UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
- --------------------------------------------------------------------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For the year ended December 31, 1999 Commission file Number 000-21750
PRIMESOURCE CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1430030
- ------------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4350 Haddonfield Road, Suite 222, Pennsauken, N.J. 08109
- -------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(856)488-4888
-------------
Registrant's Telephone Number
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
Common Stock $.01 par value per share Nasdaq
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. ( X )
As of March 27, 2000 the aggregate market value of the voting stock held by
nonaffiliates was approximately $36.4 million.
As of March 27, 2000 there were 6,486,212 shares of common stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934 (Item 10- Directors Only, and Items 11, 12 and
13 of Part III). The index of exhibits is located on page 33 of this document.
<PAGE>
PART I.
Certain statements contained in this annual report are forward-looking. Such
forward-looking statements are subject to a number of factors, including
material risks, uncertainties and contingencies, which could cause actual
results to differ materially from those set forth in the forward-looking
statements. These risks and uncertainties include, but are not limited to, the
Company's ability to successfully implement its business strategies including
successfully integrating business acquisitions, the effect of general economic
conditions and technological, competitive and other changes in the industry, the
impact of year 2000 issues and other risks and uncertainties as set forth in the
Company's periodic reports and other filings with the Securities and Exchange
Commission.
ITEM I. BUSINESS
PrimeSource Corporation (the "Company") is a major national distributor serving
the printing and publishing industry. For approximately 135 years, the Company
or its unincorporated predecessor has been servicing this industry. The Company,
which was incorporated under the laws of the Commonwealth of Pennsylvania in
1954, was acquired as a wholly-owned subsidiary of Tasty Baking Company ("TBC"),
Philadelphia, Pennsylvania in 1965. On August 1, 1993, TBC spun-off 100% of the
ownership of the Company in a dividend distribution of the Company common stock
to the shareholders of TBC. As a result, the Company became an independent
publicly-owned company whose shares are traded on the Nasdaq National Market.
Since becoming a public company, the Company has had three significant business
combinations. In 1994, Momentum Corporation with sales of approximately $165
million merged into the Company. In 1996, the Company acquired five of VGC
Corporation's branch operations with sales of approximately $55 million. In
1998, the Company acquired the graphic imaging group of Bell Industries, Inc.
with sales of approximately $135 million. With these acquisitions, the Company
has a significant presence in all of the major regions in the United States. The
Company believes there will be a continuing consolidation of distributors in the
industry and the Company's business strategy will continue to include pursuing
such acquisitions which will either expand the Company's presence in key markets
and/or offer new products and services to the printing and publishing industry.
The Company is headquartered in Pennsauken, New Jersey. The operations are
divided into three geographic regions. The Company maintains a decentralized
management structure that allows the operating regions broad discretion in the
conduct of their respective businesses, including responsibility for management
of their suppliers, customers and employees. Management is evaluated against
their financial and non-financial goals which are established on an annual
basis. The Company emphasizes sales growth as well as return on sales and net
assets. The Company believes it must strive to maximize its long-term return on
capital employed by quantifying this objective and applying it at the operating
level. Management believes that the concept of fostering and perpetuating the
entrepreneurial drive of operating management will continue to be a key factor
in the Company's future success.
The Company presently represents over 500 suppliers, provides more than 200,000
line items and has a customer base in excess of 30,000. No customer accounted
for more than 5% of the Company's net sales in 1999.
The Company offers consumables, such as films, plates, blankets, papers and
chemistries; scanners, servers, work stations, image setters, computer-to-plate
devices and other digital electronic equipment and the applicable software; and
press, bindery and other finishing machinery. The Company is the U.S.
distributor for Xeikon, which manufacturers on-demand and variable data digital
color printing systems and supplies. With the product range and in-house
expertise, the Company feels it is a premiere provider of printing solutions.
The printing industry has transitioned and continues to move through a period of
rapid technological change. Accordingly, the Company's product mix continues to
evolve, however, it remains positioned through both product and process
knowledge to fully service this market.
In addition, there has been and continues to be a consolidation of the customer
base. Many printing and imaging customers want a single source for design,
pre-press preparation, and printing. Consolidation eliminates duplicate overhead
costs and creates larger entities capable of supporting more sophisticated
management techniques, from strategic planning through actual production.
Management expects to continue to see this consolidation of customers into
larger operations offering more services to their customers.
<PAGE>
While the Company sells primarily the same products as its competitors,
generally at similar prices, the Company attempts to differentiate itself by
providing a value-added approach with products and training and technical
support that can make its customers more efficient and effective. In addition,
the Company's broad geographic presence provides an advantage in servicing
regional and national customers.
There are over 300 independent dealers in the United States competing in this
industry with no dealer accounting for more than 15% of the total industry
sales. The Company believes it is one of the largest dealers in the United
States in terms of annual sales and covers a broader range of geographical
markets in the United States than any of its competitors. The Company has
minimal foreign sales or income.
The Company owns several trademarks and tradenames. To the extent trademarks,
tradenames, or patents are significant to the Company's business, they are owned
by the manufacturers the Company represents.
The Company has minimal backlog. The nature of its business is such that it
maintains substantial inventories in order to supply its customers immediately
upon receipt of an order. Approximately 30% of the Company's inventories are
consigned at various customer locations. Usage of consigned inventories is
monitored at least monthly through a physical inventory taken by Company
personnel.
Company management does not believe that compliance with federal, state or local
laws relating to the protection of the environment will have a material adverse
effect on the Company's consolidated financial position or results of
operations.
The Company employed 730 employees at December 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
BUSINESS EXPERIENCE POSITION HELD
NAME AGE LAST FIVE YEARS SINCE
- ------------------------ ------ ---------------------------- ----------------------
<S> <C> <C>
James F. Mullan 60 President and Chief Executive 1991-Present
President and Officer of Registrant
Chief Executive Officer
John H. Goddard, Jr. 52 Executive Vice President September, 1994-
Executive Vice President of Registrant Present
William A. DeMarco 54 Vice President and Chief Financial Officer September, 1994-
Vice President and of Registrant Present
Chief Financial Officer
Barry C. Maulding 54 Vice President, General Counsel September, 1994-
Vice President, and Corporate Secretary Present
General Counsel and of Registrant
Corporate Secretary
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
The locations and primary use of the physical properties of the Company are as
follows:
<TABLE>
<CAPTION>
Approximate
Square
Location Footage
- ---------------------------- -----------
Corporate Headquarters
<S> <C>
Pennsauken, NJ 8,500
Distribution/Sales Facilities
Atlanta, GA (Norcross) 23,200
Birmingham, AL 37,000
Boston, MA (Hingham) 13,800
Chicago, IL (Itasca) 49,600
Cincinnati, OH 35,000
Dallas, TX 17,500
Denver, CO 10,000
Des Moines, IA (Ankeny) 14,000
Houston, TX (Bellaire) 10,300
Jackson, MS (Richland) 1,500
Kalamazoo, MI 14,700
Kansas City, KS 16,800
Lancaster, PA (Lititz) 14,300
Las Vegas, NV 6,200
Los Angeles, CA 44,900
Miami, FL (Miramar) 14,700
Milwaukee, WI (New Berlin) 23,300
Minneapolis, MN (Roseville) 76,800
Mobile, AL 8,000
Nashville, TN 16,000
New Orleans, LA (Harahan) 8,800
Omaha, NE 15,000
Orlando, FL 14,400
Pennsauken, NJ 19,500
Phoenix, AZ 11,500
Pittsburgh, PA 15,800
Portland, OR (Wilsonville) 8,800
Sacramento, CA 7,600
St. Louis, MO 22,000
San Diego, CA 10,600
San Jose, CA 21,300
Seattle, WA (Auburn) 8,300
</TABLE>
All of the properties are held under operating leases, except for the
Birmingham, Des Moines, St. Louis and Seattle facilities which are owned.
Management believes that the Company's properties are generally well maintained
and adequate for current operations and foreseeable expansion. The inability of
the Company to renew any short-term real property lease would not have a
material effect on the Company's results of operations.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time involved in litigation incidental to the
conduct of its business. Management believes that none of the litigation in
which the Company is currently involved would, individually or in the aggregate,
have a material effect on the Company's consolidated financial position or
results of operations and cash flows when resolved in a future period.
The Company, along with many other parties, is a defendant in a contribution
action to determine the liability for the state ordered clean up of a landfill.
The Company believes its insurance will cover any costs incurred in this matter.
The Company is also, in general, subject to possible loss contingencies pursuant
to federal or state environmental laws and regulations. Although these
contingencies could result in future expenses or judgments, such expenses or
judgments are not expected to have a material effect on the Company's
consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the year.
<PAGE>
PART II.
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the Nasdaq National Market under the symbol
PSRC.
The following quarterly stock price and dividend information is provided for
1999 and 1998.
<TABLE>
<CAPTION>
Stock Price
---------------------------- Cash Dividends
High Low Per Share
- --------------------------------------------------------------------------------
1999
- ----
<S> <C> <C> <C>
First Quarter $ 7.06 $ 5.25 $ .045
Second Quarter 8.12 4.84 .045
Third Quarter 8.00 4.50 .045
Fourth Quarter 6.50 4.00 .045
1998
- ----
First Quarter $ 11.50 $ 9.37 $ .045
Second Quarter 11.50 8.25 .045
Third Quarter 9.75 7.87 .045
Fourth Quarter 8.06 6.25 .045
</TABLE>
In the first quarter of 2000, the Company increased the quarterly cash dividend
to $.0475 per share. The payment of future cash dividends will depend on the
level and growth of the Company's earnings and the Company's needs for cash.
There were approximately 3,100 shareholders of record as of December 31, 1999.
For purposes of computing the aggregate market value of the voting stock of the
Company held by nonaffiliates, as shown on the cover page of this report, it has
assumed that all the outstanding shares were held by nonaffiliates except for
the shares held by directors and officers of the Company. However, this should
not be deemed to constitute an admission that all directors and officers of the
Company are, in fact, affiliates of the Company, or that there are not other
persons who may be deemed to be affiliates of the Company. Further information
concerning shareholdings of officers, directors and principal shareholders is
included in the Company's definitive proxy statement filed with the Securities
and Exchange Commission by April 30, 2000.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
This information should be read in conjunction with the Company's consolidated
financial statements and notes to such statements included herein.
<TABLE>
<CAPTION>
Years Ended December 31,
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(in thousands, except per share amounts) 1999 1998(1) 1997(2) 1996 1995 (3)
- --------------------------------------------------------------------------------------------------------
Statement of Income Data
<S> <C> <C> <C> <C> <C>
Net sales .............................. $ 545,273 $ 453,047 $ 414,867 $ 366,657 $ 357,077
Cost of sales .......................... 452,396 369,844 343,116 301,428 293,790
- --------------------------------------------------------------------------------------------------------
Gross profit ........................... 92,877 83,203 71,751 65,229 63,287
Operating expenses ..................... 78,699 72,820 63,257 57,033 58,615
- --------------------------------------------------------------------------------------------------------
Income from operations ................. 14,178 10,383 8,494 8,196 4,672
Interest expense ....................... (5,484) (3,605) (2,913) (1,915) (2,235)
Gain on sale of capital lease .......... 3,658
Loss on business divestiture ........... (401)
Other income-net ....................... 78 297 515 421 441
- --------------------------------------------------------------------------------------------------------
Income before provision for income taxes 8,772 7,075 9,353 6,702 2,878
Provision for income taxes ............. 3,663 2,975 3,862 2,788 1,232
- --------------------------------------------------------------------------------------------------------
Net income ............................. $ 5,109 $ 4,100 $ 5,491 $ 3,914 $ 1,646
========================================================================================================
Per Share Data
Net income per basic share ............. $ .78 $ .63 $ .84 $ .60 $ .25
Net income per diluted share ........... .78 .62 .83 .60 .25
Cash dividends per share ............... .18 .18 .18 .18 .38
========================================================================================================
Balance Sheet Data
Working capital ........................ $ 94,236 $ 100,602 $ 69,151 $ 67,040 $ 65,168
Total assets ........................... 196,807 190,697 138,491 134,175 119,804
Total long-term obligations ............ 62,500 75,205 32,788 36,250 32,202
Shareholders' equity ................... 59,545 55,611 52,548 48,183 45,572
========================================================================================================
<FN>
(1) Income for 1998, includes a one-time restructure and other expense of
$1,050,000 ($634,000 after tax) relating to the reorganization of the
Company into three regions and the integration of an acquisition.
(2) Income for 1997, includes a charge to cost of sales for $2,300,000
($1,381,000 after tax) for the write-down of electronic equipment
inventory, a $3,658,000 ($2,183,000 after tax) gain on the sale of a
capital lease and a $401,000 ($241,000 after tax) loss on a business
divestiture.
(3) Income for 1995, includes a one-time restructure expense of $1,315,000
($794,000 after tax) relating to the consolidation of five distribution
centers, the realignment of two others, and the centralization of certain
financial and information services.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The following table sets forth for the years indicated certain items from the
accompanying Consolidated Statements of Income expressed as a percentage of net
sales.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales .................................. 100.0% 100.0% 100.0%
Cost of sales .............................. 83.0 81.6 82.7
- --------------------------------------------------------------------------
Gross profit ............................... 17.0 18.4 17.3
Selling, general and administrative expenses 13.6 15.2 14.5
Depreciation and amortization .............. .6 .6 .6
Provision for doubtful accounts ............ .2 .1 .2
Restructure and other ...................... .2
- --------------------------------------------------------------------------
Income from operations ..................... 2.6 2.3 2.0
Interest expense ........................... (1.0) (.8) (.7)
Gain on sale of capital lease .............. .9
Loss on business divestiture ............... (.1)
Other income-net ........................... .1 .1
- --------------------------------------------------------------------------
Income before provision for income taxes ... 1.6 1.6 2.2
Provision for income taxes ................. .7 .7 .9
- --------------------------------------------------------------------------
Net income ................................. .9% .9% 1.3%
==========================================================================
</TABLE>
COMPARISON OF 1999 TO 1998
Net income for 1999 was $5,109,000, or $.78 per diluted share, compared to
$4,100,000, or $.62 per diluted share, in 1998. Excluding a one-time pre-tax
restructure and other charge of $1.05 million in 1998, the net income in 1998
was $4,734,000, or $.71 per diluted share.
This increase in net income for 1999 was the result of improved income from
operations. During the year, the Company was able to successfully integrate the
acquisition of Bell Industries' Graphic Imaging Group ("Bell acquisition") and
complete the reorganization of the Company into three regions. Excluding the
1998 one-time charge, income from operations increased 24% in 1999 from
$11,433,000 in 1998 to $14,178,000 in 1999, the highest level in the Company's
history. Including the one-time charge, 1998 income from operations was
$10,383,000.
Sales for 1999 were $545,273,000, a 20% increase over 1998 sales of
$453,047,000. This sales increase is primarily the result of the Bell
acquisition, increased national account sales and over a 200% increase in
digital press sales.
Gross profit as a percent of sales was 17% in 1999 compared to 18.4% in 1998.
This decrease is primarily the result of changes in product and customer mix and
lower manufacturer rebates.
Selling, general and administrative expenses as a percent of sales decreased
from 15.2% in 1998 to 13.6% in 1999. In 1998, the Company incurred a restructure
and other charge of $1.05 million related to reorganizing the Company into three
regions and integrating the Bell operations. This percentage decrease in
selling, general and administrative expenses reflects the successful
implementation of this reorganization and integration program.
Depreciation and amortization expense increased from $2,507,000 in 1998 to
$3,096,000 in 1999. This increase is due to additional goodwill amortization as
a result of the Bell acquisition.
<PAGE>
The provision for doubtful accounts increased from $440,000 in 1998 to
$1,186,000 in 1999. This increase is due to increased sales in 1999, plus,
losses that occurred in transitioning accounts acquired in the Bell acquisition.
Interest expense increased from $3,605,000 in 1998 to $5,484,000 in 1999. This
increase is attributable to the debt associated with the Bell acquisition.
The effective income tax rate remained relatively constant between the two years
at 41.8% in 1999 and 42% in 1998. The difference between the effective tax rates
and the federal statutory rate of 34% is primarily attributable to the effect of
state income taxes and non-deductible expenses.
For the year 2000, the Company expects to continue to see strong sales growth in
national accounts and digital press sales. The Company continues to review the
substantial technological changes occurring, and the Company's existing
operating structure, to determine what changes can be made to better serve
customers, improve efficiencies and/or reduce costs. In addition, assuming the
printing industry and the economy remain stable, the Company expects to also
lower its bad debt expense.
COMPARISON OF 1998 TO 1997
Net income for 1998 was $4,100,000, or $.62 per diluted share compared to
$5,491,000, or $.83 per diluted share in 1997. Included in the 1998 income is a
restructure and other charge of $1.05 million for aligning the Company into
three regions and integrating the Bell acquisition. Included in the 1997 income
is a $3.7 million gain on the sale of a capital lease, a $2.3 million electronic
equipment inventory write-down and a $0.4 million loss on a business
divestiture. Excluding these one-time items for both years, net income for 1998
was $4,734,000 or $.71 per diluted share compared to $4,930,000 or $.74 per
diluted share for 1997.
