1.38 "Retirement Date" means the first day of the month
coinciding with or next following the date on which the Member
retires on or after attaining Normal Retirement Age.
1.39 "Rollover Amount" means any amount transferred to the Fund
by a Member which amount qualifies as an eligible rollover
distribution under Code Section 402(c)(4), or for rollover
treatment under Code Sections 403(a)(4) or 408(d)(3)(A)(ii) and
any regulations issued thereunder.
1.40 "Termination Completion Date" means the last day of the
fifth consecutive Break in Service computation period,
determined under the Plan Section which defines Break in
Service, in which a Member completes a Break in Service.
1.41 "Trust" means the trust established under an agreement
between the Primary Sponsor and the Trustee to hold the Fund or
any successor agreement.
1.42 "Trustee" means the trustee under the Trust.
1.43 "Valuation Date" means the last day of each month.
1.44 "Vesting Service" means (a) each completed year of
"service" (as defined in the Old Plan) commencing on the "most
recent date of hire" of a Member (as defined in the Old Plan)
and ending on the anniversary of that date in 1976 and (b)
commencing on January 1, 1976, each Plan Year thereafter during
which an Employee completes at least 1,000 Hours of Service.
Vesting Service shall not, however, include:
(a) In the case of an Employee who completes five consecutive
Breaks in Service and is not reemployed by a Plan Sponsor or
Affiliate on or prior to his Termination Completion Date, for
purposes of determining the vested portion of his Accrued
Benefit derived from Plan Sponsor contributions which accrued
before his Termination Completion Date, all service in Plan
Years after his Termination Completion Date;
(b) In the case of an Employee who completes five consecutive
Breaks in Service and at that time does not have any vested
right in Plan Sponsor contributions, all service before those
Breaks in Service commenced;
(c) Years of "service" (as defined in the Old Plan), and Plan
Years beginning prior to January 1, 1985, as the case may be,
during which an Employee has not attained age twenty two (22);
and
(d) Plan Years prior to January 1, 1976, which would not be
counted as vesting service pursuant to the provisions of the Old
Plan as then in effect.
In the event that a Plan Sponsor or an Affiliate acquires
substantially all of the assets of another corporation or entity
or a controlling interest in the stock of another corporation or
merges with another corporation or entity and is the surviving
entity, then solely for purposes of determining the level of
matching contributions under either Plan Section 3.2 or 3.4, an
Employee who was employed by the prior corporation of entity and
who is employed by the Plan Sponsor or Affiliate on or about the
time of the acquisition or merger will be deemed to be credited
with Vesting Service for each completed calendar year of service
with the prior corporation or entity unless the Plan
Administrator otherwise specifies.
SECTION 2
ELIGIBILITY
2.1 Each Eligible Employee shall become a Member as of the
Entry Date coinciding with or next following the date he
completes his Eligibility Service.
2.2 Each individual who was a Member of the Plan on the day
immediately preceding July 1, 1991 shall continue to be a Member
as of July 1, 1991 and each individual who was a Member of the
PAYSOP Plan as of December 31, 1991, shall be a Member as of
January 1, 1992.
2.3 Each former Member of the Plan or former Member of the
PAYSOP Plan who is reemployed by a Plan Sponsor shall become a
Member as of the date of his reemployment as an Eligible
Employee.
2.4 Each former Employee who completes his Eligibility Service
but terminates employment with a Plan Sponsor before becoming a
Member shall become a Member as of the latest of the date he (a)
is reemployed, (b) would have become a Member if he had not
terminated employment, or (c) becomes an Eligible Employee.
2.5 Solely for the purpose of contributing a Rollover Amount to
the Plan or having assets transferred to his Direct Transfer
Account, an Eligible Employee, who has not yet become a Member
pursuant to any other provision of this Section 2, shall become
a Member as of the date on which the Rollover Amount is
contributed to the Plan or assets are transferred to the Trust
on the Member's behalf in a direct trustee-to-trustee transfer
from a plan meeting the requirements of Code Section 401(a)
which is not subject to Code Sections 401(a)(11) or 417.
SECTION 3
CONTRIBUTIONS
3.1 (a) The Plan Sponsor shall make a contribution to the Fund
on behalf of each Member who has elected to defer a portion of
Annual Compensation otherwise payable to him for the Plan Year
and to have such portion contributed to the Fund. The election
must be made no sooner than seven (7) months prior to and no
later than the date specified by the Plan Administrator before
the Annual Compensation is payable and may only be made pursuant
to an irrevocable written agreement between the Member and the
Plan Sponsor which shall be in such form and subject to such
rules and limitations as the Plan Administrator may prescribe
and shall specify, in one-half percent (1/2%) increments, the
percentage of Annual Compensation that the Member desires to
defer and to have contributed to the Fund.
(b) Elective Deferrals shall in no event exceed $8,475 (for
1991) in any one taxable year of the Member, which amount shall
be adjusted for changes in the cost of living as provided by the
Secretary of the Treasury. In the event the amount of Elective
Deferrals exceeds $8,475 (for 1991) as adjusted, in any one
taxable year then, (1) not later than the immediately following
March 1, the Member may designate to the Plan the portion of the
Member's Deferral Amount which consists of excess Elective
Deferrals, and (2) not later than the immediately following
April 15, the Plan may distribute the amount designated to it
under Paragraph (1) above, as adjusted to reflect income, gain,
or loss attributable to it through the date of the distribution,
and reduced by any "Excess Deferral Amounts," as defined in
Appendix A hereto, previously distributed or recharacterized
with respect to the Member for the Plan Year beginning with or
within that taxable year. The payment of the excess Elective
Deferrals, as adjusted and reduced, from the Plan shall be made
to the Member without regard to any other provision in the Plan.
In the event that a Member's Elective Deferrals to the Plan and
other plans of the Plan Sponsor and its Affiliates exceed
$8,475, as adjusted, in any one taxable year, the amount of
excess Elective Deferrals, as adjusted and reduced, (determined
by taking into account only Elective Deferrals under the Plan
and other plans of the Plan Sponsor and its Affiliates) shall be
distributed to the Member from the Plan on or before the
following April 15th.
3.2 Each Plan Sponsor proposes to make contributions on each
Valuation Date on behalf of each Member who has elected to
receive matching contributions under this Plan Section 3.2
instead of under Plan Section 3.4 (other than a Member who
terminated employment for reasons other than death or retirement
since the preceding Valuation Date), in an amount equal to forty
percent (40%) of the Deferral Amount elected to be contributed
to the Plan, on behalf of the Member under Plan Section 3.1
since the preceding Valuation Date, not in excess of a
percentage of the Annual Compensation earned by the Member since
the preceding Valuation Date. The percentage of Annual
Compensation matched for Members who are not Highly Compensated
Employees shall be determined in accordance with the following
schedule:
Years of Vesting Percentage of Annual
Service Compensation Matched
Less than 5 4 1/2
5 but less than 10 6
10 but less than 15 7 1/2
15 or more 9
The percentage of Annual Compensation matched for Members who
are Highly Compensated Employees shall be four and one-half
percent (4 1/2%).
3.3 Subject to such rules and limitations as the Plan
Administrator may from time to time prescribe, each Member may
elect to contribute as a Non-Deductible Voluntary Contribution
to the Fund an amount, in one percent (1%) increments, of his
Annual Compensation not in excess of fifteen percent (15%) of
the Member's Annual Compensation for the Plan Year, reduced by
the percentage of the Member's Annual Compensation contributed
pursuant to Plan Section 3.1, as designated in the written
election agreement of the Member. Non-Deductible Voluntary
Contributions shall be made to the Fund through regular payroll
deductions or in such other manner as shall be agreed upon by
each Member and the Plan Administrator, provided that a Member
may elect to make such contribution no sooner than seven (7)
months prior to and no later than the date specified by the Plan
Administrator prior to the date such contribution is contributed
to the Fund. The Plan Administrator may, at any time, suspend
the ability of Members to make further Non-Deductible Voluntary
Contributions.
3.4 Each Plan Sponsor proposes to make contributions on each
Valuation Date on behalf of each Member who has elected to
receive matching contributions under this Plan Section 3.4
instead of under Plan Section 3.2 (other than a Member who
terminated employment for reasons other than death or retirement
since the preceding Valuation Date), in an amount equal to sixty
percent (60%) of a portion of the Non-Deductible Voluntary
Contribution made by the Member under Plan Section 3.3 through
payroll deductions, not in excess of a percentage of the Annual
Compensation earned by the Member since the preceding Valuation
Date. The percentage of Annual Compensation matched for Members
who are not Highly Compensated Employees shall be determined in
accordance with the following schedule:
Years of Vesting Percentage of Annual
Service Compensation Matched
Less than 5 3
5 but less than 10 4
10 but less than 15 5
15 or more 6
The percentage of Annual Compensation matched for Member's who
are Highly Compensated Employees shall be three percent (3%).
3.5 A Member may, subject to such rules and conditions as the
Plan Administrator may prescribe, elect to switch matching
elections between Plan Sections 3.2 and 3.4 no more frequently
than once in any six month period and may give notice of such
election no more than seven (7) months prior to and not later
than the date and time prescribed by the Plan Administrator for
the making of such and election.
3.6 Forfeitures shall be used to reduce Plan Sponsor
contributions and not to increase benefits.
3.7 Any Member may, with the consent of the Plan Administrator
and subject to such rules and conditions as the Plan
Administrator may prescribe, contribute a Rollover Amount to the
Fund; provided, however, that the Plan Administrator shall not
administer this provision in a manner which is discriminatory in
favor of Highly Compensated Employees.
3.8 Contributions may be made only in cash or other property
which is acceptable to the Trustee. In no event will the sum of
contributions under Plan Sections 3.1, 3.2 and 3.4 exceed the
deductible limits under Code Section 404.
3.9 A Member may either begin to contribute or change the
percentage of his contribution under Plan Sections 3.1 or 3.3 on
any Valuation Date by written notice submitted to the Plan
Administrator on a form prescribed by the Plan Administrator by
the date and time specified by the Plan Administrator, effective
on the first day of the month following the administrative
processing of such change or such later date, but no later than
seven (7) months thereafter, as specified on the Member's
written election form.
3.10 (a) A Member may suspend his contribution under Plan
Sections 3.1 or 3.3 at any time by giving written notice to the
Plan Administrator on a form prescribed by the Plan
Administrator. Contribution suspensions become effective as of
the first day of the month following the normal administrative
processing of such suspension, or such later date, but no later
than seven (7) months thereafter, as specified on the Member's
written election form. For the period of suspension no
contributions on behalf of the Member shall be made by a Plan
Sponsor.
(b) A Member who has suspended contributions pursuant to Plan
Section 3.9(a) may resume contributions in accordance with
Sections 3.1 or 3.4 of the Plan on any Valuation Date coinciding
with or following the expiration of six (6) months from the date
the suspension took effect by submitting a written application
to the Plan Administrator on a form prescribed by the Plan
Administrator. Resumption of contributions shall commence as of
the first day of the month following the normal administrative
processing of such resumption or such later date, but no later
than seven (7) months thereafter, as specified in the Member's
written application.
SECTION 4
ALLOCATIONS
4.1 As soon as reasonably practicable following the date of
withholding by the Plan Sponsor, if applicable, and receipt by
the Trustee, Plan Sponsor contributions made on behalf of each
Member under Plan Sections 3.1, 3.2 and 3.4, and Non-Deductible
Voluntary Contributions, Rollover Amounts, and Direct Transfer
Amounts contributed by or on behalf of the Member, shall be
allocated to the Employee Deferral Account, Company Contribution
Account, Non-Deductible Voluntary Contribution Account, Rollover
Account, and Direct Transfer Account respectively, of the Member
on behalf of whom the contributions were made.
4.2 As of each Valuation Date, the Trustee shall determine the
net income or net loss attributable to each Member's Account as
follows:
(a) To any cash income since the last Valuation Date, the
Trustee shall add or subtract any net increase or decrease since
the last Valuation Date in the fair market value of the assets
of the Fund determined in accordance with Section 4.4 of the
Plan, any gain or loss on the sale or exchange of assets of the
Fund since the last Valuation Date, accrued interest since the
last Valuation Date, the amount of any dividend declared but not
paid since the last Valuation Date but not paid on shares of
stock owned by the Fund if the market quotation used in
determining the value of the shares is ex-dividend, and the
amount of any other assets of the Fund determined by the Trustee
to be income since the last Valuation Date. In the event there
are subfunds or individual funds created under the terms of the
trust agreement constituting the Trust the net income or net
provisions of the trust agreement with respect to the allocation
of net income or net loss with respect to those subfunds or
individual funds;
(b) From the sum thereof the Trustee shall deduct all charges,
expenses, and liabilities accrued since the last Valuation Date
which are proper under the provisions of the Plan and Trust and
which in the discretion of the Plan Administrator are properly
chargeable against income for the period; and
(c) (1) Effective prior to October 1, 1993, the Trustee shall
allocate the net income or net loss as of the Valuation Date to
each Account of the Member (other than Members to whose Accounts
net income or net loss is not to be allocated) in the proportion
that the value of the interest of the Member in the Fund, or the
subfund or individual fund, as of the next preceding Valuation
Date bears to the total value of the interests of all Members
(other than Members to whose Accounts net income or net loss is
not to be allocated), in the Fund, subfund, or individual fund,
respectively, on that Valuation Date.
(2) Effective on and after October 1, 1993, the net income or
net loss of each Individual Fund shall be determined as of each
Valuation Date. Net income or net loss shall be allocated as of
the Valuation Date to each Account of a Member (other than
Members to whose Accounts net income or net loss is not to be
allocated) in the proportion that the value of the Account
invested in that Individual Fund, as of the preceding Valuation
Date, increased by one-half of the total contributions allocated
to the Member's Account and one-half of any loan repayments made
by such Member which have been invested in that Individual Fund
since the preceding Valuation Date and further increased by the
full amount of any interfund transfers from and to that
Indiviudual Fund, bears to the value of all Accounts invested in
that Individual Fund, as of the Valuation Date.
4.3 In the event that any subfund or individual fund in which a
Member has invested any of his Account suffers a net loss as
determined under Section 4.2 above during the period between (a)
the Valuation Date as of which the Plan Administrator determines
the Accrued Benefit of the Member, and (b) the date the Member
receives a final distribution of his vested Accrued Benefit in
that subfund or individual fund, the Primary Sponsor shall
contribute on the next Valuation Date an amount equal to such
net loss.
If as of any Valuation Date any subfund or individual fund has
suffered a net loss or a decrease in earnings, due to
administrative delays or errors in executing investment
directions of Members, during the period between the preceding
Valuation Date and the date the investment directions are
executed, then the Primary Sponsor may contribute to each
affected subfund or individual fund an amount equal to the net
loss or decrease in earnings of such subfund or individual fund
calculated as the difference between actual investment
performance and what the investment performance would have been
had the investment directions been properly or timely executed.
The contribution shall be allocated, as of the Valuation Date
for which it is determined that the subfund or individual fund
has suffered the net loss or decrease in earnings, to the
Accounts of Members in the affected subfund or individual fund
in accordance with Section 4.2 of the Plan.
4.4 The Trustee shall determine the fair market value of the
assets of the Fund.
SECTION 5
WITHHDRAWALS DURING EMPLOYMENT
5.1 A Member may elect, no sooner than seven (7) months prior
to and no later than a date specified by the Plan Administrator,
to withdraw either twenty-five percent (25%) increments or a
specific dollar amount of his Non-Deductible Voluntary
Contribution Account, provided he submits written notice to the
Plan Administrator on a form prescribed by the Plan
Administrator by the date and time prescribed by the Plan
Administrator. No withdrawal may be in an amount less than
$100.00, unless the withdrawal is of the balance of the
Non-Deductible Voluntary Contribution Account of the Member. No
Member shall make more than one withdrawal in any Plan Year.
5.2 A Member may not withdraw corresponding matching
contributions of a Plan Sponsor under Section 3.4 of the Plan.
If a Member withdraws Non-Deductible Voluntary Contributions
that have not been matched by a Plan Sponsor under Plan Section
3.4, the Member shall be suspended from making any further
Non-Deductible Voluntary Contributions, other than those which
may be matched under Section 3.4, until six (6) months from the
date of withdrawal whereupon a Member may resume making
contributions on the first day of any succeeding month. The
change shall be effective on the first day of the month
following the normal administrative processing of such change.
During the suspension, a Plan Sponsor shall not make any
contributions on behalf of the Member under Section 3.4 of the
Plan. If the withdrawal includes any amount which has been
matched by a Plan Sponsor under Section 3.4 of the Plan, the
Member may not make Non-Deductible Voluntary Contributions
during the suspension.
5.3 A Member may elect no sooner than seven (7) months prior to
and no later than a date specified by the Plan Administrator,
upon written notice to the Plan Administrator, to withdraw from
both his Rollover Account and Qualified Voluntary Employee
Contribution Account, as this term was defined in versions of
the Plan prior to August 30, 1988, an amount not less than
$100.00 from each Account.
5.4 The Trustee shall, upon the direction of the Plan
Administrator, distribute all or a portion of a Member's
Employee Deferral Account consisting of Deferral Amounts (but
not earnings thereon) prior to the time such account is
otherwise distributable in accordance with the other provisions
of the Plan; provided, however, that any such distribution shall
be made only if the Member is an Employee and demonstrates that
he is suffering from "hardship" as determined herein. For
purposes of this Section, a distribution will be deemed to be on
account of hardship if the distribution is on account of:
(a) expenses for medical care described in Section 213(d)
of the Code incurred by the Member, his spouse, or any
dependents of the Member (as defined in Section 152 of the Code)
or necessary for these persons to obtain medical care described
in Code Section 213(d);
(b) purchase (excluding mortgage payments) of a principal
residence for the Member;
(c) payment of tuition and related educational fees for
the next twelve (12) months of post-secondary education for the
Member, his spouse, children, or dependents;
(d) the need to prevent the eviction of the Member from
his principal residence or foreclosure on the mortgage of the
Member's principal residence; or
(e) any other contingency determined by the Internal
Revenue Service to constitute an "immediate and heavy financial
need" within the meaning of Treasury Regulations Section
1.401(k)-1(d).
5.5 In addition to the requirements set forth in Plan Section
5.4, any distribution pursuant to Plan Section 5.4 shall not be
in excess of the amount necessary to satisfy the need determined
under Section 5.4 and shall also be subject to the requirements
of Subsection (a) or (b) of this Section.
(a) (1) The Member shall first obtain all distributions, other
than hardship distributions, and all nontaxable loans currently
available under all plans maintained by the Plan Sponsor;
(2) the Plan Sponsor shall not permit Elective Deferrals or
after-tax employee contributions to be made to the Plan or any
other plan maintained by the Plan Sponsor, for a period of
twelve (12) months after the Member receives the distribution
pursuant to this Section; and
(3) the Plan Sponsor shall not permit Elective Deferrals to be
made to the Plan or any other plan maintained by the Plan
Sponsor for the Member's taxable year immediately following the
taxable year of the hardship distribution in excess of the limit
under Plan Section 3.1(b) for the taxable year, less the amount
of the Elective Deferrals made to the Plan or any other plan
maintained by the Plan Sponsor for the taxable year in which the
distribution under this Section occurs.
(b) (1) The Member shall first obtain all other distributions,
other than hardship distributions, and all nontaxable loans
available under all plans maintained by the Plan Sponsor; and
(2) the Plan Administrator shall determine that it can
reasonably rely on the Member's certification by execution of a
form provided by the Plan Administrator that the need determined
under Plan Section 5.4 cannot be relieved -
(A) through reimbursement or compensation by insurance or
otherwise,
(B) by reasonable liquidation of the assets of the Member, his
spouse and minor children, to the extent that the liquidation
would not itself cause an immediate and heavy financial need and
to the extent that the assets of the spouse and minor children
are reasonably available to the Member,
(C) by cessation of Elective Deferrals, or
(D) by other distributions or nontaxable (at the time of the
distribution) loans from plans maintained by the Plan Sponsor or
any other employer, or by borrowing from commercial sources on
reasonable commercial terms.
(3) Effective on and after July 1, 1992, a Member who receives
a distribution under this Subsection (b) may not contribute
Deferral Amounts to the Plan until the first day of any month
coinciding with or next following the expiration of six (6)
months from the date of distribution. Any distribution pursuant
to this Plan Section and Plan Section 5.4 shall be made only in
accordance with such rules, policies, procedures, restrictions,
and conditions as the Plan Administrator may from time to time
adopt. Any determination of the existence of hardship and the
amount to be distributed on account thereof shall be made by the
Plan Administrator (or such other person as may be required to
make such decisions) in accordance with the foregoing rules as
applied in a uniform and nondiscriminatory manner; provided
that, unless the Member requests otherwise, any such
distribution shall include the amount necessary to pay any
federal, state and local income taxes and penalties reasonably
anticipated to result from the distribution. A distribution
under this Section shall be made in a lump sum to the Member.
5.6 A Member who has attained age 59-1/2 may elect, no sooner
than seven (7) months prior to and no later than a date
specified by the Plan Administrator, upon written notice to the
Plan Administrator, to withdraw any part of his Employee
Deferral Account, valued as of the Valuation Date immediately
following the withdrawal request plus Deferral Amounts made to
the Member's Employee Deferral Account since that preceding
Valuation Date. A Member who receives a distribution under this
Section may not contribute Deferral Amounts to the Plan until
the first day of any month coinciding with or next following the
expiration of six (6) months from the date of distribution.
5.7 Any distributions pursuant to this Plan Section 5 shall be
made first from those portions of a Member's Account which are
not invested in the SCI Stock Fund.
5.8 Any distribution pursuant to this Section 5 shall be made
pursuant to the Eligible Rollover Distribution requirements set
forth in Plan Section 9.5.
SECTION 6
INDIVIDUAL FUNDS AND INVESTMENT OF TRUST ASSETS
6.1 This Section 6 is added to the Plan effective on and after
October 1, 1993.
6.2 The assets of the Fund shall be invested in Individual
Funds, with varying investment objectives, as the Plan
Administrator shall from time to time determine.
6.3 The Plan Administrator may, in its sole discretion, from
time to time, establish one or more additional Individual Funds
or may change or terminate the availability of any then existing
Individual Fund for all Members, provided, however, that three
or more Individual Funds remain available.
6.4 Until such time as the Plan Administrator may direct
otherwise and except as otherwise provided in the Plan, each
Member may, in the manner and pursuant to the rules established
by the Plan Administrator, direct the Plan Administrator to (a)
invest contributions to his Account in one or more Individual
Funds, or (b) transfer the investment of his Account among
Individual Funds. In order to give investment directions, the
Member must complete and submit to the Plan Administrator a form
supplied by the Plan Administrator for that purpose. Investment
directions by Members shall be subject to the following rules:
(a) All investment directions of contributions to a Member's
Account shall be a multiple of five percent (5%) which is not
less than twenty percent (20%). All investment directions
transferring a portion or all of a Member's interest in one or
more of an Individual Funds to another Individual Fund shall be
a multiple of five percent (5%) which is not less than twenty
percent (20%) of the portion of such Account which is invested
in such Individual Fund.
(b) A Member may change the investment of contributions to his
Account or direct investment transfers for his Account four
times during a calendar year, but no more frequently that
monthly.
(c) Investment directions as to an investment or transfer shall
be effective as of the given month only if received by the Plan
Administrator by the tenth of the preceding month.
(d) Until a new investment direction shall be filed with the
Plan Administrator and effective, the investment of
contributions to a Member's Account shall be governed by the
investment election on file with the Plan Administrator.
(e) In the event no investment direction has been returned to
the Plan Administrator, the Plan Administrator shall direct the
Trustee to invest the Member's Account in such Individual Funds
as the Plan Administrator may determine.
6.5 Each direction under the preceding Section 6.4 received by
the Plan Administrator shall be promptly delivered to the
Trustee, and shall be effect as to the Trustee only when
received by the Trustee.
6.6 In the event that all or any portion of a Member's Account
is to be invested in an Individual Fund created primarily for
the investment in stock of the Primary Sponsor (the "SCI Stock
Fund"), the Plan Administrator shall direct the Trustee to
transfer from the Individual Fund or Funds the portion of the
Individual Fund or Funds as shall have been designated for
investment in the SCI Stock Fund and thereafter the Plan
Administrator shall direct the Trustee to purchase the number of
whole shares of Qualifying Employer Securities (the "Shares")
which the Trustee can purchase either in a block or by periodic
purchases over that period of time as the Trustee shall deem
advisable or may acquire the Shares from another Individual Fund.
Cash representing the portion of a Member's Account to be
invested in the SCI Stock Fund shall be allocated to a cash
account ("Cash Account") the Plan Administrator shall establish
within the SCI Stock Fund for each Member having an interest in
the SCI Stock Fund until the time as the Trustee is able to
purchase Shares on behalf of the SCI Stock Fund. The Plan
Administrator (1) shall credit to the Cash Account all cash
received with respect to the Shares credited to the Member or
remaining after the purchase of the largest number of whole
Shares which may be purchased with the portion of the account
made available therefor by the Member's directions, (2) shall
invest or retain the Cash Account in the manner provided herein
as the Plan Administrator shall determine in its sole
discretion, (3) shall credit or charge the Cash Account with any
earnings, gains or losses resulting from investments, and (4)
shall use the balance of the Cash Account to acquire additional
whole Shares.
Shares acquired from another Individual Fund or purchased shall
be credited to Members' Accounts as of the last day of the month
coinciding with or next preceding the date of acquisition on a
pro rata basis based upon the balances prior to the acquisition,
as of such last day of the month, of the Cash Accounts of
Members.
The proceeds from Shares sold shall be credited pro rata among
the Cash Accounts of Members who gave the earliest remaining
outstanding direction to make transfers from the SCI Stock Fund
to another Individual Fund or Funds and thereafter in ascending
chronological order; provided, however, that any requirement to
sell or otherwise dispose of Shares standing to the credit of
the account of a Member on account of the Member's retirement,
death or other termination of employment by a Plan Sponsor shall
be deemed to be the earliest remaining outstanding direction as
of the last day of the month coinciding with or immediately
preceding the event; and provided further, that for purposes of
determining which directions given are the oldest, all
directions given to be effective as of a certain date shall be
deemed given as of that date.
In the event of the receipt of any cash dividends, interest,
income, stock dividends, stock, warrants, options, rights to
purchase or subscribe or other distributions in respect of
Shares, the same shall be credited to the interest of the Member
in the SCI Stock Fund on whose behalf the Shares are held. If,
with respect to any Shares, the Trustee shall become entitled to
purchase or subscribe for Shares, the Plan Administrator shall
direct the Trustee to do so to the extent that there is
sufficient cash in the Member's Cash Account to do so without
acquiring any fractional Shares or securities. In the event that
the Member's Cash Account shall not be sufficient for that
purpose, (A) the Plan Administrator shall direct the Trustee to
sell (providing the sale thereof is reasonably practicable) any
warrants, options or rights beyond those which can be used
together with the balance of the Member's Cash Account to
purchase whole Shares or securities if partial use and partial
sale of the warrants, options or rights is permitted, or (B) if
the same is not permitted and the warrants, options or rights
cannot be used in whole together with the balance of the
Member's Cash Account to purchase only whole Shares or
securities, the Plan Administrator shall direct the Trustee to
sell the same, provided the sale thereof is reasonably
practicable. The Plan Administrator shall credit the Cash
Account of the Member with proceeds from any sale.
The interest of a Member in the SCI Stock Fund shall be
represented by the number of Shares credited to the Member plus
the balance of his Cash Account.
6.7 The Plan Administrator shall establish and maintain
individual accounts for each Member in accordance with
information provided to the Plan Administrator and shall
establish the value of such Members' accounts in accordance with
the procedures set forth below:
(a) Transfers or payments from an Individual Fund to a Member
or his beneficiary between Valuation Dates shall be charged
against the interest of the Member in the Individual Fund as of
the next preceding Valuation Date, and contributions to an
Individual Fund which are allocated to the Account of a Member
between Valuation Dates shall be credited to the interest of the
Member in the Individual Fund as of the next succeeding
Valuation Date.
(b) Transfers of payments of funds or assets between Individual
Funds shall be deemed made as of the Valuation Date coinciding
with or immediately preceding the actual date of transfer or
payment and the funds or assets shall not be credited or charged
after that date with any earnings or losses of the Individual
Fund from which transferred or paid, but shall be credited or
charged after that date with any earnings or losses of the
Individual Fund to which transferred or paid.
(c) The net income or net loss of each Individual Fund shall be
determined separately for each Individual Fund. In allocating
the net income or net loss of an Individual Fund, the Plan
Administrator shall make allocations separately in respect of
each Individual Fund to the interest of each Member (other than
Members to whose Accounts net income or net loss is not to be
allocated) in the Individual Fund in the proportion that the
value of the interest of the Member as of the next preceding
Valuation Date, less any distributions made to the Member from
the Individual Fund since that Valuation Date, bears to the
total value of all interests in the Individual Fund of all
Members (other than Members to whose Accounts net income or net
loss is not to be allocated) as of the next preceding Valuation
Date, as similarly reduced. For these purposes, in the event
all or any portion of the interest of a Member in an Individual
Fund is deemed transferred from the Individual Fund as of a
particular Valuation Date, the interest shall nonetheless be
credited or charged with its pro rata share of net income or net
loss as of the Valuation Date based upon the value of the
interest as of the next preceding Valuation Date.
6.8 The Plan Administrator shall establish an Individual Fund
designated as a "Loan Fund" for each outstanding loan from the
Fund. Each such Loan Fund shall invest in the note entered into
by the eligible borrower evidencing the promised repayment of
the monies loaned to the eligible borrow from the Fund. Upon
repayment of principal and interest, the Plan Administrator
shall credit the Accounts of Members with respect to the
investment direction in effect at the time of repayment.
SECTION 7
PLAN LOANS
7.1 Subject to the provisions of the Plan and the Trust, each
Member who is an Employee shall have the right, subject to prior
approval by the Plan Administrator, to borrow from the Fund. In
addition, each "party in interest," as defined in ERISA Section
3(14), who is (a) a Member but no longer an Employee, (b) the
Beneficiary of a deceased Member, or (c) an alternate payee of a
Member pursuant to the provisions of a "qualified domestic
relations order," as defined in Code Section 414(p), shall also
have the right, subject to prior approval by the Plan
Administrator, to borrow from the Fund; provided, however, that
loans to such parties in interest may not discriminate in favor
of Highly Compensated Employees.
7.2 In order to apply for a loan, a borrower must complete and
submit to the Plan Administrator documents provided by the Plan
Administrator for this purpose, provided that such application
may be made no more than seven (7) months in advance of
receiving such loan.
7.3 Loans shall be available to all eligible borrowers on a
reasonably equivalent basis which may take into account the
borrower's creditworthiness, ability to repay, and ability to
provide adequate security. Loans shall not be made available to
Highly Compensated Employees, officers or shareholders of a Plan
Sponsor in an amount greater than the amount made available to
other borrowers. This provision shall be deemed to be satisfied
if all borrowers have the right to borrow the same percentage of
their interest in the Member's vested Accrued Benefit,
notwithstanding that the dollar amount of such loans may differ
as a result of differing values of Members' vested Accrued
Benefits. A borrower is required to wait one year following
repayment of a loan before applying for another loan.
7.4 Each loan shall bear a "reasonable rate of interest" and
provide that the loan be amortized in substantially level
payments, made no less frequently than quarterly, over a
specified period of time. A "reasonable rate of interest" shall
be that rate that provides the Plan with a return commensurate
with the interest rates charged by persons in the business of
lending money for loans which would be made under similar
circumstances.
7.5 Each loan shall be adequately secured, with the security
for the outstanding balance of all loans to the borrower to
consist of one-half (1/2) of the borrower's interest in the
Member's vested Accrued Benefit, or such other security as the
Plan Administrator deems acceptable. Effective only before July
1, 1992, no portion of the Member's Employee Deferral Account
shall be used as security for any loan hereunder unless and
until such time as the loan amount exceeds the value of the
borrower's interest in the Member's vested Accrued Benefit in
all other Accounts.
7.6 Each loan, when added to the outstanding balance of all
other loans to the borrower from all retirement plans of the
Plan Sponsor and its Affiliates which are qualified under
Section 401 of the Code, shall not exceed the lesser of:
(a) $50,000, reduced by the excess, if any, of
(1) the highest outstanding balance of loans made to the
borrower from all retirement plans qualified under Code Section
401 of the Plan Sponsor and its Affiliates during the one (1)
year period immediately preceding the day prior to the date on
which such loan was made, over
(2) the outstanding balance of loans made to the borrower from
all retirement plans qualified under Code Section 401 of the
Plan Sponsor and its Affiliates on the date on which such loan
was made, or
(b) one-half (1/2) of the value of the borrower's interest in
the vested Accrued Benefit attributable to the Member's Account.
For purposes of this Section, the value of the vested Accrued
Benefit attributable to a Member's Account shall be established
as of the latest preceding Valuation Date, or any later date on
which an available valuation was made, and shall be adjusted for
any distributions or contributions made through the date of the
origination of the loan.
7.7 Each loan, by its terms, shall be repaid within five (5)
years, except that any loan which is used to acquire any
dwelling unit which within a reasonable time is to be used
(determined at the time the loan is made) as the principal
residence of the borrower may, by its terms, be repaid within a
longer period of time.
7.8 Each loan shall be made in an amount of no less than $1,000.
7.9 A borrower is permitted to have only one loan existing
under this Plan at any one time.
7.10 (a) Effective prior to July 1, 1992, loans shall be made
in sequential order from a Member's Non-Deductible Voluntary
Contribution Account, Rollover Account, Direct Transfer Account,
the vested portion of the Company Contribution Account, and
Employee Deferral Account and further shall be made first from
those portions of a Member's Accounts which are not invested in
the SCI Stock Fund. No loans shall be permitted from a Member's
Company Stock Account.
(b) Effective on and after July 1, 1992, loans shall be made in
sequential order from a Member's Rollover Account, Direct
Transfer Account, the vested portion of his Company Contribution
Account attributable to Plan Sponsor contributions made under
Section 3.2 of the Plan, and Employee Deferral Account to the
extent such Accounts are not invested in the SCI Stock Fund and
then from those Accounts in the same sequential order to the
extent they are invested in the SCI Stock Fund. No loans shall
be permitted from a Member's Non-Deductible Voluntary
Contribution Account, the portion of the Company Contribution
Account attributable to Plan Sponsor contributions made under
Section 3.4 of the Plan, and the Company Stock Account.
7.11 The entire unpaid principal sum and accrued interest
shall, at the option of the Plan Administrator, become due and
payable if (a) a borrower fails to make any loan payment when
due, (b) a borrower ceases to be a "party in interest", as
defined in ERISA Section 3(14), (c) the vested Accrued Benefit
held as security under the Plan for the borrower will, as a
result of an impending distribution or withdrawal, be reduced to
an amount less than the amount of all unpaid principal and
accrued interest then outstanding under the loan, or (d) a
borrower makes any untrue representations or warranties in
connection with the obtaining of the loan. In that event, the
Plan Administrator may take such steps as it deems necessary to
preserve the assets of the Plan, including, but not limited to,
the following: (1) direct the Trustee to deduct the unpaid
principal sum, accrued interest, and any other applicable charge
under the note evidencing the loan from any benefits that may
become payable out of the Plan to the borrower, (2) direct the
Plan Sponsor to deduct and transfer to the Trustee the unpaid
principal balance, accrued interest, and any other applicable
charge under the note evidencing the loan from any amounts owed
by the Plan Sponsor to the borrower, or (3) liquidate the
security given by the borrower, other than amounts attributable
to a Member's Employee Deferral Account, and deduct from the
proceeds the unpaid principal balance, accrued interest, and any
other applicable charge under the note evidencing the loan. If
any part of the indebtedness under the note evidencing the loan
is collected by law or through an attorney, the borrower shall
be liable for attorneys' fees in an amount equal to ten percent
of the amount then due and all costs of collection.
7.12 Loans shall only be made for the purpose of enabling a
Member to meet an unusual or special financial situation such as
to pay for medical expenses resulting from accident or sickness
to the Member or his dependents, educational expenses for the
Member's dependents, the purchase or renovation of his principal
residence or for such other unusual or special financial
situation as approved by the Plan Administrator.
7.13 Each loan shall be made only in accordance with
regulations and rulings of the Internal Revenue Service and the
Department of Labor. The Plan Administrator shall be authorized
to administer the loan program of this Section and shall act in
his sole discretion to ascertain whether the requirements of
such regulations and rulings and this Section have been met.
SECTION 8
DEATH BENEFITS
8.1 Upon the death of a Member who is an Employee at the time
of his death, his Beneficiary shall be entitled to the full
value of his Accrued Benefit.
8.2 Upon the death of a Member who is not an Employee at the
time of his death, prior to the distribution of his vested
Accrued Benefit, his Beneficiary shall be entitled to his vested
Accrued Benefit.
8.3 If, subsequent to the death of a Member, the Member's
Beneficiary dies while entitled to receive benefits under the
Plan, the successor Beneficiary, if any, or the Beneficiary
listed under Subsection (a), (b) or (c) of the Plan Section
containing the definition of the term "Beneficiary" shall
generally be entitled to receive benefits under the Plan.
However, if the deceased Beneficiary was the Member's spouse at
the time of the Member's death, or if no successor Beneficiary
shall have been designated by the Member and be alive and no
Beneficiary listed under Subsection (a), (b) or (c) of the Plan
Section containing the definition of the term "Beneficiary"
shall be alive, the Member's unpaid vested Accrued Benefit shall
be paid to the personal representative of the deceased
Beneficiary's estate.
8.4 Any benefit payable under this Section 8 shall be paid in
accordance with and subject to the provisions of Plan Section 9
or Section 10, whichever is applicable, after receipt by the
Trustee from the Plan Administrator of notice of the death of
the Member.
SECTION 9
PAYMENT OF BENEFITS ON RETIREMENT OR DEATH
9.1 The Accrued Benefit of a Member who has attained a
Retirement Date or has attained Normal Retirement Age or died
while an Employee shall be fully vested and nonforfeitable. As
of a Member's Retirement Date or death while an Employee, he or
his Beneficiary shall be entitled to his Accrued Benefit to be
paid in accordance with this Section 9. The Accrued Benefit of
a Member which is to be paid under this Section 9 shall be
determined as of the Valuation Date coinciding with or
immediately preceding the date the Accrued Benefit is valued for
imminent payout purposes pursuant to normal administrative
procedures, and shall be increased by any amounts allocated to
the Member's Account after that Valuation Date and reduced by
any distributions made from the Member's Account after that
Valuation Date and the amount necessary to satisfy, as of the
Member's Retirement Date, the unpaid principal, accrued
interest, and penalties on any loan made to the Member.
Payments to a Member, or to the Beneficiary of a deceased
Member, shall commence no later than sixty (60) days after the
last day of the Plan Year in which the Retirement Date or death
of the Member occurs. If the amount of the payment required to
commence on a date cannot be ascertained by that date, payment
shall commence retroactively to that date and shall commence no
later than sixty (60) days after the earliest date on which the
amount of payment can be ascertained.
9.2 The payment of a Member's Accrued Benefit shall be in the
form of one lump sum in cash. The interest of a Member, if any,
in the SCI Stock Fund (as defined in the Trust) other than his
Cash Account (as defined in the Trust) shall be distributed
either in cash or in kind, but not in the form of an annuity, as
selected by the Member or Beneficiary of a deceased Member.
9.3 Notwithstanding any provision of the Plan to the contrary,
if a Member's vested Accrued Benefit exceeds $3,500, it shall
not be distributed before the Member's Normal Retirement Age or
death without the consent of the Member.
9.4 Notwithstanding any other provisions of the Plan,
(a) Prior to the death of a Member, all retirement payments
hereunder shall --
(1) be distributed to the Member not later than the required
beginning date (as defined below) or,
(2) be distributed, commencing not later than the required
beginning date (as defined below)--
(A) in accordance with regulations prescribed by the Secretary
of the Treasury, over the life of the Member or over the lives
of the Member and his designated individual Beneficiary, if any,
or
(B) in accordance with regulations prescribed by the Secretary
of the Treasury, over a period not extending beyond the life
expectancy of the Member or the joint life and last survivor
expectancy of the Member and his designated individual
Beneficiary, if any.
(b) (1) If --
(A) the distribution of a Member's retirement payments have
begun in accordance with Subsection (a)(2) of this Section, and
(B) the Member dies before his entire vested Accrued Benefit has
been distributed to him, then the remaining portion of his
vested Accrued Benefit shall be distributed at least as rapidly
as under the method of distribution being used under Subsection
(a)(2) of this Section as of the date of his death.
(2) If a Member dies before the commencement of retirement
payments hereunder, the entire interest of the Member shall be
distributed within five (5) years after his death.
(3) If --
(A) any portion of a Member's vested Accrued Benefit is payable
to or for the benefit of the Member's designated individual
Beneficiary, if any,
(B) that portion is to be distributed, in accordance with
regulations prescribed by the Secretary of the Treasury, over
the life of the designated individual Beneficiary or over a
period not extending beyond the life expectancy of the
designated individual Beneficiary, and
(C) the distributions begin not later than one (1) year after
the date of the Member's death or such later date as the
Secretary of the Treasury may by regulations prescribe, then,
for purposes of Paragraph (2) of this Subsection (b), the
portion referred to in Subparagraph (A) of this Paragraph (3)
shall be treated as distributed on the date on which the
distributions to the designated individual Beneficiary begin.
(4) If the designated individual Beneficiary referred to in
Paragraph (3)(A) of this Subsection (b) is the surviving spouse
of the Member, then --
(A) the date on which the distributions are required to begin
under Paragraph (3)(C) of this Subsection (b) shall not be
earlier than the date on which the Member would have attained
age 70-1/2, and
(B) if the surviving spouse dies before the distributions to
such spouse begin, this Subsection (b) shall be applied as if
the surviving spouse were the Member.
(c) For purposes of this Section, the term "required beginning
date" means April 1 of the calendar year following the calendar
year in which the Member attains age 70-1/2. Notwithstanding
the foregoing, in the case of a Member who is not described in
Section 1(b)(3) of Appendix C hereto and who has attained age
70-1/2 before January 1, 1988, the term "required beginning
date" means April 1 of the calendar year following the calendar
year in which the Member retires or otherwise terminates
employment.
(d) Distributions will be made in accordance with the
regulations under Code Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Treas. Reg.
Section 1.401(a)(9)-2.
9.5 Notwithstanding any provisions of the Plan to the contrary
that would otherwise limit a Distributee's election under this
Section 9, effective on and after January 1, 1993, a Distributee
may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a direct rollover so long as all
Eligible Rollover Distributions to a Distributee for a calendar
year total or are expected to total at least $200 and, in the
case of a Distributee who elects to directly receive a portion
of an Eligible Rollover Distribution and directly roll the
balance over to an Eligible Rollover Plan, the portion that is
to be directly rolled over totals at least $500.
SECTION 10
PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT
10.1 Transfer of a Member from one Plan Sponsor to another Plan
Sponsor or to an Affiliate shall not be deemed for any purpose
under the Plan to be a termination of employment of the Member.
10.2 In the event of the termination of employment of a Member
for reasons other than death or attainment of a Retirement Date,
the Member's Accrued Benefit shall be determined as of the
Valuation Date coinciding with or immediately preceding the date
the Accrued Benefit is valued for imminent payout purposes
pursuant to normal administrative procedures, and shall be
increased by any amounts allocated to a Member's Account after
that Valuation Date and reduced by any distributions made from
the Member's Account after that Valuation Date and the amount
necessary to satisfy, as of the Member's termination of
employment, the unpaid principal, accrued interest, and
penalties on any loan made to the Member.
