FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ____________
Commission File No. 0-20292
Ampex Corporation
(Exact name of Registrant as specified in its charter)
Delaware 13-3667696
(State of incorporation) (I.R.S. employer identification number)
500 Broadway
Redwood City, California 94063-3199
(Address of principal executive offices, including zip code)
(650) 367-2011
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the Registrant as of January 30, 1998 was $115,486,648, based
on a price of $3.0625 per share, which was the closing price of the Registrant's
Class A Common Stock on the American Stock Exchange on that date. The Class A
Common Stock is the only class of voting stock outstanding.
As of January 30, 1998 there were 45,973,517 outstanding shares of Class A
Common Stock and no outstanding shares of Class C Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Proxy Statement for its 1998 Annual Meeting of Stockholders is
incorporated by reference into Part III (Items 10, 11, 12 and 13) of this Form
10-K.
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AMPEX CORPORATION
FORM 10-K
Year Ended December 31, 1997
INDEX
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Page
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PART I 1
ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 15
ITEM 3. LEGAL PROCEEDINGS 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT 17
PART II 18
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 18
ITEM 6. SELECTED FINANCIAL DATA 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 25
PART III 25
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY 25
ITEM 11. EXECUTIVE COMPENSATION 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 25
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 26
PART IV 26
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 26
SIGNATURES AND POWER OF ATTORNEY 33
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PART I
ITEM 1. BUSINESS
Introduction
Ampex Corporation ("Ampex" or the "Company") is a leading innovator in
the design and manufacture of high performance scanning recording devices and
digital image processors. Its specialized recording products are used for the
acquisition of data at high speeds under difficult conditions, such as those in
aircraft, and for the storage of mass computer data, especially images. The
Company has significant experience in digital image processing and has
approximately 1,000 patents and patent applications in this field and in
recording technology, from which it has derived significant licensing income.
The Company's principal licensees are the manufacturers of consumer video
products worldwide.
The Company's principal product groups are its mass data storage and
instrumentation products and its professional video and other products. The mass
data storage and instrumentation products group includes (i) 19- millimeter
scanning recorders and library systems (DST(R) and DIS(TM) products) and related
tape and after-market equipment; and (ii) data acquisition and instrumentation
products (primarily DCRsi(TM) instrumentation recorders) and related tape and
after-market equipment. The Company's professional video and other products
group includes primarily its DCT(R) video recorders and image processing systems
and related tape products and television aftermarket equipment. The Company's
DST tape drives and robotic library systems for computer mass data storage offer
superior data access times, rapid data transfer rates and low cost per megabyte
of storage. Ampex DIS instrumentation recorders allow users to record
instrumentation data on DST tape cartridges, so that the data can be used in a
computer environment as well as in an instrumentation environment. Ampex DCRsi
instrumentation recorders are designed for demanding aeronautical applications
such as commercial and military flight testing, as well as other applications
involving comparable data-gathering challenges in extreme environments. The
Company's DCT video recording products have been developed for high-end digital
component recording applications in entertainment and imaging markets. These
products are more fully described below under "Products."
During its 54-year history, Ampex has developed extensive technical
expertise in electronic storage, processing and retrieval of digital images. The
Company participates at the high end of the video market with its DCT broadcast
video products which were, in 1992, re-engineered to incorporate digital image
compression. The major industry market for video technology is in consumer
products. Ampex has licensed its patents for consumer markets since 1968, and
signed two new licenses in 1997. In the years 1993 through 1997, the Company's
licensing income averaged $16.3 million per year, and in fiscal 1997 totaled
$12.6 million. Royalty income has fluctuated materially from year to year and
there is no assurance that Ampex will continue to generate comparable levels of
licensing income in future years.
The Company was incorporated in Delaware in January 1992 as the
successor to a business originally organized in 1944. References to "Ampex" or
the "Company" include subsidiaries and predecessors of Ampex Corporation, unless
the context indicates otherwise. The principal executive offices of the Company
are located at 500 Broadway, Redwood City, California 94063, and its telephone
number is (650) 367-2011. The Company's Class A Common Stock is traded on the
American Stock Exchange under the symbol "AXC."
Recent Developments
In January 1998 the Company issued and sold to a group of institutional
investors its 12% Senior Notes due March 15, 2003 (the "Senior Notes") in the
aggregate principal amount of $30,000,000, together with warrants to purchase up
to 1,020,000 shares of the Class A Common Stock of the Company (the "Warrants").
As a result of the issuance of the Senior Notes, the Company's total
indebtedness and debt service obligations have increased substantially from
prior levels. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." The Company
expects to use the net proceeds of the Senior Notes
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(approximately $28.5 million after deduction of estimated fees and expenses)
primarily for working capital purposes, expansion of its existing business
lines, and possible investments in, or acquisitions of, new businesses. The
Company has not entered into any negotiations, arrangements or understandings
with any acquisition candidates at the date of this Report, except that the
Company has been in discussions regarding the acquisition of the seismic data
storage and related software and marketing business and assets of one of its
resellers in the oil and gas exploration industry. The acquisition of such
business and assets, if completed, would not be material to the Company. There
can be no assurance that the Company will successfully complete this acquisition
or any other acquisitions of businesses or that the Company will realize any
financial benefit therefrom. See "Markets -- Mass Data Storage and
Instrumentation Products -- 19-millimeter Products," "-- Research, Development
and Engineering" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations for the Three Years
Ended December 31, 1997."
Forward-Looking Statements
This Form 10-K contains predictions, projections and other statements
about the future that are intended to be "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company, or industry results, to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others: potential inaccuracy of future sales and expense
forecasts; effects of increased inventories; potential inability of the Company
to execute its marketing, acquisition, investment, licensing and other
strategies; potential inability of the Company to integrate acquired businesses;
effects of existing and emerging competition and industry conditions; decline in
sales to the government; declining sales of professional video products; rapid
technological changes and risks of new product and business development efforts;
the development of application software for its 19-millimeter products;
international operating difficulties; redemption of the Company's outstanding
Noncumulative Preferred Stock; possible future issuances of debt or equity
securities; and the Company's liquidity and anticipated interest expenses. These
forward-looking statements speak only as of the date of this Report. Statements
herein with respect to the Company's future strategies, policies or practices
are subject to change at any time without prior notice to security holders of
the Company, and the Company disclaims any obligation or undertaking to
disseminate updates or revisions of any forward-looking statements contained or
incorporated herein to reflect any change in the Company's expectations with
regard thereto or any change in events, conditions or circumstances on which any
such statement is based. Each forward-looking statement that the Company
believes is material is accompanied by one or more cautionary statements
identifying important factors that could cause actual results to differ
materially from those described in the forward-looking statement. The cautionary
statements are set forth following the forward-looking statement, and/or in
other sections of this Form 10-K. IN ASSESSING FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS FORM 10-K, READERS ARE URGED TO READ CAREFULLY ALL CAUTIONARY
STATEMENTS -- INCLUDING THOSE CONTAINED IN OTHER SECTIONS OF THIS FORM 10-K.
Products
As stated above in "Introduction," the Company's principal product
groups are its mass data storage and instrumentation products (including DST,
DIS and DCRsi) and its professional video and other products (including DCT).
For information concerning net sales for each product group, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Mass Data Storage and Instrumentation Products
19-millimeter Products. In 1992, Ampex entered the high-performance
mass data storage market with its DST series of 19-millimeter data storage
products, including tape drives and robotic library systems. Based on its
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own evaluation and that of outside sources, the Company believes its DST and DIS
mass data storage products offer a price-performance advantage over alternative
magnetic, optical, solid state or disk-based storage systems now available,
providing fast data access times, rapid data transfer rates and extremely low
cost per megabyte of storage.
Access time is one of the most important sustainable advantages of DST
products compared to alternative tape-based storage systems. Older tape-based
storage products achieve low-cost storage but trade off accessibility; since the
data stored is not available for most online or near-online applications, such
systems are generally limited to back-up and archival storage applications. DST
products, in contrast, combine low storage cost per megabyte with fast access to
rapidly transferable information. DST products use software logic that enables a
library or even a single tape drive to organize information using partitions,
much as disk drives do. Individual segments can then be accessed quickly and
updated independently. This proprietary Ampex technology, introduced in 1994,
gives DST products the performance of a digital tape drive and the efficiency
and access speed of partitioned memory. DST systems also provide rapid data
transfer rates that exceed the speed of other mass storage products such as
optical disks, allowing a user to download stored information to a computer at a
sustained rate of 15 megabytes per second ("MB/sec"), with an option available
to increase to a rate of 20 MB/sec.
DST and DIS tape drives use core technology developed by Ampex for its
digital video recorders. The drives use high-density metal particle tape
cartridges, which are available in a range of sizes providing storage capacities
from 25 to 165 gigabytes ("GB") per cartridge in single density format and from
50 to 330 GB per cartridge in double density format. DST automated library
systems incorporate multiple tape cartridges and tape drives and provide from
1.2 to 12.8 terabytes ("TB") of storage capacity while occupying only a fraction
of the floor space required by competing storage systems. The Company recently
announced the availability of expansion modules which can expand DST library
storage capacity in virtually unlimited increments.
Ampex's single-density DST product line currently includes the DST 310
tape drive, the DST 410 automated cartridge library and the DST 810 automated
library system. The DST 310 is a single cartridge tape drive that provides
convenient and fast backup for applications such as large databases or disk
arrays. The DST 310 is capable of accepting 25 GB, 75 GB and 165 GB cartridges.
The DST 410 automated cartridge library is an entry- level library with a
storage capacity of up to 1.2 TB in less than eight square feet of space. The
DST 810 automated library is designed to combine from one to four tape drives,
and features a storage capacity of 6.4 TB. The DST 810 library system is
optimized for large file size applications and, accordingly, is suited for
image-based document storage, medical records, news archives, oil and gas
seismic data and CAD/CAM image data, as well as potential video-on-demand
applications. These products can deliver a sustained rate of 15 MB/sec across a
SCSI-2 interface, search speeds of up to 1600 MB/sec, an average access time of
less than 16 seconds and capacity of up to 165 GB on a single cartridge.
In the first quarter of 1997, the Company began shipping its new
"double-density" versions of its 19- millimeter data storage product line. The
DST 310, DST 410 and DST 810 products are all available with double density
cartridges, as the DST 312, DST 412 and DST 812 products, respectively. The new
versions double the amount of data that can be stored on a single cartridge with
a corresponding reduction in the cost per megabyte of the Company's mass data
storage products. The DST 312 tape drive can hold 50 GB, 150 GB and 330 GB
cartridges, and the DST 412 library can store up to 2.4 TB of data. The DST 812
library system can store 12.8 TB of data at a cost of approximately $.02 per
megabyte. Although the new versions are intended to enhance the performance of
the Company's data storage products, the Company believes that the availability
of these new versions has contributed to the decline in sales of the Company's
existing 19-millimeter data storage products. Ampex is currently working to
double the per-cartridge capacity of its mass data storage products again which,
if successful, could permit the storage of as much as 660 GB of data on a single
cartridge. The Company believes that this will enable it to maintain its
relative cost advantage as per-megabyte costs of competing storage technologies,
such as disk drives, continue to decline. There can be no assurance that these
efforts will be successful or, if they are, that future sales will not be
adversely affected if the Company experiences any product development delays or
transition difficulties. (Subsequent references to storage capacity of the
Company's mass storage products in this Form 10-K refer to the Company's new
double-density versions unless the context otherwise specifies.)
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In October 1997, the Company announced the availability for shipment in
early 1998 of a new medium-sized library product, the DST 712, which has a
maximum storage capacity of 5.8 TB in 7.5 square feet of space and can
accommodate one or two tape drives. This automated tape library product was
designed to fill the gap between the Company's DST 412 and DST 812 products. The
Company also announced its intention to offer an expansion module for the DST
712 and DST 812 products, which will permit additional storage capacity for
those products on a cost-efficient, incremental basis.
Although the Company believes that its DST drives and library systems
offer significant advantages over competitive systems, there are a variety of
risks involved in this product line. The Company's DST products incorporate a
proprietary magnetic tape format that is not compatible with current industry
standard formats. The Company has not licensed its tape format to other
manufacturers and as such is the sole source of these products. In addition,
other factors relating to the markets for these products and to competition in
these markets may affect future sales of DST products. See "Markets--Mass Data
Storage and Instrumentation Products," "--Distribution and Customers,"
"--Competition," and "--New Product Development and Industry Conditions."
In 1995, the Company expanded its 19-millimeter product line with the
introduction of its DIS instrumentation recorders and library systems. The
Company's principal instrumentation products currently are the DIS 120i and DIS
160i instrumentation/data recorders and the DIS 220i automated
instrumentation/data library. The Company's DIS products are designed for mass
storage of instrumentation data. These recorders use the same 19mm helical scan
recording technology used in the Company's DST products. Data from DIS recorders
can also be stored on DST cartridges, placed in DST libraries and accessed using
DST tape drives, so that all the benefits of DST mass storage products are
available, including rapid, random access to the data for subsequent processing.
The DIS 120i and 160i drives have capacities of 25, 75 or 165 GB (depending on
the DST cartridge used) and record/reproduce rates of 120 Mb and 160 Mb per
second, respectively. The DIS 220i automated library, which is the
instrumentation version of the DST 410 library, can hold up to 1.2 terabytes of
data. The Company introduced double density versions of each of its DIS
recorders at the time it similarly upgraded its DST product line.
Data Acquisition/Instrumentation Products. Ampex has been
well-established for a number of years as a supplier of instrumentation
recorders. Ampex has supplied these recorders primarily to government agencies
for use in data collection, satellite surveillance and defense-related
applications, as well as to defense contractors and aerospace and other
industrial users primarily for test and measurement purposes. Ampex
instrumentation recorders have been used on almost every advanced commercial and
U.S. military aircraft, as well as on many foreign aircraft. The Company
believes they are well-suited to these demanding aeronautical applications, and
other applications involving comparable data-gathering challenges in extreme
environments, because of their unmatched performance and reliability.
The Company's principal data acquisition/instrumentation products
currently are the DCRsi 240, DCRsi 107 and DCRsi 75 digital instrumentation
recorders. The DCRsi recorders are rugged, highly reliable and compact recorders
that permit uninterrupted data capture over very long periods of time, such as
during test flights of new aircraft. The DCRsi 240 instrumentation recorder has
the capability of storing 48 GB of data at a record/reproduce rate of up to 240
megabits ("Mb") per second. The DCRsi 107 instrumentation recorder has a similar
storage capacity and a record/reproduce rate of 107 Mb per second. During 1995,
the Company introduced the DCRsi 75 recorder, a lower cost DCRsi model with a
record-reproduce rate of 75 Mb per second. Shipments of DCRsi 75 recorders
commenced in 1996.
A significant portion of data acquisition and instrumentation recorder
sales reflect purchases by the federal government, which can be subject to
significant fluctuations. See "Markets--Data Acquisition/Instrumentation
Recorders." In addition, other factors relating to the markets for the Company's
instrumentation products and to competition in these markets may affect future
sales of these products. See "Distribution and Customers," "Competition," and
"New Product Development and Industry Conditions."
Professional Video Recording and Other Products
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The Company's DCT products, which employ a 19-millimeter digital
component video recorder format, are designed primarily for use in high-quality
post-production applications. DCT products record in a digital component format
compatible with "CCIR-601," a worldwide signal standard for digital component
television equipment. The Company's DCT 1700d digital tape drive is designed for
high-end performance, as its output is not subject to signal degradation even
during complex layering and special effects sequences. In order to process the
higher data volume involved in digital component recording, DCT recorders employ
data compression techniques.
Ampex also offers a variety of switchers and systems products as part
of the DCT product line, including digital special effects systems and
production switchers, that are used in connection with the production of
television programming. These products focus on the on-line segment of the
professional television industry. On-line operations typically require equipment
to operate at high speeds and require the highest picture quality. In order to
process video signals at the required speeds, Ampex's products employ advanced
proprietary signal processing and other electronic technologies, many of which
are also used in the Company's data storage digital recorder systems. Ampex's
switchers and systems products also incorporate advanced filtering techniques
and incorporate significant special purpose software to manipulate, generate or
combine video signals.
In the period 1992 to 1994, the Company discontinued sales of many
older (primarily analog) recorders, switchers and systems products, which
contributed to the decline in sales for this product group in recent years.
Sales levels have also been adversely affected by changes in the traditional
markets for the Company's professional video products and by the reduction in
the Company's distribution network for these products. See "Markets--
Professional Video Recording Products" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Results of Operations for
the Three Years Ended December 31, 1997 -- Professional Video Recording and
Other Products." In 1995, 1996 and 1997, sales of these products consisted
almost exclusively of DCT video recorders and image processing systems. In view
of the recent announcement of standards for the digital transmission of
television signals, Ampex believes it is unlikely that such special purpose
video products will continue to be sold in material quantities. Accordingly, the
Company expects that its sales of products in this market will be limited to
after-market products and services, and that such sales will continue to decline
in future years. Certain of the Company's DST and DIS products have been used in
professional video recording markets, and the Company believes that the
potential for increased sales of its 19-millimeter products in these markets
could help to offset the decline in sales of its DCT products, but there can be
no assurance that this will occur.
The Company's other products are currently almost entirely television
after-market products (including spare parts) relating to television products
that the Company now manufactures, or that it manufactured in prior periods and
continues to support. Ampex's after-market activities have declined as a
percentage of net sales in recent years as the Company has narrowed its
professional television product line, and many of the products that have
historically generated a significant portion of these net sales (including
Betacam small-format recorder after-market products, turnkey studio facilities,
mobile vans, computer core memory products and refurbished equipment accepted as
trade-ins on new equipment sales) have been discontinued. Other products also
include the sale of a limited number of integrated circuits. See
"Markets--Components" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations for the Three Years
Ended December 31, 1997 -- Professional Video Recording and Other Products."
Markets
Mass Data Storage and Instrumentation Products
19-mllimeter Products. The Company's DST mass data storage systems are
designed to meet the rapidly changing requirements of the mass data storage
market. The market for mass storage devices has undergone an evolution in recent
years. Historically, mass storage devices were used to store data off-line as
protection against catastrophes affecting on-line storage, to archive data for
record retention purposes or as a low-cost means of storing infrequently used
data. More recently there is a growing demand for mass storage devices that
provide cost-effective storage combined with rapid access to data. The demand
for storage devices that can store large amounts of data
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in a readily accessible manner has grown due to two factors. First, faster and
lower-cost computer processors are generating more data. Second, a steadily
growing percentage of information is created, stored, accessed and transmitted
in visual form (such as drawings, pictures, scanned documents and other images),
and the storage of visual information requires much greater capacity than the
storage of text. For example, while one page of text requires 2,000 bytes of
storage, one second of full-color video requires 30,000,000 bytes.
Despite the rapid increase in the need for data storage on the part of
most computers users, the Company believes that its mass storage products offer
such large capacities and high speeds that they currently exceed the capacity
needs and retrieval rates required by the majority of computer users.
Accordingly, the Company expects that its sales of these products will continue
to be limited to large and technically sophisticated corporations and national
and local government agencies for the foreseeable future. Ampex's customers in
these industries include Mobil, Amoco, the FBI, NASA, Time Warner, Fox
Television and Industrial Light and Magic. The Company also believes that if the
new digital television standards are widely adopted, Ampex may be able to sell
its DST and DIS products to customers who historically purchased its specialized
video products. Ampex's current sales of mass data storage and instrumentation
products are concentrated at present in three major vertical industry markets --
the oil and gas exploration industry; government; and the digital video industry
organizations. The Company believes that, whereas in prior years organizations
involved in the markets described above maintained large technical staffs which
were capable of integrating equipment such as the Company's into their existing
computer facilities, even the largest of these potential customers are now
increasingly likely to purchase complete solutions or even to outsource certain
activities and to reduce their in-house technical staffs. This trend is
unfavorable to companies like Ampex, which primarily provide system components
like mass data storage tape drives. The Company has been working to address this
by ensuring that certain widely used software can interface with its products.
For example, the Company is seeking to address hierarchical storage management
and database backup applications in certain markets, and its DST 310 tape drive
and DST 410 and 810 libraries are now supported by certain third party
hierarchical storage management and UNIX file system back up software packages.
However, the Company cannot predict the extent to which such software will
result in increased sales of DST products.
In order to capitalize further on the relatively low cost per megabyte
and rapid retrieval rates of its products, the Company believes that it may be
necessary to offer more specialized and industry-specific services than it
currently provides. Accordingly, the Company intends to expand the integration,
software and other services that it offers, either by developing these services
internally or by investing or acquiring other entities capable of providing such
services, together with Ampex equipment, initially in Ampex's existing markets.
Ampex has not reached any understanding with respect to any such acquisitions or
investments, except that it has been in discussions regarding the acquisition of
the seismic data storage and related software and marketing assets of one of its
larger resellers in the oil and gas exploration industry. There can be no
assurance that the Company will successfully complete any such acquisitions or
investments or that the Company will recognize any financial benefit from them.
Although the emergence of applications that envision the transmission of video,
graphics and other images over the Internet or private networks may create new
markets for the Company's data storage products, the Company's management
believes that these applications will require bandwidth improvements to current
information delivery systems before the information storage systems offered by
the Company and others will be required. Should this technical obstacle be
overcome and commercial markets ultimately develop, the Company believes that it
will experience aggressive competition from other companies, and there can be no
assurance that the Company will be able to remain competitive against products
ultimately offered by such companies.
Data Acquisition/Instrumentation Recorders. Ampex's DCRsi recording
drives and magnetic media are designed to acquire large volumes of data in
stressful physical environments, and are used extensively in airborne and naval
intelligence acquisition and for the collection of test data during the design
and qualification of airplanes. DCRsi products are used by U.S. and foreign
military and intelligence agencies (including those of Germany, Japan, the
United Kingdom and Russia), as well as by manufacturers of commercial airplanes,
such as Boeing Corporation, and by Airbus, the consortium of European airframe
manufacturers. A significant portion of DCRsi products are also sold in versions
that are intended for use in ground facilities for the long-term storage or
analysis of data previously collected in mobile environments.
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The storage capacity and data transfer rates of the Company's DCRsi
products can be varied continuously from fractions of a megabit per second up to
240 megabits per second on its highest performance versions. These products
perform reliably in conditions of extreme shock and vibration, variations in
gravitational force and extremes of temperature, humidity and electronic
interference, such as those found in aircraft, helicopters and space vehicles.
Because these products are widely used in their target markets, recordings made
on one machine can subsequently be reproduced on other machines at various
customer locations. In ground-based applications, which generally are less harsh
environments that do not require the ruggedness of a DCRsi recorder, the storage
and analysis functions of DCRsi products can also be performed by the Company's
19-millimeter DST and DIS mass data storage products.
The Company has supplied its data acquisition and instrumentation
products to U.S. and foreign government agencies for many years, and this
continues to be the primary market for the Company's DCRsi products. Sales to
government agencies are subject to fluctuation as a result of changes in
government spending programs (including defense programs). Sales to these
markets could be adversely affected by pressure on government agencies to reduce
spending, and any material decline in the current level of government purchases
of the Company's products could have a material adverse effect on the Company.
Professional Video Recording and Other Products. The Company's DCT
professional recording products are designed to provide high-performance
capabilities for customers in entertainment and imaging markets. Historically,
Ampex sold its professional video products to television companies and
broadcasters that used them to produce or edit television commercials or
programs for broadcast. More recently, however, the production and editing of
television commercials and programs is increasingly being performed by
independent organizations rather than by broadcasters or cable television
companies themselves. These services are commonly known as "post-production"
services. Most of Ampex's video recording product sales are to such
post-production facilities or to motion picture studios that use Ampex products
for their in-house post-production needs. Post-production customers whose
business reputations are based on high picture quality and whose needs include
rapid editing capabilities currently represent the major market for the
Company's DCT digital component video recording products. The Company does not
serve the lower end of the post-production market.
Sales of the Company's video recording products have declined in recent
years as a result of changing conditions in the traditional markets for the
Company's products. In response to these changes, the Company has reduced its
product line, marketing expenditures and distribution network for its video
products. In addition, the Company believes that the recent announcement of
standards for the digital transmission of television signals will cause sales of
its special purpose video products to continue to decline in future years. These
factors have had and will continue to have a negative impact on sales of the
Company's professional video recording and related aftermarket products.
Distribution and Customers
The Company currently distributes all its 19-millimeter products
(including DST and DIS recorders) directly through its internal sales force, as
well as through independent value-added resellers. The Company's DST products
are sold to customers such as oil and gas companies, imaging companies,
information and entertainment delivery companies and broad-band
telecommunications companies. The Company is also pursuing opportunities in the
market for storage of very large databases maintained by many commercial and
government entities.
The Company's instrumentation recorders (including its DIS recorders)
are sold primarily to government agencies involved in data collection, satellite
surveillance and defense-related activities, as well as to defense contractors
and other industrial users for testing and measurement purposes. Sales of
instrumentation recorders are made through the Company's internal domestic and
international sales forces, as well as through independent sales organizations
in foreign markets.
Ampex's professional video recording products are sold principally to
customers in entertainment markets, including independent post-production
houses, broadcast and cable networks, motion picture studios and independent
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television stations. The Company distributes its video products through its
internal sales force and through various independent distributors.
The Company currently operates a total of nine sales offices, including
six in the U.S., one in Germany, one in Japan and one in the United Kingdom.
Ampex's sales to U.S. government agencies (either directly or
indirectly through government contractors) represented 27.7% of net sales in
fiscal 1997 compared to 18.0% in fiscal 1996 and 14.7% in fiscal 1995. Products
sold for U.S. government use include primarily instrumentation recording
systems. Sales to government customers are subject to fluctuations as a result
of changes in government spending programs and are subject to customary
contractual provisions permitting termination at the government's election. See
"Markets--Mass Data Storage and Instrumentation Products."
No single non-governmental customer accounted for more than 10% of
Ampex's total net sales in 1996 or 1997.
Research, Development and Engineering
Scanning recording systems such as those developed by Ampex involve
extremely complex technology. As a result, Ampex has developed extensive
expertise in a wide area of technical disciplines and has developed fundamental
innovations in digital image processing, magnetic recording technology and
channel electronics. In 1997, the Company spent approximately 19% of net sales
for research and development programs and engineering costs, compared to 17% in
1996 and 16% in 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 3 of Notes to Consolidated
Financial Statements. These continuous research and development efforts have
resulted in a substantial patent portfolio covering not only existing products,
but also covering technological innovations that may result or be useful in
future commercial products. With respect to current products, the Company has
allocated a major portion of its research and development budget in recent years
to the 19-millimeter digital recording technology included in its DST, DIS and
DCT products. The Company will continue to fund future generations of its mass
data storage and instrumentation products, and presently is working to double
the current per-cartridge capacity of these products to 660 GB of data and to
increase their data transfer rates above the current 15-20 MB/sec levels. If
successful, these efforts will further enhance the cost- efficiency of these
products. Ampex also plans to introduce lower cost versions of its data
acquisition and instrumentation products, and to improve the ability of these
products to interface with other companies' products. The Company hopes to
develop an expansion module that will increase the solid state memory capacity
of its DCRsi products, thereby increasing the speed of their data acquisition
functions. See "Products--Mass Data Storage and Instruments" above. Ampex will
also continue researching other new product opportunities that capitalize on its
expertise and patented technology in digital image processing, magnetic
recording and channel electronics. All of the Company's research, development
and engineering efforts are subject to certain risks and uncertainties described
below under "New Product Development and Industry Conditions," and there can be
no assurance that any of these efforts will be technologically or commercially
successful.
Keepered Media Development Program
Ampex has previously disclosed that it has been engaged since late in
1994 in a research and development program to attempt to commercialize its
"keepered media" technology for use in the hard disk drives that are attached to
most computers. A description of this technology and certain developments and
uncertainties related to the development program are set forth in the Company's
1996 Annual Report on Form 10-K (the "1996 Form 10-K") and its 1996 and 1997
Quarterly Reports on Form 10-Q. In order to understand properly the following
information, it is necessary to refer to these earlier reports.
As previously disclosed, keepered media technology was originally
intended for use in inductive head-based disk drives, which are rapidly being
replaced by magneto-resistive ("MR") head-based technology. In 1996 and
679833.6
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1997, the Company spent a significant portion of its research, development, and
engineering budget on the development of keepered media. The Company continues
to believe that keepered media could have commercial potential. However,
management has concluded that this technology will not generate revenue in the
near future and, accordingly, the Company has reduced the level of its
development expenditure for keepered media, but is continuing its research for
advanced uses of the technology. In the fourth quarter of 1997, the Company
incurred charges of $0.9 million in connection with the transfer of the keepered
media program to a long-term development project. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Results of
Operations for the Three Years Ended December 31, 1997 -- Research, Development
and Engineering" and "-- Restructuring Changes (Credits)."
The Company has discontinued its previously disclosed programs relating
to the development of disk drives based on inductive heads, and has terminated
one of its previously announced contractual arrangements for the development of
keepered media. The Company's research indicates that it is unlikely that
keepered media will offer significant capacity gains with current generation MR
heads unless such heads are substantially modified from current designs, and
management believes it is unlikely that disk drive manufacturers will modify
existing head designs. However, as new generations of heads are developed with
higher capacity, the benefits of keepered media, such as improved thermal
stability, could become significant. The Company is targeting its continuing
research on keepered media for such higher density uses, but it is impossible to
forecast when, or if, keepered media will be adopted for commercial disk drives.
In addition to continuing research, the Company is giving consideration to the
development of products that would incorporate keepered media in its own high
performance digital tape drives. The Company is unable to forecast when or if it
will receive any revenues from keepered media, and the Company's business plans
do not assume that any such revenue will be received.
Patents, Licenses and Trademarks
As a result of its on-going research and development expenditures, the
Company has developed substantial proprietary technology, certain of which it
has elected to patent or to seek to patent. As of December 31, 1997, Ampex held
over 1,000 patents and patent applications, including approximately 350 patents
in the U.S., approximately 550 corresponding patents in other countries, and
approximately 150 U.S. and foreign patent applications pending. The majority of
these patents and pending patents relate to the Company's recording technology.
The Company continually reviews its patent portfolio and allows non-strategic
patents to lapse, thereby minimizing substantial renewal fees.
Ampex has granted numerous royalty-bearing patent licenses to, and
holds patent licenses from, third parties. Certain of the Company's patented
innovations have been adopted for use in mass market consumer products, and as a
result, the Company receives the majority of its licensing royalties from
foreign manufacturers of VCRs and 8-mm camcorders. The Company intends to
negotiate license agreements with remaining unlicensed manufacturers of 8-mm
camcorders, but there can be no assurance that any such licensing efforts
(including any necessary litigation) will be successful. In the last two years
the Company has been pursuing licensing opportunities in the market for
television receivers, from which it has not previously derived any material
licensing income. The Company believes it may have several patents that could be
useful in television receivers and is taking various steps to enforce them,
including in one instance litigation.
Since the fourth quarter of 1995, the Company has been involved in
patent infringement litigation with a major foreign manufacturer of VHS video
recorders and television receivers. In response to the Company's lawsuit, this
manufacturer filed a lawsuit against Ampex alleging patent infringement. This
litigation relates not only to videotape recorders, a traditional source of the
Company's royalty income, but also to television receivers from which the
Company has not previously generated any income. There can be no assurance that
the Company will be successful in this litigation, but to the extent that it
prevails in this litigation, it may be able to obtain additional royalty income
from the licensing of its patents that are used in the manufacture of television
receivers. See "Legal Proceedings."
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The Company believes that it has other patents, not the subject of this
litigation, that may also be used in the manufacture of television receivers. In
addition, Ampex is evaluating the extent to which its technology may be employed
or useful in video games, and will continue to evaluate additional products as
potential licensing opportunities to the extent that its technical and financial
resources permit. Ampex has not granted any licenses under its scanning recorder
patents specifically for data storage applications, but it may do so in the
future if it determines that this would support the Company's marketing
strategy.
It is not possible to predict the amount of royalty income that will be
received in the future. Royalty income has historically fluctuated widely due to
a number of factors that the Company cannot predict, such as the extent of use
of the Company's patented technology by third parties, the extent to which the
Company must pursue litigation in order to enforce its patents, and the ultimate
success of its licensing and litigation activities. Moreover, there can be no
assurance that the Company will continue to develop patentable technology that
will generate significant patent royalties in future years.
U.S. patents are, at present, in force for a period of 20 years from
the date of application and patents granted by foreign jurisdictions are
generally in force for between 14 years to 20 years from the date of
application. Ampex has obtained its present patents over the course of the past
20 years and, accordingly, has patents in force that will expire from time to
time over the next 20 years. Patents are important to the current overall
business of the Company, both as a source of protection of the proprietary
technology used in the Company's current products, and as a source of royalty
income. While results of operations would be adversely affected by the loss of
patents that generate significant royalty income, management believes that none
of Ampex's current product lines is materially dependent upon a single patent or
license or group of related patents or licenses, and that timely introduction of
products incorporating new technologies or particularly suited to meet the needs
of a specific market or customer group is a more important determinant of the
success of Ampex's current business. Nevertheless, there can be no assurance
that the Company will continue to develop patentable technology that will be
able to generate significant patent royalties in future years to replace patents
as they expire. See "Research, Development and Engineering."
Ampex regards its trademark Ampex(R) and the Ampex logo as valuable to
its businesses. Ampex has registered its trademark and logo in the U.S. and a
number of foreign countries. U.S. trademark registrations are generally valid
for an initial term of 10 years and renewable for subsequent 10-year periods.
The Company's former magnetic tape subsidiaries (the "Media" subsidiaries),
which were sold by the Company in November 1995, have a non-exclusive license to
use the Ampex trademark on their audio, video and instrumentation media products
through July 2000. Ampex has not granted any other material rights to use its
name or logo to any other third party. Other trademarks of Ampex include DCT,
DST, DCRsi and DIS.
Manufacturing
The Company's products are manufactured at Ampex's facilities in
Redwood City, California and Colorado Springs, Colorado. Products are designed
and engineered primarily in Redwood City, California. Because the Company's mass
data storage products incorporate many of the technologies and components of the
Company's 19mm-based video tape recorders, the manufacturing process of the mass
data storage products has benefited from the existing video recorder production
facilities and techniques.
In January 1996, the Company sold its Redwood City, California
property, and relocated its manufacturing, administrative and RD&E operations to
smaller facilities located on a portion of the property that it leased back at
the time of sale. In May 1996, the Company sold a portion of its Colorado
Springs, Colorado facility which was not required for current operations. See
"Properties." The Company believes that its consolidated manufacturing
facilities continue to have sufficient capacity to accommodate business growth
for its present products in the foreseeable future, and that the relocations
will not have a long-term adverse effect on the Company's manufacturing capacity
or on its ability to meet the customer demands for its products in a timely
manner.
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The Company maintains insurance, including business interruption
insurance, that management considers to be adequate and customary under the
circumstances. However, there is no assurance that the Company will not incur
losses beyond the limits of, or outside the coverage of, its insurance.
Sources of Supply
Ampex uses a broad variety of raw materials and components in its
manufacturing operations. While most materials are readily available from
numerous sources, Ampex purchases certain components, such as customized
integrated circuits and flexible magnetic media, from a single domestic or
foreign manufacturer. Significant delays in deliveries of, or defects in the
supply of, such components could adversely affect Ampex's manufacturing
operations pending qualification of an alternative supplier. In addition, the
Company produces highly engineered products in relatively small quantities. As a
result, its ability to cause suppliers to continue production of certain
products on which the Company may depend may be limited. The Company does not
generally enter into long-term raw material supply contracts. In addition, many
of the components of Ampex's products are designed, developed and manufactured
by Ampex itself, and thus are not readily available from alternative sources.
Fluctuations in Operating Results; Seasonality; Backlog
Ampex's sales and results of operations are generally subject to
quarterly and annual fluctuations. Factors affecting operating results include:
customer ordering patterns; availability and market acceptance of new products;
timing of significant orders and new product announcements; order cancellations;
receipt of royalty income; and numerous other factors. Ampex's revenues are
typically dependent upon receipt of a limited number of customer orders
involving relatively large dollar volumes in any given fiscal period, increasing
the potential volatility of its sales revenues from quarter to quarter. In
addition, sales to government customers (primarily sales of DCRsi
instrumentation products) are subject to fluctuations as a result of changes in
government spending programs, which can materially affect the Company's gross
margin as well as its sales. Sales of most of the Company's products have
historically declined during the first and third quarters of its fiscal year,
due to seasonal procurement practices of its customers.
A substantial portion of the Company's backlog at a given time is
normally shipped within one or two quarters thereafter. Therefore, sales in any
quarter are heavily dependent on orders received in that quarter and the
immediately preceding quarter. Ampex's backlog of firm orders at December 31,
1997 was $6.9 million, compared to $3.4 million at December 31, 1996 and $13.8
million at December 31, 1995. The backlog at December 31, 1997 was approximately
35% of average quarterly net sales, based on 1997 sales levels. Ampex does not
generally include foreign orders in backlog until it has obtained requisite
export licenses and other documentation. Orders may be subject to cancellation
in the event shipments are delayed. For all of the foregoing reasons, results of
a given quarter are not necessarily indicative of results to be expected for a
fiscal year.
Competition
Ampex encounters significant competition in all its product markets.
Although its competitors vary from product to product, many are significantly
larger companies with greater financial resources, broader product lines and
other competitive advantages.
Ampex competes in the mass data storage market with a number of
well-established competitors, such as IBM, Storage Technology Corporation,
Exabyte Corporation, Sony Corporation and Quantum Corporation, as well as
smaller companies. In addition, other manufacturers of scanning video recorders
may seek to enter the mass data storage market in competition with the Company.
For example, in 1996, IBM Corporation announced the general availability of a
new high-capacity, high-speed tape storage product designated "Magstar." Also,
Sony Corporation in 1995 introduced its DTF tape drive, which is intended for
the mass data storage industry. In the mass data storage market, the Company
believes that the principal competitive factors are product performance, cost of
equipment and media, product reliability and availability of service and
support. The Company believes its strongest competitive
679833.6
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advantage is in the area of product performance. However, DST products are
relatively expensive in comparison to other competitive products, and are
generally cost-effective only if the customer requires the high level of
performance and storage capacity of DST products. While the Company is working
to reduce the cost of its DST products, the prices of other storage systems,
such as disk drives, are also declining. In addition, although DST products
offer faster data access times than competing tape-based library systems,
magnetic disks deliver faster data access than DST products. There can be no
assurance that the Company can compete successfully on a long-term basis in the
mass data storage market.
In the instrumentation market, the Company competes primarily with
companies that depend on government contracts for a major portion of their sales
in this market, including Sony, Loral Data Systems, Datatape Incorporated and
Metrum Incorporated. The number of competitors in this market has decreased in
recent years as the level of government spending in many areas has declined. The
principal competitive factors in this market are cost, product reliability,
product performance and the ability to satisfy applicable government procurement
requirements.
In the professional video recorder market, Sony and Panasonic are the
leading competitors of the Company. Competition in this market is based
principally on design and manufacturing expertise, new product development,
service, reliability and price. In the high end of the market, management
believes that Ampex is competitive in each of these areas, although the
Company's sales of these products have declined due to the recently announced
digital television transmission standards. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations for the Three Years Ended December 31, 1997 -- Mass Data Storage and
Instrumentation Recorders." DCT products are not competitive in the lower end of
the market. Sales of these products have been declining in recent years as the
Company has discontinued many of its professional video products.
New Product Development and Industry Conditions
The data storage, instrumentation and video recording industries are
characterized by continual technological change and the need to introduce new
products and product upgrades. This requires a high level of expenditure for
research and development. Obsolescence of existing product lines, or the
inability to develop and introduce new products, could have a material adverse
effect on sales and results of operations. Although Ampex has completed
development of its 19-millimeter digital video tape recorders and its
second-generation mass data storage drives and robotic library systems, the
Company must continue to invest in research and development programs to improve
these products and develop new products. No assurance can be given that existing
products will not become obsolete, that any new products will win commercial
acceptance or that Ampex's new products or technology will be competitive. See
"Competition." Furthermore, the introduction of new products or technologies can
be hampered by technical problems in design, manufacturing and test procedures
or the occurrence of other unforeseen events.
Ampex has been manufacturing its 19-millimeter digital video recorders
since 1989, and has been selling its DCT recorders since 1992. However, sales of
all of its video recording products have declined substantially in recent years,
partly as a result of changes in the market for the Company's products, as
lower-cost small format recorders have replaced traditional high-end products
for many applications. The Company expects that the traditional markets for its
video products will continue to decline. Accordingly, any significant increases
in sales of DCT products will depend on the success of the Company's efforts at
identifying and developing new markets for the products, and there can be no
assurance that the Company can do so. See "Products-Professional Video Recording
and Other Products" and "Markets--Professional Video Recording and Other
Products."
Sales of the Company's instrumentation products can be significantly
affected by changes in government spending levels. See "Markets--Mass Data
Storage and Instrumentation Products--Data Acquisition Instrumentation
Recorders" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
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The Company significantly restructured its product lines during 1993
and 1994, and the Company has no present plans to discontinue any of its current
principal products. However, like all technology companies, the Company must
continually reassess its products based on their ability to respond to the
changing demands of the marketplace. If, as a result of such a reassessment, the
Company decides to discontinue any significant products, such a decision could
have a material adverse effect on sales and operating results.
International Operations
Although the Company's net sales revenues include significant revenue
from sales to foreign customers, these sales (particularly sales of professional
video products) have been declining in recent years. Sales to foreign customers
accounted for approximately 31.2% of net sales in fiscal 1997, compared to 34.1%
in fiscal 1996 and 35.6% in 1995. Foreign marketing operations are conducted
primarily through local distributors and agents, with support from Ampex's
internal marketing and sales organization. See "Distribution and Customers."
Foreign operations are subject to the usual risks attendant upon
investments in foreign countries, including limitations on repatriation of
earnings, restrictive actions by local governments, fluctuations in foreign
currency exchange rates and nationalization. Additionally, export sales are
subject to export regulations and restrictions imposed by the U.S. Department of
State and the U.S. Department of Commerce.
In certain prior periods, declines in the value of the U.S. dollar in
relation to certain foreign currencies have favorably affected Ampex's
international operations, and in other periods the strength of the dollar
relative to such currencies has adversely affected its operations. Fluctuations
in the value of international currencies can be expected to continue to affect
Ampex's operations in the future, although the impact will be less significant
than it was in periods with a higher proportion of sales in foreign currencies.
The Company currently does not hedge its assets that are denominated in foreign
currencies. U.S. export sales are denominated in U.S. dollars.
See Note 20 of Notes to Consolidated Financial Statements for
additional information concerning the Company's foreign operations.
Readiness for Year 2000
Many existing computer systems, applications and other control devices
(collectively, "Systems") use only two digits to identify a year in the date
field, and will therefore be unable to reflect accurately the change from the
year 1999 to the years 2000 and beyond. Unless corrected, these Systems could
fail or create erroneous results, rendering them unable to process data related
to the year 2000. The Company relies on its Systems in operating and monitoring
all major aspects of its business, including financial systems (such as general
ledger, accounts payable and payroll modules), customer services,
infrastructure, embedded computer chips, networks and telecommunications
equipment and products. The Company also relies on the external Systems of its
suppliers and other organizations with which it does business.
The Company has established a Year 2000 Compliance Committee that is
investigating the impact of the year 2000 on the Company's business. The
Committee membership includes representatives involved in all major functions of
the Company. Its charter is to identify all Systems that, if not in compliance,
could adversely affect the Company's business. For critical Systems that are
found not to be in compliance, the Committee will develop a plan, including a
budget for associated costs, to ensure compliance before the year 2000. It has
already been determined that many of the Company's Systems, such as its
manufacturing Systems, are in compliance. Other Systems, such as its financial
Systems, currently do not comply but are expected to do so this year pursuant to
vendor maintenance agreements. To date, no material issue has been identified in
any of the other Systems used or relied upon by the Company. However, despite
the Company's efforts thus far to address the Year 2000 impact, the Company
cannot guarantee that all internal or external Systems will be compliant, or
that its business will not be materially adversely affected by any such
non-compliance.
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Environmental Regulation and Proceedings
The Company's facilities are subject to numerous federal, state and
local laws and regulations designed to protect the environment from waste
emissions and hazardous substances. Ampex is also subject to the federal
Occupational Safety and Health Act and other laws and regulations affecting the
safety and health of employees in its facilities. Management believes that Ampex
is generally in compliance in all material respects with all applicable
environmental and occupational safety laws and regulations or has plans to bring
operations into compliance. Management does not anticipate that capital
expenditures for pollution control equipment for fiscal 1998 or 1999 will be
material.
Owners and occupiers of sites containing hazardous substances, as well
as generators and transporters of hazardous substances, are subject to broad
liability under various federal and state environmental laws and regulations,
including liability for investigative and cleanup costs and damages arising out
of past disposal activities. The Company has been named as a potentially
responsible party by the United States Environmental Protection Agency with
respect to four contaminated sites that have been designated as "Superfund"
sites on the National Priorities List under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980. The Company is engaged in
seven environmental investigation, remediation and/or monitoring activities at
sites located off Company facilities, including the removal of solvent
contamination from subsurface aquifers at a site in Sunnyvale, California, and
surface clean-up and the closure of a former site in El Segundo, California.
Some of these activities involve the participation of state and local government
agencies. The other five sites (including the four Superfund sites) are
associated with the operations of the Media subsidiaries formerly owned by the
Company. Although the Company sold Media in November 1995, the Company may have
continuing liability with respect to environmental contamination at these sites
if Media fails to discharge its responsibilities with respect to such sites.
During 1997, the Company spent a total of approximately $0.2 million in
connection with environmental investigation, remediation and monitoring
activities and expects to spend a similar amount in fiscal 1998 for such
activities.
Because of the inherent uncertainty as to various aspects of
environmental matters, including the extent of environmental damage, the most
desirable remediation techniques and the time period during which cleanup costs
may be incurred, it is not possible for the Company to estimate with any degree
of certainty the ultimate costs that it may incur with respect to the currently
pending environmental matters referred to above. Nevertheless, at December 31,
1997, the Company had an accrued liability of $2.1 million for pending
environmental liabilities associated with the Sunnyvale site and certain other
sites currently owned or leased by the Company. The Company has not accrued any
liability for contingent liabilities it may incur with respect to former Media
sites discussed above. Based on facts currently known to management, management
believes it is only remotely likely that the liability of the Company in
connection with such pending matters, either individually or in the aggregate,
will be material to the Company's financial condition or results of operations
or material to investors.
While the Company believes that it is generally in compliance with all
applicable environmental laws and regulations or has plans to bring operations
into compliance, it is possible that the Company will be named as a potentially
responsible party in the future with respect to additional Superfund or other
sites. Furthermore, because the Company conducts its business in foreign
countries as well as in the U.S., it is not possible to predict the effect that
future domestic or foreign regulation could have on Ampex's business, operating
results or cash flow. There can be no assurance that the Company will not
ultimately incur liability in excess of amounts currently reserved for pending
environmental matters, or that additional liabilities with respect to
environmental matters will not be asserted. In addition, changes in
environmental regulations could impose the need for additional capital equipment
or other requirements. Such liabilities or regulations could have a material
adverse effect on the Company in the future.