Sales in 1998 were $453,047,000 compared to $414,867,000 in 1997, an increase of
9%. This sales increase is primarily the result of the Bell acquisition.
Excluding the effect of the Bell acquisition, sales of digital presses had
strong growth and consumable sales increased slightly. Sales of electronic
prepress systems decreased, which tended to offset most of the overall internal
sales growth.
Gross profit as a percent of sales was 18.4% in 1998 compared to 17.8% in 1997,
before including the effect of the $2.3 million electronic equipment inventory
write-down in 1997. The improvement in 1998 is primarily the result of stronger
margins from systems sales, increased digital press sales with higher margins
and higher margins from the Bell business. Including the inventory write-down,
the gross profit percentage in 1997 was 17.3%.
Selling, general and administrative expenses as a percent of sales increased
from 14.5% in 1997 to 15.2% in 1998. This increase is primarily due to
additional personnel costs associated with electronic prepress sales. In
addition, the benefits of integrating the Bell acquisition did not occur until
1999.
In the fourth quarter of 1998, the Company incurred a restructure and other
charge of $1.05 million related to reorganizing the Company into three regions
and integrating the Bell operations. The costs incurred were for employee
severances and closure of duplicate facilities. The Company anticipates the
savings from this reorganization will bring the percentage of selling, general
and administrative expenses to sales to levels consistent with or lower than
preceding years.
In 1998, the provision for doubtful accounts decreased to $440,000 from $694,000
in 1997. The Company has benefited from effective credit policies and the strong
economy.
Interest expense increased from $2,913,000 in 1997 to $3,605,000 in 1998. This
increase is attributable to the debt associated with the Bell acquisition.
In 1997, the Company sold a capital lease for a gain of $3.7 million and
disposed of a business operation for a loss of $0.4 million. In 1998, there were
no similar disposals.
The effective income tax rate increased from 41.3% in 1997 to 42% in 1998. The
higher rate in 1998 is primarily due to non-deductible expenses being a higher
percent of income in 1998 compared to 1997. The difference between the effective
tax rates and the federal statutory rate of 34% for both years is primarily
attributable to the effect of state income taxes and non-deductible expenses.
Financial Condition and Liquidity
Cash provided by operating activities was $10,196,000 in 1999 and cash used in
operating activities was $2,302,000 and $1,795,000 in 1998 and 1997,
respectively. The improvement between 1999 and 1998 is primarily attributable to
changes in working capital levels. Changes in assets and liabilities resulted in
a $1.4 million inflow of cash in 1999 compared to an outflow of $10 million in
1998. Excluding the impact of changes in assets and liabilities, the cash flow
<PAGE>
was $8.8 million in 1999, a 15% increase over the $7.7 million in 1998. In 1997,
the cash flow before the effect of changes in assets and liabilities was $4.9
million.
Cash flow used by investing activities was $487,000 and $45,618,000 in 1999 and
1998, compared to cash provided by investing activities of $3,650,000 in 1997.
The large outflow in 1998 was primarily due to the Bell acquisition and the
inflow in 1997 was primarily the result of the proceeds from the sale of a
capital lease. In the three years, property and equipment expenditures ranged
between $1.5 and $1.9 million. The Company had no material capital expenditure
commitments at December 31, 1999 and expects capital expenditures for 2000 to be
approximately $2 million.
Cash flows from financing activities were $9,709,000 used in 1999, $47,920,000
provided in 1998, and $1,855,000 used in 1997. The cash used in 1999 was
primarily the result of reducing debt with cash provided from operations. The
cash provided in 1998 was primarily from additional debt and was used for
acquisitions. The cash used in 1997 was primarily for the repayment of debt and
was primarily provided from the proceeds from the sale of the capital lease and
the business divestiture.
The Company's primary source of debt financing is a revolving credit agreement
with a commitment of $75 million and $62.5 million outstanding at December 31,
1999. In addition, the Company has $7.5 million available under short-term lines
with $1.0 million outstanding at December 31, 1999. The Company believes these
sources of borrowing, combined with cash from operations, is sufficient to
support the current capital requirements of the Company.
Year 2000 Issues
The Company's business system required program modifications prior to the year
2000 for what is commonly referred to as the "Year 2000 Issue." Similar to other
systems, the Company's system had to be modified to change the date for years
from an abbreviated two-digit number to a four-digit number. Without this
modification, the abbreviated two-digit number would have caused many of the
functions within the system to operate improperly or malfunction in the year
2000.
The above modification was part of an extensive system enhancement. The cost for
the complete enhancement was approximately $300,000. No other significant
information system additions have been postponed as a result of this project.
To date, the Company has not identified any Year 2000 problems. The Company has
not incurred any problems with its business system. There have been no
significant problems with suppliers or customers, or services to Company
facilities such as telecommunication or power.
The Company realizes problems could arise during the year, and will continually
be reviewing its system during the year to identify potential problems. With
regard to future readiness of suppliers, customers and service providers, based
on the lack of problems incurred in January, 2000, the Company does not plan on
any additional testing of their readiness throughout the remainder of the year
unless problems start to evolve or such companies indicate they have concerns
about their systems.
The Company has not been notified by any current or former customers of any Year
2000 problems with equipment sold to them by the Company. If claims related to
this equipment were to occur, the Company believes it would have several
defenses to such claims, but it is presently unable to estimate what the
aggregate cost of defending and/or settling any such claims would be.
New Accounting Standards
In 1999, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 137, "Deferral of the Effective Date of SFAS
133" which defers the effective date of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", to all fiscal quarters of all fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes new procedures for
accounting for derivatives and hedging activities and supersedes and amends a
number of existing standards. The Company currently uses interest rate swap
agreements ("swaps") to effectively fix the interest rate on a portion of the
Company's floating rate debt. Under current accounting standards, no gain or
loss is recognized on changes in the fair value of these swaps. Under this
statement, gains or losses will be recognized based on changes in the fair value
of the swaps which generally occur as a result of changes in interest rates. The
Company is currently evaluating the financial impact of adoption of the
Statement. The adoption is not expected to have a material effect on the
Company's consolidated results of operations, financial position or cash flows.
<PAGE>
Market Sensitive Instruments and Risk Management
The Company utilizes derivative financial instruments to reduce interest rate
risks. The Company does not hold or issue financial instruments for trading or
speculative purposes. The counterparty is a major commercial bank. At December
31, 1999, the Company had one derivative financial instrument, an interest rate
swap agreement with a notional amount of $17 million. This swap agreement
effectively fixes the interest rate on a like amount of the Company's floating
rate debt at 6.16% plus the Company's LIBOR spread in effect at the time. The
effective rate was 7.86% at December 31, 1999. The swap expires on November 6,
2001. A 100 basis point downward parallel shift in the yield curve would not
have a material effect on the Company's results of operations, liquidity or
financial condition.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PRIMESOURCE CORPORATION
Consolidated Statements of Income
Years Ended December 31,
-----------------------------------
(Thousands of dollars, except per share amounts) 1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales ................................... $ 545,273 $ 453,047 $ 414,867
Cost of sales ............................... 452,396 369,844 343,116
- -----------------------------------------------------------------------------------
Gross profit ................................ 92,877 83,203 71,751
Selling, general, and administrative expenses 74,417 68,823 60,151
Depreciation and amortization ............... 3,096 2,507 2,412
Provision for doubtful accounts ............. 1,186 440 694
Restructure and other ....................... 1,050
- -----------------------------------------------------------------------------------
Income from operations ...................... 14,178 10,383 8,494
Interest expense ............................ (5,484) (3,605) (2,913)
Gain on sale of capital lease ............... 3,658
Loss on business divestiture ................ (401)
Other income-net ............................ 78 297 515
- -----------------------------------------------------------------------------------
Income before provision for income taxes .... 8,772 7,075 9,353
Provision for income taxes .................. 3,663 2,975 3,862
- -----------------------------------------------------------------------------------
Net income .................................. $ 5,109 $ 4,100 $ 5,491
===================================================================================
Net income per share
Basic ....................................... $ .78 $ .63 $ .84
Diluted ..................................... .78 .62 .83
===================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMESOURCE CORPORATION
Consolidated Balance Sheets
December 31,
--------------------
(Thousands of dollars, except share information) 1999 1998
- -------------------------------------------------------------------------------------------
Assets
Current Assets
<S> <C> <C>
Trade receivables, less allowances of $3,127 and $3,419, respectively $ 83,012 $ 73,602
Other receivables ................................................... 10,683 9,973
Inventories ......................................................... 68,379 69,111
Deferred income taxes ............................................... 3,228 2,852
Other ............................................................... 843 962
- -------------------------------------------------------------------------------------------
Total Current Assets ................................................ 166,145 156,500
Property and equipment, net ......................................... 12,063 12,773
Excess of cost over net assets of businesses acquired,
net of accumulated amortization of $3,043 and $1,958, respectively 16,427 17,526
Deferred income taxes ............................................... 977 1,567
Long-term receivables ............................................... 585 697
Other assets ........................................................ 610 1,634
- -------------------------------------------------------------------------------------------
Total Assets ........................................................ $196,807 $190,697
===========================================================================================
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term obligations ............................ $ 104 $ 1,128
Notes payable ....................................................... 953 3,500
Accounts payable .................................................... 45,766 33,745
Book overdraft ...................................................... 16,937 9,195
Accrued payroll and benefits ........................................ 4,241 3,745
Other accrued liabilities ........................................... 3,908 4,585
- -------------------------------------------------------------------------------------------
Total Current Liabilities ........................................... 71,909 55,898
Long-term obligations, net of current portion ....................... 62,500 75,205
Accrued pension and other liabilities ............................... 1,068 2,070
Postretirement benefits other than pension .......................... 1,785 1,913
- -------------------------------------------------------------------------------------------
Total Liabilities ................................................... 137,262 135,086
- -------------------------------------------------------------------------------------------
Commitments and Contingencies
Shareholders' Equity
Common stock, $.01 par value, 24,000,000 shares authorized
6,536,212 and 6,536,018 issued and outstanding, respectively ........ 65 65
Additional paid-in capital .......................................... 25,725 25,724
Retained earnings ................................................... 33,755 29,822
- -------------------------------------------------------------------------------------------
Total Shareholders' Equity .......................................... 59,545 55,611
- -------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity .......................... $196,807 $190,697
===========================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMESOURCE CORPORATION
Consolidated Statements of Cash Flows
Years Ended December 31,
------------------------------
(Thousands of dollars) 1999 1998 1997
- ----------------------------------------------------------------------------------------------
Operating Activities
<S> <C> <C> <C>
Net income ............................................. $ 5,109 $ 4,100 $ 5,491
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ........................................ 2,003 1,957 1,980
Amortization ........................................ 1,093 550 432
Provision for doubtful accounts ..................... 1,186 440 694
Pension benefit ..................................... (959) (218) (190)
Gain on sale of capital lease ....................... (3,658)
Loss on business divestiture ........................ 401
Restructure and other expense ....................... 996
Other ............................................... 406 (112) (201)
Changes in assets and liabilities, net of
effects from business combinations/divestitures:
Receivables ......................................... (11,306) (1,075) (574)
Inventories ......................................... 732 2,388 (7,754)
Other current assets ................................ 119 278 (484)
Income taxes ........................................ 843 (668) 100
Accounts payable and other accrued liabilities ...... 11,303 (10,803) 2,255
Pension and other postretirement benefits ........... (333) (135) (287)
- ----------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities .... 10,196 (2,302) (1,795)
Investing Activities
Proceeds from sales of property and equipment .......... 67 163 565
Proceeds from sale of capital lease .................... 3,151
Purchase of property and equipment ..................... (1,452) (1,743) (1,918)
Proceeds from business divestitures .................... 2,388
Payments for business acquisitions, net of cash acquired (100) (43,946)
Decrease in long-term receivables ...................... 112 127 71
Decrease (increase) in other assets ................... 1,017 (185) (254)
Other, net ............................................. (131) (34) (353)
- ----------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities .... (487) (45,618) 3,650
Financing Activities
Net increase (decrease) in short-term borrowings ....... (2,547) 3,500
Proceeds from long-term obligations .................... 92,600 144,300 74,600
Repayment of long-term obligations ..................... (106,329) (102,429) (77,048)
Increase in book overdraft ............................. 7,742 3,586 1,762
Dividends paid ......................................... (1,176) (1,175) (1,172)
Purchase of common stock ............................... (106)
Proceeds from exercise of stock options ................ 1 138 109
- ----------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities .... (9,709) 47,920 (1,855)
- ----------------------------------------------------------------------------------------------
Net change in cash ..................................... -- -- --
Cash at beginning of year .............................. -- -- --
- ----------------------------------------------------------------------------------------------
Cash at end of year .................................... $ -- $ -- $ --
==============================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMESOURCE CORPORATION
Consolidated Statements of Shareholders' Equity
Common Stock Unamortized
($.01 Par Value) Additional Restricted
(Thousands of dollars, ------------------------ Paid-in Retained Stock
except share information) Shares Amount Capital Earnings Awards Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 ........... 6,514,795 $ 65 $ 25,533 $ 22,628 $ (43) $ 48,183
Net income ......................... 5,491 5,491
Cash dividends paid to
shareholders ($.18 per share) ... (1,172) (1,172)
Stock options exercised and related
tax benefit, net of shares
received as payment upon exercise 15,837 109 109
Amortization of restricted
stock awards .................... 43 43
Purchase and retirement
of common stock ................. (14,012) (56) (50) (106)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 ......... 6,516,620 65 25,586 26,897 -- 52,548
Net income ......................... 4,100 4,100
Cash dividends paid to
shareholders ($.18 per share) ... (1,175) (1,175)
Stock options exercised and related
tax benefit, net of shares
received as payment upon exercise 19,398 138 138
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 ......... 6,536,018 65 25,724 29,822 -- 55,611
Net income ......................... 5,109 5,109
Cash dividends paid to
shareholders ($.18 per share) ... (1,176) (1,176)
Stock options exercised ............ 200 1 1
Purchase and retirement
of common stock ................. (6)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 ......... 6,536,212 $ 65 $ 25,725 $ 33,755 $ -- $ 59,545
=======================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
PRIMESOURCE CORPORATION
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Consolidation
PrimeSource Corporation (the "Company") is a national distributor
serving the printing and publishing industries. The consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany transactions
and accounts have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments
purchased with a maturity of three months or less to be cash
equivalents. The Company's cash management program utilizes zero
balance accounts. Accordingly, in general, the Company has none or
minimal cash balances. Book overdraft balances have been reclassified
to a current liability in the accompanying Consolidated Balance Sheets.
Inventory Valuation
Inventories are stated at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) and first-in, first-out
(FIFO) methods.
Property and Equipment
Property and equipment are carried at cost or assigned values as a
result of acquisitions. Costs of major additions, replacements and
betterments are capitalized, and maintenance and repairs which do not
extend the life of the respective assets are expensed as incurred. When
property is retired or otherwise disposed, the cost of the property and
the related accumulated depreciation are removed from the accounts, and
any resulting gains or losses are reflected in current operations.
Depreciation is computed by the straight-line method over the estimated
useful lives of the assets which range from three to ten years for
machinery and equipment and ten to forty years for buildings and
improvements.
Capital leases are included under property and equipment with the
corresponding amortization included in depreciation. The related
financial obligations under the capital leases are included in
long-term obligations. Capital leases are amortized over the useful
lives of the respective assets.
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows
is less than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying value of the asset.
Excess of Cost Over Net Assets of Businesses Acquired
The excess of the total acquisition cost over the fair value of net
tangible assets acquired (the "goodwill acquired") is being amortized
by the straight-line method over periods ranging from fifteen to forty
years. The Company's policy is to record an impairment loss against the
goodwill acquired in the period when it is determined the carrying
amount of the net assets may not be recoverable. The Company performs
this evaluation on a quarterly basis. This determination includes
evaluation of factors such as current market value, future asset
utilization, business climate and future net cash flows (undiscounted
and without interest) expected to result from the use of the net
assets.
Revenue Recognition
Revenue is generally recognized when products are shipped and title is
passed to the customer.
Derivative Financial Instruments
The Company utilizes derivative financial instruments to reduce
interest rate risks. The Company does not hold or issue financial
instruments for trading or speculative purposes. The counterparty is a
major commercial bank. Management believes losses related to credit
risk are remote. The instruments are accounted for on an accrual basis.
The net cash amounts paid or received under such agreements are accrued
and recognized as an adjustment to interest expense.
Fair Value of Financial Instruments
The carrying value of the Company's short-term financial instruments,
such as receivables and notes and accounts payable, approximate their
fair values, based on the short-term maturities of these instruments.
<PAGE>
The carrying value of long-term investments, consisting primarily of
long-term notes receivable, and long-term debt obligations, consisting
primarily of revolving credit debt with interest rates based on current
short-term market rates, approximates the market value based on the
estimated discounted value of future cash flows at December 31, 1999
and 1998. The fair value of derivative financial instruments is based
on the quoted settlement cost on the balance sheet date.