10.3 That portion of a Member's Accrued Benefit in which he is
vested shall be:
(a) his Employee Deferral Account, Non-Deductible Voluntary
Contribution Account, Rollover Account, Company Stock Account,
and Direct Transfer Account which shall be fully vested and
nonforfeitable at all times; and
(b) that portion of the value of his Company Contribution
Account computed as of the Valuation Date according to the
following vesting schedule, taking into account any Vesting
Service subsequent to such Valuation Date until the date of his
termination of employment:
Full Years of Percentage
Vesting Service Vested
Less than Five 0%
Five or More 100%
10.4 The Member shall be entitled to payment in the form of a
lump sum payment in cash. The interest of a Member, if any, in
the SCI Stock Fund (as defined in the Trust) other than his Cash
Account (as defined in the Trust) shall be distributed either in
cash or in kind, but not in the form of an annuity, as selected
by the Member. Payment shall be made as soon as
administratively feasible after the Member terminates
employment; provided, however, if the Member's vested Accrued
Benefit exceeds $3,500 it will not be distributed before the
Member's Normal Retirement Age or death without the Member's
consent. In no event shall payment be made later than sixty
(60) days after the end of the Plan Year in which the Normal
Retirement Age of the Member occurs.Payment shall be made
subject to the minimum distribution requirements set forth in
Plan Section 9.4, and the Eligible Rollover Distribution
requirements set forth in Plan Section 9.5.
10.5 (a) If any portion of a Member's vested Accrued Benefit
derived from Plan Sponsor contributions is paid prior to his
Termination Completion Date, a portion of his Accrued Benefit
equal to his total non-vested Accrued Benefit derived from Plan
Sponsor contributions multiplied by a fraction, the numerator of
which is the amount of the distribution attributable to Plan
Sponsor contributions and the denominator of which is the total
vested Accrued Benefit attributable to Plan Sponsor
contributions, shall be immediately forfeited. The amount
forfeited shall not exceed the Member's nonvested Accrued
Benefit. Upon the termination of employment of a Member who is
not vested in any part of his Accrued Benefit, the Member shall
be deemed to have received a distribution and his Accrued
Benefit shall be immediately forfeited.
(b) If the Member is reemployed by a Plan Sponsor or an
Affiliate prior to his Termination Completion Date and (1) if
the Member's Accrued Benefit was partially vested and the Member
repays to the Fund no later than the fifth anniversary of the
Member's reemployment by the Plan Sponsor or an Affiliate all of
that portion of his vested Accrued Benefit which was paid to him
or (2) if the Member's Accrued Benefit was not vested upon his
termination of employment, then any portion of his Accrued
Benefit which was forfeited shall be restored effective on the
Valuation Date coinciding with or next following the repayment
or the Member's reemployment, respectively. The restoration on
any Valuation Date of the forfeited portion of the Accrued
Benefit of a Member pursuant to the preceding sentence shall be
made first from forfeitures available for allocation on that
Valuation Date, to the extent available, and secondly from net
income calculated as of that Valuation Date, if any, and third
from Plan contributions for this purpose. Only after
restorations have been made shall the remaining net income be
available for allocation under Plan Section 4.
(c) If a Member who is partially vested in his Accrued Benefit
does not receive, prior to his Termination Completion Date, a
distribution of any portion of his vested Accrued Benefit, then
no forfeiture of that Member's nonvested portion of his Accrued
Benefit shall occur until that Member's Termination Completion
Date.
10.6 In the event that a Plan amendment directly or indirectly
changes the vesting schedule, the vesting percentage for each
Member in his Accrued Benefit accumulated to the date when the
amendment is adopted shall not be reduced as a result of the
amendment. In addition, any Member with at least three (3)
years of Vesting Service may irrevocably elect, by written
notice to the Plan Administrator within the following election
period, to remain under the pre-amendment vesting schedule with
respect to all of his benefits accrued both before and after the
amendment. The election period shall begin no later than the
date the amendment is adopted and end no earlier than sixty (60)
days after the latest of (a) the date the amendment is adopted,
(b) the date the amendment becomes effective, or (c) the date
the Member is issued written notice of the amendment by a Plan
Sponsor or the Plan Administrator.
SECTION 11
ADMINISTRATION OF THE PLAN
11.1 Trust Agreement. The Primary Sponsor shall establish a
Trust with the Trustee designated by the Board of Directors for
the management of the Fund, which Trust shall form a part of the
Plan and is incorporated herein by reference.
11.2 Operation of the Plan Administrator.
(a) The Primary Sponsor shall appoint a Plan Administrator. If
an organization is appointed to serve as the Plan Administrator,
then the Plan Administrator may designate in writing a person
who may act on behalf of the Plan Administrator. The Primary
Sponsor shall have the right to remove any person or persons
constituting the Plan Administrator at any time by notice in
writing. A person constituting any part of Plan Administrator
may resign at any time by written notice of resignation to the
Plan Administrator, Trustee and Primary Sponsor. Upon removal
or resignation, or in the event of the dissolution of the Plan
Administrator, the Primary Sponsor shall appoint a successor.
(b) The Plan Administrator shall perform any act which the
Plan authorizes by affirmative action of a majority of the
persons constituting the Plan Administrator, expressed by a vote
at a meeting of the Plan Administrator, or in a writing signed
by majority without a meeting. The Plan Administrator may, by a
writing signed by a majority, designate any person constituting
any part of the Plan Administrator as the person entitled to
give notices on behalf of the Plan Administrator and the Trustee
is entitled to rely upon any writing until amended or superseded
by a subsequent similar writing.
11.3 Fiduciary Responsibility.
(a) The Plan Administrator, as a Named Fiduciary, may allocate
its fiduciary responsibilities among Fiduciaries other than the
Trustee, designated in writing by the Plan Administrator and may
designate in writing persons other than the Trustee to carry out
its fiduciary responsibilities under the Plan. The Plan
Administrator may remove any person designated to carry out its
fiduciary responsibilities under the Plan by notice in writing
to such person.
(b) The Plan Administrator and each of the other Fiduciaries
may employ persons to perform services and to render advice with
regard to any of the Fiduciary's responsibilities under the
Plan. Charges for all such services performed and advice
rendered may be directly paid by each Plan Sponsor but until
paid shall constitute a charge against the Fund.
(c) Each Plan Sponsor shall indemnify and hold harmless each
person constituting the Plan Administrator or the Investment
Committee, if any, from and against any and all claims, losses,
costs, expenses (including, without limitation, attorney's fees
and court costs), damages, actions or causes of action arising
from, on account of or in connection with the performance by
such person of his duties in such capacity, other than such of
the foregoing arising from, on account of or in connection with
the willful neglect or willful misconduct of such person.
11.4 Duties of the Plan Administrator.
(a) The Plan Administrator shall advise the Trustee with
respect to all payments under the terms of the Plan and shall
direct the Trustee in writing to make such payments from the
Fund; provided, however, in no event shall the Trustee be
required to make such payments if the Trustee has actual
knowledge that such payments are contrary to the terms of the
Plan and the Trust.
(b) The Plan Administrator shall from time to time establish
rules, not contrary to the provisions of the Plan and the Trust,
for the administration of the Plan and the transaction of its
business. All elections and designations under the Plan by a
Participant or Beneficiary shall be made on forms prescribed by
the Plan Administrator. The Plan Administrator shall have
discretionary authority to construe the terms of the Plan and
shall determine all questions arising in the administration,
interpretation and application of the Plan, including, but not
limited to, those concerning eligibility for benefits and it
shall not act so as to discriminate in favor of any person. All
determinations of the Plan Administrator shall be conclusive and
binding on all Employees, Members, Beneficiaries and
Fiduciaries, subject to the provisions of the Plan and the Trust
and subject to applicable law.
(c) The Plan Administrator shall furnish Members and
Beneficiaries with all disclosures now or hereafter required by
ERISA or the Code. The Plan Administrator shall file, as
required, the various reports and disclosures concerning the
Plan and its operations as required by ERISA and by the Code,
and shall be solely responsible for establishing and maintaining
all records of the Plan and the Trust.
(d) The statement of specific duties for a Plan Administrator
in this Section is not in derogation of any other duties which a
Plan Administrator has under the provisions of the Plan or the
Trust or under applicable law.
11.5 Investment Manager. The Primary Sponsor may, by action
in writing certified by notice to the Trustee, appoint an
Investment Manager or Investment Managers to manage any assets
of the Fund, including the power to acquire and dispose of the
assets. Any Investment Manager may be removed in the same
manner in which appointed, and in the event of any removal, the
Investment Manager shall, as soon as possible, but in no event
more than thirty (30) days after notice of removal, turn over
all assets managed by it to the Trustee or to any successor
Investment Manager appointed, and shall make a full accounting
to the Primary Sponsor with respect to all assets managed by it
since its appointment as an Investment Manager.
11.6 Investment Committee. The Primary Sponsor may, by action
in writing certified by notice to the Trustee, appoint an
Investment Committee to direct the investment of assets of the
Fund. The Primary Sponsor shall have the right to remove any
person on the Investment Committee at any time by notice in
writing to such person. A person on the Investment Committee
may resign at any time by written notice of resignation to the
Primary Sponsor. Upon such removal or resignation, or in the
event of the death of a person on the Investment Committee, the
Primary Sponsor may appoint a successor. Until a successor has
been appointed, the remaining persons on the Investment
Committee may continue to act as the Investment Committee. The
Investment Committee shall perform any act which the Plan
authorizes by an affirmative action of a majority of the persons
constituting the Investment Committee, expressed by a vote at a
meeting of the Investment Committee or in a writing signed by
the majority without a meeting. The Investment Committee may
designate in writing a person to give notices on behalf of the
Investment Committee and the Trustee is entitled to rely upon
the writing until amended or superseded by a subsequent similar
writing.
11.7 Action by a Plan Sponsor. Any action to be taken by a
Plan Sponsor shall be taken by resolution or written direction
duly adopted by its board of directors or appropriate governing
body, as the case may be; provided, however, that by such
resolution or written direction, the board of directors or
appropriate governing body, as the case may be, may delegate to
any officer or other appropriate person of a Plan Sponsor the
authority to take any such actions as may be specified in such
resolution or written direction, other than the power to amend,
modify or terminate the Plan or the Trust or to determine the
basis of any Plan Sponsor contributions.
SECTION 12
CLAIM REVIEW PROCEDURE
12.1 If a Member or Beneficiary is denied a claim for benefits
under a Plan, the Plan Administrator shall provide to the
claimant written notice of the denial within 90 days after the
Plan Administrator receives the claim, unless special
circumstances require an extension of time for processing the
claim. If such an extension of time for processing is required,
written notice of the extension shall be furnished to the
claimant prior to the termination of the initial 90-day period.
In no event shall the extension exceed a period of 90 days from
the end of such initial period. The extension notice shall
indicate the special circumstances requiring an extension of
time and the date by which the Plan Administrator expects to
render the final decision.
12.2 If the claimant is denied a claim for benefits, the Plan
Administrator shall provide, within the time frame set forth in
Plan Section 12.1, written notice of the denial which shall set
forth:
(a) the specific reasons for the denial;
(b) specific references to the pertinent provisions of the Plan
on which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why the material or information is necessary; and
(d) an explanation of the Plan's claim review procedure.
12.3 After receiving written notice of the denial of a claim,
a claimant or his representative may:
(a) request a full and fair review of the denial by written
application to the Plan Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Plan
Administrator.
12.4 If the claimant wishes a review of the decision denying
his claim to benefits under the Plan, he or his representative
must submit the written application to the Plan Administrator
within sixty (60) days after receiving written notice of the
denial.
12.5 Upon receiving the written application for review, the
Plan Administrator may schedule a hearing for purposes of
reviewing the claimant's claim, which hearing shall take place
not more than thirty (30) days from the date on which the Plan
Administrator received the written application for review.
12.6 At least ten (10) days prior to the scheduled hearing,
the claimant and his representative designated in writing by
him, if any, shall receive written notice of the date, time, and
place of the scheduled hearing. The claimant or his
representative may request that the hearing be rescheduled for
his convenience on another reasonable date or at another
reasonable time or place.
12.7 All claimants requesting a review of the decision denying
their claim for benefits may employ counsel for purposes of the
hearing.
12.8 No later than sixty (60) days following the receipt of
the written application for review, the Plan Administrator shall
submit its decision on the review in writing to the claimant
involved and to his representative, if any; provided, however, a
decision on the written application for review may be extended,
in the event special circumstances such as the need to hold a
hearing require an extension of time, to a day no later than one
hundred twenty (120) days after the date of receipt of the
written application for review. The decision shall include
specific reasons for the decision and specific references to the
pertinent provisions of the Plan on which the decision is based.
SECTION 13
LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS
13.1 No benefit which shall be payable under the Plan to any
person shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge the same shall be void; and
no such benefit shall in any manner be liable for, or subject
to, the debts, contracts, liabilities, engagements or torts of
any person, nor shall it be subject to attachment or legal
process for, or against, such person, and the same shall not be
recognized under the Plan, except to such extent as may be
required by law. Notwithstanding the above, this Section shall
not apply to a "qualified domestic relations order" (as defined
in Code Section 414(p)), and benefits may be paid pursuant to
the provisions of such an order. The Plan Administrator shall
develop procedures (in accordance with applicable federal
regulations) to determine whether a domestic relations order is
qualified, and, if so, the method and the procedures for
complying therewith.
13.2 If any person who shall be entitled to any benefit under
the Plan shall become bankrupt or shall attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge
such benefit under the Plan, then the payment of any such
benefit in the event a Member or Beneficiary is entitled to
payment shall, in the discretion of the Plan Administrator,
cease and terminate and in that event the Trustee shall hold or
apply the same for the benefit of such person, his spouse,
children, other dependents or any of them in such manner and in
such proportion as the Plan Administrator shall determine.
13.3 Whenever any benefit which shall be payable under the
Plan is to be paid to or for the benefit of any person who is
then a minor or determined to be incompetent by qualified
medical advice, the Plan Administrator need not require the
appointment of a guardian or custodian, but shall be authorized
to cause the same to be paid over to the person having custody
of such minor or incompetent, or to cause the same to be paid to
such minor or incompetent without the intervention of a guardian
or custodian, or to cause the same to be paid to a legal
guardian or custodian of such minor or incompetent if one has
been appointed or to cause the same to be used for the benefit
of such minor or incompetent.
13.4 If the Plan Administrator cannot ascertain the
whereabouts of any Member to whom a payment is due under the
Plan, the Plan Administrator may direct that the payment and all
remaining payments otherwise due to the Member be cancelled on
the records of the Plan and the amount thereof applied as a
forfeiture in accordance with Plan Section 3.5 except that, in
the event the Member later notifies the Plan Administrator of
his whereabouts and requests the payments due to him under the
Plan, the Plan Sponsor shall contribute to the Plan an amount
equal to the payment to be paid to him as soon as
administratively feasible.
SECTION 14
PROHIBITION AGAINST DIVERSION
At no time shall any part of the Fund be used for or diverted
to purposes other than the exclusive benefit of the Members or
their Beneficiaries, subject, however, to the payment of all
taxes and administrative expenses and subject to the provisions
of the Plan with respect to returns of contributions.
SECTION 15
LIMITATION OF RIGHTS
Membership in the Plan shall not give any Employee any right or
claim except to the extent that such right is specifically fixed
under the terms of the Plan. The adoption of the Plan and the
Trust by any Plan Sponsor shall not be construed to give any
Employee a right to be continued in the employ of a Plan Sponsor
or as interfering with the right of a Plan Sponsor to terminate
the employment of any Employee at any time.
SECTION 16
AMENDMENT TO OR TERMINATION OF THE PLAN AND THE
TRUST
16.1 The Primary Sponsor reserves the right at any time to
modify or amend or terminate the Plan or the Trust in whole or
in part by notice thereof in writing delivered to the Trustee;
provided, however, that the Primary Sponsor shall have no power
to modify or amend the Plan in such manner as would cause or
permit any portion of the funds held under a Plan to be used
for, or diverted to, purposes other than for the exclusive
benefit of Members or their Beneficiaries, or as would cause or
permit any portion of a fund held under the Plan to become the
property of a Plan Sponsor; and provided further, that the
duties or liabilities of the Trustee shall not be increased
without its written consent; and provided further, that
provisions of the Plan affecting the amount, price and timing of
awards (within the meaning of Rule 16b-3(c) promulgated pursuant
to the Securities Exchange Act of 1934) and the eligibility of
such persons to participate in the Plan, shall not be amended
more frequently than once in any six-month period, other than to
comport with changes in the Code, ERISA or the rules and
regulations thereunder. No such modifications or amendments
shall have the effect of retroactively changing or depriving
Members or Beneficiaries of rights already accrued under the
Plan. No Plan Sponsor other than the Primary Sponsor shall have
the right to so modify, amend or terminate the Plan or the
Trust. Notwithstanding the foregoing, each Plan Sponsor may
terminate its own participation in the Plan and Trust pursuant
to the Plan.
16.2 Each Plan Sponsor other than the Primary Sponsor shall
have the right to terminate its participation in the Plan and
Trust by resolution of its board of directors or other
appropriate governing body and notice in writing to the Primary
Sponsor and the Trustee unless such termination would result in
the disqualification of the Plan or the Trust or would adversely
affect the exempt status of the Plan or the Trust as to any
other Plan Sponsor. If contributions by or on behalf of a Plan
Sponsor are completely terminated, the Plan and Trust shall be
deemed terminated as to such Plan Sponsor and such Plan Sponsor
may not resume its participation in the Plan until a date at
least six (6) months after the date of such termination. Any
termination by a Plan Sponsor, shall not be a termination as to
any other Plan Sponsor.
16.3 (a) If the Plan is terminated by the Primary Sponsor or
if contributions to the Trust should be permanently
discontinued, it shall terminate as to all Plan Sponsors and the
Fund shall be used, subject to the payment of expenses and
taxes, for the benefit of Members and Beneficiaries, and for no
other purposes, and the Account of each affected Member shall be
fully vested and nonforfeitable, notwithstanding the provisions
of the Section of the Plan which sets forth the vesting schedule.
(b) In the event of the partial termination of the Plan, each
affected Member's Account shall be fully vested and
nonforfeitable, notwithstanding the provisions of the Section of
the Plan which sets forth the vesting schedule.
16.4 In the event of the termination of the Plan or the Trust
with respect to a Plan Sponsor, the Accounts of the Members with
respect to the Plan as adopted by such Plan Sponsor shall be
held subject to the instructions of the Plan Administrator;
provided that the Trustee shall not be required to make any
distribution until it receives a copy of an Internal Revenue
Service determination letter to the effect that the termination
does not affect the qualified status of the Plan or the exempt
status of the Trust or, in the event that such letter is applied
for and is not issued, until the Trustee is reasonably satisfied
that adequate provision has been made for the payment of all
taxes which may be due and owing by the Trust.
16.5 In the case of any merger or consolidation of the Plan
with, or any transfer of the assets or liabilities of the Plan
to, any other plan qualified under Code Section 401, the terms
of the merger, consolidation or transfer shall be such that each
Member would receive (in the event of termination of the Plan or
its successor immediately thereafter) a benefit which is no less
than the benefit which the Member would have received in the
event of termination of the Plan immediately before the merger,
consolidation or transfer.
16.6 Notwithstanding any other provision of the Plan, an
amendment to the Plan --
(a) which eliminates or reduces an early retirement benefit, if
any, or which eliminates or reduces a retirement-type subsidy
(as defined in regulations issued by the Department of the
Treasury), if any, or
(b) which eliminates an optional form of benefit
shall not be effective with respect to benefits attributable to
service before the amendment is adopted. In the case of a
retirement-type subsidy described in Subsection (a) above, this
Section shall be applicable only to a Member who satisfies,
either before or after the amendment, the preamendment
conditions for the subsidy.
SECTION 17
ADOPTION OF PLAN BY AFFILIATES
Any corporation or other business entity related to the Primary
Sponsor by function or operation and any Affiliate, if the
corporation, business entity or Affiliate is authorized to do so
by written direction adopted by the Board of Directors, may
adopt the Plan and the related Trust by action of the board of
directors or other appropriate governing body of such
corporation, business entity or Affiliate. Any adoption shall
be evidenced by certified copies of the resolutions of the
foregoing board of directors or governing body indicating the
adoption and by the execution of the Trust by the adopting
corporation, or business entity or Affiliate. The resolution
shall state and define the effective date of the adoption of the
Plan by the Plan Sponsor and, for the purpose of Code Section
415, the "limitation year" as to such Plan Sponsor.
Notwithstanding the foregoing, however, if the Plan and Trust as
adopted by an Affiliate or other corporation or business entity
under the foregoing provisions shall fail to receive the initial
approval of the Internal Revenue Service as a qualified Plan and
Trust under Code Sections 401(a) and 501(a), any contributions
by the Affiliate or other corporation or business entity after
payment of all expenses will be returned to such Plan Sponsor
free of any trust, and the Plan and Trust shall terminate, as to
the adopting Affiliate or other corporation or business entity.
SECTION 18
QUALIFICATION AND RETURN OF CONTRIBUTIONS
18.1 If the Plan and the related Trust fail to receive the
initial approval of the Internal Revenue Service as a qualified
plan and trust within one (1) year after the date of denial of
qualification (a) the contribution of a Plan Sponsor after
payment of all expenses will be returned to a Plan Sponsor free
of the Plan and Trust, (b) contributions made by a Member shall
be returned to the Member who made the contributions, and (c)
the Plan and Trust shall thereupon terminate.
18.2 All Plan Sponsor contributions to the Plan are contingent
upon deductibility. To the extent permitted by the Code and
other applicable laws and regulations thereunder, upon a Plan
Sponsor's request, a contribution which was made by reason of a
mistake of fact or which was nondeductible under Code Section
404, shall be returned to a Plan Sponsor within one (1) year
after the payment of the contribution, or the disallowance of
the deduction (to the extent disallowed), whichever is
applicable.
In the event of a contribution which was made by reason of a
mistake of fact or which was nondeductible, the amount to be
returned to the Plan Sponsor shall be the excess of the
contribution above the amount that would have been contributed
had the mistake of fact or the mistake in determining the
deduction not occurred, less any net loss attributable to the
excess. Any net income attributable to the excess shall not be
returned to the Plan Sponsor. No return of any portion of the
excess shall be made to the Plan Sponsor if the return would
cause the balance in a Member's Account to be less than the
balance would have been had the mistaken contribution not been
made.
SECTION 19
INCORPORATION OF SPECIAL LIMITATIONS
Appendices A, B, C and D to the Plan, attached hereto, are
incorporated by reference and the provisions of the same shall
apply notwithstanding anything to the contrary contained herein.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
indenture to be executed as of this 20th day of May, 1994.
SCI SYSTEMS (ALABAMA), INC.
By:/s/A. Eugene Sapp, Jr.
Title: President and Chief Operating Officer
ATTEST:
/s/Michael M. Sullivan
Title: Secretary
[CORPORATE SEAL]
APPENDIX A
SPECIAL NONDISCRIMINATION RULES
SECTION 1
As used in this Appendix, the following words shall have the
following meanings:
"Eligible Member" means a Member who is an Employee during any
particular Plan Year.
(b) "Highly Compensated Eligible Member" means any Eligible
Member who is a Highly Compensated Employee.
(c) "Matching Contribution" means any contribution made by a
Plan Sponsor based upon either the amount contributed by a
Member as a non-deductible employee contribution or the amount
contributed on behalf of a Member as an Elective Deferral.
(d) "Qualified Matching Contributions" means Matching
Contributions which are immediately nonforfeitable when made,
and which would be nonforfeitable, regardless of the age or
service of the Employee or whether the Employee is employed on a
certain date, and which may not be distributed, except upon one
of the events described under Section 401(k)(2)(B) of the Code
and the regulations thereunder.
(e) "Qualified Nonelective Contributions" means contributions
of the Plan Sponsor or an Affiliate, other than Matching
Contributions or Elective Deferrals, which are nonforfeitable
when made, and which would be nonforfeitable regardless of the
age or service of the Employee or whether the Employee is
employed on a certain date, and which may not be distributed,
except upon one of the events described under Code Section
401(k)(2)(B) and the regulations thereunder.
SECTION 2
In addition to any other limitations set forth in the Plan, for
each Plan Year one of the following tests must be satisfied:
(a) the actual deferral percentage for the Highly Compensated
Eligible Members must not be more than the actual deferral
percentage of all other Eligible Members multiplied by 1.25; or
(b) the excess of the actual deferral percentage for the Highly
Compensated Eligible Members over that of all other Eligible
Members must not be more than two (2) percentage points, and the
actual deferral percentage for the Highly Compensated Eligible
Members must not be more than the actual deferral percentage of
all other Eligible Members multiplied by two (2).
The "actual deferral percentage" for the Highly Compensated
Eligible Members and all other Eligible Members for a Plan Year
is the average in each group of the ratios, calculated
separately for each Employee, of the Deferral Amounts
contributed by the Plan Sponsor on behalf of an Employee for the
Plan Year to the Annual Compensation of the Employee in the Plan
Year. In addition, for purposes of calculating the "actual
deferral percentage" as described above, Deferral Amounts of
Employees who are not Highly Compensated Employees which are
prohibited by Code Section 401(a)(30) shall not be taken into
consideration. Except to the extent limited by Proposed
Treasury Regulation section 1.401(k)-1(b)(3) and any other
applicable regulations promulgated by the Secretary of the
Treasury, all or part of the Qualified Matching Contributions
and Qualified Nonelective Contributions made pursuant to the
Plan may be treated as Deferral Amounts for purposes of
determining the "actual deferral percentage."
SECTION 3
If the Deferral Amounts contributed on behalf of any Highly
Compensated Eligible Member exceeds the amount permitted under
the "actual deferral percentage" test described in Section 2 of
this Appendix A for any given Plan Year, then before the end of
the Plan Year following the Plan Year for which the Excess
Deferral Amount was contributed, (a) the amount of the Excess
Deferral Amount for the Plan Year, as adjusted to reflect
income, gain, or loss attributable to it through the date the
Excess Deferral Amount is distributed to the Member and reduced
by any excess Elective Deferrals as determined pursuant to Plan
Section 3.1 previously distributed to the Member for the
Member's taxable year ending with or within the Plan Year, may
be distributed to the Highly Compensated Eligible Member or (b)
to the extent provided in regulations issued by the Secretary of
the Treasury, the Plan Administrator may permit the Member to
elect, within two and one-half months after the end of the Plan
Year for which the Excess Deferral Amount was contributed, to
treat the Excess Deferral Amount, unadjusted for earnings,
gains, and losses, but as so reduced, as an amount distributed
to the Member and then contributed as an after-tax contribution
by the Member to the Plan ("recharacterized amounts"). The
income allocable to such Excess Deferral Amount shall be
determined in a similar manner as described in Section 4.2 of
the Plan. The Excess Deferral Amount to be distributed or
recharacterized shall be reduced by Deferral Amounts previously
distributed or recharacterized for the taxable year ending in
the same Plan Year, and shall also be reduced by Deferral
Amounts previously distributed or recharacterized for the Plan
Year beginning in such taxable year. For all other purposes
under the Plan other than this Appendix A recharacterized
amounts shall continue to be treated as Deferral Amounts. In
the event the multiple use of limitations contained in Sections
2(b) and 5(b) of this Appendix, pursuant to Treasury Regulations
section 1.401(m)-2 as promulgated by the Secretary of the
Treasury, requires a corrective distribution, such distribution
shall be made pursuant to this Section 3, and not Section 6 of
Appendix A.
For purposes of this Section 3, "Excess Deferral Amount" means,
with respect to a Plan Year, the excess of:
(a) the aggregate amount of Deferral Amounts contributed by a
Plan Sponsor on behalf of Highly Compensated Eligible Members
for the Plan Year, over
(b) the maximum amount of Deferral Amounts permitted under
Section 2 of this Appendix A for the Plan Year, which shall be
determined by reducing the Deferral Amounts contributed on
behalf of Highly Compensated Eligible Members in order of the
actual deferral percentages beginning with the highest of such
percentages.
Distribution of the Excess Deferral Amounts for any Plan Year
shall be made to the Highly Compensated Eligible
Members on the basis of the respective portions of the Excess
Deferral Amount attributable to each Highly Compensated
Eligible Member. As to any Highly Compensated Employee who is
subject to the family aggregation rules of subsection (b) of the
Plan Section containing the definition of the term "Highly
Compensated Employee," any distribution of such Highly
Compensated Employee's allocable portion of the Excess Deferral
Amount for a Plan Year shall be allocated among the family
members of such Highly Compensated Employee who are combined to
determine the actual deferral percentage in proportion to the
Deferral Amounts taken into account under this Section 3.
SECTION 4
The Plan Administrator shall have the responsibility of
monitoring the Plan's compliance with the limitations of this
Appendix A and shall have the power to take all steps it deems
necessary or appropriate to ensure compliance, including,
without limitation, restricting the amount which Highly
Compensated Eligible Members can elect to have contributed
pursuant to Plan Section 3.1. Any actions taken by the Plan
Administrator pursuant to this Section 4 shall be pursuant to
non-discriminatory procedures consistently applied.
SECTION 5
In addition to any other limitations set forth in the Plan,
Matching Contributions under the Plan and the amount of
nondeductible employee contributions under the Plan, for each
Plan Year must satisfy one of the following tests:
(a) The contribution percentage for Highly Compensated Eligible
Members must not exceed 125% of the contribution percentage for
all other Eligible Members; or
(b) The contribution percentage for Highly Compensated Eligible
Members must not exceed the lesser of (i) 200% of the
contribution percentage for all other Eligible Members, and (ii)
the contribution percentage for all other Eligible Members plus
two (2) percentage points.
Notwithstanding the foregoing, if Qualified Matching
Contributions are taken into account for purposes of applying
the test contained in Section 2 of this Appendix A, they shall
not be taken into account under this Section 5. In applying the
above tests, the Plan Administrator shall comply with any
regulations promulgated by the Secretary of the Treasury which
prevent or restrict the use of the test contained in Section
2(b) of this Appendix A and the test contained in Section 5(b)
of this Appendix A. The "contribution percentage" for Highly
Compensated Eligible Members and for all other Eligible Members
for a Plan Year shall be the average of the ratios, calculated
separately for each Member, of (A) to (B), where (A) is the
amount of Matching Contributions under the Plan (excluding
Qualified Matching Contributions which are used to apply the
test set forth in Section 2 of this Appendix A or Matching
Contributions which are used to satisfy the minimum required
contributions to the Accounts of Eligible Members who are not
Key Employees pursuant to Section 1 of Appendix C to the Plan)
and nondeductible employee contributions made under the Plan for
the Eligible Member for the Plan Year, and where (B) is the
Annual Compensation of the Eligible Member for the Plan Year.
Except to the extent limited by Proposed Treasury Regulation
Section 1.401(m)-1(b)(2) and any other applicable regulations
promulgated by the Secretary of the Treasury, a Plan Sponsor may
elect to treat Deferral Amounts and Qualified Nonelective
Contributions as Matching Contributions for purpose of
determining the "contribution percentage," provided the Deferral
Amounts, excluding those treated as Matching Contributions,
satisfy the test set forth in Section 2 of Appendix A.
SECTION 6
If the Matching Contributions and nondeductible employee
contributions and, if taken into account under Section 5 of this
Appendix A, the Deferral Amounts made by or on behalf of Highly
Compensated Eligible Members exceed the amount permitted under
the "contribution percentage test" for any given Plan Year,
then, before the close of the Plan Year following the Plan Year
for which the excess aggregate contributions were made, the
amount of the excess aggregate contributions attributable to the
Plan for the Plan Year, as adjusted to reflect any income, gain
or loss attributable to such contributions through the date the
excess aggregate contributions are distributed or forfeited,
shall be distributed or, if the excess aggregate contributions
are forfeitable, forfeited. The income allocable to such
contributions shall be determined in a similar manner as
described in Section 4.2 of the Plan. As to any Highly
Compensated Employee, any distribution or forfeiture of his
allocable portion of the excess aggregate contributions for a
Plan Year shall first be attributed to any nondeductible
employee contributions made by the Member during the Plan Year
for which no corresponding Plan Sponsor contribution is made and
then to any remaining nondeductible employee contributions made
by the Member during the Plan Year and any Matching
Contributions thereon. As between the Plan and any other plan
or plans maintained by the Plan Sponsor in which excess
aggregate contributions for a Plan Year are held, each such plan
shall distribute or forfeit a pro-rata share of each class of
contribution based on the respective amounts of a class of
contribution made to each plan during the Plan Year. The
payment of the excess aggregate contributions shall be made
without regard to any other provision in the Plan. In the event
the multiple use of limitations contained in Sections 2(b) and
5(b) of this Appendix, pursuant to Treasury Regulations section
1.401(m)-2 as promulgated by the Secretary of the Treasury,
requires a corrective distribution, such distribution shall be
made pursuant to Section 3 of this Appendix A, and not this
Section 6.
For purposes of this Section 6, with respect to any Plan Year,
"excess aggregate contributions" means the excess of:
(a) the aggregate amount of the Matching Contributions and
nondeductible employee contributions and, if taken into account
under Section 5 of this Appendix A, the Deferral Amounts
actually made on behalf of Highly Compensated Eligible Members
for the Plan Year, over
(b) the maximum amount of the contributions permitted under the
limitations of Section 5 of this Appendix A, determined by
reducing contributions made on behalf of Highly Compensated
Eligible Members in order of their contribution percentages
beginning with the highest of such percentages.
Distribution or forfeiture of nondeductible employee
contributions or Matching Contributions in the amount of the
excess aggregate contributions for any Plan Year shall be made
with respect to Highly Compensated Employees on the basis of the
respective portions of the excess aggregate contributions
attributable to each Highly Compensated Employee. Forfeitures
of excess aggregate contributions may not be allocated to
Members whose contributions are reduced under this Section 6.
As to any Highly Compensated Employee who is subject to the
family aggregation rules of subsection (b) of the Plan Section
containing the definition of the term "Highly Compensated
Employee," any distribution or forfeiture of such Highly
Compensated Employee's allocable portion of the excess aggregate
contributions for a Plan Year shall be allocated among the
family members of such Highly Compensated Employees which are
combined to determine the contribution percentage in proportion
to the contributions taken into account under this Section 6
The determination of the amount of excess aggregate
contributions under this Section 6 shall be made after (1) first
determining the excess Elective Deferrals under Section 3.1(b)
of the Plan, and (2) then determining the Excess Deferral
Amounts under Section 3 of this Appendix A.
SECTION 7
Except to the extent limited by rules promulgated by the
Secretary of the Treasury, if a Highly Compensated Eligible
Member is a participant in any other plan of the Plan Sponsor or
any Affiliate which includes Matching Contributions, deferrals
under a cash or deferred arrangement pursuant to Code Section
401(k), or nondeductible employee contributions, any
contributions made by or on behalf of the Member to the other
plan shall be allocated with the same class of contributions
under the Plan for purposes of determining the "actual deferral
percent age" and "contribution percentage" under the Plan;
provided, however, contributions that are made under an
"employee stock ownership plan" (within the meaning of Code
Section 4975(e)(7)) shall not be combined with contributions
under any plan which is not an employee stock ownership plan
(within the meaning of Code Section 4975(e)(7)). Except to the
extent limited by rules promulgated by the Secretary of the
Treasury, if the Plan and any other plans which include Matching
Contributions, deferrals under a cash or deferred arrangement
pursuant to Code Section 401(k), or nondeductible employee
contributions are considered as one plan for purposes of Code
Section 401(a)(4) and 410(b)(1), any contributions under the
other plans shall be allocated with the same class of
contributions under the Plan for purposes of determining the
"contribution percentage" and "actual deferral percentage" under
the Plan; provided, however, contributions that are made under
an "employee stock ownership plan" (within the meaning of Code
Section 4975(e)(7)) shall not be combined with contributions
under any plan which is not an employee stock ownership plan
(within the meaning of Code Section 4975(e)(7)).
APPENDIX B
LIMITATION ON ALLOCATIONS
SECTION 1
The "annual addition" for any Member for any one limitation
year may not exceed the lesser of:
(a) $30,000 (or, if greater, one-quarter of the dollar
limitation in effect under Code Section 415(b)(1)(A)), as
adjusted for changes in the cost of living as provided in
regulations issued by the Secretary of the Treasury; or
(b) 25% of the Member's Annual Compensation.
SECTION 2
For the purposes of this Appendix B, the term "annual addition"
for any Member means for any limitation year, the sum of certain
Plan Sponsor and Member contributions, forfeitures, and other
amounts as determined in Code Section 415(c)(2) in effect for
that limitation year.
SECTION 3
In the event that a Plan Sponsor maintains a defined benefit
plan under which a Member also participates, the sum of the
defined benefit plan fraction and the defined contribution plan
fraction for any limitation year for any Member may not exceed
1.0.
(a) The defined benefit plan fraction for any limitation year
is a fraction:
(1) the numerator of which is the projected annual benefit of
the Member under the defined benefit plan (determined as of the
close of such year); and
(2) the denominator of which is the lesser of
(A) the product of 1.25, multiplied by the maximum annual
benefit allowable under Code Section 415(b)(1)(A), or
(B) the product of i)1.4, multiplied by
(ii) the maximum amount which may be taken into account under
Section 415(b)(1)(B) of the Code with respect to the Member
under the defined benefit plan for the limitation year
(determined as of the close of the limitation year).
(b) The defined contribution plan fraction for any limitation
year is a fraction:
(1) the numerator of which is the sum of a Member's annual
additions as of the close of the year; and
(2) the denominator of which is the sum of the lesser of the
following amounts determined for the year and for all prior
limitation years during which the Member was employed by a Plan
Sponsor:
(A) the product of 1.25, multiplied by the dollar limitation in
effect under Code Section 415(c)(1)(A) for the limitation year
(determined without regard to Section 415(c)(6) of the Code); or
(B) the product of
(i) 1.4, multiplied by
(ii) the amount which may be taken into account under Code
Section 415(c)(1)(B) (or Code Section 415(c)(7), if applicable)
with respect to the Member for the limitation year.
SECTION 4
For purposes of this Appendix B, the term "limitation year"
shall mean a Plan Year unless a Plan Sponsor elects, by adoption
of a written resolution, to use any other twelve-month period
adopted in accordance with regulations issued by the Secretary
of the Treasury. For purposes of applying the limitations set
forth in this Appendix B, the term "Plan Sponsor" shall mean a
Plan Sponsor and any other corporations which are members of the
same controlled group of corporations (as described in Section
414(b) of the Code, as modified by Code Section 415(h)) as is a
Plan Sponsor, any other trades or businesses (whether or not
incorporated) under common control (as described in Code Section
414(c), as modified by Code Section 415(h)) with a Plan Sponsor,
any other corporations, partnerships, or other organizations
which are members of an affiliated service group (as described
in Section 414(m) of the Code) with a Plan Sponsor, and any
other entity required to be aggregated with a Plan Sponsor
pursuant to regulations under Code Section 414(o).
SECTION 5
For purposes of applying the limitations of this Appendix B,
all defined contribution plans maintained or deemed to be
maintained by a Plan Sponsor shall be treated as one defined
contribution plan, and all defined benefit plans now or
previously maintained or deemed to be maintained by a Plan
Sponsor shall be treated as one defined benefit plan. In the
event any of the actions to be taken pursuant to Section 6 of
this Appendix or pursuant to any language of similar import in
another defined contribution plan are required to be taken as a
result of the annual additions of a Member exceeding the
limitation set forth in Section 1 of this Appendix because of
the Member's participation in more than one defined contribution
plan, the actions shall first be taken with respect to this Plan.
SECTION 6
In the event that as a result of either the allocation of
forfeitures to the Account of a Member or a reasonable error in
estimating the Member's Annual Compensation, the annual addition
allocated to the Account of a Member exceeds the limitations set
forth in Section 1 of this Appendix B or in the event that the
aggregate contributions made on behalf of a Member under both a
defined benefit plan and a defined contribution plan, subject to
the reduction of allocations in other defined contribution plans
required by Section 5 of this Appendix B, cause the aggregate
limitation fraction set forth in Section 3 of this Appendix B to
be exceeded, the Plan Administrator shall, in writing, direct
the Trustee to take such of the following actions as the Plan
Administrator shall deem appropriate, specifying in each case
the amount or amounts of contributions involved:
(a) A Member's annual addition shall be reduced by
distributing to the Member Non-Deductible Voluntary
Contributions made by the Member pursuant to Plan Section 3.3
with respect to which no contribution is made under Plan Section
3.4, which cause the annual addition to exceed such limitations;
(b) If further reduction is necessary, contributions made by
the Plan Sponsor on behalf of the Member pursuant to Plan
Section 3.1 with respect to which no contribution is made under
Plan Section 3.2 shall be reduced in the amount of the remaining
excess and distributed to the Member;
(c) If further reduction is necessary, contributions made by
the Member pursuant to Plan Section 3.3 with respect to which
contributions were made under Plan Section 3.4 and contributions
of the Plan Sponsor thereon pursuant to Plan Section 3.4 shall
be reduced in the amount of the remaining excess. The amount of
the reduction under Plan Section 3.3 shall be distributed to the
Member. The amount of the reduction under Plan Section 3.4
shall be reallocated to the Accounts of Members who are not
affected by the limitation in the same proportion as the
contribution of the Plan Sponsor for the year is allocated under
Plan Section 5.1 to the Accounts of such Members;
(d) If further reduction is necessary, contributions made by
the Plan Sponsor on behalf of the Member pursuant to Plan
Section 3.1 with respect to which contributions were made under
Plan Section 3.2 and contributions of the Plan Sponsor thereon
pursuant to Plan Section 3.2 shall be reduced in the amount of
the remaining excess. The amount of the reduction under Plan
Section 3.1 shall be distributed to the Member. The amount of
the reduction under Plan Section 3.2 shall be reallocated to the
Accounts of Members who are not affected by the limitation in
the same proportion as the contribution of the Plan Sponsor for
the year is allocated under Plan Section 5.1 to the Accounts of
such Members; and
(e) If the contribution of the Plan Sponsor and forfeitures
would cause the annual addition to exceed the limitations set
forth herein with respect to all Members under the Plan, the
portion of such contribution in excess of the limitations shall
be segregated in a suspense account. While the suspense account
is maintained, (1) no Plan Sponsor contributions under the Plan
shall be made which would be precluded by this Appendix B, (2)
income, gains and loses of the Fund shall not be allocated to
such suspense account and (3) amounts in the suspense account
shall be allocated in the same manner as Plan Sponsor
contributions and forfeitures under the Plan as of each
Valuation Date on which Plan Sponsor contributions may be
allocated until the suspense account is exhausted. In the event
of the termination of the Plan, the amounts in the suspense
account shall be returned to the Plan Sponsor to the extent that
such amounts may not then be allocated to the Members' Accounts.
APPENDIX C
TOP-HEAVY PROVISIONS
SECTION 1
As used in this Appendix, the following words shall have the
following meanings:
(a) "Determination Date" means, with respect to any Plan Year,
the last day of the preceding Plan Year, or, in the case of the
first Plan Year, means the last day of the first Plan Year.