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Employees
As of December 31, 1997, Ampex employed 509 people worldwide, compared
to 527 at December 31, 1996 and 531 at December 31, 1995. Approximately 8% of
Ampex's current worldwide workforce is employed in the Company's international
operations, compared to 7% at December 31, 1996 and 6% at December 31, 1995. No
employees are covered by any collective bargaining Agreement. The Company is
dependent on the performance of certain key members of management and key
technical personnel. The Company has not entered into employment agreements with
any such individuals. Edward J. Bramson, who has served as the Company's Chief
Executive Officer since 1991, is also engaged in the management of certain
companies affiliated with Sherborne Holdings Incorporated, a privately owned
Delaware holding company and a Company stockholder. Mr. Bramson currently
devotes most of his time to the management of the Company. The loss of the
services of Mr. Bramson or other key individuals could have a material adverse
effect on the Company.
Pension Plan Matters
In 1994, the Company, the Pension Benefit Guaranty Corporation (the
"PBGC") and certain affiliates (the "Affiliates") who were members of a "group
under common control" for purposes of the Employee Retirement Income Security
Act ("ERISA") entered into certain agreements in connection with the liquidation
of the Company's former parent, NH Holding Incorporated ("NHI"), relating to the
pension plans of the Company and of its former Media subsidiaries, which are
currently underfunded. See Note 16 of Notes to Consolidated Financial
Statements. Pursuant to these agreements, the Affiliates agreed that if during
the terms of the agreements Ampex fails to make a required contribution to the
pension plans, the Affiliates will make or advance funds to permit Ampex to make
such contribution, and Ampex agreed to repay such amounts in accordance with the
terms of the agreements. Ampex has agreed to grant the Affiliates a security
interest in certain assets as collateral for any advances which the Affiliates
may be required to make in the future pursuant to the agreements. The agreements
contain certain restrictive covenants which, among other things, restrict
Ampex's ability to declare dividends, sell all or substantially all its assets
or commence liquidation, or engage in specified transactions with certain
related parties, breach of which could result in acceleration of the Company's
potential termination liabilities. In 1994, the Company discontinued accrual of
benefits under the pension plans, but has continued to fund its plan in
accordance with ERISA (and remains contingently liable to fund the Media plan if
Media fails to do so). No claims have been asserted or, to the knowledge of
management, are threatened under these agreements.
ITEM 2. PROPERTIES
As of December 31, 1997, the Company's principal properties were as
follows:
<TABLE>
<CAPTION>
Approximate
Square Footage
Location Activities Conducted of Facility
- -------- -------------------- -----------
<S> <C> <C>
Redwood City, California Executive offices, RD&E
and manufacturing (1) 195,840
Colorado Springs, Colorado Manufacturing 229,961
Chineham, Basingstoke, England Sales and service (2) 7,184
Tokyo, Japan Sales and service (3) 3,886
Sulzbach, Germany Sales and service (3) 13,530
</TABLE>
- -------------------
(1) The majority of this property (186,440 square feet) is leased under
leases entered into in connection with the January 1996 sale of this
property. The remainder (9,400 square feet) is leased on a short-term
basis.
(2) These facilities are leased under a ten-year lease, which is terminable
at the option of the Company or the landlord in 2002.
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(3) These facilities are leased under leases that expire at various times
through 2000.
In addition to the properties and leased facilities listed above, Ampex
leases office space and warehouse facilities from time to time at various
domestic and foreign locations. In addition, the Company has outstanding lease
obligations with respect to various facilities whose functions were terminated
in connection with the Company's prior period restructuring of its business
operations. The Company is subleasing portions of these facilities pending
termination of the underlying leases.
On January 25, 1996, the Company completed the sale of its real
property in Redwood City, California. All of the functions that were located at
the Redwood City site have been relocated to portions of the facility that have
been leased back from the purchaser under two separate leases. One lease covers
approximately 132,150 square feet in buildings leased for a term of from 10 to
13 years. The second lease covers a 54,290 square foot building occupied on an
interim basis under similar terms, but the lease contains a provision allowing a
move to a new 60,000 square foot building upon its completion, which is expected
to occur in 1998. When the move to this new building is complete, the lease for
the 54,290 square foot building will terminate and the Company will enter into a
new ten-year lease for the 60,000 square foot property. The lease for the
132,150 square foot property will then become co-terminous with the new lease,
so that both such leases are expected to terminate in 2008; however, the Company
has a one-time option to terminate the lease for the 132,150 square foot
facility in 2001.
The Company believes that its current facilities, including machinery
and equipment, are generally in good condition, well-maintained and suitable for
their intended uses, and that its facilities have, and will continue to have,
adequate capacity to accommodate the Company's present needs and business growth
for its present products in the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its
business. In the opinion of management, no such current or pending lawsuits,
either individually or in the aggregate, are likely to have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.
On September 22, 1995, the Company filed a lawsuit against Mitsubishi
Electric Corporation and Mitsubishi Electric America Inc. ("Mitsubishi") in the
U.S. District Court for the District of Delaware, alleging patent infringement
and breach of license agreement in connection with the manufacture of VHS video
recorders and television receivers, and seeking damages and injunctive relief.
In response to the Company's lawsuit, on December 12, 1995, Mitsubishi filed a
lawsuit against Ampex in the U.S. District Court for the Central District of
California, alleging patent infringement of two Mitsubishi patents by certain
Ampex video and data recorder products, and seeking unspecified damages and
injunctive relief. In March 1997, the California court determined that Ampex has
no liability to Mitsubishi patents. Mitsubishi's request for a new trial and for
judgment as a matter of law was denied. In July 1997, the court affirmed its
decisions in favor of Ampex and Mitsubishi filed a notice of appeal with the
Court of Appeals for the Federal Circuit.
In April 1997, a jury in the U.S. District Court for the District of
Delaware returned a verdict in favor of Ampex in its patent infringement lawsuit
against Mitsubishi and awarded damages to Ampex of approximately $8.1 million
for infringing a patent used in connection with the manufacture of certain
television receivers. The defendants asserted various defenses and in June 1997
the judge granted a post-trial motion by Mitsubishi to set aside the verdict and
award of damages on the theory of prosecution history estoppel. In August 1997,
Ampex's motion for retrial was denied and the Company filed a notice of appeal
with the Court of Appeals for the Federal Circuit. The Company does not expect
the Courts of Appeals to issue their decision in this case or in the case
described in the foregoing paragraph before the latter part of 1998. In view of
the substantial uncertainty remaining in this litigation, no income from this
verdict has been recorded in the Company's financial statements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations for the Three Years Ended December 31, 1997 --
Selling and Administrative Expenses" and "--Royalty Income,"
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above. The June 1997 decision relates only to infringement of one of the
Company's patents which is used in picture-in-picture television sets. Ampex has
asserted additional claims against Mitsubishi with respect to infringement of
Ampex patents in connection with various VCR products. No date has been set for
trial of these claims.
See also "Environmental Regulation and Proceedings" and Note 12 of
Notes to Consolidated Financial Statements for additional information with
respect to pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages as of February 1,
1998 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Edward J. Bramson 46 Chairman and Chief Executive Officer
Craig L. McKibben 47 Vice President, Chief Financial Officer and Treasurer
Robert L. Atchison 60 Vice President
Richard J. Jacquet 58 Vice President
Joel D. Talcott 56 Vice President and Secretary
</TABLE>
Each of the executive officers of the Company serves in such capacity
at the discretion of the Board.
Edward J. Bramson is Chairman of the Board, Chief Executive Officer and
a director of the Company. He has been an officer and director of the Company
since 1987, and since January 1991 has been Chief Executive Officer of the
Company. He is also Chairman and Chief Executive Officer of Sherborne Holdings
Incorporated, Sherborne & Company Incorporated and Sherborne Investments
Corporation, is a limited partner of Newhill Partners, L.P. and the managing
member of SH Securities Co., L.L.C. These entities, which are private investment
holding companies, may be deemed to be affiliates of the Company. Mr. Bramson is
also a director of Hillside Capital Incorporated, a private industrial holding
company with which he has been associated since 1976. From 1987 until 1994, Mr.
Bramson was a director and executive officer of NH Holding Incorporated ("NHI"),
the Company's former parent. See "Relationship with NH Holding Incorporated,"
below.
Craig L. McKibben is Vice President, Treasurer, Chief Financial Officer
and a director of the Company. Mr. McKibben has been an officer and a director
of the Company since 1989. From 1983 to 1989, he was a partner at the firm of
Coopers & Lybrand, independent public accountants. He is also Vice President and
a director of Sherborne Holdings Incorporated and of Sherborne & Company
Incorporated. Since 1989, Mr. McKibben has been a director and executive officer
of NHI. See "Relationship with NH Holding Incorporated," below.
Robert L. Atchison is Vice President of the Company. Since January
1994, he has been responsible for all operating activities of the Company, and
in 1996 assumed responsibility for certain of the Company's sales and marketing
activities. From April 1991 to January 1994, he was responsible for engineering
and operations for the Company. Mr. Atchison also serves as President and a
director of Ampex Data Systems Corporation, a wholly owned subsidiary of the
Company. He has served as an executive officer of the Company and various
subsidiaries since 1987.
Richard J. Jacquet is Vice President of the Company. Since January
1994, he has been responsible for all administrative functions of the Company.
From 1989 to January 1994, he was responsible for personnel and human resources
matters for the Company. Mr. Jacquet has been associated with the Company since
1988, serving as Director of Human Resources prior to his appointment in 1989 as
Vice President.
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Joel D. Talcott is Vice President and Secretary of the Company,
positions he has held since 1987. He has served as General Counsel since January
1996, a position he also held from 1987 to January 1994. He is also responsible
for the Company's patent licensing activities (having served as Patent Counsel
from 1981 to 1987), and has supervisory responsibility for investor relations
and corporate communications functions. Mr. Talcott is an officer and director
of Ampex Data Systems Corporation, a wholly-owned subsidiary of the Company.
Relationship with NH Holding Incorporated
From May 1987 until December 1994, the Company was a subsidiary of NH
Holding Incorporated ("NHI"). Messrs. Bramson, McKibben and Slusser were the
directors of NHI, and Messrs. Bramson and McKibben were executive officers of
NHI. On December 28, 1994 (the "Consummation Date"), the United States
Bankruptcy Court for the District of Delaware confirmed a plan of reorganization
for NHI (the "NHI Plan"), pursuant to which all of the assets of NHI (including
16,000,000 shares of Class A Stock of the Company) were distributed to NHI's
former creditors. Since the Consummation Date, Mr. McKibben has been serving as
the sole officer and director of NHI and the disbursing agent under the NHI
Plan.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) The following table sets forth the high and low prices for the
Company's Class A Common Stock for each quarter during fiscal 1996 and 1997.
Since January 16, 1996, the Class A Common Stock has been traded on the American
Stock Exchange under the symbol "AXC."
The trading price of the Company's Class A Common Stock has been and
can be expected to be subject to significant volatility, reflecting a variety of
factors, including quarterly variations in operating results, analysts'
estimates, announcements of new product introductions and other announcements by
the Company or its competitors and general economic or market conditions. In
addition, the stock market in general and technology companies in particular
have experienced a high degree of price volatility, which has had a substantial
effect on the market prices of many technology companies for reasons that often
are unrelated or disproportionate to operating performance.
Fiscal Year High Low
----------- ---- ---
1997
First Quarter $10.50 $5.63
Second Quarter 7.38 5.44
Third Quarter 6.25 3.88
Fourth Quarter 4.56 2.13
1996
First Quarter 7.06 3.63
Second Quarter 15.75 5.38
Third Quarter 9.50 5.13
Fourth Quarter 11.38 6.25
As of January 30, 1998, there were 833 holders of record of the
Company's Class A Common Stock.
The Company has not declared any dividends on its Common Stock since
its incorporation in 1992 and has no present intention of paying dividends on
its Common Stock. The Company is also restricted by the terms of the Indenture
for the Senior Notes and certain other agreements and of its outstanding
Noncumulative Preferred Stock as to the declaration of dividends. Under current
circumstances, the Company may not pay any cash dividends on
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its Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
Notes 10 and 13 of Notes to Consolidated Financial Statements.
(b) The following sets forth information as to securities sold by the
Company during the past three years which were not registered under the
Securities Act of 1933, as amended (the "Securities Act"):
On January 28, 1998, the Company issued and sold $30 million of its
Senior Notes and Warrants to purchase 1,020,000 shares of its Class A Common
Stock to a group of "qualified institutional buyers" as that term is defined in
Rule 144A under the Securities Act. The transaction was exempt from registration
under the Securities Act by reason of Section 4(2) thereof and Regulation D
thereunder as a transaction by an issuer not involving any public offering. Each
Warrant is exercisable to purchase one share of the Company's Class A Common
Stock at $2.25 per share, and expires on March 15, 2003.
On October 29, 1997, November 7, 1997 and February 18, 1998, the
Company issued a total of 400,000 shares of its Class A Common Stock to Edward
J. Bramson, chief executive officer of the Company. The shares were sold for an
aggregate purchase price of $1,268,752, of which 20% was paid in cash and the
balance by promissory notes of Mr. Bramson. All such shares have been pledged to
the Company as security for the promissory notes. Mr. Bramson represented that
the acquisition of such shares was made for investment and not with a view to
resale or other distribution absent registration under the Securities Act or the
availability of an exemption therefrom. The transaction was exempt from
registration under the Securities Act by reason of Section 4(2) thereof as a
transaction not involving any public offering.
On October 23, 1996, the Company issued 400,000 shares of Class A Stock
to SH Securities Co. LLC ("SH LLC"), a limited liability company controlled by
Mr. Bramson, chief executive officer of the Company. The shares were sold for an
aggregate price of $2,750,000, of which $550,000 was paid in cash and the
balance by a promissory note issued by SH LLC. All such shares have been pledged
to the Company as security for the promissory note issued by SH LLC. The
purchaser represented that the acquisition of such securities was made for
investment and not with a view to resale or other distribution absent
registration under the Securities Act or the availability of an exemption
therefrom. The transaction was exempt from registration under the Securities Act
by reason of Section 4(2) thereof as a transaction by an issuer not involving
any public offering.
Information as to additional sales of unregistered securities by the
Company during the past three years is contained in Item 15 of Amendment No. 2
to Registration Statement on Form S-1 of the Company (File No. 33- 91312) filed
with the Securities and Exchange Commission and is incorporated herein by
reference. All such sales were made to affiliates of the Company or to
institutional investors who represented that the acquisition of such securities
was made for investment and not with a view to resale or other distribution
absent registration under the Securities Act or the availability of an exemption
therefrom. The transactions were exempt from registration under the Securities
Act by reason of Section 4(2) thereof as transactions by an issuer not involving
any public offering.
ITEM 6. SELECTED FINANCIAL DATA
The financial data required by Item 6 is included immediately following
Item 14 hereof.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of the Company and its subsidiaries should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto,
included elsewhere in this Report.
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Product Groups
The Company's principal product groups are: its mass data storage and
instrumentation products and its professional video and other products. The mass
data storage and instrumentation products group includes: (i) 19- millimeter
scanning recorders and library systems (DST and DIS products) and related tape
and after-market equipment; and (ii) data acquisition and instrumentation
products (primarily DCRsi instrumentation recorders) and related tape and
after-market equipment. The Company's professional video and other products
group includes primarily its DCT video recorders and image processing systems
and related tape products and television aftermarket equipment. These product
groups are described below. No other class of similar products accounted for
more than 10% of net sales during the comparison periods discussed below. In
recent years, the Company has focused its efforts on high-performance digital
data storage and delivery systems for the emerging commercial mass data storage
market, and has discontinued many older products and businesses. The Company
operates in one industry segment for financial reporting purposes: the design,
development, production and distribution of high-speed, high-capacity magnetic
recording products and systems.
The following table shows sales of the Company's products by product
group for the past three years.
Net Sales
(in millions)
1997 1996 1995
Mass data
storage/instrumentation $63.7 $71.6 $65.6
Professional video and
other products 16.6 24.9 30.1
---- ---- ----
Total net sales 80.3 96.5 95.7
Results of Operations for the Three Years Ended December 31, 1997
Net Sales. Net sales decreased by 16.8% to $80.3 million in 1997 from
$96.5 million in 1996, compared to $95.7 million in 1995. The anticipated
continuing decline in sales of professional video and other products accounted
for the majority of the decline in net sales during 1997 and 1996. In 1997,
sales of the Company's 19-millimeter product line declined from 1996 levels and
sales of instrumentation recorders increased modestly during the period. The
Company doubled the capacity of its 19-millimeter product line early in 1997 and
passed along this improvement to the customer at no increase in selling price.
Although the Company shipped more megabytes of 19-millimeter tape-based
storage, its revenues for this product category declined during the 1997 fiscal
year, due also to declining sales to customers in the oil and gas industry and
the government. In 1996, the increase in sales of 19-millimeter tape-based mass
data storage and instrumentation products offset the decline in sales of
professional video recording products and other products. The Company's backlog
of firm orders increased to $6.9 million at December 31, 1997 from $3.4 million
at December 31, 1996. The Company typically operates with low levels of backlog,
requiring it to obtain the vast majority of each period's orders in the same
period that they must be shipped to the customer. Historically, a small number
of large orders has significantly impacted sales levels and often orders are
received late in the quarter making it difficult to predict sales levels in
future periods. See "Business -- Fluctuations in Operating Results; Seasonality;
Backlog." Management currently believes that net sales of its existing products
will decline materially in the first quarter of 1998 and in fiscal 1998,
relative to comparable 1997 periods.
Mass Data Storage Products and Instrumentation Recorders. Sales of mass
data storage products and instrumentation recorders and related after-market
products decreased by 11.0% from 1996 to 1997, after experiencing a 9.1%
increase in 1996 from 1995 levels. Early in 1997, the Company doubled the
density of its 19-
679833.6
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millimeter tape-based storage products without increasing the selling price in
order to retain the price/performance advantage over competing tape-based
storage products and hard disk drives. Accordingly, while the Company shipped a
larger amount of capacity measured in megabytes, revenues in this product
category declined in 1997 from 1996 levels. Revenues from these products in 1997
were also affected by declining sales to customers in the oil and gas industry
and the government. In addition to retaining its price/performance advantage,
broader commercial acceptance of its 19-millimeter storage systems will depend
significantly on the integration and vendor support of third party application
software, which are often beyond the Company's control.
The cost-efficiency of the Company's 19-millimeter storage systems has
historically been dependent on data intensive applications, such as those which
incorporate video, graphics and other images, requiring storage capacity
materially greater than those required by traditional alphanumeric applications.
The Company has concentrated its sales and marketing efforts primarily in
certain specialized vertical markets, such as digital special effects creation
and 3-D seismic data gathering and analysis, that can utilize the unique
performance capabilities of the Company's 19-millimeter scanning recorders.
Industry sources predict that by 2002, image-based storage content will account
for 40% of all storage, up from 15% today. In order to capitalize on this
increasing demand for storage, the Company may be required to increase its sales
and marketing efforts to penetrate the commercial data processing market, and
there is typically a lag from the time such efforts are initiated until
additional revenues are generated.
A significant portion of instrumentation product sales reflect
purchases by the federal government. Direct and indirect sales to U.S.
government agencies amounted to $22.3 million, $17.4 million and $14.0 million
in 1997, 1996 and 1995, respectively, representing 27.7%, 18.0% and 14.7% of net
sales in those years. While sales to government agencies have historically
consisted primarily of data acquisition and instrumentation recorders, the
Company has recently experienced an increase in sales of 19-millimeter-based
data storage products to these customers. Sales to government agencies fluctuate
as a result of changes in government spending programs (including defense
programs), and may be adversely impacted by Congressional appropriations
discussions. The Company is unable to forecast the extent to which sales may be
adversely affected in future periods by these factors.
Professional Video Recording and Other Products. Sales of professional
video recording products and all other products (consisting primarily of
television after-market products) continued to decline as anticipated and as
previously disclosed. In 1997 and 1996, sales of the Company's DCT products
accounted for all of the Company's professional television product sales. The
Company's DCT digital products were designed for existing broadcast transmission
standards, which are expected to become obsolete upon the adoption of new
digital transmission standards that were recently announced. The Company
anticipates that its professional video product sales will continue to decline
pending the establishment of new standards and until new products can be
introduced that are designed for them. The Company also anticipates a continuing
reduction in the sale of television after-market products for these same
reasons. Such sales declines could have a materially adverse effect on the
Company. There can be no assurance as to when broadcasters will re-equip for the
new transmission standards or whether the Company will be successful in any
future efforts it may undertake to design and sell new products based on such
standards. The Company is exploring ways to increase its market presence in the
professional video industry, capitalizing on its reputation in television and
video recording, which may include acquisitions of products and/or businesses
that serve these markets. There can be no assurance that the Company will be
successful in integrating these products and businesses into its operations.
Gross Profit. Gross profit as a percentage of net sales was 48.8% in
1997, 45.7% in 1996 and 45.9% in 1995. The improved gross margin percentages
reflect the effects of the Company's cost containment activities, which have
reduced fixed manufacturing and administrative costs, as well as an improved
sales mix of newer, high-margin products. If sales of the Company's relatively
high-margin instrumentation recorders are adversely affected by pressure on
government agencies to further reduce spending, gross margins in future periods
could be adversely affected. Also, the Company may elect to use aggressive
pricing as a marketing strategy to enter new markets for its storage products.
While these efforts would be designed ultimately to increase revenues and
profitability, they might reduce the gross margin percentage of net sales in the
current period.
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Selling and Administrative Expenses. Selling and administrative
expenses as a percentage of net sales were 30.4% in 1997, 28.1% in 1996 and
23.7% in 1995. Spending levels included $4.2 million in 1997, $4.9 million in
1996 and $0.1 million in 1995 relating to patent infringement litigation with a
foreign consumer products manufacturer. While the Company anticipates that the
appeal of this litigation will be heard late in 1998, it anticipates that it
will not incur material costs related to this matter in 1998. Excluding such
costs, selling and administrative costs declined in 1997, reflecting savings
realized in facility operating costs from levels incurred in 1996 as a result of
relocating the Company's headquarters into smaller facilities. The Company
anticipates that it will need to increase its sales and marketing efforts to be
successful in penetrating the commercial data markets with its 19-millimeter
storage products. Also, if it pursues additional opportunities in video and
image processing, the Company forecasts that selling and administrative expenses
may increase as a percentage of sales in future periods until such new business
efforts begin to generate additional revenues.
Research, Development and Engineering Expenses. Research, development
and engineering expenses represented 19.3%, 16.5% and 16.3% of net sales in
1997, 1996 and 1995, respectively. The Company does not capitalize a material
amount of RD&E expenditures. The majority of RD&E expenses in each of these
years was used to enhance the price/performance levels of the Company's mass
data storage products, as well as to integrate the Company's storage systems
with various computer manufacturers' servers, workstations and other computer
systems. Since the second half of 1994, the Company has been investing in the
development of keepered media technology and has spent $3.6 million, $1.9
million and $1.0 million in 1997, 1996 and 1995, respectively, on
commercializing this technology for use in hard disk drives. The keepered media
development program was substantially completed during 1997. The Company has
transferred this program to a long-term research and development project to
assess whether the technology might be commercially employed with advanced head
technologies. Continuing expenses for keepered media research are estimated to
be less than $0.5 million annually. The Company is committed to investing in
research, development and engineering programs at levels that can be supported
by current levels of sales.
Royalty Income. Royalty income was $12.6 million in 1997, $10.5 million
in 1996 and $15.0 million in 1995. The Company's royalty income derives from
patent licenses, and the Company receives most of its royalty income from
licenses with companies that manufacture consumer video products (such as VCRs
and camcorders) and, in certain cases, professional video tape recorders. During
this period a growing portion of royalty income related to 8-mm video recorders
and camcorders. In 1996, the Company negotiated its first license for use of
certain of its patents in the manufacture of 6-mm digital video recorders. The
Company intends to pursue additional digital video recorder licensees. The
Company is also assessing whether its patented technology is being used by
manufacturers of video games, DVD recorders and digital television receivers.
There can be no assurance that the Company's technology is being utilized by the
manufacturers of these products or, if used, whether the Company will be able to
negotiate license agreements with the manufacturers. Royalty income has
historically fluctuated widely due to a number of factors that the Company can
not predict or control, such as the extent of use of the Company's patented
technology by third parties, the materiality of any non-recurring royalties
received as the result of negotiated settlements for products sold by
manufacturers prior to entering into licensing agreements with the Company, the
extent which the Company must pursue litigation in order to enforce its patents,
and the ultimate success of its licensing and litigation activities. The costs
of patent litigation can be material, and the institution of patent enforcement
litigation may also increase the risk of counterclaims alleging infringement by
the Company of patents held by third parties or seeking to invalidate patents
held by the Company. See "Legal Proceedings," above.
Restructuring Charges (Credits). In connection with the Company's
restructuring that was substantially completed in 1993, the Company had accrued
for the estimated future costs of vacated leased property and the closure of
certain foreign subsidiaries. In the past three years, the Company has entered
into transactions that reduced its anticipated obligations under several vacated
leases. In addition, certain expenses related to the closure of foreign
subsidiaries were less than originally anticipated. In 1997, the amount of
restructuring credit recognized in income is net of a reserve that was recorded
to write-off certain fixed assets and to provide for certain other costs
totaling $0.9 million in connection with the transfer of the keepered media
program to a long-term research and development project. As of December 31,
1997, the Company had a remaining balance of $3.3 million of accrued
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restructuring costs. The Company will continue to evaluate the amount of accrued
restructuring costs on a quarterly basis, and the Company may make additional
adjustments in future periods if it determines that its actual obligations will
differ significantly from the amounts accrued.
Operating Income. Operating income was $13.5 million (16.8% of net
sales) in 1997, $12.0 million (12.5% of net sales) in 1996 and $23.1 million
(24.2% of net sales) in 1995. Operating income was positively impacted by the
receipt of negotiated license settlements in addition to regular recurring
license payments, improved gross margins due to an improved sales mix of
products, continuing focus on cost controls on recurring selling and
administrative expenses and restructuring credits. Patent infringement
litigation costs, RD&E spending on keepered media and continuing declines in
sales, particularly sales of professional video and other products, adversely
impacted operating income as discussed above.
Interest Expense. Interest expense was not material in 1997, $0.8
million in 1996 and $3.8 million in 1995. In the first quarter of 1996, the
holders of the then outstanding 8% zero coupon convertible notes with a
principal amount at maturity of $27.4 million converted the notes into
approximately 8.5 million shares of Common Stock. Also, in January 1996, the
mortgage on the real property in Redwood City, California was repaid from the
cash proceeds of the sale of such property. In January 1998, the Company issued
$30.0 million of 12% Senior Notes due 2003 and warrants to purchase
approximately 1.02 million shares of Common Stock to certain institutional
investors. Accordingly, leverage and interest expense will increase in 1998 from
current levels.
Amortization of Debt Financing Costs. These amounts reflect periodic
amortization of financing costs over the remaining terms of the debt. Due to the
conversion of the zero coupon notes and the repayment of the mortgage in 1996,
the remaining deferred financing costs were written off during 1996. Financing
costs associated with the January 1998 issuance of the 12% Senior Notes,
estimated to total $1.5 million, will be charged to expense over 5 years.
Interest Income. Interest income is earned on cash balances, and in
1997 and 1996 interest income was imputed on the notes received in connection
with the sale of the Company's Redwood City, California property in 1996. The
notes were fully paid in 1997. Pending application of the proceeds of the Senior
Notes, they have been invested in short-term government securities.
Other (Income) Expense, Net. Other (income) expense, net consists
primarily of foreign currency transaction gains and losses resulting from the
Company's foreign operations. In 1996, such amounts included a gain of $0.9
million on the sale of the smaller of its two manufacturing facilities in
Colorado Springs, Colorado, offset by moving-related expenditures of $0.9
million at the Redwood City, California facility.
Provision for Income Taxes. The Company was not required to include any
material provision for U.S. Federal income tax in any of the last three fiscal
years due to the utilization of net operating loss carryforwards and timing
differences. At December 31, 1997, the Company had net operating loss
carryforwards for income tax purposes of $100.0 million, expiring in the years
2005 through 2009. As a result of financing transactions that were completed in
1994 and 1995, the Company is limited in the amount of net operating loss
carryforwards that can offset consolidated Federal taxable income in a given
year. See Note 19 of Notes to Consolidated Financial Statements. The Company
derives pretax foreign income from its international operations, which are
conducted principally by its foreign subsidiaries. In addition, the Company's
royalty income is subject, in certain cases, to foreign tax withholding. Such
income is taxed by foreign taxing authorities, and the Company's domestic
interest and amortization expenses and operating loss carryforwards are not
deductible in computing such foreign taxes. The provisions for income taxes in
1997, 1996 and 1995 consist primarily of foreign income taxes and withholding
taxes on royalty income.
Gain of Business Held for Disposition. In November 1995, the Company
completed the disposition of the Media subsidiaries, which had been accounted
for as a business held for disposition since the quarter ended June 1993. The
sale did not result in the receipt of any cash proceeds by the Company, and the
non-recurring gain of
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$43.9 million in 1995 represented the elimination of net liabilities of Media,
less taxes and other costs. See Note 2 of Notes to Consolidated Financial
Statements.
Net Income. The Company reported net income of $14.8 million in 1997,
$12.7 million in 1996 and $63.3 million in 1995. Net income benefited from the
non-recurring gain of $43.9 million on the sale of Media in 1995 and from the
factors discussed above in "Operating Income."
Liquidity and Capital Resources.
Cash Flow. At December 31, 1997, the Company had cash and short-term
investments of $41.8 million, an increase from $30.7 million at December 31,
1996. In addition, in January 1998, the Company issued $30.0 million of Senior
Notes. The net proceeds of the Senior Notes are available for general corporate
purposes, including acquisitions of and investments in new business. Pending
application for such purposes, the net proceeds are being invested in short-term
government securities. The increase in cash and short-term investments in 1997
and in 1996 was due in part to receipt of the proceeds of repayment of certain
notes received from the sale of portions of the Company's Redwood City,
California facilities in 1996. The Company's operating activities generated cash
of $4.6 million in 1997 and used cash of $6.1 million in 1996. The improvement
in operating cash flow resulted from the factors discussed above in "Operating
Income." The Company's decision to increase inventories to support sales of its
19-millimeter DST and DIS products is the primary reason for the increase of
$2.3 million in inventories at December 31, 1997 from December 31, 1996. The
increased investment in inventories, particularly with respect to its library
systems, which have a limited sales history, may expose the Company to an
increased risk of inventory write-offs.
The Company has available a working capital and letter of credit
facility that allows it to borrow up to $7.0 million through May 2000, based on
eligible accounts receivable. At December 31, 1997, the Company had no material
borrowings outstanding and had letters of credit issued against the facility
totaling $2.7 million.
Financing Transactions. In January 1996, the Company repaid the balance
of the $7.4 million mortgage loan on the Redwood City, California property from
a portion of the cash proceeds of the sale. Also, during 1996, the Company's
convertible notes with an aggregate face amount at maturity of $27.4 million
were converted into approximately 8.5 million shares of Common Stock, and
warrants to purchase approximately 1.7 million shares were exercised. As of
December 31, 1997, the Company became obligated to redeem the 69,970 outstanding
shares of its 8% Noncumulative Preferred Stock, to the extent of funds legally
available therefor (generally the excess of the value of assets over
liabilities), at a redemption price of $1,000 per share. As of December 31,
1997, the Company did not have any funds legally available to redeem the
Noncumulative Preferred Stock, and the Company cannot predict when, and to what
extent, it will generate any legally available funds to redeem the Noncumulative
Preferred Stock. The Company will remain obligated to redeem such shares from
time to time in future fiscal periods to the extent funds become legally
available for redemption, and will generally be precluded from declaring any
cash dividends on, or repurchasing shares of, its Common Stock, until the
Noncumulative Preferred Stock has been redeemed in full. Redemption of the
Noncumulative Preferred Stock for cash in future periods could have a negative
impact on the Company's liquidity. Under certain circumstances the Company may
redeem the Noncumulative Preferred Stock by issuing Common Stock. See Note 13 of
Notes to Consolidated Financial Statements.
In the second quarter of 1996, the Company filed a shelf registration
statement with the Securities and Exchange Commission covering 1,150,000 shares
of Common Stock which may be offered from time to time by the Company, the
proceeds of which would be used for general corporate purposes. The sale of
Common Stock covered by the shelf registration statement could adversely affect
the market price for the Common Stock, and would dilute current stockholders'
interest by approximately 2% if all such shares were to be issued. The Company
does not currently anticipate proceeding with this financing based on the
current market price of the Company's Common Stock.
679833.6
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<PAGE>
In January 1998, the Company issued $30.0 million of its Senior Notes,
together with Warrants to purchase 1.02 million outstanding shares of Common
Stock. The Warrants are exercisable at $2.25 per share at any time on or prior
to March 15, 2003. The Warrants, if exercised, would represent approximately 2%
of the Company's outstanding shares of Common Stock on a diluted basis. As a
result of the issuance of the Senior Notes, the Company's total indebtedness and
future debt service obligations have increased significantly from prior levels.
The Company is required to use its best efforts to register the Senior Notes and
Warrants with the Securities and Exchange Commission in order to permit public
resales of these securities in accordance with the Securities Act of 1933, as
amended. The net proceeds of the offering have been invested in short-term
government securities, the yield on which investments is substantially lower
than the interest charges on the Senior Notes. The Company has wide discretion
as to how the proceeds may be invested, including for the acquisitions of and
investments in new businesses. Any such investments or acquisitions, if made,
might not pay a current return, which could require the Company to fund debt
service obligations on the Senior Notes out of its liquidity and cash flow from
its existing operations. The Indenture under which the Senior Notes were issued
contains customary affirmative and negative restrictive covenants that limit,
among other things, the incurrence of additional senior debt, the payment of
dividends, the sale of assets and other actions by the Company and certain
restricted subsidiaries. Under such Indenture the Company may, in general, issue
additional senior debt, without meeting certain fixed charges coverage tests, up
to $15.0 million. The Company has no present plans to issue any such additional
debt, but may do so in the future if investment or acquisition opportunities are
subsequently identified that require additional capital funds.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by Item 8 and the financial statement
schedules required by Item 14(d) are included following Item 14 hereof. The
supplementary data called for by Item 8 is not applicable to the Company.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by this item is incorporated herein by
reference to the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders (the "Proxy Statement").
Information regarding executive officers is included in Part I hereof
as Item 4A and is incorporated by reference into this Item 10.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated herein by
reference to the Company's Proxy Statement.
679833.6
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed with this Report
1. Financial Statements (see Item 8 above)
Ampex Corporation Consolidated Financial Statements
as of December 31, 1997, 1996 and 1995 and for each
of the three years in the period ended December 31,
1997
2. Financial Statement Schedules (see Item 8 above)
Schedule II Valuation and Qualifying Accounts
3. Exhibits
Exhibit
Number Description
Purchase and Sale Agreement dated as of November 29, 1995,
2.1 between the Company, as seller, and The Martin Group of
Companies, as buyer, relating to the Company's real property
in Redwood City, California, and First Amendment to Purchase
and Sale Agreement dated January 19, 1996 (filed as Exhibit
2.01 to the Company's Form 8-K dated January 25, 1996 (the
"January 1996 8-K") and incorporated herein by reference).
2.2 Secured Purchase Money Promissory Note in the face amount of
$6.5 million, and Secured Purchase Money Promissory Note
(Phase 2 Land) in the face amount of $11.0 million, each dated
January 24, 1996, made by Martin/Campus Associates, L.P., and
payable to the Company (filed as Exhibit 2.02 to the January
1996 8-K and incorporated herein by reference).
2.3 Stock Purchase Agreement dated as of November 10, 1995, among
the Company, Quantegy Acquisition Corp., Ampex Media Holdings
Incorporated, Ampex Media Corporation and Ampex Recording
Media Corporation (filed as Exhibit 10.1 to the Company's Form
8-K dated November 13, 1995 and incorporated herein by
reference).
3.1 Restated Certificate of Incorporation of the Company dated
June 1, 1993 (filed as Exhibit 4.01 to the Company's Form 10-Q
for the quarter ended March 31, 1993 and incorporated herein
by reference); Certificate of Amendment of Restated
Certificate of Incorporation of the Company filed with the
Secretary of State of Delaware on April 22, 1994 (filed as
Exhibit 3.2 to the Company's Form 8-K filed on May 2, 1994
(the "May 1994 8-K") and incorporated herein by reference);
and Certificate of Amendment of Restated Certificate of
Incorporation of the Company filed with the Secretary of State
of Delaware on April 20, 1995 (filed as Exhibit 4.1 to the
Company's Form 10-Q for the quarter ended March 31, 1995 (the
"First Quarter 1995 10-Q") and incorporated herein by
reference).
3.2 Certificate of Ownership and Merger of Ampex Video Systems
Corporation and Ampex Recording Systems Corporation into Ampex
Systems Corporation (filed as Exhibit 3.2 to the Company's
Form 10-Q for the quarter ended March 31, 1994 (the "First
Quarter 1994 10-Q") and incorporated herein by reference).
679833.6
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<PAGE>
3.3 Certificate of Ownership and Merger of Ampex Systems
Corporation into the Company (filed as Exhibit 3.1 to the May
1994 8-K and incorporated herein by reference).
3.4 Certificate of Designations, Preferences and Rights of the
Company's 8% Noncumulative Preferred Stock (filed as Exhibit
3.1 to the Company's Form 8-K filed on February 24, 1995 (the
"February 1995 8-K") and incorporated herein by reference).
3.5 By-Laws of the Company, as amended through April 20, 1995
(filed as Exhibit 4.2 to the First Quarter 1995 10-Q and
incorporated herein by reference).
4.1 Form of Class A Common Stock Certificate (filed as Exhibit 4.4
to the Company's Post-Effective Amendment No. 1 on Form S-3 to
Form S-1 (File No. 33-91312) (the "1996 Form S-3") and
incorporated herein by reference).
4.2 Form of Class C Common Stock Certificate (filed as Exhibit 4.5
to the Form S-3 and incorporated herein by reference).
4.3 Form of 8% Noncumulative Preferred Stock Certificate (filed as
Exhibit 4.6 to the Form S-3 and incorporated herein by
reference).
4.4 Exchange Agreement for 8% Noncumulative Preferred Stock and
Common Stock, dated as of February 14, 1995, among the Company
and the Initial Holders named therein (filed as Exhibit 4.1 to
the February 1995 8-K and incorporated herein by reference).
4.5 Exchange Agreement for 8% Step-Up Rate Cumulative Convertible
Preferred Stock, Warrants and Common Stock, dated as of April
22, 1994, among the Company and the Initial Holders named
therein (filed as Exhibit 4.1 to the May 1994 8-K and
incorporated herein by reference).
4.6 Exchange Agreement for Zero-Coupon Convertible Notes, Warrants
and Common Stock, dated as of April 22, 1994, among the
Company and the Initial Holders named therein (filed as
Exhibit 4.2 to the May 1994 8-K and incorporated herein by
reference).
4.11 Registration Rights Agreement for Notes dated as of April 22,
1994 among the Company and the Initial Holders named therein
(filed as Exhibit 4.6 to the May 1994 8-K and incorporated
herein by reference).
4.12 Registration Rights Agreement for Warrants and Shares dated as
of April 22, 1994 among the Company and the Initial Holders
named therein (filed as Exhibit 4.7 to the May 1994 8-K and
incorporated herein by reference).
4.13 Registration Rights Agreement for 8% Noncumulative Preferred
Stock dated as of February 14, 1995 among the Company and the
Initial Holders named therein (filed as Exhibit 4.2 to the
February 1995 8-K and incorporated herein by reference).
4.14 Registration Rights Agreement for Shares dated as of February
14, 1995 among the Company and the Initial Holders named
therein (filed as Exhibit 4.3 to the February 1995 8-K and
incorporated herein by reference).
4.15 Stock Purchase Agreement, dated February 10, 1995, between the
Company and Edward J. Bramson, and related promissory note
issued to the Company by Sherborne Investments Corporation
(each filed as an Exhibit to Amendment No. 6 to Schedule 13D,
filed on February
679833.6
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<PAGE>
23, 1995 by Edward J. Bramson and the other filing parties
named therein, and incorporated herein by reference).
4.16 Stock Subscription and Debt Exchange Agreement dated as of
January 25, 1993 between the Company and Sherborne Group
Incorporated, and Registration Rights Agreement dated as of
January 25, 1993 between the Company and Sherborne Group
Incorporated, executed in counterpart by Sherborne Holdings
Incorporated (each filed as an Exhibit to Amendment No. 1 to
Schedule 13D, filed on February 3, 1993 by Sherborne Group
Incorporated, Sherborne Holdings Incorporated and the other
filing parties named therein, and incorporated herein by
reference).
4.17 Letter Agreement between the Company and Sherborne Group
Incorporated, dated December 22, 1993, providing for the
issuance of shares of Class A Common Stock to Sherborne Group
Incorporated in exchange for cancellation of debt (filed as
Exhibit 4.24 to the Company's Form 10-K for fiscal 1993 (the
"1993 10-K") and incorporated herein by reference).
4.18 Promissory Note in the amount of $1,754,727, issued by the
Company to NH Holding Incorporated, dated December 22, 1993
(filed as Exhibit 4.25 to the 1993 10-K and incorporated
herein by reference).
4.19 Warrant Agreement, dated as of January 28, 1998, between
the Registrant and American Stock Transfer &Trust Company, as
warrant agent, including form of Warrant Certificate (filed as
Exhibit 4.2 to the Registrant's Form 8-K filed on February 2,
1998 (the "February 1998 8-K") and incorporated herein by
reference).
4.20 Indenture, dated as of January 28, 1998, between the Company
and IBJ Schroder Bank & Trust Company, as trustee, relating to
the Registrant's 12% Senior Notes due 2003, including forms of
12% Senior Notes (filed as Exhibit 4.1 to the February 1998
8-K and incorporated herein by reference).
4.21 Purchase Agreement, dated January 26, 1998, between the
Registrant and First Albany Corporation, relating to the
Registrant's 12% Senior Notes due 2003 (filed as Exhibit 1.1
to the February 1998 8-K and incorporated herein by
reference).
4.22 Exchange and Registration Rights Agreement, dated as of
January 28, 1998, between the Registrant and First Albany
Corporation, relating to the Registrant's 12% Senior Notes due
2003 (filed as Exhibit 4.3 to the February 1998 8-K and
incorporated herein by reference.
4.23 Warrants and Warrants Share Registration Rights Agreement,
dated as of January 28, 1998, between the Registrant and First
Albany Corporation (filed as Exhibit 4.4 to the February 1998
8-K and incorporated herein by reference).
10.1 Tax Indemnification Agreement dated as of July 24, 1992 among
Sherborne Group Incorporated, NH Holding Incorporated, the
Company and certain affiliates and former affiliates of the
Company (filed as Exhibit 10.11 to the Company's Form 10-Q for
the quarter ended September 30, 1992 (the "Third Quarter 1992
10-Q") and incorporated herein by reference).
10.2 Ampex Corporation 1992 Stock Incentive Plan and related
documents, as amended through August 22, 1996 (filed as
Exhibit 4.03 to the Company's Post-Effective Amendment No. 1
to Registration Statement on Form S-8 (File No. 333-05623) and
incorporated herein by reference).
679833.6
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<PAGE>
10.3* Ampex Systems Corporation Savings Plan (1997 Restatement).
10.4* Ampex Systems Corporation Employees' Retirement Plan, as
amended and restated as of January 1, 1997.
10.5 Ampex Corporation Supplemental Retirement Income Plan, as
amended through September 3, 1985 (filed as Exhibit 10.27 to
Amendment No. 3 to the Company's Registration Statement on
Form S-1 (filed No. 33-47660) and incorporated herein by
reference).
10.6 Ampex Corporation Retiree & Disabled Retiree Medical Care
Plan, as amended and restated effective April 22, 1994 (filed
as Exhibit 10.8 to the 1994 10-K and incorporated herein by
reference).
10.7 Form of Indemnification Agreement entered into between the
Company and directors Bramson, McKibben, Slusser and Stoltzfus
(filed as Exhibit 10.16 to the Company's Form 10-Q for the
quarter ended June 30, 1993 (the "Second Quarter 1993 10-Q")
and incorporated herein by reference).
10.8 Office Sharing Agreement and Assignment and Assumption of
Lease, each dated as of July 24, 1992 and each between the
Company and Sherborne Group Incorporated (filed as Exhibit
10.20 to the Third Quarter 1992 10-Q and incorporated herein
by reference), and related Sublease dated October 4, 1993 and
Letter Agreement dated October 28, 1993 (filed as Exhibit
10.20 to the 1993 10-K and incorporated herein by reference).
10.9 Loan and Security Agreement by and between Ampex Finance
Corporation and Congress Financial Corporation dated May 5,
1994 (filed as Exhibit 10.2 to the First Quarter 1994 10-Q and
incorporated herein by reference) and Amendment Agreement
dated as of July 31, 1995, second Amendment Agreement, dated
March 29, 1996 (filed as Exhibit 10.2 to Second Quarter 1996
10-Q and incorporated herein by reference) and third Amendment
Agreement, dated December 26, 1996 (filed as Exhibit 10.13 to
the 1996 Form 10-K and incorporated herein by reference).
10.10 Form of Employment Security Letter entered into between the
Company and Messrs. Atchison, McKibben, Jacquet and Talcott
(executive officers of the Company), dated May 19, 1993, with
addendum dated June 10, 1993 (filed as Exhibit 10.32 to the
Second Quarter 1993 10-Q and incorporated herein by
reference).
10.11 Stock Purchase Agreement, dated October 22, 1996, between the
Company and Edward J. Bramson (filed as Exhibit 10.15 to the
Company's Form 10-K for fiscal 1996 (the "1996 10- K") and
incorporated herein by reference).
10.12 Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 132,150 square feet of premises
located on Douglas Avenue and on Broadway in Redwood City,
California (filed as Exhibit 2.03 to the January 1996 8-K and
incorporated herein by reference) as amended by amendment
dated December 20, 1996 (filed as Exhibit 10.17 to the 1996
10-K and incorporated herein by reference).
10.13 Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 54,290 square feet of premises
located on Bay Road in Redwood City, California (filed as
Exhibit 2.04 to the January 1996 8-K and incorporated herein
by reference).
679833.6
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<PAGE>
10.14 Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 359,218 square feet of premises
located on Bay Road and Broadway in Redwood City, California
(filed as Exhibit 2.05 to the January 1996 8-K and
incorporated herein by reference).
10.15 Lease dated January 19, 1996 by and between Martin/Campus
Associates, L.P. as landlord and the Company as tenant, with
respect to approximately 60,000 square feet of premises to be
constructed on Broadway in Redwood City, California (filed as
Exhibit 2.06 to the January 1996 8-K and incorporated herein
by reference).