Concentrations of Credit Risk
Concentrations of credit risk with respect to trade receivables are
limited due to a large customer base and its geographic dispersion.
Ongoing credit evaluations of customers' financial condition are
performed and, generally, no collateral is required.
Stock-Based Compensation
The Company applies the intrinsic value based method prescribed in
Accounting Principles Board Opinion No. 25 to account for options
granted to employees to purchase common shares. Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" requires that companies electing to continue using the
intrinsic value method must make pro forma disclosures of net income
and net income per share as if the fair-value-based method of
accounting had been applied.
Income Taxes
Income tax expense is based on pretax financial accounting income.
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax basis of assets
and liabilities and their reported amounts.
Net Income Per Common Share
Basic net income per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period.
Diluted net income per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period
adjusted for the number of shares that would have been outstanding if
the dilutive potential common shares had been issued.
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications
Certain reclassifications of prior years' amounts have been made to
conform to the current year's presentation.
2. Business Acquisitions
In September 1998, the Company acquired the net assets of Bell
Industries' Graphic Imaging Group ("Bell acquisition") with thirteen
locations in the West, Southwest and Midwest for approximately $42.5
million. The excess of the acquisition costs over the net tangible
assets acquired is included in the Consolidated Balance Sheets and is
being amortized on a straight-line basis over 20 years. Assuming the
acquisition had occurred at the beginning of the year, unaudited
pro-forma sales and net income for the year ended December 31, 1998,
would have been approximately $552.7 million and $4.8 million ($.73 per
basic share and $.72 per diluted share), respectively. For the year
ended December 31, 1997, unaudited pro-forma sales and net income,
would have been approximately $571.2 million and $5.9 million ($.90 per
basic share and $.88 per diluted share), respectively. The sales
decrease between 1997 and 1998 reflects reduced sales in the Bell
business.
In April 1998, the Company acquired the assets of Joseph Genstein,
Inc., a graphics distributor in the Pittsburgh area, for approximately
$1.5 million. In 1999, an additional $100,000 was paid in accordance
with a contingent incentive provision under the purchase agreement for
obtaining a specified sales level after the acquisition. The excess of
the acquisition costs over the net tangible assets acquired for this
acquisition is included in the Consolidated Balance Sheets and is being
amortized on a straight-line basis over 15 years. The pro-forma results
of this acquisition would not have had a significant impact on the
Company's consolidated results of operations.
These acquisitions have been accounted for as purchases and,
accordingly, are included in operations from their respective
acquisition dates.
<PAGE>
3. Restructure and Other
In 1998, the Company reorganized the operations into three regions.
This included integrating the Bell acquisition operations into the
applicable regions and, where appropriate, combining Bell facilities
with existing PrimeSource facilities in the area. In conjunction with
this reorganization in 1998, the Company incurred $1,050,000 in
restructure and other expenses composed of $600,000 for employee
severance compensation for 36 employees, $350,000 in the write-down of
a building to net realizable value, and $100,000 for lease costs on
vacated leased facilities. At December 31, 1998, $54,000 of the
severance compensation had been paid. In 1999, several of the vacated
leased facilities were subleased resulting in a $20,000 reduction in
this anticipated loss. In February 2000, the building was sold
resulting in an additional loss of $80,000. This net $60,000 additional
expense was recognized in the Consolidated Statements of Income in
1999. The following table sets forth the components at December 31,
1998 and the activity during 1999.
<TABLE>
<CAPTION>
Balance Balance
December 31, Cash Income December 31,
(Thousands of dollars) 1998 Expenditures Adjustments 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee severance $ 546 $ (546) $ --- $ ---
Lease obligations 100 (80) (20) ---
Asset write-downs 350 80 430
----------------------------------------------------------------------------------------------------
Total ............ $ 996 $ (626) $ 60 $ 430
=====================================================================================================
</TABLE>
The asset write-downs are included as a reduction in property and
equipment on the Consolidated Balance Sheets.
4. Sale of Capital Lease
In 1997, the Company sold its rights to a building lease in the Los
Angeles California area for $3,151,000. The lease had been accounted
for as a capital lease. The pretax gain on the sale, after eliminating
the associated net financial basis of the lease assets of $695,000 and
the liability for future lease payments of $1,202,000, was $3,658,000.
Subsequent to the sale, the Company's operations previously located in
the facility were moved to a new leased facility in the area.
5. Business Divestitures
In 1997, the Company completed the sale of a pressroom material
converting operation. The pretax loss on the sale was $401,000. In
conjunction with the sale, the Company entered into a supplier
agreement with the buyer. In 1996, the Company sold substantially all
of the assets of its Rochester, New York subsidiary, Onandaga Litho
Supply, Co., Inc. There was no gain or loss on this sale.
6. Cash Flow Information
Cash payments for interest and income taxes (net of refunds) for the
years ended December 31, consisted of:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
Interest ... $5,687 $3,368 $2,742
Income taxes 2,750 3,760 3,878
========================================================
</TABLE>
Excluded from the accompanying Consolidated Statements of Cash Flows
for the year ended December 31, 1998 are the fair value of the assets
acquired in the Bell acquisition of $55,314,000 and the liabilities
assumed or created in the same acquisition of $11,368,000.
<PAGE>
7. Inventories
Inventories, which are primarily finished goods, at December 31,
consisted of:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
------------------------------------------------------
<S> <C> <C>
Last-in, first-out (LIFO) $32,400 $33,631
First-in, first-out (FIFO) 35,979 35,480
------------------------------------------------------
Total inventories ....... $68,379 $69,111
======================================================
</TABLE>
The current replacement costs of inventories exceeds LIFO values by
approximately $5,785,000 and $5,660,000 at December 31, 1999 and 1998,
respectively.
In 1997, the Company expensed $2.3 million to write-down electronic
equipment inventory to current market value. This amount has been
recorded in cost of sales in the Consolidated Income Statements.
8. Property and Equipment
Property and equipment, net, at December 31, consisted of:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
------------------------------------------------------------------------
<S> <C> <C>
Land ......................................... $ 1,354 $ 1,354
Buildings and improvements ................... 7,300 7,381
Leased property .............................. 399 399
Machinery, equipment and other ............... 13,707 14,623
------------------------------------------------------------------------
22,760 23,757
Less accumulated depreciation and amortization (10,697) (10,984)
------------------------------------------------------------------------
Property and equipment, net .................... $ 12,063 $ 12,773
========================================================================
</TABLE>
9. Notes Payable and Long-Term Obligations
The long-term obligations of the Company at December 31, consisted of:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
------------------------------------------------------------------------
<S> <C> <C>
Revolving credit agreement ..................... $ 62,500 $ 74,800
Term loan (interest rate of 6.03%), principal
payments of $167 plus interest due quarterly . 667
Term loan (interest rate of 6.03%), principal
payments of, $134 plus interest due quarterly 535
Other miscellaneous obligations ................ 104 331
-----------------------------------------------------------------------
62,604 76,333
Less current portion ........................... (104) (1,128)
-----------------------------------------------------------------------
Net long-term obligations ...................... $ 62,500 $ 75,205
=======================================================================
</TABLE>
Maturities of long-term obligations are $104,000 in 2000, $62,500,000
in 2001 and none thereafter.
The Company has an uncollateralized $75 million revolving credit
agreement that expires in May 2001. Under the terms of the agreement,
which includes three banks, the Company can borrow at the prime rate or
the London Interbank Offered Rate (LIBOR) plus between .50% to 1.70%
depending on certain specified performance levels.
The Company has two short-term bank lines of credit for $5 million
each. One is a committed line established in 1999 with a bank
commitment through June 30, 2000 and an interest rate of prime less
1.5%. The outstanding balance under this line was $953,000 at December
31, 1999 and the weighted average interest rate for 1999 was 6.9%. The
second line is an uncommitted discretionary line that was for $10
million in 1998, and was decreased to $5 million in 1999 in conjunction
<PAGE>
with the issuance of the committed line. The outstanding balance under
this line was none and $3,500,000 at December 31, 1999 and 1998,
respectively. The interest rate on this line is based on an internal
rate established by the bank. The weighted average interest rate was
7.2% and 7% for 1999 and 1998, respectively. Under the revolving credit
agreement, the total outstanding balances under these lines cannot
exceed $7.5 million at any given point.
The loan agreements provide, among other terms, various requirements
for tangible net worth and leverage and fixed charge coverage ratios.
At December 31, 1999, the Company was in compliance with these
requirements.
In 1997, the Company entered into an interest rate swap agreement with
a notional amount of $17 million. This swap agreement effectively fixes
the interest rate on a like amount of the Company's floating rate debt
at 6.16% plus the Company's LIBOR spread in effect at the time. The
effective rate was 7.86% at December 31, 1999. The swap expires on
November 6, 2001. The fair value of the swap agreement, based on the
quoted settlement cost to close the contract at December 31, 1999, is a
liability of $139,000. The fair value of the swap agreement is not
recognized in the consolidated financial statements since it is
accounted for as a hedge.
10. Provision for Income Taxes
The income tax provision for the years ended December 31, consisted of:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
-----------------------------------------------------------
Current:
<S> <C> <C> <C>
Federal .................. $ 2,762 $ 2,450 $ 3,349
State .................... 754 644 791
-----------------------------------------------------------
3,516 3,094 4,140
Deferred:
Federal .................. 115 (93) (229)
State .................... 32 (26) (49)
-----------------------------------------------------------
147 (119) (278)
-----------------------------------------------------------
Provision for income taxes $ 3,663 $ 2,975 $ 3,862
===========================================================
</TABLE>
Reconciliation of the provision for income taxes computed at the
federal statutory rate of 34% to the actual provision for income taxes
for the years ended December 31, consisted of:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax provision ............................. $ 2,982 $ 2,406 $ 3,180
State income taxes, net of federal income tax benefit 519 408 490
Expenses for which there are no tax benefits ........ 179 190 172
Other, net .......................................... (17) (29) 20
-------------------------------------------------------------------------------------
Provision for income taxes .......................... $ 3,663 $ 2,975 $ 3,862
=====================================================================================
</TABLE>
Deferred income taxes represent the future tax consequences of
differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end. Significant components of
the Company's deferred tax assets (liabilities) at December 31,
consisted of:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
-----------------------------------------------------------------
<S> <C> <C>
Provision for doubtful accounts ........... $ 1,238 $ 764
Inventory reserves ........................ 857 712
Postretirement benefits other than pensions 707 758
Vacation accrual .......................... 424 434
Pension and employee benefit costs ........ 385 774
Goodwill .................................. 277 313
Depreciation .............................. (495) (422)
Other, net ................................ 812 1,086
-----------------------------------------------------------------
Total deferred tax assets ................. $ 4,205 $ 4,419
=================================================================
</TABLE>
<PAGE>
11. Net Income Per Share
The following is a reconciliation of the average shares of common stock
used to compute basic net income per share to the shares used to
compute diluted net income per share as shown on the Consolidated
Statements of Income for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------------------------------------
Average shares of common stock outstanding
<S> <C> <C> <C>
used to compute basic net income per share . 6,536,098 6,526,805 6,509,083
Dilutive effect of stock options ........... 12,842 122,611 126,751
---------------------------------------------------------------------------------
Average shares of common stock outstanding
used to compute diluted net income per share 6,548,940 6,649,416 6,635,834
---------------------------------------------------------------------------------
Net income per share:
Basic ...................................... $.78 $.63 $.84
Diluted .................................... .78 .62 .83
================================================================================
</TABLE>
At December 31, 1999, there were outstanding options to purchase
589,492 shares of common stock at a range of prices between $5.75 and
$11.18. The dilutive effect of stock options is based on the treasury
method that computes the equivalent dilutive shares as the difference
between the option shares and the amount of assumed common shares that
could be purchased from the proceeds from the exercise of the stock
options at the then current market price. To the extent the option
price exceeds the current common stock price, the options are
excluded, as the effect of including these options would be
anti-dilutive, reducing the number of shares. The calculation for a
year is based on the weighted-average dilutive shares during the year
reflecting both changes in outstanding options during the year and
changes in the common stock's market price. At December 31, 1999, the
option prices were above the common stock's market price, thus none of
the option shares were included in the calculation.
12. Defined Benefit Pension Plans
The Company has a defined benefit pension plan that covers
substantially all of the Company's employees. In general, an employee
becomes vested after completing five years of service, and the benefit
is based on the employee's years of service and compensation during the
ten years preceding retirement. Contributions to the plan are based on
funding standards established by the Employee Retirement Income
Security Act of 1974. In addition, the Company has a supplemental
executive retirement plan for certain Company executives that provides
certain additional benefits.
The components of the net periodic pension benefit for the years ended
December 31, were:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
---------------------------------------------------------------------
<S> <C> <C> <C>
Service cost ..................... $ 995 $ 982 $ 728
Interest cost .................... 1,874 1,872 1,734
Expected return on plan assets ... (3,538) (2,980) (2,524)
Amortization of prior service cost (9) (9) (9)
Transition cost amortization ..... 5 5 5
Recognized net actuarial gain .... (286) (88) (124)
--------------------------------------------------------------------
Net periodic pension benefit ..... $ (959) $ (218) $ (190)
====================================================================
Assumptions:
Discount rate .................... 7.50% 6.50% 7.00%
Expected return on plan assets ... 10.00% 10.00% 10.00%
Rate of compensation increase .... 4.00% 4.00% 4.00%
====================================================================
</TABLE>
<PAGE>
The change in the financial status of the plans and amounts recognized
in the Company's Consolidated Balance Sheets at December 31, were:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
----------------------------------------------------------------------
Change in benefit obligation:
<S> <C> <C>
Benefit obligation at beginning of year ...... $ 30,805 $ 26,689
Service cost ................................. 995 982
Interest cost ................................ 1,874 1,872
Actuarial loss (gain) ........................ (4,811) 2,627
Benefits paid ................................ (1,579) (1,365)
---------------------------------------------------------------------
Benefit obligation at end of year ............ $ 27,284 $ 30,805
---------------------------------------------------------------------
Change in Plan assets:
Fair value of plan assets at beginning of year $ 36,111 $ 30,507
Actual return on plan assets ................. 3,937 6,953
Employer contributions ....................... 57 16
Benefits paid ................................ (1,579) (1,365)
---------------------------------------------------------------------
Fair value of plan assets at end of year ..... $ 38,526 $ 36,111
---------------------------------------------------------------------
Reconciliation of funded status:
Funded status ................................ $ 11,242 $ 5,306
Unrecognized net actuarial gain .............. (11,279) (6,354)
Unrecognized prior service cost .............. (200) (209)
Unrecognized transition obligation ........... 9 14
---------------------------------------------------------------------
Accrued pension liability .................... $ (228) $ (1,243)
=====================================================================
</TABLE>
The plans' assets are invested in undivided interests in several funds
structured to duplicate the performance of various stock and bond
indexes. The accrued pension liability is included in accrued pension
and other liabilities on the Consolidated Balance Sheets.
13. Defined Contribution Pension Plans
The Company sponsors a number of defined contribution pension plans in
the form of IRC 401(k) plans. Participation in one of these plans is
available to substantially all employees. Company contributions to
these plans are based on a percentage of the employee contributions not
to exceed certain maximum levels. The cost of these plans was $275,000,
$290,000 and $296,000 for the years 1999, 1998, and 1997, respectively.
14. Postretirement Benefits Other Than Pensions
The Company has two retiree health benefit plans, the Phillips & Jacobs
Retiree Health Plan (the "P/J Retiree Plan") that primarily covers
retirees and employees who previously participated in theTasty Baking
Company's Retiree Medical Plan prior to the Company's spin-off from
Tasty Baking Company in 1993, and the Momentum Retiree Medical Plan
(the "Momentum Retiree Plan"), that primarily covers retirees and
employees who were previously employed by Momentum Corporation prior to
the merger with the Company in 1994. Both plans provide health care
benefits through a health care administrator and contracts with health
service providers. In addition, the P/J Retiree Plan provides life
insurance benefits through an insurance company. The Company life
insurance premium contribution is limited to $20,000 of coverage per
retiree, with the retiree paying the premium for any coverage beyond
the $20,000. The Company's policy is to fund the plans as benefits are
paid.
The plans are contributory with ceilings on the Company's contribution.
In addition, under the Momentum Retiree Plan, employees who were under
the age of 55 on December 31, 1992 receive no contribution from the
Company under the plan.