(b) "Key Employee" means an Employee or former Employee
(including a Beneficiary of a Key Employee or former Key
Employee) who at any time during the Plan Year containing the
Determination Date or any of the four (4) preceding Plan Years
is:
(1) An officer described in the Subsection of the Plan Section
containing the definition of the term "Highly Compensated
Employee";
(2) One of the ten (10) Employees owning both (A) more than
one-half percent (1/2%) of the outstanding stock of the Plan
Sponsor or an Affiliate, more than one-half percent (1/2%) of
the total combined voting power of all stock of the Plan Sponsor
or an Affiliate, or more than one-half percent (1/2%) of the
capital or profits interest in the Plan Sponsor or an Affiliate,
and (B) the largest percentage ownership interests in the Plan
Sponsor or any of its Affiliates, and whose Annual Compensation
is equal to or greater than the amount in effect under Section
1(a) of Appendix B to the Plan for the calendar year in which
the Determination Date falls; or
(3) An owner of more than five percent (5%) of the outstanding
stock of the Plan Sponsor or an Affiliate or more than five
percent (5%) of the total combined voting power of all stock of
the Plan Sponsor or an Affiliate; or
(4) An owner of more than one percent (1%) of the outstanding
stock of the Plan Sponsor or an Affiliate or more than one
percent (1%) of the total combined voting power of all stock of
the Plan Sponsor or an Affiliate, and who in such Plan Year had
Annual Compensation from the Plan Sponsor and all of its
Affiliates of more than $150,000.
Employees other than Key Employees are sometimes referred to in
this Appendix as "non-key employees."
(c) "Required Aggregation Group" means:
(1) each plan of the Plan Sponsor and its Affiliates which
qualifies under Code Section 401(a) in which a Key Employee is a
participant, and
(2) each other plan of the Plan Sponsor and its Affiliates
which qualifies under Code Section 401 (a) and which enables any
plan described in Subsection (a) of this Section to meet the
requirements of Section 401(a)(4) or 410 of the Code.
(d) (1) "Top-Heavy" means:
(A) if the Plan is not included in a Required Aggregation
Group, the Plan's condition in a Plan Year for which, as of the
Determination Date:
(i) the present value of the cumulative Accrued Benefits under
the Plan for all Key Employees exceeds 60 percent of the present
value of the cumulative Accrued Benefits under the Plan for all
Members; and
(ii) the Plan, when included in every potential combination, if
any, with any or all of:
(I) any Required Aggregation Group, and
(II) any plan of the Plan Sponsor which is not part of any
Required Aggregation Group and which qualifies under Code
Section 401 (a) is part of a Top-Heavy Group (as defined in
Paragraph (2) of this Subsection); and
(B) if the Plan is included in a Required Aggregation Group,
the Plan's condition in a Plan Year for which, as of the
Determination Date:
(i) the Required Aggregation Group is a Top-Heavy Group (as
defined in Paragraph (2) of this Subsection); and
(ii) the Required Aggregation Group, when included in every
potential combination, if any, with any or all of the plans of
the Plan Sponsor and its Affiliates which are not part of the
Required Aggregation Group and which qualify under Code Section
401(a), is part of a Top-Heavy Group (as defined in Paragraph
(2) of this Subsection).
(C) For purposes of Subparagraphs (A)(ii) and (B)(ii) of this
Paragraph (1), any combination of plans must satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
(2) A group shall be deemed to be a Top-Heavy Group if:
(A) the sum, as of the Determination Date, of the present value
of the cumulative accrued benefits for all Key Employees under
all plans included in such group exceeds
(B) 60 percent of a similar sum determined for all participants
in such plans.
(3) (A) For purposes of this Section, the present value of the
accrued benefit for any participant in a defined contribution
plan as of any Determination Date or last day of a plan year
shall be the sum of:
(i) as to any defined contribution plan other than a
simplified employee pension, the account balance as of the most
recent valuation date occurring within the plan year ending on
the Determination Date or last day of a plan year, and
(ii) as to any simplified employee pension, the aggregate
employer contributions, and
(iii) an adjustment for contributions due as of the
Determination Date or last day of a plan year.
In the case of a plan that is not subject to the minimum
funding requirements of Code Section 412, the adjustment in
Clause (iii) of this Subparagraph (A) shall be the amount of any
contributions actually made after the valuation date but on or
before the Determination Date or last day of the plan year to
the extent not included under Clause (i) or (ii) of this
Subparagraph (A); provided, however, that in the first plan year
of the plan, the adjustment in Clause (iii) of this Subparagraph
(A) shall also reflect the amount of any contributions made
thereafter that are allocated as of a date in such first plan
year. In the case of a plan that is subject to the minimum
funding requirements, the account balance in Clause (i) and the
aggregate contributions in Clause (ii) of this Subparagraph (A)
shall include contributions that would be allocated as of a date
not later than the Determination Date or last day of a plan
year, even though those amounts are not yet required to be
contributed, and the adjustment in Clause (iii) of this
Subparagraph (A) shall be the amount of any contribution
actually made (or due to be made) after the valuation date but
before the expiration of the extended payment period in Code
Section 412(c)(10) to the extent not included under Clause (i)
or (ii) of this Subparagraph (A).
(B) For purposes of this Subsection, the present value of the
accrued benefit for any participant in a defined benefit plan as
of any Determination Date or last day of a plan year must be
determined as of the most recent valuation date which is within
a 12-month period ending on the Determination Date or last day
of a plan year as if such participant terminated as of such
valuation date; provided, however, that in the first plan year
of a plan, the present value of the accrued benefit for a
current participant must be determined either (i) as if the
participant terminated service as of the Determination Date or
last day of a plan year or (ii) as if the participant terminated
service as of such valuation date, but taking into account the
estimated accrued benefit as of the Determination Date or last
day of a plan year. For purposes of this Subparagraph (B), the
valuation date must be the same valuation date used for
computing plan costs for minimum funding, regardless of whether
a valuation is performed that year. The actuarial assumptions
utilized in calculating the present value of the accrued benefit
for any participant in a defined benefit plan for purposes of
this Subparagraph (B) shall be established by the Plan
Administrator after consultation with the actuary for the plan,
and shall be reasonable in the aggregate and shall comport with
the requirements set forth by the Internal Revenue Service in
Q&A T-26 and T-27 of Regulation Section 1.416-1.
(C) For purposes of determining the present value of the
cumulative accrued benefit under a plan for any participant in
accordance with this Subsection, the present value shall be
increased by the aggregate distributions made with respect to
the participant (including distributions paid on account of
death to the extent they do not exceed the present value of the
cumulative accrued benefit existing immediately prior to death)
under each plan being considered, and under any terminated plan
which if it had not been terminated would have been in a
Required Aggregation Group with the Plan, during the 5-year
period ending on the Determination Date or last day of the plan
year that falls within the calendar year in which the
Determination Date falls.
(D) For purposes of this Paragraph (3), participant
contributions which are deductible as "qualified retirement
contributions" within the meaning of Code Section 219 or any
successor, as adjusted to reflect income, gains, losses, and
other credits or charges attributable thereto, shall not be
considered to be part of the accrued benefits under any plan.
(E) For purposes of this Paragraph (3), if any employee is not
a Key Employee with respect to any plan for any plan year, but
such employee was a Key Employee with respect to such plan for
any prior plan year, any accrued benefit for such employee shall
not be taken into account.
(F) For purposes of this Paragraph (3), if any employee has not
performed any service for any Plan Sponsor or Affiliate
maintaining the plan during the five-year period ending on the
Determination Date, any accrued benefit for that employee shall
not be taken into account.
(G) (i) In the case of an "unrelated rollover" (as defined
below) between plans which qualify under Code Section 401(a),
(a) the plan providing the distribution shall count the
distribution as a distribution under Subparagraph (C) of this
Paragraph (3), and (b) the plan accepting the distribution shall
not consider the distribution part of the accrued benefit under
this Section; and
(ii) in the case of a "related rollover" (as defined below)
between plans which qualify under Code Section 401(a), (a) the
plan providing the distribution shall not count the distribution
as a distribution under Subparagraph (C) of this Paragraph (3),
and (b) the plan accepting the distribution shall consider the
distribution part of the accrued benefit under this Section.
For purposes of this Subparagraph (G), an "unrelated rollover"
is a rollover as defined in Code Section 402(c)(4) or 408(d)(3)
or a plan-to-plan transfer which is both initiated by the
participant and made from a plan maintained by one employer to a
plan maintained by another employer where the employers are not
Affiliates. For purposes of this Subparagraph (G), a "related
rollover" is a rollover as defined in Code Section 402(c)(4) or
408(d)(3) or a plan-to-plan transfer which is either not
initiated by the participant or made to a plan maintained by the
employer or an Affiliate.
SECTION 2
(a) Notwithstanding anything contained in the Plan to the
contrary, except as otherwise provided in Subsection (b) of this
Section, in any Plan Year during which the Plan is Top-Heavy,
allocations of Plan Sponsor contributions [and forfeitures] for
the Plan Year for the Account of each Member who is not a Key
Employee and who has not separated from service with the Plan
Sponsor prior to the end of the Plan Year shall not be less than
3 percent of the Member's Annual Compensation. For purposes of
this Subsection, an allocation to a Member's Account resulting
from any Plan Sponsor contribution attributable to a salary
reduction or similar arrangement shall not be taken into account.
(b) (1) The percentage referred to in Subsection (a) of this
Section for any Plan Year shall not exceed the percentage at
which allocations are made or required to be made under the Plan
for the Plan Year for the Key Employee for whom the percentage
is highest for the Plan Year. For purposes of this Paragraph,
an allocation to the Account of a Key Employee resulting from
any Plan Sponsor contribution attributable to a salary reduction
or similar agreement shall be taken into account.
(2) For purposes of this Subsection (b), all defined
contribution plans which are members of a Required Aggregation
Group shall be treated as part of the Plan.
(3) This Subsection (b) shall not apply to any plan which is a
member of a Required Aggregation Group if the plan enables a
defined benefit plan which is a member of the Required
Aggregation Group to meet the requirements of Code Section
401(a)(4) or 410.
(4) If the Plan Sponsor maintains a defined benefit plan which
is qualified under Code Section 401(a) and which would be
Top-Heavy within the meaning of the Plan for its plan year
ending within or coincident with the Plan Year, no allocation
shall be made pursuant to Subsection (a) of this Section on
behalf of any Member who participates in the defined benefit
plan and acquires a year of service within the meaning of
paragraphs (4), (5) and (6) of Code Section 411(a) under the
defined benefit plan for the plan year, if the defined benefit
plan provides generally that the accrued benefit of the Member
when expressed as an annual retirement benefit shall not, when
expressed as a percentage of the Member's Annual Compensation,
be less than the lesser of (A) 2 percent multiplied by the
number of such years of service in plan years during which such
plan was Top-Heavy, or (B) 20 percent.
SECTION 3
In any limitation year (as defined in Section 4 of Appendix B
to the Plan) which contains any portion of a Plan Year in which
the Plan is Top-Heavy, the number "1.0" shall be substituted for
the number "1.25" in Section 3 of Appendix B to the Plan.
SECTION 4
Notwithstanding anything contained in the Plan to the contrary,
in any Plan Year during which the Plan is Top-Heavy, a Member's
interest in his Accrued Benefit shall not vest at any rate which
is slower than the following schedule, effective as of the first
day of that Plan Year:
Full Years of Percentage
Vesting Service Vested
Fewer than Three 0%
Three or More 100%
The Schedule set forth above in this Section 4 shall be
inapplicable to a Member who has failed to perform an Hour of
Service after the Determination Date on which the Plan has
become Top-Heavy. When the Plan ceases to be Top-Heavy, the
Schedule set forth above in this Section 4 shall cease to apply;
provided however, that the provisions of the Plan Section
dealing with changes in the vesting schedule shall apply.
APPENDIX D
PAYSOP PLAN
Notwithstanding the foregoing Plan, the following shall apply
with respect to the Company Stock Accounts.
SECTION 1
For purposes of this Appendix, the following definitions shall
apply:
(a) "Company Stock" means (a) Qualifying Employer Securities
which are common stock issued by SCI or a corporation which is a
member of a controlled group of corporations which includes SCI
(within the meaning of Section 1563(a) of the Code, determined
without regard to Section 1563(a)(4) and (e)(3)(C) of the Code)
and with voting power and dividend rights no less favorable than
the voting power and dividend rights of other common stock
issued by SCI or other corporation, or (b) securities issued by
SCI or such other corporation, convertible into stock, which are
not stock rights, warrants and options, and if not common stock
of SCI or such other corporation must at all times be
immediately convertible into that common stock that satisfies
the above regulations at a conversion price which is not greater
than the fair market value of that common stock at the time the
Plan acquires the security. Each Company Stock Account shall
consist of a Company Stock Subaccount and a Residual Subaccount.
(b) "Company Stock Subaccount" means that portion of the
Company Stock Account which is invested in Company Stock.
(c) "Fair Market Value" shall mean with respect to the Company
Stock:
(1) if the Company Stock is not Publicly Traded, the value as
determined by an Independent Appraiser; or
(2) if the Company Stock is Publicly Traded, the price most
recently bid or asked, as appropriate, or paid for Company Stock
listed on any exchange, quoted through the National Association
of Securities Dealers, Inc. Automated Quotation System, or
traded in the over-the-counter market.
(d)"Independent Appraiser" means an individual who holds
himself out to the public as an appraiser, who is qualified to
make an appraisal of Qualifying Employer Securities, who
understands that a false or fraudulent overstatement of the
value of Qualifying Employer Securities may subject him to a
civil penalty under Code Section 6701 and who is not:
(1) the seller of Qualifying Employer Securities;
(2) the Plan Sponsor or an Affiliate;
(3) any person employed by or related to (within the meaning of
Code Section 267(b)) the persons described in (1) or (2) above;
(4) a party to the transaction by which the person selling or
contributing any Qualifying Employer Securities to the Plan
acquired the Qualifying Employer Securities (unless the
Qualifying Employer Securities are sold or contributed to the
Plan within two months of its acquisition and its appraisal
price does not exceed its acquisitions cost); or
(5) any person whose relationship with a person described in
Subsection (a), (b), (c) or (d) above is such that a reasonable
person would question the independence of the appraiser.
(e) "Publicly Traded" means Company Stock that is listed on a
national securities exchange registered under Section 6 of the
Securities Exchange Act of 1934 (15 U.S.C. Section 78F) or that
is quoted on a system sponsored by a national securities
association registered under Section 15A(b) of the Securities
Exchange Act (15 U.S.C. Section 78O).
(f) "Qualifying Employer Securities" means employer securities
issued by a Plan Sponsor or an Affiliate which are stocks or
otherwise an equity security, or a bond, debenture, note or
certificate or other evidence of indebtedness described in
paragraphs (1), (2) and (3) of Code Section 503(e).
(g) "Residual Subaccount" means that portion of the Company
Stock Account invested in other than Company Stock.
SECTION 2
No Company Stock allocated to a Member's Company Stock
Subaccount may be distributed from that account before the end
of the 84th month beginning after the month in which Company
Stock is allocated to the Company Stock Subaccount, except in
the case of the following:
(a) The death, separation from service or Disability of the
Member, or termination of the Plan;
(b) The transfer of employment of a Member from a Plan Sponsor
to an employer who has purchased substantially all of the assets
used by the Plan Sponsor in the conduct of its trade or
business; or
(c) The sale by a Plan Sponsor of the stock of a subsidiary
corporation when the Member continues in the employ of the
subsidiary corporation.
This Section shall not apply to any distribution required under
Plan Section 9.4 or transfers pursuant to Section 7 of this
Appendix.
SECTION 3
(a) The payment of a Member's Company Stock Account upon the
retirement, death, or termination of employment of a Member
shall be in the form of one lump sum. The value of whole shares
of Company Stock in the Member's Company Stock Subaccount shall
be distributed to the Member in cash; provided, however, that
the Member shall have the right to demand, in writing filed with
the Plan Administrator on any form as the Plan Administrator may
from time to time prescribe, that the whole shares of Company
Stock in his Company Stock Subaccount be distributed to him in
kind. A Member's right to demand that his Company Stock
Subaccount be distributed to him in kind shall not apply with
respect to the portion of the Member's Account to which the
Member has elected to direct investment pursuant to Section 7 of
this Appendix. The value of any fractional share or rights to a
fractional share held in the Member's Company Stock Subaccount
shall be paid in cash to the extent that cash is available for
distribution. If cash is not available, then a fractional share
shall be distributed in kind.
(b) Any fractional shares of Company Stock held in a Member's
Company Stock Subaccount shall be purchased by the Trustee with
assets of the Fund held in Residual Accounts based upon the Fair
Market Value of Company Stock and the Fair Market Value of any
fractional shares purchased shall be allocated to the Residual
Subaccounts of Members as of the next Valuation Date.
SECTION 4
(a) To the extent necessary to comply with federal or state
securities laws, each certificate for Company Stock distributed
pursuant to the Plan shall be marked "RESTRICTED" on its face
and, to the extent appropriate at the time, shall bear on its
reverse side legends to the following effect:
(1) That the securities evidenced by the certificate were
issued and distributed without registration under the Federal
Securities Act of 1933 (the "1933 Act") or under the applicable
laws of any state or states (collectively referred to as the
"State Acts"), in reliance upon certain exemptive provisions of
the 1933 Act or any applicable State Acts;
(2) That the securities cannot be sold or transferred unless,
in the opinion of counsel reasonably acceptable to the Primary
Sponsor, the sale or transfer would be:
(i) pursuant to an effective registration statement under the
1933 Act or pursuant to an exemption from registration; and
(ii) a transaction which is exempt under any applicable State
Acts or pursuant to an effective registration statement under or
in a transaction which is otherwise in compliance with the State
Acts; and
(3) That the securities evidenced by the certificate were
issued and distributed in accordance with the provisions of the
Plan and Trust Agreement, are subject to the provisions thereof,
and may not be sold or transferred except in compliance with
said provisions.
(b) If necessary to comply with the 1933 Act or any applicable
State Acts, shares of Company Stock distributable under the Plan
must be acquired for investment and not with a view to the
public distribution thereof. In furtherance thereof, as a
condition of receiving Company Stock under the Plan, the
distributee may be required to execute an investment letter and
any other documents that in the opinion of counsel reasonably
acceptable to the Primary Sponsor, as issuer, are necessary to
comply with the 1933 Act or any applicable State Acts or any
other applicable laws regulating the issuance or transfer of
securities.
SECTION 5
(a) Each share of Company Stock distributed under the Plan
shall be subject to Put Rights. The Put Rights grant to the
distributee (or his heirs or legatees) the right to require the
Plan Sponsor or its designee to purchase any shares of Company
Stock which have been distributed from the Plan provided that
the Company Stock is not Publicly Traded, at the time (the
"Put"). The Put shall be exercisable by giving written notice
to the Plan Sponsor for a period of sixty (60) days following
the date of distribution, and if the Put is not exercised within
that 60-day period, for an additional period of 60 days which
begins on the later of (1) the first day of the Plan Year
following the Plan Year of distribution, or (2) the day
following the expiration of the initial 60 day period. In the
case of Company Stock which is Publicly Traded without
restriction when distributed but ceases to be so traded during
either of the sixty (60) day periods, the Primary Sponsor must
give notice to each distributee (or his heirs or legatees) in
writing on or before the tenth (10th) day after the date the
Company Stock ceases to be so traded informing each distributee
(or his heirs or legatees) that for the remainder of the period
the Company Stock is subject to the Put and setting forth the
terms of the Put. The number of days between the tenth (10th)
day and the date on which notice is actually given, if later,
must be added to the duration of the Put. The period during
which the Put is exercisable does not include the time when a
distributee (or his heirs or legatees) is unable to exercise it
because the Plan Sponsor is prohibited from honoring it by
applicable federal or state law, and the Plan Sponsor shall not
be in breach of the Put if it is prohibited from honoring it by
applicable federal or state law.
(b) Company Stock distributed and purchased pursuant to the
Put shall, to the extent permitted by state law, be purchased in
cash at Fair Market Value as follows:
(i) if the distribution constitutes a total distribution,
meaning a distribution of the entire balance to the credit of
the Member within one taxable year of such recipient, then
payment of the Fair Market Value of a Member's Company Stock
Account shall be made in five substantially equal annual
payments. The first installment shall be paid not later than 30
days after the Member exercises the Put option; or
(ii) if the distribution does not constitute a total
distribution, the Plan Sponsor or his designee shall pay the
Member an amount equal to the Fair Market Value of the Company
Stock repurchased no later than 30 days after the Member
exercises the Put option.
The Plan Sponsor shall provide adequate security and pay
reasonable interest on any unpaid amounts. Payment under the
Put may not be restricted by the provisions of any loan or any
other arrangement, including the terms of the Primary Sponsor's
articles of incorporation, unless required by applicable state
law.
SECTION 6
(a) The Plan Administrator shall direct the Trustee to vote
shares of Company Stock held in the Fund as follows:
(i) Whole shares of Company Stock held in Company Stock
Subaccounts for which the Plan Administrator has received
instructions from Members shall be voted in accordance with
those instructions. In the absence of voting instructions by a
Member, whole shares of Company Stock held in a Member's Company
Stock Subaccount shall not be voted.
(ii) The combined fractional shares and fractional rights to
shares of Company Stock held in Company Stock Subaccounts shall
be voted to the extent possible in the same proportion as whole
shares of Company Stock held in Company Stock Accounts are
directed to be voted by Members.
(b) The issuer of Company Stock must furnish the Plan
Administrator and Members with notices and information
statements of when voting rights are to be exercised. The time
and manner for furnishing Members with a notice or information
statement must comply with both applicable law and the Plan
Sponsor's charter and by-laws as generally applicable to
security holders. In general, the content of the statement must
be the same for Members as for security holders.
(c) Notwithstanding any other provision of the Plan, if the
Plan has any class of securities which is not a
registration-type class of securities, as described in
Subsection (d), a Member shall be entitled to direct the Trustee
as to the manner in which voting rights will be exercised with
respect to any corporate matter which involves the voting of
such shares allocated to the Member's account with respect to
the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation,
dissolution, sale of substantially all assets of a trade or
business, or such similar transaction as may be prescribed in
Treasury Regulations.
(d) As used in Subsection (c) of this Section,
registration-type class securities shall mean (i) a class of
securities required to be registered under Section 12 of the
Securities Exchange Act of 1934, and (ii) a class of securities
which would be required to be so registered except for the
exemption from registration provided in Subsection (g)(2)(H) of
Section 12 of the Securities Exchange Act of 1934.
SECTION 7
(a) Each Member, who has both completed ten years of
membership in the Plan (including membership in the PAYSOP Plan)
and attained age 55, shall be permitted, within 90 days of the
close of each Plan Year during the Member's election period
described in Subsection (c) of this Section, to direct the Plan
Administrator as to the investment of at least twenty-five
percent (25%) of the Member's Company Stock Subaccount balance
attributable to Company Stock which was acquired by the plan
after December 31, 1986 reduced by the value of the Company
Stock to which a prior election under this Section 7 applied.
Within 90 days after the close of the last Plan Year in the
Member's election period, a Member may direct the plan as to the
investment of fifty percent (50%) of the value of such account
balance.
(b) The Member's direction shall be provided to the Plan
Administrator in writing; shall be effective no later than 180
days after the close of the Plan Year to which the direction
applies; and shall specify which, if any, of the investment
options set forth in the Trust the Member selects.
(c) As used in Subsection (a) of this Section, election period
shall mean the six Plan Year period beginning with the Plan Year
in which the Member has attained age 55 and completed ten years
of membership in the Plan.
(d) Any amounts for which the Member may make investment
directions under this Section 7 shall be segregated in a
separate subaccount of the Company Stock Account and shall be
subject to the same rights and features as the remainder of the
Member's Account for which the Plan allows investment direction.
(END OF SAVINGS PLAN EXHIBIT 10 (i) (1))
EXHIBIT 10 (j) (1) TO FORM 10-K FOR FISCAL YEAR ENDED JUNE 30,
1994
DEFERRED COMPENSATION PLAN
OF THE SCI SYSTEMS, INC.
EMPLOYEE FINANCIAL SECURITY PROGRAM
THIS INDENTURE made on the 6th day of April, 1992, by SCI
SYSTEMS (ALABAMA), INC., a corporation organized and existing
under the laws of the State of Alabama (hereinafter called the
"Primary Sponsor"):
W I T N E S S E T H:
WHEREAS, the Primary Sponsor by indenture dated March 8, 1988,
established the Deferred Compensation Plan of the SCI Systems,
Inc. Employee Financial Security Program (the "Plan"); and
WHEREAS, the Primary Sponsor amended and restated the Plan by
indenture dated August 30, 1988, which plan was subsequently
amended by indenture dated December 5, 1988; and
WHEREAS, the Primary Sponsor now desires to amend and restate
the Plan in order to provide for compliance with Section 16(b)
of the Securities and Exchange Act of 1933, as amended, and to
improve the Plan's matching schedule; and
WHEREAS, the Board of Directors of the Primary Sponsor has
approved the amended and restated Plan embodied herein;
NOW, THEREFORE, the Primary Sponsor does hereby amend and
restate the Plan, effective January 1, 1992, as follows:
DEFERRED COMPENSATION PLAN
OF THE SCI SYSTEMS, INC.
EMPLOYEE FINANCIAL SECURITY PROGRAM
TABLE OF CONTENTS
Page
Section 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . .
3
Section 2 ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . 5
Section 3 CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 6
Section 4 WITHDRAWALS. . . . . . . . . . . . . . . . . . . . . 9
Section 5 CREDITING OF CONTRIBUTIONS AND INCOME. . . . . . . . 10
Section 6 TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . 11
Section 7 RETIREMENT BENEFITS. . . . . . . . . . . . . . . . . 12
Section 8 DEATH BENEFITS . . . . . . . . . . . . . . . . . . . 12
Section 9 PAYMENT OF BENEFITS ON RETIREMENT OR DEATH . . . . . 13
Section 10 PAYMENT OF BENEFITS ON TERMINATION OF
EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 11 ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . 16
Section 12 ADOPTION OF PLAN BY AFFILIATES. . . . . . . . . . . 17
Section 13 CLAIM REVIEW PROCEDURE. . . . . . . . . . . . . . . 17
Section 14 LIMITATION OF RIGHTS. . . . . . . . . . . . . . . . 19
Section 15 LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS . . . . . . . 19
Section 16 AMENDMENT TO OR TERMINATION OF THE PLAN AND
RABBI TRUST. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 1
DEFINITIONS
1.1 "Affiliate" means (a) any corporation which is a member of
the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as is a Plan Sponsor, (b) any other
trade or business (whether or not incorporated) controlling,
controlled by, or under common control (within the meaning of
Section 414(c) of the Code) with a Plan Sponsor, and (c) any
other corporation, partnership, or other organization which is a
member of an affiliated service roup (within the meaning of
Section 414(m) of the Code) with a Plan Sponsor.
1.2 "Annual Salary" means the total compensation paid by a Plan
Sponsor to a Member during a Plan Year, excluding overtime,
shift premiums, bonus payments, commissions and other
supplemental remuneration, increased by any amount contributed
by a Plan Sponsor during the Plan Year on behalf of an Employee
pursuant to a salary reduction agreement which is not includable
in the gross income of the Employee under Code Sections 125,
402(a)(8), or 402(h) and as a Deferral Amount; provided,
however, in the case of an Employee who becomes a Member on a
date which is not also the first day of the Plan Year, the
Member's Annual Salary shall be only that portion of the total
compensation paid to the Member by the Plan Sponsor attributable
to the period beginning on the date on which he became a Member
and ending on the last day of the Plan Year.
1.3 "Beneficiary" means only the person or trust as a Member, in
his most recent written designation filed with the Plan
Administrator, shall have designated; provided that, if the
Member has failed to make a designation or if no person
designated shall be alive or if no trust shall have been
established by the Member, and no successor Beneficiary shall
have been designated and be alive, the term "Beneficiary" shall
mean (i) the spouse of the deceased Member, or (ii) if no spouse
shall be alive, the surviving children of the deceased Member,
or (iii) if no children shall be alive, the parent or parents of
the deceased Member, or (iv) if no parent shall be alive, the
legal representative of the deceased Member's estate. Changes in
designations of Beneficiaries may be made upon written notice to
the Plan Administrator in any form as the Plan Administrator may
prescribe and the Plan Administrator shall immediately notify
the Trustee, in writing, of any designation or change in
designation. 1.4 "Board of Directors" means the Board of
Directors of the Primary Sponsor.
1.5 "Bookkeeping Account" means the accounts as may be
maintained by the Plan Administrator to reflect the interest of
a Member under the Plan which shall include the following:
(a) "Company Contribution Bookkeeping Account" which shall
reflect the portion of a Member's Bookkeeping Account
representing contributions made by a Plan Sponsor to the Rabbi
Trust pursuant to Sections 3.2, 3.3, 3.5 and 3.8 hereof, as
adjusted to reflect income, gains, losses and other credits or
charges attributable thereto.
(b) "Employee Deferred Bookkeeping Account" which shall reflect
the portion of a Member's Bookkeeping Account representing
deferrals by a Member pursuant to Section 3.1 hereof, as
adjusted to reflect income, gains, losses and other credits or
charges attributable thereto.
(c) "Non-Deductible Voluntary Contribution Bookkeeping Account"
which shall reflect the portion of a Member's Bookkeeping
Account representing the amount of all Non-Deductible Voluntary
Contributions made by a Member pursuant to Section 3.4 hereof,
as adjusted to reflect income, gains, losses and other credits
or charges attributable thereto.
1.6 "Code" means the Internal Revenue Code of 1986, as
heretofore and hereafter amended.
1.7 "Deferral Amount" means a contribution by a Member pursuant
to Section 3.1 of this Plan.
1.8 "Effective Date" means, with respect to the Primary Sponsor,
January 1, 1988, and with respect to each other Plan Sponsor
adopting this Plan, the date designated by the adopting Plan
Sponsor.
1.9 "Employee" means any person who is employed by a Plan
Sponsor for purposes of the Federal Insurance Contributions Act.
1.10 "Highly Compensated Employee" means an employee who is
categorized as a Highly Compensated Employee under the Savings
Plan.
1.11 "Member" means any Employee or former Employee who has
become a Member in the Plan for as long as his benefit has not
been fully distributed pursuant to the Plan.
1.12 "Non-Deductible Voluntary Contribution" means a
contribution by a Member pursuant to Section 3.4.
1.13 "Normal Retirement Age" means age 65.
1.14 "Plan Administrator" means the compensation committee of
the Board of Directors.
1.15 "Plan Sponsor" means individually (a) the Primary Sponsor
or any successor thereto or (b) each Affiliate or other
organization which has adopted the Plan and become a party to
the Trust in the manner set forth in Section 12 of the Plan.
1.16 "Plan Year" means the calendar year.
1.17 "Rabbi Trust" means that certain trust agreement
established pursuant to the Plan between the Primary Sponsor and
the Trustee or any trust agreement hereafter established.
1.18 "Savings Plan" means the Savings Plan of The SCI Systems,
Inc. Employee Financial Security Program.
1.19 "Supplemental Retirement Plan" means the Supplemental
Retirement Plan of the SCI Systems, Inc. Employee Financial
Security Program.
1.20 "Trustee" means the Trustee under the Rabbi Trust.
1.21 "Valuation Date" means the last day of each calendar
quarter.
1.22 "Vesting Service" means that service which is categorized
as "Vesting Service" under the Savings Plan.
Section 2
ELIGIBILITY
Those individuals entitled to participate in the Plan are
Highly Compensated Employees of a Plan Sponsor designated by the
compensation committee of the Board of Directors. Such
individuals shall become Members on the same date on which they
become members of the Savings Plan.
Section 3
CONTRIBUTIONS
3.1 (a) For any Plan Year, a Member may elect to defer a
portion of the Annual Salary otherwise payable to him. Any
deferrals shall be in increments of one-half percent (1/2%).
Contributions of amounts deferred shall be made by the Plan
Sponsor directly to the Rabbi Trust.
(b) A Member may also elect to defer a portion of any annual
supplemental compensation award which might be payable to him by
a Plan Sponsor. Contributions of amounts so deferred shall be
made by the Plan Sponsor directly to the Rabbi Trust.
(c) Elections pursuant to these Subsections (a) and (b) must
be made no sooner than seven (7) months prior to and no later
than the date specified by the Plan Administrator before the
Annual Salary is payable and may only be made pursuant to an
irrevocable written agreement between the Member and the Plan
Sponsor which shall be in such form and subject to such rules
and limitations as the Plan Administrator may prescribe.
3.2 A Plan Sponsor shall make matching contributions to the
Rabbi Trust on behalf of each Member (except for Members who
terminated employment during the Plan Year for reasons other
than death or retirement) under either Section 3.3 or Section
3.5, but not both, as chosen by the Member no sooner than seven
(7) months prior to and no later than the date specified by the
Plan Administrator, pursuant to an irrevocable written agreement
between the Member and the Plan Sponsor which shall be in such
form and subject to such rules and limitations as prescribed by
the Plan Administrator, at any time prior to each January 1 and
July 1 for the ensuing six (6) month period with respect to
which the Plan Sponsor matching contribution shall be made.
3.3 A Plan Sponsor shall make matching contributions to the
Rabbi Trust on behalf of each Member who has elected to receive
matching contributions under this Section 3.3 instead of under
Section 3.5 (other than Members who terminated employment during
the Plan Year for reasons other than death or retirement) and
who has at least five (5) years of Vesting Service in an amount
equal to forty percent (40%) of the amount of the Deferral
Amount made by the Member under Section 3.1(a) of the Plan
during the applicable six (6) month period, which for purposes
of receiving a matching contribution is limited as
follows: (a) For a Member with at least five (5) years of
Vesting Service but fewer than ten (10) years of Vesting
Service, one and one-half percent (1 1/2%) of the Member's
Annual Salary earned during that Plan Year;
(b) For a Member with at least five (10) years of Vesting
Service but fewer than fifteen (15) years of Vesting Service,
three percent (3%) of the Member's Annual Salary earned during
that Plan Year; and
(c) For a Member with fifteen (15) or more years of Vesting
Service, four and one-half percent (4 1/2%) of the Member's
Annual Salary earned during that Plan Year.
3.4 Each Member may contribute to the Rabbi Trust as a
Non-Deductible Voluntary Contribution, through payroll
deductions any amount of the Member's Annual Salary for the Plan
Year, and in a manner other than through payroll deductions any
amount of Member's Annual Salary for all years during which he
was a Member of the Savings Plan. The Member's contribution
through payroll deductions under this Section 3.4 shall be in an
amount specified in the Member's written election, which
contribution shall be designated in one-half percent (1/2%)
increments. A Member's election to make such a contribution
under this Plan Section 3.4 in a manner other than through
payroll deductions must be made no sooner than seven months
prior to and no later than the date specified by the Plan
Administrator prior to the date such contribution is contributed
to the Fund.
3.5 Subject to the limitations described in Section 3.2, a Plan
Sponsor shall make contributions to the Rabbi Trust on behalf of
each Member who has elected to receive matching contributions
under this Section 3.5 instead of under Section 3.3 (other than
a Member who terminated employment during the Plan Year for
reasons other than death or retirement), in an amount equal to
sixty percent (60%) of the Member's Non-Deductible Voluntary
Contribution made under Section 3.4 of the Plan during the
applicable six (6) month period, which for purposes of receiving
a matching contribution is limited as follows; provided,
however, that the matching contribution made under this Plan
Section 3.5 shall be reduced by the matching contribution made
on behalf of the Member for the Plan Year under Section 3.4 of
the Savings Plan:
(a) For a Member with fewer than five (5) years of Vesting
Service, three percent (3%) of the Member's Annual Salary earned
during that Plan Year;
(b) For a Member with at least five (5) years of Vesting
Service, but fewer than ten (10) years of Vesting Service, four
percent (4%) of the Member's Annual Salary earned during that
Plan Year;
(c) For a Member with at least ten (10) years of Vesting
Service but fewer than fifteen (15) years of Vesting Service,
five percent (5%) of the Member's Annual Salary earned during
that Plan Year; and
(d) For a Member with fifteen (15) or more years of Vesting
Service, six percent (6%) of the Member's Annual Salary earned
during that Plan Year.
3.6 A Member may elect, no sooner than seven (7) months prior
to and no later than the date specified by the Plan
Administrator, pursuant to an irrevocable written agreement
between the Member and the Plan Sponsor, to change the
percentage of contributions under Section 3.1(a) or Section 3.4
twice a year before each January 1 and July 1 by written notice
to the Plan Administrator, on a form prescribed by the Plan
Administrator, which change shall be effective beginning with
the Member's first full payroll period after that date. An
election to defer a portion of any annual supplemental
compensation award which might be payable to a Member by a Plan
Sponsor under Section 3.1(b) shall be made by written notice to
the Plan Administrator, on a form prescribed by the Plan
Administrator, within a reasonable period of time following the
SCI Manager's Meeting held each year to be effective for that
year.
3.7 (a) A Member may suspend his contribution under Section 3.4
at any time, but in no event more than once during each Plan
Year, by giving written notice to the Plan Administrator on a
form prescribed by the Plan Administrator at least twenty (20)
days prior to the date on which the suspension shall become
effective.
(b) A Member who has suspended his contributions under Section
3.7(a) of the Plan and who applies to the Plan Administrator
shall be entitled to resume his contributions in accordance with
Section 3.4 on any January 1 or July 1 following the expiration
of at least six (6) months from the date on which the suspension
became effective. Any application shall be made in writing to
the Plan Administrator on a form prescribed by the Plan
Administrator, and made at least twenty (20) days prior to that
date.
3.8 A Plan Sponsor shall also make contributions to the Rabbi
Trust with respect to each Plan Year on behalf of each Member
(other than a Member who terminated employment during the Plan
Year for reasons other than death or retirement) in an amount
equal to the sum of the following:
(a) the amount of matching contributions made by a Plan
Sponsor to the Savings Plan with respect to that same Plan Year
which are distributed to the Member from the Savings Plan in
order to keep the Savings Plan in compliance with Section 401 of
the Code;
(b) the amount of matching contributions which a Plan Sponsor
is unable to make to the Savings Plan with respect to the same
Plan Year on behalf of a Member because of the limitation on
annual additions to the account of the Member under the Savings
Plan; and
(c) the amount of matching contributions which the Plan
Sponsor would have made to the Savings Plan with respect to that
same Plan Year on behalf of a Member if the Annual Salary of the
Member in excess of $228,860 (for 1992, and adjusted by the
Internal Revenue Service for future years by changes in the cost
of living) could have been taken into account in determining the
amount of non-deductible voluntary contributions and pretax
elective deferrals of compensation which the Member could make
to the Savings Plan.
3.9 In the event that the amounts to be credited to the
Members' Bookkeeping Accounts as of each Valuation Date pursuant
to Section 5.2 of the Plan exceed the income, gains, losses and
other credits or charges of the Rabbi Trust as of the same
Valuation Date, then the Plan Sponsor shall make contributions
to the Rabbi Trust within a reasonable period of time after
the-Valuation Date in an amount equal to the excess. In the
event that such amounts to be credited are less than such items
in the Rabbi Trust, then the Plan Sponsor shall be entitled to
apply such difference as a credit toward future contributions
required of the Plan Sponsor under the Plan.
Section 4
WITHDRAWALS
4.1 A Member may at any time elect, no sooner than seven (7)
months prior to and no later than twenty (20) days before the
last day of the Plan year, pursuant to an irrevocable written
agreement between the Member and the Plan Sponsor, to withdraw
twenty-five percent (25%) increments or a specific dollar amount
of his Non-Deductible Voluntary Contribution Bookkeeping
Account; provided, however, that no withdrawal shall be made
which is less than $100.00, unless the withdrawal is of the
entire balance of the Member's Non-Deductible Voluntary
Contribution Bookkeeping Account. No Member shall make more
than one such withdrawal in any Plan Year. A Member may not
withdraw matching contributions made by a Plan Sponsor under
Section 3.5 of this Plan.
4.2 In the event of hardship, a Member may apply to receive any
portion of his Deferral Amount. For purposes of this Section,
the term "hardship" shall mean a hardship as defined under the
Savings Plan and any other circumstance determined to constitute
a hardship by the Plan Administrator. Any determination of the
existence of hardship and the amount to be distributed on
account thereof shall be made by the Plan Administrator.
However, no hardship distribution shall be made which is less
than $500.00, unless the distribution is of the entire portion
of the Member's Deferral Amounts. A request for a distribution
may be made no sooner than seven (7) months prior to and no
later than a date specified by the Plan Administrator pursuant
to an irrevocable written agreement between the Member and the
Plan Sponsor, and may be expressed as a specific dollar amount
or in twenty-five percent (25%) increments. A hardship
distribution shall not be taken into account under the
Supplemental Retirement Plan to calculate the amount of the
Member's pension.
4.3 Withdrawals and other distributions shall be charged pro
rata to the individual funds in which the Bookkeeping Account of
the Member would have been invested, pursuant to his designation
under Section 5.3(a), had his Bookkeeping Account been in the
Savings Plan.
Section 5
CREDITING OF CONTRIBUTIONS AND INCOME
5.1 All Deferral Amounts, Non-Deductible Voluntary
Contributions and Plan Sponsor contributions shall be
transmitted to the Trustee by the Plan Sponsor as soon as
reasonably practicable and shall be credited to the Employee
Deferred Bookkeeping Account, Non-Deductible Voluntary
Contribution Bookkeeping Account and Company Contribution
Bookkeeping Account, respectively, of the Member immediately.
All payments from a Bookkeeping Account between Valuation Dates
shall be charged against that Bookkeeping Account as of the
preceding Valuation Date.
5.2 Except as otherwise provided in the Plan and Rabbi Trust,
as of each Valuation Date the Trustee shall credit to each
Member's Bookkeeping Account the income, gains, losses and other
credits or charges attributable thereto which the Bookkeeping
Account would have earned had it been invested in the Savings
Plan.
5.3 (a) The Plan Administrator shall provide each Member with
an irrevocable written agreement for designating the manner in
which his Bookkeeping Account would have been invested had it
been held in the Savings Plan. The Member must return the
written agreement to the Plan Administrator no sooner than seven
(7) months prior to and no later than a date prescribed by the
Plan Administrator before each such Valuation Date, designating
the percentages of his Bookkeeping Account which the Member
would have invested in the various individual funds in the
Savings Plan had his Bookkeeping Account been in the Savings
Plan. The designation will continue until changed by the
submission of a new written agreement no sooner than seven (7)
months prior to and no later than a date prescribed by the Plan
Administrator, which change will be effective as of the first
day following the next succeeding Valuation Date. The amount
which is deemed to be invested on behalf of a Member shall at
all times be a portion of the Member's Bookkeeping Account which
is a multiple of 5% and which is not less than 20%.
(b) For purposes of this Section 5, the Member shall be
treated as if he were a member of the Savings Plan, subject to
all of the terms of the trust agreement relating to the Savings
Plan.
Section 6
TOP-HEAVY PROVISIONS
6.1 Notwithstanding anything contained in the Plan to the
contrary, if in any Plan Year the Savings Plan is Top-Heavy, the
schedule set forth in Section 10.3 of the Plan shall be replaced
by the following schedule, effective as of January 1 in that
Plan Year:
Years of Percentage
Vesting Service Vested
less than 3 0%
3 or more 100%
When the Savings Plan ceases to be Top-Heavy, the schedule set
forth above in this Section of the Plan shall cease to be
applicable; provided, however, that the provisions of Plan
Section 10.5 shall apply.
Section 7
RETIREMENT BENEFITS
7.1 The provisions of this Section 7 apply only in the event
that a Member remains an Employee (or an employee of an
Affiliate) until reaching a retirement date. Wherever in this
Plan, reference is made to a retirement date, it shall mean the
Normal Retirement Date or Deferred Retirement Date, whichever is
applicable.
7.2 Normal Retirement Date. The Normal Retirement Date of a
Member is the first-day-of-the-month coinciding with or next
following the date on which the Member attains Normal Retirement
Age and, except as otherwise provided in this Plan, the Member
shall be entitled to the sum of (a) the value of his Bookkeeping
Account and (b) an amount equal to the difference between (i)
the then present value of the benefit which would have been
payable to him from the Supplemental Retirement Plan had the
amount of his Annual Salary which the Member deferred under
Section 3.1 of this Plan been used to calculate his benefit
under the Supplemental Retirement Plan and (ii) the then present
value of the benefit payable to him from the Supplemental
Retirement Plan.