10.16 TrademarkLicense Agreement dated May 31, 1990, by and between
Ampex Corporation (a predecessor of the Company) as licensor,
and certain of the Media Subsidiaries as licensee, relating to
the Ampex trademark; related Trademark License Agreement dated
July 24, 1992, by and between Ampex Systems Corporation (a
former subsidiary that was merged into the Company) certain of
the Media Subsidiaries; Amendment No. 1 to Trademark License
Agreement dated March 23, 1993; Amended and Restated Trademark
License Agreement dated June 22, 1993; and First Amendment to
Amended and Restated Trademark License Agreement dated
November 10, 1995 (filed as Exhibit 10.2 to 1995 10-K and
incorporated herein by reference).
10.17 Joint Settlement Agreement by and among Pension Benefit
Guaranty Corporation, the Ampex Group (a group of companies
that includes the Company), the Limited Hillside Group and the
Sherborne Group, dated November 22, 1994 (filed as Exhibit
10.2 to 1995 10-K and incorporated herein by reference).
10.18 Hillside-Ampex/Sherborne Agreement by and among the Ampex
Group (a group of companies that includes the Company), the
Limited Hillside Group and the Sherborne Group, dated December
1, 1994 (effective November 22, 1994) (filed as Exhibit 10.2
to 1995 10-K and incorporated herein by reference).
10.19 Real Estate Purchase Agreement dated as of April 16, 1996,
between U.S. Filter/Ionpure Inc. and the Company, together
with amendments thereto dated as of April 29, 1996 and May 3,
1996, relating to the sale of the Company's Colorado Springs,
Colorado facility (filed as Exhibit 10.1 to Second Quarter
1996 10-Q and incorporated herein by reference).
10.20* 10.2Stock Purchase Agreement, dated as of October 29, 1997,
between the Registrant and Edward J. Bramson.
10.21* Stock Purchase Agreement, dated as of November 7, 1997,
between the Registrant and Edward J. Bramson.
10.22* Stock Purchase Agreement dated as of February 18, 1998
between the Registrant and Edward J. Bramson.
21.1* Subsidiaries of the Company
23.1* Consent of Independent Accountants
25.1* Power of Attorney (included in the signature page of this
Report)
27.1* Financial Data Schedule
- -------------------
* Filed herewith
679833.6
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<PAGE>
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the fourth quarter of 1997.
(c) Exhibits. See Item 14(a)(3) above.
(d) Financial Statement Schedules. See Items 8 and 14(a)(2) above.
679833.6
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<PAGE>
SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data, which
have been derived from and should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto, and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," both
of which are included elsewhere herein. There have been no cash dividends
declared for the periods presented. In November 1995, the Company completed the
divestiture of its Media subsidiaries, which had been accounted for as a
business held for disposition since the second quarter of 1993. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Note 2 of Notes to Consolidated Financial Statements and Note 1 to
the table below.
Statement of Operations Data (1):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $80,311 $96,485 $95,662 $127,212 $169,711
Gross profit 39,171 44,078 43,886 49,795 48,523
Selling and administrative 24,452 27,084 22,626 24,279 66,219
Restructuring charges (credits) (1,659) (453) (2,480) -- 230,523
Income (loss) from continuing
operations 14,803 12,741 19,407 15,542 (295,261)
Net income (loss) 14,803 12,741 63,293 15,542 (296,404)
Diluted income (loss) per share
from continuing operations 0.32 0.28 0.47 0.36 (16.67)
Diluted income (loss) per share 0.32 0.28 1.40 0.36 (16.74)
Balance Sheet Data (1)
At December 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Working capital $44,607 $39,277 $ 10,742 $ (3,960) $ (41,429)
Total assets 81,671 84,492 88,651 87,459 129,446
Long-term debt 2 914 31,585 30,805 90,641
Redeemable preferred stock 69,970 69,970 69,970 83,977 --
Total stockholders' equity
(deficit) (90,015) (86,360) (127,357) (195,240) (210,481)
- --------------------------
</TABLE>
(1) The statement of operations data for all periods presented have been
reclassified to reflect the results of operations of Media as discontinued
operations, with the sale of discontinued operations reflected in the
statement of operations for 1995. The balance sheet data for 1993 and 1994
reflect the assets and liabilities of Media as a single line item, "net
liabilities of business held for disposition." This line item is
inapplicable for subsequent periods as the sale of Media was completed in
November 1995.
679833.6
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<PAGE>
AMPEX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants............................................F-2
Consolidated Balance Sheets
As of December 31, 1997 and 1996.......................................F-3
Consolidated Statements of Operations
For Each of the Three Years in the Period Ended December 31, 1997......F-4
Consolidated Statements of Cash Flows
For Each of the Three Years in the Period Ended December 31, 1997......F-5
Consolidated Statements of Stockholders' Deficit
For Each of the Three Years in the Period Ended December 31, 1997......F-6
Notes to Consolidated Financial Statements...................................F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Ampex Corporation
We have audited the accompanying consolidated balance sheets of Ampex
Corporation as of December 31, 1997 and 1996, and the related consolidated
statements of operations, cash flows and stockholders' deficit for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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
Ampex Corporation as of December 31, 1997 and 1996, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
February 20, 1998
679833.6
F-2
<PAGE>
AMPEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 24,076 $ 13,410
Short-term investments 17,685 17,241
Notes receivable - 7,926
Accounts receivable (net of allowances of $1,484 and $2,241) 13,246 16,721
Inventories 16,380 14,095
Other current assets 1,347 2,709
--------------- ---------------
Total current assets 72,734 72,102
Property, plant and equipment 8,892 10,059
Other assets 45 2,331
--------------- ---------------
Total assets $ 81,671 $ 84,492
=============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable $ 933 $ 1,075
Accounts payable 5,173 7,148
Income taxes payable 373 571
Accrued restructuring costs 1,706 2,002
Other accrued liabilities 19,942 22,029
--------------- ---------------
Total current liabilities 28,127 32,825
Long-term debt 2 914
Other liabilities 70,708 60,233
Deferred income taxes 1,267 1,314
Accrued restructuring costs 1,612 5,596
--------------- ---------------
Total liabilities 101,716 100,882
--------------- ---------------
Commitments and contingencies (Note 12)
Redeemable nonconvertible preferred stock, $1,000 liquidation value:
Authorized: 69,970 shares 1997 and 1996
Issued and outstanding - 69,970 shares 1997 and 1996 69,970 69,970
Stockholders' deficit:
Preferred stock, $1.00 par value:
Authorized: 930,030 shares 1997 and 1996
Issued and outstanding - none 1997 and 1996 - -
Common stock, $.01 par value:
Class A:
Authorized: 125,000,000 shares 1997 and 1996
Issued and outstanding - 45,936,707 shares 1997; 45,434,417 shares 1996 459 454
Class C:
Authorized: 50,000,000 shares 1997 and 1996
Issued and outstanding - none 1997 and 1996 - -
Other additional capital 383,513 382,042
Note receivable from stockholder (4,818) (3,979)
Accumulated deficit (440,068) (454,871)
Cumulative translation adjustments 507 526
Minimum pension liability adjustment (29,608) (10,532)
--------------- ---------------
Total stockholders' deficit (90,015) (86,360)
--------------- ---------------
Total liabilities and stockholders' deficit $ 81,671 $ 84,492
=============== ===============
The accompanying notes are an integral part of these condolidated financial statements.
F-3
</TABLE>
<PAGE>
AMPEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1997 1996 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
Net sales $ 80,311 $ 96,485 $ 95,662
Cost of sales 41,140 52,407 51,776
------------------ ----------------- -----------------
Gross profit 39,171 44,078 43,886
Selling and administrative 24,452 27,084 22,626
Research, development and engineering 15,464 15,930 15,622
Royalty income (12,550) (10,497) (15,006)
Restructuring charges (credits) (1,659) (453) (2,480)
------------------ ----------------- -----------------
Operating income 13,464 12,014 23,124
Interest expense 86 756 3,775
Amortization of debt financing costs - 85 126
Interest income (2,991) (3,257) (1,145)
Other (income) expense, net 59 35 40
------------------ ----------------- -----------------
Income from continuing operations
before income taxes 16,310 14,395 20,328
Provision for income taxes 1,507 1,654 921
------------------ ----------------- -----------------
Income from continuing operations 14,803 12,741 19,407
Gain of business held for disposition (net of taxes of
$1,137 in 1995) - - 43,886
------------------ ----------------- -----------------
Net income $ 14,803 $ 12,741 $ 63,293
================== ================= =================
Basic income per share :
Income per share from continuing operations $ 0.32 $ 0.29$ 0.58
Income per share from discontinued operations 0.00 0.00 1.38
------------------ ----------------- -----------------
Income per share $ 0.32 $ 0.29 $ 1.96
================== ================= =================
Weighted average number of common shares outstanding 45,616,344 43,307,645 31,964,682
================== ================= =================
Diluted income per share :
Income per share from continuing operations $ 0.32 $ 0.28$ 0.47
Income per share from discontinued operations 0.00 0.00 0.93
------------------ ----------------- -----------------
Income per share $ 0.32 $ 0.28$ 1.40
================== ================= =================
Weighted average number of common shares outstanding 46,461,321 44,723,031 47,145,357
================== ================= =================
The accompanying notes are an integral part of these condolidated financial statements.
</TABLE>
F-4
<PAGE>
AMPEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1997 1996 1995
----------------- ------------------ -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,803 $ 12,741 $ 63,293
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion 2,244 2,803 6,714
Net gain on sale of assets - 932 -
Write-off of long-lived assets 445 - -
Net increase in notes receivable (874) (1,519) -
Deferred income taxes (47) (65) -
(Increase) decrease in accounts receivable 4,243 (1,848) (2,848)
Increase in inventories (2,285) (1,583) (2,666)
Net (increase) decrease in other assets 3,516 (1,922) 105
Increase (decrease) in accounts payable (2,269) (2,492) 2,832
Net decrease in accrued liabilities and
income taxes payable (4,170) (1,898) (9,515)
Net decrease in long-term receivables 132 26 393
Net decrease in accrued restructuring costs (4,280) (3,131) (7,810)
Net decrease in other non-current obligations (6,883) (8,129) (3,669)
Net decrease in net liabilities associated with
business held for disposition - - (43,886)
----------------- ------------------ -----------------
Net cash provided by (used in) operating activities 4,575 (6,085) 2,943
----------------- ------------------ -----------------
Cash flows from investing activities:
Purchases of short-term investments (78,629) (72,670) (39,303)
Proceeds received on the maturity of short-term investments 77,957 64,376 27,392
Proceeds from the sale of short-term investments 228 3,938 6,876
Additions to property, plant and equipment (1,560) (2,834) (658)
Net proceeds and additions to notes receivable 8,800 (6,407) -
Proceeds from the sale of property, plant and equipment - 27,485 120
Deferred gain on sale of assets (814) 5,930 -
Decrease in other assets - 2 -
----------------- ------------------ -----------------
Net cash provided by (used in) investing activities 5,982 19,820 (5,573)
----------------- ------------------ -----------------
Cash flows from financing activities:
Borrowings under working capital facilities 52,053 48,130 50,527
Repayments under working capital facilities (52,908) (49,410) (49,905)
Repayment of secured note payable - (7,333) (3,000)
Repayment of notes payable-affiliates (2) (80) (706)
Proceeds from issuance of common stock 637 1,624 394
Proceeds from issuance of warrants - 17 -
Debt financing costs - - (137)
----------------- ------------------ -----------------
Net cash used in financing activities (220) (7,052) (2,827)
----------------- ------------------ -----------------
Effect of exchange rates on cash 329 (38) 164
----------------- ------------------ -----------------
Net increase (decrease) in cash and cash equivalents 10,666 6,645 (5,293)
Cash and cash equivalents, beginning of period 13,410 6,765 12,058
----------------- ------------------ -----------------
Cash and cash equivalents, end of period $ 24,076 $ 13,410 $ 6,765
================= ================== =================
The accompanying notes are an integral part of these condolidated financial statements.
</TABLE>
F-5
<PAGE>
AMPEX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For Each of the Three Years in the Period Ended
December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Note
Common Stock Other R'cvble
Class A Class C Additional from
Shares Amount Shares Amount Capital Stkhlder
----------- ------------ ------------- -------------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1995 20,551 $ 206 6 - $ 338,993 -
Net income - - - - - -
Translation adjustments - - - - - -
Minimum pension liability
adjustment - - - - - -
Proceeds from exercise
of warrants 1,345 13 - - - -
Proceeds from issuance
of shares 1,500 15 - - 2,400 $ (2,053)
Preferred stock accretion - - - - (783) -
Stock options exercised 8 - - - 19 -
Preferred stock exchange 1,225 12 9,782 $ 98 14,680 -
Expenses on exchange - - - - (137) -
Conversion of shares 7,681 77 (7,681) (77) - -
----------- --------- ------------- -------- ---------------- -------------
Balances, December 31, 1995 32,310 $ 323 2,107 $ 21 $ 355,172 $ (2,053)
Net income - - - - - -
Translation adjustments - - - - - -
Minimum pension liability
adjustment - - - - - -
Proceeds from exercise
of warrants 1,699 17 - - - -
Proceeds from issuance
of shares 400 4 - - 2,746 (1,926)
Stock options exercised 395 4 - - 797 -
Conversion of notes 8,523 85 - - 23,327 -
Conversion of shares 2,107 21 (2,107) (21) - -
----------- --------- ------------- -------- ---------------- -------------
Balances, December 31, 1996 45,434 $ 454 - - $ 382,042 $ (3,979)
Net income - - - - - -
Translation adjustments - - - - - -
Minimum pension liability
adjustment - - - - - -
Proceeds from issuance
of shares 325 3 - - 1,045 (839)
Stock options exercised 178 2 - - 426 -
----------- --------- ------------- -------- ---------------- -------------
Balances, December 31, 1997 45,937 $ 459 - - $ 383,513 $ (4,818)
=========== ========= ============= ======== ================ =============
Cumulative Pension Stockholders'
Accumulated Translation Liability Equity
Deficit Adjustment Adjustment (Deficit)
------------------- --------------- ----------------- -------------------
Balances, January 1, 1995 $ (530,905) $ 592 $ (4,126) $ (195,240)
Net income 63,293 - - 63,293
Translation adjustments - (147) - (147)
Minimum pension liability
adjustment - - (9,527) (9,527)
Proceeds from exercise
of warrants - - - 13
Proceeds from issuance
of shares - - - 362
Preferred stock accretion - - - (783)
Stock options exercised - - - 19
Preferred stock exchange - - - 14,790
Expenses on exchange - - - (137)
Conversion of shares - - - -
------------ ------------ --------------- -----------------
Balances, December 31, 1995 $ (467,612) $ 445 $ (13,653) $ (127,357)
Net income 12,741 - - 12,741
Translation adjustments - 81 - 81
Minimum pension liability
adjustment - - 3,121 3,121
Proceeds from exercise
of warrants - - - 17
Proceeds from issuance
of shares - - - 824
Stock options exercised - - - 801
Conversion of notes - - - 23,412
Conversion of shares - - - -
------------ ------------ --------------- -----------------
Balances, December 31, 1996 $ (454,871) $ 526 $ (10,532) $ (86,360)
Net income 14,803 - - 14,803
Translation adjustments - (19) - (19)
Minimum pension liability
adjustment - - (19,076) (19,076)
Proceeds from issuance
of shares - - - 209
Stock options exercised - - - 428
------------ ------------ --------------- -----------------
Balances, December 31, 1997 $ (440,068) $ 507 $ (29,608) $ (90,015)
============ ============ =============== =================
The accompanying notes are an integral part of these condolidated financial statements.
</TABLE>
F-6
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 - Ampex Corporation
Ampex Corporation ("Ampex" or the "Company") is engaged in the design,
development, production and distribution of high-performance mass data storage
systems, instrumentation recorders and professional video recording products. In
November 1995, the Company disposed of a subsidiary, Ampex Media Holdings
Incorporated ("AMHI" and, collectively with its subsidiaries, "Media"), which
was engaged in the manufacture and sale of magnetic recording media. See Note 2.
All references to "Ampex" or the "Company" include subsidiaries and predecessors
of Ampex Corporation but exclude Media, unless otherwise indicated.
The Company operates in one industry segment for financial reporting
purposes: the design, development, production and distribution of high-speed,
high-capacity magnetic recording products and systems.
Note 2 - Business Held For Disposition
In November 1995, the Company completed the disposition of Media, which
had been accounted for as a business held for disposition since the second
quarter of 1993. The Company recognized a nonrecurring gain for financial
reporting purposes of $43.9 million in 1995.
The consolidated statements of operations have been reclassified for
all periods presented and the assets and liabilities associated with Media's
business, which consisted principally of accounts receivable, inventory, fixed
assets and debt facilities, were reported as a single line item in the
consolidated balance sheets. Net sales of Media were $128.7 million from January
1, 1995 to November 13, 1995 (the date of disposition), and $144.6 million in
1994. The Company recognized a gain for financial reporting purposes on
disposition of Media because Media's liabilities exceeded its assets.
Costs and expenses reported by the Company for the distribution of tape
products were included in the results of business held for disposition to the
extent not offset by distribution fees received from Media.
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are presented on a
historical cost basis. All intercompany accounts and transactions have been
eliminated. Certain reclassifications have been made to the prior years'
financial statements to conform to the current year's presentation. These
reclassifications had no effect on the prior years' stockholders' deficit or net
income.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of net sales and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents consist of investments with original maturities of 90
days or less.
691340.1 F-7
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 3 - Summary of Significant Accounting Policies (cont'd.)
Short-term Investments
Investments with a maturity period greater than three months but less
than one year are classified as short-term investments. The Company's short-term
investments consist of highly liquid U.S. Treasury instruments and are
considered "available-for-sale" securities under Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Unrealized gains and losses, if material, are reported net of
tax as a separate component of stockholders' equity until realized. Realized
gains and losses, if any, are determined using the specific identification
method.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost and is stated net of
accumulated depreciation. Depreciation is provided on a straight-line basis over
estimated useful lives ranging from 6 to 9 years for machinery and equipment and
5 to 50 years for buildings and improvements. When assets are disposed of, the
cost and related accumulated depreciation are removed from the accounts and the
resulting gains or losses are included in the results of operations.
Carrying Value of Long-Lived Assets
The Company writes off the carrying value of long-lived assets to the
extent estimated future undiscounted operating cash flows are not sufficient to
recover the carrying value of these assets over their remaining useful life.
Foreign Currency Translation
Assets and liabilities of subsidiaries located outside the United
States have been translated at rates in effect at year end. Revenues and
expenses are translated at average rates during the year. Local currencies are
considered to be the functional currencies for substantially all of the
Company's foreign subsidiaries. Accordingly, the effects of translating the
financial statements of foreign subsidiaries into U.S. dollars are reported in
the cumulative translation adjustment, a separate component of stockholders'
deficit. Foreign currency transaction gains and losses, which are included in
other expense, were not material in the periods reported.
Revenue Recognition
Revenue is recognized at the time products are shipped to customers and
at the time services are rendered.
Research, Development and Engineering
Research and development costs are expensed as incurred and amounted to
$13.1 million, $14.0 million and $12.3 million in 1997, 1996 and 1995,
respectively. Other engineering costs, principally incurred in connection with
product introductions and process enhancements, amounted to $2.4 million, $1.9
million and $3.3 million in 1997, 1996 and 1995, respectively.
691340.1 F-8
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 3 - Summary of Significant Accounting Policies (cont'd.)
Royalties
Royalty income is recorded when earned and receipt is assured.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109
("SFAS 109"), Accounting for Income Taxes. See Note 19.
Foreign withholding taxes have been provided on the undistributed
earnings of foreign subsidiaries, giving recognition to applicable tax rates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of risk consist principally of temporary cash investments and
trade receivables. The Company invests its temporary cash balances in short-term
U.S. Treasury obligations and with high credit quality financial institutions
and, by policy, limits the investment maturity and the amount of credit exposure
to any one financial institution. The Company performs ongoing credit
evaluations on its customers, and collateral is generally not required for trade
receivables.
Fiscal Year
The Company's fiscal year is the 52 or 53-week period ending on the
Saturday nearest December 31. Fiscal 1997 was a 53-week year. Fiscal 1996 and
1995 were 52-week years.
Income Per Common Share
The Company has adopted the provisions of Statement of Financial
Accounting Standards No.128 ("SFAS 128"), Earnings Per Share, effective December
31, 1997. SFAS 128 requires the presentation of basic and diluted income per
common share. Basic income per common share is computed by dividing net income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted income per common share is computed giving
effect to all potentially dilutive common shares that were outstanding during
the period. Dilutive common shares consist of the incremental common shares
issuable upon the conversion of convertible subordinated debt (using the "if
converted" method) and exercise of stock options and warrants for all periods.
All prior period income per common share amounts have been restated to comply
with SFAS 128.
Stock Options
The Company accounts for stock-based awards to employees in accordance
with APB No. 25 ("APB 25"), Accounting for Stock Issued to Employees and has
adopted the disclosure-only alternative of Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), Accounting for Stock Based Compensation. See
Note 15.
Fair Value of Financial Instruments
For certain instruments that are short-term in nature, such as cash and
cash equivalents, short-term investments and working capital facilities,
carrying value approximates fair value. Management has determined that it is not
practicable to estimate fair value for note payable-other, as no market for such
instruments currently exists. See Note 10.
691340.1 F-9
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 3 - Summary of Significant Accounting Policies (cont'd.)
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive
Income. SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from nonowner sources. The impact of adopting SFAS 130, which is
effective for the Company in 1998, has not yet been determined.
In June 1997, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 131 ("SFAS 131"), Disclosure about Segments of an
Enterprise and Related Information. SFAS 131 requires publicly-held companies to
report financial and other information about revenue-producing segments of the
entity for which such information is available and is utilized by the chief
operating decision makers. Specific information to be reported for individual
segments includes profit or loss, certain revenue and expense items and total
assets. A reconciliation of segment financial information to amounts reported in
the financial statements would be provided. SFAS 131 is effective for the
Company in 1998 and the impact of adoption has not been determined.
Note 4 - Computation of Basic and Diluted Income per Share
In accordance with the disclosure requirements of SFAS 128, a
reconciliation of the numerator and denominator of basic and diluted income per
common share is provided as follows (in thousands, except per share amounts) :
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Numerator - Basic
Income from continuing operations ..................... $ 14,803 $ 12,741 $ 19,407
Less preferred stock accretion ........................ - - (783)
------------- ------------- ---------------
Adjusted income from continuing operations ............ $ 14,803 $ 12,741 $ 18,624
============= ============= ==============
Net income............................................ $ 14,803 $ 12,741 $ 63,293
Less preferred stock accretion ........................ - - (783)
------------- ------------- ---------------
Adjusted net income ................................... $ 14,803 $ 12,741 $ 62,510
============= ============= ==============
Denominator - Basic
Weighted average common stock outstanding ............. 45,616 43,308 31,965
------------ ------------- --------------
Basic income per share from continuing operations.......... $ 0.32 $ 0.29 $ 0.58
============= ============ =============
Basic income per share...................................... $ 0.32 $ 0.29 $ 1.96
============= ============ =============
</TABLE>
691340.1 F-10
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 4 - Computation of Basic and Diluted Income per Share (cont'd.)
<TABLE>
<S> <C> <C> <C>
Numerator - Diluted
Income from continuing operations ..................... $ 14,803 $ 12,741 $ 19,407
Add zero coupon interest .............................. - - 2,550
------------- ------------- --------------
Adjusted income from continuing operations ............ $ 14,803 $ 12,741 $ 21,957
============= ============= ==============
Net income............................................ $ 14,803 $ 12,741 $ 63,293
Add zero coupon interest............................... - - 2,550
------------- ------------- --------------
Adjusted net income ................................... $ 14,803 $ 12,741 $ 65,843
============= ============= ==============
Denominator - Diluted
Weighted average common stock outstanding ............. 45,616 43,308 31,965
Effect of dilutive securities:
Stock options...................................... 845 1,231 509
Warrants........................................... - 184 2,546
Conversion of zero coupon notes.................... - - 8,522
Conversion of redeemable preferred stock........... - - 3,603
------------ ------------- --------------
46,461 44,723 47,145
------------ ------------- --------------
Diluted income per share from continuing operations........ $ 0.32 $ 0.28 $ 0.47
============= ============ =============
Diluted income per share.................................... $ 0.32 $ 0.28 $ 1.40
============= ============ =============
</TABLE>
Stock options to purchase 566,775 shares of common stock at prices
ranging from $3.19 to $10.50 per share were outstanding at December 31, 1997,
but were not included in the computation of diluted income per share because the
exercise price was greater than the average market value of the common shares.
In January 1998, warrants to purchase 1,020,000 shares of common stock
were issued in connection with a private placement. The warrants, if exercised,
would represent approximately 2% of the Company's common shares on a diluted
basis. See Note 22.
Stock options to purchase 273,500 shares of common stock at $10.50 per
share were outstanding at December 31, 1996, but were not included in the
computation of diluted income per share because the exercise price was greater
than the average market value of the common shares.
Stock options to purchase 2,500 shares of common stock at $6.00 per
share were outstanding at December 31, 1995, but were not included in the
computation of diluted income per share because the exercise price was greater
than the average market value of the common shares.
Note 5 - Supplemental Schedule of Cash Flow Information
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Interest paid.......................................... $ 86 $ 265 $ 1,310
Income taxes paid ..................................... $ 1,752 $ 1,706 $ 1,436
</TABLE>
691340.1 F-11
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 6 - Short-Term Investments
The carrying and market values of short-term investments are as follows
at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Available - For - Sale December 31, 1997
Scheduled
Carrying Unrealized Fair Maturity
Value Gains Losses Value Date
----- ----- ------ ----- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
U.S. Government and
Agency Obligations $ 17,685 $ - $ - $ 17,685 Jan.-Mar. 1998
Available - For - Sale December 31, 1996
Scheduled
Carrying Unrealized Fair Maturity
Value Gains Losses Value Date
(in thousands)
U.S. Government and
Agency Obligations $ 17,241 $ - $ - $ 17,241 Jan.-Mar. 1997
</TABLE>
Short-term investment purchases and maturities for the years ended
December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Purchases............................................................... $ 78,629 $ 72,670
Maturities.............................................................. 78,185 68,314
------------- --------------
Net change.............................................................. $ 444 $ 4,356
============= ==============
Note 7 - Inventories
December 31,
1997 1996
(in thousands)
Raw materials........................................................... $ 6,686 $ 6,097
Work in process......................................................... 5,424 5,160
Finished goods.......................................................... 4,270 2,838
------------- --------------
Total.............................................................. $ 16,380 $ 14,095
============= ==============
</TABLE>
Inventories are stated net of reserves for obsolete and slow moving
items of $15.6 million and $20.1 million at December 31, 1997 and 1996,
respectively. Inventory disposals which had previously been fully reserved
totaled $4.0 and $4.4 million, during 1997 and 1996, respectively.
691340.1 F-12
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 8 - Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Land.................................................................... $ 952 $ 952
Buildings and improvements.............................................. 8,338 10,943
Furniture, fixtures and equipment....................................... 29,740 43,381
Construction in progress................................................ 439 -
------------- --------------
39,469 55,276
Less accumulated depreciation........................................... (30,577) (45,217)
-------------- ---------------
Total.............................................................. $ 8,892 $ 10,059
============== ==============
</TABLE>
Depreciation charged to operations was $2.2 million, $2.1 million and
$3.7 million in 1997, 1996 and 1995, respectively. During the year, the Company
retired fixed assets with a gross value of $17.0 million and a net book value of
$0.1 million.
In January 1996, the Company completed the sale of its real property in
Redwood City, California for $36.0 million. The net book value of the property
at the time of the sale was $26.2 million. The sale resulted in a gain of
approximately $8.3 million. Of this amount, approximately $2.4 million
represents imputed interest on the secured notes (and is being recognized over
the terms of the notes), and $4.1 million is being recognized over a five-year
period representing the noncancelable portion of two of the Company's leases
relating to the property. The remaining $1.8 million is being deferred for four
years. If, at that time, the Company decides to continue the two leases for an
additional six- to nine-year period, the $1.8 million will be recognized over
the remaining terms of the leases; otherwise, the $1.8 million gain will be
offset by lease cancellation fees of the same amount. At December 31, 1997 and
1996, the balance of the deferred gain was $4.4 and $5.2 million, respectively.
In May 1996, the Company completed the sale of the smaller of its two
manufacturing facilities in Colorado Springs, Colorado for $3.6 million, and
realized a gain of $0.9 million on the sale. The net book value of the property
at the time of the sale was $2.4 million.
Note 9 - Other Accrued Liabilities
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Compensation and employee benefits...................................... $ 6,213 $ 6,552
Pension................................................................. 6,339 5,435
Warranty and other product costs........................................ 1,363 2,337
Customer deposits....................................................... 163 -
Other................................................................... 5,864 7,705
------------- --------------
Total............................................................... $ 19,942 $ 22,029
============= ==============
</TABLE>
691340.1 F-13
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 10 - Debt
December 31,
1997 1996
---- ----
(in thousands)
Notes Payable
Working capital facilities.......... $ 769 $ 909
Note payable - other................ 164 166
------------- --------------
$ 933 $ 1,075
============= ==============
Long-term Debt
Working capital facilities.......... $ 2 $ 914
------------- --------------
$ 2 $ 914
============= ==============
Working Capital Facilities
Ampex has a loan from a foreign bank and a revolving credit line with a
domestic financial institution to finance working capital requirements. Average
borrowings under these agreements in 1997 were $1.2 million at an average
interest rate of 2.5%, and in 1996 were $2.3 million at an average interest rate
of 2.5%. Maximum borrowings outstanding at any time during 1997 and 1996 were
$1.8 million and $3.3 million, respectively. At December 31, 1997 and 1996,
under these agreements $0.8 million and $1.8 million were outstanding,
respectively. The Company's domestic revolving credit agreement permits
borrowings up to $7.0 million, based on eligible accounts receivable as defined
in the agreement, less a standby letter of credit facility in the amount of $2.5
million. At December 31, 1997 under the domestic revolving credit agreement
there was $1,616 outstanding and at December 31, 1996 there was $4,669
outstanding. The Company pays a monthly commitment fee of 0.5% per annum based
on the average daily unused amount. The borrowings are collateralized by certain
current assets of the Company.
Note Payable - Other
The note is a non-interest bearing demand promissory note held by NHI.
The remaining balance of $0.2 million at December 31, 1997 is expected to be
paid or converted to shares of Common Stock in 1998.
Noncurrent Maturities of Long-Term Debt
The following table summarizes the scheduled noncurrent maturities of
the Company's long-term debt as of December 31, 1997, for years subsequent to
1998 :
Year (in thousands)
---- --------------
1999....................................... $ 2
691340.1 F-14
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 11 - Other Liabilities
December 31,
1997 1996
---- ----
(in thousands)
Pension.................................... $ 31,510 $ 18,370
Reserve for contingent liabilities......... 27,015 27,015
Other postemployment benefits.............. 6,478 6,894
Other...................................... 5,705 7,954
----------- -----------
Total.................................. $ 70,708 $ 60,233
=========== ===========
The increase in the pension liability was attributable to an increase
in the minimum pension liability resulting from adoption of updated group
mortality assumptions, lowering the discount rate from 7.25% in 1996 to 7.0% in
1997 due to a decline in long-term interest rates, less the gain on the fair
value of the plan assets.
See Note 16.
Note 12 - Commitments and Contingencies
Leases
The Company leases certain manufacturing and office facilities and
equipment under operating lease agreements. As of December 31, 1997 future
annual lease obligations under leases with noncancellable lease terms in excess
of one year were as follows:
Year (in thousands)
1998....................................... $ 3,770
1999....................................... 3,607
2000....................................... 3,291
2001....................................... 3,249
2002....................................... 509
Thereafter................................. 2,569
------------
$ 16,995
Total rent expense for all operating leases was $4.9 million, $5.1
million and $2.9 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
691340.1 F-15
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 12 - Commitments and Contingencies (cont'd.)
In January 1996, the Company completed the sale of its real property in
Redwood City, California and leased back a portion of the property from the
purchaser. Future annual lease obligations, included in the above table, under
two lease agreements with noncancellable lease terms until April 2001
approximates $1.8 million per year. An additional $1.8 million representing a
potential lease termination penalty was included in the table above. The Company
funded $3.8 million of leasehold improvements in 1996 which, with interest, was
refunded by the property owner through rent credits and a buy-out in 1997. Rent
credits of $1.0 and $0.4 million were used in 1997 and 1996, respectively. In
October 1997, the property owner paid the balance of $2.7 million.
The following is a schedule by years of future minimum lease payments
under capital leases together with the present value of the net minimum lease
payments as of December 31, 1997:
Year (in thousands)
1998....................................... $ 143
1999....................................... 91
2000....................................... 23
2001....................................... 17
------------
Net minimum lease payments 274
Less amount representing interest (46)
------------
Present value of net minimum lease payments $ 228
============
The gross book value and accumulated depreciation of capital leases at
December 31, 1997 were $0.4 million and $0.1 million, respectively.
Legal Proceedings
The Company is currently a defendant in lawsuits that have arisen in
the ordinary course of its business. Management does not believe that any such
lawsuits or unasserted claims will have a material adverse effect on the
Company's financial position, results of operations or cash flows.
In addition, certain subsidiaries have been assessed income and value
added taxes together with penalties and interest by Italian tax authorities. The
Company has been indemnified by its former owner for costs of defending this
action as well as for payments in excess of certain amounts that have been
provided for in the accompanying financial statements.
Environmental Matters
The Company currently is involved in various stages of investigation
and cleanup relative to environmental protection matters, some of which relate
to past disposal practices. Some of these matters are being overseen by state or
federal agencies. Management has recorded certain amounts related to
investigation and cleanup costs and believes that the final disposition of these
matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
Guarantees
The Company has certain arrangements with banks primarily to facilitate
the issuance of performance guarantees or letters of credit. At December 31,
1997 and 1996, the Company was contingently liable for $2.4 million and $2.0
million, respectively, of general performance guarantees and letters of credit.
The Company has not recorded reserves for potential losses for these items at
December 31, 1997 and 1996.
691340.1 F-16
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 13 - Preferred Stock
In February 1995, the Company completed a refinancing in which all
outstanding Redeemable Convertible Preferred Stock, which had an aggregate value
at January 31, 1995 of approximately $84.8 million, was exchanged for shares of
a new series of 8% Noncumulative Redeemable Preferred Stock with an aggregate
liquidation value of $70.0 million and 11 million shares of Common Stock. The
transaction eliminated the obligation of the Company to accrue dividends on
preferred stock unless dividends are declared on Common Stock and eliminated the
right of the holders of the Redeemable Convertible Preferred Stock to convert
their shares into up to 27.9 million shares of Common Stock.
The Noncumulative Redeemable Preferred Stock is subject to mandatory
redemption after December 31, 1997, out of funds legally available therefor
(generally the excess of assets over liabilities). Mandatory or optional
redemption payments are payable in cash or, at the option of the Company, in
shares of Common Stock, provided that, as a condition to redemption in shares,
the average market price of the Company's Common Stock must have been at least
$4 per share during the 10 trading days preceding the notice of redemption.
Common Stock issued to redeem the Preferred Stock shall be valued at 90% of fair
market value. As at December 31, 1997, the Company did not have funds legally
available to redeem any of the Preferred Stock. As legally available funds begin
to be generated, the Company will be required to redeem such shares thereafter
to the extent funds become legally available therefor, and will be precluded
from declaring dividends on its Common Stock until the Preferred Stock has been
redeemed.
Note 14 - Related Party Transactions
During 1997 and 1996, the Company received 5-year notes for the
purchase of Common Stock by an affiliated company in the principal amounts of
$838,750 and $2,200,000, respectively. The notes bear annual interest at 6.34%
and 6.72%, respectively, and are collateralized by the purchased shares. In June
1996, the Company received a partial payment on the notes outstanding of
$273,700. Note 15 - Common Stock, Stock Options and Warrants
The Company's authorized capital stock consists of Class A Common Stock
("Class A Stock"), Class C Common Stock ("Class C Stock", and collectively with
Class A Stock, the "Common Stock") and Preferred Stock. Shares of Class C Stock
and Preferred Stock are generally nonvoting except in circumstances specified in
the Company's charter documents or as otherwise required by applicable corporate
law. Accordingly, holders of Class A Stock are generally the only stockholders
with voting rights. Each share of Class C Stock converts into one share of Class
A Stock automatically following transfer unless otherwise elected by the
transferee.
The Company's 1992 Stock Incentive Plan (the "Stock Incentive Plan")
for directors, executive officers and other key employees provides for the
granting of "non-qualified stock options" and "incentive stock options" to
acquire Class A Stock and/or the granting of stock appreciation rights to
obtain, in cash or shares of Class A Stock, the benefit of the appreciation of
the value of shares of Class A Stock after the grant date.
On January 10, 1995 the Committee approved the repricing of 104,000
options that had been granted on April 14, 1994 and 50,000 options that had been
granted on November 4, 1994 to an exercise price of $1.50 per share, which was
the fair market value of the stock on January 10, 1995. Prior to the repricing,
the options had an exercise price of $2.375 per share.
691340.1 F-17
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 15 - Common Stock, Stock Options and Warrants (cont'd.)
On May 19, 1995, at the Company's Annual Meeting, stockholders
authorized the issuance of an additional 1,500,000 shares under the 1992 Stock
Incentive Plan, of which 1,100,000 shares had been authorized by the Company's
Board of Directors on June 16, 1994, and 400,000 had been authorized on December
16, 1994.
On June 7, 1996, at the Company `s Annual Meeting, stockholders
authorized the issuance of an additional 2,000,000 shares under the 1992 Stock
Incentive Plan. The Company is currently authorized to issue up to 4,250,000
shares of Class A Stock under the Stock Incentive Plan.
On October 28, 1997, the Committee authorized the holders of 918,100
"out-of-the-money" stock options with exercise prices ranging from $3.625 to
$10.50, to voluntarily elect to cancel those options in exchange for an
equivalent number of new options. The new options were granted at an exercise
price of $3.125, which was the fair value of the Class A Stock on October 28,
1997, and with new vesting and expiration schedules. Of the 918,100 options
eligible for exchange, option holders elected to exchange 664,250 options that
had exercise prices ranging from $4.875 to $10.50.
At December 31, 1997 there were 2,309,865 options outstanding,
including 1,404,725 vested options. The exercise prices range from $1.50 to
$10.50 per share and vesting schedules vary from immediate vesting to vesting
over a five-year period.
<TABLE>
<CAPTION>
Weighted
Shares Number Price Aggregate Average
Available of Per Exercise Exercise
for Grant Options Share Price Price
--------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994 455,500 1,794,500 $ 1.50-6.00 $ 3,354,001 $ 1.87
Granted (517,400) 517,400 1.50-3.69 1,475,825 2.85
Canceled 297,560 (297,560) 1.50-2.38 (637,178) 2.14
Exercised (7,900) 2.38 (18,763) 2.38
--------- --------- ------------ ------------- ---------
Balances, December 31, 1995 235,660 2,006,440 $ 1.50-3.69 $ 4,173,885 $ 2.08
Authorized 2,000,000
Granted (914,750) 914,750 3.75-10.50 6,781,750 7.41
Canceled 129,390 (129,390) 1.50-6.44 (390,054) 3.01
Exercised (394,900) 1.50-3.63 (800,350) 2.03
--------- --------- ------------ ------------- ---------
Balances, December 31, 1996 1,450,300 2,396,900 $ 1.50-10.50 $ 9,765,231 $ 4.07
Granted (990,000) 990,000 2.38-7.94 3,789,813 3.83
Canceled 899,745 (899,745) 1.50-10.50 (6,023,836) 6.70
Exercised (177,290) 1.50-5.75 (384,298) 2.17
--------- --------- ------------ ------------- ---------
Balances, December 31, 1997 1,360,045 2,309,865 $ 1.50-10.50 $ 7,146,910 $ 3.09
========= ========= ============ ============= =========
</TABLE>
For the years ended December 31, 1997 and 1996, the weighted average
fair value of options granted was $2.76 and $5.17 per share, respectively.
At December 31, 1997 and 1996, there were no warrants outstanding.
During 1996 and 1995, there were 1,699,499 and 1,344,985 shares, respectively,
of Common Stock at $0.01 per share issued on the exercise of warrants.
691340.1 F-18
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 15 - Common Stock, Stock Options and Warrants (cont'd.)
The Company has elected to account for employee stock options using the
intrinsic value method prescribed by APB 25, and therefore compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock. Had compensation cost for the Company's stock-based
compensation plan been determined on the fair value of the grant dates for
awards under those plans consistent with the method of SFAS 123, the Company's
net income and diluted income per share would have been reduced to the pro forma
amounts indicated below :
<TABLE>
<CAPTION>
December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Net income :
As reported.............................................. $ 14,803 $ 12,741 $ 63,293
------------- ------------- ------------
Pro forma................................................ $ 12,360 $ 11,616 $ 63,118
------------- ------------- ------------
Diluted income per share :
As reported.............................................. $ 0.32 $ 0.28 $ 1.40
------------ ------------- ------------
Pro forma................................................ $ 0.27 $ 0.26 $ 1.39
------------ ------------- ------------
</TABLE>
The above proforma disclosures are not necessarily representative of
the effects on reported net income (loss) for future years.
The fair values of options at the date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Expected life (years).................................... 1.5 - 5.5 1.67-5.0 1.0-4.0
------------- ------------ -----------
Risk-free interest rate.................................. 5.6-6.54% 5.2-6.7% 5.6-7.9%
------------- ------------ -----------
Expected volatility...................................... 0.85-1.41 1.38-1.46 1.49-1.61
------------- ------------ -----------
Expected dividend yield.................................. - - -
------------- ------------ -----------
</TABLE>
The options outstanding and currently exercisable by exercise price at
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Options Currently
Options Outstanding Exercisable
------------------- -----------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$1.50-$2.38 1,080,840 6.40 $ 1.74 1,070,340 $ 1.74
$3.13-$6.06 1,104,025 4.22 3.70 235,033 4.33
$6.13-$7.94 35,000 1.89 6.84 9,352 6.88
$10.50 90,000 1.20 10.50 90,000 10.50
--------- ---- ------- --------- -------
2,309,865 5.09 $ 3.09 1,404,725 $ 2.77
========= ==== ======= ========= =======
</TABLE>
691340.1 F-19
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 16 - Pension Plans
The Company's domestic employees participate in a qualified
noncontributory defined benefit pension plan. Benefits are based on years of
service and salary levels during the highest 60 consecutive months of the last
120 consecutive months of service. In early 1994, the Company amended the plan
to terminate benefit service and compensation credit accruals as of February 1,
1994. The impact of this curtailment was not material to the Company's liability
accounts relating to its pension plan. Certain of the Company's employees
employed by its foreign subsidiaries are covered by contributory pension plans
maintained and funded in accordance with local laws.
Pension expense for the domestic plan in 1997, 1996 and 1995 consisted
of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost........................................... $ - $ - $ -
Interest on projected benefit obligation.............. 11,389 11,500 11,723
Actual return on assets................................ (7,673) (22,061) (11,313)
Amortization of unrecognized prior service costs....... (4,401) 10,481 -
---------------- --------------- --------------
Net periodic pension cost (benefit)................ $ (685) $ (80) $ 410
=============== =============== ==============
</TABLE>
The domestic plan funded status and amounts included in the
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value of benefits:
Vested.............................................................. $ 178,171 $ 164,027
Nonvested........................................................... 658 606
------------- --------------
Total accumulated benefits........................................ $ 178,829 $ 164,633
============= ==============
Projected benefit obligation............................................ $ (178,829) $ (164,633)
Less: plan assets at fair value......................................... 144,705 144,848
------------- --------------
(34,124) (19,785)
Unrecognized net loss................................................... - -
Tax benefit of excess pension liability................................. - -
-------------- --------------
Accrued pension cost......................................................... $ (34,124) $ (19,785)
============== ===============
</TABLE>
In connection with the sale of Media, the Company became the sponsor of
the Media pension plan, and its ultimate liability will remain the same as it
was prior to the sale. Media has agreed to provide continued funding for the
plan, but if it fails to do so, the Company may be required to make funding
payments or to make any required termination liability payments. As of December
31, 1997, the Company's consolidated balance sheets included $1.9 million in
"other liabilities" for the Media plan's underfunded status. The Media plan's
projected benefit obligation and plan assets at fair value were approximately
$39.7 million and $36.2 million, respectively.
691340.1 F-20
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 16 - Pension Plans (cont'd.)
Actuarial assumptions as of December 31, 1997 and 1996 are as follows:
December 31,
1997 1996
---- ----
Assumed discount rate...................... 7.0% 7.25%
Rate of compensation increase.............. N/A N/A
Expected long-term rate of return.......... 9.0% 9.0%
Assets of the domestic pension plan are invested in directed trusts. At
December 31, 1997 and 1996, assets of the directed trusts were primarily
invested in U.S. government obligations, corporate stocks and bonds and units of
common investment funds consisting of short-term interest bearing instruments
and common stock.
In accordance with Statement of Financial Accounting Standards No. 87,
the Company has recorded an additional minimum pension liability for the
underfunded plan of $29.6 million at December 31, 1997 and $10.5 million at
December 31, 1996, representing the excess of unfunded accumulated benefit
obligations over previously recorded pension cost liabilities. To the extent
that these additional liabilities exceed related unrecognized prior service cost
and net transition obligations, the increase or decrease in liabilities is
charged directly to stockholders' deficit. For 1997 and 1996, $19.1 and $(3.1)
million, respectively, was charged (credited) to stockholders' deficit.
The components of foreign pension expense were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost........................................... $ 41 $ 1,225 $ 88
Interest cost.......................................... 127 136 664
Return on assets....................................... - - (1,695)
Amortization and deferral.............................. 10 13 969
-------------- ------------- --------------
Net periodic pension cost (benefit)................ $ 178 $ 1,374 $ 26
============== ============= ==============
</TABLE>
The reconciliation of the funded status of the foreign plans is as
follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
Plans In Which Plans In Which
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
-------- ------ -------- ------
(in thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefits:
Vested....................................... $ - $ 1,630 $ - $ 1,710
Nonvested.................................... - 20 - 125
------------ ----------- ------------ ------------
Total accumulated benefits................. $ - $ 1,650 $ - $ 1,835
============ =========== ============ ============
Projected benefit obligation................... $ - $ (1,823) $ - $ (2,034)
Less: plan assets at fair value............... - - - -
------------ ----------- ------------ ------------
- (1,823) - (2,035)
Remaining unrecognized transition
net (asset) obligation....................... - (115) - (65)
------------ ------------ ------------ -------------
Prepaid (accrued) pension cost................. $ - $ (1,938) $ - $ (2,099)
============ ============ ============ =============
</TABLE>
691340.1 F-21
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 16 - Pension Plans (cont'd.)
Effective July 1, 1996, the United Kingdom defined benefit pension plan
was terminated and replaced by a new defined contribution retirement plan. Due
to the termination, there was no accrued or prepaid pension cost remaining at
December 31, 1996 and service cost included the amount which reflects all
components of the prorated net pension cost.