<PAGE>
Net periodic postretirement benefit expense for the years ended
December 31, included the following components:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost .............................. $ 20 $ 20 $ 16
Interest cost ............................. 98 80 89
Recognized net actuarial gain ............. (31) (76) (103)
---------------------------------------------------------------------
Net periodic postretirement benefit expense $ 87 $ 24 $ 2
======================================================================
</TABLE>
The change in the financial status of the plans and amounts recognized
in the Company's Consolidated Balance Sheets at December 31, were:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
----------------------------------------------------------------
Change in benefit obligation:
<S> <C> <C>
Benefit obligation at beginning of year .. $ 1,526 $ 1,160
Service cost ............................. 20 20
Interest cost ............................ 98 80
Actuarial loss (gain) .................... (9) 325
Benefits paid ............................ (216) (59)
----------------------------------------------------------------
Benefit obligation at end of year ........ $ 1,419 $ 1,526
----------------------------------------------------------------
Fair value of plan assets ................ -- --
----------------------------------------------------------------
Reconciliation of funded status:
Funded Status ............................ $(1,419) $(1,526)
Unrecognized net actuarial gain .......... (366) (387)
---------------------------------------------------------------
Postretirement benefits other than pension $(1,785) $(1,913)
===============================================================
</TABLE>
Assumptions:
Discount rate
1999 7.50%
1998 6.50%
1997 7.00%
Medical Trend
Indemnity Plan 6.78% in 1999 grading to 5% in 2003
HMO 6.64% in 1999 grading to 5% in 2005
Due to the ceilings on Company contributions, the effect of increases
in health care cost trend rates do not have a material effect on the
liability or expense.
15. Stock Compensation
Stock Options
The Company's stock incentive plans provide for the awarding of stock
options to directors, officers and other key employees. All granted
options, which vest over a four year period, lapse at the earlier of
the expiration of the option term (not more than ten years from the
grant date) or within three months following the date on which
employment with the Company terminates.
<PAGE>
Changes in options outstanding for the three years ended December 31,
1999 are:
<TABLE>
<CAPTION>
Option Prices
--------------------------
Weighted
Options Average Range
----------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at January 1, 1997 . 464,849 $6.34 $6.11- 8.06
----------------------------------------------------------------------
Granted ........................ 56,500 11.18 11.18
Exercised ...................... (15,853) 6.15 6.11- 6.97
Canceled ....................... (7,115) 6.15 6.11- 6.97
----------------------------------------------------------------------
Outstanding at December 31, 1997 498,381 6.89 6.11-11.18
----------------------------------------------------------------------
Granted ........................ 101,500 7.41 6.81-11.18
Exercised ...................... (20,194) 6.25 6.11- 6.97
Canceled ....................... (16,085) 7.58 6.11-11.18
----------------------------------------------------------------------
Outstanding at December 31, 1998 563,602 6.99 6.11-11.18
----------------------------------------------------------------------
Granted ........................ 75,000 5.75 5.75
Exercised ...................... (200) 6.11 6.11
Canceled ....................... (48,910) 6.46 6.11-11.18
----------------------------------------------------------------------
Outstanding at December 31, 1999 589,492 $6.88 $5.75-11.18
----------------------------------------------------------------------
</TABLE>
At December 31, 1999, there were 349,074 options exercisable with a
weighted-average option price of $6.79 and a range from $6.11 to $11.18
and 9,300 options available for grant. The weighted-average remaining
contractual life of outstanding options at December 31, 1999 and 1998
was 6.8 and 7.3 years, respectively.
The Company has not recognized compensation expense in connection with
stock option grants. Had compensation expense been determined based on
the fair value on the grant date of options granted after December 31,
1994, the Company's net income and net income per share on a pro forma
basis would have been reduced for the years ended December 31, as
follows:
<TABLE>
<CAPTION>
(Thousands of dollars,
except per share data) 1999 1998 1997
--------------------------------------------------------
Net Income:
<S> <C> <C> <C>
As reported $5,109 $4,100 $5,491
Pro forma .. 4,906 3,917 5,360
========================================================
Net Income Per Share:
As reported
Basic .... $ .78 $ .63 $ .84
Diluted .. .78 .62 .83
Pro forma
Basic .... .75 .60 .82
Diluted .. .75 .59 .81
========================================================
</TABLE>
The weighted-average fair value per share for options granted was
$1.62, $2.50 and $5.23 for 1999, 1998 and 1997, respectively. The fair
value was estimated using the Black-Scholes option-pricing model. For
options granted in 1999, a dividend yield rate of 3.1%, expected stock
volatility of 25% and risk-free interest rate of 6.7% were used in
estimating the value. For options granted in 1998, a dividend yield
rate of 2.5%, expected stock volatility of 32% and risk-free interest
rate of 5.4% were used. For options granted in 1997, a dividend yield
rate of 1.6%, expected stock volatility of 45% and risk-free interest
rate of 5.8% were used. For all years, an expected option life of seven
years was used. Restricted Stock Awards The Company's stock incentive
plans provide for the awarding of restricted stock to officers and key
employees. The fair market value of the stock at the date of grant
establishes the compensation amount that is amortized to operations
over the restriction period. At December 31, 1999, all awards were
fully amortized and an additional 61,280 shares were available for
future awards.
<PAGE>
16. Leases
The Company leases certain distribution and office facilities,
machinery and equipment, and automotive equipment under various
noncancelable lease agreements. The Company expects that in the normal
course of business, leases that expire will be renewed or replaced by
other leases.
Minimum annual rentals payable under noncancelable operating leases
with a remaining term of more than one year from December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
(Thousands of dollars)
--------------------------------------------
<S> <C> <C>
2000 $ 2,317
2001 2,243
2002 1,728
2003 1,248
2004 780
Thereafter 5,725
--------------------------------------------
Total minimum lease payments $14,041
============================================
</TABLE>
Rent expense, net of noncancelable sublease income of $24,000, $10,000
and none in 1999, 1998, and 1997, respectively, was $3,203,000,
$2,851,000 and $2,219,000 for 1999, 1998, and 1997, respectively.
17. New Accounting Standards
In 1999, the Financial Accounting Standards Board issued SFAS No. 137,
"Deferral of the Effective Date of SFAS 133" which defers the effective
date of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," to all fiscal quarters of all fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes new procedures
for accounting for derivatives and hedging activities and supersedes
and amends a number of existing standards. The Company currently uses
interest rate swap agreements ("swaps") to effectively fix the interest
rate on a portion of the Company's floating rate debt. Under current
accounting standards, no gain or loss is recognized on changes in the
fair value of these swaps. Under this statement, gains or losses will
be recognized based on changes in the fair value of the swaps which
generally occur as a result of changes in interest rates. The Company
is currently evaluating the financial impact of adoption of the
Statement. The adoption is not expected to have a material effect on
the Company's consolidated results of operations, financial position or
cash flows.
18. Commitments and Contingencies
The Company is subject to various legal proceedings and claims which
have arisen in the ordinary course of its business. The Company does
not believe that the ultimate resolution of such matters will have a
material effect on the Company's consolidated financial position or
results of operations.
The Company, along with many other parties, is a defendant in a
contribution action to determine the liability for the state ordered
clean up of a landfill. The Company believes its insurance will cover
any costs incurred in this matter. The Company is also, in general,
subject to possible loss contingencies pursuant to federal or state
environmental laws and regulations. Although these contingencies could
result in future expenses or judgments, such expenses or judgments are
not expected to have a material effect on the Company's consolidated
financial position or results of operations.
<PAGE>
19. Quarterly Financial Information (unaudited)
Summarized unaudited quarterly financial data for the years ended
December 31, 1999 and 1998 are:
<TABLE>
<CAPTION>
(Thousands of dollars
except per share data) First Second Third Fourth Total
-----------------------------------------------------------------------------
Year Ended December 31, 1999
<S> <C> <C> <C> <C> <C>
Net sales ...................... $139,434 $133,355 $132,537 $139,947 $545,273
Gross profit ................... 23,472 23,304 22,527 23,574 92,877
Net income ..................... 1,235 1,295 1,170 1,409 5,109
Net income per share (1)
Basic ....................... $ .19 $ .20 $ .18 $ .22 $ .78
Diluted ...................... .19 .20 .18 .22 .78
Year Ended December 31, 1998 (2)
Net sales ...................... $101,528 $104,846 $109,486 $137,187 $453,047
Gross profit ................... 18,452 19,578 19,608 25,565 83,203
Net income ..................... 1,112 1,270 1,002 716 4,100
Net income per share (1)
Basic ........................ $ .17 $ .19 $ .15 $ .11 $ .63
Diluted ...................... .17 .19 .15 .11 .62
<FN>
(1) Due to changes in the weighted average number of basic and diluted
shares during the periods and rounding, the sum of the quarterly
net incomes per share will not necessarily be equal to the full
years' income per share.
(2) The operations of the Bell acquisition are included from the
September 14, 1998 acquisition date. Income for the quarter and
year ended December 31, 1998 includes a restructure and other
expense of $1,050,000 ($634,000 after tax) for the reorganizing of
the operations into three divisions and the integration of the
Bell locations.
</FN>
</TABLE>
<PAGE>
Report of Independent Accountants
To the Shareholders and the Board of Directors of PrimeSource Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under item 14(a)(1) present fairly, in all material respects, the
financial position of PrimeSource Corporation and its subsidiaries (the
"Company") at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with accounting principles generally accepted in the
United States. In addition, in our opinion, the financial statement schedule
listed in the index appearing under item 14(a)(2) present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 22, 2000
<PAGE>
PART III.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the definitive proxy statement to be filed with
the Securities and Exchange Commission by April 30, 2000, except information
regarding executive officers which appears under Part I.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Registrants' definitive proxy statement to be
filed with the Securities and Exchange Commission by April 30, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Registrants' definitive proxy statement to be
filed with the Securities and Exchange Commission by April 30, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Registrants' definitive proxy statement to be
filed with the Securities and Exchange Commission by April 30, 2000.
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements have been included as part of this
report:
Form 10-K
Page
---------
Consolidated Statements of Income ................... 13
Consolidated Balance Sheets ......................... 14
Consolidated Statements of Cash Flows ............... 15
Consolidated Statements of Shareholders' Equity ..... 16
Notes to Consolidated Financial Statements .......... 17
Report of Independent Accountants ................... 28
(a)(2) Financial Statement Schedule
(a) The following financial statement schedule is submitted herewith:
-Schedule II Valuation of Qualifying Accounts and Reserves
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
(a)(3) Exhibits
The required exhibits are included at the back of this Form 10-K and
are described in the Exhibit Index immediately preceding the first
exhibit.
(b) Reports on Form 8-K
The Registrant did not file a report on Form 8-K during the quarter
ended December 31, 1999. .
<PAGE>
<TABLE>
PRIMESOURCE CORPORATION AND SUBSIDIARIES
<CAPTION>
SCHEDULE II -- VALUATION OF QUALIFYING ACCOUNTS AND RESERVES
Column A Column B Column C Column D Column E
- --------------------------------- ----------- -------------------------- ------------ ------------
Classification Balance at Charged to Balance
Beginning Charged to Other Deductions at End
(thousands of dollars) of Period Expenses Accounts Write-offs of Period
- ----------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1999
<S> <C> <C> <C> <C>
Allowance for doubtful accounts .............. $ 3,419 $ 1,186 $(1,478) (A) $3,127
Amortization of goodwill ..................... 1,958 1,085 3,043
Inventory reserves ........................... 5,414 352 (2,477) (B) 3,289
- -----------------------------------------------------------------------------------------------------------------------
$10,791 $ 2,623 $(3,955) $ 9,459
- -----------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1998
Allowance for doubtful accounts .............. $ 1,913 $ 440 $1,295 (C) $ (229) (A) $ 3,419
Amortization of goodwill ..................... 1,435 523 1,958
Inventory reserves ........................... 4,664 233 2,000 (C) (1,483) (B) 5,414
- -----------------------------------------------------------------------------------------------------------------------
$ 8,012 $ 1,196 $ 3,295 $(1,712) $10,791
- -----------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1997
Allowance for doubtful accounts .............. $ 1,787 $ 694 $(568) (A) $1,913
Amortization of goodwill ..................... 1,102 333 1,435
Inventory reserves ........................... 3,172 2,602 $ (137) (D) (973) (B) 4,664
- -----------------------------------------------------------------------------------------------------------------------
$ 6,061 $ 3,629 $ (137) $(1,541) $ 8,012
- -----------------------------------------------------------------------------------------------------------------------
<FN>
(A) Doubtful accounts written off, net of any recoveries.
(B) The disposal of obsolete inventory, net of any recoveries.
(C) Related to the acquisition of Bell Industries' Graphic Imaging Group.
(D) Reserve disposed of with the sale of the pressroom material converting
operation.
</FN>
</TABLE>
<PAGE>
PRIMESOURCE CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated March 27, 2000
/s/ James F. Mullan
-------------------
James F. Mullan
President and
Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on the behalf of the registrant
and in the capacity and on the date indicated.
Dated March 27, 2000
/s/ William A. DeMarco
----------------------
William A. DeMarco
Vice President, Chief Financial Officer
(principal financial and accounting officer)
DIRECTORS
Richard E. Engebrecht} /s/ William A. DeMarco
Fred C. Aldridge, Jr.} -----------------------
Philip J. Baur, Jr.} William A. DeMarco
John H. Goddard, Jr.} Attorney in fact
Gary MacLeod} Power of Attorney
James F. Mullan} dated February 29, 2000
Klaus D. Oebel}
Edward N. Patrone} Date March 27, 2000
John M. Pettine}
<PAGE>
Exhibit Index
Exhibit Number and Description
The following Exhibit Numbers refer to Regulation S-K, Item 601. All other
exhibits are omitted because they are inapplicable.
2.1 Agreement and Plan of Reorganization dated as of May 27, 1994 by and
between MOMENTUM CORPORATION and PHILLIPS & JACOBS, INCORPORATED
(filed as Annex A to the Proxy/Prospectus included within registration
statement No. 33-54913 on Form S-4 filed by the Registrant on August
4, 1994)
2.2 Form of Plan of Merger (filed as Annex B to the Proxy/Prospectus
included within registration statement No. 33-54913 on Form S-4 filed
by the Registrant on August 4, 1994)
2.3 Asset Purchase Agreement By And Among VGC Corp., VGC Holding USA,
Inc., NV Koninklijke KNP BT and PrimeSource dated November 1, 1996,
for the purchase of the operating assets (excluding accounts
receivable) of VGC Corporation's branch operations in Minneapolis,
Minnesota; Milwaukee, Wisconsin; Des Moines, Iowa; and Omaha,
Nebraska. (filed as exhibit 2 to Form 8-K dated November 13, 1996,
File No. 0-21750)
2.4 Asset Purchase Agreement By And Among Momentum Corporation And TK
Gray, Inc. And Its Shareholders dated April 15, 1994, for the purchase
of substantially all of the assets and certain of the liabilities of
TK Gray, Inc. (filed as exhibit 2(i) to Form 8-K dated May 2, 1994,
File No. 0-18112)
2.5 Asset Purchase Agreement between PrimeSource Corporation and Bell
Industries, Inc. dated August 28, 1998 for the purchase of
substantially all the assets and certain liabilities of the Graphic
Imaging Group of Bell Industries, Inc. (filed as exhibit 2 to Form 8-K
dated September 28, 1998, File No. 000-21750)
3.1 Amended and Restated Articles of Incorporation of the Registrant
(filed as Annex C to the Proxy/Prospectus included within registration
statement No. 33-54913 on Form S-4 filed by the Registrant on August
4, 1994)
3.2 Restated By-laws of the Registrant effective March 2, 1999
4.1 Form of Common Stock Certificate (filed with Form 10 filed by
Registrant on May 12, 1993, (File No. 0-21750 and as subsequently
amended on Form 8 filed on May 28, 1993, Form 8 filed on July 6, 1993
and Form 8 filed on July 13, 1993)
4.2 Form of Common Stock Certificate, effective September 1, 1994 (filed
as Exhibit 4.2 to Form 10-K, File No. 0-21750, dated March 30, 1995)
10.1 Form of Phillips & Jacobs, Inc. 1993 Long Term Incentive Plan (filed
as Exhibit 10.1 to Form 10-K, File No. 0-21750, dated March 30, 1995)
10.2 Form of Phillips & Jacobs, Incorporated Indemnification Agreement
(filed with Form 10 filed by Registrant on May 12, 1993, (File No.
0-21750) and as subsequently amended on Form 8 filed on May 28, 1993,
Form 8 filed on July 6, 1993 and Form 8 filed on July 13, 1993)*
10.3 PrimeSource Corporation 401(k) Savings Plan (Amended and Restated
Effective January 1, 1997)*
10.4 Employment Agreement between the Registrant and W.A. DeMarco dated
December 31, 1996 (filed as Exhibit 10.5 to Form 10-K, File No.
0-21750, dated March 28, 1997)*
10.5 Employment Agreement between the Registrant and J.F. Mullan dated
December 31, 1996 (filed as Exhibit 10.6 to Form 10-K, File No.
0-21750, dated March 28, 1997)*
<PAGE>
10.6 Form of Tax Matters Agreement (filed with Form 10 filed by Registrant
on May 12, 1993, (File No. 0-21750) and as subsequently amended on
Form 8 filed on May 28, 1993, Form 8 filed on July 6, 1993 and Form 8
filed on July 13, 1993)
10.7 Amendment No. 1 to Agreement among Employers Participating in Certain
Qualified Plans (filed as Exhibit 10.14 to the Proxy/Prospectus
included within registration statement No. 33-54913 on Form S-4 filed
by the Registrant on August 4, 1994)*
10.8 1993 Replacement Option Plan (P&J Spin-off) for Directors (filed as
Annex I to the Proxy/Prospectus included within registration statement
No. 33-54913 on Form S-4 filed by the Registrant on August 4, 1994)*
10.9 Restated Momentum Distribution Inc. Supplemental Benefits Plan,
effective April 22, 1991 (filed as Exhibit 10.13 to Form 10-K, File
No. 0-18112 dated March 30 1993)*
10.10 Employment Agreement between the Registrant and John H. Goddard, Jr.
dated December 24, 1996 (filed as Exhibit 10.14 to Form 10-K, File No.