7.3 Deferred Retirement Date. The Deferred Retirement Date of
a Member is the first-day-of-the-month subsequent to the
Member's Normal Retirement Date on which he actually retires as
an Employee of a Plan Sponsor, and the Member shall be entitled
to the sum of (a) the value of his Bookkeeping Account and (b)
an amount equal to the difference between (i) the then present
value of the benefit which would have been payable to him from
the Supplemental Retirement Plan had the amount of the Annual
Salary which the Member deferred under Section 3.1 of this Plan
been used to calculate the benefit under the Supplemental
Retirement Plan and (ii) the then present value of the benefit
payable to him from the Supplemental Retirement Plan.
Section 8
DEATH BENEFITS
8.1 Upon the death of a Member while an Employee of a Plan
Sponsor or an employee of an Affiliate, his Beneficiary shall be
entitled to the sum of (a) the value of his Bookkeeping Account
and (b) an amount equal to the difference between (i) the then
present value of the benefit which would have been payable to
him from the Supplemental Retirement Plan had the amount of the
Annual Salary which the Member deferred under Section 3.1 of
this Plan been used to calculate the benefit under the
Supplemental Retirement Plan and (ii) the then present value of
the benefit payable to him from the Supplemental Retirement Plan.
8.2 Upon the death of a Member who is no longer an Employee or
an employee of an Affiliate, prior to the distribution of that
portion of the Member's benefit in which the Member was vested,
his Beneficiary shall be entitled to receive that vested portion.
8.3 If, subsequent to the death of a Member, the Member's
Beneficiary dies while entitled to receive benefits under this
Plan, the successor Beneficiary, if any, or the Beneficiary
listed under (i), (ii) or (iii) of Section 1.3 shall generally
be entitled to receive benefits under this Plan. However, if
the deceased Beneficiary was the Member's spouse at the time of
the Member's death, or if no successor Beneficiary shall have
been designated and shall be alive, and no Beneficiary listed
under (i), (ii) or (iii) of Section 1.3 shall be alive, the
benefits shall be paid to the personal representative of the
deceased Beneficiary's estate to be paid according to the
deceased Beneficiary's will, or if the deceased Beneficiary has
no will, by the laws of intestacy of the state in which the
deceased Beneficiary resided at the date of the Beneficiary's
death.
8.4 Any benefit payable under this Section 8 shall be paid in
accordance with Section 9 or Section 10 of the Plan, whichever
is applicable, after receipt by the Trustee from the Plan
Administrator of notice of the death of the Member.
Section 9
PAYMENT OF BENEFITS ON RETIREMENT OR DEATH
9.1 Upon the retirement or death of a Member, the Bookkeeping
Account of a Member shall be determined as of the Valuation Date
coinciding with or next following the Member's retirement date
or date of death, unless the Member or Beneficiary of a deceased
Member elects by written notice to the Plan Administrator,
subject to the approval of the Plan Administrator, to have
payment made promptly after the date of retirement or death of a
Member in which event the Bookkeeping Account of the Member
determined under Section 7 or 8.1, as applicable, shall be
determined as of the Valuation Date next preceding the Member's
retirement date or date of death, increased by any
Non-Deductible Voluntary Contributions, Deferral Amounts and
Plan Sponsor contributions made since that Valuation Date, and
in that event payment shall commence or be made no later than
sixty (60) days after the retirement date or death of the
Member. Otherwise, payment to a Member, or to the Beneficiary
of a deceased Member, shall be made no later than sixty (60)
days after the end of the Plan Year in which the retirement date
or the death of the Member occurs. Notwithstanding the
foregoing, if the amount of the payment required to be made on
that date cannot be ascertained by that date, payment shall be
made no later than sixty (60) days after the earliest date on
which the amount of the payment can be ascertained under the
Plan.
9.2 The payment of a Member's benefits shall be made either in
a lump sum in cash, or in cash payments in annual or more
frequent installments over a period certain not exceeding twenty
(20) years. The method and frequency of payment shall be
determined by the Plan Administrator. If installment payments
are made, the unpaid balance shall from time to time be credited
with net income, gain or loss as determined under the Plan and
Rabbi Trust during the period over which the installments are
paid.
Section 10
PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT
10.1 Transfer of a Member from one Plan Sponsor to another Plan
Sponsor or to an Affiliate shall not be deemed for any purpose
under the Plan to be a termination of employment by the Member.
A Member shall be deemed to have terminated employment only upon
the earlier of his death, retirement or other actual termination
of employment with a Plan Sponsor or any Affiliate.
10.2 In the event of the termination of employment of a Member
for reasons other than death or retirement, the Member shall be
entitled to the sum of (a) that portion of his Bookkeeping
Account in which he is vested as of the Valuation Date
coinciding with or immediately preceding the date of the
Member's termination of employment, plus any Non-Deductible
Voluntary Contributions and Deferral Amounts made by the Member
since that Valuation Date, and (b) an amount equal to the
difference between (i) the then present value of the benefit
which would have been payable to him from the Supplemental
Retirement Plan had the amount of the Annual Salary which the
Member deferred under Section 3.1 of this Plan been used to
calculate the benefit under the Supplemental Retirement Plan and
(ii) the then present value of the benefit payable to him from
the Supplemental Retirement Plan.
That portion of the terminated Member's benefits in which he
is vested shall be: (a) the value of his Employee Deferred
Bookkeeping Account and Non-Deductible Voluntary Contribution
Bookkeeping Account as of that Valuation Date, increased by any
Non-Deductible Voluntary Contributions and Deferral Amounts made
by him since that Valuation Date; and
(b) that portion of the value of his Company Contribution
Bookkeeping Account as of that Valuation Date, computed
according to the following vesting schedule taking into account
any Vesting Service following that Valuation Date through the
date of termination of employment:
Full Years of Percentage
Vesting Service Vested
Less than Five Years 0%
Five Years or more 100%
10.4 The payment of a terminated member's benefit shall be made
from the Rabbi Trust in an amount-equal to that portion of his
benefit in which he is vested according to Section 10.3 of the
Plan. Payment shall be made either in a lump sum in cash, or in
cash payments in annual or more frequent installments over a
period certain not exceeding twenty (20) years. The method and
frequency of payment shall be determined by the Plan
Administrator. If installment payments are made, the unpaid
balance shall from time to time be credited with net income,
gain or loss as determined under the Plan and Rabbi Trust during
the period over which the installments are paid. Payment shall
commence or be made as soon as practicable after the Member's
date of termination of employment but in no event later than one
year following that date.
10.5 In the event that an amendment to this Plan directly or
indirectly changes the vesting schedule set forth in Section
10.3 of the Plan, the vested percentage for each Member in his
benefit accumulated to the date when the amendment is adopted
shall not be reduced as a result of the amendment. In addition,
any Member with at least three (3) years of Vesting Service may
irrevocably elect, by written notice to the Plan Administrator
within the election period hereinafter provided, to remain under
the pre-amendment vesting schedule with respect to all of his
benefits accrued both before and after the amendment. The
election period shall begin no later than the date the amendment
is adopted and end no earlier than sixty (60) days after the
latest of (a) the date the amendment is adopted, (b) the date
the amendment becomes effective, or (c) the date the Member is
issued written notice of the amendment by a Plan Sponsor or the
Plan Administrator.
Section 11
ADMINISTRATION OF THE PLAN
11.1 Trust Agreement. The Primary Sponsor shall enter into a
Trust with the Trustee, which Trust shall form a part of this
Plan and is incorporated herein by reference.
11.2 Organization of the Plan Administrator. The Plan
Administrator shall perform any act which the Plan authorizes
expressed by a vote at a meeting or in a writing signed by
majority without a meeting. The Plan Administrator may, by a
writing signed by a majority, designate any person constituting
the Plan Administrator as the person entitled to give notices on
behalf of the Plan Administrator and the Trustee is entitled to
rely upon any writing until amended or superseded by a
subsequent similar writing.
11.3 Responsibilities.
(a) The Plan Administrator may designate in writing other
persons to carry out its responsibilities under the Plan. The
Plan Administrator may remove any person designated to carry out
its responsibilities under the Plan by notice in writing to that
person.
(b) The Plan Administrator may employ persons to render advice
with regard to any of their responsibilities. Charges for all
services rendered shall be directly paid by the Primary Sponsor
but until paid shall constitute a charge against the Rabbi Trust.
(c) Each Plan Sponsor shall indemnify and hold harmless each
person constituting the Plan Administrator from and against any
and all claims and expenses (including, without limitation,
attorney's fees and related costs), in connection with the
performance by the person of his duties in that capacity, other
than any of the foregoing arising in connection with the willful
neglect or willful misconduct of the person acting.
11.4 Duties of the Plan Administrator.
(a) The Plan Administrator shall advise the Trustee with
respect to all payments under the terms of the Plan and shall
direct the Trustee in writing to make payments from the Rabbi
Trust.
(b) The Plan Administrator shall establish rules, not contrary
to the provisions of the Plan and the Rabbi Trust, for the
administration of the Plan and the transaction of its business.
The Plan Administrator shall have the discretionary authority to
construe and interpret the provisions of the Plan and shall
determine all questions arising in the administration,
interpretation and application of the Plan, including, but not
limited to those concerning eligibility for benefits. All
determinations of the Plan Administrator shall be conclusive and
binding on all Employees, Members and Beneficiaries, subject to
the provisions of this Plan, the Rabbi Trust and applicable law.
11.5 Action by Plan Sponsor. Any action to be taken by a Plan
Sponsor shall be taken by resolution adopted by its board of
directors or an executive committee thereof; provided, however,
that by resolution, the board of directors or an executive
committee thereof may delegate to any officer of a Plan Sponsor
the authority to take any actions other than the power to amend
or terminate the Plan or the Rabbi Trust or to determine the
basis of Plan Sponsor contributions.
Section 12
ADOPTION OF PLAN BY AFFILIATES
With the consent of the Board of Directors, any Affiliate of
the Primary Sponsor or any corporation related to the Primary
Sponsor by function or operation may adopt this Plan and the
Rabbi Trust by action of its board of directors. Any adoption
shall be evidenced by certified copies of the resolutions of the
foregoing board of directors indicating the adoption by and the
execution of the Rabbi Trust by the adopting corporation or
Affiliate. The resolution shall define the Effective Date for
the purpose of the Plan as adopted by the corporation or
Affiliate.
Section 13
CLAIM REVIEW PROCEDURE
13.1 In the event that a Member or Beneficiary is denied a
claim for benefits under this Plan (the "claimant"), the Plan
Administrator shall provide to the claimant written notice of
the denial which shall set forth:
(a) the specific reason or reasons for the denial;
(b) specific references to the pertinent Plan provisions on
which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why the material or information is necessary; and
(d) an explanation of the Plan's claim review procedure.
13.2 After receiving written notice of the denial of a claim, a
claimant or his representative may:
(a) request a full and fair review of the denial by written
application to the Plan Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Plan
Administrator.
13.3 If the claimant wishes a review of the decision denying
his claim to benefits under the Plan, he or his representative
must submit a written application to the Plan Administrator
within sixty (60) days after receiving written notice of the
denial.
13.4 Upon receiving a written application for review, the Plan
Administrator shall schedule a hearing for purposes of reviewing
the claimant's claim, which hearing shall take place not more
than sixty (60) days from the date on which the Plan
Administrator received the written application for review.
13.5 At least ten (10) days prior to the scheduled hearing, the
claimant and any representative designated in writing by him
shall receive written notice of the date, time and place of the
scheduled hearing. The claimant or his representative may
request that the hearing be rescheduled for his convenience on
another reasonable date or at another reasonable time or place.
13.6 All claimants requesting a review of the decision denying
their claim for benefits may employ counsel for purposes of the
hearing.
13.7 No later than thirty (30) days following the hearing, the
Plan Administrator shall submit its decision on the review in
writing to the claimant involved and to his representative, if
any. The decision shall include specific reasons for the
decision and specific references to the pertinent Plan
provisions on which the decision is based.
13.8 The Primary Sponsor shall promptly reimburse a Member for
all costs and expenses incurred by the Member in the enforcement
of his rights under this Plan, including but not limited to
attorneys' fees and court costs, when it has been determined by
a court of competent jurisdiction that the Primary Sponsor has
not complied with the terms of this Plan and related Trust
Agreement.
Section 14
LIMITATION OF RIGHTS
Neither this Plan, the Rabbi Trust, nor membership in the Plan,
shall give any Employee or other person any right, except to the
extent that right is specifically fixed under the terms of the
Plan and the Fund is sufficient therefor. The establishment of
the Plan shall not be construed to give any Employee a right to
be continued in the employ of a Plan Sponsor or to interfere
with the right of a Plan Sponsor to terminate the employment of
any Employee at any time.
Section 15
LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS
15.1 No benefit which shall be payable under the Plan to any
person shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, charge or otherwise dispose of the
same shall be void. No benefit shall in any manner be subject
to the debts, contracts, liabilities, engagements or torts of
any person, nor shall it be subject to attachment or legal
process for or against any person, except to the extent as may
be required by law.
15.2 Whenever any benefit which shall be payable under the Plan
is to be paid to or for the benefit of any person who is then a
minor or determined to be incompetent by qualified medical
advice, the Plan Administrator need not require the appointment
of a guardian or custodian, but shall be authorized to cause the
same to be paid over to the person having custody of the minor
or incompetent, or to cause the same to be paid to the minor or
incompetent without the intervention of a guardian or custodian,
or to cause the same to be paid to a legal guardian or custodian
of the minor or incompetent if one has been appointed or to
cause the same to be used for the benefit of the minor or
incompetent.
15.3 If the Plan Administrator cannot ascertain the
whereabouts of any Member to whom a payment is due under the
Plan, the Plan Administrator may direct that the payment and all
remaining payments otherwise due to the Member be cancelled on
the records of the Plan and the amount thereof shall be applied
as a credit against Plan Sponsor contributions otherwise payable
during that Plan Year except that, in the event the Member later
notifies the Plan Administrator of his whereabouts and requests
the payments due to him under the Plan, the Plan Sponsor shall
contribute to the Rabbi Trust an amount equal to the payment to
be paid to him as soon as administratively feasible.
Section 16
AMENDMENT TO OR TERMINATION OF THE PLAN AND RABBI TRUST
Except as otherwise expressly provided in the Rabbi Trust, the
Primary Sponsor reserves the right at any time to amend or
terminate the Plan or Rabbi Trust in whole or in part; provided,
however, that provisions of the Plan affecting the amount, price
and timing of awards (within the meaning of Rule 16b-3(c)
promulgated pursuant to the Securities Exchange Act of 1934) and
the eligibility of such persons to participate in the Plan,
shall not be amended more frequently than once in any six-month
period, other than to comport with changes in the Code, ERISA or
the rules and regulations thereunder; and provided further, that
the the duties or liabilities of the Trustee shall not be
increased without its written consent. No amendments shall have
the effect of retroactively changing or depriving Members or
Beneficiaries of rights already accrued under the Plan. In the
event that the Primary Sponsor shall change its name, the Plan
shall be deemed to be amended to reflect the name change without
further action of the Primary Sponsor, and the language of the
Plan shall be changed accordingly.
Section 17
STATUS OF MEMBER
AS UNSECURED CREDITOR
All benefits shall be the unsecured obligations of the Primary
Sponsor and each Plan Sponsor, as applicable, and, except for
those assets which will be placed in the Rabbi Trust established
in connection with this Plan, no assets will be placed in trust
or otherwise segregated from the general assets of the Primary
Sponsor or each Plan Sponsor, as applicable, for the payment of
obligations hereunder.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
indenture to be executed as of the day and year first above
written.
PRIMARY SPONSOR:
SCI SYSTEMS (ALABAMA), INC.
By:/s/A. Eugene, Sapp, Jr.
Title: President and Chief Operating Officer
ATTEST:/s/Michael M. Sullivan
Title: Secretary
[CORPORATE SEAL]
FIRST AMENDMENT TO
THE DEFERRED COMPENSATION PLAN OF THE SCI SYSTEMS, INC.
EMPLOYEE FINANCIAL SECURITY PROGRAM
THIS FIRST AMENDMENT, made on this 5th day of February, 1993,
by SCI SYSTEMS (ALABAMA), INC., a corporation duly organized and
existing under the laws of the State of Alabama (the "Primary
Sponsor");
W I T N E S S E T H:
WHEREAS, the primary Sponsor maintains The Deferred
Compensation Plan of the SCI Systems, Inc. Employee Financial
Security Program (the "Plan") which was amended and restated
effective as of January 1, 1992; and
WHEREAS, the Plan inadvertently failed to include provisions
which were made effective January 1, 1992 allowing participants
to switch contribution and investment elections on a monthly
basis; and
WHEREAS, the Board of Directors wishes to correct the omission
made to the Plan and make certain other amendments to the Plan;
NOW, THEREFORE, pursuant to the power reserved to the Primary
Sponsor under Section 16 of the Plan, the Plan is hereby
amended, effective January 1, 1992, as follows:
1. By adding the following Plan Sections 1.10A and 1.10B
immediately following the existing Plan Section 1.10 as follows:
"1.10A `Investment Committee' means a committee which may be
established to direct the Trustee with respect to investments of
the assets of the Rabbi Trust.
1.10B `Investment Manager' means a fiduciary, other than the
Trustee, the Plan Administrator, or a Plan Sponsor, who may be
appointed by the Primary Sponsor:
(a) who has the power to manage, acquire or dispose of any
assets of the Rabbi Trust or a portion thereof; and
(b) who (1) is registered as an investment adviser under the
Investment Advisers Act of 1940; (2) is a bank as defined in
that Act; or (3) is an insurance Company qualified to perform
services described in Subsection (a) above under the laws of
more than one state; and
(c) who has acknowledged in writing that he is a fiduciary with
respect to the Plan."
2. By substituting the following for Plan Section 1.21:
"1.4 Valuation Date means the last day of each month."
3. By substituting the following for Plan Section 3.2:
"3.2 A Plan Sponsor proposes to make matching contributions to
the Rabbi Trust on each Valuation Date on behalf of each member
(except for Members who terminated employment during the Plan
Year for reasons other than death or retirement) under either
Section 3.3 or Section 3.5, but not both, as chosen by the
Member no sooner than seven (7) months prior to and no later
than the date specified by the Plan Administrator, pursuant to
an irrevocable written agreement between the Member and the Plan
Sponsor which shall be in such form and subject to such rules
and limitations as prescribed by the Plan Administrator."
4. By substituting the following for Section 2 of the Plan as
follows:
"Those individuals eligible to participate in the Plan are
Highly compensated Employees of a Plan Sponsor designated by the
compensation committee of the Board of Directors. Such
individuals shall become Members on the date specified by the
compensation committee of the Board of Directors, or if no date
is specified, on the same date on which they become members of
the Savings Plan."
5. By deleting the following phrase from the end of the first
paragraph of Plan Section 3.3:
"during the applicable six (6) month period, which for purposes
of receiving a matching contribution is limited as follows".
6. By deleting the following phrase from the end of the first
paragraph of Plan Section 3.5:
"during the applicable six (6) month period, which for purposes
of receiving a matching contribution is limited as follows".
7. By replacing the first sentence of Plan Section 3.6 with the
following:
"A Member may either begin to contribute or change the
percentage of his contribution under Plan Sections 3.1(a) and
3.4 on any Valuation Date by written notice submitted to the
Plan Administrator on a form prescribed by the Plan
Administrator by the date and time specified by the Plan
Administrator, effective on the first day of the month following
the administrative processing of such change or such later date,
but no later than seven (7) months thereafter as specified on
the Member's written election form."
8 By substituting the following for Plan Section 3.7(b):
"(b) A Member who has suspended contributions pursuant to Plan
Section 3.7(a) may resume contributions in accordance with
Sections 3.1(a) and 3.4 of the Plan on any Valuation Date
coinciding with or following the expiration of six (6) months
from the date the suspension took effect by submitting a written
application to the Plan Administrator on a form prescribed by
the Plan Administrator. Resumption of contributions shall
commence as of the first day of the month following the normal
administrative processing of such resumption or such later date,
but no later than seven (7) months thereafter, as specified in
the Member's written application."
9. By adding the following Sections 10.6 and 10.7 to the Plan
following the existing Plan Section 10.5 as follows:
"10.6 Investment Manager. The Primary Sponsor may, by action
in writing certified by notice to the Trustee, appoint an
Investment Manager or Investment Managers to manage the assets
of the Rabbi Trust, including the power to acquire and dispose
of the assets. Any Investment Manager may be removed in the
same manner in which appointed, and in the event of any removal,
the Investment Manager shall, as soon as possible, but in no
event more than thirty (30) days after notice of removal, turn
over all assets managed by it to the Trustee or to any successor
Investment Manager appointed, and shall make a full accounting
to the Primary Sponsor with respect to all assets managed by it
since its appointment as an Investment Manager.
10.7 Investment Committee. The Primary Sponsor may, by action
in writing certified by notice to the Trustee, appoint an
Investment Committee to direct the investment of assets of the
Rabbi Trust. The Primary Sponsor shall have the right to remove
any person on the Investment Committee at any time by notice in
writing to such person. A person on the Investment Committee
may resign at any time by written notice of resignation, or in
the event of the death of a person on the Investment Committee,
the Primary Sponsor may appoint a successor.
Until a successor has been appointed, the remaining persons on
the Investment Committee may continue to act as the Investment
Committee. The Investment Committee shall perform any act which
the Plan authorizes by an affirmative action of a majority of
the persons constituting the Investment Committee, expressed by
a vote at a meeting of the Investment Committee or in a writing
signed by the majority without a meeting. The Investment
Committee may designate in writing a person to give notices on
behalf of the Investment Committee and the Trustee is entitled
to rely upon the writing until amended or supeseded by a
subsequent similar writing."
Except as specifically amended hereby, the Plan shall remain in
full force and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this First
Amendment to be executed on the day and year first written.
SCI SYSTEMS (ALABAMA), INC.
By: /s/A. Eugene Sapp, Jr.
Title: Presidnet and Chief Operating Officer
ATTEST:
/s/Michael M. Sullivan
Title: Secretary
[CORPORATE SEAL]
SECOND AMENDMENT TO
THE DEFERRED COMPENSATION PLAN OF THE SCI SYSTEMS, INC.
EMPLOYEE FINANCIAL SECURITY PROGRAM
THIS SECOND AMENDMENT, made on this 24th day of November, 1993,
by SCI SYSTEMS (ALABAMA), INC., a corporation duly organized and
existing under the laws of the State of Alabama (the "Primary
Sponsor");
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains The Deferred
Compensation Plan of the SCI Systems, Inc. Employee Financial
Security Program (the "Plan") which was amended and restated
effective as of January 1, 1992; and
WHEREAS, the Primary Sponsor now wishes to amend the Plan;
NOW, THEREFORE, pursuant to the power reserved to the Primary
Sponsor under Section 16 of the Plan, the Plan is hereby
amended, as follows:
1. Effective January 1, 1992, by substituting the following for
Plan Section 3.1(c):
"3.1 (c) Elections pursuant to these Subsections (a) and
(b) must be made before the Annual Salary is payable and within
the period specified by the Plan Administrator, and may only be
made pursuant to an irrevocable written agreement between the
Member and the Plan Sponsor which shall be in such form and
subject to such rules and limitations as the Plan Administrator
may prescribe."
2. Effective January 1, 1992, by substituting the following for
Plan Section 3.2:
"3.2 A Plan Sponsor proposes to make matching
contributions to the Rabbi Trust on each Valuation Date on
behalf of each member (except for Members who terminated
employment during the Plan Year for reasons other than death or
retirement) under either Section 3.3 or Section 3.5, but not
both, as chosen by the Member within the period specified by the
Plan Administrator, pursuant to an irrevocable written agreement
between the Member and the Plan Sponsor which shall be in such
form and subject to such rules and limitations as prescribed by
the Plan Administrator."
3. Effective January 1, 1992, by substituting the following for
Plan Section 3.4:
"3.4 Each Member may contribute to the Rabbi Trust as a
Non-Deductible Voluntary Contribution, through payroll
deductions any amount of the Member's Annual Salary for the Plan
Year, and in a manner other than through payroll deductions, any
amount of Member's Annual Salary for all years during which he
was a Member of the Savings Plan. The Member's contribution
through payroll deductions under this Section 3.4 shall be in an
amount specified in the Member's written election, which
contribution shall be designated in one-half percent (1/2%)
increments. A Member's election to make such a contribution
under this Plan Section 3.4 in a manner other than through
payroll deductions must be made prior to the date such
contribution is contributed to the Fund, but no sooner than and
no later than the dates specified by the Plan Administrator.
Any election pursuant to this Section 3.4 shall be made in such
form and subject to such rules and limitations as prescribed by
the Plan Administrator."
4. Effective January 1, 1992, by replacing the first sentence of
Plan Section 3.6 with the following:
"A Member may either begin to contribute or change the
percentage of his contribution under Plan Sections 3.1(a) and
3.4 on any Valuation Date by written notice submitted to the
Plan Administrator on a form prescribed by the Plan
Administrator by the date and time specified by the Plan
Administrator, effective on the first day of the month following
the administrative processing of such change or such later date
specified on the Member's written election form as is permitted
pursuant to rules adopted by the Plan Administrator."
5. Effective January 1, 1992, by substituting the following for
Plan Section 3.7(b):
"3.7 (b) A Member who has suspended contributions pursuant
to Plan Section 3.7(a) may resume contributions in accordance
with Sections 3.1(a) and 3.4 of the Plan on any Valuation Date
coinciding with or following the expiration of six (6) months
from the date the suspension took effect by submitting a written
application to the Plan Administrator on a form prescribed by
the Plan Administrator. Resumption of contributions shall
commence as of the first day of the month following the normal
administrative processing of such resumption or such later date
as specified in the Member's written application as is permitted
pursuant to rules adopted by the Plan Administrator."
6. Effective January 1, 1992, by substituting the following for
Plan Section 4.1:
"4.1 A Member may, within the period of time permitted by
rules adopted by the Plan Administrator, and upon written
request to and approval of the Plan Administrator, and pursuant
to an irrevocable written agreement between the Member and the
Plan Sponsor, withdraw twenty-five percent (25%) increments or a
specific dollar amount of his Non-Deductible Voluntary
Contribution Bookkeeping Account; provided, however, that no
withdrawal shall be made which is less than $100.00, unless the
withdrawal is of the entire balance of the Member's
Non-Deductible Voluntary Contribution Account. No Member shall
make more than one such withdrawal in any Plan Year. A Member
may not withdraw matching contributions made by a Plan Sponsor
under Section 3.5 of the Plan."
7. Effective January 1, 1992, by substituting the following for
Plan Section 4.2:
"4.2 In the event of hardship, a Member may apply to
receive any portion of his Deferral Amount. For purposes of
this Section, the term "hardship" shall mean a hardship as
defined under the Savings Plan and any other circumstance
determined to constitute a hardship by the Plan Administrator.
Any determination of the existence of hardship and the amount to
be distributed on account thereof shall be made by the Plan
Administrator. However, no hardship distribution shall be made
which is less than $500.00, unless the distribution is of the
entire portion of the Member's Deferral Amounts. A request for
a distribution shall be made pursuant to rules adopted by the
Plan Administrator, and pursuant to an irrevocable written
agreement between the Member and the Plan Sponsor, and may be
expressed as a specific dollar amount or in twenty-five percent
(25%) increments. A hardship distribution shall not be taken
into account under the Supplemental Retirement Plan to calculate
the amount of the Member's pension."
8. Effective January 1, 1992, by substituting the following for
Plan Section 5.3(a):
"5.3 (a) The Plan Administrator shall provide each Member
with an irrevocable written agreement for designating the manner
in which his Bookkeeping Account would have been invested had it
been held in the Savings Plan. The Member must return the
written agreement to the Plan Administrator within the period
prescribed by the Plan Administrator before each such Valuation
Date, designating the percentages of his Bookkeeping Account
which the Member would have invested in the various individual
funds in the Savings Plan had his Bookkeeping Account been in
the Savings Plan. The designation will continue until changed
by the submission of a new written agreement within the period
prescribed by the Plan Administrator, which change will be
effective as of the first day following the next succeeding
Valuation Date. The amount which is deemed to be invested on
behalf of a Member shall at all times be a portion of the
Member's Bookkeeping Account which is a multiple of 5% and which
is not less than 20%. Any election pursuant to this Section
shall be made in such form and subject to such rules and
limitations as prescribed by the Plan Administrator."
Except as specifically amended hereby, the Plan shall remain in
full force and effect as prior to this Second Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this Second
Amendment to be executed on the day and year first written.
SCI SYSTEMS (ALABAMA), INC.
By: /s/A.E. Sapp, Jr.
Title: President and Chief Operating Officer
ATTEST:
/s/Michael M. Sullivan
Title: Secretary
[CORPORATE SEAL]
(End of Exhibit 10 (j) (1) )
EXHIBIT 10 (k) (1) TO FORM 10-K FOR FISCAL YEAR ENDED JUNE 30,
1944
SUPPLEMENTAL RETIREMENT PLAN
OF THE SCI SYSTEMS, INC.
EMPLOYEE FINANCIAL SECURITY PROGRAM
(Amended and restated as of April 1994)
THIS INDENTURE made on the 1st day of May, 1994, by SCI SYSTEMS
(ALABAMA), INC., a corporation organized and existing under the
laws of the State of Alabama (hereinafter called the "Primary
Sponsor");
W I T N E S S E T H:
WHEREAS, SCI Systems, Inc. by indenture dated November 23, 1973,
established the Supplemental Retirement Plan of the SCI Systems,
Inc. Employee Financial Security Program, effective July 1,
1973, for the benefit of its employees (hereinafter called the
"Old Plan"); and
WHEREAS, SCI Systems (Alabama), Inc. succeeded to certain
rights and obligations of SCI Systems, Inc. and by virtue
thereof became the Primary Sponsor of the Plan; and
WHEREAS, the Primary Sponsor maintains the Supplemental
Retirement Plan of SCI Systems, Inc. Employee Financial Security
Program (the "Plan"), which was last amended and restated by
indenture dated August 30, 1988 and effective January 1, 1989;
and
WHEREAS, the Primary Sponsor now desires again to amend and
restate the Plan in order to incorporate into one Plan document
the changes embodied in the most recent amendments and make
further amendments thereto; and
WHEREAS, the Board of Directors of the Primary Sponsor has
approved and authorized the amendment and restatement embodied
herein;
NOW, THEREFORE, effective generally as of January 1, 1989
(except to the extent the provisions herein are required to
apply on another date), the Primary Sponsor does hereby amend
and restate the Plan as follows: SUPPLEMENTAL
RETIREMENT PLAN OF THE SCI SYSTEMS, INC.
EMPLOYEE FINANCIAL SECURITY PROGRAM
TABLE OF CONTENTS
PAGE
SECTION 1 DEFINITIONS. . . . . . . . . . . . . . . .4
SECTION 2 ELIGIBILITY AND PARTICIPATION. . . . . . .16
SECTION 3 FUNDING.. . . . . . . . . . . . . . . . 16
SECTION 4 DEATH BENEFITS . . . . . . . . . . . . . . . . . .17
SECTION 5 RETIREMENT BENEFITS. . . . . . . . . . . . . . . . . 18
SECTION 6 PAYMENT OF BENEFITS ON RETIREMENT. . . . . . . . . . 19
SECTION 7 PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT . . 26
SECTION 8 ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . 29
SECTION 9 ADOPTION OF PLAN BY AFFILIATES . . . . . . . . . . .31
SECTION 10 CLAIM REVIEW PROCEDURE . . . . . . . . . . . . . . .31
SECTION 11 LIMITATION OF RIGHTS . . . . . . . . . . . . . . . .32
SECTION 12 LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS................33
SECTION 13 AMENDMENTS AND TERMINATION . . . . . . . . 33
SECTION 14 PROHIBITION AGAINST DIVERSION. . . . . . . . . . 36
SECTION 15 QUALIFICATION AND RETURN OF CONTRIBUTIONS. . . . 36
SECTION 16 MISCELLANEOUS. . . . . . . . . . . . . . . . .37
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . .A-1
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . .B-1
APPENDIX C . . . . . . . . . . . . . . . . . . . . . ..C-1
SECTION 1
DEFINITIONS
1.1 "Accrued Benefit" means the sum of the Annual Accruals of a
Participant on any given date payable in the form of a single
life annuity for the life of the Participant commencing as of
the Participant's Normal Retirement Date or, if the Participant
is still an Employee after his Normal Retirement Age, his
Postponed Retirement Date. A Participant shall be credited with
an Annual Accrual for each year of Creditable Service as an
Eligible Employee.
1.2 "Actuarial Equivalent" means, with respect to a benefit,
any other benefit provided under the terms of the Plan which has
the same present value on the date benefit payment commences.
For the purpose of establishing whether a benefit is the
Actuarial Equivalent of another benefit, the present value of
benefit payments shall be determined by reference to the 1983
Group Annuity Mortality Table, assuming a 90% male/10% female
unisex mix, with a rate of interest used to establish the value
of benefit payments in a form other than a lump sum cash payment
equal to seven percent (7%). For purposes of determining the
lump sum value of the Participant's Accrued Benefit, the present
value of benefit payments shall be determined by reference to
1984 Unisex Pensioner Mortality Table (set forward one year for
males and set backward four years for females, with a 90%/10%
male/female mix), and (a) by using an interest rate equal to the
"applicable interest rate" if the present value of the Accrued
Benefit in which the Participant is vested (using that rate) is
not in excess of $25,000, and (b) by using an interest rate
equal to one hundred twenty percent (120%) of the "applicable
interest rate" if the present value of the Accrued Benefit in
which the Participant is vested is greater than $25,000 as
determined in (a) above. In no event shall the present value as
determined under clause (b) be less than $25,000. As used
above, the term "applicable interest rate" shall mean the
interest rate which would be used as of the first day of the
Plan Year of distribution by the PBGC in order to determine the
present value of a lump sum distribution on plan termination.
1.3 "Affiliate" means (a) any corporation which is a member of
the same controlled group of corporations (within the meaning of
Code Section 414(b)) as is a Plan Sponsor, (b) any other trade
or business (whether or not incorporated) controlling,
controlled by, or under common control (within the meaning of
Code Section 414(c)) with a Plan Sponsor, (c) any other
organization which is a member of an affiliated service group
(within the meaning of Code Section 414(m)) along with a Plan
Sponsor, and (d) any other entity required to be aggregated with
a Plan Sponsor pursuant to regulations under Code Section 414(o).
1.4 "Anniversary Date" means January 1 of each year.
1.5 "Annual Accrual" means
(a) for periods prior to 1989, one percent (1%) of Annual
Earnings in excess of the Integration Level for each year of
Creditable Service, and
(b) for periods commencing on and after January 1, 1989, one
percent (1%) of Annual Earnings in excess of the Integration
Level for each year of Creditable Service, plus one-half percent
(1/2%) of Annual Earnings up to the Integration Level for each
year of Creditable Service.
In the event that a Plan Sponsor or an Affiliate acquires
substantially all of the assets of another corporation or entity
or a controlling interest in the stock of another corporation,
or merges with another corporation or entity and is the
surviving entity, Annual Earnings which are paid to an Employee,
or for which he is entitled to payment, for periods of time
while he was employed by the prior corporation or entity will
not be taken into account in the computation of an Annual
Accrual unless the Plan Administrator otherwise specifies.
1.6 "Annual Earnings" means
(a) for years prior to 1973, the final hourly rate for that
year multiplied by 2,080; however, for the year in which an
Employee was first hired prior to 1973, the multiplier will be
2,080 multiplied by a fraction equal to the number of full
calendar months between the date of hire and the end of the year
of hire divided by 12;
(b) for years 1973 through 1984, the amount of annual base pay
paid by a Plan Sponsor to an Employee during a calendar year,
excluding overtime pay, shift premiums, bonus payments,
commissions and other supplemental remuneration;
(c) for the period of time commencing on January 1, 1985, and
ending on December 31, 1988, the total compensation that would
be subject to tax under Section 3101(a) of the Code (but without
the dollar limitation of Section 3121(a)(2) of the Code and
without regard to the inclusion of non-qualified deferred
compensation prior to its receipt under the terms of Code
Section 3121(v)(2)) actually paid by a Plan Sponsor to an
Employee during a calendar year, but excluding bonus payments;
and
(d) for the period of time commencing on and after January 1,
1989, the total compensation paid to a Participant (to the
extent it does not exceed the Annual Earnings Limit) that would
be subject to tax under Code Section 3401(a) (but 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 agricultural labor in Code
Section 3401(a)(2)), excluding bonus payments, but including
pre-tax elective deferrals under the Savings Plan of the SCI
Systems, Inc. Employee Financial Security Program.
Notwithstanding anything contained herein to the contrary, if
using the above definition of Annual Earnings results in a
"compensation percentage" for Employees who are Highly
Compensated Employees which is greater than the "compensation
percentage" for Employees who are not Highly Compensated
Employees by more than a de minimis amount, then bonus payments
shall be included in Annual Earnings for Employees who are not
Highly Compensated Employees. The "compensation percentage" for
a group of Employees is the average of the "compensation ratio"
for each Employee in the group. An Employee's "compensation
ratio" is the Employee's Compensation determined pursuant to the
first sentence of this Subsection (d) divided by the Employee's
Compensation determined pursuant to the second sentence of this
Subsection (d).
1.7 "Annual Earnings Limit" means (a) $200,000 for the Plan
Year beginning on January 1, 1989, which amount may be adjusted
for each subsequent Plan Year through the Plan Year beginning on
January 1, 1993, based on changes in the cost of living as
announced by the Secretary of the Treasury, and (b) $150,000 for
the Plan Year beginning on January 1, 1994, which amount may be
adjusted for subsequent Plan Years based on changes in the cost
of living as announced by the Secretary of the Treasury.
1.8 "Beneficiary" means the person or trust that a Participant
designated most recently to the Plan Administrator; provided,
however, that if the Participant has failed to make a
designation, no designated person is alive, no trust has been
established, or no successor Beneficiary has been designated who
is alive, the term "Beneficiary" means (a) the Participant's
spouse or (b) if no spouse is alive, the Participant's surviving
children, in equal parts (including children by blood, marriage,
and adoption), or (c) if no children are alive, the
Participant's parent or parents, in equal parts, or (d) if no
parent is alive, the legal representative of the deceased
Participant's estate. Notwithstanding the preceding sentence,
the spouse of a married Participant shall be his Beneficiary
unless the spouse has consented in writing to the designation by
the Participant of some other person or trust in the manner
described in Plan Section 6. The designation by the Participant
may not be changed to another person or trust without the
spouse's further consent unless the spouse's consent has
permitted designations of another person or trust without
further consent and has acknowledged the spouse's right to limit
consent to a specific beneficiary and a specific optional form
of benefit, and has voluntarily relinquished both of these
rights. All spousal consents shall be witnessed by a notary
public or Plan representative. Notwithstanding the above, the
spouse's consent is not required if it is established to the
satisfaction of the Plan Administrator that the spouse cannot be
located, or if the Participant has a court order indicating that
he is legally separated or has been abandoned (within the
meaning of local law) unless a "qualified domestic relations
order" (within the meaning of Code Section 414(p)) provides
otherwise, or if there are other circumstances prescribed by the
Secretary of the Treasury. If the spouse is legally incompetent
to give consent, consent by the spouse's legal guardian shall be
deemed to be consent by the spouse. Changes in designations of
Beneficiaries may be made upon written notice to the Plan
Administrator in the form as the Plan Administrator may from
time to time prescribe.
1.9 "Board of Directors" means the Board of Directors of the
Primary Sponsor.
1.10 "Break in Service" means the failure of an Employee, in
connection with a termination of employment other than by reason
of death or retirement, to complete more than 500 Hours of
Service in the twelve-month period beginning when his employment
commenced or in any Plan Year thereafter, including the Plan
Year in which that twelve-month period ends.
1.11 "Code" means the Internal Revenue Code of 1986, as amended.
1.12 "Creditable Service" means the sum of the following full
or fractional years for each Eligible Employee:
(a) each full twelve-month period of employment before January
1, 1976, that was considered "continuous service" under the Old
Plan, and
(b) one-twelfth (1/12) of a year for each month of "continuous
service" from the first day of the month in 1975 in which falls
the anniversary of the Participant's "most recent date of hire"
(as defined in the Old Plan) used by the Plan Sponsor to compute
"continuous service" (as defined in the Old Plan) for the
Participant through December 31, 1975, and
(c) each Plan Year beginning on or after January 1, 1976,
during which an Eligible Employee completes at least 1,000 Hours
of Service; provided, however, that an Eligible Employee will
receive a year of Creditable Service for any Plan Year during
which such Eligible Employee is hired or terminated, as long as
one complete month is worked, unless such Eligible Employee is
terminated and subsequently rehired within the same Plan Year,
in which case such Employee must complete 1,000 Hours of Service
within that Plan Year to receive a year of Creditable Service,
and
(d) any Eligible Employee hired on or after January 1, 1987,
will receive Creditable Service only for Plan Years during or
after which the Eligible Employee attained age twenty-one (21)
and with respect to which the Eligible Employee otherwise meets
the requirements in Subsection (c) above.
In the case of an Eligible Employee who became a Participant
after attaining age sixty (60) and who completed at least one
(1) Hour of Service with a Plan Sponsor in any Plan Year
beginning on or after January 1, 1988, such Employee will
receive Creditable Service for that period of time between the
date his employment commenced and January 1, 1988, and with
respect to which the Employee otherwise meets the requirements
of Subsections (a) through (d) above.
Notwithstanding anything herein to the contrary, the following
rule shall apply to Eligible Employees who become Participants
on or after January 1, 1994: For Plan Years beginning on or
after January 1, 1994, Creditable Service shall not include, in
the case of an Employee who completes five consecutive Breaks in
Service and at that time does not have any vested right in his
Accrued Benefit, all years of Creditable Service before those
Breaks in Service commenced.
1.13 "Direct Rollover" means a payment by the Plan to an
Eligible Retirement Plan specified by a Distributee.
1.14 "Distributee" means an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p), are Distributees with
regard to the interest of the spouse or former spouse.
1.15 "Early Retirement Age" means the later of the date a
Participant (a) attains age fifty-five (55), or (b) completes
ten (10) years of Vesting Service.
1.16 "Early Retirement Date" means the first day of the month
coinciding with or next following the date on which a
Participant retires on or after attaining Early Retirement Age.
1.17 "Effective Date" means July 1, 1973, with respect to the
Primary Sponsor, and with respect to each other Plan Sponsor
adopting this Plan, the date designated as such by the Plan
Sponsor.
1.18 "Eligibility Service" means the twelve (12) month period
beginning on the date on which an Employee performs his first
Hour of Service by reason of his employment or reemployment
during which he completes at least 1,000 Hours of Service, or in
the event an Employee fails to complete 1,000 Hours of Service
in that twelve (12) month period, in any Plan Year thereafter,
including the Plan Year which includes the first anniversary of
the date the Employee performed his first Hour of Service by
reason of his employment or reemployment.
1.19 "Eligible Employee" means an Employee other than an
Employee who is (a) covered by a collective bargaining agreement
between a union and a Plan Sponsor, provided that retirement
benefits were the subject of good faith bargaining in the
negotiations culminating in the agreement, unless the collective
bargaining agreement provides for participation in the Plan, (b)
a leased employee within the meaning of Code Section 414(n)(2),
or (c) deemed to be an Employee of a Plan Sponsor pursuant to
regulations under Code Section 414(o).