The Company also maintains a 401(k) savings plan available to domestic
employees. The Company matches certain portions of employee contributions after
one year of service. Contributions and expenses in connection with this plan
amounted to $0.7 million, $0.8 million and $0.7 million for the years ended
December 31, 1997, 1996 and 1995, respectively.
Note 17 - Royalty Income
In 1997, 1996 and 1995, the Company received and recognized
non-recurring royalty payments attributable to the settlement of patent
litigation and other negotiated settlements related to prior sales of products
by licensees. Such non-recurring royalties amounted to $4.6 million, $2.0
million and $10.5 million in 1997, 1996 and 1995, respectively. The balance of
royalties earned in these years represents royalties for product shipments in
the current period.
Note 18 - Restructuring Charges (Credits)
In connection with the Company's decision to refocus its business
toward mass data storage products and to narrow its product line in its
traditional television markets, the Company began to restructure operations in
1990. These efforts were essentially completed by the end of 1994.
Restructuring charges (credits) for the years ended December 31, 1997
and 1996 consist of the following :
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Provisions for vacated lease obligations................. $ (2,603) $ (200) $ (1,480)
Write-down of property, plant and equipment.............. 858 - -
Provisions for employee separation costs................. 86 - -
Costs associated with closure of foreign
subsidiaries......................................... - (253) (1,000)
-------------- ------------- ---------------
$ (1,659) $ (453) $ (2,480)
=============== ============= ===============
</TABLE>
In 1997, 1996 and 1995 excess accruals of $2.6, $0.5 and $2.5 million
(reflecting lower than anticipated expenses for the closure of foreign
subsidiaries and lease obligations) were credited to operating income.
Accruals for restructuring costs totaled $3.3 million at December 31,
1997 including $2.4 million relating to vacated or abandoned leases.
691340.1 F-22
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 19- Income Taxes
Income from continuing operations before income taxes for domestic and
foreign operations consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Domestic ................................................ $ 15,389 $ 16,016 $ 20,822
Foreign ................................................ 921 (1,621) (494)
----------- ----------- -----------
$ 16,310 $ 14,395 $ 20,328
=========== =========== ===========
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Current:
Federal.............................................. $ (77) $ 178 $ (500)
State................................................ (24) 92 50
Foreign.............................................. 358 312 5
Foreign withholding taxes on royalty
income............................................. 1,250 1,072 1,366
-------------- ------------- --------------
1,507 1,654 921
-------------- ------------- --------------
Deferred:
Federal.............................................. - - -
Foreign.............................................. - - -
-------------- ------------- --------------
$ 1,507 $ 1,654 $ 921
============== ============= ==============
</TABLE>
The difference between taxes computed by applying the statutory federal
corporate income tax rate (effective for 1997, 1996, and 1995) to income from
continuing operations before income taxes and the actual provision for income
taxes was as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
Federal income tax provision
at statutory rate.................................... 5,709 $ 5,038 $ 7,114
Foreign losses not benefited............................. - 879 178
Rates in excess of U.S................................... 972 951 1,605
Temporary differences not previously benefited........... (4,254) (2,286) (7,534)
Net operating losses not previously benefited............ (769) (3,205) -
Other, net............................................... (151) 277 (442)
---------- ---------- --------------
$ 1,507 $ 1,654 $ 921
========== ========== ==============
</TABLE>
691340.1 F-23
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 19 - Income Taxes (cont'd.)
An income tax liability of $1.1 million, representing the alternative
minimum tax due on the disposition of Media, has been recognized against the
gain of business held for disposition in 1995.
The following table shows the major components of the deferred income
tax assets and liabilities as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Inventory basis differences........................................... $ 5,608 $ 5,996
Restructuring reserves and other liabilities not yet
deductible for tax purposes....................................... 12,158 17,910
Loss carryforwards.................................................... 34,998 33,360
Foreign withholding taxes on undistributed earnings
of foreign subsidiaries........................................... (1,267) (1,314)
Property, plant and equipment
basis differences ................................................ 721 73
Credit from prior year's minimum tax.................................. 1,235 1,315
Other ............................................................... 8,770 8,909
Less valuation allowance.............................................. (63,490) (67,563)
-------------- ------------
Deferred tax liability......................................... $ (1,267) $ (1,314)
============== ============
</TABLE>
A valuation allowance has been established to reduce the deferred tax
asset to the amount expected to be realized.
As at December 31, 1997, the Company had net operating loss
carryforwards for income tax purposes of $100.0 million expiring in the years
2005 through 2009. As a result of the financing transactions that were completed
in April 1994 and February 1995, the Company's ability to utilize its net
operating losses and credit carryforwards as an offset against future
consolidated federal income tax liabilities will be restricted in its
application, which will result in a material amount of the net operating loss
never being utilized by the Company.
691340.1 F-24
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 20- Foreign Operations
The following table shows certain financial information relating to the
Company's continuing operations in various geographical areas:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Net Sales:
United States........................................ $ 73,441 $ 92,711 $ 91,908
Europe, Africa and the Middle East................... 16,338 20,744 21,324
Other foreign........................................ 3,124 4,884 5,572
Eliminations (1)..................................... (12,592) (21,854) (23,142)
--------------- -------------- ---------------
Total........................................ $ 80,311 $ 96,485 $ 95,662
================ =============== ==============
</TABLE>
(1) Inter-area sales, primarily from the United States.
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Income before income taxes:
United States........................................ $ 6,699 $ 8,918 $ 9,256
Europe, Africa and the Middle East................... 498 1,352 3,704
Other foreign........................................ 905 350 1,116
Royalties............................................ 12,550 10,497 15,006
Eliminations and corporate expenses.................. (4,342) (6,722) (8,754)
--------------- -------------- --------------
Total........................................ $ 16,310 $ 14,395 $ 20,328
============== ============== ==============
Year Ended December 31,
1997 1996
---- ----
(in thousands)
Identifiable assets:
United States.......................................................... $ 34,488 $ 48,521
Europe, Africa and the Middle East..................................... 5,448 6,565
Other foreign.......................................................... 1,094 1,484
Eliminations and corporate assets...................................... 40,641 27,922
------------- --------------
Total.......................................................... $ 81,671 $ 84,492
============= ==============
</TABLE>
Transfers between geographic areas are at cost plus a reasonable
profit. Sales from the United States include export sales to unaffiliated
customers of $5.6 million, $7.3 million and $7.1 million in 1997, 1996 and 1995,
respectively. Identifiable assets are classified by the location of the
Company's facilities and include cash, accounts receivable, inventory and
property, plant and equipment. Corporate assets consisted principally of cash
and short-term investments at December 31, 1997 and 1996.
691340.1 F-25
<PAGE>
AMPEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 21 - Major Customers
Direct and indirect sales to various U.S. government agencies amounted
to approximately $22.3 million, $17.4 million and $14.0 million for 1997, 1996
and 1995, respectively. In 1997, 1996 and 1995 no other single customer
accounted for more than 10% of total net sales.
Note 22 - Subsequent Event
In January 1998, the Company issued $30.0 million 12% Senior Notes due
March 15, 2003, together with warrants to purchase 1,020,000 Common Shares. The
warrants are exercisable at $2.25 per share at any time on or prior to March 15,
2003. The warrants, if exercised, would represent approximately 2% of the
Company's Common Shares on a diluted basis. The indenture under which the Notes
were issued contains customary affirmative and negative restrictive covenants
that limit, among other things, the incurrence of additional senior debt, the
payment of dividends, the sale of assets and other actions by the Company and
certain restricted subsidiaries. Under such indenture the Company may, in
general, issue additional senior debt, without meeting certain fixed charges
coverage tests, up to $15.0 million. The Company has no present plans to issue
any such additional debt, but may do so in the future if investment
opportunities are subsequently identified that require additional capital funds.
Note 23 - Quarterly Financial Information (Unaudited)
The following is a summary of the unaudited quarterly financial
information for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
(In thousands, except share data)
Fiscal 1997
Quarters ended March 31 June 30 Sept. 30 Dec. 31
- -------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $ 21,081 $ 21,299 $ 18,182 $ 19,749
Gross profit 10,519 10,618 8,232 9,802
Net income 4,944 2,336 2,604 4,919
Basic and diluted income per share $ 0.11 $ 0.05 $ 0.06 $ 0.11
Fiscal 1996
Quarters ended March 31 June 30 Sept. 30 Dec. 31
- -------------- ---------- ----------- ---------- -----------
Net sales $ 24,232 $ 24,420 $ 23,604 $ 24,229
Gross profit 10,861 10,902 11,022 11,293
Net income 3,473 3,972 3,103 2,193
Basic and diluted income per share $ 0.09 $ 0.09 $ 0.07 $ 0.05
</TABLE>
691340.1 F-26
<PAGE>
AMPEX CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page
Report of Independent Accountants on Financial Statement Schedule......... S-2
Schedule II - Valuation and Qualifying Accounts..................... S-3
S-1
DOCUMENT NO. 691346.1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
Board of Directors and Stockholders
Ampex Corporation
Our report on the consolidated financial statements of Ampex Corporation is
included on page F-2 of this Form 10-K. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the index on page S-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
San Francisco, California
February 20 , 1998
S-2
DOCUMENT NO. 691349.1
<PAGE>
AMPEX CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Charges to Balance at
beginning of cost and other end of
Description period expenses accounts (1) (Deductions) (2) period
- ----------- ------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts and sales returns
December 31, 1995 $ 5,404 $ (858) $ (221) $ (1,784) $ 2,541
- -----------------
December 31, 1996 $ 2,541 $ (192) $ (94) $ (14) $ 2,241
- -----------------
December 31, 1997 $ 2,241 $ (395) $ (67) $ (295) $ 1,484
- -----------------
Allowance for obsolete and
slow moving inventory
December 31, 1995 $ 29,477 $ 1,930 $ 1,958 $ (7,692) $ 25,673
- -----------------
December 31, 1996 $ 25,673 $ (362) $ - $ (5,234) $ 20,077
- -----------------
December 31, 1997 $ 20,077 $ 25 $ (3) $ (4,470) $ 15,629
- -----------------
</TABLE>
- ------------------------------------
(1) Includes transfers and reclassifications to other accounts.
(2) Includes write-offs of accounts receivable and inventories.
S-3
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMPEX CORPORATION
By: /s/ Edward J. Bramson
---------------------
Edward J. Bramson
Chairman and Chief Executive Officer
Date: March 13, 1998
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Edward J. Bramson, Joel D.
Talcott, Vicki Gruber Callahan or any of them, with full power to act, his
attorney-in-fact, with the power of substitution for him in any and all
capacities, to sign any or all amendments to this report, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
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
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Edward J. Bramson Chairman, Chief Executive Officer March 13, 1998
- ---------------------
Edward J. Bramson and Director (Principal Executive Officer)
/s/ Craig L. McKibben Vice President, Chief Financial Officer, March 13, 1998
- ---------------------
Craig L. McKibben Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Douglas T. McClure, Jr. Director March 13, 1998
- ---------------------------
Douglas T. McClure, Jr.
/s/ Peter Slusser Director March 13, 1998
Peter Slusser
/s/ William A. Stoltzfus, Jr. Director March 13, 1998
- -----------------------------
William A. Stoltzfus, Jr.
</TABLE>
679833.6
-33-
<PAGE>
AMPEX CORPORATION
1997 FORM 10-K
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.3 Ampex Systems Corporation Savings Plan (1997 Restatement).
10.4 Ampex Systems Corporation Employees' Retirement Plan, as
amended and restated as of January 1, 1997.
10.20 Stock Purchase Agreement, dated as of October 29, 1997,
between the Registrant and Edward J. Bramson.
10.21 Stock Purchase Agreement, dated as of November 7, 1997,
between the Registrant and Edward J. Bramson.
10.22 Stock Purchase Agreement dated as of February 18, 1998 between
the Registrant and Edward J. Bramson.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Accountants.
25.1 Power of Attorney (included in the signature page of this
Report).
27.1 Financial Data Schedule.
679833
EXHIBIT 10.3
THE AMPEX CORPORATION
SAVINGS PLAN
(1997 Restatement)
688857.1
<PAGE>
THE AMPEX CORPORATION
SAVINGS PLAN
(1997 Restatement)
Table of Contents
INTRODUCTION...................................................................1
ARTICLE I DEFINITIONS . ............................................ 3
ARTICLE II ELIGIBILITY.................................................16
ARTICLE III PARTICIPATION...............................................19
ARTICLE IV COMPANY CONTRIBUTIONS.......................................27
ARTICLE V CHANGE IN ALLOCATION TO INVESTMENT FUNDS....................36
ARTICLE VI CHANGE IN OR SUSPENSION OF EMPLOYEE
CONTRIBUTIONS...............................................38
ARTICLE VII TRUST FUNDS, TRUSTEE AND INVESTMENT
MANAGER.....................................................39
ARTICLE VIII VALUATION OF TRUST FUNDS....................................47
ARTICLE IX DISTRIBUTION UPON SEPARATION FROM SERVICE...................48
ARTICLE X WITHDRAWAL DURING EMPLOYMENT................................54
ARTICLE XI VESTING AND FORFEITURES.....................................57
ARTICLE XII ADMINISTRATION..............................................58
ARTICLE XIII NONASSIGNABILITY............................................64
ARTICLE XIV AMENDMENT, TERMINATION, MERGER OR
CONSOLIDATION...............................................66
ARTICLE XV GENERAL PROVISIONS..........................................68
688857.1
<PAGE>
ARTICLE XVI TOP HEAVY...................................................70
EXECUTION.....................................................................74
688857.1
<PAGE>
THE AMPEX CORPORATION
SAVINGS PLAN
(1997 Restatement)
INTRODUCTION
Effective July 24, 1992, Ampex Systems Corporation ("Ampex") became the
successor to Ampex Corporation. Effective April 22, 1994, Ampex Corporation
became the successor to Ampex Systems Corporation.
Effective May 1, 1956, Ampex Corporation had established the Ampex
Corporation Employees' Profit Sharing and Retirement Trust, so that its eligible
employees and the eligible employees of other corporations which adopted the
Trust with the consent of Ampex Corporation could provide for their future
security by accumulating funds and sharing in their respective employer's
profits. Thereafter, the document evidencing the Trust was amended and restated
in the form of a separate plan document entitled "Ampex Corporation Employees'
Supplemental Retirement Plan" (the "Plan"), and the trust incorporated therein
was set forth in a trust agreement entitled "Ampex Corporation Employees'
Supplemental Retirement Trust".
The Plan was further amended and restated effective August 1, 1984, as
"The Ampex Corporation Savings and Signal Stock Purchase Plan", among other
things to include a qualified cash or deferred arrangement in accordance with
the provisions
of Section 401(k) of the Code.
The Plan was further amended and restated, effective September 20,
1985, as "The Ampex Corporation Savings and Stock Purchase Plan" and
subsequently amended, effective August 1,
1986 and September 21, 1986.
The Plan was further amended and restated in its entirety, effective
December 16, 1988, as "The Ampex Corporation Savings Plan" and subsequently
amended on two occasions, effective
688857.1
<PAGE>
January 1, 1987 and January 1, 1992.
The Plan was further amended and restated in its entirety, effective
January 1, 1993 as "The Ampex Systems Corporation Savings Plan", and was
subsequently amended on five occasions.
The Plan is hereby further amended and again restated in its entirety,
effective January 1, 1997, as "The Ampex Corporation Savings Plan" in order to
incorporate the relevant provisions of the last five amendments into one
restated Plan document, to delete Plan provisions that are no longer relevant,
and to make certain clarifying changes to the Plan, as such Plan was in effect
on December 31, 1996. No provision of this Plan as hereby amended and restated
shall divest any previously accrued or vested interest.
The Plan is intended to retain its status as a tax-exempt and qualified
profit sharing plan under Section 401(a) of the Internal Revenue Code of 1986 as
amended and as an employee pension plan which is subject to the provisions of
the Employee Retirement Income Security Act of 1974 as amended. The Plan is also
intended to qualify as a "404(c) plan" within the meaning of Section 404(c) of
ERISA. The Plan is further intended to be an "eligible individual account plan"
under Section 407 of ERISA, that is designed to hold up to 100% of its assets in
stock of Ampex Corporation ("Ampex Stock").
Notwithstanding the foregoing, any Plan provision regarding the
investment of Participants' accounts in shares of Ampex Stock or the payment of
contributions in shares of Ampex Stock shall not be effective until such date as
the Board of Directors of Ampex specifies in a duly adopted resolution (which
effective date shall not be retroactive).
688857.1
2
<PAGE>
ARTICLE I
DEFINITIONS
1.1 "Accounts" of a Participant shall mean his Company Matching
Account, Employee Regular Account, Employee Tax Saver Account, and Rollover
Account, as the context indicates.
1.2 "Administrator" shall mean Ampex acting through its officers,
except that if Ampex appoints a Committee under Article XII, the term shall mean
the Committee as to duties, powers and responsibilities specifically conferred
thereon by Ampex.
1.3 "Affiliate" shall mean any employer which is not a Company but
which, at the time of reference, was, with a Company, a member of a controlled
group of corporations or a trade or business under common control, as determined
under Section 414(b) and (c) of the Code and, for purposes of Section 415 of the
Code, under Section 415(h) of the Code.
1.4 "Ampex" shall mean (a) until July 24, 1992, Ampex Corporation,
originally a California corporation, and then a Delaware corporation, which
recently changed its name to Xepma I Inc., (b) from July 24, 1992 until April
22, 1994, Ampex Systems Corporation, a Delaware corporation, which succeeded to
the business of Xepma I Inc., and (c) on and after April 22, 1994, Ampex
Corporation, a Delaware Corporation (the successor in interest to Ampex Systems
Corporation).
1.5 "Annual Addition" of a Participant for the Plan Year in question
shall mean the sum of:
(a) Company Matching Contributions and forfeitures allocated to his
Company Matching Account for that Plan Year;
(b) Employee Tax Saver Contributions allocated to his Tax Saver
Account for that Plan Year;
(c) Company or Affiliate contributions and forfeitures
688857.1
3
<PAGE>
allocated to his account under all other qualified defined contribution plans,
if any, of the Company or any Affiliate for that Plan Year;
(d) The sum of his Employee Regular Contributions under the Plan and
his personal contributions under all other qualified defined contribution plans,
if any, of the Company and all Affiliates for that Plan Year;
(e) Company or Affiliate contributions allocated after 1984 to all
individual medical accounts (within the Section 415(1) (1) of the Code), if any,
which are under any qualified defined benefit plan of the any Affiliate; and
(f) For purposes of applying the limitation in Section 415(c) (1) (A)
of the Code, Company or Affiliate contributions paid or accrued, if any, and
allocated to the separate account of a Key Employee for the purpose of providing
post-retirement medical benefits.
1.6 "Basic Compensation" shall mean full salary, wages and, in the case of
persons employed in a sales or sales supervisory capacity, commissions based on
sales under a policy approved by a divisional general manager, due for a
particular pay period of a Company, exclusive of overtime, shift differential,
unused vacation paid upon termination of employment, bonuses or any other form
of premium or incentive pay, and with respect to a Participant to whom ss. 4.1
applies, before any reduction under ss. 3.2(a)(ii). (a) No portion of the Basic
Compensation of any Employee which exceeds the dollar limit prescribed in
Section 401(a)(17) of the Code (as adjusted pursuant to Sections 401(a)(17) and
415(d) of the Code) shall be taken into account for any purpose under the Plan
for any Plan Year, and (b) in applying the dollar limit, ss. 1.26(e) shall apply
except that the term "Family Member" shall only include a spouse or a lineal
descendant who has not attained age 19 before the close of the Plan Year.
1.7 "Basic Contributions" shall mean the aggregate of a Participant's
Employee Tax Saver and Employee Regular
688857.1
4
<PAGE>
Contributions for a month which does not exceed an amount equal to 8% of the
Participant's Basic Compensation for that month.
1.8 "Board of Directors" shall mean the Board of Directors of Ampex.
1.9 "Break in Service Year" of any Employee or former Employee shall mean a
period of twelve consecutive months during which the Employee receives no
Credited Service; provided, however, that if the Employee provides to the
Committee such timely information as the Committee may reasonably require to
establish that the Employee is absent owing to pregnancy of the Employee, birth
of a child of the Employee, placement of a child with the Employee in connection
with adoption of the child by the Employee or the care of the child following
such birth or placement (a "Child-Related Absence"), no Break In Service Year
shall include any portion of the twelve-consecutive month period beginning on
the first day for which the Employee, because of the Child-Related Absence, is
not credited with Credited Service pursuant to ss. 1.16.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
1.11 "Committee" shall mean the Committee, if any, appointed pursuant
to Article XII.
1.12 As the context requires, "Company" or "Companies" shall mean
Ampex, any Affiliate which has adopted or which subsequently adopts the Plan as
a whole or as to one or more divisions or classifications in accordance with
Article XV, and any successor thereto which continues the Plan under ss.
14.3(a), acting through their respective officers.
1.13 "Company Matching Account" shall mean the account that holds a
Participant's Company Matching Contributions and the investment results thereof.
1.14 "Company Matching Contributions" shall mean
688857.1
5
<PAGE>
contributions made by a Company under ss. 4.2 or 4.3.
1.15 "Contribution" shall mean a contribution referred to in ss. 1.14,
1.21 or 1.23, as the context dictates.
1.16 (a) "Credited Service" shall mean that period of time, beginning
on the date on which an Employee first renders one Hour of Service, that the
Employee performs services for the Company. An Employee's Credited Service shall
be determined without regard to whether he is a Participant during his period of
service with the Company and shall also include those periods, up to one year
each, during which the Employee is on a leave of absence, is disabled, is on
sick leave, or is on vacation or holiday. In addition, if an Employee ceases to
be an Employee and then resumes Employee status within twelve consecutive months
immediately following the date of such cessation, his Credited Service shall
also include each day during the period following the time he ceases to be an
Employee and ending with the day he again becomes an Employee. An Employee's
Credited Service shall be expressed in years and portions of years and shall be
measured in cumulative daily increments (including holidays, weekends and other
nonworking days) with 365 days of Credited Service equaling a year of Credited
Service irrespective of whether the year of Credited Service was completed
within a twelve-consecutive-month period. For purposes of determining an
Employee's Credited Service under this provision, the term "Employee" shall mean
any employee of a Company or an Affiliate, and the term "Company" shall include
all Affiliates. If the Company maintains an employee plan of a predecessor
employer, all service for the predecessor employer shall be treated as service
for the Company for purposes of computing Credited Service.
(b) In the case of an Employee who was or would be entitled to
be credited with "years of service" under the provisions of the Plan as in
effect before May 23, 1987, Credited Service shall also include (1) a number of
years equal to the number of "years of service" credited to such employee
688857.1
6
<PAGE>
before January 1, 1987; and (2) the greater of:
(i) the service taken into account under such
previous provisions from January 1, 1987 to and including May 22, 1987; or
(ii) the period of service that would be credited to
such employee under the method described in subsection (a) during the Plan Year
beginning on January 1, 1987.
1.17 "Deferral Compensation" shall mean, for purposes of applying
ss.ss. 1.18, 3.11 and 4.4 and the discrimination tests of Sections 401(k)(3) and
401(m)(2) of the Code with respect to any eligible Employee (as described in
ss.ss. 1.18 and 4.4(b)), the sum of (a) his or her Statutory Compensation, (b)
his or her Employee Tax Saver Contributions, and (c) any other amounts which are
contributed to an employee benefit plan by a Company or Affiliate pursuant to a
salary reduction agreement and are not includible in gross income under Section
125, 401(k), 402 (a) (8) or 402(h) of the Code. Compensation for periods prior
to the time that the individual becomes a Participant shall not be taken into
account. (1) No amount in excess of the dollar limit prescribed in Section 401
(a) (17) of the Code (as adjusted pursuant to Sections 401(a)(17) and 415(d) of
the Code) shall be taken into account under this S 1.15 for any Plan Year, and
(2) in applying the dollar limit, ss. 1.26(e) shall apply except that the term
"Family Member" shall only include a spouse or a lineal descendant who has not
attained age 19 before the close of the Plan Year.
1.18 "Deferral Percentage" shall mean:
(a) with respect to Highly Compensated Employees, the average
of the decimal numbers, obtained by (i) dividing (a) the amount (if any)
credited to Employee Tax Saver Account of each such Employee who is employed by
a Company to which ss. 4.1 is applicable, and who is eligible to participate in
the Plan, for the Plan Year in question, by (b) his Deferral Compensation for
such Plan Year, and (ii) applying all aggregation rules set forth in ss.
3.11(b); and
688857.1
7
<PAGE>
(b) with respect to Employees who are not Highly Compensated
Employees, the average of the decimal numbers, obtained by (i) dividing (a) the
amount (if any) credited to Employee Tax Saver Account of each such Employee who
is employed by a Company to which ss. 4.1 is applicable, and who is eligible to
participate in the Plan, for the Plan Year in question, by (b) his Deferral
Compensation for such Plan Year, and (ii) applying the aggregation rule set
forth in ss. 3.11(b)(i).
1.19 "Employee" shall mean any employee of any Company or Affiliate,
excluding:
(a) a temporary employee, that is, one who (i) is employed to
do a specific job for a limited period of time, and (ii) performs less than
1,000 Hours of Service in any twelve- consecutive-month period;
(b) a director who is not otherwise an Employee; and (c) a
nonresident alien who is not receiving U.S.
source income from a Company or an Affiliate.
1.20 "Employee Regular Account" shall mean the account
that holds a Participant's Employee Regular Contributions, amounts previously
held in his "Employee Special Account" under the Plan as in effect before
December 16, 1988, and the investment results thereof.
1.21 "Employee Regular Contributions" or "Regular Contributions" shall
mean a Participant's contributions of up to and including 18% of his Basic
Compensation made in accordance with Article III.
1.22 "Employee Tax Saver Account" shall mean the account that holds a
Participant's Employee Tax Saver Contributions and the investment results
thereof.
1.23 "Employee Tax Saver Contributions" or "Tax Saver Contributions"
shall mean contributions of a Company on behalf of a Participant of up to and
including 16% of his Basic Compensation, made in accordance with ss. 4.1.
1.24 "ERISA" shall mean the Employee Retirement Income
688857.1
8
<PAGE>
Security Act of 1974, as amended. Reference to a specific section of ERISA shall
include such section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending, supplementing or
superseding such section.
1.25 "Hardship" of a Participant shall mean, subject to such
limitations as may be imposed by law or regulation, an immediate and heavy, and
as to such Participant, an unusual, financial need involving the Participant's
primary residence, his education affecting his employment with a Company,
education of his children or other dependents, medical, dental or funeral
expenses for members of his family, judgments, awards or other liabilities which
might otherwise result in levy of execution upon the property or compensation of
himself and/or his spouse, or other events of equal seriousness and financial
impact, all as determined by the Administrator in its discretion in accordance
with uniform and nondiscriminatory standards adopted for this purpose and
uniformly interpreted and consistently applied.
1.26 "Highly Compensated Employee" shall mean any Employee who performs
services for a Company or Affiliate during the Determination Year and who:
(a) During the Look-Back Year (i) was a 5-percent owner
(within the meaning of Section 414(q) (3) of the Code) (a "5% owner"), (ii)
received Compensation in excess of $75,000 (as adjusted pursuant to Sections
414(q) (1) and 415(d) of the Code), (iii) received Compensation in excess of
$50,000 (as adjusted pursuant to Sections 414(q) (1) and 415(d) of the Code) and
was a member of the top-paid group (within the meaning of Section 414(q)(4) of
the Code) for such Year, or (iv) was an officer of a Company or Affiliate and
received Compensation for such Year that is greater than 50% of the dollar
limitation in effect under Section 415(b)(1)(A) and (d) of the Code or (if no
officer has Compensation in excess of that threshold for such Year) the highest
paid officer for such Year;
688857.1
9
<PAGE>
(b) (i) Would be described in clause (ii) , (iii) or (iv) of subsection
(a) above if the term "Determination Year" were substituted for the term
"Look-Back Year", and (ii) is one of the 100 Employees who received the most
Compensation for the Determination Year; or
(c) Is a 5% Owner at any time during the Determination Year.
(d) Subject to the satisfaction of such conditions as may be prescribed
under Section 414(q)(12)(B)(ii) of the Code, Ampex may elect for any Plan Year
to apply subsection (a)(ii) above by substituting "$50,000'. for "$75,000" and
not to apply subsection (a)(iii) above.
(e) If an Employee is, at any time during a Determination or Look-Back
Year, a spouse, lineal ascendant or descendant, or spouse of a lineal ascendant
or descendant (a "Family Member") of either (i) a 5% Owner who is an active or
former Employee or (ii) a Highly Compensated Employee who is one of the ten most
highly compensated employees ranked on the basis of Compensation paid for such
Year (a "Family Employee"), then for such Year the Family Member and the Family
Employee shall be aggregated and treated as one Employee receiving Compensation
and contributions under the Plan equal to the sum of such Compensation and
contributions received by the Family Member and the Family Employee.
(f) The determination of who is a Highly compensated Employee,
including the determinations of the number and identity of Employees in the
top-paid group, the top 100 Employees and the number of Employees treated as
officers, shall be made in accordance with Section 414(q) of the Code.
(g) For purposes of this ss. 1.26, (i) "Determination Year" shall mean
the Plan Year for which the determination is being made; (ii) "Look-Back Year"
shall mean the Plan Year immediately preceding the Determination Year; and (iii)
"Compensation" shall mean Deferral Compensation (as defined in ss. 1.17, but
without regard to the last sentence thereof).
688857.1
10
<PAGE>
1.27 (a) An "Hour of Service" of an Employee shall mean:
(i) Each hour for which an Employee is either
directly or indirectly paid or entitled to payment by a Company or an Affiliate
for the performance of duties during the applicable computation period. These
hours shall be credited to the Employee for the computation period in which the
duties were performed; and
(ii) Each hour in or attributable to a period of time
during which he performs no duties (irrespective of whether he had had a
Separation from Service) due to a vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or a leave of absence,
for which he is so paid or so entitled to payment; provided, however, that:
(a) no more than 501 Hours of Service shall be credited
under this paragraph to an Employee on account of any such period; and
(b) no such hours shall be credited to an Employee if
attributable to payments made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, unemployment
compensation or disability insurance laws or to a payment which solely
reimburses the Employee for medical or medically related expenses incurred by
him.
(iii) Each hour for which he is entitled to back pay,
irrespective of mitigation of damages, either awarded or agreed to by a Company
or an Affiliate.
(iv) Solely for purposes of ss. 1.9, each hour in or
attributable to a Plan Year during which the Employee performs no duties for a
Company or an Affiliate (irrespective of whether he had a Separation from
Service) due to an absence from work:
(a) by reason of pregnancy of the Employee,
(b) by reason of the birth of a child of the Employee,
(c) by reason of the placement of a child
688857.1
11
<PAGE>
with the Employee in connection with the adoption of such child by the Employee,
or
(d) for purposes of caring for such child for a period
beginning immediately following such birth or placement. subject, however, to
the provisions of paragraphs (v),(vi) and (vii).
(v) The hours described in paragraph (iv) are:
(a) the Hours of Service which otherwise would normally have
been credited to the Employee but for such absence, or
(b) in any case in which the Plan is unable to determine such
hours, eight Hours of Service per day of such absence; provided, however, that
the total number of hours treated as Hours of Service under paragraph (iv) by
reason of such pregnancy or placement shall not exceed 501.
(vi) The hours described in paragraph (v) shall be treated as
Hours of Service under paragraph (iv):
(a) only in the Plan Year in which the absence from work for
such reason or purpose begins if the Employee would be prevented from incurring
a Break in Service Year in such Plan Year solely because of the provisions of
paragraphs (iv) and (v); or
(b) in any other case, in the immediately following Plan Year.
(vii) No credit for hours referred to in paragraphs (iv), (v)
and (vi) shall be given unless the Employee furnishes to the Administrator such
timely information as the Administrator may reasonably require to establish:
(a) that the absence from work is for a reason or purpose
referred to in paragraph (iv), and
(b) the number of days for which there was such an absence.
(b) Hours of Service under subsections (a)(ii) and (a)(iii)
shall be calculated in accordance with 29 C.F.R. Section 2530.200b-2(b). Each
Hour of Service shall be
688857.1
12
<PAGE>
attributed to the Plan Year or initial eligibility year in which it occurs
except to the extent that a Company or an Affiliate, in accordance with 29
C.F.R. Section 2530.200b-2(c), credits such Hours to another computation period
under a reasonable method consistently applied.
(c) The number of an Employee's Hours of Service shall be
determined from the records of his Company or Affiliate.
(d) Where such records do not permit determination of an
Employee's actual hours, Hours of Service before 1976 shall be the product of:
(i) forty, and
(ii) the number of weeks in which he had an Hour of Service.
1.28 "Investment Funds" shall mean (collectively)
(a) The Stock Fund (as defined in ss. 1.36),
(b) The Prior Fixed Income Fund (as defined in ss. 7.4(a)),
and
(c) The other investment funds established or maintained
pursuant to ss. 7.4(b).
As provided in ss.ss. 3.2(b) and 7.5, neither Contributions nor
transfers shall be paid into the Prior Fixed Income Fund.
1.29 "Participant" shall mean any person included in the Plan as
provided in Article II.
1.30 "Plan" shall mean The Ampex Corporation Savings Plan (formerly the
Ampex Systems Corporation Savings Plan), as set forth in this instrument and as
heretofore and hereafter amended from time to time.
1.31 "Plan Year" shall mean the calendar year, including such years
preceding the adoption of the Plan.
1.32 "Retirement" shall mean retirement on any date permitted by the
Ampex Corporation Employees' Retirement Plan or any Company's defined benefit
pension plan under which the retirement occurs.
1.33 "Rollover Account" shall mean the account that holds
688857.1
13
<PAGE>
transfers to the Plan made by or on behalf of a Participant under ss. 3.13.
1.34 "Separation from Service" of an Employee shall mean the time when
the employer-employee relationship with the Company or an Affiliate is
terminated for any reason including, but not by way of limitation, a termination
by resignation, release, discharge, death, total disability, Retirement or
layoff, but excluding any such Separation from Service where there is a
simultaneous reemployment by either the Company or an Affiliate.
(a) A leave of absence authorized by the Company or an
Affiliate in accordance with established policies, military leave or a vacation
period shall not constitute a Separation from Service; provided, however, that
failure to return to work upon expiration of any leave of absence, military
leave or vacation shall be considered a resignation.
(b) Any Employee who leaves his Company or Affiliate directly
to perform service in the Armed Forces of the United States or the United States
Public Health Services under conditions entitling him to reemployment rights as
provided in the laws of the United States, shall, solely for the purposes of the
Plan and irrespective of whether he is compensated by any Company or Affiliate
during such period of service, be considered to be on military leave. Such leave
shall expire if such Employee voluntarily resigned from his Company or Affiliate
during such period of service, or if he fails to make application for
reemployment within the period specified by such laws for the preservation of
his reemployment rights.
1.35 "Statutory Compensation" of a Participant for any Plan Year means
his compensation for such Plan Year as shown on his IRS Form W-2.
1.36 "Stock Fund" shall mean the Investment Fund, if
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any, that is invested primarily in shares of common stock of Ampex.
1.37 "Supplement" shall mean any supplement or supplements which (a)
have been added to the Plan by amendment from time to time, (b) have become a
part of and are affixed to the Plan, and (c) remain part of the Plan as of the
time of reference.
1.38 "Supplemental Contributions" shall mean the aggregate of a
Participant's Tax Saver and Regular Contributions which exceeds an amount equal
to 8% of the Participant's Basic Compensation for a month, but does not exceed
the percentage provided in ss. 3.12.
1.39 "Trust Agreements" shall mean the trust agreements between Ampex
and the Trustees, as they may be amended from time to time, providing for the
investment and administration of the Trust Funds. By this reference, the Trust
Agreements are incorporated in and made part of the Plan.
1.40 "Trust Funds" shall mean the funds established under Trust
Agreements by contributions made pursuant to the Plan from which any amounts
payable under the Plan are to be paid.
1.41 "Trustees" shall mean (a) State Street Bank and Trust Company, as
trustee of the Trust Fund maintained for investment of the Stock Fund, if any,
and the Prior Fixed Income Fund as defined in ss. 7.4(a)) ("Trustee A"), and (b)
Fidelity Management Trust Company, as trustee of the Trust Fund maintained for
investment of all other assets of the Plan ("Trustee B").
1.42 "Valuation Date" shall mean any day as of which the values of the
Trust Funds are determined by the Trustees in accordance with the provisions of
Article VIII.
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ARTICLE II
ELIGIBILITY
2.1 (a) Any person who is presently a Participant shall remain a
Participant until he has a Separation from Service.
(b) Subject to ss. 4.2(c), any Employee of a Company who on any date:
(i) has completed at least one Hour of Service;
and
(ii) is not in a bargaining unit which is covered by a collective
bargaining agreement with respect to which retirement benefits were the subject
of good faith bargaining (unless such agreement provides for the coverage of
Employees in such unit under the Plan), shall become a Participant on the first
day of the calendar month that is immediately following the calendar month in
which the Employee has satisfied such requirements, provided the Employee has
filed an application to participate in accordance with ss. 3.2.
(c) Any Participant whose participation terminates shall again become
a Participant effective as of his first subsequent Hour of Service as an
Employee of a Company in a portion or classification which is not within a
bargaining unit described in subsection (b)(ii) if he again files an application
to participate in accordance with ss. 3.2.
(d) An individual who was not an Employee of a Company, or who was in
a bargaining unit described in subsection (b)(ii), on the first day on which he
first met all other eligibility requirements shall become a Participant
effective as of the next day on which he completes an Hour of Service as an
Employee of a Company, in a position or classification which is not within a
bargaining unit described in subsection (b)(ii), if he files an application to
participate in accordance with ss. 3.2.
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2.2 Notwithstanding ss. 2.1, any Employee who is subject to or eligible
to participate in any other savings, thrift or similar contributory plan to
which the Company makes contributions on his behalf or with respect to his
employment, and which is qualified under Section 401(a) of the Code, shall not
be eligible to participate in the Plan.
2.3 (a) A Participant who becomes subject to or eligible to participate
in a plan described in ss. 2.2, or who is transferred directly to a position or
classification with the Company which is within a bargaining unit covered by a
collective bargaining agreement which does not provide for the coverage of
Employees in such unit under the Plan and with respect to which retirement
benefits were the subject of good faith bargaining, shall thereupon become a
Participant on inactive status.
(b) All provisions of the Plan will continue to apply to a
Participant on inactive status, but such a Participant shall cease making
contributions under Article III and shall not share in allocations under ss.
4.2, except that, for the Plan Year in which such change in Plan coverage or
transfer occurs, such Participant shall share in such allocations only on the
basis of his Basic Compensation received in such Plan Year while a Participant
and prior to the effective date of such change or transfer.
(c) If a Participant on inactive status ceases to be subject
to or eligible to participate in all plans described in ss. 2.2 or is
retransferred to a position or classification which is not within a bargaining
unit covered by such a collective bargaining agreement, he shall thereupon be
restored to active status. If such change in Plan coverage or retransfer occurs
during a Plan Year, the retransferred Participant shall share in allocations
under ss. 4.2 only on the basis of his Basic Compensation received in such Plan
Year on and after the effective date of such retransfer.
2.4 To the extent required by Section 414(n) of the Code,
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any individual who is a leased employee of any Company or Affiliate (within the
meaning of Section 414(n) of the Code) (a "Leased Employee") shall be treated as
an "employee"; provided, however, that no Leased Employee shall be eligible to
become a Participant or to make transfers to the Trust Funds pursuant to ss.
3.13.
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ARTICLE III
PARTICIPATION
3.1 Participation in the Plan is voluntary. 3.2 Each eligible Employee
who elects to participate in the Plan shall file an application in a manner
prescribed by the Administrator, upon forms prescribed and furnished by it, in
which he:
(a) shall specify either:
(i) the amount of Employee Regular Contributions
which he wishes to contribute to the Plan, and/or
(ii) if ss. 4.1 applies to his Company, the amount by
which he wishes to have his Basic Compensation reduced which shall result in
Employee Tax Saver Contributions by his Company to the Plan on his behalf;
(b) shall specify the percentage or percentages of his
Employee Regular Contributions, Tax Saver Contributions and Company Matching
Contributions that are to be invested in each of the Investment Funds, except
that such Employee Regular Contributions, Tax Saver contributions and Company
Matching contributions shall not be invested in the Prior Fixed Income Fund;
(c) shall designate a beneficiary or beneficiaries to receive
any payment or distribution which may be due upon his death; provided, however,
that a married Participant may not designate any beneficiary other than his
spouse without the written consent of his spouse, which consent (i) acknowledges
the effect of such designation and consent upon the spouse's rights otherwise
provided under ss. 9.2(a)(i), (ii) is witnessed by a Plan representative or a
notary public, (iii) identifies the beneficiary or beneficiaries
688857.1
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for which the consent is given, and (iv) applies only to the beneficiary or
beneficiaries so designated; and
(d) shall submit such other or additional information as in
the opinion of the Administrator is desirable or necessary in the operation of
the Plan.
3.3 Subject to ss.ss. 3.9, 3.10 and 3.12, a Participant's Employee Tax
Saver Contributions may be from 1% through 16%, in whole percentage increments,
of his Basic Compensation.
3.4 Subject to ss.ss. 3.11 and 3.12, a Participant's Employee Regular
Contributions may be from 1% through 18%, in whole percentage increments, of his
Basic Compensation.
3.5 To the extent permitted by Article VI or other provisions of the
Plan and approved by the Administrator, a Participant may change, delete or add
to any of the specifications or designations made by him in his application
under ss. 3.2.
3.6 Employee Regular Contributions shall be deducted from the
Participant's pay and paid by the Company on his behalf to the Plan.
3.7 Each Participant may direct from time to time, on such election
form as the Administrator may prescribe or in such other manner as the
Administrator may designate, and at such times as the Administrator may permit,
that the aggregate contributions to his Accounts be allocated to any combination
of the Investment Funds (other than the Prior Fixed Income Fund) in whole
multiples of a percentage to be determined by the Administrator, provided that
the total of the percentages specified shall not exceed 100%.
3.8 A change in beneficiary designation may be made by
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a Participant at any time by written notice filed in the manner prescribed by
the Administrator upon forms described and furnished by it; provided, however,
that no designation or change of designation shall be effective unless filed in
the manner proscribed by the Administrator prior to a Participant's death and
unless it complies with the provisions of ss. 3.2(c).
3.9 Notwithstanding any contrary Plan provision, the Administrator (in
its discretion) (a) may suspend, limit or modify any Participant's Employee Tax
Saver election at any time in order to prevent the cumulative amount of the
Participant's Employee Tax Saver Contributions for any calendar year from
exceeding the Section 401(k) Ceiling (as defined below); and (b) may (but shall
have no obligation whatsoever to) cause any amount allocated to the Plan as an
excess deferral (with or without any income allocable to such amount) to be
distributed to the Participant in accordance with Section 402(g)(2)(A)(ii) of
the Code. "Section 401(k) Ceiling" shall mean a dollar amount equal to $7,000
(as adjusted pursuant to Sections 402(g)(5) and 415(d) of the Code).
3.10 (a) Notwithstanding any contrary Plan provision, one of the
following requirements shall be satisfied for each Plan Year:
(i) the Deferral Percentage for Highly Compensated
Employees shall not exceed the Deferral Percentage for all other Employees by
1.25; or
(ii) the Deferral Percentage for Highly Compensated
Employees shall not exceed the Deferral Percentage for all other Employees by
more than two percentage points, and the Deferral Percentage for Highly
Compensated Employees shall
688857.1
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not exceed the Deferral Percentage for all other Employees multiplied by two.
(b) The Administrator (in its discretion) (i) may suspend,
limit or modify any Participant's Employee Tax Saver Election at any time in
order to satisfy the requirements set forth in subsection (a); and (ii) may make
a distribution from the Employee Tax Saver Accounts of Participants who are, and
former Participants who were, Highly Compensated Employees to such Participants
of amounts proportionate to their respective Employee Tax Saver Contributions
for such Plan Year which (alone or in connection with other action taken under
ss. 3.9, 3.11(b) or 4.3) will result in a Deferral Percentage for such Plan Year
with respect to Employees who are not Highly Compensated Employees which
satisfies the requirements set forth in subsection (a). To the extent permitted
under Section 401(k) of the Code, a Participant who would otherwise receive a
distribution pursuant to this subsection (b) may elect to have all or a portion
of such distribution transferred to his Employee Regular Account, provided that
the requirements of ss. 3.11 are satisfied.
(c) For purposes of determining the Deferral percentages under
Subsection (a) for any Plan Year, only Employee Tax Saver Contributions shall be
taken into account and only if such contributions (i) are allocated to a
Participant's Employee Tax Saver Account as of a date within such Plan Year and
(ii) relate to compensation that, but for the election to defer, either would
have been paid during such Plan year or is attributable to services performed in
such Plan year and would have been paid within two and one-half months after the
end of such Plan year.
3.11 (a) In order to assure that the limitation described in Section
401(m) of the Code will be satisfied, the Employee Regular Contributions made by
Highly Compensated Employees shall
be subject to ss. 4.4.
(b) The Deferral Percentage for the Highly Compensated
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Employees or non-Highly Compensated Employees who are employed by a Company to
which ss. 4.1 is applicable, and who are eligible to participate in the Plan,
for the Plan Year in question, shall be calculated in accordance with ss. 1.18
by computing the average of the decimal numbers (calculated separately for each
such Employee) (the "Deferral Rates") determined by dividing (1) the total of
all Employee Tax Saver Contributions made by such Employee and credited to his
Account for the Plan Year, by (2) such Employee's Deferral Compensation for the
Plan Year. In computing any such Employee's Deferral Rate, the following special
rules shall apply:
(i) If any Company or Affiliate maintains any other
cash or deferred arrangement which is aggregated by Ampex with this Plan for
purposes of applying Section 401(a)(4) or 410(b) of the Code, then all such cash
or deferred arrangements shall be treated as one plan for purposes of applying
ss. 3.10.
(ii) If a Highly Compensated Employee is a
participant in any other cash or deferred arrangement maintained by any Company
or Affiliate, then the separate Deferral Rates determined for such Employee
under all such cash or deferred arrangements shall be aggregated with the
separate Deferral Rate determined for such Employee for purposes of applying ss.
3.10.
(iii) If a Highly Compensated Employee is subject to
the family aggregation rules of ss. 1.26(e), the Deferral Rate of the family
unit shall be determined by using the combined Deferral Rate of all eligible
Family Members.
(c) In the event that (but for the application of
this subsection (c)) the Administrator determines that the Deferral Percentage
for the Highly Compensated Employees would exceed the maximum permitted under
ss. 3.10(a) for a Plan Year (the "ADP Maximum"), then the Administrator (in its
discretion) may reduce, in accordance with ss. 3.10(b), the percentage or amount
of Employee Tax Saver Contributions subsequently to be contributed on behalf of
the Highly Compensated Employees by such percentage or amount as, and for as
long as, the
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Administrator (in its discretion) may determine is necessary or appropriate in
the circumstances then prevailing.