0-21750 dated March 25, 1998)*
10.11 Form of Indemnification Agreement for Directors and certain officers
effective September 1, 1994 and executed in January, 1996 (filed as
Exhibit 10.22 to Form 10-K, File No. 0-21750, dated March 26, 1996)*
10.12 PrimeSource Corporation Pension Plan (filed as Exhibit 10.23 to Form
10-K, File No. 0-21750, dated March 26, 1996)*
10.13 Credit Agreement dated as of November 1, 1996 by and among PrimeSource
Corporation, Dixie Type & Supply Company, Inc., Onondaga Litho Supply
Co., Inc. and The Banks Party Hereto and PNC Bank, National
Association, As Agent (filed as Exhibit 10.18 to Form 10-K, File No.
0-21750, dated March 28, 1997)
10.14 Employment Agreement between the Registrant and Edward Padley dated
December 31, 1997 (filed as Exhibit 10.19 to Form 10-K, File No.
0-21750 dated March 25, 1998)*
10.15 Employment Agreement between the Registrant and D. James Purcell dated
December 31, 1997(filed as Exhibit 10.20 to Form 10-K, File No.
0-21750 dated March 25, 1998)*
21 Subsidiaries of the Registrant
23 Consent of PricewaterhouseCoopers LLP, Independent Accountants
27 Financial Data Schedule for the year ended December 31, 1999
99.1 Undertakings
*Management contracts and/or compensatory plans, contracts or
arrangements in which a director and/or a named executive officer
participates.
PRIMESOURCE CORPORATION
BYLAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be provided by CT Corporation
System in the Commonwealth of Pennsylvania. Solely for purposes of venue and
official publication, the registered office of the corporation shall be deemed
to be located in the City of Philadelphia, Philadelphia County.
Section 2. The corporation may also have offices at such other places
both within and without the Commonwealth of Pennsylvania as the Board of
Directors may, from time to time, determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. All meetings of the shareholders shall be held at such
places within or without the Commonwealth of Pennsylvania as the Board of
Directors may designate.
Section 2. The annual meeting of the shareholders, commencing with the
year 1994, shall be held at such time and at such place as shall be determined
by the Board, when they shall elect by a plurality vote a Board of Directors and
transact such other business as may properly be brought before the meeting.
Section 3. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called at any time by the Chairman of the Board, Chief
Executive Officer or a majority of the Board of Directors, or shareholders
entitled to cast at least a majority of the votes which all shareholders are
entitled to cast at the particular meeting, upon written request delivered to
the Secretary of the corporation. Such request shall state the purpose or
purposes of the proposed meeting. Upon receipt of any such request, it shall be
the duty of the Secretary to call a special meeting of the shareholders to be
held at such time, not less than ten (10) nor more than sixty (60) days
thereafter, as the Secretary may fix. If the Secretary shall neglect to issue
such call, the person or persons making the request may issue the call.
<PAGE>
Section 4. Written notice of every meeting of the shareholders,
specifying the place, date and hour and the general nature of the business of
the meeting, shall be served upon or mailed, postage prepaid, at least five (5)
days prior to the meeting, unless a greater period of notice is required by
statute, to each shareholder.
Section 5. The officer having charge of the transfer books for shares
of the corporation shall prepare and make, at least ten (10) days before each
meeting of shareholders, a complete list of the shareholders entitled to notice
of the meeting and a complete list of shareholders entitled to vote at the
meeting, arranged in alphabetical order, with the address and the number of
shares held by each, which lists shall be kept on file at the principal office
of the corporation and shall be subject to inspection by any shareholder at any
time during usual business hours. Such lists shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any shareholder during the whole time of the meeting.
Section 6. Business transacted at all special meetings of shareholders
shall be limited to the purposes stated in the notice.
Section 7. The presence, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes which all shareholders are
entitled to cast on a particular matter, shall be requisite and shall constitute
a quorum at all meetings of the shareholders for the transaction of business,
except as otherwise provided by statute or by the articles of incorporation or
by these bylaws. The shareholders present in person or by proxy at a duly
convened meeting can continue to do business until adjournment, notwithstanding
withdrawal of enough shareholders to leave less than a quorum. If, however, any
meeting of the shareholders cannot be organized because a quorum has not
attended, the shareholders entitled to vote thereat, present in person or by
proxy, shall have power, except as otherwise provided by statute, to adjourn the
meeting to such time and place as they may determine, but in the case of any
meeting called for the election of directors such meeting may be adjourned from
day to day or for such longer periods not exceeding fifteen (15) days each as
the holders of a majority of the shares present in person or by proxy and
entitled to vote shall direct, and those who attend the second of such adjourned
meetings, although less than a quorum, shall nevertheless constitute a quorum
for the purpose of electing directors. At any adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified.
Section 8. When a quorum is present or represented at any meeting, the
acts of the shareholders present, in person or by proxy, entitled to cast at
least a majority of the votes which all shareholders present are entitled to
cast shall be the acts of the shareholders, unless the question is one upon
which, by express provision of the statutes or of the articles of incorporation
or of these bylaws, a different vote is required in which case such express
provision shall govern and control the decision of such question.
Section 9. Unless otherwise provided in the articles of incorporation,
each shareholder shall, at every meeting of the shareholders, be entitled to one
(1) vote in person or by proxy for each share having voting power held by such
shareholder, but no proxy shall be voted on after three (3) years from its date,
unless coupled with an interest, and except where the transfer books of the
corporation have been closed or a date has been fixed as a record date for the
determination of its shareholders entitled to vote, transferees of shares which
are transferred on the books of the corporation within ten (10) days next
preceding the date of such meeting shall not be entitled to vote at such
meeting. In each election for directors, every shareholder entitled to vote
shall have the right, in person or by proxy, to multiply the number of votes to
which he may be entitled by the total number of directors to be elected in the
same election, and he may cast the whole number of such votes for one candidate
or he may distribute them among any two (2) or more candidates. The candidates
receiving the highest number of votes up to the number of directors to be
elected shall be elected.
<PAGE>
Section 10. In advance of any meeting of shareholders, the Board of
Directors may appoint judges of election, who need not be shareholders, to act
at such meeting or any adjournment thereof. If judges of election be not so
appointed, the chairman of any such meeting may and, on the request of any
shareholder entitled to vote or his proxy, shall make such appointment at the
meeting. The number of judges shall be one (1) or three (3). If appointed at a
meeting on the request of one (1) or more shareholders entitled to vote or
proxies, the majority of shares present and entitled to vote shall determine
whether one (1) or three (3) judges are to be appointed. No person who is a
candidate for office shall act as a judge. The judges of election shall do all
such acts as may be proper to conduct the election or vote with fairness to all
shareholders, and shall make a written report of any matter determined by them
and execute a certificate of any fact found by them, if requested by the
chairman of the meeting or any shareholder entitled to vote or his proxy. If
there be three (3) judges of election, the decision, act or certificate of a
majority, shall be effective in all respects as the decision, act or certificate
of all.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the Board
shall be nine (9). The Board of Directors may by a vote of not less than a
majority of the authorized number of directors increase or decrease the number
of directors from time to time without a vote of the shareholders, provided,
however that any such decrease shall not eliminate any director then in office.
The directors shall be classified, with respect to the time for which they
severally hold office, into three (3) classes, as nearly equal in number as
possible, as shall be provided in the manner specified in these bylaws; one (1)
class to hold office initially for a term expiring at the annual meeting of
shareholders to be held in 1995, another class to hold office initially for a
term expiring at the annual meeting of the shareholders to be held in 1996, and
another class to hold office initially for a term expiring at the annual meeting
of shareholders to be held in 1997. The number of directors in each class shall
be determined by a vote of not less than a majority of the authorized number of
directors. At each annual meeting of shareholders of the corporation beginning
with the 1995 annual meeting, the class of directors then being elected shall be
elected to hold office for a term of office to expire at the third succeeding
annual meeting of shareholders after their election. Subject to any provisions
contained in these bylaws relating to mandatory retirement, each director shall
hold office for the term for which elected and until his or her successor shall
have been elected and qualified.
Section 2. Except as otherwise prescribed in the articles of
incorporation, notwithstanding anything contained in these bylaws to the
contrary, and notwithstanding the fact that a lesser percentage may be permitted
by law, the affirmative vote of the holders of not less than 80% of the
outstanding shares of Voting Stock (as defined in the articles of incorporation)
of the corporation, subject to the provisions of any preferred stock of the
corporation which may at the time be outstanding, voting together as a single
<PAGE>
class, shall be required to remove any director from office without assigning
any cause for such removal at any annual or special meeting of shareholders.
Except as otherwise prescribed in the articles of incorporation, notwithstanding
anything contained in these bylaws to the contrary, and notwithstanding the fact
that a lesser percentage may be permitted by law, the affirmative vote of the
holders of not less than 80% of the outstanding shares of Voting Stock (as
defined in the articles of incorporation) of the corporation, subject to the
provisions of any preferred stock of the corporation which may at the time be
outstanding, voting together as a single class, shall be required to alter,
amend or adopt any provisions inconsistent with, or repeal this Section 2, or
any provision hereof at any annual or special meeting of shareholders; provided,
however, that if there is a shareholder of the corporation which is a 10%
Shareholder (as defined in the articles of incorporation) such 80% vote must
include the affirmative vote of at least two-thirds of the outstanding Voting
Stock (as defined in the articles of incorporation) held by shareholders other
than the 10% Shareholder.
Section 3. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors shall be filled by the
affirmative vote of a majority of the remaining directors, though less than a
quorum. Any director so elected shall hold office for the remainder of the full
term of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected and
qualified.
Section 4. The business and affairs of the corporation shall be managed
under the direction of its Board of Directors, which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the articles of incorporation or by these bylaws directed or
required to be exercised and done by the shareholders. Directors need not be
shareholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the Commonwealth of
Pennsylvania.
Section 6. The first meeting of each newly elected Board of Directors
shall be held at the same place as, and immediately following, the annual
meeting of the shareholders, unless a different time and place shall be fixed by
the shareholders at the meeting at which such directors were elected, and no
notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a majority of the whole Board
shall be present. In the event such meeting is not held at such time and place,
or in the event of the failure of the shareholders to fix a different time or
place for such first meeting of the newly elected Board of Directors, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for such meetings of the Board of Directors, or as
shall be specified in a written waiver signed by all of the directors.
Section 7. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.
Section 8. Special meetings of the Board may be called by the Chairman
of the Board or Chief Executive Officer on one day's notice to each director,
either personally or by mail or by telegram; special meetings shall be called by
the Chief Executive Officer or Secretary in like manner and on like notice on
the written request of two directors, which request shall state the purpose or
purposes of the proposed meeting.
<PAGE>
Section 9. At all meetings of the Board a majority of the directors in
office shall be necessary to constitute a quorum for the transaction of
business, and the acts of a majority of the directors present at a meeting at
which a quorum is present shall be the acts of the Board of Directors, except as
may be otherwise specifically provided by statute or by the articles of
incorporation. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 10. Any action required or permitted to be taken at a meeting
of the directors or any committee thereof may be taken without a meeting if,
prior or subsequent to the action, all the directors shall severally or
collectively consent in writing to any such action taken or to be taken by the
corporation, and such action shall be as valid a corporate action as though it
had been authorized at a meeting of the Board of Directors.
Section 11. In the event a national disaster or national emergency is
proclaimed by the President or Vice President of the United States, the
directors, even though there may be less than a quorum present, may take all
actions which they could have taken if a quorum had been present.
Section 12. One or more directors may participate in a meeting of the
Board or any committee of the Board by means of conference telephone or similar
communications equipment by means of which all persons participating in such
meeting can hear each other. Participation in a meeting pursuant to this section
shall constitute presence in person at the meeting.
NOMINATING COMMITTEE
Section 13. The Board of Directors shall, by resolution passed by a
majority of the whole Board, designate a nominating committee which shall have
the exclusive power to nominate persons to serve as directors of the
corporation. All nominations by the nominating committee shall require the
unanimous vote of all members of the committee, and all such nominations shall
be subject to approval of the Board of Directors. The members of the nominating
committee designated after the adoption of this Article III, Section 13 shall
serve for an initial term of two years.
OTHER COMMITTEES
Section 14. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more other committees, each
committee to consist of two or more of the directors of the corporation. Any
committee, to the extent provided in the authorizing resolutions of the Board,
shall have and exercise the authority of the Board of Directors in the
management of the business affairs of the corporation. Vacancies in the
membership of any committee shall be filled by the Board of Directors at a
regular or special meeting of the Board of Directors. The committee or
committees designated shall keep regular minutes of its or their proceedings and
report the same to the Board when required.
COMPENSATION OF DIRECTORS
Section 15. The Board of Directors shall have the power to fix, and
from time to time to change, the compensation of the directors of the
<PAGE>
corporation, which compensation may include an annual retainer fee and a fee for
attendance at regular or special meetings of the Board and of any committees of
the Board.
MANDATORY RETIREMENT
Section 16. The term of office of each director of the corporation
shall automatically expire as of the date of the next annual meeting of
shareholders immediately following the date of such director's 72nd birthday,
regardless of whether the term of office of said director would otherwise have
expired at such annual meeting. Notwithstanding the foregoing sentence, the term
of office of Richard E. Engebrecht may extend beyond this mandatory retirement
date if and as extended on a year to year basis by action of the Board of
Directors.
ARTICLE IV
NOTICES
Section 1. Notices to directors and shareholders shall be in writing
and delivered either personally or by sending such notice by first class or
express mail, postage prepaid, or by telegram (with messenger service
specified), telex or TWX (with answer back received) or courier service, charges
prepaid, or by telecopier, to their respective addresses (or to their respective
telex, TWX, telecopier or telephone number) appearing on the books of the
corporation or, in the case of directors, supplied by him or her to the
corporation for the purpose of notice. Notice by mail, telegraph or courier
service shall be deemed to be given at the time when the same shall be deposited
in the United States mail or with a telegraph office or courier service for
delivery to that person or, in the case of telex or TWX, when dispatched. Notice
to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the articles of incorporation or of these
bylaws, a waiver thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board
of Directors and shall be a Chairman of the Board, a Chief Executive Officer, a
President, a Vice-President, a Secretary and a Treasurer. The Board of Directors
may also choose a Vice Chairman and additional vice-presidents and one or more
assistant secretaries and assistant treasurers. Any number of offices may be
held by the same person.
Section 2. The Board of Directors, immediately after each annual
meeting of shareholders, shall elect a Chairman of the Board. The Board shall
<PAGE>
also annually choose a Chief Executive Officer, a President, a Vice-President, a
Secretary and a Treasurer who need not be members of the Board.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The compensation of all officers of the corporation shall be
fixed by the Board of Directors or a duly authorized committee.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in the office of any
officer or agent of the corporation shall be filled by the Board of Directors,
and such successor officer or agent shall hold office for the unexpired term in
respect of which the vacancy occurred.
CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board shall preside, when present, at
all meetings of the Board of Directors and all meetings of the shareholders and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe. The Chairman of the Board need not be
an employee of the corporation.
VICE CHAIRMAN
Section 7. The Vice Chairman shall, in the absence of the Chairman of
the Board, preside, when present, at all meetings of the Board of Directors and
all meetings of the shareholders and shall perform such other duties and have
such other powers as the Board of Directors may from time to time prescribe. The
Vice Chairman need not be an employee of the corporation.
CHIEF EXECUTIVE OFFICER
Section 8. The Chief Executive Officer shall have general supervisory
responsibility and authority over the officers of the corporation, shall see
that all orders and resolutions of the Board of Directors are carried into
effect, shall preside at all meetings of the Board of Directors in the absence
of the Chairman and Vice Chairman, and shall perform such other duties and have
such other powers as the Board of Directors may from time to time prescribe. The
Board of Directors shall determine the person or persons who shall perform the
duties and exercise the powers of the Chief Executive Officer in the absence or
disability of the Chief Executive Officer.
Section 9. The Chief Executive Officer shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the corporation.
<PAGE>
THE PRESIDENT
Section 10. The President shall be the chief operating officer of the
corporation, shall, under the direction of the Chief Executive Office, have
general and active management of the business of the corporation and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe. The Board of Directors shall determine the
person or persons who shall perform the duties and exercise the powers of the
President in the absence or disability of the President.
THE VICE-PRESIDENTS
Section 11. The Vice-President or Vice-Presidents shall perform such
duties and have such powers as the Board of Directors may from time to time
prescribe.
THE SECRETARIES AND ASSISTANT SECRETARIES
Section 12. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the committees of the
Board of Directors when required. He shall give, or cause to be given, notice of
all meetings of the shareholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or Chief Executive Office, under whose supervision he shall be. He
shall keep in safe custody the seal of the corporation and affix the same to any
instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of an Assistant Secretary.