1.20 "Eligible Retirement Plan" means an individual retirement
account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity
plan described in Code Section 403(a) or a qualified trust
described in Code Section 401(a) that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
1.21 "Eligible Rollover Distribution" means any distribution
of all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does
not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated Beneficiary, or
for a specified period of ten years or more; any distribution to
the extent such distribution is required under Code Section
401(a)(9); and the portion of any distribution that is not
includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
1.22 "Employee" means any person who is (a) employed by a Plan
Sponsor or an Affiliate for purposes of the Federal Insurance
Contributions Act, (b) a leased employee within the meaning of
Code Section 414(n)(2), or (c) deemed to be an employee of a
Plan Sponsor pursuant to regulations under Code Section 414(o).
1.23 "Entry Date" means each January 1 and July 1.
1.24 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
1.25 "Fiduciary" means each of the Named Fiduciaries and any
other person who exercises or has any discretionary authority or
discretionary control regarding management or administration of
the Plan or disposition of Plan assets and any other person who
renders investment advice for a fee or has any authority or
responsibility to do so with respect to any Plan assets.
1.26 "Fund" means the amount at any given time of the cash and
other property held by the Trustee pursuant to the Plan.
1.27 "Highly Compensated Employee" means each Employee who is
described in Subsection (a), unless the Plan Sponsor makes an
election pursuant to Subsection (b).
(a) (1) The Employee during the Plan Year immediately
preceding the Plan Year in question:
(A) was at any time an owner of more than five
percent (5%) of the outstanding stock of a Plan Sponsor or
Affiliate or more than five percent (5%) of the total combined
voting power of all stock of a Plan Sponsor or Affiliate; or
(B) received Annual Earnings in excess of $96,368 (for the Plan
Year beginning in 1993) which amount shall be adjusted for
changes in the cost of living as provided in regulations issued
by the Secretary of the Treasury; or
(C) received Annual Earnings in excess of $64,245 (for the Plan
Year beginning in 1993) which amount shall be adjusted for
changes in the cost of living as provided in regulations issued
by the Secretary of the Treasury, and who was in the group
consisting of the most highly compensated twenty percent (20%)
of the Employees; or
(D) was at any time an officer of the Plan Sponsor or of any
Affiliate whose Annual Earnings was greater than fifty percent
(50%) of the amount in effect under Code Section 415(b)(1)(A)
for the calendar year in which the Plan Year ends, where the
term "officer" means an administrative executive in regular and
continual service to the Plan Sponsor or Affiliate; provided,
however, that in no event shall the number of officers exceed
the lesser of Clause (i) or (ii) of this Subparagraph (D), where:
(a) equals fifty (50) Employees; and
(b) equals the greater of (I) three (3) Employees or (II) ten
percent (10%) of the number of Employees during the Plan Year,
with any non-integer being increased to the next integer.
If for any year no officer of the Plan Sponsor meets the
requirements of this Subparagraph (D), the highest paid officer
of the Plan Sponsor for the Plan Year shall be considered an
officer for purposes of this Subparagraph (D).
(2) The Employee during the Plan Year in question (A) is
described in Subsection (a)(1)(A), or (B) is both (i) described
in Subsection (a)(1)(B), (a)(1)(C), or (a)(1)(D), and (ii) one
of the 100 Employees who received the most Annual Earnings
during that Plan Year.
The Plan Administrator may make an election to substitute
$64,245 (as adjusted) for $96,368 (as adjusted) in Subparagraph
(B) of Subsection (a)(1) provided that at all times during the
Plan Year the Plan Sponsor and its Affiliates maintain
significant business activities and have Employees in at least
two significantly separate geographic areas and satisfy such
other conditions as the Secretary of the Treasury prescribes.
For purposes of Subparagraphs (C) and (D) of Subsection
(a)(1), the following shall be excluded when determining the
number of Employees in the most highly compensated twenty
percent (20%) of the Employees and the number of officers:
(A) employees who have not completed six (6) months of service,
(B) employees who normally work less than 17-1/2 hours per week,
(C) employees who normally work during not more than six (6)
months during any Plan Year,
(D) employees who have not attained age twenty-one (21),
(E) employees who are included in a unit of employees covered
by an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee representatives
and the Plan Sponsor or its Affiliates, provided ninety percent
(90%) or more of the Employees are covered under collective
bargaining agreements and the Plan only covers Employees who are
not covered under the collective bargaining agreements.
(b) Notwithstanding the provisions of Subsection (a), the
Primary Sponsor may elect to determine each Highly Compensated
Employee to be each Employee who during the Plan Year in
question is described in Subsection (a) (determined without
regard to the head language of Subsection (a)(1)), pursuant to
the provisions of Treas. Reg. Section 1.414(q)-1T, Q&A-14(b).
(c) For purposes of this Section, if any Employee is a member
of the family of a five percent (5%) owner as defined in
Subsection (a)(1) of this Section or of a Highly Compensated
Employee whose Annual Earnings is such that he is among the ten
(10) Highly Compensated Employees receiving the greatest amount
of Annual Earnings during the Plan Year, then (1) the Employee
shall not be considered a separate Employee, and (2) any Annual
Earnings paid to the Employee, and any applicable contribution
or benefit on behalf of the Employee, shall be treated as if it
were paid to, or on behalf of, the five percent (5%) owner or
the Employee who is among the ten (10) Highly Compensated
Employees receiving the greatest amount of Annual Earnings
during the Plan Year. For purposes of this Section (b), the
term "family" means with respect to any Employee, the Employee's
spouse and lineal descendants or ascendants and the spouses of
lineal descendants or ascendants.
(d) For purposes of this Section, a former Employee shall be
treated as a Highly Compensated Employee if (1) the former
Employee was a Highly Compensated Employee at the time the
former Employee separated from service with the Plan Sponsor or
Affiliate or (2) the former Employee was a Highly Compensated
Employee at any time after the former Employee attained age
fifty-five (55).
(e) For purposes of this Section, Employees who are nonresident
aliens and who receive no earned income from the Plan Sponsor or
an Affiliate from sources within the United States shall not be
treated as Employees.
(f) For purposes of this Section, Annual Earnings shall include
amounts paid by Affiliates and shall be determined without
regard to the Annual Earnings Limit, as adjusted.
"Hour of Service" means:
(a) Each hour for which an Employee is paid or entitled to
payment for the performance of duties for a Plan Sponsor or any
Affiliate during the applicable computation period, and these
hours shall be credited to the computation period in which the
duties are performed.
(b) Each hour for which an Employee is paid or entitled to
payment by a Plan Sponsor or any Affiliate on account of a
period of time during which no duties are performed (regardless
of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence, and these
hours shall be computed and credited in accordance with the
provisions of Section 2530.200b-2(b) and (c) of the U.S.
Department of Labor Regulations or any other federal regulations
as may from time to time be applicable.
(c) In the event that a Plan Sponsor or an Affiliate acquires
substantially all of the assets of another corporation or entity
or a controlling interest in the stock of another corporation or
merges with another corporation or entity and is the surviving
entity, then Hours of Service for an Employee who was employed
by the prior corporation or entity and who is employed by a Plan
Sponsor or Affiliate will be credited from the effective date of
the acquisition or merger unless the Plan Administrator
otherwise specifies.
(d) Each hour for which back pay, regardless of mitigation of
damages, is either awarded or agreed to by a Plan Sponsor or any
Affiliate, and these hours shall be credited to the computation
period or periods to which the award or agreement for back pay
pertains rather than to the computation period in which the
award, agreement or payment is made; provided, however, that the
same Hours of Service shall not be credited both under
Subsection (a) or (b) above and under this Subsection (d); and
further provided that the crediting of Hours of Service for back
pay awarded or agreed to with respect to periods described in
Subsection (b) above shall be subject to the limitations set
forth therein.
(e) Solely for purposes of determining whether a Break in
Service has occurred, each hour during any period that the
Employee is absent from work (1) by reason of the pregnancy of
the Employee, (2) by reason of the birth of a child of the
Employee, (3) by reason of the placement of a child with the
Employee in connection with the adoption of the child by the
Employee, or (4) for purposes of caring for a child for a period
immediately following its birth or placement. These hours shall
be credited (A) only in the computation period in which the
absence from work begins, if the Employee would be prevented
from incurring a Break in Service in a year solely because of
the credit, or (B) in any other case, in the next following
computation period. In no event shall an Employee be credited
with more than 501 Hours of Service during any single continuous
period during which he performs no duties for a Plan Sponsor or
Affiliate.
(f) The Plan Administrator shall determine Hours of Service
from the employment records of a Plan Sponsor or in any other
manner consistent with regulations promulgated by the Secretary
of Labor, and shall construe any ambiguities in favor of
crediting Employees with Hours of Service.
1.29 "Integration Level" means $10,000; provided, however, that
for any calendar year during which an Employee's employment
commences or terminates and in which the Employee was employed
for at least one complete calendar month, the Integration Level
shall be that amount calculated by multiplying $10,000, by a
fraction, the numerator of which shall be the number of his
complete calendar months of employment during that period or
year and the denominator of which shall be twelve (12).
Notwithstanding the foregoing, if an Employee's employment
terminates and subsequently recommences within the same Plan
Year, the Integration Level with respect to such Employee will
be $10,000.
1.30 "Investment Committee" means a committee, the membership
of which shall be designated by the Board of Directors, which
may be established to direct the Trustee with respect to
investments of the Fund in accordance with the Plan and the
Trust and in a manner not contrary to the Code or ERISA. The
Board of Directors shall certify to the Trustee the
establishment, composition and address of the Investment
Committee and all changes therein.
1.31 "Investment Manager" means a Fiduciary which may be
appointed by the Board of Directors:
(a) who has the power to manage, acquire, or dispose of any
part or all of the assets of the Fund;
(b) who is registered as an investment adviser pursuant to the
Investment Advisers Act of 1940, is a bank, as defined in that
Act, or is an insurance company qualified to perform services
described in (a) above under the laws of more than one state; and
(c) who has acknowledged in writing that he is a Fiduciary with
respect to the Plan.
The Board of Directors shall certify to the Trustee the
appointment, composition and address of the Investment Manager
and all changes therein.
1.32 "Named Fiduciary" means the following persons who shall be
the only Named Fiduciaries under the Plan and the Trust:
the Plan Administrator,
(b) the Trustee,
(c) the Board of Directors,
(d) the Investment Committee, and
(e) the Investment Manager.
1.33 "Normal Fund Payment" means:
(a) in the case of a Participant who is not married on the date
payments to the Participant commence under the terms of the
Plan, a single life annuity, payable in equal monthly
installments, which is an immediate annuity for the life of the
Participant;
(b) in the case of a Participant who is married on the date
payments are to commence under the terms of the Plan, a joint
and survivor annuity which is the Actuarial Equivalent of a
single life annuity to the Participant, payable in monthly
installments, which is an immediate annuity for the life of the
Participant with a survivor annuity for the life of his spouse
equal to fifty percent (50%) of the amount of the annuity
payable during the joint lives of the Participant and his
spouse; and
(c) in the case of a Participant whose vested Accrued Benefit
has a present value Actuarial Equivalent of $3,500 or less, a
lump sum payment in cash.
Any annuity may be purchased from an insurance company
designated by the Plan Administrator in writing to the Trustee,
and may be distributed to the Participant or his spouse, as the
case may be. The distribution, if any, shall be in full
satisfaction of the benefits to which the Participant or his
spouse is entitled under the Plan.
1.34 "Normal Retirement Age" means age sixty-five (65), or in
the case of an Employee who becomes a Participant after age
sixty (60), the fifth anniversary of the date on which he
becomes a Participant.
1.35 "Normal Retirement Date" means the first day of the month
coinciding with or next following the date on which a
Participant retires on or after attaining Normal Retirement Age.
1.36 "Participant" means any Employee who participates
in the Plan for so long as he has not received a full
distribution from the Plan of his Accrued Benefit.
1.37 "PBGC" means the Pension Benefit Guaranty Corporation.
1.38 "Plan Administrator" means the organization, person or
persons appointed by the Board of Directors.
1.39 "Plan Sponsor" means (a) the Primary Sponsor or any
successor thereto, or (b) each Affiliate or other corporation or
organization which has adopted the Plan and become a party to
the Trust in the manner set forth in Section 9 of the Plan.
1.40 "Plan Year" means the six-month period between July 1 and
December 31, 1973, and each calendar year thereafter.
1.41 "Postponed Retirement Date" means the first day of the
month coinciding with or next following the date on which a
Participant who did not retire as of his Normal Retirement Date
actually retires.
1.42 "Retirement Date" means a Participant's Normal Retirement
Date, Early Retirement Date, or Postponed Retirement Date.
1.43 "Social Security Retirement Age" means the age used as the
retirement age under Section 216(l) of the Social Security Act,
as applied (a) without regard to the age increase factor, and
(b) as if the early retirement age under Section 216(l)(2) of
that Act were 62.
1.44 "Termination Completion Date" means (a) with respect to
Plan Years commencing before January 1, 1985, the last day of a
Break in Service computation period, determined pursuant to
Section 1.10 of the Plan, and (b) with respect to Plan Years
commencing after December 31, 1984, the last day of the fifth
consecutive Break in Service computation period, determined
pursuant to Section 1.10 of the Plan, in which a Participant
completes a Break in Service.
1.45 "Trust" means that certain trust agreement established
between the Primary Sponsor and the Trustee named therein or any
trust agreement hereafter established.
1.46 "Trustee" means the Trustee named in the Trust.
1.47 "Valuation Date" means January 1 of each year, the
effective date of the resignation or removal of the Trustee, or
the date of the termination of the Trust.
1.48 "Vesting Service" means (a) each twelve-month period which
is "continuous service" (as defined in the Old Plan) commencing
on the "most recent date of hire" of a Participant (as defined
in the Old Plan) and ending on the anniversary of that date in
1976, and (b) commencing on January 1, 1976, each calendar year
during which an Employee completes at least 1,000 Hours of
Service. After January 1, 1976, in the event that the
eligibility computation period of an Employee in which he first
completes 1,000 Hours of Service overlaps two calendar years and
such Employee fails to complete 1,000 Hours of Service in either
of the overlapping calendar years, Vesting Service shall include
the second of those two calendar years. Vesting Service shall
not, however, include the following:
(a) twelve-month periods and calendar years beginning prior to
January 1, 1985, during which an Employee has not attained age
twenty-two (22),
(b) twelve-month periods and calendar years beginning after
December 31, 1984, during which an Employee has not attained age
eighteen (18), and
(c) twelve-month periods prior to January 1, 1976, which were
not considered "continuous service" under the provisions of the
Old Plan.
Notwithstanding the above, those Employees who have not
completed at least three (3) years of Vesting Service with a
Plan Sponsor as of December 31, 1993, for all calendar years
commencing on and after January 1, 1994, Vesting Service shall
not include:
(i) in the case of an Employee who completes five consecutive
Breaks in Service for purposes of determining the vested portion
of his Accrued Benefit derived from Plan Sponsor contributions
which accrued before his Termination Completion Date, all
service in Plan Years after his Termination Completion Date;
(ii) in the case of an Employee who completes five consecutive
Breaks in Service and at that time does not have any vested
right in Plan Sponsor contributions, all service before those
Breaks in Service commenced.
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1 Each Eligible Employee who was a Participant in the Plan on
the date immediately prior to January 1, 1994 shall continue to
be a Participant as of January 1, 1994.
2.2 Each former Participant who is reemployed by a Plan Sponsor
shall become a Participant as of the date of his reemployment.
2.3 Each former Employee who completed at least one (1) year of
Eligibility Service but terminated employment with a Plan
Sponsor before becoming a Participant and who is reemployed by a
Plan Sponsor shall become a Participant as of the later of the
date of his reemployment or the date that he would have become a
Participant had he not terminated employment.
2.4 Commencing January 1, 1988, each other Eligible Employee
shall become a Participant on the Entry Date coinciding with or
next following the date the Eligible Employee has both attained
age twenty-one (21) and completed his Eligibility Service.
SECTION 3
FUNDING
3.1 (a) Each Plan Sponsor shall contribute to the Fund the
amounts an actuary determines are necessary to fund the benefits
provided under the Plan. For this purpose, the Plan
Administrator shall establish a funding standard account to be
maintained by the actuary, who shall be responsible for seeing
that the account meets the funding requirements of ERISA Section
302 and Code Section 412.
(b) All forfeitures arising under the Plan shall be used to
reduce the cost of the Plan and shall not be used to increase
benefits.
(c) A Plan Sponsor shall also have the right to contribute
additional amounts as it deems necessary or desirable to
maintain the actuarial soundness of the Plan, and a Plan Sponsor
may at any time discontinue contributions hereunder.
3.2 No contributions by Participants shall be required or
permitted under the Plan.
SECTION 4
DEATH BENEFITS
4.1 Upon the death of a Participant whose retirement benefits
under the Plan have commenced, his Beneficiary shall be entitled
to receive such payments as are payable to a Beneficiary in
accordance with the form of payment selected by the Participant
pursuant to Plan Section 6.
4.2 (a) If a Participant dies while married after becoming
vested in any portion of his Accrued Benefit, but before
commencement of retirement payments under the Plan, the
Participant's spouse shall receive a death benefit in the form
set forth below:
(1) in the case of a Participant who dies on or after attaining
Early Retirement Age or Normal Retirement Age, the Participant's
spouse shall receive an immediate single life annuity, payable
in monthly installments for the life of the Participant's
spouse, commencing no later than sixty (60) days following the
end of the Plan Year during which the Participant's death
occurs, which is fifty percent (50%) of the amount of the
annuity which would have been payable for the life of the
Participant had the Participant retired on the day before his
death and elected a Normal Fund Payment; provided, however, that
if the lump sum present value of the Participant's Accrued
Benefit exceeds $3,500, the Participant's spouse may elect to
receive a lump sum cash payment.
(2) in the case of a Participant who dies before attaining
Early Retirement Age or Normal Retirement Age, the Participant's
spouse shall receive a single life annuity, payable in monthly
installments for the life of the Participant's spouse,
commencing no later than sixty (60) days following the end of
the Plan Year during which the Participant would have attained
his earliest retirement age, which is fifty percent (50%) of the
amount of the annuity which would have been payable for the life
of the Participant had the Participant
(A) separated from service on his date of death (unless the
Participant had earlier separated from service),
(B) survived to the earliest retirement age under the Plan,
C) retired with a Normal Fund Payment as described under Plan
Section 1.33(b) at the earliest retirement age under the Plan,
and
(D) died on the day after the date on which he would have
attained the earliest retirement age under the Plan.
The Participant's spouse may elect to delay the commencement
of benefits under Paragraphs (1) and (2) above, but not beyond
the date on which the Participant would have attained his Normal
Retirement Age.
(b) Notwithstanding Subsection (2) above, if, at the time of
the Participant's death prior to the commencement of his
retirement payments, the lump sum present value of the death
benefit payable to the Participant's spouse exceeds $3,500, the
Participant's spouse may elect to receive (1) an immediate
single life annuity commencing no later than sixty (60) days
following the end of the Plan Year during which the
Participant's death occurs, which is the Actuarial Equivalent of
the single life annuity which would otherwise be payable to the
Participant's spouse pursuant to Paragraph (2) of Subsection (a)
hereof, or (2) a lump sum payment equal to the present value
Actuarial Equivalent thereof.
(c) If, at the time of the Participant's death prior to the
commencement of his retirement payments, the lump sum present
value of the death benefit payable to the Participant's spouse
does not exceed $3,500, it shall be paid to the Participant's
spouse in the form of a lump sum cash payment.
4.3 Any annuity may be purchased from an insurance company
designated by the Plan Administrator in writing to the Trustee
and may be distributed to the spouse. The distribution, if any,
shall be in full satisfaction of the benefits to which the
spouse is entitled under the Plan. Any benefit payable under
this Section 4 shall be paid in accordance with and subject to
the provisions of Plan Sections 6.7, 6.9 and 6.10, and 7.2, if
applicable, after receipt by the Trustee from the Plan
Administrator of due notice of the death of the Participant.
SECTION 5
RETIREMENT BENEFITS
5.1 The amount of a Participant's Accrued Benefit upon his
Retirement Date shall be determined in accordance with this
Section 5.
5.2 Each Participant who reaches Normal Retirement Age while an
Employee shall be entitled to retire on that date. The pension
payable to a Participant as of his Normal Retirement Date shall
be equal to the Accrued Benefit of the Participant at his Normal
Retirement Age.
5.3 Each Participant who reaches his Early Retirement Date
while an Employee shall be entitled to elect in writing to the
Plan Administrator to retire as of that date. The pension
payable to a Participant as of his Early Retirement Date shall
be equal to the Accrued Benefit of the Participant at his Early
Retirement Date, multiplied by the proper early retirement
factor pursuant to the following schedule:
Number of years by which
Early Retirement Date precedes
Normal Retirement Date Factor
10 .500
9 .533
8 .566
7 .600
6 .633
5 .666
4 .733
3 .800
2 .866
1 .933
0 1.000
The percentage reduction applicable to a Participant shall be
adjusted to the actual number of years and whole months between
a Participant's Early Retirement Date and Normal Retirement Date
by arithmetic interpolation between the whole year percentage
nearest to such actual number of years and whole months.
5.4 Each Participant may remain an Employee after his Normal
Retirement Date and retire on his Postponed Retirement Date.
The pension payable to a Participant as of his Postponed
Retirement Date shall be equal to the Accrued Benefit of the
Participant as of his Postponed Retirement Date.
SECTION 6
PAYMENT OF BENEFITS ON RETIREMENT
6.1 The retirement benefit (as described in Plan Section 5) of
a Participant who has attained a Retirement Date shall be fully
vested and nonforfeitable. As of a Participant's Retirement
Date, payment of his vested retirement benefit shall be made in
accordance with this Section 6. Payments shall commence no
later than sixty (60) days following the end of the Plan Year in
which a Retirement Date occurs. If the amount cannot be
ascertained by the required date, payment shall commence
retroactively to that date by no later than sixty (60) days
after the earliest date on which the amount of the payment can
be ascertained under the Plan.
6.2 (a) All retirement payments shall be in the form of a
Normal Fund Payment,unless the Participant's vested Accrued
Benefit then has a lump sum present value Actuarial Equivalent
of greater than $3,500 and the Participant elects during the
"applicable election period" (as hereinafter defined) not to
receive the Normal Fund Payment by delivery to the Plan
Administrator of a form provided for that purpose by the Plan
Administrator. For purposes of this Section, the term
"applicable election period" means, with respect to a Normal
Fund Payment described in Subsection (a) or (b) of the Plan
Section defining Normal Fund Payment, the 90-day period ending
on the first date on which the Participant is entitled to
payment. In the case of a married Participant, no election
shall be effective unless:
(1) the spouse of the Participant consents in writing to the
election (including, if applicable, the identity of any
Beneficiary selected other than the Participant's spouse and the
alternate form of payment selected), and the consent
acknowledges the effect of the election and is witnessed by a
representative of the Plan designated by the Plan Administrator
or by a notary public, or
(2) the Participant establishes to the satisfaction of the
Plan Administrator that spousal consent required pursuant to
Subsection (a) may not be obtained because there is no spouse,
the spouse cannot be located, the Participant has a court order
indicating that he is legally separated or has been abandoned
(within the meaning of local law) unless a "qualified domestic
relations order" (as defined in Code Section 414(p)) provides
otherwise, or because of any other circumstances as permitted by
regulations promulgated by the Department of the Treasury.
Any spousal consent (or establishment that spousal consent may
not be obtained) shall be effective only with respect to that
spouse. If an election is made, the Participant must select one
of the alternate forms of payment set forth in Subsection (b) of
this Section by delivering a written instrument to the Trustee
prior to the date payments are to otherwise commence.
(b) The alternate forms of retirement benefit payment are:
(1) one lump sum payment of the entire amount of the
Participant's Accrued Benefit in cash or in kind;
(2) a straight life annuity providing for periodic payments
for the life of the Participant;
(3) a joint and survivor annuity payable in monthly
installments, which is an actuarially reduced annuity payable to
and during the lifetime of the Participant with a survivor
annuity payable to and during the lifetime of a Beneficiary
equal to either fifty percent (50%), seventy-five percent (75%),
or one hundred percent (100%) of the annuity payable during the
life of the Participant, and which is the Actuarial Equivalent
of the single life annuity otherwise payable to the Participant;
and
(4) cash payments in monthly installments over a period
certain not exceeding the lesser of (a) twenty (20) years or (b)
the life expectancy of the Participant or the joint life
expectancies of the Participant and his Beneficiary, as the case
may be.
If a Participant elects (3) above and his joint survivor dies
after the election but before benefit payments have actually
commenced to the Participant, the election will be void and the
Participant shall elect another form of payment. Any alternate
form of payment of retirement benefits which the Participant may
elect shall be equal to the Actuarial Equivalent of the Accrued
Benefit which would otherwise be payable as a Normal Fund
Payment to the Participant.
6.3 Within a reasonable period of time prior to the
commencement of retirement payments to a Participant from the
Fund, the Plan Administrator shall furnish the Participant with
a written explanation of:
(a) the terms and conditions of the Normal Fund Payment,
including a general description of the eligibility conditions
and other material features of the alternate forms of payment
under the Plan,
(b) the right of the Participant to make, and the effect of, an
election not to receive the Normal Fund Payment,
(c) the rights of his spouse as described in Section 6.2 of the
Plan, and
(d) the right to make, and the effect of, a revocation of this
election.
The written explanation shall be provided to the Participant not
less than thirty (30) days, nor more than ninety (90) days prior
to the first date on which he is entitled to payment from the
Fund. A Participant may revoke any election not to receive
payment in the form of a Normal Fund Payment and make a new
election at any time prior to commencement of payments.
6.4 Notwithstanding anything to the contrary contained in the
Plan,
(a) the payments to be made to a Participant shall satisfy the
incidental death benefit requirements under Code Section
401(a)(9)(G) and the regulations thereunder; and
(b) if the lump sum present value Actuarial Equivalent of a
Participant's vested Accrued Benefit exceeds $3,500, it shall
not be distributed prior to the Participant's Normal Retirement
Age without the written consent of the Participant, and if the
Participant is married, his spouse (or if deceased, his
surviving spouse).
6.5 Notwithstanding any other provision of this Plan, if a
Participant's lump sum present value vested Accrued Benefit is
$3,500 or less, the Plan Administrator shall direct the Trustee
to distribute the Participant's vested Accrued Benefit to him in
a single lump sum payment within a reasonable period of time
after he ceases to be an Employee.
6.6 Notwithstanding any other provision of this Plan, the
benefits payable to a Participant or his Beneficiary (other than
pursuant to Section 6.7 below) shall be actuarially adjusted to
reflect any benefits which the Participant received by reason of
any prior participation in the Plan.
6.7 Notwithstanding any other provision of this Plan,
(a) prior to the death of a Participant, all retirement
payments hereunder shall
(1) be distributed to the Participant not later than the
required beginning date (as defined below) or,
(2) be distributed, commencing not later than the required
beginning date (as defined below) --
(A) in accordance with regulations prescribed by the Secretary
of the Treasury, over the life of the Participant or over the
lives of the Participant and his designated individual
Beneficiary, if any, or
(B) in accordance with regulations prescribed by the Secretary
of the Treasury, over a period not extending beyond the life
expectancy of the Participant or the joint life and last
survivor expectancy of the Participant and his designated
individual Beneficiary, if any.
(b) (1) If
(A) the distribution of a Participant's retirement payments
have begun in accordance with Subsection (a)(2) of this Section,
and
(B) the Participant dies before his entire vested Accrued
Benefit has been distributed to him, then the remaining portion
of his vested Accrued Benefit shall be distributed at least as
rapidly as under the method of distribution being used under
Subsection (a)(2) of this Section as of the date of his death.
(2)
If a Participant dies before the commencement of retirement
payments hereunder, the entire interest of the Participant shall
be distributed within five (5) years after his death.
(3) If
(A) any portion of a Participant's benefit is payable to or for
the benefit of the Participant's designated individual
Beneficiary, if any,
(B) that portion is to be distributed, in accordance with
regulations prescribed by the Secretary of the Treasury, over
the life of the Beneficiary or over a period not extending
beyond the life expectancy of the Beneficiary, and
(C) the distributions begin not later than one (1) year after
the date of the Participant's death or any later date as the
Secretary of the Treasury may by regulations prescribe, then,
for purposes of Paragraph (2) of this Subsection (b), the
portion referred to in Subparagraph (A) of this Paragraph (3)
shall be treated as distributed on the date on which the
distributions begin.
(4) If the designated individual Beneficiary referred to in
Paragraph (3)(A) of this Subsection (b) is the surviving spouse
of the Participant, then
(A) the date on which the distributions are required to begin
under Paragraph (3)(C) of this Subsection (b) shall not be
earlier than the date on which the Participant would have
attained age 70-1/2, and
(B) if the surviving spouse dies before the distributions to
the spouse begin, this Subsection (b) shall be applied as if the
surviving spouse were the Participant.
(c) For purposes of this Section, the term "required beginning
date" means April 1 of the calendar year following the calendar
year in which the Participant attains age 70-1/2.
Notwithstanding the foregoing, in the case of a Participant who
as attained age 70-1/2 before January 1, 1988, other than a
Participant who is described in Section 1(b)(3) of Appendix C,
the term "required beginning date" means April 1 of the calendar
year following the later of (i) the calendar year in which the
Employee attains age 70 1/2, or (ii) the calendar year in which
the Participant retires or otherwise terminates employment with
a Plan Sponsor.
(d) For purposes of this Section, the life expectancy of a
Participant and his spouse, except in the case of a life
annuity, may be redetermined, but not more frequently than
annually.
(e) Under regulations prescribed by the Secretary of the
Treasury, for purposes of this Section, any amount to be paid to
a child shall be treated as if it had been paid to the surviving
spouse of a Participant if the amount becomes payable to the
surviving spouse upon the child reaching majority, or upon any
other designated event permitted under regulations.
6.8 (a) If a Participant is reemployed by a Plan Sponsor after
beginning to receive payment of his retirement benefits or if
the Participant continues to be employed by a Plan Sponsor after
Normal Retirement Age, the payment of his retirement benefits
shall be suspended for each month during which he performs
"substantial service" for a Plan Sponsor. A Participant will be
deemed to be performing "substantial service" for a month if he
receives payment from a Plan Sponsor for services performed for
any Plan Sponsor or for reasons other than the performance of
duties on eight (8) or more days during the month.
(b) The payment of retirement benefits which have been
suspended shall resume no later than the first day of the third
calendar month after the month in which the Participant ceases
to perform substantial service for a Plan Sponsor. Upon
resumption, the initial payment shall include the amount of the
payment scheduled to occur in the calendar month of resumption
and any amounts which were withheld during the period between
the cessation of the performance of substantial service by the
Participant and the resumption of payment, reduced by an offsets
described in Subsection (c) below.
(c) Upon the resumption of payments, there shall be deducted or
offset from such payments an amount equal to any payments made
by the Plan to the Participant for any months in which the
Participant performed substantial service for a Plan Sponsor,
provided that the amount of the deduction or offset shall not
exceed, in any one month, twenty-five percent (25%) of that
month's benefit payment which would have been due the
Participant, and further provided that the initial payment made
upon the resumption of payments shall be subject to deduction or
offset without limitation.
(d) Payments shall not be suspended unless the Plan
Administrator notifies the Participant of the suspension by
personal delivery or first class mail during the first calendar
month in which payments are to be suspended. The notification
shall contain a description of the specific reasons why the
payments are being suspended, a general description of the
provisions of the Plan relating to the suspension of benefits
and a copy of those provisions, a statement to the effect that
applicable Department of Labor regulations may be found in
Section 2530.203-3 of the Code of Federal Regulations and a
statement that the Participant may employ the claim review
procedure described in Section 10 of the Plan to obtain a review
by the Plan Administrator of the decision to suspend payments.
If a reduction or offset is to be made to a Participant's
payment, the notification shall also describe the periods of
employment with respect to which payments were previously made
from the Plan and during which the Participant performed
substantial service for a Plan Sponsor, the amount of the
benefit subject to reduction or offset and the manner in which
the Plan Administrator intends to reduce or offset the benefit
payment.
(e) A Participant who is receiving benefits must notify the
Plan Administrator of any employment, and in connection
therewith the Plan Administrator shall be entitled to request
from the Participant any information which the Plan
Administrator deems reasonably necessary to verify whether or
not the Participant is employed. The Plan Administrator may
require any Participant who is receiving benefit payments, as a
condition to receiving any future benefit payments, to certify
to the Plan Administrator in writing that he is unemployed or to
provide information sufficient to establish that he is not
performing substantial service for any Plan Sponsor.
(f) A Participant who is receiving payments is entitled to
request the Plan Administrator to determine whether any specific
contemplated employment for a Plan Sponsor by the Participant
will constitute substantial service. This request shall be
treated as a claim for benefits under Section 10 of the Plan,
and accordingly the Participant must comply with the claim
review procedure described in Section 10.
(g) In order to be entitled to the resumption of payment of
benefits, the Participant must notify the Plan Administrator in
writing that he has ceased to perform substantial service. The
notification by the Plan Administrator which is described in
Subsection (d) above shall describe the procedure which the
Participant must follow in notifying the Plan Administrator that
he has ceased to perform substantial service and shall include
any forms which the Participant must file with the Plan
Administrator in connection therewith.
(h) If a Participant, the payment of whose benefits has been
suspended, resumes employment with a Plan Sponsor, his benefit
shall be recomputed upon his subsequent retirement to reflect
payments previously paid to him.
6.9 Notwithstanding anything contained to the contrary in this
Section 6, the annual payments to a Participant who is among the
twenty-five (25) highly compensated employees (within the
meaning of Code Section 414(q)) who receive during their most
recent year of employment with a Plan Sponsor the greatest
Annual Earnings (determined without regard to the Annual
Earnings Limit) shall not exceed an amount equal to the payments
that would be made on behalf of the Participant under a single
life annuity that is the Actuarial Equivalent of the sum of the
Participant's Accrued Benefit and the Participant's other
benefits described in Subsection (c) below. The restrictions of
this Section will not apply, however, if:
(a) after payment to a Participant described in this Section of
all benefits described in Subsection (c) of this Section, the
value of the Fund equals or exceeds 110% of the value of the
Plan's current liabilities, as defined in Code Section
412(l)(7); or
(b) the value of the benefits described in Subsection (c) of
this Section for a Participant described in this Section is less
than one percent (1%) of the value of the Plan's current
liabilities, as defined in Code Section 412(l)(7).
(c) For purposes of this Section, "other benefits" includes
loans in excess of the amounts set forth in Code Section
72(p)(2)(A), any periodic income, any withdrawal values payable
to a living Participant, and any death benefit which is payable
from the Plan not provided for by insurance on the Participant's
life.
6.10 Notwithstanding any provisions of the Plan to the contrary
that would otherwise limit a Distributee's election under this
Section 6, a Distributee may elect on or after January 1, 1993,
at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a direct rollover so long as all
Eligible Rollover Distributions to a Distributee for a calendar
year total or are expected to total at least $200 and, in the
case of a Distributee who elects to directly receive a portion
of an Eligible Rollover Distribution and directly roll the
balance over to an Eligible Rollover Plan, the portion that is
to be directly rolled over totals at least $500. If the
Eligible Rollover Distribution is one to which Code Sections
401(a)(11) and 417 do not apply, such Eligible Rollover
Distribution may commence less than 30 days after the notice
required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(a) the Plan Administrator clearly informs the Distributee
that the Distributee has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether
or not to elect a distribution (and, if applicable, a particular
distribution option), and
(b) the Distributee, after receiving the notice,
affirmatively elects a distribution.
SECTION 7
PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT
7.1 Transfer of a Participant from one Plan Sponsor to another
Plan Sponsor or an Affiliate shall not be deemed for any purpose
under the Plan to terminate the Participant's employment.
7.2 A Participant who ceases to be an Employee for any reason
other than death or retirement shall be entitled to receive that
portion of his Accrued Benefit, determined as of his termination
of employment, in which he is vested according to the following
vesting schedule:
Years of Percentage
Vesting Service Vested
Less than 5 0%
5 or more 100%
7.3 A Participant whose lump sum present value vested Accrued
Benefit does not exceed $3,500 shall receive his vested Accrued
Benefit in the form of a lump sum cash payment within a
reasonable period of time after he ceases to be an Employee. A
Participant's whose lump sum present value vested Accrued
Benefit exceeds $3,500 shall not be distributed without the
Participant's consent, and if the Participant is married, the
consent of the Participant's spouse, before the Participant's
Normal Retirement Age or death.
7.4 If a Participant's lump sum present value vested Accrued
Benefit exceeds $3,500, the Participant shall receive his vested
Accrued Benefit in the form of a Normal Fund Payment commencing
as soon as administratively feasible following the month the
Participant attains age sixty-five (65), unless the Participant
elects during the "applicable election period" (as defined in
Section 6.2) not to receive the Normal Fund Payment by delivery
to the Plan Administrator of a form provided for that purpose by
the Plan Administrator. Any election not to receive the Normal
Fund Payment shall be made in accordance with the consent
requirements set forth in Plan Section 6.2. If an election is
made, the Participant must elect one of the alternate forms of
payment available to such Participant in accordance with
Subsection (a) or (b) of this Section by delivering a written
instrument to the Trustee prior to the date payments are to
commence.
(a) If the Participant has not yet attained age fifty-five
(55), he may elect
(1) one lump sum payment of the entire amount of the
Participant's vested Accrued Benefit in cash or in kind, or
(2) a Normal Fund Payment commencing as soon as
administratively feasible following the month in which the
Participant terminates employment.
(b) If the Participant has not yet attained age fifty-five (55)
and at the time of his termination of employment has attained
ten (10) years of Vesting Service, then upon such Participant's
attainment of age fifty-five (55), or, regardless of the
Participant's years of Vesting Service, upon the Participant's
attainment of age sixty-five (65), he may elect
(1) one lump sum payment of the entire amount of the
Participant's vested Accrued Benefit in cash or in kind;
(2) a straight life annuity providing for periodic payments
for the life of the Participant;
(3) a joint and survivor annuity payable in monthly
installments, which is an actuarially reduced annuity payable to
and during the lifetime of the Participant with a survivor
annuity payable to and during the lifetime of a Beneficiary
equal to either fifty percent (50%), seventy-five percent (75%),
or one hundred percent (100%) of the annuity payable during the
life of the Participant;
(4) a Normal Fund Payment commencing as soon as
administratively feasible following the month in which the
Participant terminates employment; and
(5) cash payments in monthly installments over a period
certain not exceeding the lesser of (a) twenty (20) years or (b)
the life expectancy of the Participant or the joint life
expectancies of the Participant and his Beneficiary, as the case
may be.
If a Participant elects (a)(2), (b)(3) or (b)(4) above and his
joint survivor dies after the election but before benefit
payments have actually commenced to the Participant, the
election will be void and the Participant shall elect another
form of payment. With respect to Subsection (a) above, any
alternate form of payment of retirement benefits which the
Participant may elect shall be equal to the Actuarial Equivalent
of the Accrued Benefit which would otherwise be payable as a
Normal Fund Payment to the Participant, which would have
otherwise commenced at the Participant's Normal Retirement Date.
With respect to Subsection (b) above, any alternate form of
payment of retirement benefits which the Participant may elect
shall be subject to the reduction factors of Plan Section 5.3.
7.5 (a) In the event that any portion of the vested Accrued
Benefit of a Participant is paid to him prior to his Termination
Completion Date, he shall immediately forfeit the portion of his
Accrued Benefit in which he is not vested as of the following
Valuation Date. If the Participant is reemployed by a Plan
Sponsor or Affiliate prior to his Termination Completion Date
and if the Participant repays to the Fund no later than the
fifth anniversary of his reemployment the portion of his vested
Accrued Benefit which was paid to him, together with interest
thereon compounded annually at a rate equal to 120% of the
federal mid-term rate as in effect under Code Section 1274 at
the beginning of each Plan Year from the date of distribution to
the date of repayment, the forfeited portion of his Accrued
Benefit shall be restored on his behalf effective on the
Valuation Date coinciding with or next following the repayment.
(b) Upon the termination of employment of a Participant who is
not vested in any part of his Accrued Benefit, the Participant
shall be deemed to have received a distribution and his Accrued
Benefit shall be immediately forfeited. Such Participant's
Accrued Benefit will be restored upon his reemployment prior to
his Termination Completion Date.
7.6 In the event that an amendment to the Plan directly or
indirectly changes the vesting schedule of the Plan, the vesting
percentage for each Participant accumulated to the date when the
amendment is adopted shall not be reduced as a result of the
amendment. In addition, any Participant with at least three (3)
years of Vesting Service may irrevocably elect, by written
notice to the Plan Administrator within the election period
described below, to remain under the pre-amendment vesting
schedule with respect to all of his benefits accrued both before
and after the amendment. The election period shall begin no
later than the date the amendment is adopted and shall end no
earlier than sixty (60) days after the latest of the date the
(a) amendment is adopted, (b) amendment becomes effective or (c)
Participant is issued written notice of the amendment by the
Plan Administrator.
7.7 The retirement benefits payable to a Participant pursuant
to this Section shall be subject to Plan Sections 6.7, 6.9 and
6.10.
SECTION 8
ADMINISTRATION OF THE PLAN
8.1 The Primary Sponsor shall enter into a Trust with the
Trustee, which Trust shall form a part of the Plan and is
incorporated herein by reference. Each new Plan Sponsor shall
enter into the Trust in connection with becoming a Plan Sponsor
hereunder.
8.2 Any person appointed to serve as the Plan Administrator
shall signify his acceptance with the Board of Directors. If an
organization is appointed to serve as the Plan Administrator, it
may designate in writing a person who may act on its behalf, who
must signify his acceptance by filing his written acceptance
with the Board of Directors. The Board of Directors shall have
the right to remove the Plan Administrator at any time by notice
in writing. The Plan Administrator may resign at any time by
written notice of resignation to the Trustee and the Board of
Directors. The Plan Administrator shall perform any act which
the Plan authorizes or requires of the Plan Administrator by
action taken in compliance with the documents by which it was
created.
8.3 (a) The Plan Administrator, as a Named Fiduciary, may
allocate its fiduciary responsibilities among other Fiduciaries
designated in writing by the Plan Administrator and may
designate in writing other persons to carry out its fiduciary
responsibilities under the Plan. The Plan Administrator may
remove any person designated to carry out its fiduciary
responsibilities under the Plan by notice in writing to that
person.
(b) The Plan Administrator, and each other Fiduciary, may
employ persons to render advice with regard to any of their
responsibilities. Charges for all services rendered shall be
directly paid by each Plan Sponsor but until paid shall
constitute a charge against the Fund.
(c) Each Plan Sponsor shall indemnify and hold harmless each
person constituting the Plan Administrator or the Investment
Committee from and against any and all claims, losses or
expenses (including, without limitation, attorney's fees and
court costs) arising in connection with the performance by the
person of his duties in such capacity, other than any of the
foregoing arising in connection with the willful neglect or
willful misconduct of the person so acting.
8.4 (a) The Plan Administrator shall compute the amount of
retirement benefit which shall be payable to any Participant or
Beneficiary pursuant to the Plan.
The Plan Administrator shall advise the Trustee with respect
to all payments of Retirement Income pursuant to the Plan and
shall direct the Trustee in writing to make payments; provided,
however, in no event shall the Trustee be required to make
payments if the Trustee has actual knowledge that the payments
are contrary to the terms of this Plan and the Trust.
(c) The Plan Administrator shall establish rules not contrary
to the provisions of the Plan or the Trust for the
administration of the Plan. The Plan Administrator shall
interpret the Plan and shall finally answer all questions
arising in the administration, interpretation and application of
the Plan, including determinations of eligibility for and the
amount of any benefit. All determinations of the Plan
Administrator shall be final and binding on all Employees,
Participants, Beneficiaries and Fiduciaries, subject to both the
provisions of the Plan and the Trust and applicable law.