(d) In the event that the Administrator determines that the
Deferral Percentage for the Highly Compensated Employees has exceeded the ADP
Maximum for a Plan Year, then the amount of any excess contributions (within the
meaning of Section 401(k)(8)(B) of the Code) contributed on behalf of any Highly
Compensated Employee, and any income allocable thereto, shall be distributed to
the Highly Compensated Employee before the close of the Plan Year that next
follows the Plan Year to which the excess contributions relate.
(i) The amount of excess contributions for a Highly
Compensated Employee shall be determined in the following manner:
(a) The Employee Tax Saver Contributions of the Highly
Compensated Employee with the highest Deferral Rate shall be reduced to the
extent necessary to satisfy the Deferral Percentage test or cause such Rate to
equal the Deferral Rate of the Highly Compensated Employee with the next highest
Deferral Rate. This process shall be repeated until the Deferral Percentage test
is satisfied.
(b) The amount of excess contributions for a Highly
Compensated Employee shall be equal to his Employee Tax Saver Contributions
(calculated using such Employee's original Deferral Rate), minus his Employee
Tax Saver Contributions calculated using his Deferral Rate as reduced under
paragraph (a) above.
(c) The amount of excess contributions, as determined
according to the method described in this subsection (d)(i), shall be reduced by
any excess deferrals previously distributed to an Employee for the Plan Year
under ss. 3.9.
(ii) In the case of a Highly Compensated Employee whose
Deferral Rate is determined under the family aggregation rules of ss.
3.11(b)(iii), the Deferral Rate shall be reduced in accordance with the
"levelling" method described in
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Treasury Regulation Section l.401(k)-1(f)(2). Excess contributions for the
family unit shall be allocated among the Family Members in proportion to the
Employee Tax Saver Contributions of each Family Member that have been combined.
(iii) The income allocable to any excess
contribution for the Plan Year shall be determined in accordance with Section
401(k)(8)(A)(i) of the Code, without taking into account any income allocable to
those excess contributions for the period between the end of the Plan Year and
the date of distribution.
3.12 If the Participant elects both Employee Regular and Employee Tax
Saver Contributions, in no event may the amount of such Contributions for a Plan
Year exceed the limitations set forth in the following schedule:
If the Participant's Employee Then his Employee Regular
Tax Saver Contributions equal Contributions cannot exceed
this percentage of his Basic this percentage of his Basic
Compensation for the Plan Year: Compensation for that Year:
16% 1%
15% 2%
14% 3%
13% 4%
12% 6%
11% 7%
10% 8%
9% 9%
8% 10%
7% 11%
6% 12%
5% 13%
4% 14%
3% 15%
2% 16%
1% 17%
0% 18%
3.13 (a) Notwithstanding any contrary Plan provision, the Administrator
may direct Trustee B to accept a direct transfer to its Trust Fund of assets
held for the benefit of a Participant in this Plan from such Participant, if the
transfer of such assets qualifies as a rollover under section 402(c) or
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408(d)(3)(A)(ii) of the Code. For purposes of this ss. 3.13 and subject to ss.
2.4, the term "Participant" shall include an Employee who has not yet satisfied
the requirements of ss. 2.1(b).
(b) Assets transferred to the Plan pursuant to this ss. 3.13
shall be transferred only in cash. No transfer of an amount less than $2,000
shall be accepted under this ss. 3.13.
(c) Assets transferred to the Plan pursuant to this ss. 3.13
shall be credited to the Participant's Rollover Account. A Participant's
interest in his Rollover Account shall be 100% vested and nonforfeitable at all
times. A Participant's Rollover Account shall be invested in accordance with the
Participant's direction under ss. 3.7.
(d) The Administrator may require the Participant, prior to
the transfer described in Subsection (a), to furnish a letter from the
administrator, trustee, custodian or insurance company of the trust, account or
contract from which the transferred amount originated, which shall contain such
information as shall be requested by the Administrator to determine whether such
transfer qualifies as a tax-free transfer or "rollover amount" or affects the
qualified status of this Plan. The decision of the Administrator to accept a
transfer shall not give rise to any liability by the Administrator, the
Committee, the Company, or the Plan to the Participant or any other party on
account of a subsequent determination that such transfer does not qualify as a
tax-free transfer or "rollover amount". If it is later determined that a
transfer to the Plan made pursuant to this Section did not qualify as a rollover
under Sections 402(c) or 408(d)(3)(A)(ii) of the Code, then the balance credited
to the Participant's Rollover Account allocable to such transfer shall
immediately be distributed to the Participant and shall be deemed never to have
been part of the Trust Funds.
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<PAGE>
ARTICLE IV
COMPANY CONTRIBUTIONS
4.1 (a) As authorized by the Board of Directors, any Company may, by
written notice to the Administrator, make this ss. 4.1 applicable to such
Company, effective as of the date specified in such notice.
(b) Each Company to which this ss. 4.1 applies shall
contribute and pay into the Trust Funds for each month an amount equal to the
sum of the Employee Tax Saver Contributions attributable to such month elected
by Participants in the employ of such Company. Such contribution and payment
shall be made on the earliest date that it can be reasonably segregated from the
Company's general assets, but in no event later than the latest date on which it
becomes a "plan asset" under ERISA or as otherwise prescribed under applicable
federal law.
(c) The amount of each such Employee Tax Saver Contribution
shall be credited to the Employee Tax Saver Account of the Participant for whom
it is made.
4.2 (a) Each Company will contribute and pay into the Trust Funds each
month, out of its current or accumulated earnings and profits, an amount equal
to 50% of the Basic Contributions for such month of each Participant in its
employ, reduced (in accordance with ss. 11.3) by a pro rata share of amounts
forfeited in such month pursuant to ss. 9.l(b); provided, however, that:
(i) Ampex may determine and announce to
Employees before any Plan Year the maximum aggregate amount of the Company
Matching Contributions (excluding reallocated forfeitures) that shall be made by
all Companies on behalf of
all Participants for that Plan Year, and
(ii) The maximum aggregate amount of the Company
Matching Contributions (including reallocated forfeitures) that
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<PAGE>
shall be made on behalf of any one Participant for any Plan Year shall be
$4,000, and
(iii) Company Matching Contributions made on behalf
of any Participant (a) in respect of any Plan Year other than the first Plan
Year for which Company Matching Contributions may be made on his behalf pursuant
to ss. 4.2(c), shall be based only on Basic Contributions that have been made
out of the first $100,000 of his Basic Compensation for such Plan Year and (b)
in respect of the first Plan Year for which Company Matching Contributions may
be made on his behalf pursuant to ss. 4.2(c), shall be based only on Basic
Contributions that have been made out of the first $100,000 of his Basic
Compensation during the period beginning on the first day of the month in such
Plan Year by which he has completed the service requirement described in ss.
4.2(c) and ending on the last day of such Plan Year; provided, however, that all
such limitations shall remain in effect for later Plan Years until an increase
or a prospective decrease is determined by Ampex and announced to Employees.
(b) The Company Matching Contributions made on behalf of each
Participant for each month (including a pro rata share of the forfeitures
applied to reduce such Contributions) shall be allocated to that Participant and
credited to his Company Matching Account.
(c) Notwithstanding any other contrary Plan provision, a
Company shall not make any Company Matching Contributions for any given month
with respect to a Participant unless, on the first day of such month, the
Participant has completed (i) one 365-day period commencing on the date of his
first Hour of Service or (ii) one Plan Year commencing on or after the date of
his first Hour of Service, during which 365- day period or Plan Year he had
completed 1,000 or more Hours of Service.
4.3 Notwithstanding ss. 4.2(b), as of the end of each Plan Year for
which it is necessary in order to comply with Section
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401(k)(3) of the Code, Ampex (in its discretion) may cause an additional Company
Matching Contribution to be made to the Plan by each Company which ss. 4.1 is
applicable, for allocation to the Employee Tax Saver Accounts of Participants in
its employ who are not Highly Compensated Employees, of amounts proportionate to
their respective Employee Tax Saver Contributions otherwise made for such Plan
Year which (alone or in connection with other action taken under ss.ss. 3.9,
3.10(b) or 3.11(b)) will result in a Deferral Percentage for such Plan Year with
respect to Employees who are not Highly Compensated Employees which satisfies
the requirements of ss. 3.10(a). Any such additional Company Matching
Contribution may be made only if the applicable requirements set forth in
Treasury Department Regulation Section 1.401(k)-1(b)(5) or any successor
regulation thereto are satisfied.
4.4 (a) Notwithstanding any contrary Plan provision, one of the
following requirements shall be satisfied for each Plan Year:
(i) the Contribution Percentage (as defined in ss.
4.4(b)) for Highly Compensated Employees shall not exceed the Contribution
Percentage for all other Employees multiplied by 1.25; or
(ii) the Contribution Percentage for Highly
Compensated Employees shall not exceed the Contribution Percentage for all other
Employees by more than two percentage points, and the Contribution Percentage
for Highly Compensated Employees shall not exceed the Contribution Percentage
for all other Employees multiplied by two.
For any Plan Year, the Administrator (in its discretion) may limit the
Employee Regular and/or Company Matching Contributions to be contributed by or
for the benefit of Highly Compensated Employees in such manner as may be
necessary or appropriate to assure that the limitation described in this
subsection (a) will be satisfied.
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<PAGE>
(b) "Contribution Percentage" shall mean:
(i) with respect to Highly Compensated Employees, the
average of the decimal numbers, obtained by (a) dividing (1) the total amounts
(if any) credited to the Employee Regular and Company Matching Accounts of each
such Employee who is employed by a Company to which ss. 4.1 is applicable, and
who is eligible to participate in the Plan, for the Plan Year in question, by
(2) his Deferral Compensation for such Plan Year, and (b) applying the
aggregation rules referred to in ss. 4.4(c); and
(ii) with respect to Employees who are not Highly
Compensated Employees, the average of the decimal numbers, obtained by (a)
dividing (1) the total amount (if any) credited to Employee Regular and Company
Matching Accounts of each such Employee who is employed by a Company to which
ss. 4.1 is applicable, and who is eligible to participate in the Plan, for the
Plan Year in question, by (2) his Deferral Compensation for such Plan Year, and
(b) applying the aggregation rules referred to in ss. 4.4(c).
(c) The Contribution Percentage for the Highly Compensated
Employees or non-Highly Compensated Employees who are employed by a Company to
which ss. 4.1 is applicable, and who are eligible to participate in the Plan,
for the Plan Year in question, shall be calculated by computing the average of
the decimal numbers (calculated separately for each such Employee) determined by
dividing (i) the total of all Employee Regular and/or Company Matching
Contributions (including reallocated forfeitures) made by or on behalf of such
Employee and credited to his Employee Regular and/or Company Matching Account
for the Plan Year, by (ii) such Employee's Deferral Compensation for the Plan
Year. The special aggregation rules set forth in ss. 3.11(b) with respect to
calculation of Deferral Percentages shall also apply to the calculation of the
actual Contribution Percentages.
(d) In the event that (but for the application of
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this subsection (d)) the Administrator determines that the Contribution
Percentage for the Highly Compensated Employees would exceed the maximum
permitted under ss. 4.4(a) for a Plan Year (the "ACP Maximum"), then the
Administrator (in its discretion) may reduce, in accordance with ss. 4.4(a), the
percentage or amount of Employee Regular and/or Company Matching Contributions
subsequently to be contributed by or on behalf of the Highly Compensated
Employees by such percentage or amount as, and for as long as, the Administrator
(in its discretion) may determine is necessary or appropriate in the
circumstances then prevailing.
(e) In the event that the Administrator determines that the
Contribution Percentage for the Highly Compensated Employees exceeds the ACP
Maximum for a Plan Year, then the amount of any excess aggregate contributions
(within the meaning of Section 401(m)(6)(B) of the Code) contributed by or on
behalf of any Highly Compensated Employee, and any income allocable thereto,
shall be distributed to the Highly Compensated Employee before the close of the
Plan Year that next follows the Plan Year to which the excess aggregate
contributions relate.
(i) The amount of excess aggregate contributions for
a Highly Compensated Employee, the income allocable thereto and the application
of the family aggregation rules shall be determined in the manner provided in
ss. 3.11(d) with respect to excess contributions.
(ii) Notwithstanding any contrary Plan provision,
except to the extent permitted under Section 401(k) and (m) of the Code,
multiple use of the alternative methods of compliance with Section 401(k) and
(m) of the Code, as set forth in Section 401(k)(3)(A)(ii)(IX) and (m)(2)(A)(ii)
of the Code, shall not be permitted. In the event that multiple use occurs, it
shall be corrected by reducing the Deferral Percentage and/or the Contribution
Percentage for Highly Compensated Employees (in the discretion of the
Administrator) and treating such reductions as excess contributions or excess
aggregate
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contributions (as appropriate) under ss. 3.11(d) or this subsection (e).
(iii) The foregoing provisions of this ss. 4.4 are
intended to satisfy the requirements of Section 401(m) of the Code and, to the
extent not otherwise stated above, the provisions of Section 401(m)(2) and (9)
of the Code and Treasury Regulation Sections l.401(m)-1(b) and 1.401(m)-2 are
incorporated herein by reference.
4.5 Company Matching Contributions shall be paid in cash or in the form
of shares of common stock of Ampex. When Company Matching contributions are to
be made in the form of shares of common stock of Ampex, the number of shares to
be contributed shall be determined pursuant to such method as shall be selected
by the Administrator and communicated to the Participants. Notwithstanding the
foregoing, this ss. 4.5 shall not be effective until such date as the Board of
Directors specifies in a duly adopted resolution (which effective date shall not
be retroactive).
4.6 The Company will make no contributions to the Trust Funds related
to or resulting from Supplemental Contributions.
4.7 (a) In any Plan Year, which shall be the Plan's "limitation year"
within the meaning of Treasury Regulation Section 1.415-2(b), the Annual
Addition of a Participant shall not exceed the least of:
(i) 25% of such Participant's Statutory for such Plan
Year,
(ii) $30,000 (as adjusted pursuant to Section 415(d)
of the Code), or
(iii) that amount which would result in the sum of
the "defined benefit plan fraction" for all defined benefit plans of the
Companies and the "defined contribution plan fraction" for all defined
contribution plans of the Companies equaling or exceeding 1.00 with respect to
such Participant. For purposes of this subsection (a):
(a) The "defined benefit plan fraction" for
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any Plan Year is a fraction, the numerator of which is the projected annual
benefit of the Participant under all the defined benefit plans of the Companies
(determined as of the close of the Plan Year) and the denominator of which is
the lesser of:
(1) the product of 1.25 and $90,000
(as adjusted pursuant to Section 415(d) of the Code), or
(2) the product of 1.4 and the
Participant's average annual Statutory Compensation for the three consecutive
Plan Years during which he was a Participant and had his greatest aggregate
Statutory Compensation from the Companies.
(b) Subject to paragraph (c), the "defined contribution plan
fraction" for any Plan Year is a fraction, the numerator of which is the sum of
the annual additions to the Participant's accounts under all defined
contribution plans of the Companies for all Plan Years as an Employee
(determined as of the close of the Plan Year) and the denominator of such is the
lesser of:
(1) the product of 1.25 and the sum
of the amounts determined under subsection (a)(ii) for all Plan Years as an
Employee, or
(2) the product of 1.4 and the sum
of the amounts determined under subsection (a)(i) for all Plan Years as an
Employee.
(c) Notwithstanding paragraph (b), with respect to all
Plan Years ending before January 1, 1983, the Administrator may elect to
multiply the denominator of the defined contribution plan fraction (determined
for the Plan Year ending in 1982) by a "transition fraction". The transition
fraction shall have (1) a numerator which is the lesser of $51,875 or 1.4
multiplied by the amount determined under subsection (a)(i) for the Plan Year
ending in 1981, and (2) denominator which is the lesser of $41,500 or the amount
determined under subsection (a)(i) for the Plan Year ending
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1981.
(b) If the Annual Addition of a Participant would exceed the
limits of subsection (a) as a result of (1) an Allocation of forfeitures, (2) a
reasonable error in estimating a Participant's Statutory Compensation, (3) a
reasonable error in determining the amount of Employee Tax Saver Contributions
that may be made with respect to any Participant without violating the limits of
subsection (a) , or (4) other limited facts and circumstances found justifiable
by the Commissioner of Internal Revenue, it shall be reduced until it comes
within such limits Such reduction shall be accomplished by debiting the
necessary amount, in the following order:
(i) for such Plan Year, his Employee Regular
Contributions which are:
(a) Supplemental Contributions, and
(b) Basic Contributions;
(ii) for such Plan Year and to the extent that
clause (3) above applies, his Employee Tax Saver Contributions which are:
(a) Supplemental Contributions, and
(b) Basic Contributions;
(iii) Company Matching Contributions and forfeitures
allocated to his Company Matching Account for such Plan Year; and
(iv) Employee Tax Saver Contributions allocated to
his Employee Tax Saver Account for such Plan Year.
The portion of such amount attributable to Employee Regular
Contributions or (to the extent described in subsection (b)(ii)) Employee Tax
Saver Contributions first shall be refunded to him, and the balance, if any, of
such reduction shall be allocated to other Participants in the manner specified
in ss. 4.2(b). If any Participant's Annual Addition would, due to such special
allocation, exceed the limit of subsection (a), the excess shall be reallocated
by a second special allocation, and so on as necessary to allocate such amounts
within the limits of
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subsection (a). Any amounts which cannot be so allocated because of the
limitations of subsection (a), shall be held in suspense and shall be allocated
and reallocated in succeeding Plan Years, in the order of time, prior to the
allocation of any other Contributions.
(c) In the event the Plan is terminated while excess amounts
are then held in suspense under subsection (b), such excess amounts shall be
allocated and reallocated as provided in subsection (b), as of the day before
the date of the termination as if such day were the last day of such Plan Year.
Any amounts which cannot then be so allocated because of the limits of
subsection (a) shall revert to the Companies, as provided in the Trust
Agreements.
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ARTICLE V
CHANGE IN ALLOCATION TO INVESTMENT FUNDS
5.1 Each Participant shall indicate, on such election form as the
Administrator may prescribe or in such other manner as the Administrator may
designate, and at such times as the Administrator may permit, the amount or
percentage of all amounts already allocated to his Accounts that are to be
invested in each of the Investment Funds (other than the Prior Fixed Income
Fund). Each such Participant may use such election form or opportunity to change
the investment of all amounts already allocated to his Account or to indicate
that the investment allocation shall remain the same. A Participant may specify
as to any Investment Fund by amount or by any percentage that complies with the
provisions of ss. 3.7.
5.2 If a Participant fails to direct the manner in which the amounts
allocated to his Account are to be invested, such amounts shall be invested in
such one of the Investment Funds (other than the Stock Fund, if any, or the
Prior Fixed Income Fund) as shall be designated by the Administrator.
5.3 Each Participant, including a Participant who has incurred a
Separation from Service but whose entire Account balance has not yet been
distributed, may change his investment instruction at such times as the
Administrator may permit by filing the election form prescribed by the
Administrator or by indicating the desired change in such other manner as the
Administrator may designate.
5.4 Each investment direction that is received from a Participant and
satisfies all applicable requirement shall be implemented by the Administrator
or, upon
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direction by the Administrator, by the Trustee, custodian or recordkeeper (as
appropriate) as soon as reasonably practicable following receipt of the
direction. The Administrator may impose such timing restrictions and other
conditions as shall be necessary or appropriate in order to provide reasonable
assurance that the implementation of any investment direction shall not (a)
unfairly disadvantage other persons having an interest in any of the Investment
Funds involved, (b) jeopardize the benefits provided under the plan for
Participants generally, or (c) result in a violation of federal or state
securities laws.
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ARTICLE VI
CHANGE IN OR SUSPENSION OF EMPLOYEE CONTRIBUTIONS
6.1 Upon 30 days' written notice to the Administrator (or such shorter
period as may be determined by the Administrator), a Participant may direct that
his Employee Regular Contributions to the Plan, and /or that Employee Tax Saver
Contributions made on his behalf, be suspended for a period of not less than
three months. Such suspension of Employee Regular Contributions and/or Employee
Tax Saver Contributions shall not constitute withdrawal from the Plan, and the
Participant may resume his Employee Regular Contributions and/or Employee Tax
Saver Contributions upon 30 days' written notice to the Administrator.
6.2 As of such dates, upon receipt of written notice on such form and
at such intervals as the Administrator shall specify, a Participant may, not
more often than once in each calendar month, change the percentage or
percentages of his Basic Compensation to be contributed by him as Employee
Regular Contributions or for him as Employee Tax Saver Contributions.
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ARTICLE VII
TRUST FUNDS, TRUSTEES AND INVESTMENT MANAGERS
7.1 One or more Trustee shall be designated by Ampex, and Trust
Agreements shall be executed between Ampex and the Trustees under the terms of
which one or more Trust Funds shall be established to receive and hold
contributions, interest and other income and to pay the benefits provided by the
Plan. The Trust Funds shall be held, administered, invested and distributed by
the Trustees in accordance with the applicable Trust Agreements. The appropriate
Trustee shall have the sole and exclusive responsibility regarding the
investments of the Trust Funds, expect to the extent that Trust Fund investments
are subject to direction by Participants pursuant to ss. 5, direction by
investment managers appointed pursuant to ss. 7.2, or designation by the
Administrator pursuant to ss. 7.4.
7.2 Pursuant to Sections 402(c)(3) and 405(c)(1) of ERISA, the
Administrator may designate one or more investment managers as defined in
Section 3(38) of ERISA to manage (including the power to acquire and dispose of)
any assets of the Plan, and/or to make professional investment decisions or
recommendations. Neither the Companies, the Board of Directors, the Trustees nor
the Administrator shall be liable for any act or omission of any such investment
manager, except as required by law.
7.3 (a) The Trustees, the Board of Directors, the Administrator and the
Committee, if one is appointed, shall be named fiduciaries (within the meaning
of Section 402(a)(2) of ERISA) and, as permitted or required by law, shall have
exclusive authority and discretion to control and manage the operation and
administration of the Plan as
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provided by law within the limits set forth in the Trust Agreement, subject to
proper delegations. Such named fiduciaries, the Companies, each investment
manager and every person who exercises any discretionary authority or
discretionary control respecting management of the Trust Funds or Plan, or
exercises any authority or control respecting the management or disposition of
the assets of the Trust Funds or Plan, or who renders investment advice for
compensation, direct or indirect, with respect to any monies or other property
of the Trust Funds or Plan, or who has authority or responsibility to do so or
who has any discretionary authority or discretionary responsibility in the
administration of the Plan, including any person designated by a named fiduciary
to carry out fiduciary responsibilities under the Plan, shall be a fiduciary and
as such shall be subject to provisions of the Plan, the Trust Agreements, ERISA
and other applicable laws governing fiduciaries. Any person may serve in more
than one fiduciary capacity with respect to the Plan. Notwithstanding the
foregoing, no Participant or beneficiary shall be deemed to be a fiduciary with
respect to the Plan merely by reason of the power to give investment and
transfer directions with respect to the Participant's Account.
(b) Fiduciary responsibilities under the Plan are allocated as
follows:
(i) The sole power and discretion to manage and
control the Plan's assets, including but not limited to the acquisition and
disposition of Plan assets, is allocated to Trustee A (with respect to the Stock
Fund, if any, and the Prior Fixed Income Fund) and Trustee B (with respect to
all other Plan assets), except to the extent that (a) an investment manager if
appointed with the power to control or manager including the power to acquire
and dispose of) assets of the Plan, or (b) such power is
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expressly reserved by the Administrator.
(ii) The sole duties, responsibilities and powers
allocated to the Board of Directors shall be those expressly retained under ss.
14.1.
(iii) The sole duties, responsibilities and powers
allocated to the Companies shall be those expressly retained under the Plan or
the Trust Agreements.
(iv) All fiduciary responsibilities not allocated to
the Trustees, the Board of Directors, the Companies or any investment manager
are hereby allocated to the Administrator, subject to delegation in accordance
with ss. 12.1(f).
7.4 All assets of the Plan shall be invested in one or more of the
following Investment Funds:
(a) Trustee A shall continue to maintain an Investment Fund
(the "Prior Fixed Income Fund") for the purpose of investing such portions of
Participants' Accounts as are properly allocable to the Prior Fixed Income Fund,
until such time as such Investment Fund can be liquidated into cash and
reinvested into the other Investment Funds. The Prior Fixed Income Fund shall be
primarily invested in guaranteed annuity contracts heretofore entered into by
Ampex or the predecessor to Trustee A. Upon the direction of the Board of
Directors in a duly adopted resolution, Trustee A shall also establish or
maintain an Investment Fund (the "Stock Fund") for the purpose of investing such
portions of Participants' Accounts as are properly allocable to the Stock Fund.
The Stock Fund shall be primarily invested in shares of common stock of Ampex.
To the extent reasonably necessary to meet the cash requirements of the Stock
Fund, such Fund may be invested by Trustee A in units, shares or other interests
in one or more common, pooled or other collective short-term investment funds
which are designated by the Administrator and either (i) maintained by Trustee
A, any
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other person described in Section 3(38)(B) of ERISA or an affiliate or any such
person, or (ii) registered under the Investment Company Act of 1940.
(b) In accordance with directions of the Administrator,
Trustee B shall establish or maintain at least four other Investment Funds which
shall be maintained for the purpose of investing such portions of Participants'
Accounts as are, pursuant to Participants' investment instructions made in
accordance with ss.ss. 5.1 and 5.3, properly allocable to each such Fund. Each
such other Investment Fund shall be invested in units, shares or other interests
in one or more common, pooled or other collective investment funds which are (i)
designated by the Administrator, Trustee B or an investment manager appointed
pursuant to ss. 7.2 with respect to the Investment Fund, and (ii) either (1)
maintained by Trustee B, any other person described in Section 3(38)(B) of ERISA
or an affiliate of such person, or (2) registered under the Investment Company
Act of 1940.
(c) Except to the extent that investment responsibility for
one or more of the Investment Funds has been transferred to an investment
manager pursuant to ss. 7.2, the Administrator shall designate the common, poled
or other collective investment funds in which the Investment Funds shall be
invested. The Administrator may from time to time change the number, identity or
composition of the Investment Funds made available under this ss. 7.4 and
redesignate the collective investment funds in which any of the Investment Funds
shall be reinvested in the Investment Funds that realized such income.
(d) Temporary cash balances arising in any of the Investment
Funds shall be invested where feasible in any collective short-term investment
fund described in subsection (a).
7.5 All Contributions and transfers shall be paid
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into the Investment Funds (other than the Prior Fixed Income Fund) pursuant to
the Participants' directions made pursuant to ss. 3.7.
7.6 Brokerage fees, commissions, stock transfer taxes and other charges
or expenses incident to the purchase and sale of securities by, distributions or
withdrawals from, or transfers among the Investment Funds (other than the Stock
Fund) shall be paid from the investment Funds involved. Taxes, if any, payable
by the Trustees on the assets at any time held in the trust Funds or on the
income thereof shall be paid from the Trust Funds. All other expenses and
charges incurred in connection with the administration of the Plan, including
the Trustees' fees and expenses, investment managers' fees and expenses, and
those of their respective counsel, shall be paid from the Trust Funds, if and to
the extent not paid by the Companies.
7.7 To the extent that the power to vote securities held in the Trust
Funds is delegated to one or more investment managers, the Trustees shall have
the authority (in their discretion) to exercise all voting and other shareholder
rights with respect to all securities held by it in Investment Funds.
7.8 (a) Subject to the provisions of subsection (b), the following
provisions shall apply with respect to voting, tender and exchange offers
relating to shares of common stock of Ampex ("Stock") held in the Stock Fund:
(i) Whenever any proxies or consents are
solicited from the shareholders of Stock, each Participant (or in the event of
death, his beneficiary) whose Account is credited with any shares of Stock shall
have the right to direct Trustee A in writing as to the manner in which such
shares shall be voted. Trustee A or another person designated by Ampex (but not
otherwise affiliated with Ampex) to solicit and/or tabulate votes of
shareholders of
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Stock generally (a "Recordkeeper") shall utilize its best efforts to distribute
or cause to be distributed in a timely manner to each Participant (or
beneficiary) a copy of the proxy solicitation material sent to shareholders,
together with a form addressed to Trustee A or the Recordkeeper soliciting the
Participant's (or beneficiary's) confidential, written instructions as to the
manner in which such shares shall be voted. If such instructions are sent to a
Recordkeeper, the Recordkeeper shall communicate the instructions to Trustee A.
Upon receipt of such instructions, Trustee A or the custodian shall
vote such shares as instructed. Shares of Stock (a) as to which Trustee A
receives no voting instructions, or (b} which are held in the Stock Fund but are
not credited to any Participant's (or beneficiary's) Account, shall be voted by
Trustee A in the same proportion as shares are to be voted pursuant to the
written voting instructions received by Trustee A.
(ii) Each Participant (or, in the event of death, his
beneficiary) whose Account is credited with any shares of Stock shall have the
right to direct Trustee A in writing as to the manner in which to respond to a
tender or exchange offer with respect to such shares. Trustee A or, if Ampex so
elects, a Recordkeeper (as defined in subsection (a)(i)) shall utilize its best
efforts to distribute or cause to be distributed in a timely manner to each
Participant (or beneficiary) such information as will be distributed to
shareholders of Stock in connection with any such tender or exchange offer,
together with a form addressed to Trustee A or the Recordkeeper soliciting the
Participant's (or beneficiary's) confidential, written instructions as to
whether such shares shall be tendered or exchanged. If such instructions are
sent to a Recordkeeper, the Recordkeeper shall communicate the instructions to
Trustee A. If Trustee A receives no
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written directions from a Participant (or beneficiary) as to the manner in which
to respond to such a tender or exchange offer, Trustee A shall not tender or
exchange any shares of Stock credited to the Account of the Participant (or
beneficiary). Shares of Stock which are held in the Stock Fund but are not
credited to the Account of any Participant (or beneficiary) shall be tendered or
exchanged by Trustee A in the same proportion as the shares which are credited
to the Accounts of Participants (or beneficiaries) are to be tendered or
exchanged.
(b) Notwithstanding any contrary Plan provision, for purposes
of applying subsection (a) and Section 403(a)(1) of ERISA, to the extent Section
404(c) of ERISA does not apply, each Participant (or, in the event of death, his
beneficiary) shall be deemed to be a "named fiduciary" (within the meaning of
Section 402(a) of ERISA) with respect to the shares of Stock as to which such
Participant (or beneficiary) has the right of direction regarding voting, tender
or exchange. The directions received by Trustee A and any Recordkeeper (as
defined in subsection (a)(i)) from the Participants (or beneficiaries) shall be
held by Trustee A or the Recordkeeper in strict confidence and shall not be
divulged or released to any person, including employees, officers or directors
of Ampex or any Affiliate; provided, however, that, to the extent necessary for
the operation of the Plan, such directions may be relayed by Trustee A to a
recordkeeper or auditor for the Plan which recordkeeper or auditor (a) is not an
Affiliate, and (k) agrees not to divulge such directions to any other person,
including employees, officers or directors of Ampex or any Affiliate.
7.9 The Trustees shall, except as otherwise provided in the Plan, pay
all amounts payable under the Plan to the person or persons designated by the
Plan and not to any other person or corporation. The receipt by the person to
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whom such payment is made shall be a complete discharge to the Companies, the
Administrator and the Trustees, and their officers, directors and employees for
any sum so paid; and when any such payment is tendered as payment in full for
all amounts due and payable to such person in accordance with the Plan, shall be
a complete discharge to such person of all claims arising under or connected
with participation in the Plan or the participation of the person under whom he
is claiming.
7.9 The funding policy established in this Article VII may be changed
by amending the Plan in accordance with ss. 13.1.
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ARTICLE VIII
VALUATION OF TRUST FUNDS
The values of Investment Funds shall be determined separately by the
applicable Trustee as of the close of each business day. In making such
determinations, the Trustees shall take into account the market price or other
fair market value of the assets held, accrued income and uninvested cash. Each
Participant's Account shall be adjusted to reflect the value of its interest in
each of the Investment Funds as of the applicable Valuation Date.
Notwithstanding any contrary Plan provision, the Administrator (in its
discretion) shall determine the share, unit or other method(s) of accounting for
the interest of each Participant's Account in the Investment Funds.
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ARTICLE IX
DISTRIBUTION UPON SEPARATION FROM SERVICE
9.1 (a) (i) Upon Separation from Service, a Participant shall be
entitled to receive (subject to income tax withholding) the value of his vested
Accounts as of the last Valuation Date of the month in which he was last a
Participant. Distribution shall be effected by the delivery to him of the number
of full shares of stock represented by the value of his vested Accounts in the
Stock Fund (with the value of fractional shares to be paid in cash), if any, and
by payment to him of the cash value of his vested Accounts in the other
Investment Funds.
(ii) Such distribution shall be made as soon as
practicable after Separation from Service. If the vested balance credited to a
terminated Participant's Account exceeds $3,500 as of the Valuation Date that
(a) next precedes the date of the distribution, or (b) next preceded the date of
any prior distribution or withdrawal from the Account, a distribution shall be
made from the Account only if the Participant consents in writing to the
distribution on such form as the Administrator shall prescribe. In the absence
of such consent, the Participant shall be deemed to have elected to leave his
vested Account in the Trust Fund for later distribution. A Participant who so
elects to leave his Account in the Trust Funds shall remain a Participant in the
Plan until the Account is finally distributed; provided, however, that he shall
not have the right to make any further Contributions under Article III. He shall
have the right to make transfers of values under ss.ss. 5.1, 5.3 and 5.4, in
accordance with his particular eligibility at the time of Separation from
Service.
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(iii) In the case only of a Participant who became a
Participant before January 1, 1994. and whose Separation from Service occurs by
reason of Retirement, the Participant may elect to receive (subject to income
tax withholding) either a single-sum distribution, as provided in ss. 9.1(a)(i),
or distribution of the value of his Account in the Investment Funds (other than
the Stock Fund), in accordance with this subsection (a)(iii), in approximately
equal installments (provided that the first installment may be larger than the
remaining installments), over a period certain, which shall begin as soon as
practicable after his Separation from Service.
(a) The period of time over which such installment
distributions are made shall not exceed the shorter of (1) ten years from the
applicable benefit commencement date, (2) the joint life and last survivor
expectancy of the Participant and his spouse (if designated as his beneficiary),
or (3) the joint life and last survivor expectancy of the Participant and his
designated non-spouse beneficiary; provided, however, that if the Participant's
spouse is not his sole beneficiary, the minimum amount distributed each year
shall not be less than the quotient obtained by dividing (x) the balance
credited to his Account as of the last Valuation Date of the preceding year. by
(y) the applicable divisor, as determined under the minimum distribution
incidental benefit requirement of Section 401(a)(9) of the Code.
(b) For purposes of paragraph (a), life expectancies shall
be calculated in the manner prescribed under Section 401(a)(9) of the Code as of
the Participant's and beneficiary's birthdays in the calendar year preceding the
required beginning date determined under ss. 9.2(a)(iv) and shall not be
recalculated thereafter.
(c) An eligible Participant who elects to receive
installment distributions of his Accounts in the
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Investment Funds (other than the Stock Fund) shall receive the value of his
Accounts in the Stock Fund in a single-sum distribution of stock (and the cash
value of fractional shares) as soon as practicable following his Separation from
Service.
(d) A Participant who has begun to receive installment
distributions may elect to receive the balance of his Account in a single-sum
payment.
(e) In lieu of installment distributions from the Plan
pursuant to this subsection (a)(iii), the Administrator may distribute a
nontransferable single premium annuity contract for a term certain providing for
payments in accordance with this subsection (a)(iii).
(iv) In any event, if upon a participant's Separation of Service,
his vested balance credited to his Account exceeds $3,500 as of the date
described in paragraph (ii) hereof and if such Participant does not consent in
writing to an earlier benefit commencement date, the distribution of such
Participant's Account balance shall be made after the last day of the Plan Year
in which occurs the later of the Participant's Normal Retirement Date or the
Participant's Separation from Service, but not later than the 60th day after
such last day. Notwithstanding anything to the contrary in this Plan and to the
extent required by Section 401(a) of the Code, a Participant's Account balances
may not be distributed to him later than April 1 of the calendar year following
the calendar year in which he attains age 70 1/2.
(b) Upon Separation from Service prior to full vesting under
ss. 11.2, a Participant shall forfeit his Company Matching Account, which
forfeitures shall be disposed of in accordance with ss. 11.3, subject to the
following rules:
(i) If the Participant again becomes an
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Employee after he incurs five consecutive Break in Service Years, his Credited
Service for the period after his Separation of Service shall not be taken into
account for purposes of vesting in his Company Matching Account balances as of
such Separation of Service.
(ii) If the Participant again becomes an Employee before he
incurs five consecutive Break in Service Years, his Credited Service for the
period after his Separation of Service shall not be taken into account for
purposes of vesting in his previously forfeited Company Matching Account
balances, unless either (a) he does not incur even one Break in Service Year, or
(b) he repays to the Plan an amount equal to the full amount of any distribution
made to him from his Employee Regular and Employee Tax Saver Accounts under
subsection (a) before the fifth anniversary of his reemployment date. Upon his
reemployment prior to incurring a one Break in Service Year or upon such
repayment, as the case may be, such forfeited values shall be restored to his
forfeited Accounts by applying forfeitures pending reallocation and unallocated
earnings and gains of the trust Funds in that order.
(c) If a Participant was not vested in his Company Matching
Account and incurs a Separation from Service followed by a number of consecutive
Break in Service Years equal to or in excess of the greater of five or the
number of years of Credited Service as of such Separation of Service, his
Credited Service for the period prior to such Separation of Service shall not be
taken into account for purposes of determining his vested status thereafter.
9.2 (a) Upon the death of a Participant, the value of his vested
Account as of the last Valuation Date on which he was a Participant shall be
distributed to his surviving spouse, if any, except to the extent, if any, to
which the surviving spouse has consented under ss. 3.2(c) to the
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designation of one or more other beneficiaries, and in such event, or if the
Participant had no surviving spouse, to the executor and/or administrator of the
Participant's estate.
(b) Distribution shall be made under subsection (a) either in
one distribution of cash and shares of stock as described in ss. 9.1(a)(i) or,
at the election of the designated beneficiary of a Participant who became a
Participant before January 1, 1994, in a single payment of stock and installment
payments over a period certain as provided in ss. 9.1(a)(iii). Such period shall
not exceed (i) the end of the period certain elected by the Participant, if his
death occurred after receiving the first installment payment under ss. 9.1(a)
iii), or (ii) the life expectancy of the beneficiary as calculated in accordance
with ss. 9.l(a}(iii)(b). Any distribution pursuant to this subsection (b) shall
be made or commenced no later than the first anniversary of the Participant's
death.
9.3 (a) If an amount payable under this Article IX cannot be
ascertained or the person to whom it is payable has not been ascertained or
located within the stated time limits, and if reasonable efforts to do so have
been made, then distribution shall be made not later than 60 days after such
amount is determined or such person is ascertained or located, or as prescribed
in subsection (b).
(b) If, within one year after a Participant's Separation from
Service has occurred, the Administrator, in the exercise of due diligence, has
failed to locate him (or if the Separation from Service is by reason of his
death, has failed to locate the person entitled to his vested Account under ss.
9.2), his entire distributable interest in the Plan shall be forfeited and
reallocated under ss. 11.3; provided, however, that if the Participant (or in
the case of his death, the person entitled thereto under ss. 9.2)
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makes proper claim therefor, the amount so forfeited shall be restored to the
Participant's Account, applying forfeitures and earnings and gains of the Trust
Funds, in that order, as necessary.
9.4 Notwithstanding any contrary Plan provision, if the distributee of
any eligible rollover distribution (within the meaning of Section 401(a)(31)(C)
of the Code) (a) elects to have at least $500 of such distribution paid directly
to an eligible retirement plan (within the meaning of Section 401(a)(31)(D) of
the Code), and (b) specifies such plan on such form, at such time and subject to
such permissible restrictions as the Administrator may prescribe, such
distribution or portion thereof shall be made in the form of a direct rollover
to such plan, in accordance with and subject to the conditions and limitations
of Section 401(a)(31) and related provisions of the Code.
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ARTICLE X
WITHDRAWAL DURING EMPLOYMENT
10.1 A Participant who is an Employee may make a withdrawal from the
Plan, in an amount or amounts approved by the Administrator, from his Employee
Regular Account, his vested Company Matching Account, his Rollover Account,
and/or if he has attained age 59-1/2, his Employee Tax Saver Account, determined
as of the valuation Date coincident with or next following the Administrator's
receipt of the Participant's notice of withdrawal, subject to the following
restrictions:
(a) A Participant may make withdrawals from his Company
Matching Account only after he has withdrawn all amounts from his Employee
Regular Account, his Rollover Account, and if he has attained age 59-1/2. his
Employee Tax Saver Account.
(b) Withdrawals from a Participant's Employee Regular and
Employee Tax Saver Accounts shall be deemed to be made first from amounts
attributable to Supplemental Contributions.
(c) A withdrawal shall be made from the Investment Funds in
amounts attributable to his Account(s) in question, in such order of withdrawal
as the Administrator may determine, subject to subsection (a)
(d) The amount withdrawn will be paid (subject to tax
withholding) in cash except for the value of his Account in the Stock Fund which
will be paid to him in full shares of stock.
(e) In the case of a withdrawal of any amount attributable to
a Participant's Basic Contributions, except in the case of a withdrawal from the
Participant's Employee Regular or Employee Tax Saver Account following
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his layoff from employment with his Company, there shall be a suspension of the
Participant's Company Matching Contributions for a period of six months
following the date of the withdrawal.
10.2 Subject to the conditions set forth in this ss. 10.2, a
Participant who is an Employee may make a withdrawal from the Plan from his
Employee Tax Saver Account in the event of Hardship. A Hardship withdrawal shall
be made from the Participant's Employee Tax Saver Account in the Investment
Funds, in such order of withdrawal as the Administrator may determine. The
amount withdrawn will be paid (subject to income tax withholding) in cash,
except for the value of the withdrawal from his Account in the Stock Fund which
will be distributed to him in full shares of stock. A withdrawal under this ss.
10.2 shall not exceed the lesser of (1) the amount required to meet the
immediate financial need created by the Hardship and not reasonably available
from other resources of the Participant, or (2) the dollar amount of the
Participant's Tax Saver contributions. The Administrator shall determine whether
the amount is required to meet the Participant's immediate financial need on the
basis of all relevant facts and circumstances. In making such determinations,
the Administrator may require a Participant to provide such information as it
may reasonably require and to represent to the Administrator, in the manner
specified by it, that:
(a) The withdrawal does not exceed the immediate and heavy
financial need created by the Hardship; and
(b) The immediate and heavy financial need created by the
Hardship cannot be relieved:
(i) Through reimbursement or compensation by
insurance or otherwise;
(ii) By reasonable liquidation of the Participant's
assets, to the extent such liquidation would
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not itself cause an immediate and heavy financial need;
(iii) By cessation of Employee Regular and Tax Saver
Contributions; or
(iv) By other distributions, withdrawals or loans (if
nontaxable at the time of the loan) from plans maintained by the Company or any
Affiliate or by borrowing from commercial sources on reasonable commercial
terms.
10.3 A withdrawal under ss. 10.1 or 10.2 shall not reduce the
Participant's interest in, or rights in respect of, the balance of his Account.
10.4 After a withdrawal under ss. 10.1 or 10.2, a Participant may, at
intervals of not less than six months after the last previous such withdrawal,
again make a withdrawal under ss. 10.1 or 10.2.
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ARTICLE XI
VESTING AND FORFEITURES
11.1 A Participant's Employee Regular, Employee Tax Saver and Rollover
Accounts shall at all times be fully vested and nonforfeitable.
11.2 The interest of a Participant in his Company Matching Account
shall become fully vested and nonforfeitable upon the earliest to occur of:
(a) his completion of five years of Credited Service,
(b) his death,
(c) his 65th birthday,
(d) his total disability,
(e) his release from employment (other than by discharge),
(f) in the event of layoff, 30 days following his layoff date
of record, or
(g) the termination or discontinuance of the Plan under
Article XIV if he is then an employee of a Company or an Affiliate.
11.3 Amounts attributable to Company Matching Contributions
standing to the credit of a Participant's Account which are forfeited by the
Participant under the provisions of ss. 9.1 shall be cancelled, and shall be
applied first to the restoration of forfeitures under ss. 9.1(b), and then
against the Company's next Company Matching Contributions to the Trust Funds
pursuant to Article IV; provided, however, that no Company Matching
Contributions shall be repaid to or otherwise recovered by any Company.
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ARTICLE XII
ADMINISTRATION
12.1 The Administrator shall conduct the general administration of the
Plan in accordance with the Plan and shall have all the necessary power and
authority to carry out that function, including the following discretionary
powers and authority:
(a) To determine questions of eligibility of Participants and
the entitlement to amounts of Participants, former Participants, beneficiaries
and all other persons.
(b) As required by law, to engage and designate a qualified
public accountant meeting the requirements of Section 103(a)(3)(D) of ERISA, and
other actuaries, accountants, attorneys, appraisers, brokers, consultants,
administrators, physicians or other persons and (with the Companies and their
officers, directors and employees) to rely upon the advice, opinions or
valuations of any such persons and, except as required by law, be fully
protected in acting or relying thereon in good faith.
(c) To adopt any rules for the administration, interpretation
and application of the Plan as are not inconsistent with the Plan and applicable
law, and to amend or revoke any such rule,
(d) To interpret, and to resolve any ambiguities in, the Plan
and any rules adopted under subsection (c).
(e) To conduct claim review procedures as provided in ss.
12.10.
(f) To delegate any power or duty to any other person or
persons including a Committee appointed pursuant to ss. 12.3.
(g) To impose a reasonable charge to cover the
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cost of furnishing to Participants or beneficiaries, upon their written request,
documents as required under Section 104(b)(4) of ERISA, but not for furnishing
information, statements or documents as required by Section 104(b)(1), (2) or
(3) or Section 104(c) or Section 105(a) or (c) of ERISA.
(h) To determine in good faith the fair market value of any
asset other than a security for which there is a generally recognized market.
12.2 The Plan shall not be operated so as to discriminate in favor of
Participants who are officers or shareholders or who are Highly Compensated
Employees. The Plan shall be uniformly and consistently interpreted and applied
with regard to all Participants in similar circumstances. The Plan shall be
administered, interpreted and applied fairly and equitably and in accordance
with the specified purposes of the Plan.
12.3 Ampex may, but need not, appoint a committee consisting of three
or more members appointed by and holding office during Ampex's pleasure, to
function as specified under ss. 1.2.
12.4 Committee members may resign at any time by delivering written
notice to Ampex.
12.5 Vacancies on the Committee shall be filled by Ampex at its
pleasure. If at any time there should be no members of the Committee in office,
Ampex shall again have its full responsibilities as Administrator.
12.6 The Committee shall act by a majority of its members in office;
provided, however, that it may appoint any of its members, or a non-member, to
act on behalf of the Committee on matters arising in the ordinary course of
administration. No member of the Committee shall vote on any matter in which he
is personally interested, except on matters applying to Participants generally.