Section 13. The Assistant Secretary, or if there are more than one, the
Assistant Secretaries, in the order determined by the Board of Directors, shall,
in the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 14. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 15. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
<PAGE>
Section 16. If required by the Board of Directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration of the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 17. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers, in the order determined by the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
VACANCIES
Section 18. If the office of any officer or agent becomes vacant for
any reason, the Board of Directors may choose a successor or successors, who
shall hold office for the unexpired term in respect of which such vacancy
occurred.
ARTICLE VI
CERTIFICATES OF SHARES
Section 1. The certificates of shares of the corporation shall be
numbered and registered in a share register as they are issued. They shall
exhibit the name of the registered holder and the number and class of shares and
the series, if any, represented thereby and the par value of each share or a
statement that such shares are without par value as the case may be.
Section 2. Every share certificate shall be signed by the Chief
Executive Officer or President and the Secretary or Treasurer and shall be
sealed with the corporate seal which may be facsimile, engraved or printed.
Section 3. Where a certificate is signed (1) by a transfer agent or (2)
by a transfer agent and/or registrar, the signature of the officers of the
corporation may be facsimile. In case any officer or officers who have signed,
or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be adopted by the corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be such officer or officers of the corporation.
<PAGE>
LOST OR DESTROYED CERTIFICATES
Section 4. The Board of Directors shall direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, destroyed or
wrongfully taken, upon the making of an affidavit of that fact by the person
claiming the share certificate to be lost, destroyed or wrongfully taken. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, destroyed or wrongfully taken,
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and give the corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate or certificates alleged to have been
lost, destroyed or wrongfully taken.
TRANSFER OF SHARES
Section 5. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 6. The Board of Directors may fix a time, not more than ninety
(90) days, prior to the date of any meeting of shareholders or the date fixed
for the payment of any dividend or distribution or the date for the allotment of
rights or the date when any change or conversion or exchange of shares will be
made or go into effect, as a record date for the determination of the
shareholders entitled to notice of and to vote at any such meeting or entitled
to receive payment of any such dividend or distribution or to receive any such
allotment of rights or to exercise the rights in respect to any such change,
conversion or exchange of shares. In such case only such shareholders as shall
be shareholders of record on the date so fixed shall be entitled to notice of
and to vote at such meeting or to receive payment of such dividend or to receive
such allotment of rights or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
any record date so fixed. The Board of Directors may close the books of the
corporation against transfers of shares during the whole or any part of such
period and in such case written or printed notice thereof shall be mailed at
least ten (10) days before the closing thereof to each shareholder of record at
the address appearing on the records of the corporation or supplied by him to
the corporation for the purposes of notice.
REGISTERED SHAREHOLDERS
Section 7. The corporation shall be entitled to treat the holder of
record of any share or shares as the holder in fact thereof and shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person, and shall not be liable for any registration or
transfer of shares which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with actual knowledge that a
fiduciary or nominee of a fiduciary is committing a breach of trust in
requesting such registration or transfer, or with knowledge of such facts that
its participation therein amounts to bad faith.
<PAGE>
ARTICLE VII
INDEMNIFICATION AND INSURANCE; LIMITATION OF DIRECTORS' LIABILITY
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 1. The corporation shall indemnify any person who was or is
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonably cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against expense (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. No such indemnification against expenses shall be made, however, in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless and only to the extent that the Court of Common
Pleas of the county in which the registered office of the corporation is located
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Common Pleas or such other court
shall deem proper.
Section 3. Indemnification under Sections 1 and 2 of this Article shall
be made by the corporation when ordered by a court or upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in those
Sections Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by shareholders.
Section 4. In addition to and notwithstanding the limited
indemnification provided in Section 1, 2 and 3 of this Article, the corporation
<PAGE>
shall indemnify and hold harmless its present and future officers and directors
of, from and against any and all liability, expenses (including attorneys'
fees), claims, judgments, fines and amounts paid in settlement, actually
incurred by such person in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including but not limited to any action by or in the right of the
corporation), to which such person is, was or at any time becomes, a party, or
is threatened to be made a party, by reason of the fact that such person is, was
or at any time becomes a director or officer of the corporation, or is or was
serving or at any time serves at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other person of any nature whatsoever. Nothing contained in this
Section 4 shall authorize the corporation to provide, or entitle any officer or
director to receive, indemnification for any action taken, or failure to act,
which action or failure to act is determined by a court to have constituted
willful misconduct or recklessness.
Section 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding of the kind described in Sections 1, 2 and 4 of this Article
shall be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking, by or on behalf of
the person who may be entitled to indemnification under those Sections, to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
Section 6. The indemnification, advancement of expenses and limitation
of liability provided in this Article shall continue as to a person who has
ceased to be a director or officer of the corporation and shall inure to the
benefit of the heirs, executors and administrators of such person.
Section 7. Nothing herein contained shall be construed as limiting the
power or obligation of the corporation to indemnify any person in accordance
with the Pennsylvania Business Corporation Law as amended from time to time or
in accordance with any similar law adopted in lieu thereof. The indemnification
and advancement of expenses provided under this Article shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any agreement, vote of
shareholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding that office.
Section 8. The corporation shall also indemnify any person against
expenses, including attorneys' fees, actually and reasonably incurred by him in
enforcing any right to indemnification under this Article, under the
Pennsylvania Business Corporation Law as amended from time to time or under any
similar law adopted in lieu thereof.
Section 9. Any person who shall serve as director, officer, employee or
agent of the corporation or who shall serve, at the request of the corporation,
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall be deemed to do so with
knowledge of and in reliance upon the rights of indemnification provided in this
Article, in the Pennsylvania Business Corporation Law as amended from time to
time and in any similar law adopted in lieu thereof.
INSURANCE
Section 10. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
<PAGE>
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the shares of the corporations, subject to
the provisions of the articles of incorporation, if applicable, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in its shares, subject to the
provisions of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
FINANCIAL REPORT TO SHAREHOLDERS
Section 3. The directors shall send, or cause to be sent, to the
shareholders, within one hundred twenty (120) days after the close of the fiscal
year of the corporation, a financial report as of the closing date of the
preceding fiscal year.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed manually or by facsimile signature of such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
<PAGE>
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Pennsylvania." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
EMERGENCY BYLAWS
Section 7. The Board of Directors of the corporation may adopt
emergency bylaws, subject to repeal or change by action of the shareholders,
which shall, notwithstanding any different provisions of law or of the articles
of incorporation or these bylaws, be effective during any emergency resulting
from an attack on the United States, a nuclear disaster or another catastrophe
as a result of which a quorum of the Board cannot be readily assembled. The
emergency bylaws may make any provision that may be practical and necessary for
the circumstances of the emergency.
ARTICLE IX
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed by a
majority vote of the shareholders entitled to vote thereon at any regular or
special meeting duly convened after notice to the shareholders of that purpose
or by a majority vote of the members of the Board of Directors at any regular or
special meeting duly convened after notice to the directors of that purpose,
subject always to the power of the shareholders to change such action by the
directors.
* * * * * * * * * * * *
As amended through March 2, 1999.
PRIMESOURCE CORPORATION
401(k) SAVINGS PLAN
(Amended and Restated Effective January 1, 1997)
<PAGE>
PRIMESOURCE CORPORATION 401(k) SAVINGS PLAN
(Amended and Restated Effective January 1, 1997)
PrimeSource Corporation (formerly known as Phillips & Jacobs,
Incorporated), a Pennsylvania corporation, (the "Company") adopted the
PrimeSource Corporation 401(k) Savings Plan (formerly known as Phillips &
Jacobs, Incorporated 401(k) Savings Plan) (the "Plan"). The Plan was amended
from time to time.
The Company hereby amends and completely restates the Plan
effective January 1, 1997, except as expressly stated to the contrary herein,
subject to the subsequent condition that the Internal Revenue Service issues a
determination that the Plan as amended and restated herein meets all applicable
requirements of section 401(a) of the Code (as defined in subsection 1(f)), that
employer contributions thereto remain deductible under section 404 of the Code
and that the trust fund maintained with respect thereto remains tax exempt under
section 501(a) of the Code. The Plan, as herein amended and restated, shall
apply only to an Employee who is credited with an Hour of Service (as defined in
subsection 1(p)) on or after January 1, 1997, except as expressly stated to the
contrary herein. The rights and benefits, if any, of a former employee shall be
determined in accordance with the provisions of the Plan as in effect on the
date he last was credited with an Hour of Service.
<PAGE>
PRIMESOURCE CORPORATION 401(k) SAVINGS PLAN
(Amended and Restated Effective January 1, 1997)
TABLE OF CONTENTS
Section Page
1 DEFINITIONS............................................. 1
(a) Accrued Benefit...................................... 1
(b) Administrator or Plan Administrator.................. 1
(c) Annual Additions..................................... 1
(d) Board of Directors................................... 1
(e) Break in Service..................................... 1
(f) Code................................................. 2
(g) Committee............................................ 2
(h) Company.............................................. 2
(i) Compensation......................................... 2
(j) Disability........................................... 2
(k) Employee............................................. 3
(l) Entry Date........................................... 3
(m) ERISA................................................ 3
(n) Fiduciary............................................ 3
(o) Fund................................................. 4
(p) Hour of Service...................................... 4
(q) Investment Category.................................. 6
(r) Investment Manager................................... 6
(s) Limitation Year...................................... 6
(t) Matching Account..................................... 7
(u) Member............................................... 7
(v) Normal Retirement Date............................... 7
(w) Participating Company................................ 7
(x) Period of Service.................................... 7
(y) Period of Severance.................................. 7
(z) Plan................................................. 8
(aa) Prior Year........................................... 8
(ab) PrimeSource Stock.................................... 8
(ac) Prior Plan........................................... 8
(ad) Related Entity....................................... 8
(ae) Restatement Effective Date........................... 9
(af) Rollover Account..................................... 9
(ag) Salary Reduction Account............................. 9
(ah) Service.............................................. 9
(ai) Severance Date....................................... 10
(aj) Transferred Account.................................. 11
(ak) Trust Agreement...................................... 11
(al) Trustee.............................................. 11
(am) Valuation Date....................................... 11
(an) Voluntary Contributions Account...................... 11
(ao) Year of Service for Eligibility...................... 11
<PAGE>
PRIMESOURCE CORPORATION 401(k) SAVINGS PLAN
(Amended and Restated Effective January 1, 1997)
TABLE OF CONTENTS
Section Page
2 ADMINISTRATION OF THE PLAN............................... 12
(a) Allocation of Responsibility.......................... 12
(b) Plan Administrator.................................... 12
(c) Committee............................................. 12
(d) Powers of Board of Directors.......................... 13
(e) Powers of Trustee..................................... 14
(f) Claims................................................ 14
(g) Fiduciary Compensation................................ 15
(h) Plan Expenses......................................... 15
(i) Fiduciary Insurance................................... 15
(j) Indemnification....................................... 15
3 PARTICIPATION IN THE PLAN................................ 16
(a) Initial Eligibility.................................. 16
(b) Measuring Service.................................... 17
(c) Termination and Requalification...................... 17
(d) Commencement of Participation........................ 18
(e) Special Rule for Rollovers........................... 18
(f) Termination of Membership............................ 18
4 MEMBER AND PARTICIPATING COMPANY CONTRIBUTIONS........... 19
(a) Salary Reduction Contributions....................... 19
(b) Salary Reduction Contribution Limitations............ 19
(c) Salary Reduction Account............................. 21
(d) Participating Company Matching Contributions......... 21
(e) Matching Account..................................... 22
(f) Compliance with Salary Reduction Contributions
Discrimination Tests................................ 22
(g) Compliance with Participating Company Matching
Contributions Discrimination Tests.................. 26
(h) Payroll Taxes........................................ 31
(i) Rollovers............................................ 31
(j) Other Member Contributions........................... 31
(k) Transferred and Voluntary Contributions Accounts..... 31
(l) Deductibility........................................ 32
5 MAXIMUM CONTRIBUTIONS AND BENEFITS....................... 33
(a) Defined Contribution Limitation...................... 33
(b) Combined Limitation.................................. 34
(c) Combined Limitation Computation...................... 34
(d) Definition of "Compensation" for Code Limitations.... 35
(e) Transition Provision................................. 37
<PAGE>
PRIMESOURCE CORPORATION 401(k) SAVINGS PLAN
(Amended and Restated Effective January 1, 1997)
TABLE OF CONTENTS
Section Page
6 ADMINISTRATION OF FUNDS.................................. 38
(a) Investment Control.................................... 38
(b) Employer Stock........................................ 38
(c) Member Elections...................................... 39
(d) No Member Election.................................... 39
(e) Facilitation.......................................... 39
(f) Valuations............................................ 40
(g) Allocation of Gain or Loss............................ 40
(h) Bookkeeping........................................... 40
(i) Tender Offers......................................... 40
(j) Voting Company Stock.................................. 41
7 BENEFICIARIES AND DEATH BENEFITS......................... 42
(a) Designation of Beneficiary............................ 42
(b) Beneficiary Priority List............................. 42
(c) Proof of Death........................................ 43
(d) Divorce............................................... 43
8 BENEFITS FOR MEMBERS..................................... 44
(a) Retirement Benefit.................................... 44
(b) Death Benefit......................................... 44
(c) Disability Benefit.................................... 44
(d) Termination of Employment Benefit..................... 44
(e) Time of Forfeiture.................................... 47
9 DISTRIBUTION OF BENEFITS................................. 48
(a) Commencement.......................................... 48
(b) Benefit Forms......................................... 49
(c) Benefit Election...................................... 49
(d) Distributions in Kind................................. 49
(e) Deferred Payments and Installments.................... 49
(f) Withholding........................................... 50
(g) Compliance with Code Requirements..................... 50
(h) Distribution Limitations ............................. 50
(i) Rollover Election . . . .............................. 51
10 IN-SERVICE DISTRIBUTIONS................................. 53
(a) General Rule.......................................... 53
(b) Elective Distributions................................ 53
(c) Age 59-1/2............................................ 53
(d) Hardship.............................................. 53
(e) Special Vested Balance Calculation Rule............... 55
<PAGE>
PRIMESOURCE CORPORATION 401(k) SAVINGS PLAN
(Amended and Restated Effective January 1, 1997)
TABLE OF CONTENTS
Section Page
11 LOANS.................................................... 57
(a) Availability............................................ 57
(b) Minimum Requirements.................................... 57
(c) Accounting.............................................. 59
12 TITLE TO ASSETS.......................................... 60
13 AMENDMENT AND TERMINATION................................ 61
(a) Amendment.............................................. 61
(b) Termination............................................ 61
(c) Conduct on Termination................................. 61
14 LIMITATION OF RIGHTS..................................... 63
(a) Alienation............................................. 63
(b) Qualified Domestic Relations Order Exception........... 63
(c) Employment............................................. 63
15 MERGERS, CONSOLIDATIONS OR TRANSFERS OF PLAN ASSETS...... 65
(a) General Rule........................................... 65
(b) Protected Benefits..................................... 65
(c) Special Provisions Applicable to Transferred Accounts
from The Momentum Money-Maker 401(k)
Retirement Plan and the Onondaga Litho Supply Co.,
Inc. Employees' Profit Sharing and Retirement Plan.... 65
(d) In-Service Distribution from Certain Transferred
Accounts............................................. 69
(e) Vesting -- Dixie Plan.................................. 69
(f) Code Requirements...................................... 69
16 PARTICIPATION BY RELATED ENTITIES........................ 70
(a) Commencement........................................... 70
(b) Termination............................................ 70
(c) Single Plan............................................ 70
(d) Delegation of Authority................................ 70
17 TOP-HEAVY REQUIREMENTS................................... 71
(a) General Rule............................................ 71
(b) Calculation of Top-Heavy Status......................... 71
(c) Definitions............................................. 71
(d) Combined Benefit Limitation............................. 74
(e) Vesting................................................. 74
(f) Minimum Contribution.................................... 74
<PAGE>
PRIMESOURCE CORPORATION 401(k) SAVINGS PLAN
(Amended and Restated Effective January 1, 1997)
TABLE OF CONTENTS
Section Page
18 MISCELLANEOUS............................................ 76
(a) Incapacity.............................................. 76
(b) Reversions.............................................. 76
(c) Employee Data........................................... 77
(d) In Writing Requirement.................................. 77
(e) Doubt as to Right to Payment............................ 77
(f) Inability to Locate Distributee......................... 77
(g) Estoppel of Members and Their Beneficiaries............. 78
(h) Law Governing........................................... 78
(i) Pronouns................................................ 78
(j) Interpretation.......................................... 78
Schedule A............................................................. A-1
<PAGE>
1. DEFINITIONS
(a) "Accrued Benefit" shall mean on any date of determination the
value of a Member's share of the Fund. (b) "Administrator" or
"Plan Administrator" shall mean a plan administrator within the
meaning of the Code and ERISA. The Company shall be the
Administrator. (c) "Annual Additions" shall mean the sum for any
Limitation Year of (i) employer contributions, (ii) employee
contributions, (iii) forfeitures and (iv) amounts described in
sections 415(l) and 419A(d) of the Code, which are (A) allocated
to an account which provides medical benefits under section
401(h) or 419(e) of the Code and (B) treated as "Annual
Additions" to the account of a Member under such provisions of
the Code. "Annual Additions" shall include excess contributions
as defined in section 401(k)(8)(B) of the Code, excess aggregate
contributions as defined in section 401(m)(6)(B) of the Code and
excess deferrals as described in section 402(g) of the Code,
regardless of whether such amounts are distributed or forfeited.