(d) The Plan Administrator shall furnish Participants with all
disclosures now or hereafter required by ERISA or the Code. The
Plan Administrator shall file, as required, the various reports
and disclosures concerning the Plan and its operations as
required by ERISA and the Code, and shall be solely responsible
for establishing and maintaining all records of the Plan.
(e) The statement of specific duties for a Plan Administrator
in this Section 8.4 is not in derogation of any other duties
which a Plan Administrator has under the provisions of the Plan
or any applicable law.
8.5 The Board of Directors may by action in writing certified
by notice to the Trustee appoint an Investment Manager or
Investment Managers to manage the Fund, including the power to
acquire and dispose of assets. Any Investment Manager may be
removed in the same manner in which appointed, and in the event
of any removal, the Investment Manager shall, as soon as
possible, but in no event more than thirty (30) days after
notice of removal, turn over all assets managed by it to the
Trustee or to any appointed successor Investment Manager so
appointed, and shall make a full accounting to the Board of
Directors with respect to all assets managed by it since its
appointment as an Investment Manager.
8.6 The Board of Directors may, by action in writing certified
by notice to the Trustee, appoint an Investment Committee to
direct the investment of assets of the Fund. The Investment
Committee shall consist of one or more persons and the Board of
Directors shall have the right to remove any person constituting
any part of the Investment Committee at any time by notice in
writing to the person or persons. A person constituting any
part of the Investment Committee may resign at any time by
written notice of resignation to the Board of Directors. Upon
any removal, resignation or death, the Board of Directors may
appoint a successor to that person. Until a successor has been
appointed, the remaining person constituting the Investment
Committee may continue to act as the Investment Committee.
SECTION 9
ADOPTION OF PLAN BY AFFILIATES
Any corporation related to the Primary Sponsor by function or
operation and any Affiliate, if the corporation or Affiliate is
authorized to do so by a resolution adopted by the Board of
Directors, may adopt this Plan and the related Trust by action
of the board of directors of the corporation or Affiliate. Any
adoption shall be evidenced by certified copies of the
resolutions of the board of directors indicating the adoption
and by the execution of the Trust by the adopting corporation or
Affiliate. The resolution shall state the effective date for
the purpose of the adopting corporation or Affiliate and, for
the purpose of Code Section 415, the "limitation year" as to the
adopting corporation or Affiliate. Notwithstanding the
foregoing, however, if the Plan and Trust as adopted by an
Affiliate or other corporation fails to receive the initial
approval of the Internal Revenue Service as a qualified plan and
trust, any contributions by the Affiliate or other corporation
after payment of all expenses will be returned to the Plan
Sponsor free of any trust, and the Plan and Trust shall
terminate as to the adopting Affiliate or other corporation.
SECTION 10
CLAIM REVIEW PROCEDURE
10.1 In the event that a Participant or Beneficiary is denied a
claim for benefits under the Plan (the "claimant"), the Plan
Administrator shall provide to the claimant written notice of
the denial which shall set forth:
(a) the specific reasons for the denial;
(b) specific references to the pertinent Plan provisions on
which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why the material or information is necessary; and
(d) an explanation of the Plan's claim review procedure.
10.2 After receiving written notice of the denial of a claim, a
claimant or his representative may:
(a) request a full and fair review of the denial by written
application to the Plan Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Plan
Administrator.
10.3 If the claimant wishes a review of the decision denying
his claim to benefits under the Plan, he must submit a written
application to the Plan Administrator within sixty (60) days
after receiving written notice of the denial.
10.4 Upon receiving a written application for review, the Plan
Administrator shall schedule a hearing before the appeal board
of the Plan Sponsor for purposes of reviewing the claimant's
claim, which hearing shall take place not more than thirty (30)
days from the date on which the Plan Administrator received the
written application for review. All claimants requesting a
review of the decision denying their claim for benefits may
employ counsel for purposes of the hearing.
10.5 At least ten (10) days prior to the scheduled hearing, the
claimant and his representative designated in writing by him, if
any, shall receive written notice of the time and place the
scheduled hearing.
10.6 No later than sixty (60) days after receiving the written
application for review, the appeal board of the Plan Sponsor
shall submit its decision on the written application to the
claimant involved and to his representative, if any. The
decision shall include specific reasons therefor and specific
references to the pertinent Plan provisions on which it is based.
SECTION 11
LIMITATION OF RIGHTS
Neither this Plan, the Trust, nor participation in the Plan
shall give any Employee any right or claim except to the extent
that the right or claim is specifically fixed under the terms of
the Plan. The establishment of the Plan shall not be construed
to give any Employee a right to continue in a Plan Sponsor's
employ or to interfere with a Plan Sponsor's right to terminate
the employment of any Employee at any time.
SECTION 12
LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY INCOMPETENT
DISTRIBUTEE AND UNCLAIMED PAYMENTS
12.1 No benefit which shall be payable under the Plan to any
person shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge the same shall be void. No
benefit shall in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements or torts of any
person, nor shall it be subject to attachment or legal process,
and the same shall not be recognized under the Plan, except to
the extent as may be required by law. Notwithstanding the
above, this Section shall not apply to a "qualified domestic
relations order" (as defined in Code Section 414(p)), and
benefits may be paid pursuant to the provisions of such an
order. The Plan Administrator shall develop procedures (in
accordance with applicable federal regulations) to determine
whether a domestic relations order is qualified, and if so, the
procedures for complying therewith.
12.2 Whenever any benefit which shall be payable under the Plan
is to be paid to or for the benefit of any person who is then a
minor or determined to be incompetent by qualified medical
advice, the Plan Administrator need not require the appointment
of a guardian or custodian, but shall be authorized to cause the
same to be paid over to the person having custody of the minor
or incompetent, or to the minor or incompetent without the
intervention of a guardian or custodian, or to a legal guardian
of the minor or incompetent if one has been appointed or to
cause the same to be used for the benefit of the minor or
incompetent.
12.3 Whenever the Plan Administrator cannot ascertain the
whereabouts of any Participant to whom a payment is due under
the Plan, the Plan Administrator may direct that the payment and
all remaining payments otherwise due to the Participant be
cancelled on the records of the Plan and the amount thereof
applied as a forfeiture except that, in the event the
Participant later notifies the Plan Administrator of his
whereabouts and requests the payments due to him under the Plan,
the Plan Sponsor shall contribute to the Plan an amount equal to
the payment to be paid to him as soon as administratively
feasible.
SECTION 13
AMENDMENTS AND TERMINATION
13.1 The Primary Sponsor reserves the right at any time to
amend or terminate the Plan or the Trust. The Primary Sponsor
shall have no power, however, to amend the Plan or Trust in a
manner which would permit any portion of the funds held under
the Plan to be used for any purpose other than for the exclusive
benefit of Participants or their Beneficiaries, or to become the
property of a Plan Sponsor. No amendments shall have the effect
of retroactively changing or depriving Participants or
Beneficiaries of rights already accrued under the Plan.
13.2 Each other Plan Sponsor shall have the right to terminate
its participation in the Plan by resolution of its board of
directors or other governing body and notice in writing to the
Primary Sponsor and the Trustee, unless the termination would
result in the disqualification of the Plan or would adversely
affect the exempt status of the Trust as to any other Plan
Sponsor. If contributions by or on behalf of a Plan Sponsor are
completely terminated, the Plan and Trust shall be deemed
terminated as to the Plan Sponsor. A termination by a Plan
Sponsor shall not terminate the Plan as to any other Plan
Sponsor.
13.3 In the event of the termination of the Plan in accordance
with ERISA Section 4041, the assets of the Plan shall be
distributed in accordance with ERISA Section 4044 and any
regulations issued thereunder. In order that the assets of the
Plan may be properly allocated, the total benefits payable under
the Plan shall be divided with respect to each Participant among
the priority categories (a) through (g) set forth below. Each
Participant's benefit assigned to a particular priority category
shall then be separated between basic benefits and non-basic
benefits. The Plan Administrator shall then value each type of
benefit in each priority category in accordance with the
valuation factors prescribed by the PBGC, and shall then
allocate the assets of the Plan sequentially to the following
priority categories:
(a) that portion of each Participant's Accrued Benefit which is
derived from his voluntary employee contributions.
(b) that portion of each Participant's Accrued Benefit which is
derived from his mandatory employee contributions.
(c) those benefits, excluding any increases resulting from Plan
amendments during the preceding five (5) years, payable as an
annuity to all Participants and Beneficiaries:
(1) to whom benefits have been in pay status for at least
three (3) years prior to the date of Plan termination, taking
the lowest benefit in pay status during the three (3) year
period, and
(2) to whom any other benefits would have been in pay status as
of the beginning of the three (3) year period had an eligible
Participant actually retired on a retirement date prior to the
beginning of the three (3) year period, as if the benefits had
commenced as a Normal Fund Payment at the beginning of the three
(3) year period.
(d) those benefits, other than benefits payable pursuant to (b)
and (c) immediately above, to which Participants or their
Beneficiaries are entitled, or would be entitled if their
employment were terminated on the date of Plan termination, to
the extent the benefits are guaranteed by the PBGC.
(e) all other benefits in which a Participant is vested as of
the date of Plan termination; provided, however, that if the
Plan assets are insufficient to satisfy in full the benefits
provided pursuant to category (d), the available assets shall be
allocated in accordance with Section 13.5 of the Plan.
(f) all other benefits provided for under the Plan.
(g) if any assets remain as a result of actuarial error after
complete allocation pursuant to this Section 13.3, the remaining
assets shall be paid to the terminating Plan Sponsor.
13.4 In the event the Plan assets shall be insufficient to
provide in full the benefits of the entire class of individuals
described within any priority category other than priority
category (e), the available assets for the class shall be
allocated among the Participants of that class and their
Beneficiaries, pro rata among the individuals on the basis of
the present value (as of the Plan termination date) of their
respective benefits as described in that Section.
13.5 In the event that the assets available for allocation
under Section 13.3(e) are insufficient to satisfy in full the
benefits of Participants described within that Section, the
available assets for that class shall be allocated on the basis
of the benefits of Participants of that class and their
Beneficiaries, based upon the Plan as in effect at the beginning
of the five (5) year period ending on the date of Plan
termination; or if additional assets remain available for
allocation under Section 13.3(e), the available assets shall be
allocated on the basis of the Plan as amended by the most recent
Plan amendment effective during the five (5) year period, under
which the assets available for allocation are sufficient to
satisfy in full the benefits of the class of individuals
described in Section 13.3(e) and any assets thereafter remaining
to be allocated under Section 13.3(e) shall be allocated on the
basis of the Plan as amended by the next succeeding Plan
amendment effective during the five (5) year period.
13.6 The Plan Administrator may direct that any Retirement
Income payable in accordance with Section 13.3 shall be provided
through the purchase of an annuity contract from an insurance
company. If the allocations produce a Retirement Income of less
than one hundred twenty dollars ($120) a year, a lump sum
payment which is the Actuarial Equivalent of the Retirement
Income may be paid in lieu thereof.
13.7 In the case of any merger or consolidation of the Plan
with, or any transfer of their assets or liabilities, to any
other plan qualified under Code Section 401, the terms of the
merger, consolidation or transfer shall ensure that each
Participant in the Plan will receive a benefit which is no less
than the benefit which the Participant would have received in
the event of termination of the Plan and Trust immediately
before the merger, consolidation or transfer.
13.8 Subject to the limitations on entitlements to benefits
contained in this Section 13 of the Plan, in the event of the
termination or partial termination of the Plan, the Accrued
Benefit as of the date of termination or partial termination of
each affected Participant, to the extent funded as of that date,
shall be fully vested. The Plan shall be considered a "single
plan" (within the meaning of Treasury Regulation 1.414(1)-1(b))
of a controlled group of corporations (within the meaning of
Code Section 414(b)), with all assets of the Plan available to
pay benefits to all Participants and Beneficiaries.
13.9 Notwithstanding any other provision of this Plan, a Plan
amendment which (a) eliminates or reduces an early retirement
benefit, if any, or which eliminates or reduces a
retirement-type subsidy (as defined in regulations issued by the
Department of the Treasury), if any, or (b) eliminates an
optional form of benefit, shall not be effective with respect to
benefits attributable to service before the amendment is
adopted. In the case of a retirement-type subsidy described in
(a) above, this Section shall be applicable only to a
Participant who satisfies, either before or after the amendment,
the preamendment conditions for the subsidy.
SECTION 14
PROHIBITION AGAINST DIVERSION
At no time shall any part of the Fund be used for or diverted
to purposes other than the exclusive benefit of the Participants
or their Beneficiaries, subject, however, to the payment of all
taxes and administrative expenses, the return of contributions
described in Section 15 and the return of residual assets to a
Plan Sponsor as described in Section 13.3(g).
SECTION 15
QUALIFICATION AND RETURN OF CONTRIBUTIONS
15.1 All Plan Sponsor contributions to the Plan are contingent
upon deductibility. To the extent permitted by the Code and
other applicable laws and regulations thereunder, upon a Plan
Sponsor's request, a contribution which was made by a
mistake-in-fact, or conditioned upon initial qualification of
the Plan, or upon the deductibility of the contribution under
Code Section 404 shall be returned to the Plan Sponsor within
one (1) year after the payment of the contribution, the denial
of the qualification, or the disallowance of the deduction (to
the extent disallowed), whichever is applicable. The amount to
be returned to the Plan Sponsor shall be the excess of the
contribution above the amount that would have been contributed
had the mistake of fact or the mistake in determining the
deduction not occurred, less any net loss attributable to such
excess. Any net income attributable to such excess shall not be
returned to the Plan Sponsor. In the event of a contribution
which was conditioned upon initial qualification of the Plan,
the amount to be returned to the Plan Sponsor shall be all of
the assets of the Fund.
15.2 If the Plan and the related Trust fail to receive the
initial approval of the Internal Revenue Service as a qualified
plan, within one (1) year after the date of denial of
qualification, the contribution by a Plan Sponsor of the Plan
and the Trust, and the Plan and Trust shall thereupon terminate.
SECTION 16
MISCELLANEOUS
16.1 The Plan and the Trust shall be governed, administered,
regulated and construed under the laws of the State of Alabama
and the laws of the United States to the extent they preempt
state law or are otherwise applicable to the Plan.
16.2 This Plan shall be binding upon the parties hereto, upon
each Plan Sponsor, upon each Participant and upon the
Beneficiaries, heirs, executors, administrators, distributees
and assigns of the individual Participants; the heirs,
executors, administrators, and successors of the Trustee; and
the successors and assigns of a Plan Sponsor, subject to Section
15 of the Plan.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
indenture to be executed as of the day and year first above
written.
SCI SYSTEMS (ALABAMA), INC.
By:/s/A. Eugene Sapp, Jr.
Title: President and Chief Operating Officer
ATTEST:
/s/Michael M. Sullivan
Title:Secretary
[CORPORATE SEAL]
APPENDIX A
LIMITATION ON BENEFITS
SECTION 1
(a) Notwithstanding any other provision of the Plan, in no
event shall the annual pension benefit of a Participant under
the Plan attributable to Plan Sponsor contributions exceed the
lesser of (1) $90,000, subject to adjustment in accordance with
regulations issued by the Secretary of Treasury or other
applicable provision of law, provided that any adjustment shall
be effective as of January 1 of each calendar year and shall be
applicable with respect to the limitation year ending with or
within each calendar year, or (2) 100% of the Participant's
Average Annual Earnings for the three consecutive calendar years
during which (A) he was a Participant and (B) his aggregate
Annual Earnings from a Plan Sponsor was the highest.
(b) In the case of a Participant who has less than ten (10)
years of participation in the Plan, the limitation under
Subsection (a)(1) of this Section shall be determined by
multiplying the otherwise applicable limit by a fraction, the
numerator of which is the number of years (or part thereof) of
participation in the Plan and the denominator of which is ten
(10). In the case of a Participant who has less than ten (10)
years of Credited Service with a Plan Sponsor, the limitation
under Subsection (a)(2) of this Section shall be determined by
multiplying the otherwise applicable limit by a fraction, the
numerator of which is the number of years (or part thereof) of
Credited Service with a Plan Sponsor and the denominator of
which is ten (10). Notwithstanding the above, in no event shall
the limitations contained in this Subsection reduce the
limitations referred to in Subsection (a) of this Section to an
amount less than one-tenth (1/10) of the applicable limitation
provided in Subsection (a) (as determined without regard to this
Subsection). To the extent provided in regulations promulgated
by the Secretary of the Treasury, this Subsection shall be
applied separately with respect to each change in the benefit
structure of the Plan.
SECTION 2
If retirement payments to a Participant commence after the
Participant attains age 62 but before the Participant attains
Social Security Retirement Age, the limitation under Section
1(a)(1) of this Appendix A shall be adjusted as follows: (1) if
the Participant's Social Security Retirement Age is 65, the
limitation under Section 1(a)(1) of this Appendix A shall be
reduced by 5/9 of 1% for each month by which retirement payments
commence before the month in which the Participant attains age
65; or (2) if the Participant's Social Security Retirement Age
is greater than 65, the limitation under Section 1(a)(1) of this
Appendix A shall be reduced by 5/9 of 1% for each of the first
36 months and 5/12 of 1% for each of the additional months (up
to 24) by which retirement payments commence before the
Participant attains his Social Security Retirement age. If
retirement payments to a Participant commence before the
Participant attains age 62, the limitation under Section 1(a)(1)
of this Appendix A shall be reduced so that it is the actuarial
equivalent of the adjusted $90,000 limit at age 62; provided,
however, that the interest rate in used in determining the
actuarial equivalent shall be the greater of the interest rate
in Plan Section 1.2 or five percent (5%) per year.
SECTION 3
If the retirement payments to a Participant commence after the
Participant's Social Security Retirement Age, the limitation
under Section 1(a)(1) shall be adjusted so that it is the
Actuarial Equivalent of a benefit of $90,000 beginning at the
Social Security Retirement Age, multiplied by the cost-of-living
adjustment factor prescribed by the Secretary of the Treasury
under Code Section 415(d), based on the lesser of the interest
rate specified in Plan Section 1.2 or five percent (5%) per year.
SECTION 4
In the event a Plan Sponsor maintains a defined contribution
plan in which a Participant also participates, the sum of the
defined benefit plan fraction and the defined contribution plan
fraction shall not exceed 1.0.
(a The defined benefit plan fraction for any limitation year is
a fraction:
(1) the numerator of which is the projected annual benefit of
the Participant under all defined benefit plans (determined as
of the close of the year); and
(2) the denominator of which is the lesser of
(A) the product of 1.25, multiplied by the maximum annual
benefit allowable under Code Section 415(b)(1)(A), or
(B) the product of 1.4 multiplied by the amount which may be
taken into account under Code Section 415(b)(1)(B) with respect
to a Participant under the defined benefit plan for the year
(determined as of the close of the year).
(b) The defined contribution plan fraction for any limitation
year is a fraction:
(1) the numerator of which is the sum of a Participant's annual
additions as of the close of the year; and
(2) the denominator of which is the sum of the lesser of the
following amounts determined for the year and for all prior
limitation years during which the Participant was employed by a
Plan Sponsor:
(A) the product of 1.25, multiplied by the dollar limitation in
effect under Code Section 415(c)(1)(A) for the limitation year
(determined without regard to Code Section 415(c)(6)), or
(B) the product of 1.4 multiplied by the amount which may be
taken into account under Code Section 415(c)(1)(B) (or Code
Section 415(c)(7) if applicable) with respect to the Participant
for the limitation year.
SECTION 5
For purposes of determining whether the limitations set forth
in this Appendix A have been satisfied for Plan Years beginning
after December 31, 1986, the following transitional rules as
established by Section 1106(i) of the Tax Reform Act of 1986
shall be applied:
(a) If the Accrued Benefit of a Participant determined as of
December 31, 1986 exceeds the limitations as set forth in this
Appendix A, then for purposes of satisfying the limitations as
set forth in this Appendix A, the limitation of Section 1(a)(1)
of this Appendix A with respect to the Participant shall be
equal to his Accrued Benefit as of December 31, 1986; and
(b) Pursuant to regulations prescribed by the Secretary of the
Treasury, for the last limitation year beginning before January
1, 1987, an amount shall be subtracted from the numerator of the
defined contribution plan fraction, which number shall not
exceed the numerator, so that the sum of the defined benefit
plan fraction and the defined contribution plan fraction does
not exceed 1.0 for such limitation year.
SECTION 6
For purposes of this Appendix A, the term "limitation year"
shall mean a Plan Year unless a Plan Sponsor elects, by adoption
of a written resolution, to use any other twelve-month period in
accordance with regulations issued by the Secretary of the
Treasury.
SECTION 7
For purposes of applying the limitations of this Appendix A,
all defined contribution plans maintained or deemed to be
maintained by a Plan Sponsor shall be treated as one defined
contribution plan, and all defined benefit plans now or
previously maintained or deemed to be maintained by a Plan
Sponsor shall be treated as one defined benefit plan.
SECTION 8
In the event that the limitations set forth in this Appendix A
are exceeded with respect to a Participant for a particular
limitation year, a Plan Sponsor shall take appropriate steps to
comply with the limitations. If a Participant is a participant
in one or more defined contribution plans sponsored by a Plan
Sponsor, his benefit under this Plan shall be reduced, if the
defined contribution plans do not provide for a sufficient
automatic reduction of the Participant's annual additions in
that case, so that the aggregate of all benefits does not exceed
the permissible limits set forth in Code Section 415.
SECTION 9
For purposes of applying the limitations set forth in this
Appendix A, the term "Plan Sponsor" shall be deemed to mean a
Plan Sponsor and any other corporations which are members of the
same controlled group of corporations (as described in Code
Section 414(b), as modified by Code Section 415(h)) with a Plan
Sponsor, any other trades or businesses under common control (as
described in Code Section 414(c), as modified by Code Section
415(h)) with a Plan Sponsor, any other corporations,
partnerships or other organizations which are members of an
affiliated service group (within the meaning of Code Section
414(m)) with the Plan Sponsor and any other entity required to
be aggregated with a Plan Sponsor pursuant to regulations under
Code Section 414(o). For purposes of applying the limitations
set forth in this Appendix A, where a defined benefit plan
provides for employee contributions, the annual benefit
attributable to those contributions is not taken into account,
but those contributions are considered a separate defined
contribution plan maintained by the Plan Sponsor which is
subject to the limitations set forth in this Appendix A.
APPENDIX B
PERMITTED DISPARITY LIMITATIONS
SECTION 1
As used in this Appendix B, the following words shall have
the following meanings:
(a) "Annual Disparity Fraction" means each of the
following:
(1) Annual Defined Contribution Plan Fraction: means with
respect to each Plan that is a defined contribution plan and is
a Section 401(l) Plan under which an Employee benefits, the
result obtained by dividing the Disparity provided under such
Plan for the plan year by the "maximum excess allowance" under
Treasury Regulations Section 1.401(l)-2(b)(2) for the plan year;
(2) Annual Defined Benefit Excess Plan Fraction: means with
respect to each Excess Plan that is a defined benefit plan and
is a Section 401(l) Plan under which an Employee benefits, the
result obtained by dividing the Disparity provided under such
Plan for the plan year by the "maximum excess allowance" under
Treasury Regulations Section 1.401(l)-3(b)(2) for the plan year;
(3) Annual Defined Benefit Offset Plan Fraction: means with
respect to Offset Plan that is a defined benefit plan and is a
Section 401(l) Plan under which an Employee benefits, the result
obtained by dividing the Disparity provided under such Plan for
the plan year by the "maximum offset allowance" under Treasury
Regulations Section 1.401(l)-3(b)(3) for the plan year;
(4) Annual Imputed Disparity Plan Fraction: means with respect
to each Plan under which an Employee benefits that imputes
permitted disparity with respect to an Employee under Treasury
Regulations Section 1.401(a)(4)-7, one (1); and (5) Annual
Nondisparate Plan Fraction: means with respect to each Plan
under which an Employee benefits, that neither is a Section
401(l) Plan nor a plan that imputes permitted disparity pursuant
to Treasury Regulations Section 1.401(a)(4)-7, zero (0).
(b) "Base Benefit Percentage" means the rate at which
employer-provided benefits are determined under a defined
benefit Excess Plan with respect to an Employee's average annual
compensation at or below the Integration Level (expressed as a
percentage of such average annual compensation), determined
separately for the normal form and each optional form of benefit
under the Plan.
(c) "Base Contribution Percentage" means the rate at which
employer contributions are allocated to the account of an
Employee under a defined contribution Excess Plan with respect
to the Employee's plan year compensation at or below the
Integration Level (expressed as a percentage of such plan year
compensation).
(d) "Cumulative Disparity Fraction" means the sum of the
Employee's Total Annual Disparity Fractions attributable to the
Employee's total years of service under all Plans.
(e) "Disparity" means:
(1) with respect to an Excess Plan that is a defined
contribution plan, the percentage difference obtained by
subtracting the Base Contribution Percentage from the Excess
Contribution Percentage;
(2) with respect to an Excess Plan that is a defined
benefit plan, the percentage difference obtained by subtracting
the Base Benefit Percentage from the Excess Benefit Percentage;
(3) with respect to an Offset Plan, the Offset Percentage.
(f) "Excess Benefit Percentage" means the rate at which
employer-provided benefits are determined under a defined
benefit Excess Plan with respect to an Employee's average annual
compensation in excess of the Integration Level (expressed as a
percentage of such average annual compensation), determined
separately for the normal form and each optional form of benefit
under the Plan.
(g) "Excess Contribution Percentage" means the rate at
which employer contributions are allocated to the account of an
Employee under a defined contribution Excess Plan with respect
to the Employee's plan year compensation in excess of the
Integration Level (expressed as a percentage of such plan year
compensation).
(h) "Excess Plan" means: (1) a Plan which is a
defined contribution plan under which the rate at which employer
contributions are allocated to the account of an Employee with
respect to plan year compensation above the Integration Level
(expressed as a percentage of such plan year compensation) is
greater than the rate at which employer contributions are
allocated to the account of an Employee with respect to plan
year compensation at or below the Integration Level (expressed
as a percentage of such plan year compensation); or
(2) a Plan which is a defined benefit plan under which the
rate at which employer-provided benefits are determined with
respect to average annual compensation above the Integration
Level under such Plan (expressed as a percentage of such average
annual compensation) is greater than the rate at which
employer-provided benefits are determined with respect to
average annual compensation at or below the Integration Level
(expressed as a percentage of such average annual compensation).
(i) "Integration Level" means the dollar amount specified
in an Excess Plan at or below which the rate of
employer-provided contributions or benefits (expressed in each
case as a percentage of an Employee's plan year compensation or
average annual compensation up to the specified dollar amount)
under the Plan is less than the rate of employer-provided
contributions or benefits (expressed in each case as a
percentage of an Employee's plan year compensation or average
annual compensation above the specified dollar amount) under the
Plan above such dollar amount.
(j) "Offset Level" means the dollar limit specified in the
Plan on the amount of each Employee's final average compensation
taken into account in determining the offset under an Offset
Plan.
(k) "Offset Percentage" means the rate at which an
Employee's employer-provided benefit is reduced or offset under
an Offset Plan (expressed as a percentage of the Employee's
final average compensation up to the Offset Level), determined
separately for the normal form and each optional form of benefit
under the Plan.
(l) "Offset Plan" means a Plan which is a defined benefit
plan that is not an Excess Plan and that provides that each
Employee's employer-provided benefit is reduced or offset by a
specified percentage of the Employee's final average
compensation up to the Offset Level under such Plan.
(m) "Plans" or "Plan" means: (1) a plan or plans of a
Plan Sponsor or any Affiliate; or
(2) a plan or plans of any other employer for which the
Employee receives credit for purposes of benefit accrual under
any plan of the Plan Sponsor.
For purposes of this Appendix, where specific reference is
made to the Supplemental Retirement Plan of the SCI Systems,
Inc. Employee Financial Security Program, the reference is made
to the `Supplemental Retirement Plan'.
(n) "Section 401(l) Plan" means an Excess Plan or an
Offset Plan which is intended to satisfy Section 401(l) of the
Code.
(o) "Total Annual Disparity Fraction" means the sum of the
Annual Disparity Fractions of all Plans in which an Employee
participates, determined as of the end of the current Plan Year.
For purposes of calculating an Employee's Total Annual
Disparity Fraction, the Total Annual Disparity Fraction shall
include all Annual Disparity Fractions of all Plans with plan
years ending in the current Plan Year.
SECTION 2
(a) Notwithstanding any other provision of the
Supplemental Retirement Plan, in no event shall the Total Annual
Disparity Fraction for each Employee for a given Plan Year
exceed one.
(b) For purposes of calculating the Total Annual Disparity
Fraction for an Employee, the following rules shall apply:
(1) A separate Annual Disparity Fraction shall be determined
for each Plan (or number of Plans, if aggregated for purposes of
complying with Code Section 401(a)(4)) under which an Employee
benefits; provided, however, that:
(A) if a Plan provides an allocation or benefit under two
or more formulae, an Annual Disparity Fraction shall be
determined for each formula;
(B) if a Plan provides an allocation or benefit under the
greater of two or more formulae, an Annual Disparity Fraction
shall be determined for each of the formulae, and the largest of
the fractions shall be the Employee's Annual Disparity Fraction
under the Plan;
(C) if -- (i) an Employee's employer-provided accrued
benefit under a Plan which is a defined benefit plan is offset
by the Employee's total employer-provided accrued benefit under
another Plan which is a defined benefit plan or by the actuarial
equivalent (as defined in Treasury Section 1.401(a)(4)-12) of
the Employee's total account balance under a Plan which is a
defined contribution plan that is attributable to employer
contributions, or
(ii) the amount allocated to the Employee's account under
a Plan which is a defined contribution plan is offset by the
Total amount allocated to the Employee's account under another
Plan which is a defined contribution plan, then, the Employee's
Annual Disparity Fraction under both Plans shall be the larger
of the Annual Disparity Fractions calculated separately under
each Plan.
SECTION 3
(a) Notwithstanding any other provision of the
Supplemental Retirement Plan, the Cumulative Disparity Fraction
of an Employee who has benefited under one or more defined
benefit plans for any plan year beginning on or after January 1,
1994 shall not exceed thirty-five (35); provided, however, that
an Employee shall not be treated as benefiting under a Plan
which is a defined benefit plan for purposes of this Subsection
(a) if the employer can establish that, for that plan year, the
Plan which is a defined benefit plan was not a Section 401(l)
Plan and did not impute permitted disparity under Treasury
Regulations Section 1.401(a)(4)-7.
(b) For purposes of calculating an Employee's Cumulative
Disparity Fraction, the Employee's Total Annual Disparity
Fraction for each of the Employee's years of service, not to
exceed thirty-five (35), under all Plans as of the end of the
last plan year beginning before January 1, 1989, is one.
Therefore, if, before the first plan year beginning on or after
January 1, 1989, an employee never participated in or benefitted
under any plan taken into account for purposes of this Appendix
B, the employee's Total Annual Disparity Fraction is determined
without regard to this subsection (b).
SECTION 4
(a) In the event the limitations set forth in Section 2 of
this Appendix B are exceeded, the Excess Benefit Percentage
under the Supplemental Retirement Plan shall be reduced by an
amount necessary to lower the Disparity provided under the
Retirement Plan so as to comply with the limitations set forth
in this Appendix B.
(b) In the event the limitations set forth in Section 3 of
this Appendix B are exceeded with respect to an Employee, then
for all years of the Employee's Credited Service earned after
such limitations are exceeded, such Employee's Accrued Benefit
shall be determined with respect to his Annual Earnings for such
Plan Years at a rate equal to the lesser of
(1) .5% per year of Credited Service, or
(2) the highest percentage permitted under the 133 1/3% accrual
rule of Code Section 411(b)(1)(B).
APPENDIX C
TOP-HEAVY PROVISIONS
SECTION 5
As used in this Appendix C, the following words shall have the
following meanings:
(a) "Determination Date" means, with respect to any Plan Year,
the last day of the preceding Plan Year, or, in the case of the
first Plan Year, means the last day of the first Plan Year.
(b) "Key Employee" means an Employee or former Employee
(including a beneficiary of a Key Employee or former Key
Employee) who at any time during the Plan Year containing the
Determination Date or any of the four preceding Plan Years is:
(1) An officer of a Plan Sponsor or of any Affiliate of a Plan
Sponsor whose Annual Earnings was greater than fifty percent
(50%) of the amount in effect under Code Section 415(b)(1)(A)
for the calendar year in which the Plan Year ends, where the
term "officer" means an administrative executive in regular and
continual service to a Plan Sponsor or Affiliate; provided,
however, that in no event shall the number of officers exceed
the lesser of Subparagraphs (A) or (B) of this Paragraph (1),
where:
(A) equals fifty Employees; and
(B) equals the greater of (i) three Employees or (ii) ten
percent (10%) of the number of Employees during the Plan Year,
with any non-integer being increased to the next integer; or
(2) One of the ten Employees owning both (A) more than one-half
percent (.5%) of the outstanding stock of the Plan Sponsor, more
than one-half percent (.5%) of the total combined voting power
of all stock of the Plan Sponsor, or more than one-half percent
(.5%) of the capital or profits interest in the Plan Sponsor,
and (B) the largest percentage ownership interests in the Plan
Sponsor or any of its Affiliates, and whose Annual Earnings is
equal to or greater than the amount set forth in Section 1(a) of
Appendix A to the Plan for the calendar year in which the
Determination Date falls; or
(3) An owner of more than five percent (5%) of the outstanding
stock of the Plan Sponsor or more than five percent (5%) of the
total combined voting power of all stock of the Plan Sponsor; or
(4) An owner of more than one percent (1%) of the outstanding
stock of the Plan Sponsor or more than one percent (1%) of the
total combined voting power of all stock of the Plan Sponsor,
and who in the Plan Year had Annual Earnings calculated from the
Plan Sponsor and all of its Affiliates in the sum of more than
$150,000.
Employees other than Key Employees are sometimes referred to in
this Appendix as "non-key employees."
(c) "Required Aggregation Group" means:
(1) each plan of a Plan Sponsor and its Affiliates which
qualifies under Code Section 401(a) in which a Key Employee is a
participant, and
(2) each other plan of a Plan Sponsor and its Affiliates which
qualifies under Code Section 401(a) and which enables any plan
described in Subsection (a) of this Section to meet the
requirements of Section 401(a)(4) or 410 of the Code.
(d) (1) "Top-Heavy" means:
(A) if the Plan is not included in a Required Aggregation
Group, the Plan's condition in a Plan Year for which, as of the
Determination Date:
(i) the present value of the cumulative Accrued Benefits under
the Plan for all Key Employees exceeds 60 percent of the present
value of the cumulative Accrued Benefits under the Plan for all
Participants; and
(ii) the Plan when included in every potential combination, if
any, with any or all of:
(I) any Required Aggregation Group, and
(II) any plan of a Plan Sponsor which is not part of any
Required Aggregation Group and which qualifies under Code
Section 401(a), is part of a Top-Heavy Group (as defined in
Paragraph (2) of this Subsection); and
(B) if the Plan is included in a Required Aggregation Group,
the Plan's condition in a Plan Year for which, as of the
Determination Date:
(i) the Required Aggregation Group is a Top-Heavy Group (as
defined in Paragraph (2) of this Subsection); and
(ii) the Required Aggregation Group when included in every
potential combination, if any, with any or all of the plans of a
Plan Sponsor and its Affiliates which are not part of the
Required Aggregation Group and which qualify under Code Section
401(a) is part of a Top-Heavy Group (as defined in Paragraph (2)
of this Subsection).
(C) For purposes of Subparagraphs (A)(i) and (B)(ii) of this
Paragraph (1), any combination of plans must satisfy the
requirements of Code Sections 401(a)(4) and 410.
(2) A group shall be deemed to be a Top-Heavy Group if:
(A) the sum, as of the Determination Date, of the present value
of the cumulative accrued benefits for all Key Employees under
all plans included in such group exceeds
(B) 60 percent of a similar sum determined for all participants
in such plans.
(3) (A) For purposes of this Section, the present value of the
accrued benefit for any participant in a defined contribution
plan as of any Determination Date or last day of a plan year
shall be the sum of:
(i) as to any defined contribution plan other than a simplified
employee pension, the account balance as of the most recent
valuation date occurring within the plan year ending on the
Determination Date or last day of a plan year, and
(ii) as to any simplified employee pension, the aggregate
employer contributions, and
(iii) an adjustment for contributions due as of the
Determination Date or last day of a plan year.
In the case of a plan that is not subject to the minimum
funding requirements of Code Section 412, the adjustment in
Clause (iii) of this Subparagraph (A) shall be the amount of any
contributions actually made after the valuation date but on or
before the Determination Date or last day of the plan year to
the extent not included under Clause (i) or (ii) of this
Subparagraph (A); provided, however, that in the first plan year
of the plan, the adjustment in Clause (iii) Subparagraph (A)
shall also reflect the amount of any contributions made
thereafter that are allocated as of a date in such first Plan
Year. In the case of a plan that is subject to the minimum
funding requirements, the account balance in Clause (i) of this
Subparagraph (A) and the aggregate contributions in Clause (i)
of this Subparagraph (A) shall include contributions that would
be allocated as of a date not later than the Determination Date
or last day of a plan year, even though those amounts are not
yet required to be contributed, and the adjustment in Clause
(iii) of this Subparagraph (A) shall be the amount of any
contribution actually made (or due to be made) after the
valuation date but before the expiration of the extended payment
period in Code Section 412(c)(10) to the extent not included
under Clause (i) or (ii) of this Subparagraph (A).
(B) For purposes of this Subsection, the present value of the
accrued benefit for any participant in a defined benefit plan as
of any Determination Date or last day of a plan year must be
determined as of the most recent valuation date which is within
a 12-month period ending on the Determination Date or last day
of a plan year as if such participant terminated as of such
valuation date; provided, however, that in the first plan year
of a plan, the present value of the accrued benefit for a
current participant must be determined either (i) as if the
participant terminated service as of the Determination Date or
last day of a plan year or (ii) as if the participant terminated
service as of such valuation date, but taking into account the
estimated accrued benefit as of the Determination Date or last
day of a plan year. For purposes of this Subparagraph (B), the
valuation date must be the same valuation date used for
computing plan costs for minimum funding, regardless of whether
a valuation is performed that year. The actuarial assumptions
utilized in calculating the present value of the accrued benefit
for any participant in a defined benefit plan for purposes of
this Subparagraph (B) shall be established by the Plan
Administrator after consultation with the actuary for the plan,
and shall be reasonable in the aggregate and shall comport with
the requirements set forth by the Internal Revenue Service in
Q&A T-26 and T-27 of Regulation Section 1.416-1.
(C) For purposes of determining the present value of the
cumulative accrued benefit under a plan for any participant in
accordance with this Subsection, the present value shall be
increased by the aggregate distributions made with respect to
the participant (including distributions paid on account of
death to the extent they do not exceed the present value of the
cumulative accrued benefit existing immediately prior to death)
under each plan being considered, and under any terminated plan
which if it had not been terminated would have been in a
Required Aggregation Group with the participating plan, during
the 5-year period ending on the Determination Date or last day
of the plan year that falls within the calendar year in which
the Determination Date falls.
(D) For purposes of this Paragraph (3), participant
contributions which are deductible as "qualified retirement
contributions" within the meaning of Code Section 219 or any
successor, as adjusted to reflect income, gains, losses, and
other credits or charges attributable thereto, shall not be
considered to be part of the accrued benefits under any plan.
(E) For purposes of this Paragraph (3), if any employee is not
a Key Employee with respect to any plan for any plan year, but
such employee was a Key Employee with respect to such plan for
any prior plan year, any accrued benefit for such employee shall
not be taken into account.
(F) For purposes of this Paragraph (3), if any employee has not
any Plan Sponsor or Affiliate maintaining the plan at any time
during the five-year period ending on the Determination Date,
any accrued benefit for that employee shall not be taken into
account.
(G) (i) In the case of an "unrelated rollover" (as defined
below) between plans which qualify under Code Section 401(a),
(a) the plan providing the distribution shall count the
distribution as a distribution under Subparagraph (C) of this
Paragraph (3), and (b) the plan accepting the distribution shall
not consider the distribution part of the accrued benefit under
this Section; and
(ii) In the case of a "related rollover" (as defined below)
between plans which qualify under Code Section 401(a), (a) the
plan providing the distribution shall not count the distribution
as a distribution under Subparagraph (C) of this Paragraph (3),
and (b) the plan accepting the distribution shall consider the
distribution part of the accrued benefit under this Section.
For purposes of this Subparagraph (G), an "unrelated rollover"
is a rollover as defined in Code Section 402(a)(5) or 408(d)(3)
or a plan-to-plan transfer which is both initiated by the
participant and made from a plan maintained by one employer to a
plan maintained by another employer where the employers are not
Affiliates. For purposes of this Subparagraph (G), a "related
rollover" is a rollover as defined in Code Section 402(a)(5) or
408(d)(3) or a plan-to-plan transfer which is either not
initiated by the participant or made to a plan maintained by the
employer or an Affiliate.
SECTION 6
Notwithstanding anything contained in the Plan to the contrary,
in any Plan Year during which the Plan is Top-Heavy, a
Participant's interest in his Accrued Benefit shall not vest at
any rate which is slower than the following schedule, effective
as of the first day of that Plan Year:
Full Years of Percentage
Vesting Service Vested
Less than Three 0%
Three or more 100%
The schedule set forth above in this Section of Appendix B of
the Plan shall be inapplicable to a Participant who has failed
to perform an Hour of Service after the Determination Date on
which the Plan has become Top-Heavy. When the Plan ceases to be
Top-Heavy, the schedule set forth above in this Section of
Appendix C to the Plan shall cease to be applicable; provided
however, that the provisions of the Plan Section dealing with
changes in the vesting schedule shall apply.
SECTION 7
(a) Notwithstanding anything contained in the Plan to the
contrary, and except as otherwise provided in Subsection (b) of
this Section, the Accrued Benefit derived from Plan Sponsor
contributions of each Participant who is not a Key Employee,
when expressed as an annual retirement benefit (as defined
below), shall not be less than the applicable percentage (as
defined in Subsection (b) of this Section) of the Participant's
average compensation (as defined in Subsection (d) of this
Section below).
(b) For purposes of Subsection (a) of this Section, the term
"applicable percentage" means the lesser of:
(1) 2 percent multiplied by the number of years of service (as
defined in (c) below) with a Plan Sponsor, or
(2) 20 percent.
For purposes of this Section:
(1) Except as provided in Paragraph (2) of this Subsection (c),
years of service shall be determined under the rules of
Paragraphs (4), (5), and (6) of Code Section 411(a).
(2) A year of service with a Plan Sponsor shall not be taken
into account if:
(A) the Plan was not Top-Heavy for any Plan Year ending during
that year of service, or
(B) that year of service was completed in a Plan Year beginning
before January 1, 1984.
(d) (1) For purposes of Subsection (a) of this Section, "average
compensation" means the average of a Participant's Annual
Earnings for each Plan Year in the Participant's testing period
(as defined in Paragraph (2) of this Subsection).
(2) (A) A Participant's testing period shall be the period of
consecutive Plan Years (not exceeding 5) during which the
Participant had the greatest aggregate compensation from a Plan
Sponsor.
(B) The Plan Years taken into account under Subparagraph (A) of
this Paragraph (2) shall not include years for which the
Participant did not earn a year of service under the rules of
paragraphs (4), (5) and (6) of Code Section 411(a).