12.7 Except as provided in ss. 12.10, all actions taken
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and all determinations made by the Committee in good faith shall be final and
binding upon all Participants, the Companies, the Trustees, any investment
manager and any person interested in the Plan or the Trust Funds, and shall be
given the maximum possible deference allowed by law.
12.8 Copies of the Plan and any other documents and records which a
Participant is entitled by law to inspect shall be open to inspection by him or
his duly authorized representative at the principal office of Ampex at any
reasonable business hour.
12.9 Committee members shall not receive compensation from the Trust
Funds for serving on the Committee. The Companies shall pay or reimburse
Committee members for all expenses reasonably incurred by them in, and shall
indemnify and hold them and the Companies' officers and employees harmless from,
all claims, liabilities and costs (including reasonable attorneys" fees) arising
out of the good faith performance of their functions under the Plan, and may
obtain and provide for them, at the Companies' expense, liability insurance
against liabilities imposed on them by law. All expenses properly incurred by
the Administrator and the Committee in the administration of the Plan, including
legal expenses incurred in the preparation and amendment of documents, shall be
paid from the Trust Funds, if and to the extent not paid by the Companies.
12.10 (a) A claim by a Participant, former Participant, beneficiary or
any other person shall be presented in writing as soon as practicable after the
occurrence of the events giving rise to the claim. The claim shall be presented
to a claims officer who shall be appointed by the Administrator.
(b) The claims officer shall, within a reasonable time, not
exceeding 90 days after the claim is received, consider the claim and shall
issue his
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determination thereon in writing.
(c) If the claim is granted, the appropriate distribution or
payment shall be made from the Trust Funds or by the Companies.
(d) If the claim is wholly or partially denied, the claims
officer shall, within a reasonable time, provide the claimant with written
notice of the denial, setting forth, in a manner calculated to be understood by
the claimant:
(i) the specific reason or reason for the denial,
(ii) specific references to pertinent Plan the denial
is based,
(iii) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary, and
(iv) an explanation of the Plan's claim review
procedure.
(e) The claims officer shall provide each claimant with a
reasonable opportunity to appeal a denial of a claim by the claims officer for a
full and fair review by the Administrator. The claimant or his duly authorized
representative:
(i) may request a review upon written application to
the Administrator (which shall be filed with his Company),
(ii) may review pertinent documents, and (iii) may
submit issues and comments in writing.
(f) The Administrator may establish such time limits within
which a claimant may request review of a denied claim as are reasonable in
relation to the nature of the benefit which is the subject of the claim and to
other attendant circumstances but which, in no event, shall be
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less than 60 days after receipt by the claimant of written notice of denial of
his claim.
(g) The decision by the Administrator upon review of a claim
shall be made not later than 60 days after receipt by the Company of the request
for review, unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered as soon as practicable,
but not later than 120 days after receipt of the request for review.
(h) The decision on review shall be in writing and shall
include specific reasons for the decision, written in a manner calculated to be
understood by the claimant, and specific references to the pertinent Plan
provision on which the decision is based.
(i) To the extent permitted by law, the decision of the
Administrator (if no review is properly requested) or the decision of the
Administrator on review, as the case may be, shall be final and binding on all
parties, if warranted on the record and reasonably based on the law and the
provisions of the Plan and Trust Agreement.
12.11 The Secretary of the Company is hereby designated as agent of the
Plan for the service of legal process.
12.12 No person shall have any rights in or to the Trust Funds or other
assets of the Plan, or under the Plan, except as, and only to the extent,
expressly provided for by the Plan. The benefits provided under the Plan shall
be only those provided by the assets of the Trust Funds, and no liability for
payment of Plan benefits shall be imposed upon Ampex or the Company or any of
their Employees, officers, directors or shareholders. To the maximum extent
permissible under Sections 404(c) and 410 of ERISA, neither the Companies, the
Board of Directors, the Trustees, the Administrator nor the Committee, if any,
shall be subject to any fiduciary liability with respect to investment
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directions made under ss. 3.7 or Article V, or any other liability or duty under
the Plan, except as expressly provided in the Plan, or for any action taken,
omitted or supplied in good faith.
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ARTICLE XIII
NONASSIGNABILITY
13.1 It is a condition of the Plan, to which all rights of each
Participant and beneficiary shall be subject, that no right or interest of any
Participant or beneficiary under the Plan or in the Trust Funds shall be
assignable or transferable in whole or in part, either directly or indirectly,
by operation of law, or otherwise, including, but not by way of limitation,
execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other
manner, but excluding devolution by death or mental incompetency, unless
otherwise required by the tax withholding provisions of the Code or any state's
income tax laws, and no right or interest of any Participant or beneficiary
under the Plan or in the Trust Funds shall be liable for or subject to any of
his obligations or liabilities. The foregoing, however, shall not apply to
prevent any payment pursuant to a qualified domestic relations order (within the
meaning of Section 414(p) of the Code) (a "QDRO").
13.2 (a) The Administrator shall establish written procedures for
determining whether a domestic relations order purporting to dispose of all or a
portion of a Participant's Account is a QDRO. No payment shall be made to any
person designated in a domestic relations order (an "Alternate Payee") until the
Administrator (or a court of competent jurisdiction reversing an initial adverse
determination by the Administrator) determines that the order is a QDRO. Payment
shall be made to each Alternate Payee as specified in the QDRO.
(i) Payment may be made to an Alternate Payee, in
accordance with a QDRO, at any time beginning as
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soon as practicable after the QDRO determination is made, without regard to
whether payment, if made to a Participant at the time specified in the QDRO,
would be permitted under the terms of the Plan.
(ii) If the QDRO does not provide for immediate
payment to an Alternate Payee, the Administrator shall establish a subaccount to
record the interest of that Alternate Payee in the Participant's Account. The
Alternate Payee shall have all the same rights to make such investment decisions
with respect to his subaccount as the Participant has under ss. 3.7 and Article
V. Pending distribution of his subaccount, an Alternate Payee shall not be
permitted to make withdrawals (except in accordance with the QDRO pursuant to
this ss. 13.2) or borrow funds from the subaccount. Payment to the Alternate
Payee shall not be deferred beyond the date distribution to the Participant (or
his beneficiary) is made.
(b) With respect to any distributions to or withdrawals by a
Participant under Articles IX or X, if the Administrator receives notice before
the distribution or withdrawal is made that a QDRO is being sought with respect
to the Participant's Account, the Administrator (in its discretion) may delay
the distribution or withdrawal for a reasonable time pending the issuance of the
QDRO.
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ARTICLE XIV
AMENDMENT. TERMINATION. MERGER OR CONSOLIDATION
14.1 The Board of Directors shall have the right at any time, and from
time to time, to amend, in whole or in part, any or all of the provisions of
this Plan. However, no such amendment shall:
(a) authorize or permit any part of the Trust Funds (other
than such part as is required to pay taxes and administrative expenses) to be
used for or diverted to purposes other than for the exclusive benefit of the
Participants or their beneficiaries or estates;
(b) cause any reduction in Participant's Account, divest any
portion of an Account that is then vested under the Plan, or except as may be
permitted under Section 411(d)(6) of the Code, eliminate any optional form of
benefit with respect to benefits accrued prior to adoption of the amendment; or
(c) cause or permit any portion of the Trust Funds to revert
to or become the property of any Company.
14.2 Ampex shall have the right at any time to terminate this Plan, and
each Company shall have the right to discontinue its Contributions under the
Plan. Upon complete or partial termination of the Plan or complete and permanent
discontinuance of a Company's Contributions, the rights and interests of each of
such Company's Participants in the Participants' Accounts (including their
rights and interests in Company Matching Accounts) while employed by such
Company shall become fully vested and shall not thereafter be subject to
forfeiture. Discharge or layoff of Employees of a Company without such a
declaration shall not result in a termination or partial termination of the
Plan, except to the extent required by law. Upon termination of
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the Plan or the complete and permanent discontinuance of a Company's
Contributions, the Administrator shall direct the Trustee to distribute all
assets attributable to such Company's Participants, remaining in the Trust Fund
after payment of any expenses properly chargeable against such portions of the
Trust Funds, to such Company's Participants in accordance with the values
credited to their Accounts as of the date of such termination; provided,
however, that the balances credited to each such Company's Participants'
Accounts may be distributed prior to Severance from Service only to the limited
extent permitted by Section 401(k)(2)(B) of the Code. The Administrator's
determination shall be conclusive upon all persons.
14.3 (a) In the event of the consolidation or merger of a Company with
or into any other corporation, or the sale by a Company of its assets, the
resulting successor may continue the Plan by resolution of its board of
directors and by executing any required supplemental agreements to the Trust
Agreements. If, within 90 days from the effective date of such consolidation, a
merger or sale of assets, the new corporation does not adopt the Plan, the Plan
shall be terminated with respect to such Company in accordance with ss. 14.2.
(b) There shall be no merger or consolidation with, or
transfer of the assets or liabilities of the Plan to any other plan unless the
account balance of each Participant immediately after the merger, consolidation
or transfer equals the total of the Participant's account balances immediately
before the merger, consolidation or transfer.
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ARTICLE XV
GENERAL PROVISIONS
15.1 Any Affiliate may, with the approval of the Board of Directors,
adopt the Plan as a whole corporation or as to any one or more divisions or
classifications of Employees, as permitted by law and by resolution of its own
board of directors. Any such Affiliate shall give written notice of such
adoption to the Administrator and to the Trustees by its duly authorized
officers.
15.2 Notwithstanding any contrary Plan provision, at no time shall any
assets of the Plan be used for, or diverted to, purposes other than for the
exclusive benefit of Participants, beneficiaries and other persons receiving or
entitled to receive benefits or payments under the Plan. Except to the limited
extent permitted by ss.ss. 4.7(c) and 15.3, no assets of the Plan shall ever
revert to or become the property of the Company.
15.3 Any obligation of the Company to contribute Tax Saver and/or
Company Matching Contributions under the Plan is hereby conditioned upon the
continued qualification of the Plan under Section 401(a) of the Code and the
exempt status of the Trust Funds under Section 501(a) of the Code and upon the
deductibility of such Tax Saver and/or Company Matching Contributions under
Section 404 (a) of the Code. That portion of any Tax Saver or Company Matching
Contribution which is made by reason of a good faith mistake of fact, or by
reason of a good faith mistake in determining the deductibility of such portion,
shall be returned to the Company as promptly as practicable, but not later than
one year after the contribution was made or the deduction was disallowed (as the
case may be) The amount returned pursuant to the preceding sentence shall be an
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amount equal to the excess of the amount actually contributed over the amount
that would have been contributed if the mistake had not been made; provided,
however, that gains attributable to the returnable portion shall be retained in
the Trust Funds; and provided, further, that the returnable portion shall be
reduced (a) by any losses attributable thereto, and (b) to avoid a reduction in
the balance of any Participant's Account below the balance that would have
resulted if the mistake had not been made.
15.4 Neither the establishment or maintenance of the Plan, the making
of any contributions, nor any action of the Company, the Trustees, the
Administrator or the Committee, if any, shall be held or construed to confer
upon any individual any right to be continued as an Employee nor, upon
dismissal, any right or interest in the Trust Funds or any other assets of the
Plan, except to the extent provided in the Plan. The Company expressly reserves
the right to discharge any Employee at any time.
15.5 The provisions of the Plan shall be construed, administered and
enforced in accordance with ERISA and, to the extent applicable, the laws of the
State of California.
15.6 If any provision of the Plan is held invalid or unenforceable, its
invalidity or unenforceability shall not affect any other provisions of the
Plan, and the Plan shall be construed and enforced as if such provision had not
been included.
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ARTICLE XVI
TOP HEAVY PROVISIONS
16.1 (a) Solely in the event that this Plan ever becomes Top Heavy (as
defined in this subsection (a)), the provisions of this Article XVI shall apply.
The Plan shall be Top Heavy if, as of any Determination Date, the aggregate of
the Accounts (under this Plan and such other plans as the Companies elect to
take into account under Section 416(g)(2)(A)(ii) of the Code) of Key Employees
exceeds 60% of the aggregate of the Accounts of all Key Employees and Non-Key
Employees. In making this calculation as of a Determination Date:
(i) each Account balance as of the most recent
valuation date occurring within the Plan Year which includes the Determination
Date shall be determined;
(ii) an adjustment for contributions due as of the
shall be determined;
(iii) the Account balance of any Employee or former
employee shall be increased by the aggregate distributions made during the
five-year period ending on the Determination Date with respect to the Employee
or former Employee;
(iv) the Account balance of:
(a) any Non-Key Employee who was a Key
Employee for any prior Plan Year, and
(b) any former Employee who completed no
Hours of Service during the five-year period ending on the Determination Date,
shall be ignored; and
(v) if there have been any rollovers to or from any
Account, the balance of the Account shall be adjusted, as required by Section
416(g) (4)(A) of the Code.
Notwithstanding the foregoing, this Plan shall be Top
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Heavy if, as of any Determination Date, it is required by Section 416(g) of the
Code to be included in an Aggregation Group which is determined to a Top Heavy
Group.
(b) For purposes of this Article XVI, the following
definitions shall be used:
(i) "Aggregation Group" shall mean:
(a) each plan of a Company or Affiliate in
which a Key Employee is a Participant at any time during the five-year period
ending on the Determination Date, and
(b) each other plan of a Company or
Affiliate which enables any plan described in paragraph Ca) to meet the
requirements of Sections 401(a)(4) or 410(b) of the Code.
(ii) "Determination Date" shall mean, with respect to
any Plan Year, the last day of the preceding Plan Year.
(iii) "Key Employee" shall be determined in
accordance with the definition in Section 416(i) of the Code, the provisions of
which are hereby incorporated by reference; and an individual's Statutory
Compensation shall be used to determine his status as "Key Employee".
(iv) "Non-Key Employee" shall mean any Employee who
is not a Key Employee.
(v) "Top Heavy Group" shall mean any Aggregation
Group if, as of the Determination Date, the sum of:
(a) the present value of the cumulative
accrued benefits for all Key Employees under all defined benefit plans in such
Aggregation Group, and
(b) the aggregate of the accounts of all Key
Employees under all defined contribution plans in such Aggregation Group exceeds
60% of a similar sum determined for all Key Employees and Non-Key Employees.
16.2 (a) For any Plan Year in which the Plan is Top
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Heavy, the total allocations to the Company Matching Account and Employee Tax
Saver Account of any Employee who is a Non-Key Employee at the end of such Plan
Year shall not be less than that determined under subsection (b).
(b) An allocation determined under this subsection (b) shall
be a percentage of the Statutory Compensation of the Non-Key Employee which is
not less than the lesser of:
(i) 3%, or
(ii) that percentage reflecting the ratio of:
(a) the allocations under ss.ss. 4.1(b),
4.2(b) and 4.3, to
(b) Basic Compensation for the Key Employee
with respect to whom such ratio is highest for the Plan Year.
(c) Notwithstanding the provisions of
Subsection (b), if the Plan is a Top Heavy Plan in a Plan Year and if a
Participant who is a Non-Key Employee is also covered in such Plan year under a
defined benefit plan of a Company or an Affiliate, a greater contribution shall
be made to the extent necessary to satisfy the rules of Sections 415 and 416 of
the Code, by either (i) using a comparability analysis showing that the Plan is
providing benefits equal to the minimum benefits that must be provided under a
defined benefit plan that is a Top Heavy Plan or (ii) offsetting benefits under
the defined benefit plan by the benefits provided under the Plan. The minimum
allocation is determined without regard to any Social Security contribution, and
shall be made even though, under other Plan provisions, the Participant would
not otherwise be entitled to receive an allocation, or would have received a
lesser allocation for the year because of (i) the Participant's failure to
complete any hours of service requirement, or (ii) the Participant's failure to
make
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mandatory employee contributions to the Plan, or (iii) the Participant's receipt
of compensation less than a stated amount. Such minimum allocations shall be
made in accordance with Code Section 416.
16.3 (a) For any Plan Year in which the Plan is Top Heavy, the vested
percentage of the Company Matching Account of each Participant who completes an
Hour of Service in the Plan Year shall be the percentage of the Account shown on
the following Table:
Years of Vested
Credited Service Percentage
Less than 3 0%
3 or more 100%
(b) The vested percentage of a Participant's Company Matching
Contribution Account shall be not less than the vested percentage determined as
of the last day of the last Plan Year in which the Plan was Top Heavy.
(c) Each Participant who has had his vested percentage
computed under subsection (a) and who has completed at least three years of
Credited Service shall be permitted to elect to have his vested percentage
computed in accordance with subsection (a) for any Plan Year in which the Plan
is no longer Top Heavy.
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16.4 For any Plan Year in which the Plan is Top Heavy, the denominator
of both the defined benefit plan fraction and the defined contribution plan
fraction set forth in ss. 4.7(a)(iii)(a) and (k), respectively, shall be
adjusted by substituting 1.0 for 1.25, but only to the extent required by
Section 416(h) of the Code.
EXECUTION
IN WITNESS WHEREOF, Ampex Corporation, by its duly authorized officer,
has executed this restated Plan on the date indicated below.
AMPEX CORPORATION
Dated: _____________ By________________________
Title:
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EXHIBIT 10.4
AMPEX CORPORATION
EMPLOYEES' RETIREMENT PLAN
(as amended and restated as of January 1, 1997)
<PAGE>
WHEREAS, Ampex Corporation (the "Company") previously
established the Ampex Corporation Employees Retirement Plan (the "Plan")
effective as of May 27, 1987; and
WHEREAS, on July 24, 1992 Ampex Systems Corporation succeeded
to the business and employees of the Company and assumed sponsorship of the
Plan, and on April 22, 1994 Ampex Corporation succeeded to the business and
employees of Ampex Systems Corporation and has assumed sponsorship of the Plan;
and
WHEREAS, the Plan was most recently amended and restated
effective as of January 1, 1990 and was amended four times thereafter; and
WHEREAS, pursuant to the first of such amendments, as of
February 1, 1994 accrued benefits under the Plan ceased to accrue for all
participants therein; and
WHEREAS, it is desired to amend and completely restate the
Plan once again to incorporate the relevant provisions of the last four Plan
amendments into one restated Plan document, to delete Plan provisions that are
no longer relevant, and to make certain clarifying changes to the Plan, as such
Plan was in effect on December 31, 1996; and
WHEREAS, it is intended that the Plan continue to be
administered as a qualified plan pursuant to Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and as an employee pension plan
which is subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended;
NOW, THEREFORE, in consideration of the premises, the Plan is
hereby amended and restated as follows:
688864.1
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ARTICLE I
DEFINITIONS
The following words and phrases as used herein shall, when
capitalized, have the following meaning unless a different meaning is required
by the context:
1.1 "ACCRUED BENEFIT," as of any specified date, means
the greater of
(a) the Retirement Pension, commencing on his Normal
Retirement Date, earned by a Participant as of such specified date or January
31, 1994, if earlier, which shall be equal to the Retirement Pension, computed
in accordance with Section 3.1, to which he would be entitled based on his
Credited Service, Average Final Compensation, Average Final Compensation With
Respect to Base Compensation and Social Security Covered Compensation as of such
specified date; or
(b) if the Plan is a Top Heavy Plan in any Plan Year and
solely with respect to a Participant who is not a key employee as defined in
Section 416 of the Code (whether or not he is employed on the last day of the
Plan Year) and to the extent he is not receiving sufficient minimum benefits, as
required by Code Section 416 and the regulations thereunder, from any other plan
in which an Employer or Affiliate is participating, an annual amount for the
life of the Participant (or if payment is made in another form, the Actuarial
Equivalent thereof) equal to the product of
(1) the lesser of
(A) 20% (or 30% if it is desired that the
denominator in both the "Defined Benefit Plan Fraction" and "Defined
Contribution Plan Fraction," as defined in Section 415 of the Code which is
hereby incorporated by reference, should contain a factor of 1.25 instead of
1.0) or
(B) 2% (or 3% if it is desired that the
denominator of both the "Defined Benefit Plan Fraction" or "Defined Contribution
Plan Fraction," as defined in Section 415 of the Code which is hereby
incorporated by reference, should contain a factor of 1.25 instead of 1.0)
multiplied by the number of his Years of Service coincident with or beginning in
Plan Years that begin on or after January 1, 1984 and in which the Plan is a Top
Heavy Plan,
multiplied by
(2) his greatest average annual Compensation (as
defined in Section 10.1(e)) out of all such averages, which are calculated in
each of his 5 consecutive Years of Service (A) coincident with or ending in Plan
Years that begin on or after
-2-
688864.1
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January 1, 1984 and (B) beginning on or before the close of the last Plan Year
in which the Plan is a Top-Heavy Plan.
(c) Notwithstanding anything to the contrary herein,
(1) each individual who is a Participant in this Plan shall be
entitled to an Accrued Benefit under this Plan to the extent vested therein that
is not less than the Actuarial Equivalent of his vested accrued benefit as of
December 31, 1995, if any, as calculated under the provisions of the Plan in
effect on December 31, 1995; and
(2) no person shall accrue benefits under this Plan in respect
of service completed on or after, or compensation earned on or after, February
1, 1994, except as otherwise may be required by law.
(d) Unless otherwise provided under the Plan, each Section
401(a)(17) Employee's accrued benefit under this Plan will be the greater of the
accrued benefit determined for the Employee under (1) or (2) below:
(1) the Employee's accrued benefit determined with respect to
the benefit formula applicable for the Plan Year beginning on or after
January 1, 1994, as applied to the Employee's total period of service
taken into account under the Plan for the purposes of benefit accruals;
or
(2) the sum of:
(A) the Employee's accrued benefit as of the last day
of the last Plan Year beginning before January 1, 1994, frozen
in accordance with Section 1.401(a)(4)-13 of the Internal
Revenue regulations, and
(B) the Employee's accrued benefit determined under
the benefit formula applicable for the Plan Year beginning on
or after January 1, 1994, as applied to the Employee's period
of service credited to the Employee for Plan Years beginning
on or after January 1, 1994, for purposes of benefit accruals.
For purposes of this subsection (d), a "Section 401(a)(17)
Employee" means an Employee whose current accrued benefit as of a date on or
after the first day of the first Plan Year beginning on or after January 1,
1994, is based on compensation for a year beginning prior to the first day of
the first Plan Year beginning on or after January 1, 1994, that exceeded
$150,000.
1.2 "ACTUARIAL EQUIVALENT" means, except as otherwise provided
in Sections 3.3 and 5.2 of this Plan and other sections referring to such
Sections 3.3 and 5.2, a benefit of equivalent value based on (a) an assumed
seven and one-half percent (7-1/2%)
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interest rate compounded annually and (b) annuity rates determined by the 1984
Unisex Pension Mortality Table.
1.3 "AFFILIATE" means (a) any corporation or unincorporated
business in control of, controlled by, or under common control with, an Employer
within the meaning of Sec tions 414(b) and (c) of the Code, or (b) a member in
an affiliated service group (as defined in Section 414(m) of the Code) of which
an Employer is a member, or (c) any other entity required to be aggregated with
an Employer pursuant to regulations under Section 414 of the Code; provided,
however, that, for purposes of the limitations upon benefits contained in
Article X, "Affiliate" status shall be determined in accordance with Section
415(h) of the Code. A corporation or unincorporated business shall not be deemed
an Affiliate for any purpose under the Plan with respect to any period before it
became an Affiliate.
1.4 "AVERAGE ANNUALIZED COMPENSATION", for any period of
months prior to February 1, 1994, means the product of (a) the quotient
determined by dividing (1) the sum of the Monthly Compensation for each month in
the period by (2) the sum of the months, multiplied by (b) twelve (12).
1.5 "AVERAGE FINAL COMPENSATION" means a Participant's Average
Annualized Compensation during the 60 consecutive month period out of his last
120 consecutive months of employment rendered prior to February 1, 1994 or his
Severance from Service, if earlier, for which his Average Annualized
Compensation was greatest (or during all months prior to February 1, 1994 in
which he earned Compensation, if fewer than 60 months).
1.6 "AVERAGE FINAL COMPENSATION WITH RESPECT TO BASE
COMPENSATION" means Average Final Compensation determined by substituting "Base
Compensation" for "Compensation" whenever the latter term is used in the
definition of "Monthly Compensation".
1.7 "BASE COMPENSATION" means Compensation excluding overtime,
bonuses, commissions and all special pay.
1.8 "BENEFICIARY" means such person or persons as may be
designated by Participants or as may otherwise be entitled, upon their death, to
receive any benefits or payments under the terms of this Plan.
1.9 "BOARD OF DIRECTORS" or "BOARD" means the Board of
Directors of the Company.
1.10 "BREAK IN SERVICE" means a period of at least twelve (12)
consecutive months, beginning on the date of an Employee's Severance from
Service (as defined in Paragraph 1.40), during which he neither performs
services for nor receives severance pay from any Employer or Affiliate.
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1.11 "CODE" means the Internal Revenue Code of 1986, as
amended from time to time.
1.12 "COMMITTEE" means the group of individuals appointed by
the Board to administer the Plan as provided in Article XIV.
1.13 "COMPANY" means (a) until July 24, 1992, Ampex
Corporation, originally a California corporation, and then a Delaware
corporation, which recently changed its name to Xepma I Inc., (b) from July 24,
1992 until April 22, 1994, Ampex Systems Corporation, a Delaware corporation,
which succeeded to the business of Xepma I Inc., and (c) on and after April 22,
1994, Ampex Corporation, a Delaware Corporation (the successor in interest to
Ampex Systems Corporation).
1.14 (a) "COMPENSATION" with respect to an Employee, for any
Plan Year, means the sum of only the following amounts paid or payable to an
Employee by his Employer in respect of such Plan Year: (1) base salary, (2)
bonuses paid prior to January 1, 1988 (in accordance with Ampex Corporation
Retirement Plan in effect on such date), (3) overtime, (4) shift differentials,
(5) commissions, (6) accrued vacation pay paid upon a Termination of Employment,
(7) salary-reduction (before-tax) contributions to the Employer's qualified
salary reduction pension plan under Section 401(k) of the Code, and (8)
salary-reduction (before-tax) contributions to the Employer's salary-reduction
welfare plan that is operated in accordance with Section 125 of the Code.
(b) "Compensation" shall not include any payment or expense
paid or payable to or for Employees (1) pursuant to any welfare plan or any
pension, profit-sharing or other deferred compensation plan, other than
salary-reduction contributions; or (2) as automobile allowances, or
reimbursement for services not in the United States, or separation payments or
other special allowances of a similar nature.
(c) "Compensation" for a Period of Service rendered prior to
February 1, 1994 for which no service was provided shall be equal to the product
of (1) the daily rate of Base Compensation in effect immediately prior to such
Period of Service, multiplied by (2) the number of days in such Period of
Service.
(d) Notwithstanding the foregoing,
(1) except as provided in Paragraph (2) below, "Compensation"
for any such Plan Year ending before January 1, 1989 in which the Plan is a Top
Heavy Plan, and for any Plan Year ending after December 31, 1988, shall be
limited to the first $200,000 adjusted for increases as permitted under the Code
and the regulations thereunder; and
(2) in addition to other applicable limitations set forth in
the Plan, and notwithstanding any other provision of the
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Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the
annual compensation of each Employee taken into account under the Plan shall not
exceed the OBRA '93 annual compensation limit. The "OBRA '93 annual compensation
limit" is $150,000, as adjusted by the Commissioner of Internal Revenue for
increases in the cost of living in accordance with Section 401(a)(17)(B) of the
Code. The cost-of-living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which compensation is determined (a
determination period) beginning in such calendar year. If a determination period
consists of fewer than 12 months, the OBRA '93 annual compensation limit will be
multiplied by a fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Section 401(a)(17) of the Code
shall mean the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in the current Plan
Year, the compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
In determining the Compensation of an Employee, the family aggregation rules of
Code Section 414(q)(6) shall apply, except that in applying such rules, the term
"family" shall include only the spouse of the Employee and any lineal
descendants of the Employee who have not attained age 19 before the close of the
year.
(e) Notwithstanding the foregoing, "Compensation" shall not
include any amount paid or payable to an Employee on and after February 1, 1994.
1.15 "CREDITED SERVICE," with respect to an Employee, means
the Employee's Period of Service, excluding service as an Excluded Employee,
except that service with an Employer or an Affiliate for which an Employee is
entitled to benefits under another Defined Benefit Plan (as defined in Section
10.1(c)) shall be included in the Employee's Credited Service under this Plan.
Any service prior to June 1, 1990 that was treated as "Benefit Service" under
the provisions of this Plan prior to its amendment and complete restatement
hereby shall be included in the Employee's Credited Service.
Notwithstanding the foregoing, "Credited Service" shall not
include any Period of Service rendered on and after February 1, 1994.
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1.16 "DEFERRED RETIREMENT" means an Employee's continued
employment after his Normal Retirement Date.
1.17 "DEFERRED RETIREMENT DATE" means the first day of the
month coincident with or next following the date upon which an Employee's
Termination of Employment occurs, if such Termination of Employment occurs after
his Normal Retirement Date.
1.18 "DISABILITY" means the mental or physical incapacity of a
Participant which as determined by the Committee renders a Participant totally
and permanently incapable of performing assigned duties with an Employer or
Affiliate. The Committee's determination shall be made under uniformly applied
standards adopted by the Committee, which standards may include adopting the
definition of "disability" under the Social Security Act, or as applied to the
Company's long-term disability programs, if any, or such other definition as may
be adopted from time to time by the Committee.
1.19 "EFFECTIVE DATE" of this Plan means May 27, 1987. The
Effective Date of this amendment and restatement is January 1, 1997.
1.20 "EMPLOYEE" means an individual who is employed by an
Employer or an Affiliate as a common law employee, or who is a "leased employee"
with respect to an Employer or Affiliate within the meaning of Section 414(m) of
the Code, including any Credit Union Participant employed by the Credit Union,
as defined in Section 5.7.
1.21 "EMPLOYER" means the Company and any other Affiliate
which, with the consent of the Board of Directors, has adopted the Plan as a
participant herein and any successor to any such Employer.
1.22 "EMPLOYMENT COMMENCEMENT DATE" means
(a) the date on which an Employee first performs an
Hour of Service; or
(b) in the case of an Employee who has incurred a Break in
Service following a Termination of Employment, the date on which he first
completes an Hour of Service after such Termination of Employment.
1.23 "ERISA" means Public Law No. 93-406, the Employee
Retirement Income Security Act of 1974, as amended from time to time.
1.24 "EXCLUDED EMPLOYEE" means an individual in the
employ of an Employer or an Affiliate who -
(1) is employed by an Affiliate that is not an
Employer; or
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(2) is included in a unit of employees covered by
a collective bargaining agreement between employee representatives and one or
more Employers or Affiliates, if under such agreement such employees are not
required to be covered by the Plan, and if retirement benefits were the subject
of good faith bargaining between such employee representatives and such
Employers or Affiliates; or
(3) (A) is neither a resident nor a citizen of
the United States of America, and
(B) receives from Employers or Affiliates no
earned income, within the meaning of Section 911(b) of the Code, that
constitutes income from sources within the United States, within the meaning of
Section 861(a)(3) of the Code; or
(4) is a "leased employee" within the meaning of
Section 414(m) of the Code.
1.25 (a) "HOUR OF SERVICE" means -
(1) each hour for which an Employee is paid or
entitled to payment, by an Employer or Affiliate for the performance of duties
for such Employer or Affiliate, credited for the Plan Year or other computation
period in which such duties were performed; or
(2) each hour of a period during which no duties
are performed due to vacation, holiday, illness, incapacity, layoff, jury duty,
military duty or leave of absence, determined in accordance with the following
rules:
(A) (i) If the Employee is directly or
indirectly paid, or entitled to payment by an Employer or Affiliate on account
of such period of absence, the Employee shall be credited with Hours of Service
in accordance with Sub section (b), up to a maximum of five hundred one (501)
Hours of Service in each such period of absence;
(ii) If the Employee is absent from
work by reason of the Employee's pregnancy, the birth of the Employee's child,
or the placement of a child with the Employee in connection with the adoption of
such child by such individual or for purposes of caring for such child for a
period beginning immediately following such birth or placement, the Employee
shall be credited with eight (8) Hours of Service per day of such absence up to
a maximum of five hundred one (501) Hours of Service in each such period of
absence.
(iii) If the Employee is not paid or
entitled to payment by an Employer or Affiliate on account of such period of
absence, other than absence for maternity or paternity reasons as described in
Subparagraph (a), he shall be credited with no Hours of Service in respect of
such period of absence.
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(B) if the Employee is not paid, or entitled
to payment, by an Employer or Affiliate on account of such period of absence, he
shall be credited with no Hours of Service in respect of such period of absence;
(3) each hour during an Employee's period of
service in the Armed Forces of the United States, credited on the basis of forty
(40) Hours of Service for each week, or eight (8) Hours of Service for each
weekday, of such service, if the Employee retains reemployment rights under the
Military Selective Service Act and is reemployed by an Employer or Affiliate
within the period provided by such Act; or
(4) each hour for which an Employee has been
awarded, or is otherwise entitled to, back pay from an Employer or Affiliate,
irrespective of mitigation of damages, if he is not entitled to credit for such
hour under any other Paragraph of this Subsection (a).
(b) The number of an Employee's Hours of Service and the Plan
Year or other computation period to which they are to be credited shall be
determined in accordance with Sec tion 2530.200b-2 of the Rules and Regulations
for Minimum Standards for Employee Pension Benefit Plans, which section is
hereby incorporated by reference into this Plan.
(c) In the case of an Employee whose compensation is not
determined on the basis of certain amounts for each hour worked, such Employee's
Hours of Service shall not be determined from employment records, and such
Employee may, in accordance with uniform and nondiscriminatory rules adopted by
the Trustees, be credited with forty (40) Hours of Service for each week in
which he would be credited with any Hours of Service under the provisions of
Subsection (a) or (b).
1.26 "MINOR CHILDREN" means a Participant's natural or legally
adopted children who are under the age of 21.
1.27 "MONTHLY COMPENSATION" for any month in a calendar year
means the quotient determined by dividing the Compensation for the calendar year
by twelve (12), or by the number of months actually paid, if less.
1.28 "NORMAL RETIREMENT AGE" means the Participant's
sixty-fifth (65th) birthday.
1.29 "NORMAL RETIREMENT DATE" means the first day of the month
coincident with or next following the Normal Retirement Age of a Participant or
Retired Participant.
1.30 "OPTION" means any of the optional methods of payment of
a Retirement Pension which a Participant or Retired Participant may elect in
accordance with Article VI.
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1.31 "PARTICIPANT" means an individual who has become a
Participant in the Plan pursuant to Article II and whose participation has not
terminated pursuant to such Article.
1.32 "PLAN" means the Ampex Corporation Employees' Retirement
Plan, as set forth herein and as from time to time amended.
1.33 "PERIOD OF SERVICE" means the aggregate of each and every
month in which an Employee is employed for at least 16 days, in each of which he
is credited with at least one (1) Hour of Service, beginning on an Employee's
Employment Commencement Date and ending on the date of his Severance from
Service next following such Employment Commencement Date. For the purpose of
determining the length of an Employee's Period of Service, all non-successive
Periods of Service (except those which may be disregarded as provided under
Section 5.6) shall be aggregated. The length of an Employee's Period of Service
shall be equal to the number of years (i.e., 12 month periods) in such Period of
Service, counting from the Employment Commencement Date on which it began, plus
a fractional year consisting of (a) the number of months not included in any
year, divided by (b) twelve (12).
1.34 "PLAN YEAR" means the period which began on the Effective
Date and ended December 31, 1987, and each calendar year thereafter.
1.35 (a) "QUALIFIED JOINT AND SURVIVOR ANNUITY" means an
annuity for the life of a Participant, with a survivor annuity for the life of
his Spouse which is equal to 50% of the amount of the annuity payable during the
joint lives of such Participant and his Spouse.
(b) The benefit payable in the form of a Qualified Joint and
Survivor Annuity shall be the normal form of a Participant's Retirement Pension
if such Participant has a Spouse and shall be the Actuarial Equivalent of the
Retirement Pension in the normal form of a non-assignable life annuity for the
life of the Participant who has no Spouse.
1.36 "RETIRED PARTICIPANT" means any Participant or former
Participant who is entitled to benefits pursuant to Arti cle III, V or VI.
1.37 "RETIREMENT" means any Termination of Employment, other
than by reason of death, on or after a Participant's Normal Retirement Date.
1.38 (a) "RETIREMENT PENSION" means the annual pension to
which a Participant or Beneficiary shall become entitled pursuant to Article
III, V, VI or VII. Except as otherwise provided in this Plan, such Retirement
Pension shall be in the normal form of a non-assignable annuity for the
Participant's life, payable in monthly installments, each of
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which shall be equal to one-twelfth (1/12th) of the Retirement Pension.
(b) Nothing herein shall affect or lessen the right of any
Participant or Beneficiary to receive a Qualified Joint and Survivor Annuity
under the provisions of Section 3.4 or a death benefit under Article IV, or to
elect any optional form of payment under the provisions of Article VII.
1.39 (a) "RETIREMENT PENSION STARTING DATE" means the
scheduled payment date of (1) a Retirement Pension in the form of lump sum
distribution or (2) the first installment of a Retirement Pension payable in the
form of an annuity. Except as otherwise provided in this Plan, payment of a
Retirement Pension shall be made or shall commence to be made, as the case may
be, on his Normal Retirement Date or Deferred Retirement Date, as the case may
be, and the last payment of a Retirement Pension shall be made depending on the
form in which the Retirement Pension is payable.
(b) A Participant's Retirement Pension Starting Date shall
ordinarily not be later than the sixtieth (60th) day after the last day of the
Plan Year in which occurs the later of his Normal Retirement Age or the date of
his Termination of Employment; however, a Participant may postpone his
Retirement Pension Starting Date beyond the latest date specified hereinabove,
by filing a written statement with the Trustees, stating the date on which
payment of the benefit to which he is entitled shall commence.
(c) Notwithstanding anything to the contrary in the preceding
Subsections, a Participant's Retirement Pension may not commence to be
distributed to him after April 1 of the calendar year following the end of the
calendar year in which he attains age 70-1/2, except as otherwise permitted
under Section 401 of the Code or any federal law or regulation then in effect.
1.40 "SEVERANCE FROM SERVICE" of an Employee means the earlier
of:
(a) an Employee's Termination of Employment (but for
purposes of eligibility to participate and vesting credit, only if within
12 months thereafter he does not complete an Hour of Service); or
(b) the first anniversary of the date on which an
Employee began his absence from service (with or without pay) with all
Employers and Affiliates for any reason other than his Termination of
Employment, if he does not return from such absence upon or prior to such
first anniversary; provided, however, that absence from work by reason of
the Employee's pregnancy, the birth of the Employee's child, or the
placement of a child with the Employee in connection with the adoption of
such child by the Employee or for purposes of caring for such child for a
period beginning
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immediately following such birth or placement shall not be deemed absence
from service for purposes of eligibility and vesting until the second
anniversary of such absence but shall be deemed absence from service for
purposes of computing credited service from the first anniversary of such
absence.
1.41 "SOCIAL SECURITY COVERED COMPENSATION" means for any
Participant the average of the taxable wage bases in effect under Section 230 of
the Social Security Act for each year in the thirty-five (35) year period ending
with the year in which the Participant attains his Social Security Retirement
Age. In determining a Participant's's Social Security Covered Compensation for
any Plan Year commencing on or prior to January 1, 1994, the taxable wage base
for the current Plan Year and any subsequent Plan Year shall be assumed to be
the same as the taxable wage base in effect as of the beginning of the Plan Year
for which the determination is made. In determining a Participant's Social
Security Covered Compensation for any Plan Year commencing after January 1,
1994, the taxable wage base for the current Plan Year and any subsequent Plan
Year shall be assumed to be the same as the taxable wage base in effect as of
January 1, 1994. For purposes of this Section, "Social Security Retirement Age"
means age 65 with respect to a Participant who was born before January 1, 1938;
age 66 with respect to a Participant who was born after December 31, 1937 and
before January 1, 1955; and age 67 with respect to a Participant who was born
after December 31, 1954.
1.42 "SPOUSE" means a Participant's lawfully married spouse on
the date of his death or his Retirement Pension Starting Date, whichever date is
earlier, if such spouse is married to the Participant for an entire year ending
on such earlier date; provided, however, that (a) if a spouse marries a
Participant at any time within 1 year ending on the Participant's Retirement
Pension Starting Date and is so married for a full year ending on the subsequent
date of the Participant's death, or (b) if the Participant's death occurs after
his 55th birthday and while the Participant is an Employee, such spouse of the
Participant on the date of his death shall be deemed the "Spouse" for purposes
of this Plan.
1.43 "TERMINATION OF EMPLOYMENT" means termination of
employment with an Employer or an Affiliate for any reason; provided, however,
that no Termination of Employment shall be deemed to occur (a) upon an
Employee's transfer from the employ of one Employer or Affiliate to another
Employer or Affiliate or (b) upon a change from an Employee who is not an
Excluded Employee to an Employee who is an Excluded Employee, or vice-versa.
1.44 (a) "TOP HEAVY PLAN" means with respect to any plan year
beginning on or after January 1, 1984 (1) any Defined Benefit Plan, described in
Section 10.1(c), the present value of whose cumulative accrued benefits
(determined as of the
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"determination date") for "key employees" exceeds 60% of the present value of
the cumulative accrued benefits under the Plan for all participating employees,
and (2) any Defined Contribution Plan, described in Section 10.1(e), the value
of whose aggregate accounts (determined as of the "determination date") for "key
employees" exceeds 60% of the value of the aggregate of the accounts for all
participating employees.
(b) For purposes of this Section 1.44 -
(1) a "key employee" is determined in accordance with the
definition in Section 416(i) of the Code, the provisions of which are hereby
incorporated by reference, and an individual's Compensation (as defined in
Section 10.1(e)) shall be used to determine his status as a "key employee". A
"non-key employee" is any employee who is not a "key employee;
(2) the actuarial assumptions used to determine the present
value of benefits shall be those described in Sec tion 1.2; provided, however,
no assumptions as to future withdrawal, future salary increases, pre-retirement
death benefits or disability benefits will be taken into account;
(3) the top-heavy test described in the first para graph of
this Section shall be computed in accordance with Sec tion 416(g) of the Code;
(4) all Defined Benefit Plans and Defined Contribution Plans
that as a group continue to satisfy the discrimination tests of Code Sections
401(a)(4) and 410 shall be aggregated to determine top-heaviness. However, if by
so aggregating, any one such plan remains a Top Heavy Plan, only those plans
either that enable such Top Heavy Plan to satisfy the discrimination tests of
Section 401(a)(4) or 410(b) of the Code or in which a key employee is a
participant will be aggregated and treated as Top Heavy Plans;
(5) the "determination date" shall be the valuation date for
determining accrued benefits and/or account balances and shall be the last day
of the preceding plan year or, in the case of the first plan year, the last day
of such plan year. If 2 or more plans are aggregated, they are so aggregated by
adding the results of each plan as of the determination dates that fall within
the same calendar year and shall be the valuation date for determining accrued
benefits and/or account balances;
(6) if any individual has not performed services for the
Employer maintaining the Plan at any time during the five-year period ending on
the determination date, any accrued benefit for such individual (and the account
of such individual) shall not be taken into account;
(7) the accrued benefits and accounts of an individual shall
include aggregate distributions to such individual during the five-year period
ending on the determination date, from
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Defined Benefit Plans and Defined Contribution Plans, including terminated plans
that would have been required to be aggregated if such plans had not been
terminated; and
(8) the provisions of Code Section 416 on how the top-heavy
ratio is computed are hereby incorporated by reference.
1.45 "TRUST" or "TRUST FUND" means the Ampex Retirement Master
Trust pursuant to an agreement between Ampex Corporation and State Street Bank
and Trust Co., as Trustee, and any other trust forming part of this Plan that is
established pursuant to a trust agreement with the Trustee to hold assets of the
Plan. Such trust may be a "master trust" serving as the trust vehicle for other
plans that are qualified under Section 501(a) of the Code and for tax-exempt
individual retirement accounts under Section 408 of the Code, where the assets
of each participating plan or individual retirement accounts are separately
accounted for.
1.46 "TRUSTEE" or "TRUSTEES" means the State Street Bank and
Trust Co. and any additional or successor trustees of the Trust Fund, with whom
the Company has entered into a trust agreement.
1.47 "VESTING SERVICE" means, with respect to an Employee, his
Period of Service, including (a) the period following his Termination of
Employment if within 12 months thereafter he completes at least one Hour of
Service and (b) the first 12 months of absence from service for any reason other
than a Termination of Employment and (c) the first two years of absence of
service in the case of an absence described in Section 1.25(a)(2)(A)(ii).
1.48 "YEAR OF SERVICE," with respect to an Employee,
means:
(a) with respect to Article II, the twelve (12) month period
beginning on his Employment Commencement Date during which an Employee has
completed at least one thousand (1,000) Hours of Service, and
(b) with respect to Article II and all other Articles of this
Plan, each Plan Year during which he completes at least one thousand (1,000)
Hours of Service.
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ARTICLE II
ELIGIBILITY FOR PARTICIPATION
2.1 Each Employee on January 1, 1997 who was a Participant on
December 31, 1996 in the Plan shall continue as a Participant under this amended
and restated Plan.
2.2 Each Employee who is not a Participant pursuant to Section
2.1 shall not become a Participant, and participation under this Plan shall
thereinafter be frozen except as provided in Section 2.5.
2.3 If the Committee so requests, an Employee who has
qualified for participation in the Plan shall file with the Committee a
statement, in such forms as the Committee may prescribe, setting forth his age
and giving such proof thereof and other information as the Committee may
reasonably require.
2.4 A Participant shall cease to be a Participant (a) for
purposes of accruing additional Vesting Service and Credited Service, as of the
date of his Severance from Service (except that no Credited Service shall be
included for service with an Employer or an Affiliate on or after February 1,
1994), and (b) for all other purposes, as of the date he is no longer entitled
to receive a benefit under the Plan.
2.5 A former Participant who has incurred a Severance from
Service shall again become a Participant (a) as of his latest Employment
Commencement Date, on which begins a 12-month period in which he completes one
thousand (1,000) Hours of Service, or (b) if he does not become a Participant as
of such date, as of the first day of the first Plan Year in which he completes
one (1) Year of Service.
2.6 (a) An Excluded Employee may not become a Participant
while he remains an Excluded Employee.
(b) An Employee who is an Excluded Employee on the date on
which he would otherwise qualify for participation in the Plan under Sections
2.2 and 2.5 shall become a Participant on the first day thereafter on which he
is no longer an Excluded Employee; provided, however, that no Excluded Employee
shall become a Participant on and after February 1, 1995.
2.7 A Participant who becomes and remains an Excluded Employee
shall be entitled to benefits under Article III, IV, V or VII of the Plan upon
his Retirement or Termination of Employment under the terms of the Plan in
effect on the date he became an Excluded Employee.
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ARTICLE III
RETIREMENT
3.1 (a) A Participant shall have a fully (100%) vested and
nonforfeitable interest in his Accrued Benefit on the attainment of his Normal
Retirement Age while employed with an Employer or an Affiliate.