"Annual Additions" shall not include (i) rollover contributions
(as defined in sections 402(c), 403(a)(4), 403(b)(8) and
408(d)(3) of the Code), (ii) employee contributions to a
simplified employee pension plan which are excludable from gross
income under section 408(k)(6) of the Code or (iii) "buy-back"
contributions made under subsection 8(d)(iv) of the Plan. (d)
"Board of Directors" shall mean the Board of Directors of the
Company or any committee or delegee thereof designated in
accordance with subsection 2(d). (e) "Break in Service" shall
mean for purposes of Section 3 a specified twelve-month
computation period in which an Employee is credited with less
than 501 Hours of Service and for purposes of Section 8 a Period
of Severance of at least five years.
<PAGE>
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the same as may be further amended from time to
time. (g) "Committee" shall mean the individual or group of
individuals designated to control and manage the operation and
administration of the Plan to the extent set forth herein. (h)
"Company" shall mean PrimeSource Corporation, a Pennsylvania
corporation. (i) "Compensation" shall mean the total cash
remuneration for services paid to an Employee by a Participating
Company for services during the portion of a plan Year such
Employee is eligible to participate under subsections 3(a) and
3(d). "Compensation" shall also include amounts of cash
remuneration for services which an Employee elects to have
withheld from his remuneration for services under this Plan or a
plan which meets the requirements of section 125 of the Code.
"Compensation" shall not include (i) income from exercise of
stock options, receipt or vesting of restricted stock grants,
exercise of stock appreciation rights or similar equity-based
compensation arrangements, (ii) severance pay, (iii) deferred
compensation, (iv) expense reimbursements or allowances of any
kind, including, but not limited to, tuition reimbursement and
car allowances, (v) moving expenses, and (vi) the value of
welfare benefits or perquisites or similar items. "Compensation"
with respect to any Member for any Plan Year shall be limited to
$150,000 (or an increased amount permitted in accordance with a
cost of living adjustment under section 415(d) of the Code).
<PAGE>
(j) "Disability" shall mean a medically determinable
physical or mental impairment which would qualify a
Member for benefits under the Company's long-term disability plan, without
regard to whether the Member participates in such plan and is of a potentially
permanent character which prevents a Member from continuing his usual and
customary employment with a Participating Company. Disability shall be
determined by the Committee in its absolute discretion on the basis of such
medical evidence as the Committee deems necessary or desirable.
(k) "Employee" shall mean each and every person who
is an employee of a Participating Company or a Related
Entity. The term "Employee" shall also include a person who is a "leased
employee" (within the meaning of section 414(n)(2) of the Code) with respect to
a Participating Company or a Related Entity. Notwithstanding the foregoing, no
person who is a "leased employee" or who a Participating Company determines is
not its employee for purposes of wage withholding required under section 3401,
et. seq. of the Code (regardless of whether an administrative agency or court
rules that such person is a Participating Company's employee for any purpose)
shall be eligible to participate in this Plan or be deemed an "Employee" for
purposes of eligibility to participate in this Plan.
(l) "Entry Date" shall mean the first day of each January,
April, July and October of each Plan Year.
Effective July 1, 1999, "Entry Date" shall mean the first day of each calendar
month.
(m) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended, and the same as
may be further amended from time to time.
(n) "Fiduciary" shall mean a person who, with
respect to the Plan, (i) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control with respect to management or disposition of
the Plan's assets, (ii) renders investment advice for a fee or other
compensation, direct or indirect, with respect to any monies or other property
of the Plan, or has any authority or responsibility to do so, or (iii) has any
discretionary authority or discretionary responsibility in the administration of
the Plan.
<PAGE>
(o) "Fund" shall mean the assets of the Plan. All Investment
Categories shall be part of the Fund.
(p) "Hour of Service"
(i) General Rule. "Hour of Service" shall mean each hour (A) for
which an Employee is directly or indirectly paid, or entitled to
payment, by a Participating Company or a Related Entity for the
performance of duties or (B) for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed to by a
Participating Company or a Related Entity. These hours shall be
credited to the Employee for the period or periods in which the
duties were performed or to which the award or agreement pertains
irrespective of when payment is made. The same hours shall not be
credited under both (A) and (B) above.
(ii) Paid Absences. An Employee shall also be credited with one
"Hour of Service" for each hour for which the Employee is
directly or indirectly paid, or entitled to payment, by a
Participating Company or a Related Entity for reasons other than
the performance of duties or absence due to vacation, holiday,
illness, incapacity, disability, layoff, jury duty or authorized
leave of absence for a period not exceeding one year for any
reason in accordance with a uniform policy established by the
Committee; provided, however, not more than 501 "Hours of
Service" shall be credited to an Employee under this subsection
1(p)(ii) on account of any single, continuous period during which
the Employee performs no duties and provided, further, that no
credit shall be given if payment (A) is 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 (B) is made solely to reimburse an Employee for
medical or medically related expenses incurred by the Employee.
<PAGE>
(iii) Military. An Employee shall also be credited with one "Hour
of Service" for each regularly scheduled work hour during which
the Employee is absent on active duty in the military service of
the United States under leave of absence granted by a
Participating Company or a Related Entity provided he returns to
employment with a Participating Company or a Related Entity
within 90 days after his release from active duty.
Notwithstanding the foregoing or any provision of this Plan to
the contrary, Hours of Service credit with respect to qualified
military service will be provided in accordance with section
414(u) of the Code if that provides greater credit.
(iv) Maternity/Paternity. For purposes of subsection 1(e), an
Employee shall be credited with one "Hour of Service" for each
hour that otherwise would normally have been credited to the
Employee but during which such Employee is absent from work for
any period (A) by reason of the Employee's pregnancy, (B) by
reason of the birth of the Employee's child, (C) by reason of the
placement of a child with such Employee in connection with an
adoption of such child by the Employee or (D) for purposes of
caring for a child for a period beginning immediately following
such birth or placement, provided that an Employee shall be
credited with no more than 501 "Hours of Service" on account of
any single continuous period of absence by reason of any such
pregnancy, birth or placement and provided further that "Hours of
Service" credited to an individual on account of such a period of
absence shall be credited in the Plan Year in which such absence
begins if an Employee would otherwise fail to be credited with
501 or more "Hours of Service" in such Plan Year or, in any other
case, in the immediately following Plan year.
(v) Equivalencies. If, for Plan purposes, an Employee's records
are kept on other than an hourly basis as described above, the
Committee, according to uniform rules applicable to a class of
Employees or Members, may apply the following equivalencies for
purposes of crediting "Hours of Service":
<PAGE>
Basis Upon Which Records Credit Granted to Individual if Individual Earns
are Maintained One or More Hours of Service During Period
Shift Actual hours for full shift
Day 10 Hours of Service
Week 45 Hours of Service
Semi-Monthly Payroll Period 95 Hours of Service
Months of Employment 190 Hours of Service
(vi) Miscellaneous. For purposes of this subsection 1(p), the
regulations issued by the Secretary of Labor at 29 CFR
ss.2530.200b-2(b) and (c) are incorporated by reference. Nothing
herein shall be construed as denying an Employee credit for an
"Hour of Service" if credit is required by separate federal law.
(q) "Investment Category" shall mean any separate investment fund
which is made available under the terms of the Plan.
(r) "Investment Manager" shall mean any Fiduciary (other than a
Trustee) who:
(i) has the power to manage, acquire, or
dispose of any asset of the Plan;
(ii) is:
(A) registered as an investment
advisor under the Investment Advisers
Act of 1940; (B) a bank, as defined
in that Act; or (C) an insurance
company qualified to perform services
described in subsection 1(r)(i)
above under the laws of more than one state; and
(iii) has acknowledged in writing that he
is a Fiduciary with respect to the Plan.
(s) "Limitation Year" shall mean the consecutive
twelve-month period commencing on January 1st and ending on December 31st.
<PAGE>
(t) "Matching Account" shall mean the portion of the
Member's Accrued Benefit derived from Participating
Company contributions under subsection 4(d) hereof and the corresponding
provisions of the Plan as heretofore effective, adjusted as provided in
subsection 4(e).
(u) "Member" shall mean each Employee of a
Participating Company who satisfies the requirements for participation under
Section 3 hereof and each other person who has an AccruedBenefit held under the
Plan.
(v) "Normal Retirement Date" shall mean the date on
which a Member attains age 65.
----------------------
(w) "Participating Company" shall mean each Related
Entity with respect to the Company which adopts or is
---------------------
deemed to adopt this Plan pursuant to Section 16. The term shall also include
the Company, unless the context otherwise requires.
(x) "Period of Service" shall mean the period of
time commencing on the date on which an Employee first is
-----------------
credited with an Hour of Service or, if applicable, on the date following a
Period of Severance of one year or more on which an Employee first is credited
with an Hour of Service provided he requalifies for participation under
subsection 3(c), and ending on the next following Severance Date; provided,
however, the period beginning on the anniversary of the date of an Employee's
absence due to maternity or paternity and ending on the second anniversary
thereof shall not be included in a Period of Service. A Period of Severance of
less than one year shall be included in a Period of Service for all purposes.
(y) "Period of Severance" shall mean the period of
time commencing on an Employee's Severance Date and
-------------------
ending on the date on which the Employee first again is credited with an Hour of
Service, exclusive of periods during which an Employee is on an unpaid leave
pursuant to the Family and Medical Leave Act of 1993.
<PAGE>
(z) "Plan" shall mean the PrimeSource Corporation
401(k) Savings Plan as amended and restated as set forth
----
herein effective January 1, 1997, and the same as may be amended from time to
time.
(aa) "Plan Year" shall mean the consecutive twelve-
month period commencing on January 1st and ending on December 31st.
(ab) "PrimeSource Stock" shall mean PrimeSource
Corporation common stock.
-----------------
(ac) "Prior Plan" shall mean any retirement plan
which satisfies the applicable requirements of section
----------
401(a) of the Code and from which assets and liabilities are transferred to this
Plan in accordance with section 414(l) of the Code so that this Plan is subject
to the requirements of section 411(d)(6) of the Code with respect to transferred
accounts.
<PAGE>
(ad) "Related Entity" shall mean (i) all corporations
which are members with a Participating Company in a
controlled group of corporations within the meaning of section 1563(a) of the
Code, determined without regard to sections 1563(a)(4) and (e)(3)(C) of the
Code, (ii) all trades or businesses (whether or not incorporated) which are
under common control with a Participating Company as determined by regulations
promulgated under section 414(c) of the Code, (iii) all trades or businesses
which are members of an affiliated service group with a Participating Company
within the meaning of section 414(m) of the Code and (iv) any entity required to
be aggregated with a Participating Company under regulations prescribed under
section 414(o) of the Code (to the extent provided in such regulations);
provided, however, for purposes of Section 5, the definition shall be modified
to substitute the phrase "more than 50%" for the phrase "at least 80%" each
place it appears in section 1563(a)(1) of the Code. Furthermore, for purposes of
crediting Hours of Service for eligibility to participate and Service for
purposes of vesting, employment as a "leased employee," within the meaning of
section 414(n) of the Code, of a Participating Company or a Related Entity shall
be treated as employment for a Participating Company or a Related Entity. For
purposes of subsection 3(a) governing Hours of Service and periods of employment
credited for purposes of eligibility to participate, Bell Industries, Inc. shall
be deemed a "Related Entity" for periods through September 14, 1998 for persons
who become Employees on September 14, 1998 as a result of an asset acquisition
from Bell Industries, Inc. on that date. An entity the stock or assets of which
a Participating Company acquires on or after September 1, 1999 which is listed
on Schedule A shall be deemed a "Related Entity" for the purposes and the
periods prior to the date set forth in Schedule A for persons who become
Employees incident to and within 30 days of such acquisition. In any other case,
an entity is a "Related Entity" only during those periods in which it is
included in a category described in this subsection.
(ae) "Restatement Effective Date" shall mean January
1, 1997.
--------------------------
(af) "Rollover Account" shall mean the portion of the
Member's Accrued Benefit derived from contributions
----------------
made under subsection 4(i)(i) hereof and the corresponding provisions of the
Plan as heretofore effective, adjusted as provided in subsection 4(i)(ii).
(ag) "Salary Reduction Account" shall mean the
portion of the Member's Accrued Benefit derived from
------------------------
contributions made under subsection 4(a) hereof and the corresponding provisions
of the Plan as heretofore effective, adjusted as provided in subsection 4(c).
(ah) "Service" shall mean the sum of an Employee's
Periods of Service. Service is measured in completed
-------
years and days, where 365 days of Service equal one completed year of Service.
<PAGE>
(ai) "Severance Date" shall mean the earlier of (i)
the date an Employee quits, is discharged (or severed,
if later), retires or dies or (ii) the first anniversary of the date an Employee
is absent from the employ of all Participating Companies and all Related
Entities for any reason other than an approved leave of absence granted in
writing by the Company according to a uniform rule applied without
discrimination or in accordance with applicable law provided the Employee
returns to the employ of a Participating Company or a Related Entity upon
completion of the leave. However, if the Employee was on any period of unpaid
leave taken pursuant to the Family and Medical Leave Act of 1993, he shall not
incur a Severance Date for purposes of subsection 1(e) until the leave expires
or, if applicable, the date determined under the last sentence of this
subsection. Further, an Employee who terminates Service to enter the military
service of the United States shall not suffer a Severance Date as of such date
provided (i) such Employee's rights are protected by the Uniform Services
Employment and Reemployment Rights Act of 1994 or other federal law and (ii)
such Employee returns to employment with a Participating Company or a Related
Entity within the period required by law for preservation of his rights. Under
such circumstances, an Employee shall receive credit for Service for his entire
period of absence. If an Employee on an approved leave of absence or qualified
military service does not return to the employ of a Participating Company or a
Related Entity upon completion of his leave or expiration of the period provided
by law in the case of qualified military service, his Severance Date generally
shall be the last day for which he received his regular pay. In addition, for
purposes of subsection 1(e), an Employee shall not suffer a Severance Date until
the second anniversary of the date on which such Employee is absent from work
(i) by reason of the Employee's pregnancy, (ii) by reason of the birth of the
Employee's child, (iii) by reason of the placement of a child with such Employee
in connection with an adoption of
<PAGE>
such child by the Employee or (iv) for purposes of caring for a child for a
period beginning immediately following birth or placement.
(aj) "Transferred Account" shall mean the portion of
the Member's Accrued Benefit transferred to this Plan
from a Prior Plan by reason of a plan merger or direct transfer from another
plan without the Member's consent.
(ak) "Trust Agreement" shall mean the agreement or
agreements between the Company and a Trustee under which all or a portion of the
Fund is held.
(al) "Trustee" shall mean such person, persons or
corporate fiduciary designated to manage and control all or a portion of the
Fund pursuant to the terms of the Plan and a Trust Agreement.
(am) "Valuation Date" shall mean any business day the
New York Stock Exchange is open for trading and such other dates as the
Committee may specify from time to time. With respect to a
Member's Accrued Benefit, the business day of initial investment of new
contributions or liquidation of a Member's investment credited to an Investment
Category for reinvestment or distribution shall be the "Valuation Date" for
purposes of determining the amount of investment, reinvestment or distribution.
(an) "Voluntary Contributions Account" shall mean the
portion of a Member's Accrued Benefit derived from his contributions under a
Prior Plan which were includable in gross income forfederal income tax purposes.
(ao) "Year of Service for Eligibility" shall mean a
consecutive twelve-month measuring period specified in Section 3 in which an
Employee is credited with 1,000 Hours of Service or more.
<PAGE>
20 ADMINISTRATION OF THE PLAN
(a) Allocation of Responsibility. The Board of
Directors, the Administrator, the Committee, each Trustee
and each Investment Manager (if any) possess certain specified powers, duties,
responsibilities and obligations under the Plan's governing instruments. It is
intended under this Plan that each Fiduciary be responsible solely for the
proper exercise of its own functions and that each not be responsible for any
act or failure to act of another, unless otherwise responsible as a breach of
its fiduciary duty or for breach of duty by another Fiduciary under ERISA's
rules of co-fiduciary responsibility. Any person may serve in more than one
fiduciary capacity.
(b) Plan Administrator. The Plan Administrator
shall file all reports and distribute to Members and
beneficiaries reports and other information required under ERISA or the Code and
shall discharge all other duties of a plan administrator under ERISA or the Code
with respect to the Plan.