(C) A Plan Year shall not be taken into account under
Subparagraph (A) of this Paragraph (2) if:
(i) that Plan Year ends before January 1, 1984, or
(ii) that Plan Year begins after the close of the last Plan
Year in which the Plan was Top-Heavy.
(e) (1) For purposes of Subsection (a) of this Section, the
term "annual retirement benefit" means a benefit payable
annually in the form of a single life annuity (with no ancillary
benefits) beginning at Normal Retirement age.
(2) If the Participant's benefit under this Plan begins at a
date other than his Normal Retirement age, the Participant shall
receive a benefit which is no less than the Actuarial Equivalent
of the annual retirement benefit provided under this Section.
(f) The minimum Accrued Benefit described under this Section
shall be provided to any Employee who is otherwise eligible for
participation in the Plan, even if:
(1) The Employee fails to make mandatory employee contributions
required as a condition of participation in the Plan, or
(2) The Employee's compensation is less than a stated amount, or
(3) The Employee is not employed by a Plan Sponsor or Affiliate
on a given date.
SECTION 8
In any limitation year (as defined in Section 6 of Appendix A
to the Plan) which contains any portion of a Plan Year in which
the Plan is Top-Heavy, the number "1.0" shall be substituted for
the number "1.25" in Section 5 of Appendix A to the Plan.
(End of Exhibit 10 ( k) (1) )
EXHIBIT 11 - COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(In thousands of dollars except number of shares and per share amounts)
Year Ended:
June 30, June 30, June 30,
1994 1993 1992
Primary Earnings Per Share
Income from continuing operations $29,936 $30,615 $ 9,061
Loss from discontinued operations (8,775) (4,056) (5,236)
--------------------------------
Net income 21,161 26,559 3,825
Add back after-tax interest expense for
debentures converted in fiscal 1993. N/A 3,394 N/A
--------------------------------
Adjusted net income used in
primary computation $21,161 $29,953 $ 3,825
================================
Weighted average number of shares
outstanding during period 27,138,945 26,965,660 20,968,969
Applicable number of shares for
common stock equivalents
(stock options) outstanding for period,
using Treasury Stock Method based on
average market price for period 564,248 566,648 (A)
------------------------------------
Weighted average number of shares
used in computation 27,703,193 27,532,308 20,968,969
====================================
Primary earnings per share:
From continuing operations $ 1.08 $ 1.24 $ .43
From discontinued operations (.32) (.15) (.25)
------------------------------------
Net income $ .76 $ 1.09 $ .18
====================================
Fully Diluted Earnings Per Share (B) (B)
Income from continuing operations $30,615
Loss from discontinued operations (4,056)
-------
Net income 26,559
Add back after-tax interest expense
for debentures converted in fiscal 1993. 3,394
Add back after-tax interest expense for
outstanding 5 5/8% convertible subordinated
debentures 1,609
------
Adjusted net income used in fully diluted
computation $31,562
=======
Weighted average number of shares
outstanding during period 26,965,660
Applicable number of shares for common
stock equivalents (stock options)
outstanding for period, using Treasury
Stock Method based on period ended
market price 602,512
Number of shares to be issued if 5 5/8%
convertible subordinated debentures were
converted 1,850,727
----------
Weighted average number of shares used
in computation 29,418,899
==========
Fully diluted earnings per share:
From continuing operations $ 1.21
From discontinued operations (.14)
------
Net income $ 1.07
======
(A) Under the Treasury Stock Method, the weighted average number
of shares associated with outstanding common stock options represented
less than of 1% of the total weighted number of shares; therefore, their
effect was not included in the earnings per share computation.
(B) The potential conversion of the convertible debentures were
anti-dilutive for this period.
(End of Exhibit 11)
EXHIBIT 13 - ANNUAL REPORT TO SHAREHOLDERS
(BEGINNING OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
(INSIDE FRONT COVER OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
The Company
SCI Systems, Inc., is a ``Fortune 300'' electronics manufacturer with
1.85 billion dollars in annual revenues. Its plants serve a diversified and
growing customer base in North America, Western Europe, and East Asia. The
Company designs, manufactures, markets, distributes, and services electronic
products for the computer, aerospace, defense, telecommunication, medical,
and banking industries, as well as the U.S. Government. SCI is the world's
largest electronics contract manufacturer and operates the largest surface
mount technology (SMT) production capacity in the merchant market. The
Company's success has been built on a foundation of high quality,
responsiveness, and competitiveness.
The Company's operational activities are conducted by a Commercial Division
and a Government Division. The Commercial Division operates five geographically
organized business units: Eastern, Central, and Western Regions of North
America; and European and Asian Regions. Each Region operates multiple plants
which manufacture components, subassemblies, and finished products primarily
for original equipment manufacturers. They also offer customers a wide range
of design, engineering, purchasing, manufacturing, distribution, and support
services, as well as several groups of proprietary products. The Government
Division provides data management, instrumentation, communication, and computer
subsystems to the U.S. Government and its prime contractors and several
foreign governments.
Although the Company derives a majority of its revenues from hardware
manufacturing and maintains a broad technology base, it is primarily a
vertically integrated engineering and manufacturing services provider whose
dedication to close customer interaction is the cornerstone of its activities.
Facility Locations
Corporate Headquarters Huntsville, Alabama
Plant 1 Huntsville, Alabama
Plant 2 Huntsville, Alabama
Plant 3 Huntsville, Alabama
Plant 4 Lacey's Spring, Alabama
Plant 5 Arab, Alabama
Plant 6 Irvine, Scotland
Plant 7 Republic of Singapore
Plant 8 Graham, North Carolina
Plant 9 San Jose, California
Plant 11 Rapid City, South Dakota
Plant 12 Colorado Springs, Colorado
Plant 13 Huntsville, Alabama
Plant 14 Hooksett, New Hampshire
Plant 15 Pathum Thani, Thailand
Plant 16 Guadalajara, Mexico
Plant 17 Dorval, Quebec, Canada
Plant 18 Fermoy, County Cork, Ireland
Plant 19 Watsonville, California
Plant 20 Grenoble, France
(PAGE 1 OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
Financial Highlights
Annual Report for the Year Ended June 30, 1994
(Dollars in thousands except for per share data)
No cash dividends were declared in the periods presented. 1990 to 1993 amounts
have been restated for 1994's discontinued operations.
(See Part II, Items 7 and 8 of Excerpts from Form 10-K for Fiscal 1994,
bound herein.)
1994 1993 1992 1991 1990
Net Sales $1,852,478 $1,672,115 $1,038,454 $1,121,807 $1,178,580
Income from
Continuing Operations 29,936 30,615 9,061 9,242 3,602
Per Common Share
(Fully Diluted) 1.08 1.21 .43 .44 .17
Net Income 21,161 26,559 3,825 12,620 2,308
Per Common Share
(Fully Diluted) .76 1.07 .18 .60 .11
Interest Expense 15,423 16,793 15,479 22,400 27,099
Taxes on Income from
Continuing Operations 16,980 12,268 (2,259) (757) 460
Total Assets 920,212 780,339 612,962 550,935 629,733
Borrowings 284,283 253,341 224,876 236,226 320,470
Cash and Cash Equivalents 35,822 15,846 38,722 25,529 27,983
Working Capital 395,628 336,516 255,270 253,677 316,070
Capital Expenditures 46,488 84,084 29,822 30,326 62,676
Depreciation
and Amortization 48,623 41,303 38,682 36,911 35,709
Net Property, Plant,
and Equipment 182,768 184,032 143,687 148,242 153,922
Shareholders' Equity 304,634 277,856 192,349 185,909 176,371
Per Common Share 11.16 10.27 9.17 8.87 8.42
New Orders Received 2,074,205 1,922,366 1,150,708 995,283 1,212,200
Order Backlog $1,234,800 $1,013,073 $762,822 $650,568 $777,092
Common Shares
Outstanding 27,306,099 27,050,282 20,977,670 20,953,569 20,950,519
Employees 12,027 10,811 9,512 9,762 10,694
Manufacturing Plants 19 18 17 17 18
Facility Square Footage 2,834,000 2,745,000 2,678,000 2,572,000 2,637,000
Automated Assembly Lines 154 139 109 102 105
Pin-in-Hole Technology 42 38 34 31 31
Surface Mount Technology 112 101 75 71 74
___ ___________________________________ _________________________________
| | | |
| PICTURE No. 1 | | PICTURE No. 2 |
| | | |
| | | |
|_____________________________________ __________________________________
PICTURE No. 1 - The latest models of automated equipment speed process flow,
reduce cost, and enhance quality of electronic assemblies.
PICTURE No. 2 - Software delivered with personal computers is automatically
installed to order while machines are in an extended test cycle.
(PAGE 2 OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
Executive Letter
To the Shareholders:
The fiscal year ended June 30, 1994 was a period of important transition for
SCI Systems, Inc. New growth initiatives matured and a strategic acquisition
was consummated while several activities were slated for discontinuance.
Significantly higher volume levels were achieved by year-end. New leading
customers were developed to replace declining revenues from several customers
losing market share in dynamic industries. Manufacturing capacity was increased
to support unit volume and revenue growth in both traditional and new product
areas. Internal systems were enhanced and evolved to support new distribution
trends. Several senior and middle management positions were upgraded to
complement the transitioned business.
Revenues. Sales for the year were $1.852 billion, 11% above fiscal year
1993's $1.672 billion. Revenues in the first three fiscal quarters were quite
stable in the $420 to $425 million range. During a several quarter period
spanning fiscal years 1993 and 1994, a major customer transition occurred.
A number ofthe Company's larger customers experienced market share difficulties
and revenue declines, resulting in a substantial decline in SCI's sales to
those customers. During the same period the Company was growing its sales to a
number of additional customers; that growth was masked by the traditional
customer declines with the result of an apparent revenue ``flat spot.'' By the
fourth fiscal quarter the declines were over, and with newer customer sales
growth continuing to accelerate, a revenue ``breakout'' occurred. Quarterly
sales increased to $585 million and a new revenue base was established.
Parenthetically, fiscal year 1993's sales level propelled the Company 98
positions higher on the latest Fortune 500 list to number 251. Breaking the
``Fortune 200'' barrier is a near term management goal.
Income. The first two quarters of the fiscal year each produced nominal
profitability of approximately eight million dollars, or 28 cents per share.
During the third fiscal quarter the Company announced plans for the closing of
a Government Division plant and discontinuation of certain noncore business
units. Those actions recognize the realities of declining defense markets and
the Company's limited position in consumer product markets. Operating losses in
certain facilities, estimated disposal costs, and asset write downs impacted
third quarter results and caused a five and a half
___________________________________
| Picture of Olin B. King |
___________________________________
million dollar or 20 cents per share, net loss. In the fourth quarter profits
increased to the eleven million dollar level, or 40 cents per share. For the
year, earnings from continuing operations were $1.08 per share (after charges
for the plant closing). Net earnings were 76 cents per share (after charges
for discontinued operations), compared with $1.07 per share a year earlier.
The effective income tax rate for the fiscal year rose to 36.2%, compared with
28.6% in the previous year.
Order Backlog. New orders received during the year were a record $2.074
billion compared with $1.922 billion in the previous year. Year-end order
backlog was a record $1.235 billion, 22% above the $1.013 billion level of a
year earlier. The resulting eight months of sales in backlog is considered high
in today's customer environment; backlog period reduction through accelerated
sales will be a management objective in fiscal year 1995.
Balance Sheet. The Company's balance sheet remained strong during fiscal year
1994. The current asset ratio at year-end was a healthy 2.2, as was the sales
to assets ratio. The Company's general policy of building to order only and
requiring customer "take-or-pay" contract terms minimizes inventory risks and
made the stable 0.9 total debt to equity ratio of fiscal 1994 quite reasonably
leveraged. Shareholders' equity passed the $300 million milestone during the
year. Over $180 million of funds were available at year-end to provide ample
liquidity to support ongoing growth.
Facilities and Equipment. In the fourth quarter the Company acquired the
Grenoble Surface Mount Center of Hewlett-Packard in Southeastern France. That
unit added 64,000 square feet ofleased manufacturing space and four automated
assembly lines to the Company's capacity. Land has since been acquired and
construction begun of a permanently owned facility in Grenoble with March 1995
planned occupancy. The new plant provides the Company a desirable Continental
European
(PAGE 3 OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
manufacturing site. During the first half of the year, new construction doubled
the size of the Company's plant in Guadalajara, Mexico. The additional space
there is already supporting production capability and capacity growth to
accommodate increasing demand in that market. Four additional pin-in-hole (PIH)
and eleven surface mount technology (SMT) automated electronic assembly lines
were added during the year to bring capacity to a total of 154 lines. During
the year the Company also installed new lines to accommodate finished product
production in several plants.
Internal Systems. Mainframe based financial and manufacturing systems are now
installed and operational in all of the Company's plants worldwide. Ongoing
efforts are tuning and enhancing these systems while increasing their
utilization through continued training. The new French facility was converted
to the corporate systems at year- end. New and upgraded applications software
has been selected and procured for installation Company-wide to implement
standardization at the desktop computer level to facilitate interplant
communications and interoperability. A major effort of the past year has been
the ongoing development of distributed computing systems. These systems employ
powerful ``server'' computers at the plant level to implement functions not
requiring mainframe power but for which desktop capabilities are limited.
Initially installed applications are performing interplant data communications,
electronic mail, order processing, work-in-progress tracking, statistical
process control, and statistical quality assurance functions. Initial
applications have progressed from prototype to beta site to fully operational
status. The immediate task ahead is to proliferate these systems Company-wide.
Product Mix. A substantial evolution is occurring in the Company's product
mix. In addition to traditional electronic subassemblies, SCI's customers are
increasingly outsourcing tailored completed products for delivery to the
distribution channel, or even directly to the end user. This type of custom
manufacturing can support lot sizes as small as one and delivery cycles as
short as one day. Unique internal systems have been developed to implement and
support this business area which has become the Company's fastest growing. A
collateral trend is an increasing SCI design contribution to product
development.
Personnel. Employment grew during the year to the 12,000 level to support
revenue growth. New
___________________________________
| Picture of A. Eugene Sapp, Jr. |
___________________________________
international senior management appointments were made during the year;
Alexander A.C. Wilson joined the Company from IBM as Senior Vice President for
the European Region and Peter M. Scheffler came from Apple Computer to be
Senior Vice President for the Asian Region. Jerry F. Thomas, a thirty year SCI
veteran, was promoted to Senior Vice President for the Central Region. Francois
M. Thionet joined the Company from Hewlett-Packard to manage the acquired
Grenoble, France plant and was named a SCI Vice President.
Outlook. The macro industry trend towards outsourcing in general continues
to develop in SCI's best interest. Additional trends to finished product
outsourcing and increased supplier participation in engineering and
distribution likewise favor SCI. The Company's now proven capabilities in
``lot size of one'' custom contract manufacturing are unique and are expected
to lead to significant new programs. Demand for small computers and
new multimedia and interactive systems is expected to continue to provide high
industry unit volume growth, accompanied by unrelenting price emphasis that
will favor low cost producers such as SCI. Although its markets are becoming
increasingly competitive, the Company has a broad customer base, good order
momentum, a record high backlog, well positioned facilities, modern equipment,
and an excellent staff with which to address market pressures. The Company's
management looks forward with anticipation to capitalizing upon the
opportunities ahead.
Olin B. King /s/ A. Eugene Sapp, Jr. /s/
Olin B. King A. Eugene Sapp, Jr.
Chairman of the Board and President and
Chief Executive Officer Chief Operating Officer
(PAGE 4 OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
Commercial Division
All activities of the Company that are nongovernment are conducted by the
Commercial Division. Its business is multinational in scope and is organized
into multiple plant groups in each of five geographical regions: the Central,
Eastern, and Western Regions of North America, the Asian Region,and the
European Region.
SCI is the leading international supplier of full service contract
manufacturing to the electronics industry. A steady shift to outsourcing is
ongoing as original equipment manufacturers (OEMs) seek solutions to the
problems of rapid change in manufacturing technologies, new product
proliferation, short product life cycles, intense cost pressures, and
heightened user reliability and quality expectations. Computer aided design;
component purchase and test; subassembly and finished unit production, test,
and distribution; after sales service; and a full range of engineering support
are performed for a sizeable number of customers.
The Company is expert in the automation of traditional electronics assembly
utilizing printed circuit boards and leaded components. This approach has the
nomenclature of pin-in-hole (PIH) and, although conceptually several decades
old, still has a significant market. SCI operates 42 automated PIH assembly
lines in its various plants.
The production technique of growing preference is surface mount technology
(SMT); it offers smaller size, lower cost, and higher reliability. Barriers to
entry into SMT are high, as it is process sensitive, design critical, and
capital intensive. The Company currently operates 112 automated SMT assembly
lines in eight countries, making SCI one of the top SMT producers in the world
and clearly the leader in the merchant market.
The Company is committed to the latest manufacturing technologies. Ongoing
equipment additions are focused on evolutions in SMT processes and capabilities
are now operational for a range of microelectronic assembly processes.
An expanded number of production lines for finished product assembly,
burn-in, and test are in operation to meet a growing number of customers'
requirements, including rapid direct shipment to their customers. Continued
growth of this capability is planned throughout the Company.
Quality improvement programs remain a continuous key focus. All plants are
certified to the rigorous quality requirements of the International
Organization for Standardization (ISO 9000).
Central Region
The Central Region's plants are located in Huntsville and Arab, Alabama;
and Guadalajara, Mexico. They provide a full range of manufacturing services
to customers in the Southeast and Southwest United States and Latin America,
as well as nonregional customers that view Mexico as an attractive alternative
to Asian sourcing.
A Huntsville plant serves a diversified customer base with electronic
assemblies and a mix of finished products. Certification to Food and Drug
Administration standards is an important element of its success as a supplier
of medical devices and instruments. The plant's growth in finished products has
continued with the award of contracts to produce video terminals and networked
client computers for a major computer company. This plant is also one of the
Company's primary technology development centers and is a production site for
advanced processes.
The Arab plant has long been a leading producer of high volume electronic
assemblies. During the year this plant became a key supplier of subsystem
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| |
|Picture that stretches between page 4 and 5 of Annual Report |
| See page 5 for description |
|--------------------------------------------------------------|
(PAGE 5 OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
electronics for finished products produced in Huntsville. In the fall quarter
a new finished product assembly line will also become operational in this plant
for a major new customer.
The Mexican plant was doubled in size during the year to accommodate growing
demand for low cost products for both Latin American and domestic customers.
Surface mount assembly was expanded and a finished product assembly capability
became operational. Several new customers broadened the plant's product and
customer bases as evidence of growing interest in this location.
The Region operates a second Huntsville plant that supports a number of
leading companies with a full range of design engineering support,
manufacturing, and distribution services. This business is experiencing
dynamic growth by providing innovative finished products that are brought to
market in minimum time, custom manufactured in large volumes, and shipped
directly to multiple market channels as well as directly to end users.
_________________________________________________________________________
| Picture that stretches between page 4 and 5 of Annual Report with the |
| caption - One hundred and twelve automated surface mount assembly lines|
|operate in sixteen plants in eight countries around the globe. |
__________________________________________________________________________
Eastern Region
Eastern Region plants in Graham, North Carolina; Hooksett, New Hampshire;
and Dorval, (a suburb of Montreal), Quebec, Canada; continue to serve customers
in the Eastern United States and Canada. The Canadian plant also supports
Canadian content requirements of a number of multinationals doing business in
that country.
The North Carolina facility continued its focus on the manufacture of local
area network (LAN) and wide area network (WAN) interfaces as well as network
routers and bridges. The plant also increased production volumes in support of
a major customer's mobile computing product ramp up. The past year marked the
volume production of interactive fiber optic network electronic assemblies for
deployment by telephone companies. The plant is noted for process innovations
in support of a variety of state-of-the-art products.
The New Hampshire plant is strategically located to serve the densely
populated electronics community in the Boston area, as well as others
throughout the Northeastern United States. The plant has continued to benefit
from the regional concentration and rapid growth of a number of companies that
are leading suppliers of networking devices and systems. Medical instruments,
computers and related peripheral devices as well as consumer electronic
products also contributed to growth of plant activities during the year.
Several customers in this Region require multinational manufacturing and rely
on the New Hampshire plant for new product introduction support and management
of production transfers to one or more selected manufacturing sites of the
Company.
The Canadian Plant successfully completed its first full year of operation,
and is well positioned to benefit from increasing demands for Canadian
contract manufacturing. Initial emphasis upon U.S. based multinationals
requiring Canadian manufacturing content has led to contracts from several
major computer companies. Prospects for significant additional business exist
in each case as well as from others with similar interests in Canada. The
plant's capacity has been expanded as early opportunities from Canada based
customers exceeded initial expectations. Terminals for a Canadian lottery
system were produced in volume to further broaden this young plant's
activities. The plant is serving as a useful corporate marketing resource as
Canadian companies recognize the sizeable advantages of international
manufacturing.
(PAGE 6 OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
Western Region
The Western Region serves customers in the Plains and Mountain States and
the West Coast of the United States from plants in Rapid City, South Dakota;
Colorado Springs, Colorado; San Jose, California; and Watsonville, California.
The Rapid City plant's production of electronics for a long-standing
customer's mass storage devices has declined as manufacturing of these products
continues to migrate to Asia. Replacement business has led to net growth,
expansion of capacity, and excellent overall performance by the plant. Complex
mainframe assemblies with high average selling prices and large and growing
volumes of electronic assemblies for desktop and notebook computer products
provide balanced activities that leverage the plant's well established
strengths in producing a wide range of products.
The Colorado Springs plant enjoyed a successful first full year in its new
facility. The plant produces a wide range of assemblies for mass storage
products including small tape back-up devices, large multiple disk array
systems, and high capacity optical storage units. Computers using electronics
produced at this location range from personal computers to high performance
workstations. The plant has been selected as the sole supplier of electronics
for a major personal computer company's latest high performance model.
Fiscal 1994 was the first full year of SCI operation of the Watsonville,
California plant since it was acquired from Tandem Computers. Quantities
manufactured for Tandem under a multiyear contract exceeded earlier
expectations, primarily due to customer new product initiatives. The plant
added its first non-Tandem customer during the year and will continue a
conservative diversification strategy in the coming years.
The San Jose plant primarily manufactures products for customers located in
California and the Northwestern States. It also provides computer aided design
services, design for manufacturability studies, new product introduction
support, and prototype production for customers throughout the Western Region.
The plant is increasingly involved in new product introduction and early
production activities followed by managing the transfer of volume production
to one or more of SCI's foreign plants. This Silicon Valley plant benefits
from its strategic location and will continue to offer optimum manufacturing
solutions on a multinational basis to customers in that area.
Asian Region
SCI operates Asian plants in Singapore and Pathum Thani Province, a Bangkok,
Thailand, suburb. Customers of these facilities include local manufacturers
as well as U.S. and European multi- nationals who require Asian sources of
manufacturing. Moderate growth was experienced in 1994 as SCI maintained its
position as the largest contract manufacturer in the region.
The Singapore plant recovered from some softness in market demand in the
early part of the fiscal year. Several network devices and electronic
assemblies for personal computers are being produced for a number of new
customers. These recent additions reduced the Singapore plant's historical
dependence on the production of electronic assemblies for the disk drive
industry. The Singapore plant has also expanded its customer support by
providing computer aided design services to several large regional customers.
The Thailand plant continued to expand its production activities. The plant
added significant new
___________________________________________________________________
| Picture with the caption - Custom configured personal computers |
| are produced in high volume for a Japanese company's American subsidiary.|
|___________________________________________________________________________
____________________________________________________________________________|
| Picture with the caption - Precision assembly of high lead count |
|microelectronics utilizes state- of-the-art equipment in a highly |
|controlled environment. |
___________________________________________________________________________
(PAGE 7 OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
surface mount assembly and test equipment to support increased orders from both
existing and new customers. SCI Thailand is a major supplier of electronic
assemblies to several disk drive manufacturers. During the year the Thailand
facility won new contracts for full turnkey assembly of computer terminals
and optical mass storage devices on a finished product basis.
Both Asian plants enhanced their internal systems during the year with the
installation of standard corporate financial and manufacturing systems. To
derive greater economies of scale and purchasing power, a regional procurement
structure has been initiated which will be fully implemented during the first
half of fiscal 1995.
The coming year will offer SCI's Asian plants numerous occasions to serve an
expanding customer base. Contract manufacturing opportunities from local as
well as U.S. and European customers are numerous and growing. Collectively they
may well provide the catalyst for further expansion in Asia in the near term.
_______________________________________________________________________
| Picture with the caption - Asian production processes include |
|rigorous testing to ensure quality and reliabilityof printed |
|circuit board assemblies. |
_______________________________________________________________________
_______________________________________________________________________
| Picture with the caption - The fastest growing business area of the |
|Company is volume production of finished products for direct distribution.|
|___________________________________________________________________________
European Region
The European Region operates facilities in Irvine, Scotland; Fermoy, County
Cork, Ireland; and Grenoble, France. The Grenoble operation was previously
Hewlett-Packard's European Surface Mount Center and was acquired by SCI late
in the fiscal year. With this expansion SCI can now provide close support to
Continental European customers while the plants in Scotland and Ireland
continue to support their established in-country and multinational customers.
The Scotland plant celebrated its tenth anniversary in 1994. The plant is a
major supplier of electronic assemblies for a number of large manufacturers of
computer systems and provides sizeable volumes of assemblies for a major
customer's line of video monitors. Ball Grid Array assembly technology was
successfully established during the year to pave the way for contracts with a
major new customer. The plant also implemented a complex process for producing
notebook computer electronic assemblies for a customer's highly successful
line of mobile products.
The Irish plant's customers are primarily local and European operations of
multinationals with whom the Company has ongoing or potential multiplant
involvement. During the year a major global communications customer awarded
significant volumes of business to the plant. The plant's success in satisfying
requirements of multinational customers has continued to strengthen SCI's
relationship with them. With recent decisions to locate in Ireland finalized
by a number of major companies, SCI anticipates additional opportunities for
continued growth of the Irish plant.
The Grenoble acquisition included a multiyear agreement under which Hewlett-
Packard will purchase electronic assemblies from SCI for a number of its
European operations. The ownership transition has proceeded well and unit
volumes have exceeded plan. To support further growth in Hewlett- Packard's
requirements and accommodate customer diversification, a new facility is
currently under construction in Grenoble with occupancy planned in March, 1995.
The Region's design center in Scotland has been expanded to support growing
opportunities in product development. The Irish and French plants have well
established new product introduction skills. The Region is well postured to
expand full service manufacturing in Europe as that market experiences
economic recovery and growth.
(PAGE 8 OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
Government Division
The Government Division provides a wide range of high performance systems
and subsystems for use by the United States and foreign governments and the
defense and aerospace industries. Its primary engineering and manufacturing
operations are carried out in facilities located in Huntsville and Lacey's
Spring, Alabama.
The Division designs and manufactures electronic systems and subsystems for
launch vehicle, satellite, aircraft, and surface applications, with emphasis
on the instrumentation, communication and computer disciplines.
During the year production of mission critical voice and communication
control systems continued in support of the F-15, F-16, F-18, and AV-8B
Aircraft; the Digital Non-Secure Voice Terminal; and the FAA Rapid
Deployment Voice System. New orders were received in support of ongoing
aircraft production and foreign military sales. Production
__________________________________________________________________________
| Picture with the caption - The Company designs and produces the latest |
|technology flight test instrumentation systems for military aircraft. |
__________________________________________________________________________
continued of the Advanced Airborne Test Instrumentation System, Global
Positioning System User Equipment, and core memory systems for use in a number
of military aircraft.
Qualification testing of the Weapons and Systems Computers and
Communications Interface Unit for the Apache Longbow Helicopter was completed
during the year, while flight testing continued. Initial production orders for
this long-term major program are expected in the coming year. Development
continued of the ARINC-629 current mode coupler and Standard Interface Module
(SIM) for the fly-by-wire Boeing 777 Aircraft; preproduction units were
delivered and tested. Design of a Cesium Atomic Frequency Standard precision
clock was completed, and the first unit entered test. This clock will be used
on all GPS Block II-R satel-
____________________________________________________________________________
| Picture with the caption - Locomotive electronic assemblies are produced |
|in volume underthe rigorouscontrols of government manufacturing operations.|
_____________________________________________________________________________
lites. The fiber optics interface design for the Small Explorer Data System
Satellite was completed and production begun. Design and qualification testing
for the Common Airborne Instrumentation System were completed and production
was initiated. This system has been selected for the F-22 and F-18E/F aircraft
programs.
Development contract awards included the intercommunications and
communications controls for the V-22 Osprey and C-130J Hercules Aircraft.
Contracts for improvements to the Marine Corps Advanced Tactical Air Control
Central, development of the C-130H Aircraft Advanced Lighting Control System,
and the design of Fiber Optic Terminal Equipment for Kennedy Space Center were
also received during fiscal 1994.
Contract manufacturing was expanded by adding new programs in missile
electronics and ruggedized electronics for a major transportation customer.
Design of a new semiconductor gas distribution system was completed and
production was begun for several foreign customers.
________________________________________________________________________
| Picture with the caption - Semiconductor manufacturing equipment is |
|produced in the ultra- clean environments in which it will be used. |
________________________________________________________________________
(PAGE 1 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
EXCERPTS FROM FORM 10-K FOR FISCAL 1994
(Except for the parts of SCI Systems, Inc. Annual Report
expressly incorporated in the Form 10-K by reference, the Annual
Report is not to be deemed filed with the Securities and
Exchange Commission)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[.. X...] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1994
-- Commission File No. 0-2251
SCI SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0583436
(State or other jurisdiction
of incorporation or organization) (IRS Employer Identification No.)
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35805
(Address of principal executive offices) (Zip Code)
(302) 998-0592
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None (Title of Class)
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.10 Par Value
5-5/8% Convertible Subordinated Debentures, due March 1, 2012
At August 29, 1994 the aggregate market value of the voting
stock held by non-affiliates of the registrant was approximately
$499,094,000. At August 29, 1994 there were 27,315,699
outstanding shares of the registrant's Common Stock.
Documents Incorporated By Reference
Portions of the registrant's 1994 Annual Report to Shareholders
are incorporated by reference into Parts I and II. Portions of
the registrant's definitive Proxy Statement for its October 28,
1994 Annual Meeting of Shareholders are incorporated by
reference into Parts I and III.
PART I
Item 1. Business
See inside cover, and pages 4 to 8 of the Company's 1994
Annual Report to Shareholders (``Annual Report''), which are
incorporated herein by reference.
Backlog
At June 30, 1994 the Company's order backlog believed firm was
approximately $1.235 billion, compared with $1.013 billion a
year earlier (after adjustment for discontinued operations). As
a portion of this backlog is subject to customer releases,
there is some variability as to shipment date. Indications are
that approximately $1.2 billion of this backlog will be shipped
during fiscal 1995.
Foreign Sales
U.S. export and foreign sales from continuing operations
totaled approximately $778 million in 1994, $744 million in
1993, and $425 million in 1992, representing 42% of total sales
in 1994, 45% in 1993, and 41% in 1992. The Company believes its
operations are such that foreign sales risks are not
substantially greater than those of domestic ones. (See Note L
to the Company's 1994 Consolidated Financial Statements, which
is incorporated herein by reference.)
Engineering, Research and Product Development
The Company devotes substantial effort to design and
development activities. The Company believes its future success
depends upon, among other things, its ability to improve
products, processes, and internal systems. The Company has an
ongoing program to develop innovative and cost effective new
ones.
The Company is committed to a continuing program of product,
process, and system development. Computer aided design centers
are employed at strategic regional plants in support of domestic
and foreign customers. Much of the Company's design automation
emphasis is currently focused upon surface mount technology,
future automated manufacturing processes, and Very Large Scale
Integration (VLSI) semiconductors. (See Note A to the Company's
1994 Consolidated Financial Statements, which is incorporated
herein by reference.)
The Company has developed unique internal systems in support
of opportunities for production of tailored completed products
for delivery to customer distribution channels, or directly to
the end user. The Company believes these systems to be an
important factor in obtaining future, and maintaining existing,
finished product assembly contracts.
(PAGE 2 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
Patents and Licenses
The Company holds a number of patents, but they are not
considered significant to the Company's business. The Company
believes that its success depends more upon the creativity of
its personnel than upon patent ownership. Because of rapid
technological change and the rapid rate of issuance of new
patents, certain of the Company's products may inadvertently
infringe patents. If such occurs, the Company believes, based
upon industry practice, that necessary licenses could be
obtained under terms not having a material adverse effect;
however, there can be no assurance given to that effect.
Marketing and Customers
A majority of the Company's revenues are derived from direct
sales to original equipment manufacturers and the U.S. Government.
Marketing is conducted primarily by factory based personnel, with
a limited number of products sold by distributors and manufacturers'
representatives. The Company maintains regional field offices
across the United States as well as in Canada, France, Ireland,
Mexico, Singapore, Thailand, and the United Kingdom. The Company
advertises its products on a limited scale in industry
publications and participates in various industry trade shows.
Although the Company has several hundred customer accounts,
experience has indicated that a significant percentage of sales
has been attributed to a limited group of customers in any
particular period. Sales to individual customers that exceeded
10% of annual consolidated sales for the last three fiscal years
were: Hewlett-Packard Company $436 million in 1994;
International Business Machines Corporation $326 million in 1994
and $192 million in 1992; Conner Peripherals, Inc. $229 million
in 1993 and $190 million in 1992; and Dell Computer Corporation
$280 million in 1993. The loss of a major customer, without
offsetting orders from other sources, could have a material
adverse effect on the business of the Company.
The majority of the Company's receivables are from customers
in the high technology industry. Credit terms are extended to
customers after performing credit evaluations; such evaluations
continue throughout an individual customer's contract period.
Letters of credit or other security are generally requested from
customers where the Company believes significant credit risks or
exposure exist.
Competition and Other Factors
The Company competes in the electronic equipment industry that
is populated by hundreds of competitors, no one of which is
dominant. Competition in the industry is intense, and the
Company believes this condition will continue. A number of
competitors are larger than the Company and have greater
resources, while a number of competitors are smaller with fewer
resources. The Company could be adversely affected if its
competitors introduce superior or significantly lower priced
products. The Company not only competes against domestic
concerns, but also competes in international markets. Offshore
concerns are very competitive with respect to labor costs. The
Company believes that its continued success depends upon its
ability to remain a low cost supplier.
The Company does not consider its business to be consistently
seasonal, although seasonal demands for computers and related
products sold to consumers may impact quarterly revenues. The
Company cannot predict effects of unsettled economic conditions,
but believes it would be adversely effected by a recession of
significant duration.
Due to the competitive nature of its industry, the Company is
subject to certain inherent risks. The Company believes that the
ongoing necessity for introduction of new products and systems,
development of new software for such products and systems, and
development of new proecesses and equipment for
competitive manufacturing subjects it to the risks of
development and production problems, market acceptance,
technological obsolescence, and price competition. During the
last three fiscal years, no single product accounted for ten
percent or more of consolidated revenues.
The Company sources its materials on a global basis. Component
availability is periodically subject to constraints, shortages,
and abundances. Although no assurances can be given, the Company
believes it can generally obtain adequate components to maintain
satisfactory production levels in periods of shortages. When
shortages and excesses have occurred, the Company has generally
been successful in passing on increased or reduced costs to its
customers.
The Company's contracts with the U.S. Government and its prime
contractors are subject to audit and termination at the election
of the Government. On January 7, 1991, the U.S. Government
canceled the A-12 Aircraft program for which the Company was a
major subcontractor (See Note D to the Company's 1994
Consolidated Financial Statements, which is incorporated herein
by reference). The Company believes that its other principal
programs will continue to be funded, but there can be no
assurance to that effect. The loss of a government related
program would not have a material impact on the Company. (The
largest
(PAGE 3 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
government program accounted for less than 1% of consolidated
revenue in fiscal 1994.)
Employees
At June 30, 1994 the Company employed 12,027 persons, of which
5,742 were based in the United States. Except for two foreign
plants, no employees are subject to a collective bargaining
agreement. There have been no work stoppages caused by employee
activities. The Company believes that its employee relations are
good.
Ongoing success is believed dependent upon the Company's
ability to recruit and retain skilled professional and technical
salaried personnel, for which there is intense competition, and
its ability to recruit, train, and retain skilled and
semi-skilled hourly employees at competitive costs.
Item 2. Properties
Domestically the Company owns, or finances with Industrial
Revenue Bonds and treats as purchases for financial statement
purposes, facilities in Alabama, California, Colorado, New
Hampshire, New York, North Carolina, and South Dakota, with
total area of 2,186,000 square feet. Internationally, the
Company owns facilities in Ireland, Mexico, Scotland, Singapore,
and Thailand with total area of 478,000 square feet and leases
facilities in Canada, France and Hong Kong with total area of
140,000 square feet. An additional 30,000 square feet of
miscellaneous spaces are leased in various locations.
The Company believes its facilities are modern, in good repair,
and suitable for its operations.
Item 3. Legal Proceedings
The Company is a party to several lawsuits associated with its
various activities and incurred in the ordinary course of business.
The Company believes that it has meritorious claims and defenses
in each case. After consultation with counsel, it is the opinion
of management that, although there can be no assurance given,
none of the associated claims, when resolved, will have a material
adverse effect upon the financial position of the Company.
(See Note D to the Company's 1994 Financial Statements which is
incorporated herein by reference.)
Item 4. Submission of Matters to a Vote of Security
Holders--None.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock is traded in the NASDAQ National
Market System under the ``SCIS'' symbol. At August 29, 1994
there were 2,567 shareholders of record. See Note M to the
Company's 1994 Financial Statements (which is incorporated
herein by reference) for the last two fiscal years' quarterly
high and low bid stock prices.
The Company has not paid cash dividends on its Common Stock to
date. Payment of dividends is restricted as described in Note C
to the Company's 1994 Consolidated Financial Statements, which
is incorporated herein by reference.
Item 6. Selected Financial Data
See page 1 of the Company's 1994 Annual Report, which is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
1994 Results Compared with 1993
Fiscal 1994 sales of $1.852 billion increased $180 million
(11%) from $1.672 billion in fiscal 1993. The majority of the
increase came in the fourth quarter, when sales increased 35%
over a year earlier. A substantial portion of the sales increase
came from finished product assembly services offered by the
Company. Geographically, domestic sales increased 24%, while
foreign sales decreased 6%.
Income from continuing operations was $30 million in fiscal
1994, as compared to $31 million a year earlier. As a percent of
sales, income from continuing operations was 1.6% in fiscal 1994
versus 1.8% in fiscal 1993. The decline mainly resulted from an
effective tax rate increase to 36.2% from 28.6%. Fiscal 1994's
income from continuing operations before income taxes remained
at approximately the same percent of sales as in fiscal 1993.
Fiscal 1994's fully diluted earnings per share from continuing
operations were $1.08 as compared with $1.21 in the previous
year.
Operating income for fiscal 1994 was 3.3% of sales, down
slightly from the 3.5% in fiscal 1993. A negative impact on
fiscal 1994's operating profit was operating
(PAGE 4 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
losses (compared with fiscal 1993 operating profit) of a
domestic plant associated with government business that was
slated for closing during the year and related closing costs
aggregating approximately $5 million. Additionally, the Company
wrote down certain assets to net realizable value in the amount
of approximately $4 million. (See Notes E and L to the
Consolidated Financial Statements which is incorporated herein
by reference.)
Interest expense decreased $1.4 million in fiscal 1994 from
that incurred in the prior year. While borrowings on a
year-to-year basis increased, the Company's quarterly average
borrowings were relatively constant. The interest expense
decrease was primarily the result of lower effective interest
rates.
Income tax expense increased $4.7 million, mainly as a result
of an increased effective income tax rate (36.2% in fiscal 1994
compared with 28.6% in fiscal 1993). The effective tax rate
increase primarily resulted from higher state income taxes
(state income tax loss carryforwards were available in fiscal
1993); higher foreign income taxes (as certain tax holidays
expired); and reduced income tax credits. (See Note H to the
Consolidated Financial Statements which is incorporated herein by reference.)
During the third quarter of fiscal 1994, the Company adopted
plans for disposal of certain business units. (See Note J to the
Consolidated Financial Statements which is incorporated herein
by reference.) The estimated disposal loss of $4.5 million
reduced earnings per share by $.16. On August 26, 1994, the
Company entered into an agreement for the sale of a substantial
part of the discontinued operations (Cambridge Computer, Ltd.).
The potential sale proceeds for this operation approximate the
amount the Company assumed in its disposal loss provision, and
no material adjustment to the provision is anticipated. The
remaining discontinued operations are available for sale. If
reasonable purchase offers are not received for these
operations, the Company will close them. In either case, the
third quarter estimated disposal loss is currently believed to
be materially sufficient.
Exchange rate fluctuations during the year, especially in the
Company's European Region, had a minor impact on revenue and net
income. The Company uses the U.S. Dollar as the functional
currency of a majority of its foreign operations. (See Note F to
the Consolidated Financial Statements for discussion of foreign
currency gains, which is incorporated herein by reference.)
Average asset turnover in fiscal 1994 was 2.2 times compared
to fiscal 1993's 2.4 times. This small decline correlated to
increased accounts receivable and inventory levels.
See pages 2 to 8 of the Company's 1994 Annual Report to
Shareholders, which is incorporated herein by reference, for
further management discussion and analysis information.
Capital Resources and Liquidity
At June 30,1994 working capital was $396 million compared with
$337 million at June 30, 1993, an increase of 17.5%. The June
30, 1994 ratio of current assets to current liabilities (current
asset ratio) was 2.2 as compared to 2.4 a year earlier. The
increase in working capital resulted from larger current asset
balances to support revenue growth.
"Available funds'' at June 30, 1994 approximated $183 million,
consisting of $36 million in cash and $147 million in unused
credit facilities and commitments. (See Note C to the Company's
1994 Consolidated Financial Statements, which is incorporated
herein by reference.) Increased borrowings are anticipated
during fiscal 1995 to finance higher levels of working capital
to support planned revenue growth.
The Company's 1994 capital expenditures approximated 1994's
depreciation and amortization (depreciation and amortization
exceeded capital expenditures by $2.1 million). Fiscal 1995's
capital expenditures are currently budgeted at fiscal 1995's
estimated depreciation and amortization of $50 million.
Inflationary trends are not expected to have a material impact
on operations as relatively high asset turnover and long-term
financing minimize the effects of inflationary conditions.
1993 Results Compared with 1992
Fiscal 1993 sales of $1.672 billion increased $634 million
(61%) from $1.038 billion in fiscal 1992. The sales increase was
the result of improved economic conditions, new customers, and
new product unit volume increases. The Company also benefited
from a continuing shift to outsourcing by original equipment
manufacturers (OEMs) and recent capacity expansion.
Geographically, domestic sales increased 50% in fiscal 1993,
while foreign sales increased 77%.
Recovery from the prior recession was completed in the first
fiscal quarter. The last three fiscal quarters saw the Company
develop a stable new revenue base during the year. New orders,
backlog, sales and earnings each reached record levels.
Operating margins
(PAGE 5 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
steadily improved during the year. Average selling price
declines, which were very troublesome in the prior two years,
stimulated markets and led to substantial unit volume increases.
While the Government Division's revenues grew during the year,
a general slowdown was being experienced by government customers
as federal budgets were reduced. In contrast, unit volumes
continued to grow rapidly across the computer industry. As a
result, both selling prices and profits of most computer
companies declined. Those conditions caused the industry to migrate
to additional outsourcing to reduce costs.
Net income and primary earnings per share in fiscal 1993 were
$26.6 million and $1.09, respectively, as compared to $3.8 million
and $.18 in fiscal 1992. Fully diluted earnings per share were $1.07
in fiscal 1993; there was no dilution in fiscal 1992. Net income was 1.6%
of sales in fiscal 1993 as compared with 0.4% in fiscal 1992.