(b) Upon his Retirement on his Normal Retirement Date, he
shall be entitled to receive an annual Retirement Pension, commencing on his
Normal Retirement Date, which shall be equal to the greatest of the amounts
calculated under Paragraphs (1) through (5) hereinbelow, reduced if applicable
by the amounts determined in Subsection (c):
(1) an amount equal to the product of
(A) his number of years of Credited Service,
multiplied by
(B) the sum of:
(i) 1.1% of his Average Final Compensation
not in excess of his Social Security Covered
Compensation, plus
(ii) 1.4% of his Average Final Compensation
in excess of his Social Security Covered
Compensation; and
(2) an amount equal to the product of
(A) his number of years of Credited Service,
multiplied by
(B) 1.25% of his Average Final Compensation With
Respect To Base Compensation; and
(3) an amount equal to the sum of
(A) the amount determined in Paragraph (1), computed
by calculating Average Final Compensation without
taking into account any bonuses, plus
(B) an amount equal to the product of
(i) his number of years of Credited Service
until December 31, 1987, multiplied by
(ii) 1.5% of the quotient determined by
dividing the sum of the bonuses he received
by his Employer in respect of the five
calendar years 1983 through 1987, by five
(5); and
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(4) if he is a non-key employee as defined in Section 1.44(b),
the amount calculated in Subsection 1.1(b); and
(5) if he was a Participant in the Plan on December 31, 1989,
the amount determined in Subsection 1.1(c); and
(c) The amount of a Participant's Retirement Pension described
in Subsection (b) shall be reduced by
(1) if he participated in the Ampex Corporation Employees'
Profit Sharing Plan and Retirement Trust, as of April 30, 1974, the quotient
determined by dividing (A) the fair market value of his account balance in such
Trust as of April 30, 1974, increased with interest at the rate of 6% per year
compounded annually from May 1, 1974 until December 31, 1983, by (B) an annuity
factor equal to 10.8378; and
(2) the benefit which he has accrued (converted, if necessary,
to an Actuarial Equivalent annual benefit as deter mined by the Plan's actuary)
under any other Defined Benefit Plan (as defined in Section 10.1(c)) to which an
Employer or Affiliate contributed on his behalf, to the extent such benefit
relates or is based on service ("Affiliated Service") which is included in
Credited Service under this Plan; provided, however, that the amount of the
reduction described in this Paragraph (2) shall not reduce his Retirement
Pension below the amount of the Retirement Pension to which he would have been
entitled if Affiliated Service were not included in Credited Service.
(d) Notwithstanding anything in this Section to the contrary,
a Participant's Retirement Pension under this Section shall in no event be less
than the greatest benefit to which he would be entitled under Section 5.2(b) if
his Termination of Employment occurred at any time on or after his fifty-fifth
(55th) birthday and before his Normal Retirement Date.
3.2 (a) Upon Retirement after his Normal Retirement Date, a
Participant shall receive a Retirement Pension, commencing on his Deferred
Retirement Date, which shall be equal to the Retirement Pension computed under
Section 3.1(b) by substituting Deferred Retirement Date for Normal Retirement
Date wherever the latter term appears or is referenced therein.
(b) Notwithstanding any provision of Subsection (a), if a
Participant remains an Employee on the latest Retirement Pension Starting Date
permitted pursuant to Section 1.39(c), the amount payable as a Retirement
Pension during the period beginning on his Retirement Pension Starting Date and
ending on his Deferred Retirement Date and the amount payable on and after his
Deferred Retirement Date shall be determined, in accordance with Section
401(a)(9) of the Code and the regulations thereunder, under the following rule:
Each Retirement Pension payment in a Plan Year shall first be based on
compensation and service accrued as of the last day of the preceding Plan Year
as
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if the Participant had incurred a Termination of Employment as of such day, and
then shall be reduced by the Actuarial Equivalent of the Retirement Pension
payments paid to such Participant in preceding Plan Years.
(c) Not later than the last day of the month in which his
Normal Retirement Age occurs, the Committee shall (1) notify each Participant
who continues as an Employee beyond his Normal Retirement Age that no benefits
are payable in a month during which he is an Employee for 8 or more days, (2)
inform him of the procedure adopted by the Committee for affording a review of
his deferral of benefits, (3) provide him such other information as required by
Department of Labor Regulations Section 2530.203-3 and (4) make such payments at
such times as are required under the Regulations. In accordance with such
Regulations, the Committee shall also adopt procedures and provide information
to Employees regarding employee requests as to whether their continued
employment will cause a suspension of their Retirement Pension Starting Date.
3.3 (a) Notwithstanding any other provision of this Plan, if a
Participant is entitled to a Retirement Pension, the single sum Actuarial
Equivalent of which does not exceed $3,500, such Participant shall be paid a
lump sum distribution in an amount equal to the single sum Actuarial Equivalent
of his Retirement Pension, regardless of the form in which he would otherwise be
entitled to receive his benefits. No lump sum Actuarial Equivalent Retirement
Pension that is in excess of $3,500 or that is payable after the Retirement
Pension Starting Date may be payable without the consent of the Participant and
his Spouse in the manner described in Section 3.4.
(b) Solely for purposes of this Section, Section 4.2, Section
5.3, and any other provision in this Plan where lump sum amounts are to be
calculated, to the extent required under Sec tion 401(a) of the Code, the
Actuarial Equivalent shall be calculated by using an interest rate no greater
than the (1) Applicable Interest Rate, as defined below, if the lump sum
Actuarial Equivalent present value of such Retirement Pension (using such rate)
is not in excess of $25,000 or (2) 120% of the Applicable Interest Rate if the
lump sum Actuarial Equivalent present value of such Retirement Pension, exceeds
$25,000 (as determined in Paragraph (1)). In no event shall the present value
determined in Paragraph (2) be less than $25,000.
(c) For purposes of this Section 3.3, the "Applicable Interest
Rate" shall mean the interest rate or rates which would be used, as of the
beginning of the Plan Year in which the distribution commences, by the Pension
Benefit Guaranty Corporation for purposes of determining the present value of
that Participant's benefits under the Plan if the Plan had terminated on the
date distribution commences with insufficient assets to provide benefits
guaranteed by the Pension Benefit Guaranty Corporation on that date.
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3.4 (a) Notwithstanding any other provision, except as
provided herein or in Section 3.3, the Retirement Pension of a Participant or a
Retired Participant who has a Spouse on his Retirement Pension Starting Date and
who is alive on such date shall be paid in the form of a Qualified Joint and
Survivor Annuity.
(b) A married Participant or former Participant shall have the
right to elect, during the election period specified in Subsection (c), to
receive his Retirement Pension not in the form of a Qualified Joint and Survivor
Annuity, but only if his Spouse consents in writing to such election which
writing (1) designates a Beneficiary or a form of benefits which may not be
changed without the consent of the Spouse (unless the Spouse expressly permits
new designations by the Participant without the need for further consent by the
Spouse), (2) is notarized or witnessed by a member of the Committee and (3)
acknowledges the effect of such consent. Any such election may be revoked at any
time by the Participant alone during the election period. Any number of
elections or revocations may be made during the election period.
(c) The election period shall begin on the date which is 90
days prior to his Retirement Pension Starting Date and shall end on his
Retirement Pension Starting Date.
(d) Prior to the election period described in Sub section (c),
the Committee shall deliver or mail to such Participant a general description of
the terms and conditions of the Qualified Joint and Survivor Annuity, the
circumstances under which it will be provided to a Participant who has not
elected another form of benefit, the availability and effect of the election not
to receive benefits in Qualified Joint and Survivor Annuity form, and the rights
of the Participant's Spouse, and the Participant's rights of revocation.
(e) A married Participant who with his Spouse's consent elects
not to receive his Retirement Pension in the form of a Qualified Joint and
Survivor Annuity shall receive his Retirement Pension in the form specified by
the Option which he has elected pursuant to Article VI or, if no such Option has
been elected or is available, in the form of an annuity for his life only.
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ARTICLE IV
DEATH BENEFITS
4.1 No death benefit shall be paid in respect of a Participant
who dies prior to his Retirement Pension Starting Date unless he has a Spouse or
Minor Children.
4.2 (a) If a Participant (1) is vested in his Accrued Benefit
pursuant to Section 3.1, 5.1, 12.3 or 12.4, and (2) dies either while an
Employee or prior to his Retirement Pension Starting Date, his Spouse shall be
entitled to receive a death benefit described in Subsection (b), or Section 4.5
if applicable, commencing on the Spouse's Retirement Pension Starting Date
described in Section 4.3.
(b) The death benefit to which a Spouse of a Participant is
entitled under Subsection (a) shall be payable in form of an annuity during her
life and shall be equal to 50% of the annuity to which the Participant would
have been entitled if (1) in the case the Participant died while an Employee,
such Participant had not died but instead had then retired, (2) the Participant
had remained alive until, and his benefits had been payable on, the Spouse's
Retirement Pension Starting Date described in Section 4.3 and (3) his benefits
had been payable in the form of an annuity on his life only, in the amount
determined under Sections 3.1, 3.2, 5.2(b)(1), or 5.2(b)(2), whichever Section
is applicable.
4.3 The Spouse's Retirement Pension Starting Date described in
Section 4.2 shall be the earlier of
(a) the first day of the first month following the later of
the Participant's 65th birthday or date of death, or
(b) the first day of any month, following the later of the
Participant's fifty-fifth (55th) birthday or date of death, if elected by the
Spouse in writing at least 30 days (or such fewer number of days as the
Committee in its sole discretion shall determine) prior to such first day.
4.4 (a) If a Participant (1) is vested in his Accrued Benefit
pursuant to Section 3.1, 5.1, 12.3 or 12.4, (2) dies on or after his fifty-fifth
(55th) birthday and either while an Employee or prior to his Retirement Pension
Starting Date, and (3) either (A) on the date of his death there are Minor
Children but no Spouse or (B) on the date of the Spouse's death occurring after
the Participant's death, whether or not the Spouse commenced receiving death
benefits described in Section 4.2, there are Minor Children, each of such Minor
Children shall be entitled to receive a death benefit described in Subsection
(b), or Section 4.5 if applicable, commencing on their Retirement Pension
Starting Date described in Subsection (c).
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(b) The death benefit to which each of the Minor Children is
entitled under Section (a) shall be payable in the form of an annuity until such
individual reaches age 21 or dies, if earlier, and shall be equal to the
quotient determined by dividing (1) the benefit which the Participant's Spouse
would have been entitled to receive if she had been alive under Section 4.2, by
(2) the number of Minor Children on their Retirement Pension Starting Date.
(c) The Retirement Pension Starting Date of the Minor Children
described in Subsection (a) shall be the first day of the first month following
the later of the Participant's death or Spouse's death.
(d) If the Participant designated, in a writing delivered to
the Committee, a trust to receive the benefit hereunder of any of the Minor
Children, payment of the death benefit payable hereunder for such individual
shall be made to the trust.
4.5 Notwithstanding the preceding Sections 4.2 and 4.4, if the
lump sum Actuarial Equivalent of the entire death benefit, as of the
beneficiary's Retirement Pension Starting Date, does not exceed $3,500, the
Spouse or Minor Children, as the case may be, shall be paid on such Retirement
Pension Starting Date a lump sum distribution equal to the lump sum Actuarial
Equivalent amount of the benefit described in Section 4.2 or 4.4, as the case
may be. The lump sum Actuarial Equivalent amount shall be calculated in
accordance with Section 3.3.
4.6 Subject to the provisions of Section 4.1, a death benefit
shall also be payable under this Plan on account of the death of a Participant
or Retired Participant pursuant to Section 3.4, or Section 5.3 or an Option
validly elected pursuant to Article VII.
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ARTICLE V
TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT
5.1 (a) A Participant who incurs a Termination of Employment,
other than by reason of death, Disability or Retirement, shall be vested in his
Accrued Benefit to the extent provided in Subsection (b) and shall be entitled
to a Retirement Pension, commencing on the date specified in Section 5.2(a),
equal to the amount determined in Section 5.2(b).
(b) (1) Except as provided in Paragraph (2), a Participant
shall have a 100% vested interest in his Accrued Benefit at the end of 5 years
of Vesting Service, and a 0% vested interest in his Accrued Benefit prior to
completion of 5 years of Vesting Service.
(2) For any Plan Year in which the Plan is a Top
Heavy Plan, a Participant shall have a vested interest in his Accrued Benefit
that is not less than 20% for each year of Vesting Service that he completes
after his first year of Vesting Service, up to 100% after his completion of 6
years of Vesting Service; provided, however, that subject to Section 11.3, a
Participant's vested interest shall not increase in accordance with this
Subsection (b)(2) during a Plan Year in which the Plan is not a Top Heavy Plan,
and any increase in his vested interest during each such Plan Year shall be
determined only pursuant to Subsection (b)(1).
5.2 (a) The Retirement Pension payable to a vested Participant
who incurs a Termination of Employment, other than by reason of death,
Disability or Retirement, shall commence on his Normal Retirement Date. However,
a Participant may elect, upon thirty (30) days' prior written notice to the
Committee, to commence receiving his Retirement Pension on the first day of a
month during the period commencing with the month following his fifty-fifth
(55th) birthday and ending on his Normal Retirement Date.
(b) The Retirement Pension payable to a vested Participant who
incurs a Termination of Employment, other than by reason of death, Disability or
Retirement, shall be equal to
(1) if the Participant's Termination of
Employment occurs on or after his fifty-fifth (55th) birthday, his vested
Accrued Benefit as of the date of his Termination of Employment, reduced by 1/3
of 1% of such Accrued Benefit for each month, if any, by which his Retirement
Pension Starting Date precedes his 60th birthday; and
(2) if the Participant's Termination of
Employment occurs before his fifty-fifth (55th) birthday, the product of (A) his
vested Accrued Benefit as of the date of his Termination of Employment
multiplied by (B) the factor determined by interpolating between the factor set
forth on Appendix A
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opposite the age on his birthday coincident with or immediately preceding his
Retirement Pension Starting Date described in Sec tion 5.2(a) and the factor set
forth on Appendix A opposite the age on his birthday immediately following such
Retirement Pension Starting Date.
5.3 Except as provided in Section 3.3, the Retirement Pension
payable to a vested Participant who incurs a Termination of Employment, other
than by reason of death, and who is married to a Spouse, shall be payable in the
form of a Qualified Joint and Survivor Annuity, unless an election is made in
accordance with Section 3.4(b), pursuant to the rules of Subsection (b) through
(d) therein.
5.4 If a former Participant is reemployed by an
Employer or an Affiliate,
(a) if he was receiving a Retirement Pension, payment of this
Retirement Pension shall cease (to the extent consistent with Section 3.2(c));
(b) (1) any Credited Service with respect to which he has
received any benefits under this Plan in the form of an annuity shall be taken
into account for purposes of determining his benefit under the benefit accrual
provisions of Sections 3.1 and 5.1, but the amount of his Retirement Pension,
when payable, shall be reduced by the Actuarial Equivalent of such benefits, and
(2) any Credited Service with respect to which he
has received a lump sum benefit under this Plan in an amount equal to his entire
Accrued Benefit shall not be taken into account for purposes of determining his
benefit under the benefit accrual provisions of Section 3.1 and 5.1; and
(c) subject to the provisions of Sections 5.5 and 5.6, any
Vesting Service with respect to which he has or has not received any benefits
under this Plan shall be taken into account for purposes of applying the vesting
provisions of Section 5.1.
5.5 If a former Participant again becomes a Participant after
having incurred a Break in Service, Vesting Service which he had completed prior
to such Break in Service shall be disregarded for the purpose of computing the
vested portion of his Accrued Benefit under Section 5.1 until he shall have
completed one year of Vesting Service after such Break in Service.
5.6 If a former Participant -
(a) has incurred at least 5 consecutive one (1) year Breaks in
Service which equal or exceed the number of his years of Vesting Service before
such Breaks in Service,
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(b) had no vested interest in his Accrued Benefit at the time
of such Breaks in Service, and
(c) again becomes a Participant,
any period of service prior to such Breaks in Service shall be disregarded for
all purposes under this Plan.
5.7 (a) Subject to the remaining paragraphs of this Section
5.7, but notwithstanding any other provision in the Plan, for any Participant in
the Plan who was an Employee of the Company on June 30, 1995, and who became an
employee of the ACU Federal Credit Union (formerly the Ampex Employees Federal
Credit Union and referred to herein as the "Credit Union") on July 1, 1995 (a
"Credit Union Participant"), any period of continuous employment with the Credit
Union rendered beginning on July 1, 1995 shall be recognized as a Period of
Service pursuant to Section 1.33 of the Plan. A Credit Union Participant who is
an employee of the Credit Union shall be considered an Employee for all purposes
under the Plan and shall not be deemed to have incurred a Termination of
Employment or Severance from Service under the Plan until the Participant first
incurs a termination of employment with the Credit Union on or after July 1,
1995. If a Credit Union Participant ceases to be employed by the Credit Union
and subsequently becomes an employee of the Company, the provisions of Sections
5.4, 5.5, and 5.6 shall apply. A Credit Union Participant who incurs a
Disability prior to his Normal Retirement Date while employed with the Credit
Union shall be eligible for benefits as set forth in Article VI of the Plan.
(b) The Retirement Pension payable to a Credit Union
Participant or a Beneficiary of a Credit Union shall be determined in accordance
with Article III, IV, V, VI, or VII of the Plan, as applicable.
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ARTICLE VI
DISABILITY
6.1 (a) A Participant who is vested in his Accrued Benefit
pursuant to Section 5.1 and who has incurred a Disability prior to his Normal
Retirement Age while employed with an Employer shall be entitled to a Retirement
Pension described in Subsection (b).
(b) (1) Except as provided in Paragraph (2), the Retirement
Pension referred to in Subsection (a) shall commence to be payable on the
Participant's Normal Retirement Date or, if the Participant consents and is
receiving benefits under the Employer's long-term disability plan, on any date
after his Normal Retirement Date but not later than the first day of the first
month coincident with or next following the date on which his long-term
disability plan benefits cease, and shall be equal to the greater of
(A) the Participant's Accrued Benefit as of
the date of his Termination of Employment due to his
Disability, calculated under Section 1.1, or
(B) the Retirement Pension computed in
accordance with Section 3.1 to which he would have been
entitled if -
(I) he were to continue as an Employee
until his Retirement Pension Starting Date;
(II) he were to be credited with Credited
Service for such period of continued employment rendered prior
to February 1, 1994; and
(III) his Compensation and Base Compensation
during such period of continued employment rendered prior to
February 1, 1994 were at the same annual rate as in effect on
the date he incurred a Termination of Employment due to the
Disability.
(2) Notwithstanding the provisions of Paragraph
(1), if a Participant who is entitled to the benefit described in this
Subsection (b) has completed prior to his Disability ten (10) years of Vesting
Service, such Participant may elect, upon thirty (30) days' prior written notice
to the Committee, to commence receiving his Retirement Pension on the first day
of any month, if he is then alive, during the period commencing with the month
following his Termination of Employment due to the Disability and ending prior
to his Normal Retirement Date. Upon such election, the Retirement Pension shall
be equal to the Retirement Pension described in Paragraph (1), reduced by 1/3 of
1% of such Accrued Benefit for each month, if any (but not for more than 60
months), by which his Retirement Pension Starting Date precedes his sixtieth
(60th) birthday, and by a monthly
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Actuarial Equivalent factor for each month, if any, by which his Retirement
Pension Starting Date precedes his fifty-fifth (55th) birthday; provided,
however, that in no event shall the Retirement Pension described in this
Paragraph (2) be less than (a) 50% of the amount calculated under Section
3.1(b)(2), reduced if applicable by (b) the amounts described in Section 3.1(c).
6.2 A Participant shall receive a Retirement Pension described
in Section 6.1 only if his Disability continues until the Retirement Pension
Starting Date of such Retirement Pension and he is alive on such Retirement
Pension Starting Date, and only for so long as he is under a Disability.
6.3 If a Participant who has incurred a Disability
subsequently does not become entitled to receive or to continue to receive the
Retirement Pension described in Section 6.1, he shall be entitled to receive or
to continue to receive, as the case may be, the benefits described in Article
III, IV or V based on his Accrued Benefit as of the date of his Termination of
Employment, determined without regard to the additional benefits provided under
this Article, reduced by the Actuarial Equivalent of any benefits he received
under this Article.
6.4 Payment of a Retirement Pension described in this Article
to a Participant who has incurred a Disability shall be made in the same form as
any other Retirement Pension under Article III or V of the Plan, and shall be
subject to the provisions of Sections 3.3 and 5.3.
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ARTICLE VII
OPTIONAL METHODS OF PAYMENT
7.1 (a)(1) Except as provided in Section 3.3, a Participant or
Retired Participant may elect any of the Options provided herein, which Option
shall be the Actuarial Equivalent (determined as of his Retirement Pension
Starting Date) of the Retirement Pension otherwise payable to him in accordance
with Article III, V or VI, whichever is applicable; provided, however, that no
Option may be elected which would permit his Beneficiary to receive a benefit
which is projected to equal fifty percent (50%) or more of the Actuarial
Equivalent (determined as of the Participant's Retirement Pension Starting Date)
of the combined benefits payable to such Beneficiary and such Participant or
Retired Participant, unless it is payable over the joint and last survivor life
expectancy of the Participant and his Spouse or over the joint lives of the
Participant and his Spouse.
(2) An election of an Option may be made only within 90 days
prior to the Retirement Pension Starting Date of the Participant or Retired
Participant, and only if he and his Spouse elect, in accordance with Section 3.4
or 5.3, whichever is applicable, not to receive benefits in the form of a
Qualified Joint and Survivor Annuity.
(3) An election of an Option under this Article is effective
only if the Retired Participant is alive on his Retirement Pension Starting
Date. If an individual after incurring a Termination of Employment was receiving
a Retirement Pension under an Option and subsequently becomes again an Employee
and as a result ceases receiving a Retirement Pension, his prior election of an
Option shall be void, and the rules of this Article VII shall start anew.
(b)(1) The Following Options may be Elected by a Par
ticipant:
Option 1 -
Life Annuity: A Participant or Retired Participant may
elect to receive his Retirement Pension in the form of an annuity
for his own life only.
Option 2 -
Joint and Survivor Annuity:
(1) A Participant or Retired Participant may
elect to receive the Actuarial Equivalent of the normal form of his Retirement
Pension payable to himself in equal monthly installments for his lifetime and
thereafter payable to his Beneficiary, if such Beneficiary survives him, in
equal monthly installments for his lifetime, at a rate of fifty percent (50%) or
seventy-five percent (75%) or one hundred percent (100%), as
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the Participant or Retired Participant may designate, of the Retirement Pension
payable during their joint lifetimes.
(2) If his Beneficiary dies before the Retirement
Pension Starting Date of the Participant or Retired Participant, any election of
this Option 2 shall be null and void.
(3) If his Beneficiary dies after the Retired
Participant's Retirement Pension Starting Date, the election of this Option 2
shall be effective, and the Retired Participant shall receive or continue to
receive the same actuarially adjusted Retirement Pension as if such Beneficiary
had not predeceased him.
(c) A Participant or Retired Participant may elect to revoke
or change the Option then in effect at any time within 90 days prior to his
Retirement Pension Starting Date.
7.2 (a) Unless his Spouse is required to be the Beneficiary
under the provisions of this Plan and has not consented as described in Section
3.4, a Participant may designate a Beneficiary and a successor Beneficiary. A
Participant or Retired Participant may change such designation from time to time
by filing a new designation with the Committee. No change of Beneficiary shall
require the consent of any previously designated Beneficiary, other than his
Spouse, if required by law, and no Beneficiary shall have any rights under this
Plan except as specifically provided by its terms.
(b) If a Retired Participant dies after any installment of his
Retirement Pension has become due but has not yet been paid to him, the balance
of such installment shall be paid to his Beneficiary.
(c) If benefits have commenced to be distributed to a
Participant before his death, the Retirement Pension necessary to be paid to the
Beneficiary shall be distributed as rapidly as under the method in effect on the
date of the Participant's death.
7.3 The Committee is authorized and empowered from time to
time to adopt and fairly to administer, in its sole discretion, regulations
relating to the exercise or operation of any Option; provided, however, that no
such regulation shall be inconsistent with the provisions of Section 7.1 or 7.2.
Without limiting the generality of the foregoing, such regulations may prescribe
- -
(a) such terms and conditions as the Committee shall deem
appropriate in respect of the exercise of any Option;
(b) the form of application;
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(c) any information or proof thereof to be furnished by a
Participant, a Retired Participant or a Beneficiary in connection with any
Option; and
(d) any other requirement or condition relating to any Option.
7.4 The Committee may, in its sole discretion, at any time or
from time to time, provide the benefits to which any Retired Participant or his
Beneficiary is entitled under this Plan by purchase of any form of
non-assignable annuity contract. Upon the purchase of any such contract, the
rights of the Retired Participant and his Beneficiary to receive any payments
pursuant to this Plan shall be exclusively limited to such rights as may accrue
under such contract, and neither such Retired Participant nor his Beneficiary
shall have any further claim against his Employer, the Committee or any other
persons.
7.5 If at any time any Retired Participant or his Beneficiary
is, in the judgment of the Committee, legally, physically or mentally incapable
of personally receiving and receipting for payment due hereunder, payment may,
in the discretion of the Committee, be made to the guardian or legal
representatives of such Retired Participant or Beneficiary or, if none exists,
to any other person or institution which, in the judgment of the Committee, is
then maintaining, or then has custody of, such Retired Participant or
Beneficiary.
7.6 Notwithstanding any provisions of this Plan to the
contrary,
(a) all distributions required under this Article shall be
determined and made in accordance with the Proposed Regulations under Section
401(a)(9), including the minimum distribution incidental benefit requirement of
section 1.401(a)(9)-2 of the Proposed Regulations. A Participant may request in
accordance with such Regulations to recalculate annually or not to recalculate
annually his life expectancy and/or that of his Spouse (if his Spouse is the
Beneficiary); and
(b) A Retirement Pension shall not be paid to a Participant
who is among the top 25 highest paid Highly Compensated Employees (as defined in
Section 414(q) of the Code), in a form the annual payment of which is greater
than the payment that would be made if the Retirement Pension were payable as a
single life annuity on the Participant's life, unless (1) after taking into
account the full payment of the Participant's entire Retirement Pension, the
fair market value of the assets of the Plan is at least equal to 110% of the
value of the Plan's current liabilities as defined in Section 412(l)(7) of the
Code, or (2) the lump sum Actuarial Equivalent Value of such Retirement Pension
is less than 1% of the value of such current liabilities.
7.7 (a) Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a Distributee's election
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under this Plan, effective January 1, 1993, a Distributee may elect, at the time
and in the manner prescribed by the Committee, to have any portion of an
Eligible Rollover Distribution (to the extent such a distribution is permitted
under the Plan) paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.
(b) For purposes of this Section,
(1) An "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: (i) 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; (ii) any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and (iii) the portion of any distribution
that is not includible in gross income.
(2) An "Eligible Retirement Plan" is an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section 401(a) of
the Code, that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the surviving
spouse, an Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
(3) A "Distributee" includes an employee or former employee.
In addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are Distributees with regard to the interest of the spouse or
former spouse.
(4) A "Direct Rollover" is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
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ARTICLE VIII
CONTRIBUTIONS AND PLAN TRANSFERS
8.1 This Plan contemplates that each Employer shall, from time
to time, contribute such amounts as may, in accordance with Section 412 of the
Code and sound actuarial principles (as recommended by an actuary enrolled
pursuant to Section 3042 of ERISA), be deemed necessary by such Employer to
provide the benefits contemplated hereunder.
8.2 All contributions made by any Employer shall be paid
directly to the Trustees for deposit in the Trust Fund.
8.3 Any forfeiture arising under the provisions of this Plan
shall be applied to reduce contributions which would otherwise be required to be
made by the Employers pursuant to Section 7.1.
8.4 No contributions may be made by any Participant.
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ARTICLE IX
NON-ALIENABILITY
9.1 Except as may be provided in Code Section 401(a)(13) or
any ruling or regulation as may from time to time be in force, no benefit under
this Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, charge, encumbrance, garnishment, levy or
attachment, and any attempt so to anticipate, alienate, sell, transfer, assign,
pledge, charge, encumber, garnish, levy upon or attach the same shall be void;
nor shall any such benefit be in any manner liable for or subject to the debts,
contracts, liabilities, engagements or torts of the person entitled to such
benefit.
9.2 If any Participant or Beneficiary under this Plan becomes
bankrupt, or attempts to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any benefit under this Plan, such benefit shall, in the
discretion of the Committee, cease and terminate, and in that event the
Committee may hold or apply the same or any part thereof for the benefit of such
Participant, his Beneficiary, his Spouse or children or other dependents, or any
of them, in such manner and in such proportion as the Committee may deem proper.
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ARTICLE X
LIMITATIONS ON BENEFITS
10.1 For purposes of this Article,
(a) Annual Additions shall be defined as in Code
Section 415(c);
(b) Defined Benefit Plan and Defined Contributions Plan shall
be defined as in Code Sections 414(i) and 414(j) which are hereby incorporated
by reference;
(c) Annual Benefit shall be defined as in Code Section
415;
(d) Limitation Year means the Plan Year;
(e) Compensation means an individual's wages, salaries, fees
and other amounts received, whether or not paid in cash, from an Employer or an
Affiliate for personal services rendered that are includible in gross income, to
the extent required by applicable law to be included in compensation for
purposes of the limitations of Code Section 415; and
(f) the limitations of Code Section 415 are hereby
incorporated by reference.
10.2 A Participant's Annual Benefit under this Plan and all
other Defined Benefit Plans maintained by the Employers and Affiliates for any
Participant for a Plan Year shall not exceed the limitations described in Code
Section 415(b).
10.3 (a) If a Participant of this Plan is also a participant
in one or more Defined Contribution Plans maintained by Employers and
Affiliates, and his benefits from the Defined Contribution Plans and the Defined
Benefit Plans of all such employers exceed the limitations as defined in Code
Section 415(e), his benefit shall first be reduced pro rata among the Defined
Contribution Plans, in which he participates to the extent necessary to comply
with such limitations. If further reductions are necessary, benefits shall be
reduced pro rata among the Defined Benefit Plans in which the Participant
participates to the extent necessary to comply with such limitations.
(b) In any year in which the Plan is a Top Heavy Plan,
paragraphs (2)(B) and (3)(B) of Section 415 of the Code shall be applied by
substituting "1.0" for "1.25" wherever it appears therein if the Plan were still
a Top Heavy Plan after substituting "90%" for "60%" in Section 1.44 or if the
benefits described in Section 1.1(b) are not increased in accordance with the
parenthetical provisions of paragraph 1.1(b)(1).
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10.4 If, on the Participant's Retirement Pension Starting
Date, his Accrued Benefit, computed without regard to the limitations set forth
in this Article X, exceeds the maximum annual benefit which he may receive under
the provisions hereof, his Retirement Pension shall be adjusted on the first day
of each subsequent Plan Year to take into account any increase, since his date
of Retirement, in the maximum permissible Retirement Pension; provided, however,
that the Retirement Pension payable to him or to his Beneficiary shall not
exceed his Accrued Benefit as of his Retirement Pension Starting Date.
10.5 The limitations imposed by this Article X shall be
administered in accordance with the final regulations and rulings issued by the
Secretary of the Treasury under Sec tions 415 and 416 of the Code.
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ARTICLE XI
AMENDMENT OF THE PLAN
11.1 The Company shall have the right, at any time and from
time to time, to amend in whole or in part any of the provisions of this Plan,
and any such amendment shall be binding upon the Participants and their
Beneficiaries, the Trustees, the Committee, any Employer who has joined in the
Plan, and all parties in interest. Any such amendment shall become effective as
of the date specified therein.
11.2 Notwithstanding anything to the contrary contained in
Section 11.1, no amendment may be made which shall (a) retroactively deprive a
Participant of any benefit accrued during any Plan Year before the Plan Year
with respect to which such amendment was executed, (b) eliminate or reduce an
early retirement benefit or subsidy or (c) eliminate an optional form of
benefit, unless such amendment is necessary to permit the Plan to qualify under
Section 401(a) of the Code.
11.3 If at any time the vesting schedule set forth in Section
5.1 is amended in such a manner as to decrease, as of any future date, the
vested interest in his Accrued Benefit which any Participant would have as of
such date, each such Participant who has completed at least three (3) Years of
Service as of the effective date of such amendment shall have the right to elect
to have his Accrued Benefit continued to vest in accordance with the vesting
schedule in effect immediately prior to such amendment.
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ARTICLE XII
TERMINATION OF THE PLAN
12.1 The Company may determine that it shall terminate the
Plan in its entirety or withdraw from the Plan and terminate the same with
respect to itself. The Company may at any time determine that any other Employer
shall withdraw from the Plan, and any Employer may determine that it shall so
withdraw, and, upon any such determination, the Plan shall be terminated with
respect to such Employer.
12.2 Any termination or partial termination shall be effective
as of the date specified in the resolution providing therefor, if any, and shall
be binding upon the Employer, the Trustees, all Participants and Beneficiaries
and all other parties in interest.
12.3 Upon termination of the Plan in its entirety, each
Participant shall have a fully (100%) vested and nonforfeitable interest in his
Accrued Benefit, determined as of the date of such termination. A Participant's
Accrued Benefit shall be payable only from the Trust Fund except to the extent
otherwise provided in Title IV of ERISA.
12.4 In the event of a partial termination of the Plan, within
the meaning of Section 411(d)(3)(A) of the Code, each affected Participant shall
have a fully (100%) vested and non-forfeitable interest in his Accrued Benefit,
determined as of the date of such partial termination insofar as required by
applicable regulations of the Internal Revenue Service.
12.5 (a) Upon termination of the Plan in its entirety or upon
a partial termination of the Plan and receipt of approvals from the appropriate
federal agencies, the assets comprising the Trust Fund shall be allocated in
accordance with the statutory priorities set forth in Section 4044(a) of ERISA
and regulations promulgated hereunder.
(b) Subject to the limitations imposed by Sec tion 4044(d)(2)
of ERISA, any funds remaining after satisfaction of all liabilities to Plan
Participants and Beneficiaries, shall be returned to the Employers.
12.6 Notwithstanding anything to the contrary in this Plan, in
the event of the termination of this Plan, any benefit under this Plan of any
Participant who is among the 25 highest paid Highly Compensated Employees, as
defined in Section 414(q) of the Code, may not exceed the benefit that is
non-discriminatory under Section 401(a)(4) of the Code and the regulations
promulgated thereunder.
12.7 If the Plan shall merge or consolidate with, or transfer
any of its assets or liabilities to, any other "pension plan", as defined in
Section 3(2) of ERISA, each Participant
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<PAGE>
shall be entitled to receive a benefit immediately after such merger,
consolidation or transfer (assuming that the Plan had then terminated) which is
equal to or greater than the benefit which he would have been entitled to
receive immediately before such merger, consolidation or transfer (assuming that
the Plan had then terminated).
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ARTICLE XIII
THE TRUST FUND
13.1 The Company has entered into a trust agreement with the
Trustee for the establishment and maintenance of the Trust. The trust agreement
shall be deemed to form a part of the Plan, and all rights which may accrue to
any person under the Plan shall be subject to the terms of the trust agreement.
13.2 The Trustee shall manage and control the Trust Fund in
accordance with the terms of the trust agreement. The Trustee shall pay benefits
to Participants only upon the specific instruction of the Committee.
13.3 The Trust fund shall be used as directed by the Committee
to provide the benefits and pay the expenses of this Plan and of the Trustee,
and no part of the corpus or income shall be used for or diverted to purposes
other than for the exclusive benefit of Participants and their Beneficiaries
under this Plan and the payment of expenses of the Plan and Trust.
13.4 All administrative and other expenses of the Plan and
Trust shall be paid out of the Trust fund unless paid by the Company.
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ARTICLE XIV
ADMINISTRATION
14.1 The Plan shall be administered and the management of the
assets thereof shall be vested in the Committee which shall consist of one (1)
or more individuals appointed by the Board. The members of the Committee shall
hold office until their successors have been duly appointed or until death,
resignation or removal.
14.2 The Board or Committee may authorize one or more of its
members to execute any document or documents on its behalf, in which event it
shall notify the Trustees in writing of such action and the name or names of
those so designated. The Trustees, thereafter, shall accept and rely
conclusively upon any direction or document executed by such member or members
as representing action by the Board or the Committee until such time as the
Board or the Committee shall file with the Trustees a written revocation of such
designation.
14.3 The Committee may appoint such independent accountants,
enrolled actuaries, legal counsel, investment advisors, and other agents or
specialists as it deems necessary or desirable in connection with the
performance of their duties hereunder. The Committee shall be entitled to rely
conclusively upon, and shall be fully protected in any action taken by it in
good faith in relying upon, any opinions or reports which shall be furnished to
it by any such independent accountants, enrolled actuary, legal counsel,
investment advisor or other specialist.
14.4 The Committee members shall serve without compensation
for services as such. All expenses of the Committee shall be paid by the
Company. Such expenses shall include any expenses incidental to the operation of
the Committee, including, but not limited to, fees of independent accountants,
enrolled actuaries, legal counsel, investment advisors and other agents or
specialists and similar costs.
14.5 The Committee members shall discharge their duties with
respect to the Plan solely in the interests of the Participants and their
Beneficiaries and
(a) for the exclusive purpose of providing
benefits to Participants and their Beneficiaries and defraying
reasonable expenses of administering the Plan;
(b) with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man, acting in like
capacity and familiar with such matters, would use in the conduct of an
enterprise of a like character and with like aims;
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(c) by diversifying the investments of the Trust
Fund so as to minimize the risk of large losses, unless under the
circumstances it is clearly prudent not to do so; and
(d) in accordance with the documents and
instruments governing the Plan insofar as such documents and instruments are
consistent with the provisions of ERISA.
14.6 The Company shall indemnify and hold harmless each of the
Committee members against any and all claims, loss, damages, expense (including
legal fees and other expenses of litigation) and liability arising from any
action or failure to act, except when the same is judicially determined to be
due to the gross negligence or willful misconduct of such members.
14.7 (a) The Company is hereby designated as the
"administrator" of the Plan within the meaning of Sec tion 3(16)(A) of ERISA.
The Committee members are hereby designated as "named fiduciaries" within the
meaning of Sec tion 402(a)(2) of ERISA, and shall, unless otherwise provided
pursuant to Subsection (b), jointly administer the Plan and manage its assets as
agents of the Company in accordance with its terms and shall have all powers
necessary to carry out the provisions of the Plan. In carrying out its duties
with respect to the general administration of the Plan, the Committee shall
have, in addition to any other lawful powers and not by way of limitation, the
following powers which together with any other lawful powers it may exercise in
its sole discretion:
(1) to determine all questions relating to
eligibility to participate in the Plan;
(2) to compute the amount and kind of
benefits payable to the Participants and their Beneficiaries;
(3) to authorize disbursements from the
Trust in accordance wit the provisions of the Plan;
(4) to maintain all records necessary for
the administration of the Plan; and
(5) to interpret the provisions of the Plan
and to make and publish such rules and regulations as are not
inconsistent with the terms hereof.
(b) (1) The Committee members may establish
procedures for (A) the allocation of fiduciary responsibilities (other than
"trustee responsibilities" as defined in Sec tion 405(c)(3) of ERISA) under the
Plan among themselves, and (B) the designation of persons other than named
fiduciaries to carry out fiduciary responsibilities (other than trustee
responsibilities) under the Plan.
(2) If any fiduciary responsibility is allocated or
if any person is designated to carry out any
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responsibility pursuant to Paragraph (1), no named fiduciary shall be liable for
any act or omission of such person in carrying out such responsibility, except
as provided in Sec tion 405(c)(2) of ERISA.
14.8 The Company shall establish a funding policy and method
consistent with the objectives of the Plan and the requirement of Title I of
ERISA. The Company shall meet at least annually to review such funding policy
and method. In establishing and reviewing such funding policy and method, the
Company shall endeavor to determine the Plan's short-term and long-term
financial needs, taking into account the need for liquidity to pay benefits and
the need for investment growth.
14.9 Any Committee member may be removed by the Company at any
time upon thirty (30) days' notice in writing to the members, which notice may
be waived by the members. A member may resign at any time upon thirty (30) days'
notice in writing to the Company, which notice may be waived by the Company.
Upon such removal or resignation of a member, or upon the death or disability or
a member, the Company may appoint, or, in the event there is no acting member,
shall appoint a successor member who shall have the same powers and duties as
those conferred upon the Committee members hereunder. The Company may at any
time appoint one or more additional members who shall have the same powers and
duties as those conferred upon the Committee members hereunder.
14.10 In any case in which any person is required or permitted
to make an election under this Plan, such election shall be made in writing and
filed with the Committee on the form provided by them or made in such other
manner as the Committee may direct.
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ARTICLE XV
CLAIMS PROCEDURE
15.1 (a) In the event of a dispute between the Committee and a
Participant or Beneficiary over the amount of benefits payable under the Plan,
the Participant or Beneficiary may file a claim for benefits by notifying the
Committee of such claim. Such notification may be in any form adequate to give
reasonable notice to the Committee, shall set forth the basis of such claim and
shall authorize the Committee to conduct such examinations as may be necessary
to determine the validity of the claim and to take such steps as may be
necessary to facilitate the payment of any benefits to which the claimant may be
entitled under the Plan.
(b) The Committee shall decide whether to grant a
claim within ninety (90) days of the date on which the claim is filed, unless
special circumstances require a longer period for adjudication and the claimant
is notified in writing of the reasons for an extension of time within such
ninety (90) day period; provided, however, that no extensions shall be permitted
beyond ninety (90) days after the date on which the claimant received notice of
the extension of time from the Committee. If the Committee fails to notify the
claimant of their decision to grant or deny the claim, such claim shall be
deemed to have been denied by the Committee and the review procedure described
in Subsection (c) shall become available to the claimant.
(c) (1) Whenever a claim for benefits is denied,
written notice, prepared in a manner calculated to be understood by the
claimant, shall be provided to the claimant, setting forth the specific reasons
for the denial and explaining the procedure for review of the decision made by
the Committee. If the denial is based upon submission of information
insufficient to support a decision, the Committee shall specify the information
which is necessary to perfect the claim and its reasons for requiring such
additional information.
(2) Any claimant whose claim is denied, may,
within sixty (60) days after the receipt of written notice of such denial,
request in writing a review by the Board, or by a committee appointed by the
Board, the members of which shall be "named fiduciaries," within the meaning of
Section 402(a) of ERISA (the "Review Board") for the purpose of adjudicating
such appeals. Such claimant or the claimant's representative may examine any
Plan documents relevant to the claim and may submit issues and comments in
writing. The Review Board shall adjudicate the claimant's appeal within sixty
(60) days after its receipt of the claimant's written request for review, unless
special circumstances require a longer period for adjudication and the claimant
is notified in writing of the reasons for an extension of time within such sixty
(60) day period; provided, however, that such adjudication shall be made no
later than one
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<PAGE>
hundred twenty (120) days after the Review Board's receipt by them of the
claimant's written request for review.
(3) If the Review Board fails to notify the
claimant of its decision with respect to the claimant's request for review
within the time specified by this Subsection (c), such claim shall be deemed to
have been denied on review.
(d) If the claim is denied by the Review Board,
such decision shall be in writing, shall state specifically the reasons for the
decision, shall be written in a manner calculated to be understood by the
claimant and shall make specific reference to the pertinent Plan provisions upon
which it is based.
(e) The procedure set forth in this Section 15.1
shall be revised as necessary to conform to regulations promulgated by the
United States Department of Labor or any successor authority regulating claims
procedures for employee benefit plans.
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ARTICLE XVI
MISCELLANEOUS
16.1 The adoption and maintenance of the Plan shall not be
deemed to constitute a contract between any Employer and any Employee or to be a
consideration for the employment of any person. Nothing herein contained shall
be deemed to give any Employee the right to be retained in the employ of any
Employer or to derogate from the right of any Employer to discharge any Employee
at any time without regard to the effect of such discharge upon the rights of
such Employee as a Participant in the Plan.
16.2 No liability shall attach to any Employer for payment of
any benefits or claims hereunder, and all Participants and Beneficiaries, and
all persons claiming under or through them, shall have recourse only to the
Trust Fund for payment of any benefit or claim hereunder.
16.3 If any provision in this Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the Plan, which shall be construed and enforced as if
such illegal or invalid provision had never been included herein. All
ambiguities in this Plan shall by resolved by the Committee in their sole
discretion to the extent such resolution is consistent with the qualified status
of the Plan under Section 401(a) of the Code.
16.4 This Plan shall be governed, construed, administered and
regulated in all respects under the laws of the State of California except
insofar as they shall have been superseded by the provisions of ERISA.
16.5 Wherever any words are used herein in the singular form,
they shall be construed as though they were also used in the plural form in all
cases where they would so apply, and vice versa.
16.6 (a) This Plan is established subject to the condition
precedent that it shall be approved by the Internal Revenue Service as qualified
under Section 401(a) of the Code as an employees' trust exempt from taxation
under Section 501(a) of the Code. If the Internal Revenue Service initially
determines that the Plan does not qualify under Section 401(a) of the Code, all
contributions made to the Plan prior to such determination shall revert to the
appropriate Employer within one year after the date of denial of qualification,
but only if the application for the determination was made by the time
prescribed by law for filing the Employer's return for the taxable year in which
the Plan was adopted or such later date as the Secretary of the Treasury shall
prescribe.
(b) If any contribution is made to this Plan by an Employer by
a mistake of fact, such contribution shall be
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<PAGE>
returned to such Employer within one year following the date that such
contribution is made.
(c) Each contribution made to this Plan is conditioned upon
its deductibility under Section 404 of the Code. Each contribution shall, to the
extent disallowed as a deduction, be returned to such Employer within one year
following the date of disallowance.
(d) This Plan is established for the exclusive benefit of the
Participants herein and their beneficiaries. Except as otherwise provided in
Section 12.5 and in Subsections (a), (b) and (c) of this Section 16.6, it shall
be impossible for any assets of the Trust to revert at any time to any Employer.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals this ____ day of _________, 1997.
AMPEX CORPORATION
By:
-------------------------
ATTEST:
- -----------------------
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<PAGE>
APPENDIX A
Pre-Early Retirement Factors for Section 5.2(b)(2).
Age Factor
65 1.0000
64 .8893
63 .7931
62 .7091
61 .6355
60 .5709
59 .5140
58 .4636
57 .4190
56 .3794
55 .3441
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
I DEFINITIONS..................................................... 2
II ELIGIBILITY FOR PARTICIPATION................................... 15
III RETIREMENT...................................................... 16
IV DEATH BENEFITS.................................................. 20
V TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT................... 22
VI DISABILITY...................................................... 25
VII OPTIONAL METHODS OF PAYMENT..................................... 27
VIII CONTRIBUTIONS AND PLAN TRANSFERS................................ 31
IX NON-ALIENABILITY................................................ 32
X LIMITATIONS ON BENEFITS......................................... 33
XI AMENDMENT OF THE PLAN........................................... 35
XII TERMINATION OF THE PLAN......................................... 36
XIII THE TRUST FUND.................................................. 38
XIV ADMINISTRATION.................................................. 39
XV CLAIMS PROCEDURE................................................ 42
XVI MISCELLANEOUS................................................... 44
Appendix A
-i-
EXHIBIT 10.20
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of October 29, 1997, between Ampex
Corporation, a Delaware corporation (the "Corporation") and Edward J. Bramson,
Chairman and Chief Executive of the Corporation (the "Executive").
Preliminary Statement.
A. The Board of Directors of the Corporation has authorized
the Corporation to sell to the Executive up to 150,000 shares of the Class A
Common Stock, par value $0.01 ("Common Stock") of the Corporation, as an
inducement to the Executive to remain as an officer and director of the
Corporation, all on the terms set forth in this Agreement; and
B. The Corporation and the Executive are entering into this
Agreement in order to evidence the terms of sale to the Executive, and set forth
the terms and conditions thereof.
1. Agreement of Sale. The Corporation hereby agrees to sell to
the Executive up to 150,000 shares (the "Shares") of Common Stock, at a price of
$3.125 per share, upon and subject to the terms and conditions set forth
hereinbelow.
2. Purchase Procedure and Payment.
a. Purchase Procedure.
(i) Subject to the conditions set forth in this
Agreement, (1) the Executive may purchase the Shares at any time prior
to October 31, 1997 by the delivery of written notice (the "Purchase
Notice") to the Corporation, and (2) the Purchase Notice shall specify
the number of Shares to be purchased and shall contain the following
representations and warranties of the Executive: (u) the Executive is
acquiring the Shares for his own account and not with a view to, or
present intention of, distribution thereof in violation of the
Securities Act of 1933, as amended, and the rules and regulations
promulgated from time to time thereunder (the "1933 Act") or any
applicable state securities laws and will not sell or otherwise
transfer the Shares unless registered or exempt from registration under
the 1933 Act and such state laws, (v) the Executive is able to bear the
economic risks of his investment in the Shares for an indefinite period
of time, (w) the Executive is familiar with the business, financial or
other condition, assets, liabilities, properties, operations,
management and prospects of the Corporation, (x) the Executive has had
full access to such information
C/M 11115.0000 253953.6
<PAGE>
concerning the Corporation as he has requested and is satisfied that
there is no material information concerning the Corporation of which he
is unaware, (y) the Executive has knowledge, skill and experience in
business, financial and investment matters so as to enable the
Executive to understand and evaluate the merits and risks of an
investment in the Shares and form an investment decision with respect
thereto and (z) acknowledges that a portion of the Shares is subject to
repurchase by the Corporation under certain circumstances as provided
below.
(ii) Upon receipt of the Purchase Notice and of the
payment therefor specified below, the Corporation shall deliver to the
Executive a certificate or certificates representing the Shares being
purchased, at the Corporation's sole cost and expense. Unless
registered under the 1933 Act, such certificate or certificates
representing the Shares sold to the Executive pursuant to this
Agreement shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ACCORDINGLY MAY NOT BE OFFERED, SOLD OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT."
b. Payment. The Executive shall pay for the Shares purchased
pursuant to this Agreement by delivery of (i) cash, or a check in good funds
payable to the Corporation, in an amount equal to twenty percent (20%) of the
purchase price ($93,750), and (ii) a promissory note (the "Note") of the
Executive for the balance, and a related pledge agreement (the "Pledge
Agreement"), in form and substance reasonably satisfactory to counsel to the
Corporation. The Note shall bear interest, payable annually on each October 15
during the term thereof and at maturity, at the Applicable Federal Rate (as
defined in the Internal Revenue Code); shall be due and payable in a single
installment on the fifth anniversary date thereof; shall be secured by a pledge
of all the Shares under the Pledge Agreement; and shall otherwise conform to the
terms specified in the resolutions of the Board of Directors of the Corporation
which authorized the sale.
3. Assignment and Release. The Executive may assign and
contribute the Shares purchased by him to a corporation or other entity owned
and controlled solely by him ("Nominee"), subject to the Pledge Agreement. The
Nominee shall execute and deliver a promissory note in substantially the form of
the Note executed by the Executive, and shall assume in writing all the
Executive's obligations under the Pledge Agreement, all in form and substance
satisfactory to counsel to the Corporation. Upon receipt of such Note and
assumption agreement, duly executed by the Nominee, the Executive shall be
released from all personal obligations under the Note and Pledge Agreement
except for any claims which have accrued to the date of assignment.
C/M 11115.0000 253953.6
2
<PAGE>
4. Registration Rights. The Corporation hereby grants to the
Executive or his Nominee (as the case may be) the right to cause the Corporation
to register the Shares purchased hereunder for sale under the 1993 Act, on terms
comparable to those contained in the Registration Rights Agreement, dated as of
February 10, 1995, between the Corporation and Sherborne Investment Corporation,
as currently in effect.
5. Repurchase Rights. The Corporation shall have the right to
repurchase from the Executive or his Nominee (as the case may be) up to 75,000
Shares purchased by the Executive pursuant to this Agreement, at $3.125 per
share, if the Executive shall voluntarily resign as both an officer and a
director of the Corporation or shall be terminated for Cause (as defined below),
prior to the first anniversary of the date of this Agreement, or to repurchase
up to 37,500 such shares, at $3.125 per share, if the Executive shall so resign
or shall be terminated for Cause on or after the first anniversary of the date
of this Agreement and before the second anniversary of the date of this
Agreement, in either case by delivery to the Executive of written notice of
repurchase within 30 days after the effective date of his resignation or
termination. In the event of any such repurchase, the Corporation shall refund
to the Executive (or his Nominee, as the case may be) the amount of cash paid
for such Shares (including any principal or interest payments on the Note) and
return the Note to the obligor against receipt by the Corporation of the
certificate representing the Shares so repurchased (or an equivalent number of
other shares of Class A Common Stock owned by the Executive or the Nominee) and
a new Note in the appropriate principal amount. The Executive shall take all
actions reasonably required in order to cause his Nominee to comply with the
terms of this paragraph 5. The term "Cause" shall mean conviction of a felony
involving acts injurious to the Corporation.
6. Miscellaneous.
a. This Agreement may not be modified or amended unless
evidenced in writing and signed by the Corporation and the Executive.
b. All notices under this Agreement shall be mailed
(registered or certified) or delivered by hand or facsimile transmission
addressed, if to the Corporation, to it at 500 Broadway, Redwood City,
California 94063, attention, General Counsel, and, if to the Executive, to him
at his office at 590 Madison Avenue, New York, New York 10022, or at such other
address as may be designated in writing by either of them to the other.
c. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
d. This Agreement shall be binding upon and inure to the
benefit of the heirs, successors and assigns of the parties, subject to the
limitations set forth in paragraph 3.
C/M 11115.0000 253953.6
3
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement on
the date first set forth above.
AMPEX CORPORATION
By: /s/Craig L. McKibben
------------------------
Name: Craig L. McKibben
Title: Vice President
By: /s/Edward J. Bramson
------------------------
Name:Edward J. Bramson
C/M 11115.0000 253953.6
4
<PAGE>
PROMISSORY NOTE
$375,000 October 29, 1997
FOR VALUE RECEIVED, THE UNDERSIGNED, EDWARD J. BRAMSON (the
"Borrower"), HEREBY PROMISES TO PAY to the order of AMPEX CORPORATION, a
Delaware corporation ("Payee"), on October 15, 2002, the principal sum of Three
Hundred Seventy Five Thousand Dollars ($375,000), together with interest on the
principal amount hereof from time to time outstanding at the rate of 6.34% per
annum. Accrued interest on this Note shall be payable on each October 15 and on
the date of each payment of the principal hereof until this Note is paid in
full.
The Borrower shall have the right, at any time, to prepay all
or any part of the outstanding principal amount without premium or penalty.
The occurrence of any one of the following shall constitute an
Event of Default hereunder:
(e) The Borrower shall default in the payment of the principal
of or accrued interest on this Note when due and such default shall continue for
a period of three (3) days after notice from the holder of this Note;
(f) The Borrower shall default in the performance of any other
term of this Note and such default shall continue for 30 days after notice from
the holder of this Note; or
(g) The Borrower shall (i) be adjudicated a bankrupt or
insolvent; or file a voluntary petition in bankruptcy; or (ii) any involuntary
petition in bankruptcy shall be filed against the Borrower which shall not have
been discharged within 60 days.
Upon the occurrence of an Event of Default, and at any time
thereafter while such Event of Default is continuing:
(a) the holder of this Note may by written notice to the
Borrower declare all or any part of the unpaid balance of this Note immediately
due and payable, whereupon such unpaid balance or part thereof shall become so
due and payable without presentation, protest or further demand or notice of any
kind, all of which are hereby expressly waived, and the holder of this Note may
proceed to enforce payment of such balance or part thereof in such manner as it
may elect; and
(b) the holder of this Note may proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate means and
may exercise any and all rights afforded a secured creditor under the Uniform
Commercial Code, including without limitation, enforcement of rights under the
Pledge Agreement referred to below.
The Borrower hereby agrees to pay on demand reasonable costs
and expenses, including without limitation reasonable attorneys' fees, incurred
or paid by the holder of this Note in enforcing this Note upon the occurrence of
an Event of Default.
C/M 11115.0000 253953.6
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<PAGE>
The Borrower hereby waives presentment, demand, notice,
protest and other demands and notices in connection with the delivery,
acceptance or enforcement of this Note.
No delay or omission on the part of the holder of this Note in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Note, and a waiver, delay or omission on any one occasion
shall not be construed as a bar to or waiver of any such right on any future
occasion.
This Note is subject to the terms and conditions set forth in
a Stock Purchase Agreement, dated October 29, 1997, between the Borrower and the
Payee, including without limitation provisions with respect to the assignment
and assumption of this Note, and is secured by a pledge with the Payee of
certain Collateral under the terms of a Pledge Agreement, of even date, between
the Borrower and the Payee.
All notices hereunder shall be deemed to have been given when
delivered in person or, if mailed, when actually received by the party to whom
addressed. Such actual receipt shall be presumed if such notice shall be mailed
by registered or certified mail, addressed to any party at its address set forth
below or at any other address notified in writing to the other parties hereto,
and if the sender shall have received back a return receipt.
To the Borrower: 590 Madison Avenue, 21st Floor
New York, NY 10022
To the Payee: 500 Broadway
Redwood City, CA 94063
Attention: Chief Financial Officer
This Note shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Note as of the date first above written.
-----------------------------
Edward J. Bramson
C/M 11115.0000 253953.6
6
<PAGE>
PLEDGE AGREEMENT, dated as of October 29, 1997, between EDWARD
J. BRAMSON, as Pledgor, and AMPEX CORPORATION, a Delaware corporation, as
Pledgee.
The Pledgor is entering into this Pledge Agreement in order to
secure repayment of Pledgor's Promissory Note dated the date hereof (the "Note")
to the Pledgee in a principal amount of $375,000, representing indebtedness
incurred by Pledgor in connection with its purchase of 150,000 shares of the
Class A Common Stock, par value $0.01 per share ("Common Stock") of the Pledgee,
pursuant to a Stock Purchase Agreement, dated of even date herewith (the
"Purchase Agreement"), between the Pledgor, and the Pledgee.
1. Pledge. As collateral security for the due and punctual
payment of the Note, the Pledgor hereby pledges to the Pledgee 150,000 shares of
Common Stock more fully identified in Schedule A hereto (the "Pledged Stock"),
together with the proceeds thereof and, except as set forth in paragraph 2
below, all cash, securities or other property distributed in respect of or in
exchange for the Pledged Stock (collectively, the "Collateral"). Upon delivery
to the Pledgee, the Pledged Stock shall be accompanied by executed stock powers
in blank or other instruments of transfer satisfactory to Pledgee. Upon the
occurrence of an Event of Default, the Pledgee shall have the right to have the
Pledged Stock registered in the name of the Pledgee.
2. Voting Rights; Dividends. Unless and until an Event of
Default under the Note shall have occurred and be continuing, the Pledgor shall
have all voting and consensual rights with respect to the Pledged Stock for any
purpose not inconsistent with the terms of this Pledge Agreement; and the
Pledgor shall be entitled to receive any cash dividends on the Pledged Stock,
but any stock dividends and other distributions of securities or property on or
in exchange for the Pledged Stock shall become part of the Collateral hereunder.
Upon the occurrence and during the continuance of an Event of Default under the
Notes, all such rights shall vest solely in the Pledgee.
3. Remedies upon Default. If an Event of Default under the
Note shall have occurred and be continuing, the Pledgee may exercise all rights
of a secured creditor under the Uniform Commercial Code, including without
limitation the right to sell, at public or private sale, the Collateral. The
Pledgee shall give the Pledgor thirty (30) business days notice of any intention
to make a sale of the Collateral. The proceeds of sale shall be applied first to
the payment of all reasonable costs and expenses incurred by the Pledgee in
collecting the Note and enforcing its rights under this Pledge Agreement,
second, to the repayment of the Note, and third, any balance shall be paid over
to the Pledgor.
4. No Waiver. No failure on the part of the Pledgee to
exercise any right or remedy hereunder shall operate as a waiver thereof, and
all remedies hereunder are cumulative.
5. Termination; Release. This Agreement shall terminate when
the Note has been fully paid, at which time the Pledgee shall reassign and
deliver to the Pledgor such of the Collateral as has not been sold by the
Pledgee pursuant to the terms hereof, such reassignment to be without
representation or recourse except that the Pledgee shall warrant that it has
made no prior sale, assignment, pledge or encumbrance of the Collateral. Upon
repayment of any portion of the principal of the Note (in an amount not less
than $1,000), the Pledgee shall release, reassign and deliver to the Pledgor a
number of shares of the Pledged Stock equal to the amount so repaid divided by
2.5 (the product of $375,000 divided by 150,000 shares).
C/M 11115.0000 253953.6
7
<PAGE>
6. Further Assurances. The Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments and instruments as the Pledgee may reasonably request in connection
with the pledge of Collateral or in order to better assure and confirm the
Pledgee's rights and remedies hereunder.
7. Binding Agreement; Assignment. This Pledge Agreement shall
be binding upon and inure to the benefit of the parties hereto and to all
holders of the Note and their successors and assigns, except that Pledgor shall
not be permitted to further pledge or encumber the Collateral. Any transferee of
any of the shares of Pledged Stock shall take subject to all Pledgor's
obligations under this Pledge Agreement until such shares have been released or
this Pledge Agreement terminated as provided in paragraph 5 above.
8. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
[END OF TEXT]
C/M 11115.0000 253953.6
8
<PAGE>
IN WITNESS WHEREOF the parties have executed this Pledge
Agreement as of the day first above written.
/s/Edward J. Bramson
--------------------
Edward J. Bramson
AMPEX CORPORATION
By: /s/Craig L. McKibben
------------------------
Name: Craig L. McKibben
Title: Vice President
C/M 11115.0000 253953.6
9
<PAGE>
SCHEDULE A
Description of Pledged Stock
150,000 shares of Class A Common Stock, par value $0.01 per share, of Ampex
Corporation registered in the name of Edward J. Bramson (Certificate No. A
6130).
C/M 11115.0000 253953.6
10
EXHIBIT 10.21
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of November 7, 1997, between Ampex
Corporation, a Delaware corporation (the "Corporation") and Edward J. Bramson,
Chairman and Chief Executive of the Corporation (the "Executive").
Preliminary Statement.
A. On November 6, 1997, the Board of Directors of the
Corporation authorized the Corporation to sell to the Executive up to 175,000
shares of the Class A Common Stock, par value $0.01 ("Common Stock") of the
Corporation, as an inducement to the Executive to remain as an officer and
director of the Corporation, all on the terms set forth in this Agreement; and
B. The Corporation and the Executive are entering into this
Agreement in order to evidence the terms of sale to the Executive, and set forth
the terms and conditions thereof.
1. Agreement of Sale. The Corporation hereby agrees to sell to
the Executive up to 175,000 shares (the "Shares") of Common Stock, at a price of
$3.3125 per share, upon and subject to the terms and conditions set forth
hereinbelow.
2. Purchase Procedure and Payment.
a. Purchase Procedure.
(i) Subject to the conditions set forth in this
Agreement, (1) the Executive may purchase the Shares at any time prior
to November 30, 1997 by the delivery of written notice (the "Purchase
Notice") to the Corporation, and (2) the Purchase Notice shall specify
the number of Shares to be purchased and shall contain the following
representations and warranties of the Executive: (u) the Executive is
acquiring the Shares for his own account and not with a view to, or
present intention of, distribution thereof in violation of the
Securities Act of 1933, as amended, and the rules and regulations
promulgated from time to time thereunder (the "1933 Act") or any
applicable state securities laws and will not sell or otherwise
transfer the Shares unless registered or exempt from registration under
the 1933 Act and such state laws, (v) the Executive is able to bear the
economic risks of his investment in the Shares for an indefinite period
of time, (w) the Executive is familiar with the business, financial or
other condition, assets, liabilities, properties, operations,
management and prospects
651770.1
<PAGE>
of the Corporation, (x) the Executive has had full access to such
information concerning the Corporation as he has requested and is
satisfied that there is no material information concerning the
Corporation of which he is unaware, (y) the Executive has knowledge,
skill and experience in business, financial and investment matters so
as to enable the Executive to understand and evaluate the merits and
risks of an investment in the Shares and form an investment decision
with respect thereto and (z) acknowledges that a portion of the Shares
is subject to repurchase by the Corporation under certain circumstances
as provided below.
(ii) Upon receipt of the Purchase Notice and of the
payment therefor specified below, the Corporation shall deliver to the
Executive a certificate or certificates representing the Shares being
purchased, at the Corporation's sole cost and expense. Unless
registered under the 1933 Act, such certificate or certificates
representing the Shares sold to the Executive pursuant to this
Agreement shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ACCORDINGLY MAY NOT BE OFFERED, SOLD OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT."
b. Payment. The Executive shall pay for the Shares purchased
pursuant to this Agreement by delivery of (i) cash, or a check in good funds
payable to the Corporation, in an amount equal to twenty percent (20%) of the
purchase price ($115,938), and (ii) a promissory note (the "Note") of the
Executive for the balance, and a related pledge agreement (the "Pledge
Agreement"), in form and substance reasonably satisfactory to counsel to the
Corporation. The Note shall bear interest, payable annually on each October 15
during the term thereof and at maturity, at the Applicable Federal Rate (as
defined in the Internal Revenue Code); shall be due and payable in a single
installment on the fifth anniversary date thereof; shall be secured by a pledge
of all the Shares under the Pledge Agreement; and shall otherwise conform to the
terms specified in the resolutions of the Board of Directors of the Corporation
which authorized the sale.
3. Assignment and Release. The Executive may assign and
contribute the Shares purchased by him to a corporation or other entity owned
and controlled solely by him ("Nominee"), subject to the Pledge Agreement. The
Nominee shall execute and deliver a promissory note in substantially the form of
the Note executed by the Executive, and shall assume in writing all the
Executive's obligations under the Pledge Agreement, all in form and substance
satisfactory to counsel to the Corporation. Upon receipt of such Note and
assumption agreement, duly executed by the Nominee, the Executive shall be
released from all personal obligations under the Note and Pledge Agreement
except for any claims which have accrued to the date of assignment.
651770.1
2
<PAGE>
4. Registration Rights. The Corporation hereby grants to the
Executive or his Nominee (as the case may be) the right to cause the Corporation
to register the Shares purchased hereunder for sale under the 1993 Act, on terms
comparable to those contained in the Registration Rights Agreement, dated as of
February 10, 1995, between the Corporation and Sherborne Investment Corporation,
as currently in effect.
5. Repurchase Rights. The Corporation shall have the right to
repurchase from the Executive or his Nominee (as the case may be) up to 87,500
Shares purchased by the Executive pursuant to this Agreement, at $3.3125 per
share, if the Executive shall voluntarily resign as both an officer and a
director of the Corporation or shall be terminated for Cause (as defined below),
prior to the first anniversary of the date of this Agreement, or to repurchase
up to 43,750 such shares, at $3.3125 per share, if the Executive shall so resign
or shall be terminated for Cause on or after the first anniversary of the date
of this Agreement and before the second anniversary of the date of this
Agreement, in either case by delivery to the Executive of written notice of
repurchase within 30 days after the effective date of his resignation or
termination. In the event of any such repurchase, the Corporation shall refund
to the Executive (or his Nominee, as the case may be) the amount of cash paid
for such Shares (including any principal or interest payments on the Note) and
return the Note to the obligor against receipt by the Corporation of the
certificate representing the Shares so repurchased (or an equivalent number of
other shares of Class A Common Stock owned by the Executive or the Nominee) and
a new Note in the appropriate principal amount. The Executive shall take all
actions reasonably required in order to cause his Nominee to comply with the
terms of this paragraph 5. The term "Cause" shall mean conviction of a felony
involving acts injurious to the Corporation.
6. Miscellaneous.
a. This Agreement may not be modified or amended unless
evidenced in writing and signed by the Corporation and the Executive.
b. All notices under this Agreement shall be mailed
(registered or certified) or delivered by hand or facsimile transmission
addressed, if to the Corporation, to it at 500 Broadway, Redwood City,
California 94063, attention, General Counsel, and, if to the Executive, to him
at his office at 590 Madison Avenue, New York, New York 10022, or at such other
address as may be designated in writing by either of them to the other.
c. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
d. This Agreement shall be binding upon and inure to the
benefit of the heirs, successors and assigns of the parties, subject to the
limitations set forth in paragraph 3.
651770.1
3
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement on
the date first set forth above.
AMPEX CORPORATION
By: /s/Craig L. McKibben
------------------------
Name: Craig L. McKibben
Title: Vice President
/s/Edward J. Bramson
------------------------
Edward J. Bramson
651770.1
4
<PAGE>
PROMISSORY NOTE
$463,750 November 7, 1997
FOR VALUE RECEIVED, THE UNDERSIGNED, EDWARD J. BRAMSON (the
"Borrower"), HEREBY PROMISES TO PAY to the order of AMPEX CORPORATION, a
Delaware corporation ("Payee"), on October 15, 2002, the principal sum of Four
Hundred Sixty Three Thousand Seven Hundred Fifty Dollars ($463,750), together
with interest on the principal amount hereof from time to time outstanding at
the rate of 6.34% per annum. Accrued interest on this Note shall be payable on
each October 15 and on the date of each payment of the principal hereof until
this Note is paid in full.
The Borrower shall have the right, at any time, to prepay all
or any part of the outstanding principal amount without premium or penalty.
The occurrence of any one of the following shall constitute an
Event of Default hereunder:
(e) The Borrower shall default in the payment of the principal
of or accrued interest on this Note when due and such default shall continue for
a period of three (3) days after notice from the holder of this Note;
(f) The Borrower shall default in the performance of any other
term of this Note and such default shall continue for 30 days after notice from
the holder of this Note; or
(g) The Borrower shall (i) be adjudicated a bankrupt or
insolvent; or file a voluntary petition in bankruptcy; or (ii) any involuntary
petition in bankruptcy shall be filed against the Borrower which shall not have
been discharged within 60 days.
Upon the occurrence of an Event of Default, and at any time
thereafter while such Event of Default is continuing:
(a) the holder of this Note may by written notice to the
Borrower declare all or any part of the unpaid balance of this Note immediately
due and payable, whereupon such unpaid balance or part thereof shall become so
due and payable without presentation, protest or further demand or notice of any
kind, all of which are hereby expressly waived, and the holder of this Note may
proceed to enforce payment of such balance or part thereof in such manner as it
may elect; and
(b) the holder of this Note may proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate means and
may exercise any and all rights afforded a secured creditor under the Uniform
Commercial Code, including without limitation, enforcement of rights under the
Pledge Agreement referred to below.
The Borrower hereby agrees to pay on demand reasonable costs
and expenses, including without limitation reasonable attorneys' fees, incurred
or paid by the holder of this Note in enforcing this Note upon the occurrence of
an Event of Default.
651770.1
5
<PAGE>
The Borrower hereby waives presentment, demand, notice,
protest and other demands and notices in connection with the delivery,
acceptance or enforcement of this Note.
No delay or omission on the part of the holder of this Note in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Note, and a waiver, delay or omission on any one occasion
shall not be construed as a bar to or waiver of any such right on any future
occasion.
This Note is subject to the terms and conditions set forth in
a Stock Purchase Agreement, dated as of November 6, 1997, between the Borrower
and the Payee, including without limitation provisions with respect to the
assignment and assumption of this Note, and is secured by a pledge with the
Payee of certain Collateral under the terms of a Pledge Agreement, of even date,
between the Borrower and the Payee.
All notices hereunder shall be deemed to have been given when
delivered in person or, if mailed, when actually received by the party to whom
addressed. Such actual receipt shall be presumed if such notice shall be mailed
by registered or certified mail, addressed to any party at its address set forth
below or at any other address notified in writing to the other parties hereto,
and if the sender shall have received back a return receipt.
To the Borrower: 590 Madison Avenue, 21st Floor
New York, NY 10022
To the Payee: 500 Broadway
Redwood City, CA 94063
Attention: Chief Financial Officer
This Note shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Note as of the date first above written.
/s/Edward J. Bramson
--------------------
Edward J. Bramson
651770.1
6
<PAGE>
PLEDGE AGREEMENT, dated as of November 7, 1997, between EDWARD J. BRAMSON, as
Pledgor, and AMPEX CORPORATION, a Delaware corporation, as Pledgee.
The Pledgor is entering into this Pledge Agreement in order to
secure repayment of Pledgor's Promissory Note dated the date hereof (the "Note")
to the Pledgee in a principal amount of $463,750, representing indebtedness
incurred by Pledgor in connection with its purchase of 175,000 shares of the
Class A Common Stock, par value $0.01 per share ("Common Stock") of the Pledgee,
pursuant to a Stock Purchase Agreement, dated of even date herewith (the
"Purchase Agreement"), between the Pledgor, and the Pledgee.
1. Pledge. As collateral security for the due and punctual
payment of the Note, the Pledgor hereby pledges to the Pledgee 175,000 shares of
Common Stock more fully identified in Schedule A hereto (the "Pledged Stock"),
together with the proceeds thereof and, except as set forth in paragraph 2
below, all cash, securities or other property distributed in respect of or in
exchange for the Pledged Stock (collectively, the "Collateral"). Upon delivery
to the Pledgee, the Pledged Stock shall be accompanied by executed stock powers
in blank or other instruments of transfer satisfactory to Pledgee. Upon the
occurrence of an Event of Default, the Pledgee shall have the right to have the
Pledged Stock registered in the name of the Pledgee.
2. Voting Rights; Dividends. Unless and until an Event of
Default under the Note shall have occurred and be continuing, the Pledgor shall
have all voting and consensual rights with respect to the Pledged Stock for any
purpose not inconsistent with the terms of this Pledge Agreement; and the
Pledgor shall be entitled to receive any cash dividends on the Pledged Stock,
but any stock dividends and other distributions of securities or property on or
in exchange for the Pledged Stock shall become part of the Collateral hereunder.
Upon the occurrence and during the continuance of an Event of Default under the
Notes, all such rights shall vest solely in the Pledgee.
3. Remedies upon Default. If an Event of Default under the
Note shall have occurred and be continuing, the Pledgee may exercise all rights
of a secured creditor under the Uniform Commercial Code, including without
limitation the right to sell, at public or private sale, the Collateral. The
Pledgee shall give the Pledgor thirty (30) business days notice of any intention
to make a sale of the Collateral. The proceeds of sale shall be applied first to
the payment of all reasonable costs and expenses incurred by the Pledgee in
collecting the Note and enforcing its rights under this Pledge Agreement,
second, to the repayment of the Note, and third, any balance shall be paid over
to the Pledgor.
4. No Waiver. No failure on the part of the Pledgee to
exercise any right or remedy hereunder shall operate as a waiver thereof, and
all remedies hereunder are cumulative.
5. Termination; Release. This Agreement shall terminate when
the Note has been fully paid, at which time the Pledgee shall reassign and
deliver to the Pledgor such of the Collateral as has not been sold by the
Pledgee pursuant to the terms hereof, such reassignment to be without
representation or recourse except that the Pledgee shall warrant that it has
made no prior sale, assignment, pledge or encumbrance of the Collateral. Upon
repayment of any portion of the principal of the Note (in an amount not less
than $1,000), the Pledgee shall release, reassign and deliver to the Pledgor a
number of shares of the Pledged Stock equal to the amount so repaid divided by
2.65 (the product of $463,750 divided by 175,000 shares).
651770.1
7
<PAGE>
6. Further Assurances. The Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments and instruments as the Pledgee may reasonably request in connection
with the pledge of Collateral or in order to better assure and confirm the
Pledgee's rights and remedies hereunder.
7. Binding Agreement; Assignment. This Pledge Agreement shall
be binding upon and inure to the benefit of the parties hereto and to all
holders of the Note and their successors and assigns, except that Pledgor shall
not be permitted to further pledge or encumber the Collateral. Any transferee of
any of the shares of Pledged Stock shall take subject to all Pledgor's
obligations under this Pledge Agreement until such shares have been released or
this Pledge Agreement terminated as provided in paragraph 5 above.
8. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
[END OF TEXT]
651770.1
8
<PAGE>
IN WITNESS WHEREOF the parties have executed this Pledge
Agreement as of the day first above written.
/s/Edward J. Bramson
--------------------
Edward J. Bramson
AMPEX CORPORATION
By: /s/Craig L. McKibben
------------------------
Name: Craig L. McKibben
Title: Vice President
651770.1
9
<PAGE>
SCHEDULE A
Description of Pledged Stock
150,000 shares of Class A Common Stock, par value $0.01 per share, of Ampex
Corporation registered in the name of Edward J. Bramson (Certificate No. A
6131).
651770.1
10
EXHIBIT 10.22
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of February 18, 1998, between Ampex
Corporation, a Delaware corporation (the "Corporation") and Edward J. Bramson,
Chairman and Chief Executive of the Corporation (the "Executive").
Preliminary Statement.
A. On February 17, 1998, the Board of Directors of the
Corporation authorized the Corporation to sell to the Executive up to 75,000
shares of the Class A Common Stock, par value $0.01 ("Common Stock") of the
Corporation, as an inducement to the Executive to remain as an officer and
director of the Corporation, all on the terms set forth in this Agreement; and
B. The Corporation and the Executive are entering into this
Agreement in order to evidence the terms of sale to the Executive, and set forth
the terms and conditions thereof.
1. Agreement of Sale. The Corporation hereby agrees to sell to
the Executive up to 75,000 shares (the "Shares") of Common Stock, at a price of
$2.9375 per share, upon and subject to the terms and conditions set forth
hereinbelow.
2. Purchase Procedure and Payment.
a. Purchase Procedure.
(i) Subject to the conditions set forth in this
Agreement, (1) the Executive may purchase the Shares at any time prior
to February 28, 1998 by the delivery of written notice (the "Purchase
Notice") to the Corporation, and (2) the Purchase Notice shall specify
the number of Shares to be purchased and shall contain the following
representations and warranties of the Executive: (u) the Executive is
acquiring the Shares for his own account and not with a view to, or
present intention of, distribution thereof in violation of the
Securities Act of 1933, as amended, and the rules and regulations
promulgated from time to time thereunder (the "1933 Act") or any
applicable state securities laws and will not sell or otherwise
transfer the Shares unless registered or exempt from registration under
the 1933 Act and such state laws, (v) the Executive is able to bear the
economic risks of his investment in the Shares for an indefinite period
of time, (w) the Executive is familiar with the business, financial or
other condition, assets, liabilities, properties, operations,
management and prospects of the Corporation, (x) the Executive has had
full access to such information concerning
686063.1
<PAGE>
the Corporation as he has requested and is satisfied that there is no
material information concerning the Corporation of which he is unaware,
(y) the Executive has knowledge, skill and experience in business,
financial and investment matters so as to enable the Executive to
understand and evaluate the merits and risks of an investment in the
Shares and form an investment decision with respect thereto and (z)
acknowledges that a portion of the Shares is subject to repurchase by
the Corporation under certain circumstances as provided below.
(ii) Upon receipt of the Purchase Notice and of the
payment therefor specified below, the Corporation shall deliver to the
Executive a certificate or certificates representing the Shares being
purchased, at the Corporation's sole cost and expense. Unless
registered under the 1933 Act, such certificate or certificates
representing the Shares sold to the Executive pursuant to this
Agreement shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ACCORDINGLY MAY NOT BE OFFERED, SOLD OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT."
b. Payment. The Executive shall pay for the Shares purchased
pursuant to this Agreement by delivery of (i) cash, or a check in good funds
payable to the Corporation, in an amount equal to twenty percent (20%) of the
purchase price ($44,062), and (ii) a promissory note (the "Note") of the
Executive for the balance, and a related pledge agreement (the "Pledge
Agreement"), in form and substance reasonably satisfactory to counsel to the
Corporation. The Note shall bear interest, payable annually on each February 15
during the term thereof and at maturity, at the Applicable Federal Rate (as
defined in the Internal Revenue Code); shall be due and payable in a single
installment on the fifth anniversary date thereof; shall be secured by a pledge
of all the Shares under the Pledge Agreement; and shall otherwise conform to the
terms specified in the resolutions of the Board of Directors of the Corporation
which authorized the sale.
3. Assignment and Release. The Executive may assign and
contribute the Shares purchased by him to a corporation or other entity owned
and controlled solely by him ("Nominee"), subject to the Pledge Agreement. The
Nominee shall execute and deliver a promissory note in substantially the form of
the Note executed by the Executive, and shall assume in writing all the
Executive's obligations under the Pledge Agreement, all in form and substance
satisfactory to counsel to the Corporation. Upon receipt of such Note and
assumption agreement, duly executed by the Nominee, the Executive shall be
released from all personal obligations under the Note and Pledge Agreement
except for any claims which have accrued to the date of assignment.
686063.1
2
<PAGE>
4. Registration Rights. The Corporation hereby grants to the
Executive or his Nominee (as the case may be) the right to cause the Corporation
to register the Shares purchased hereunder for sale under the 1993 Act, on terms
comparable to those contained in the Registration Rights Agreement, dated as of
February 10, 1995, between the Corporation and Sherborne Investment Corporation,
as currently in effect.
5. Repurchase Rights. The Corporation shall have the right to
repurchase from the Executive or his Nominee (as the case may be) up to 37,500
Shares purchased by the Executive pursuant to this Agreement, at $2.9375 per
share, if the Executive shall voluntarily resign as both an officer and a
director of the Corporation or shall be terminated for Cause (as defined below),
prior to the first anniversary of the date of this Agreement, or to repurchase
up to 18,750 such shares, at $2.9375 per share, if the Executive shall so resign
or shall be terminated for Cause on or after the first anniversary of the date
of this Agreement and before the second anniversary of the date of this
Agreement, in either case by delivery to the Executive of written notice of
repurchase within 30 days after the effective date of his resignation or
termination. In the event of any such repurchase, the Corporation shall refund
to the Executive (or his Nominee, as the case may be) the amount of cash paid
for such Shares (including any principal or interest payments on the Note) and
return the Note to the obligor against receipt by the Corporation of the
certificate representing the Shares so repurchased (or an equivalent number of
other shares of Class A Common Stock owned by the Executive or the Nominee) and
a new Note in the appropriate principal amount. The Executive shall take all
actions reasonably required in order to cause his Nominee to comply with the
terms of this paragraph 5. The term "Cause" shall mean conviction of a felony
involving acts injurious to the Corporation.
6. Miscellaneous.
a. This Agreement may not be modified or amended unless
evidenced in writing and signed by the Corporation and the Executive.
b. All notices under this Agreement shall be mailed
(registered or certified) or delivered by hand or facsimile transmission
addressed, if to the Corporation, to it at 500 Broadway, Redwood City,
California 94063, attention, General Counsel, and, if to the Executive, to him
at his office at 590 Madison Avenue, New York, New York 10022, or at such other
address as may be designated in writing by either of them to the other.
c. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
d. This Agreement shall be binding upon and inure to the
benefit of the heirs, successors and assigns of the parties, subject to the
limitations set forth in paragraph 3.
686063.1
3
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement on
the date first set forth above.
AMPEX CORPORATION
By: /s/Craig L. McKibben
------------------------
Name: Craig L. McKibben
Title: Vice President
/s/Edward L. Bramson
------------------------
Edward J. Bramson
686063.1
4
<PAGE>
PLEDGE AGREEMENT, dated as of February 18, 1998, between EDWARD J.
BRAMSON, as Pledgor, and AMPEX CORPORATION, a Delaware corporation, as Pledgee.
The Pledgor is entering into this Pledge Agreement in order to
secure repayment of Pledgor's Promissory Note dated the date hereof (the "Note")
to the Pledgee in a principal amount of $176,250, representing indebtedness
incurred by Pledgor in connection with its purchase of 75,000 shares of the
Class A Common Stock, par value $0.01 per share ("Common Stock") of the Pledgee,
pursuant to a Stock Purchase Agreement, dated of even date herewith (the
"Purchase Agreement"), between the Pledgor, and the Pledgee.
7. Pledge. As collateral security for the due and punctual
payment of the Note, the Pledgor hereby pledges to the Pledgee 75,000 shares of
Common Stock more fully identified in Schedule A hereto (the "Pledged Stock"),
together with the proceeds thereof and, except as set forth in paragraph 2
below, all cash, securities or other property distributed in respect of or in
exchange for the Pledged Stock (collectively, the "Collateral"). Upon delivery
to the Pledgee, the Pledged Stock shall be accompanied by executed stock powers
in blank or other instruments of transfer satisfactory to Pledgee. Upon the
occurrence of an Event of Default, the Pledgee shall have the right to have the
Pledged Stock registered in the name of the Pledgee.
8. Voting Rights; Dividends. Unless and until an Event of
Default under the Note shall have occurred and be continuing, the Pledgor shall
have all voting and consensual rights with respect to the Pledged Stock for any
purpose not inconsistent with the terms of this Pledge Agreement; and the
Pledgor shall be entitled to receive any cash dividends on the Pledged Stock,
but any stock dividends and other distributions of securities or property on or
in exchange for the Pledged Stock shall become part of the Collateral hereunder.
Upon the occurrence and during the continuance of an Event of Default under the
Notes, all such rights shall vest solely in the Pledgee.
9. Remedies upon Default. If an Event of Default under the
Note shall have occurred and be continuing, the Pledgee may exercise all rights
of a secured creditor under the Uniform Commercial Code, including without
limitation the right to sell, at public or private sale, the Collateral. The
Pledgee shall give the Pledgor thirty (30) business days notice of any intention
to make a sale of the Collateral. The proceeds of sale shall be applied first to
the payment of all reasonable costs and expenses incurred by the Pledgee in
collecting the Note and enforcing its rights under this Pledge Agreement,
second, to the repayment of the Note, and third, any balance shall be paid over
to the Pledgor.
10. No Waiver. No failure on the part of the Pledgee to
exercise any right or remedy hereunder shall operate as a waiver thereof, and
all remedies hereunder are cumulative.
11. Termination; Release. This Agreement shall terminate when
the Note has been fully paid, at which time the Pledgee shall reassign and
deliver to the Pledgor such of the Collateral as has not been sold by the
Pledgee pursuant to the terms hereof, such reassignment to be without
representation or recourse except that the Pledgee shall warrant that it has
made no prior sale, assignment, pledge or encumbrance of the Collateral. Upon
repayment of any portion of the principal of the Note (in an amount not less
than $1,000), the Pledgee shall release, reassign and deliver to the Pledgor a
number of shares of the Pledged Stock equal to the amount so repaid divided by
2.35 (the product of $176,250 divided by 75,000 shares).
686063.1
<PAGE>
12. Further Assurances. The Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments and instruments as the Pledgee may reasonably request in connection
with the pledge of Collateral or in order to better assure and confirm the
Pledgee's rights and remedies hereunder.
13. Binding Agreement; Assignment. This Pledge Agreement shall
be binding upon and inure to the benefit of the parties hereto and to all
holders of the Note and their successors and assigns, except that Pledgor shall
not be permitted to further pledge or encumber the Collateral. Any transferee of
any of the shares of Pledged Stock shall take subject to all Pledgor's
obligations under this Pledge Agreement until such shares have been released or
this Pledge Agreement terminated as provided in paragraph 5 above.
14. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
IN WITNESS WHEREOF the parties have executed this Pledge
Agreement as of the day first above written.
/s/Edward J. Bramson
--------------------
Edward J. Bramson
AMPEX CORPORATION
By: /s/Craig L. McKibben
------------------------
Name: Craig L. McKibben
Title: Vice President
686063.1
2
<PAGE>
SCHEDULE A
Description of Pledged Stock
75,000 shares of Class A Common Stock, par value $0.01 per share, of Ampex
Corporation registered in the name of Edward J. Bramson (Certificate No. A ).
686063.1
3
<PAGE>
PROMISSORY NOTE
$176,250 February 18, 1998
FOR VALUE RECEIVED, THE UNDERSIGNED, EDWARD J. BRAMSON (the
"Borrower"), HEREBY PROMISES TO PAY to the order of AMPEX CORPORATION, a
Delaware corporation ("Payee"), on February 15, 2003, the principal sum of One
Hundred Seventy Six Thousand Two Hundred Fifty Dollars ($176,250), together with
interest on the principal amount hereof from time to time outstanding at the
rate of 5.69% per annum. Accrued interest on this Note shall be payable on each
February 15 and on the date of each payment of the principal hereof until this
Note is paid in full.
The Borrower shall have the right, at any time, to prepay all
or any part of the outstanding principal amount without premium or penalty.
The occurrence of any one of the following shall constitute an
Event of Default hereunder:
(a) The Borrower shall default in the payment of the principal
of or accrued interest on this Note when due and such default shall continue for
a period of three (3) days after notice from the holder of this Note;
(b) The Borrower shall default in the performance of any other
term of this Note and such default shall continue for 30 days after notice from
the holder of this Note; or
(c) The Borrower shall (i) be adjudicated a bankrupt or
insolvent; or file a voluntary petition in bankruptcy; or (ii) any involuntary
petition in bankruptcy shall be filed against the Borrower which shall not have
been discharged within 60 days.
Upon the occurrence of an Event of Default, and at any time
thereafter while such Event of Default is continuing:
(a) the holder of this Note may by written notice to the
Borrower declare all or any part of the unpaid balance of this Note immediately
due and payable, whereupon such unpaid balance or part thereof shall become so
due and payable without presentation, protest or further demand or notice of any
kind, all of which are hereby expressly waived, and the holder of this Note may
proceed to enforce payment of such balance or part thereof in such manner as it
may elect; and
(b) the holder of this Note may proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate means and
may exercise any and all rights afforded a secured creditor under the Uniform
Commercial Code, including without limitation, enforcement of rights under the
Pledge Agreement referred to below.
The Borrower hereby agrees to pay on demand reasonable costs
and expenses, including without limitation reasonable attorneys' fees, incurred
or paid by the holder of this Note in enforcing this Note upon the occurrence of
an Event of Default.
686063.1
<PAGE>
The Borrower hereby waives presentment, demand, notice,
protest and other demands and notices in connection with the delivery,
acceptance or enforcement of this Note.
No delay or omission on the part of the holder of this Note in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Note, and a waiver, delay or omission on any one occasion
shall not be construed as a bar to or waiver of any such right on any future
occasion.
This Note is subject to the terms and conditions set forth in
a Stock Purchase Agreement, dated as of February 18, 1998, between the Borrower
and the Payee, including without limitation provisions with respect to the
assignment and assumption of this Note, and is secured by a pledge with the
Payee of certain Collateral under the terms of a Pledge Agreement, of even date,
between the Borrower and the Payee.
All notices hereunder shall be deemed to have been given when
delivered in person or, if mailed, when actually received by the party to whom
addressed. Such actual receipt shall be presumed if such notice shall be mailed
by registered or certified mail, addressed to any party at its address set forth
below or at any other address notified in writing to the other parties hereto,
and if the sender shall have received back a return receipt.
To the Borrower: 590 Madison Avenue, 21st Floor
New York, NY 10022
To the Payee: 500 Broadway
Redwood City, CA 94063
Attention: Chief Financial Officer
This Note shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Note as of the date first above written.
/s/Edward J. Bramson
--------------------
Edward J. Bramson
686063.1
2
Exhibit 21.1
AMPEX CORPORATION
LIST OF SUBSIDIARIES
Jurisdiction of
Name Incorporation
Ampex Data Systems Corporation ........................Delaware
Ampex Finance Corporation .............................Delaware
Ampex Holdings Corporation (1).........................Delaware
Ampex International Sales Corporation .................California
Ampex Canada Inc. .....................................Canada
Ampex Cintas Magneticas, S.A. .........................Mexico
Ampex de Colombia, S.A. ...............................Colombia
Ampex de Mexico, S.A. de C.V (2). .....................Mexico
Ampex do Brasil Electronica Ltd. ......................Brazil
Ampex Europa GmbH .....................................Germany
Ampex Great Britain Limited ...........................United Kingdom
Ampex International S.A. ..............................Switzerland
Ampex Italiana SRL (2) ................................Italy
Ampex Japan Ltd........................................Japan
Ampex S.A. (2) ........................................Belgium
Ampex S.A.R.L. ........................................France
Electronica Ampex S.A.C.I. (2) ........................Argentina
(1) Incorporated on January 20, 1998.
(2) Dissolution pending.
679833.5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in (i) the registration
statement of Ampex Corporation on Form S-8 (File No. 33-77664), (ii) the
registration statement of Ampex Corporation on Form S-8 (File No. 33-92640),
(iii) the Post-Effective Amendment No. 1 on Form S-3 to Form S-1 registration
statement of Ampex Corporation (File No. 33-91312) and (iv) the registration
statement of Ampex Corporation on Form S-3 (File No. 333-5115), of our reports
dated February 20, 1998 on our audits of the consolidated financial statements
and financial statement schedules of Ampex Corporation as of December 31, 1997
and 1996 and for the years ended December 31, 1997, 1996 and 1995, which reports
are included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
San Francisco, California
March ___, 1998
679833.5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 24,076
<SECURITIES> 17,685
<RECEIVABLES> 14,730
<ALLOWANCES> (1,484)
<INVENTORY> 16,380
<CURRENT-ASSETS> 72,734
<PP&E> 39,469
<DEPRECIATION> 30,577
<TOTAL-ASSETS> 81,671
<CURRENT-LIABILITIES> 28,127
<BONDS> 0
69,970
0
<COMMON> 459
<OTHER-SE> (90,474)
<TOTAL-LIABILITY-AND-EQUITY> 81,671
<SALES> 80,311
<TOTAL-REVENUES> 80,311
<CGS> 41,140
<TOTAL-COSTS> 81,056 <F1>
<OTHER-EXPENSES> (14,150) <F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86
<INCOME-PRETAX> 16,310
<INCOME-TAX> 1,507
<INCOME-CONTINUING> 14,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,803
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
<FN>
<F1> INCLUDES S&A AND RD&E OF 24,452 AND15,464 RESPECTIVELY
<F2> INCLUDES ROYALTY INCOME OF 12,550 AND RESTRUCTURING CREDITS OF 1,659
</FN>
</TABLE>