The earnings increase was after the effects of starting up
twenty-six new surface mount technology lines.
Operating income of $58.0 million in fiscal 1993 was $39.4
million greater than the $18.6 million of the prior year.
Operating income was 3.5% of sales in fiscal 1993 as compared
with 1.8% in fiscal 1992. The overall improvement in operating
income was due primarily to operating efficiencies and reduced
manufacturing variances as a result of higher volumes.
Exchange rate fluctuations during the year, especially in the
Company's European Region, had a small negative impact on
revenue and net income. The Company uses the U.S. Dollar as the
functional currency of the majority of its foreign operations.
(See Note F to the Consolidated Financial Statements for
discussion of foreign currency gains, which is incorporated
herein by reference.)
The Company believes an important indicator of its performance
is Asset Turnover (Sales divided by Total Assets). Turnover
indicates how well the Company's assets are utilized. Turnover
times profit margin yields return on assets. Turnover on average
assets for fiscal year 1993 was 2.4 times, as compared with 1.8
times for fiscal 1992.
Interest expense increased $1.3 million during fiscal 1993 from
$15.5 million in fiscal 1992. This increase was the net of
increased interest expense due to increased bank borrowings
resulting from sales growth, and reduced interest expense from
the conversion of approximately $70 million of 9% Convertible
Subordinated Debentures into Common Stock. (See Note C to the
Company's 1994 Consolidated Financial Statements, which is
incorporated herein by reference.)
Net other income in fiscal 1993 was $1.7 million compared to
$3.7 million in fiscal 1992. The decrease resulted primarily
from reduced foreign exchange gains on financing transactions.
(See Note F to the Consolidated Financial Statements, which is
incorporated herein by reference.)
Income taxes were $12.3 million in fiscal 1993 compared to a
credit of $2.3 million in fiscal 1992. Fiscal 1993's effective
income tax rate differed from the U.S. statutory rate primarily
due to lower effective income taxes on foreign earnings
considered permanently invested, and utilization of U.S.
research and development tax credit carryforwards. Income taxes
increased in fiscal 1993 over the prior fiscal year largely due
to increased taxable income, especially from domestic
operations. Fiscal 1992's income tax credit mainly arose from
recognition of a foreign net operating loss carryforward.
(PAGE 6 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
Item 8. Consolidated Financial Statements and Supplementary Data
Consolidated Balance Sheets
(In thousands of dollars except share data)
June 30,
--------------------------------------------
Assets 1994 1993 1992
Current Assets
Cash and cash equivalents $ 35,822 $ 15,846 $ 38,722
Accounts receivable,
less allowances of $4,267 in
1994 and $4,600 in 1993 and 1992 247,004 201,919 127,495
Inventories - Note B 400,595 338,188 265,460
Refundable and deferred federal
and foreign income taxes 7,811 12,369 11,487
Assets associated with discontinued
operations - Note J 12,504 10,018 3,725
Other current assets 17,749 1,702 2,223
------- ------- -------
Total Current Assets 721,485 580,042 449,112
-------- ------- -------
Property, Plant and Equipment - Note C
Land 15,115 15,017 13,784
Buildings including
construction in process 83,087 76,903 70,649
Equipment 301,012 267,209 226,168
Less accumulated depreciation
and amortization (216,446) (175,097) (166,914)
------- ------- -------
Net Property, Plant
and Equipment 182,768 184,032 143,687
------- ------- -------
Goodwill, less accumulated
amortization 3,682 7,915 11,491
Deferred Compensation Assets
Held in Trust 3,548 -0- -0-
Other Noncurrent Assets 8,729 8,350 8,672
--------- --------- ---------
Total Assets $ 920,212 $ 780,339 $ 612,962
========= ========= =========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and
accrued expenses $ 292,351 $ 214,773 $ 172,418
Accrued payroll and related expenses 18,997 15,920 13,414
Federal, foreign and state income taxes 6,697 8,735 2,380
Accrued liabilities relating
to plant and business unit
disposals - Notes E and J 1,930 -0- -0-
Current maturities of
long-term debt 5,882 4,098 5,630
------- ------- -------
Total Current Liabilities 325,857 243,526 193,842
------- -------- -------
Deferred Income Taxes 1,091 3,893 3,553
Pension Liability, less
current portion of $1,083 in 1994,
$1,000 in 1993 and $2,000 in 1992 6,681 5,821 3,972
Deferred Compensation 3,548 -0- -0-
Long-term Debt-Note C
Industrial revenue bonds 23,306 23,742 23,454
Long-term notes 216,202 186,643 88,903
Convertible subordinated
debentures 38,893 38,858 106,889
------- ------- -------
Total Long-term Debt 278,401 249,243 219,246
------- ------- -------
Commitments and Contingencies-Notes C and D
Shareholders' Equity
Preferred Stock, 500,000 shares
authorized but unissued -0- -0- -0-
Common Stock, $.10 par value:
authorized 50,000,000 shares;
issued 27,335,782 in 1994
27,085,282 shares in 1993,
and 21,012,670 shares in 1992 2,734 2,709 2,101
Capital in excess of par value 124,926 122,785 53,919
Retained earnings 181,952 160,791 134,232
Currency translation adjustment (4,637) (8,027) 2,499
Treasury stock at cost:
29,683 shares in 1994, and
35,000 shares in 1993 and 1992 (341) (402) (402)
------- ------- --------
Total Shareholders' Equity 304,634 277,856 192,349
-------- ------- -------
Total Liabilities and
Shareholders' Equity $ 920,212 $ 780,339 $ 612,962
========= ========= =========
See notes to Consolidated Financial Statements
(PAGE 7 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
Consolidated Statements of Income
(In thousands of dollars except per share data)
Years ended June 30,
------------------------------------------
1994 1993 1992
Net sales $ 1,852,478 $ 1,672,115 $ 1,038,454
Costs and expenses - Notes E and J 1,790,612 1,612,850 1,018,461
Goodwill amortization 1,158 1,246 1,407
---------- --------- --------
Operating Income 60,708 58,019 18,586
---------- --------- --------
Other income (expense):
Interest expense (15,423) (16,793) (15,479)
Other income, net - Note F 1,631 1,657 3,695
---------- --------- --------
Income from Continuing Operations
Before Income Taxes 46,916 42,883 6,802
Income taxes - Note H 16,980 12,268 (2,259)
---------- --------- --------
Income from Continuing Operations 29,936 30,615 9,061
---------- --------- --------
Discontinued Operations - Note J:
Loss from operations (net of income
tax benefit of $1,480 in 1994,
$1,420 in 1993 and $551 in 1992) (4,283) (4,056) (5,236)
Loss on disposal (net of income tax
benefit of $4,358 in 1994) (4,492) -0- -0-
---------- --------- --------
Loss from Discontinued Operations (8,775) (4,056) (5,236)
---------- --------- --------
Net Income $ 21,161 $ 26,559 $ 3,825
=========== =========== ===========
Earnings (Loss) per share - Note G:
Primary
From continuing operations $ 1.08 $ 1.24 $ .43
From discontinued operations (.32) (.15) (.25)
------ ------ ------
$ .76 $ 1.09 $ .18
====== ====== ======
Fully diluted
From continuing operations $ 1.08 $ 1.21 $ .43
From discontinued operations (.32) (.14) (.25)
------ ------ ------
$ .76 $ 1.07 $ .18
====== ====== ======
Consolidated Statements of Shareholders' Equity
(In thousands of dollars)
Years ended June 30,
-------------------------------------
1994 1993 1992
Common Stock
Balance at July 1 $ 2,709 $ 2,101 $ 2,099
Conversion of debt - Note C -0- 590 -0-
Stock options exercised 25 18 2
---------- ---------- ---------
Balance at June 30 $ 2,734 $ 2,709 $ 2,101
========== ========== ==========
Capital in excess of par value
Balance at July 1 $ 122,785 $ 53,919 $ 53,774
Conversion of debt - Note C -0- 67,576 -0-
Stock options exercised 2,141 1,290 145
---------- ---------- ----------
Balance at June 30 $ 124,926 $ 122,785 $ 53,919
=========== ========== ==========
Retained earnings
Balance at July 1 $ 160,791 $ 134,232 $ 130,407
Net income for the year 21,161 26,559 3,825
----------- ---------- ----------
Balance at June 30 $ 181,952 $ 160,791 $ 134,232
=========== ========== ==========
Currency translation adjustment
Balance at July 1 $ (8,027) $ 2,499 $ 31
Translation gain (loss) 2,508 (11,550) 2,468
Deferred income taxes 882 1,024 -0-
----------- ---------- ----------
Balance at June 30 $ (4,637) $ (8,027) $ 2,499
=========== ========== ==========
See notes to Consolidated Financial Statements
(PAGE 8 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
Consolidated Statements of Cash Flows
(In thousands of dollars)
Years ended June 30,
------------------------------------
1994 1993 1992
Operating Activities
Net income $ 21,161 $ 26,559 $ 3,825
Adjustments to reconcile
net income to cash provided by
(used for) operations:
Depreciation and amortization 48,623 41,303 38,682
Effect of property, plant and
equipment disposals 465 364 (40)
Noncurrent pension expense 860 1,848 -0-
Unrealized foreign currency
exchange (gain) loss (406) 1,983 -0-
Deferred income taxes (7,754) (959) 126
Other 64 -0- 200
Changes in current assets and liabilities:
Accounts receivable (47,155) (80,627) (6,121)
Inventories (79,694) (61,931) (41,113)
Refundable and deferred income taxes 4,894 975 658
Discontinued and other current assets 11,054 (22,351) (4,239)
Accounts payable and accrued expenses 81,107 51,446 66,298
Income taxes 83 7,215 (1,988)
--------- --------- --------
Net Cash Provided by (Used for)
Operating Activities 33,302 (34,175) 56,288
--------- --------- --------
Investing Activities
Purchase of property, plant and equipment (46,488) (84,084) (29,822)
Proceeds from sale of property, plant
and equipment 400 425 194
Change in noncurrent assets (971) 4 (902)
--------- --------- --------
Net Cash (Used for) Investing Activities (47,059) (83,655) (30,530)
--------- --------- --------
Financing Activities
Net increase (decrease) in
commercial paper 49,287 27,150 (21,608)
Payments on long-term debt (2,242,630) (627,162) (91,624)
Proceeds from long-term debt 2,223,480 696,462 101,583
Issuance of common stock 2,166 1,308 148
--------- --------- --------
Net Cash Provided by (Used for)
Financing Activities 32,303 97,758 (11,501)
--------- --------- --------
Effect of exchange rate changes on cash 1,430 (2,804) (1,064)
--------- --------- --------
Net increase (decrease) in cash and
cash equivalents 19,976 (22,876) 13,193
Cash and cash equivalents at
beginning of year 15,846 38,722 25,529
--------- --------- --------
Cash and Cash Equivalents
at End of Year $ 35,822 $ 15,846 $ 38,722
=========== =========== ===========
Cash equivalents are primarily short-term interest bearing deposits.
Interest paid was $14,776 in 1994, $19,723 in 1993 and $15,581 in 1992.
Net income taxes paid (refunded) were $14,781 in 1994, $6,196 in 1993
and ($1,249) in 1992
See notes to Consolidated Financial Statements.
(PAGE 9 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED
IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
Notes to Consolidated Financial Statements
Note A - Accounting Policies
Consolidated Financial Statements include accounts of the
Company and its subsidiaries after elimination of material
intercompany accounts and transactions. June 30, 1993's and
1992's current assets as originally reported have been
reclassified to correspond to 1994's presentation for assets
associated with discontinued operations. Additionally, 1993's
and 1992's Consolidated Statement of Income and related
disclosures have been reclassified to correspond to 1994's
discontinued operations presentation (see Note J).
Inventories, other than those relating to long-term contracts,
are stated at the lower of cost (principally first-in, first-out
method) or market. Inventories relating to long-term contracts
are stated at cost incurred (including indirect expenses)
reduced by costs applicable to sales recognized. General and
administrative expense on government contracts are allocated to
inventories on a total cost input basis. Inventories include
amounts relating to contracts longer than one year, and a
portion thereof may not be realized within one year. Customers
have a vested interest in inventories related to progress
payments. Inventories primarily consist of costs incurred in
support of contractual obligations.
Sales and Cost of Sales from cost reimbursable contracts are
recorded as costs are incurred and include fees in the
proportion of incurred costs to total estimated costs. Sales
from fixed price and fixed price incentive contracts are
recorded generally as units are shipped. Profits on such
contracts are determined by periodic estimates of cost at
completion and may reflect adjustments applicable to prior
years' sales. Losses on contracts are recognized when
identified. Cost of sales on fixed price and fixed price
incentive Government contracts is based on estimated average
cost of all units on order, as determined under the learning
curve concept, which anticipates a decrease in unit cost as
production progresses.
Property, Plant, and Equipment are recorded at cost. The
provision for depreciation and amortization is computed on the
straight-line method over the estimated useful lives of
individual assets.
Goodwill is unamortized excess of cost over underlying net
tangible assets of companies acquired. Goodwill is amortized on
a straight-line basis over ten years. Accumulated amortization
at June 30 was $8,239,000 in 1994, $8,265,000 in 1993, and
$7,145,000 in 1992. The June 30, 1994's balance excludes prior
years' amortization associated with discontinued operations (see
Note J).
Income Tax expense differs from amounts currently payable, as
certain revenues and expenses are reported in periods which
differ from those in which they are taxed. The principal
differences are that for income tax purposes: (a) income from
certain long-term contracts is reported in accordance with
income tax regulations; (b) accelerated depreciation of certain
fixed assets is used; (c) the direct write-off method for
doubtful accounts is used; and (d) certain foreign subsidiaries'
earnings are taxable for U.S. purposes when distributed. U.S.
income taxes have not been provided on certain undistributed
earnings of foreign subsidiaries aggregating $52 million at June
30, 1994 which are considered to be permanently invested.
Otherwise, $15 million of deferred taxes would have been
provided.
Research and Development is conducted by the Company under
both customer sponsored and company sponsored programs. Company
sponsored programs include research and development, and bid and
proposal work related to Government products and services. Costs
related to such research and development and bid and proposal
work are allocated among Government contracts in the same manner
as general and administrative expense and are recoverable under
U.S. Government contractual arrangements. Customer sponsored
research and development costs are accounted for as any other
program cost. Total research and development costs incurred by
the Company were $30,074,000 in 1994, $29,575,000 in 1993, and
$32,504,000 in 1992.
Note B - Inventories
Progress payments related to long-term contracts, netted
against inventory at year-end, were $13,454,000 in 1994,
$17,615,000 in 1993, and $21,299,000 in 1992.
General and administrative expense incurred was $15,281,000 in
1994, $15,360,000 in 1993, and $14,932,000 in 1992. General and
administrative expense remaining in inventory at June 30
approximated $4,682,000 in 1994, $4,064,000 in 1993, and
$4,310,000 in 1992. Research and development and bid and
proposal costs related to government contracts remaining in
inventory at June 30 approximated $6,975,000 in 1994, $6,404,000
in 1993, and $6,730,000 in 1992. Program related costs
(excluding A-12 Aircraft related costs as described in Note D)
in excess of currently negotiated contract value and included in
inventory approximated $8,030,000, $7,630,000, and $17,651,000
at June 30, 1994, 1993,
(PAGE 10 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994
CONTAINED IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
and 1992, respectively. Program related costs carried in
inventory at June 30,1994 primarily represent pending contract
negotiations and claims. The Company's policy is to defer only
those costs in excess of current contract value that relate to
programs entered into prior to December 31, 1990, that it
believes will be continued, or in the case of pending claims,
that it believes are fully recoverable.
Note C - Long-term Debt
Industrial Revenue Bonds. The Company is obligated by lease or
guarantee for various industrial revenue bonds maturing through
year 2015. $3,384,000 of the outstanding balance at June 30,
1994 ($3,485,000 at June 30, 1993, and $5,095,000 at June 30,
1992) bears interest at fixed rates ranging between 5.5% and
7.6%. $20,900,000 of the outstanding balance at June 30, 1994
($20,981,000 at June 30, 1993, and $20,626,000 at June 30, 1992)
bears interest at variable rates that ranged between 2.6% and
7.5% on June 30, 1994. Such obligations are collateralized by
related properties, unexpended funds, and irrevocable letters of
credit.
Long-term Notes. The Company is obligated under various
mortgages and notes maturing through year 2004. $677,000 of the
outstanding balance at June 30, 1994 ($1,667,000 at June 30,
1993, and $1,952,000 at June 30, 1992) bears a fixed interest
rate of 3% at June 30, 1994; previously the interest was fixed
at 1%. $48,263,000 of the outstanding balance at June 30, 1994
($44,572,000 at June 30, 1993, and $48,451,000 at June 30, 1992)
bears variable interest rates ranging between 3.6% and 7.3%.
$3,050,000 at June 30, 1994 ($3,757,000 at June 30, 1993) bears
a fixed interest rate of 7.9%. The June 30, 1994 outstanding
balance includes $33,263,000 that is collateralized by the
related properties.
On June 25, 1993 the Company combined its principal loan
agreements into one $270 million credit facility with a
revolving credit element of $150 million and a commercial paper
element of $120 million (a $50 million increase). The agreement
has an initial renewal date of July 15, 1996. Borrowings under
the revolving credit line, at the Company's option, bear
interest at a rate based on either a defined Base Rate or the
London Interbank Offered Rate (LIBOR). The agreement allows the
Company to enhance the marketability of its Commercial Paper
with an irrevocable letter of credit and to borrow at rates
generally below revolving credit rates. Conversion privileges
exist in the event of nonsalability of Commercial Paper. At June
30, 1994 $170,596,000 was outstanding under this agreement
versus $140,975,000 at June 30, 1993, and $42,625,000 under the
previous separate revolving credit and credit enhanced
commercial paper agreements at June 30, 1992. The June 30, 1994
average borrowing rate for $119,596,000 in Commercial Paper
outstanding was 3.3%, and for $51,000,000 revolving credit
outstanding was 5.0%. The Company under the credit agreement
must maintain certain financial ratios and meet certain net
worth and indebtedness tests. Under the most restrictive
provision of the loan agreement, $21,930,000 of retained
earnings are available for the payment of cash dividends.
A commitment fee of .4% is paid on the unused portion of the
revolving credit agreement. Fees aggregating 1% are currently
paid on letters of credit issued in support of outstanding
Commercial Paper. No compensating balances are required under
the agreement.
Short-term borrowings may be drawn under the credit agreement.
Because of the Company's ability and intent to refinance such
borrowings, total borrowings under the agreement, including
Commercial Paper, are classified as long-term debt. At June 30,
1994 unused credit facilities and commitments approximated
$147,000,000.
The Company has two interest rate swap agreements with a major
financial institution, that effectively convert $18,500,000 of
its variable interest rate real estate mortgages at June 30,
1994 to a fixed rate of 7.29% per annum. The agreements expire
on October 1, 2003. The agreements' notional amount declines
$500,000 each quarter through the expiration.
Convertible Subordinated Debentures. The Company's $70,000,000
9% Convertible Debentures issued in May 1990 were converted into
5,889,817 shares of Common Stock in April and May of 1993.
In March 1987 the Company issued $75,000,000 of 5 5/8%
Convertible Subordinated Debentures due March 1, 2012, of which
$39,476,000 remains outstanding. The Debentures are convertible
into the Company's Common Stock at $21.33 per share. During 1991
the Company purchased and retired $34,524,000 face value of the
Debentures at a cost of $20,643,000. Beginning in 2007, the
Company will be required to provide $3,750,000 annually to a
sinking fund to retire an additional 24% of the issue prior to
maturity. The Debentures are callable by the Company under
certain conditions.
Deferred charges of $2,063,000 at June 30, 1994, $1,572,000 at
June 30, 1993, and $3,349,000 at June 30, 1992, were netted
against the long-term debt outstanding balances.
(PAGE 11 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994
CONTAINED IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
Debt, Lease, and Rental Payments. Long-term debt maturities
for the next five fiscal years are: $6,631,000 in 1995;
$6,668,000 in 1996; $192,290,000 in 1997; $4,178,000 in 1998;
and $3,828,000 in 1999. Rental expense was $1,146,000 in 1994,
$1,610,000 in 1993, and $2,189,000 in 1992. Minimum future
rental payments for leased facilities and land are: $1,680,000
in 1995; $1,153,000 in 1996; and $250,000 annually thereafter
through 2020 for a land lease.
Note D - Termination of A-12 Aircraft Program Subcontracts
The Company was a subcontractor to General Dynamics Corporation
(GD) and McDonnell Aircraft Company (McDonnell) for development
of certain subsystems for the U.S. NAVY A-12 Aircraft. The
Government in January 1991 announced termination (for default)
of the A-12 prime contracts. GD terminated for convenience its
two subcontracts with the Company. Additionally, terminations
for convenience were received from McDonnell and another A-12
Aircraft subcontractor on an additional nine subcontracts.
Settlements have been concluded for all subcontracts terminated
for convenience, at the approximate amounts previously accrued
by the Company. In October 1991 McDonnell filed a sealed suit
in Federal Court in St. Louis, Missouri claiming default on
seven other subcontracts, with a remaining Company exposure of
approximately twenty-two million dollars. Based upon the advice
of special counsel, the Company believes it has meritorious
defenses, although no assurance can be given to that effect, and
is pursuing counter claims against McDonnell through the courts.
Note E - Charges to Operating Income
During March 1994 the Company adopted a plan for disposition
through closure of a domestic plant associated with its
government business. The plant's revenue represented less than
1% of consolidated sales. Operating income for fiscal year 1994
reflects operating losses and disposal charges associated with
this plant and write-down of certain assets to estimated net
realizable values, aggregating $9,200,000. The plant was closed
in August 1994. Currently, no additional material disposal
costs beyond those accrued for in the third quarter are
anticipated.
Note F - Foreign Currency Exchange Transactions
Foreign currency exchange net losses of $119,000 were
experienced in 1994 as compared to net gains of $3,000,000 in
1993, and $2,200,000 in 1992. The 1994 and 1993 amounts are
included in costs and expenses, as they mainly relate to
operating costs, while the 1992 net gain is included in other
income, since it related to financing activities.
Note G - Earnings Per Share
Primary earnings per share are based on the weighted average
number of common shares and dilutive common stock equivalents
outstanding during each period. Common stock equivalents consist
of stock options whose exercise price is less than the
stipulated market price using the treasury stock method for both
primary and fully diluted earnings per share. For the 1993
computation net income has been adjusted for the after-tax
interest expense associated with the debentures converted
during the year. The number of shares issued in 1993 upon
conversion of the debentures has been treated as though they
were outstanding from the beginning of the fiscal year. The
fully diluted computations assume the dilutive conversion of the
Company's outstanding convertible debentures, after adding back
the debentures' after-tax interest expense.
The number of shares used in the computation of earnings per
share were as follows: primary earnings per share - 27,703,163
in 1994, 27,532,308 in 1993, and 20,968,969 in 1992; and fully
diluted earnings per share - 29,418,899 in 1993. In the
computation of 1994's and 1992's earnings per share, the assumed
conversion of outstanding convertible debentures was
anti-dilutive.
Note H - Income taxes
The provision for income taxes for continuing operations is
summarized as follows:
(In thousands of dollars) 1994 1993 1992
Income (loss) from continuing operations
before income taxes:
Domestic $ 53,307 $ 26,106 $ (5,525)
Foreign (6,391) 16,777 12,327
-------- -------- --------
Total $ 46,916 $ 42,883 $ 6,802
======== ======== ========
Currently payable:
Domestic $ 17,940 $ 8,609 $ (790)
Foreign 3,097 3,389 (19)
Deferred:
Domestic (2,521) (940) (1,450)
Foreign (2,418) -0- -0-
Adjustment to Goodwill for acquired net
operating loss tax benefit -0- 798 -0-
Deferred income taxes allocated to
translation adjustment 882 412 -0-
------- ------- -------
Total $ 16,980 $ 12,268 $ (2,259)
======== ======== ========
(PAGE 12 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994
CONTAINED IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
Differences between income taxes computed using the U.S.
statutory rate and the current year's provision were:
(In thousands of dollars) 1994 1993 1992
Income taxes at
U.S. statutory rate $ 16,421 $ 14,580 $ 2,313
Effects of U.S. state income taxes, net
of federal benefits 1,054 -0- -0-
Effects of loss carryforward/carryback (147) 2,286 (863)
Effects of foreign operations (3,068) (2,113) (1,970)
Tax credits -0- (2,581) (2,107)
Permanent differences 2,720 96 368
------- ------- -------
Income taxes (credit) $ 16,980 $ 12,268 $ (2,259)
======== ======== =======
At June 30, 1994 net deferred tax asset components are as
follows:
Deferred
(In thousands of dollars) Asset
Temporary Difference Amount (Liability)
Expenses not currently deductible:
Bad debt provision $ 4,268 $ 1,494
Accrued expenses 18,233 6,381
Provision for discontinued operations 2,332 816
Inventory adjustments 9,134 2,540
Depreciation 2,017 624
Income not currently taxable:
Undistributed foreign earnings (14,266) (3,894)
Long-term contracts (11,026) (3,859)
Net operating loss carryforwards 6,034 777
Valuation allowance:
Beginning of year (11,739) (4,013)
Net change for year 11,501 3,935
-------- ---------
$ 16,488 $ 4,801
========= ==========
The change in the valuation allowance resulted from the
Company's ability to deduct currently for U.S. income taxes
previous foreign net operating losses. The majority of the
change has been recognized as an income tax benefit in
discontinued operations.
Note I - Fair Value of Financial Instruments
The estimated fair values of the Company's financial
instruments at June 30, 1994 are as follows:
(In thousands of dollars) Carrying Fair
Amount Value
Cash and cash equivalents $ 35,822 $ 35,822
Unexpended equipment funds 1,739 1,739
Long-term debt 286,750 281,619
Interest rate swaps -0- 1,411
Methods and assumptions used to estimate fair values were as
follows: Cash and cash equivalents' and unexpended equipment
funds' fair valuation was estimated at their carrying value,
because of their short maturity period; Long-term debt's fair
valuation was estimated based on current rates offered to the
Company for debt of the same remaining maturities, except for
Convertible Debentures, where the year-end closing market price
was used; and Interest rate swaps' fair valuation was estimated
using the value the Company would receive or pay to terminate
them on June 30, 1994.
Note J - Discontinued Operations
During March 1994, the Company adopted plans for sale of
certain business units. These units generally manufacture and
sell proprietary products to consumer and commercial end-users.
These business units are accounted for as discontinued
operations, and accordingly, their operations are segregated in
the accompanying income statements. Net sales, operating costs
and expenses, other income and expense, and income taxes for
fiscal years 1993 and 1992 have been reclassified for amounts
associated with the discontinued units. The actual fourth
quarter operating losses for the discontinued operations
approximated amounts estimated for in the disposal loss accrued
for at the measurement date.
Sales, related losses and income tax benefits associated with
the discontinued business units for the last three fiscal years
were as follows:
(In thousands of dollars) 1994 1993 1992
Sales $ 49,370 $ 24,985 $ 6,906
======== ======== ========
Loss from operations
before income tax benefit $ (5,763) $ (5,476) $ (5,787)
Income tax benefit 1,480 1,420 551
------ ------ ------
Loss from operations (4,283) (4,056) (5,236)
------ ------ ------
Loss on disposal before income tax benefit:
Estimated unrecovered costs
through disposal date (4,335) -0- -0-
Goodwill adjustment (2,715) -0- -0-
Asset valuation adjustment (1,800) -0- -0-
------- ------ ------
(8,850) -0- -0-
Income tax benefit 4,358 -0- -0-
------- ------ ------
Loss on disposal, recognized
in third quarter (4,492) -0- -0-
------- ------- ------
Total loss on discontinued operation s $ (8,775) $ (4,056) $ (5,236)
======= ======= =======
The effective income tax benefit rate for discontinued
operations differs from the U.S. statutory tax rate primarily as
a result of recognizing for book purposes net operating loss
carryforwards associated with the discontinued operations.
On August 26, 1994, the Company entered into an agreement for
the sale of Cambridge Computer, Ltd. (a substantial part of the
discontinued operations) for approximately $7,000,000 plus
future royalties.
(PAGE 13 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994
CONTAINED IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
Note K - Employee Benefit and Stock Option Plans.
Employee Benefit Plans. The Company provides retirement
benefits to its domestic employees who meet certain age and
service requirements through three plans: a defined benefit
pension plan, a qualified employee savings plan, and a deferred
compensation plan. Pension plan benefits are computed based upon
compensation earned during the member's career at the Company,
or its subsidiaries, and years of credited service. The Company
funds its retirement benefits annually at an amount that
approximates the maximum deductible for income taxes. Savings
and deferred compensation plans' benefits are equal to a
percentage of employees' contributions. Company contributions
to these plans are fully funded when the liability is incurred.
The Company's and employees' contributions to the deferred
compensation plan are held in an irrevocable rabbi trust. The
Company also has a defined contribution pension plan for its
European employees who meet certain requirements.
The following table sets forth the defined benefit pension
plan's status and the amounts recognized in the Company's
Consolidated Financial Statements at June 30.
Defined benefit pension plan's status
is as follows:
<TABLE>
<CAPTION>
<C> <C> <C>
1994 1993 1992
<S>
(In thousands of dollars)
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested benefits
of $9,459 in 1994, $7,107 in 1993, and $6,284 in 1992) $(10,842) $ (9,366) $ (8,504)
======== ======== ========
Projected benefit obligation for service
rendered to date $(16,254) $(14,274) $(15,366)
Plan assets at fair market value 9,030 8,962 7,213
-------- -------- --------
Projected benefit obligation in excess of plan assets (7,224) (5,312) (8,153)
Unrecognized net obligations existing at transition 475 514 554
Unrecognized prior service cost 427 466 505
Unrecognized net (gain)/loss (1,442) (2,489) 1,122
-------- -------- --------
Accrued pension cost $ (7,764) $ (6,821) $ (5,972)
========= ======== ========
Net pension cost included the following components:
Service cost - benefits earned during the period $ 1,779 $ 1,703 $ 2,124
Interest cost on projected benefit obligation 1,125 977 1,008
Actual return on plan assets (206) (1,472) (894)
Net amortization and deferral (553) 809 412
-------- -------- --------
Net periodic pension cost $ 2,145 $ 2,017 $ 2,650
========= ======== =======
Rates used in computing periodic pension costs:
Actual weighted-average discount rate used for
computing projected benefit obligation's present value 8.0% 8.0% 8.0%
Expected long-term rate of return on plan assets 9.0% 9.0% 9.0%
Future compensation increase 5.5% 5.5% 5.5%
Charges to operations for Company sponsored
Retirement benefits $ 4,478 $ 4,103 $ 4,168
========= ========= ======
</TABLE>
At June 30, 1994 domestic pension plan assets were invested
72% in equity based mutual funds, 20% in corporate bond mutual
funds, 3% in the Company's Convertible Debentures, and 5% in
cash and money market funds. During 1993, the retirement age,
mortality, withdrawal and expense load assumptions were changed
to approximate more closely the actual experience on such items.
These changes resulted in a $582,000 reduction to 1993's pension
expense.
Stock Option Plans. The Company has Incentive Stock Option and
Non-Qualified Stock Option Plans. Under the Plans, options are
granted at not less than 100% of market value on date of grant.
Outstanding options expire between September 1995 and September
2004. During 1994, 400,000 shares available for granting options
under the Incentive Stock Option Plan were transferred to the
Non-Qualified Stock Option Plan. Information relating to the
Company's Stock Option Plans follows:
<TABLE>
Incentive Stock Option Plan
(Shares in thousands)
<CAPTION> <C> <C> <C> <C> <C> <C>
1994 1994 1993 1993 1992 1992
------------------- ------------------- -------------------
Shares Price Range Shares Price Range Shares Price Range
<S>
Outstanding July 1 172.7 $8.17- 9.25 198.9 $8.17-11.17 206.4 $8.17-11.17
Granted -0- -0- -0-
Exercised (75.3) $8.17-9.00 (26.2) $9.00-11.17 -0-
Canceled -0- -0- (7.5) $9.25
----- ---------- ----- ----------- ----- -----------
Outstanding June 30 97.4 $8.17-9.25 172.7 $8.17- 9.25 198.9 $8.17-11.17
====== ========== ===== =========== ===== ===========
Exercisable at June 30 97.4 172.7 198.9
Shares available for
granting options at June 30 16.1 416.1 416.1
</TABLE>
(PAGE 14 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994
CONTAINED IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
<TABLE>
Non-Qualified Stock Option Plans
(Shares in thousands)
<CAPTION> <C> <C> <C> <C> <C> <C>
1994 1994 1993 1993 1992 1992
-------------------- ------------------- -------------------
Shares Price Range Shares Price Range Shares Price Range
<S>
Outstanding July 1 1,015.7 $6.00-21.13 1,026.3 $6.00-13.38 920.4 $6.00-13.38
Granted 270.0 $15.00-18.25 225.0 $11.88-21.13 223.0 $6.13 -8.75
Exercised (175.2) $6.00-18.25 (156.6) $6.00-12.63 (24.1) $6.00 -7.38
Canceled (62.9) $6.00-18.25 (79.0) $6.00-12.63 (93.0) $6.00-11.63
-------------------- -------------------- --------------------
Outstanding June 30 1,047.6 $6.00-21.13 1,015.7 $6.00-21.13 1,026.3 $6.00-13.38
==================== ==================== ====================
Exercisable at June 30 602.6 521.4 460.1
Shares available for
granting options at June 30 289.5 96.6 242.6
</TABLE>
Note L - Geographic Data.
The Company operates primarily in the electronic equipment
industry. These operations are conducted in two geographic
areas: Domestic and Foreign. The following geographic data is
based on estimates that do not consider fully the extent to
which the Company's product development, manufacturing,
engineering, marketing, and management activities are
interrelated. Thus, the data is not totally indicative of the
extent each geographic area contributed to the Company's
consolidated operating results. The following table summarizes
the Company's geographic data:
<TABLE>
(In thousands
of dollars)
<CAPTION>
Identifiable Assets Sales Operating Income
---------------------------- --------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1994 1993 1992 1994 1993 1992
Domestic $516,453 $493,337 $441,946 $1,155,211 $933,556 $ 620,609 $60,368 $38,852 $ 4,349
Foreign 361,363 256,121 145,356 697,267 738,559 417,845 340 19,167 14,237
Corporate 42,396 30,881 25,660 N/A N/A N/A N/A N/A N/A
---------------------------- --------------------------------- -------------------------
Consolidated $920,212 $780,339 $612,962 $1,852,478 $1,672,115 $1,038,454 $60,708 $58,019 $18,586
============================ =================================
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C>
<S>
Corporate net other expense (13,792) (15,136) (11,784)
--------------------------
Consolidated income from continuing
operations before income taxes $46,916 $42,883 $6,802
==========================
</TABLE>
Intergeographic transfers are not significant. Corporate
assets include domestic cash and cash equivalents, refundable
and deferred income taxes, assets associated with discontinued
operations, and minority investments in and loans to other
companies. Major customer data, including concentration of
credit risk, is incorporated by reference from Part I, Marketing
and Customers, of the Company's Form 10-K for the year ended
June 30, 1994. Domestic export sales were approximately
$81,000,000 in 1994, $5,000,000 in 1993, and $7,000,000 in 1992.
Note M - Selected Quarterly Financial Data (Unaudited)
Quarterly financial results, after restatement for
discontinued operations, and stock prices for the last two
fiscal years were:
<TABLE>
(In thousands of dollars except
per share data)
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C>
1994 1993
------------------------------------- --------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S>
Net sales $584,523 $424,092 $422,877 $420,986 $434,107 $450,687 $443,901 $343,420
Gross profit 22,175 4,286 17,748 17,657 16,625 17,148 14,970 10,522
Income from continuing operations 11,072 476 9,214 9,174 9,620 8,952 7,310 4,733
Net income (loss) 11,072 (5,531) 7,771 7,849 8,582 7,356 6,411 4,210
Fully diluted earnings(loss)
per share:
Continuing operationns $ .40 $ .02 $ .33 $ .33 $ .34 $ .36 $ .30 $ .23
Discontinued operations -0- (.22) (.05) (.05) (.04) (.06) (.03) (.03)
-------------------------------------- --------------------------------------
Net income $ .40 $(.20) $ .28 $ .28 $ .30 $ .30 $ .27 $ .20
====================================== ======================================
Market stock price range:
High $17 $21 5/8 $19 7/8 $21 3/8 $22 1/4 $23 3/8 $18 1/2 $12 1/2
Low 12 5/8 15 1/4 15 3/8 14 3/8 15 1/2 17 1/8 10 3/4 7 1/4
</TABLE>
Fiscal year 1994's third quarter includes charges to operating
income relating to operating losses and disposal charges for the closure
of a domestic plant associated with the Company's government business and
write-down of certain assets to estimated net realizable values,
aggregating $7,900,000.
(PAGE 15 OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994
CONTAINED IN THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
SCI Systems, Inc.,
Huntsville, Alabama
We have audited the accompanying consolidated balance sheets
of SCI Systems, Inc. as of June 30, 1994, 1993, and 1992, and
the related consolidated statements of income, shareholders'
equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of SCI Systems, Inc. at June 30,
1994, 1993, and 1992, and the consolidated results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note D to the consolidated financial
statements, the Company is involved in sealed litigation related
to certain subcontracts on the canceled A-12 Aircraft. The
Company believes it has meritorious defenses to claims against
it, although no assurance can be given to that effect, and
intends to vigorously pursue claims against the prime
contractor. The ultimate outcome of this matter cannot presently
be determined.
ERNST & YOUNG LLP
Birmingham, Alabama
August 4, 1994
(END OF THE EXCERPTS FROM FORM 10-K FOR FISCAL 1994 CONTAINED IN
THE 1994 ANNUAL REPORT TO SHAREHOLDERS)
(INSIDE OF BACK COVER TO 1994 ANNUAL REPORT TO SHAREHOLDERS)
Corporate Directory
Board of Directors
Olin B. King (1)
Chairman of the Board of
the Company
Huntsville, Alabama
Howard H. Callaway (2)(4)
CEO, Crested Butte Mountain Resort, Inc.
Crested Butte, Colorado
CEO and President, Callaway Gardens
Resort, Inc.
Pine Mountain, Georgia
William E. Fruhan (2)(3)
Professor of Business Administration
Harvard University
Cambridge, Massachusetts
Joseph C. Moquin (1)(4)
Retired CEO
Teledyne Brown Engineering
Madison, Alabama
A. Eugene Sapp, Jr. (1)(3)
President of the Company
Huntsville, Alabama
Wayne Shortridge (2)(3)
Partner
Paul, Hastings, Janofsky & Walker
Atlanta, Georgia
G. Robert Tod (2)(4)
President, CML Group, Inc.
Acton, Massachusetts
Jackie M. Ward (3)(4)
Chief Executive Officer
Computer Generation Incorporated
Atlanta, Georgia
Director Emeritus
Thomas H. Lenagh
Financial Advisor
Greenwich, Connecticut
Committees of the Board
(1) Executive Committee
(2) Audit Committee
(3) Investment Committee
(4) Compensation Committee
Officers
Chairman of the Board and Chief Executive Officer
Olin B. King
President and Chief Operating Officer
A. Eugene Sapp, Jr.
Senior Vice Presidents
Richard A. Holloway David F. Jenkins Jeffrey L. Nesbitt
Peter M. Scheffler Jerry F. Thomas Alexander A.C. Wilson
Vice Presidents
Bruce R. Anderson Charles Barnhart Patrick R. Barry
C.T. Chua James H. Ferry Francis X. Henry
George J. King Mark J. Klaver LeRoy H. Mackedanz
James H. McElroy Raymond E. Minter Michael H. Missios
Leonard L. Mitchum, Jr. B. William Nelson Charles N. Parks
N.K. Quek P. William Quinn John W. Siedlecki
Francois M. Thionet Christopher J. White
Secretary
Michael M. Sullivan
General Counsel
Powell, Goldstein, Frazer & Murphy
Atlanta, Georgia
Auditors
Ernst & Young LLP
Birmingham, Alabama
Transfer Agent and Registrar
Mellon Bank, N.A.
Pittsburgh, Pennsylvania
1-800-756-3353
Shareholder Relations
P.O. Box 1000
Huntsville, Alabama 35807
205-882-4300
Security Trading Markets
Common Stock
NASDAQ National Market System
Symbol SCIS
Common Stock Options
Chicago Board Options Exchange
Symbol SSQ
1-800-OPTIONS
Convertible Debentures
NASDAQ
Symbol SCISG
Commercial Paper
Bank of America N.T. & S.A.
San Francisco, California
Placement Agent
Annual Shareholders' Meeting
Last Friday in October
Annual Report to the S.E.C.
The annual report to the Securities and Exchange Commission on
Form 10-K provides complete exhibits and schedules. Copies will
be furnished upon written request to Shareholder Relations at
the address above.
(END OF 1994 ANNUAL REPORT TO SHAREHOLDERS)
(End of Exhibit 13)
EXHIBIT 22--SUBSIDIARIES OF REGISTRANT
Listed below are the principal subsidiaries of the Company and the percentage
of voting securities owned by the Company. The Company's other subsidiaries,
taken in the aggregate, would not constitute a significant subsidiary.
Jurisdiction in Percentage
which Incorporated of Voting
or Organized Securities
Owned
SCI Systems (Alabama), Inc. Alabama 100%
SCI Technology, Inc. Alabama 100%
Consolidated Communications Corporation Alabama 50%
SCI Foreign Sales, Inc. U.S. Virgin Isalands 100%
SCI MEX, Inc. Alabama 100%
Adelantos de Tecnologia S.A. de C.V. Mexico 100%
SCI Holdings, Inc. Delaware 100%
SCI Manufacturing Singapore Pte. Ltd. Singapore 100%
SCI Systems (Thailand) Limited Thailand 100%
SCI Irish Holdings Republic of Ireland 100%
SCI Ireland Limited Republic of Ireland 100%
SCI Alpha Limited Republic of Ireland 100%
SCI Systems (Canada), Inc. Canada 100%
SCI Holding France, S.A. France 100%
SCI France, S.A. France 100%
Newport, Inc. Georgia 100%
The Company has a branch operation in the United Kingdom, which previously was
operated as SCI U.K. Limited (a wholly owned subsidiary).
[DESCRIPTION] END OF EXHIBIT 22
Exhibit 23- Consent of Independent Auditor
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of SCI Systems, Inc. of our report dated August 4, 1994, included in the 1994
Annual Report to Shareholders of SCI Systems, Inc.
Our audits also included the financial statement schedules of SCI Systems, Inc.
listed in Item 14(a). These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in (i) the Registration
Statement (Form S-3 No. 33-12115) and related Prospectus pertaining to the
issuance of $75 million 5 5/8% Convertible Subordinated Debentures; (ii) the
Registration Statement (Form S-8 No.2-86230) and related Prospectus pertaining
to the Savings Plan of the SCI Systems, Inc. Employee Financial Security
Program; (iii) the Registration Statement (Form S-8 No. 2-91587) and related
Prospectus pertaining to the Incentive Stock Option Plan of SCI Systems, Inc.;
and, (iv) the Registration Statement (Form S-8 No. 33-11894) and related
Prospectus pertaining to the Non-Qualified Stock Option Plan of SCI Systems,
Inc., of our report dated August 4,1994, with respect to the consolidated
financial statements and schedules of SCI Systems, Inc. incorporated by
reference in this Annual Report for the year ended June 30, 1994.
Ernst & Young LLP
Birmingham, Alabama
September 26, 1994
[DESCRIPTION] END EXHIBIT 23