(c) Committee. The Committee shall be the Plan's
named fiduciary (within the meaning of ERISA) and shall
have the power and duty to control and manage the operation and administration
of the Plan which shall include, but shall not be limited to, the performance of
the following acts:
(i) the filing of all reports required of
the Plan, other than those which are the responsibility of the Administrator;
(ii) the distribution to Members and
beneficiaries of all reports and other information required of the Plan, other
than reports and information required to be distributed by the Administrator;
(iii) the keeping of complete records of
the administration of the Plan;
<PAGE>
(iv) the promulgation of rules and
regulations for administration of the Plan consistent with the terms and
provisions of the Plan and the Trust Agreement and the establishment of a
procedure to determine the qualified status of a domestic relations order;
(v) the establishment of a funding policy
and method for the Plan, including, but not limited
to, selecting or establishing Investment Categories for the Plan; and
(vi) the absolute discretion to interpret
the Plan and its terms, including the absolute
discretion to determine any questions of fact arising under the Plan and to make
all decisions required by the Plan. The Committee's interpretation of the Plan
and any actions and decisions taken in good faith by the Committee based on its
interpretation shall be final and conclusive. The Committee may correct any
defect, or supply any omission, or reconcile any inconsistency in the Plan in
such manner and to such extent as shall be expedient to carry the Plan into
effect and shall be the sole judge of such expediency. The Committee may (i)
delegate all or a portion of the responsibilities of controlling and managing
the operation and administration of the Plan to one or more persons, and (ii)
appoint agents, investment advisers, counsel, physicians or other
representatives to render advice with regard to any of its responsibilities
under the Plan.
<PAGE>
(d) Powers of Board of Directors. The Board of
Directors is responsible for appointing and removing each
Trustee, each Investment Manager (if any) and the Committee and for amending the
Plan, each Trust Agreement, and each asset management agreement (if any). The
Board of Directors may delegate any power or duty it has under the Plan or a
Trust Agreement, including, but not limited to, amending the Plan or a Trust
Agreement, to a committee of the Board of Directors, to any officer(s) or
Employee(s) of the Company or a Related Entity or to any other person or entity,
in which case such delegee and not the Board of Directors, shall be responsible
for exercise of the delegated functions.
(e) Powers of Trustee. Each Trustee and each
Investment Manager (if any) is responsible for the
management and control of the portion of the Fund over which it
has control to the extent provided in its Trust Agreement or asset management
agreement, respectively.
(f) Claims. If, pursuant to the rules, regulations
or other interpretations of the Plan, the Committee
denies the claim of a Member or beneficiary for benefits under the Plan, the
Committee shall provide written notice, within 90 days after receipt of the
claim, setting forth in a manner calculated to be understood by the claimant:
(i) the specific reasons for such denial;
(ii) the specific reference to the Plan
provisions on which the denial is based;
(iii) a description of any additional
material or information necessary to perfect the claim and
an explanation of why such material or information is needed; and
(iv) an explanation of the Plan's claim
review procedure and the time limitations of this
subsection applicable thereto.
<PAGE>
A Member or beneficiary whose claim for benefits has been denied may request
review by the Committee of the denied claim by notifying the Committee in
writing within 60 days after receipt of the notification of claim denial. As
part of said review procedure, the claimant or his authorized representative may
review pertinent documents and submit issues and comments to the Committee in
writing. The Committee shall render its decision to the claimant in a manner
calculated to be understood by the claimant not later than 60 days after receipt
of the request for review, unless special circumstances require an extension of
time, in which case decision shall be rendered as soon after the sixty-day
period as possible, but not later than 120 days after receipt of the request for
review. The decision on review shall state the specific reasons therefor and the
specific Plan references on which it is based.
(g) Fiduciary Compensation. Each Fiduciary who
already receives full-time pay from a Participating
Company or a Related Entity shall serve without compensation from the Plan for
his services as such, but he shall be reimbursed pursuant to subsection 2(h) for
any reasonable expenses incurred by him in the administration of the Plan. A
Fiduciary who is not already receiving full-time pay from a Participating
Company may be paid such reasonable compensation as shall be agreed upon.
(h) Plan Expenses. All expenses of administration
of the Plan shall be paid out of the Fund unless paid
by the Company or a Member. According to uniform rules, the Committee may charge
expenses to a particular Investment Category, a particular Member's Accrued
Benefit or a particular Member if the Committee determines that such allocation
of expense or charge is desirable for the equitable administration of the Plan.
(i) Fiduciary Insurance. If the Committee so
directs, the Plan shall purchase insurance to cover the Plan
from liability or loss occurring by reason of the act or omission of a Fiduciary
provided such insurance permits recourse by the insurer against the Fiduciary in
the case of a breach of a fiduciary obligation by such Fiduciary.
(j) Indemnification. The Company shall indemnify
and hold harmless to the maximum extent permitted by its
by-laws each Fiduciary who is an Employee or who is an officer or director of a
Participating Company or any Related Entity from any claim, damage, loss or
expense, including litigation expenses and attorneys' fees, resulting from such
person's service as a Fiduciary of the Plan provided the claim, damage, loss or
expense does not result from the Fiduciary's gross negligence or intentional
misconduct.
<PAGE>
30 PARTICIPATION IN THE PLAN
(a) Initial Eligibility
(i) Service Requirement
(A) Prior to January 1,1999. Each
and every Employee of a Participating Company not
excluded under subsection 3(a)(ii) shall be eligible to make contributions under
subsection 4(a) and be allocated matching contributions for payroll periods
commencing coincident with or next following the Entry Date the Employee is
credited with one Year of Service for Eligibility, or, if later, the Entry Date
after the Employee attains age 21.
(B) After December 31, 1998. Each
and every Employee of a Participating Company not
excluded under subsection 3(a)(ii) shall be eligible to make contributions under
subsection 4(a) and be allocated matching contributions for payroll periods
commencing coincident with or next following the Entry Date the Employee is
credited with at least 250 Hours of Service in a consecutive period of three
calendar months, or, if later, the first Entry Date after the Employee attains
age 21.
(ii) Excluded Employees. Notwithstanding the
foregoing provision of this subsection,
<PAGE>
(A) no Employee whose terms and
conditions of employment are determined by a collective
bargaining agreement between employee representatives and a Participating
Company shall be eligible to participate unless such collective bargaining
agreement provides to the contrary, in which case such Employee shall be
eligible to participate upon compliance with such provisions for eligibility and
participation as such agreement shall provide; except that no Employee who has
selected, or in the future selects, a union shall become ineligible during the
period between his selection of the union and the execution of the first
collective bargaining agreement which covers him; (B) no person who is an
Employee by reason of the second sentence of subsection 1(k) shall be eligible
to participate;
(C) no person a Participating Company
determines is not its employee for purposes of
federal income tax withholding shall be eligible to participate, regardless of
whether an administrative agency or court rules that such person is a
Participating Company's employee for any purpose; and
(D) no Employee who is a nonresident
alien and who receives no earned income (within the
meaning of section 911(d)(2) of the Code) from a Participating Company which
constitutes income from sources within the United States (within the meaning of
section 861(a)(3) of the Code) shall be eligible to participate.
(b) Measuring Service
(A) Prior to January 1, 1999.
For purposes of measuring service to satisfy the
eligibility provisions, the Year of Service for Eligibility computation period
shall begin with the date on which the Employee first is credited with an Hour
of Service; provided, however, if an Employee is credited with less than 1,000
Hours of Service in such measuring period, then subsequent measuring periods
shall begin with the January 1st next following the Employee's date of hire and
continue on a Plan Year basis thereafter.
(B) After December 31, 1998.
For purposes of measuring Service to satisfy the
eligibility provisions, the computation period shall begin with the date on
which the Employee first is credited with an Hour of Service.
(c) Termination and Requalification. An Employee
who has satisfied
the applicable service requirement of subsection 3(a) and who subsequently
becomes ineligible for any reason shall requalify for participation on the date
on which he is next
<PAGE>
credited with an Hour of Service in an eligible job classification under
subsection 3(a), or, if later, the Entry Date after he attains age 21.
(d) Commencement of Participation. An Employee who
satisfies all the requirements for eligibility under
subsection 3(a) shall become a Member on the Entry Date following his timely
election authorizing amounts be withheld from his Compensation and be credited
to his Salary Reduction Account under the Plan. An Employee who satisfies all
the requirements for eligibility under subsection 3(a) and who does not elect to
have amounts withheld from his Compensation shall be deemed a participant in the
Plan to the extent required by ERISA on the first Entry Date as of which his
election to have amounts withheld could have become effective.
(e) Special Rule for Rollovers. An Employee of a
Participating Company who will be eligible to
participate in the Plan after satisfying the Service requirement of subsection
3(a) may make a contribution to the Plan under subsection 4(i). An individual
who makes a contribution under subsection 4(i) shall become a Member on the date
of his contribution; however, such individual shall not be considered to be a
Member for purposes of the remainder of Section 4 until he satisfies the Service
requirement of subsection 3(a).
(f) Termination of Membership. An Employee who
becomes a Member shall remain a Member as long as he has
an Accrued Benefit held under the Plan.
<PAGE>
40 MEMBER AND PARTICIPATING COMPANY CONTRIBUTIONS
(a) Salary Reduction Contributions. Each Employee
who becomes eligible to participate under subsection
3(a) may contribute any even multiple of 1.0%, but not less than 2% or more than
15%, of his Compensation for a payroll period, as he shall elect in a manner
prescribed by the Committee. The Committee may limit further the amount of
contribution for all Members or a class of Members as the Committee determines
is necessary or desirable to facilitate Plan administration or comply with
applicable Code provisions. The initial election to contribute may be effective
as of any Entry Date. Such contribution shall be accomplished through direct
reduction of Compensation in each payroll period that the election is in effect.
For purposes of the Code, such contribution shall be deemed to be made by the
Member's employer. A Member may elect to increase or reduce his contributions as
of an Entry Date or terminate his contributions as of any date. All such
elections shall be made in a manner and shall become effective on the date the
Committee prescribes as the effective date. Contributions made by Participating
Companies under this subsection shall be made at such times as the Company
determines and shall be allocated to the Salary Reduction Accounts of the
Members from whose Compensation the contributions were withheld in an amount
equal to the amount withheld.
(b) Salary Reduction Contribution Limitations.
Contributions under subsection 4(a) shall be limited as provided below:
<PAGE>
(i) Exclusion Limit. The maximum amount
of contribution which any Member may make in any
calendar year under subsection 4(a) is $9,500 (or such increased annual amount
resulting from a cost of living adjustment pursuant to sections 402(g)(5) and
415(d)(1) of the Code), reduced by the amount of elective deferrals by such
Member under all other plans, contracts or arrangements of any Participating
Company or Related Entity. If the contribution under subsection 4(a) for a
Member for any calendar year exceeds $9,500 (or such increased annual amount
resulting from an adjustment described above), the Committee shall direct the
Trustee to distribute the excess amount (plus any income and minus any loss
allocable to such amount) to the Member not later than the April 15th following
the close of such calendar year. If (A) a Member participates in another plan
which includes a qualified cash or deferred arrangement or other program subject
to the limitations of section 402(g) of the Code, (B) such Member contributes in
the aggregate more than the exclusion limit under this Plan and the
corresponding provisions of the other plan and (C) the Member notifies the
Committee not later than the March 1st following the close of such calendar year
of the portion of the excess the Member has allocated to this Plan, then the
Committee may direct the Trustee to distribute to the Member not later than
April 15th following the close of such calendar year the excess amount (plus any
income and minus any loss allocable to such amount) which the Member allocated
to this Plan. A Member shall be deemed to have given the notification described
in (C) above if the excess results from contributions solely to this Plan or
plans sponsored by Related Entities.
(ii) Discrimination Test Limits. The
Committee may limit the maximum amount of contribution for
Members who are "highly compensated employees" (as defined below) to the extent
it determines that such limitation is necessary to keep the Plan in compliance
with section 401(a)(4) or section 401(k)(3) of the Code. Any limitation shall be
effective for all payroll periods following the announcement of the limitation.
For purposes of Section 4 of the Plan, the term "highly compensated employee"
shall mean an Employee who is described in either or both of the following
groups:
(A) an Employee who is a 5%
owner, as defined in section 416(i)(1) of the Code, at any
time during the current Plan Year or the last preceding Plan Year;
<PAGE>
(B) an Employee who receives
"compensation" (as defined below) in excess of $80,000
(or an increased amount resulting from a cost of living adjustment) during the
preceding Plan Year and was in the "top-paid" group (as defined below) for the
preceding Plan Year.
For purposes hereof, the following rules and
definitions shall apply:
(C) The "top-paid" group consists
of the top 20% of Employees ranked on the basis of
"compensation" received during the year. For purposes of determining the number
of Employees in the "top-paid" group, Employees described in section 414(q)(5)
of the Code and Q&A 9(b) of section 1.414(q)-1T of the regulations thereunder
are excluded.
(D) "Compensation" is
compensation within the meaning of section 415(c)(3) of the
Code, and for the 1997 Plan Year also includes elective or salary reduction
contributions to a cafeteria plan, cash or deferred arrangement or tax-sheltered
annuity under sections 125, 402(e)(3), 402(h)(3), and 403(b) of the Code.
(E) Employers aggregated under
section 414(b), (c), (m), or (o) of the Code are
treated as a single employer, subject to application of the "separate line of
business rules" exception under section 410(b)(5) of the Code.
(c) Salary Reduction Account. Each Member's salary
reduction contributions, as adjusted for investment
gain or loss and income or expense, constitute such Member's Salary Reduction
Account. A Member shall at all times have a nonforfeitable interest in the
portion of his Accrued Benefit derived from his Salary Reduction Account.
(d) Participating Company Matching Contributions.
--------------------------------------------
<PAGE>
(i) Amount. Each Participating Company
shall contribute with respect to each Member employed
by it who is eligible under subsection 3(a) a percentage set by the Company, but
not to exceed 100%, on or before the first day of the Plan Year of the Member's
salary reduction contribution for each payroll period; provided, however, the
maximum amount of contribution under this subsection for any Member for any Plan
Year shall be $450.
(ii) Forfeitures. Amounts in the Matching
Accounts of Members which have been forfeited
pursuant to the provisions of subsections 8(d) and 8(e) hereof during a Plan
Year shall be applied to reduce Participating Company contributions required
under subsection 4(d)(i).
(iii) Payment Date. The Participating
Companies shall pay over to the Fund all contributions
required under this subsection no later than the due date, including extensions,
for filing the Participating Companies' federal income tax returns for the
taxable year ended coincident with or immediately following the end of the Plan
Year with respect to which such contributions are to be made.
(e) Matching Account. The Participating Company
contributions allocated to a Member under subsection 4(d)
and the corresponding provisions of the Plan as heretofore effective, all as
adjusted for the investment gain or loss and income or expense, constitute the
Member's Matching Account. A Member shall have a nonforfeitable interest in the
portion of his Accrued Benefit derived from his Matching Account to the extent
provided under Section 8.
(f) Compliance with Salary Reduction Contributions
Discrimination Tests.
(i) Rule. In no event shall the "actual
deferral percentage" (as defined below) for Members
who are "highly compensated employees" in a testing group for any Plan Year bear
a relationship to the "actual deferral percentage" for Members who are not
"highly compensated employees" in such testing group which does not satisfy
either
<PAGE>
subsection 4(f)(i)(A) or (B) below. The test shall be separately performed for
each testing group. Each group of Members who participate in the Plan pursuant
to a collective bargaining agreement shall be a separate testing group and all
other Members shall be a separate testing group.
(A) The requirement shall be
satisfied for a Plan Year if the "actual deferral
percentage" for the Plan Year for the group of Members who are "highly
compensated employees" for the Plan Year is not more than the "actual deferral
percentage" for the preceding Plan Year of all other Members multiplied by 1.25.
(B) The requirement shall be
satisfied for a Plan Year if (1) the excess of the
"actual deferral percentage" for the Plan Year for the Members who are "highly
compensated employees" for the Plan Year over the "actual deferral percentage"
for the preceding Plan Year of all Members who are not "highly compensated
employees" for the preceding Plan Year is not more than two percentage points
(or such lower amount as may be required by applicable regulations under the
Code) and (2) the "actual deferral percentage" for Members who are "highly
compensated employees" for the Plan Year is not more than the "actual deferral
percentage" of all Members who are not "highly compensated employees" for the
preceding Plan Year multiplied by two (or such lower multiple as may be required
by applicable regulations under the Code).
(C) The Plan may test using the
"actual deferral percentage" for non-highly
compensated employees for the current Plan Year rather than the preceding Plan
Year if the Administrator so elects in accordance with applicable rules
promulgated pursuant to the Code. The Administrator may only revoke such an
election in accordance with applicable rules promulgated pursuant to the Code.
For the 1997 Plan Year, the Plan shall use the current Plan Year for the test.
For the 1998 Plan Year, the Plan shall use the preceding Plan Year for the test.
<PAGE>
(D) If the Company elects to
apply section 410(b)(4)(B) of the Code in determining
whether the Plan satisfies the requirements of subsection 4(f) for Plan Years
beginning after December 31, 1998, the Company may exclude from consideration
all non-highly compensated employees who would not have been eligible to
participate if the Plan contained the greatest age and service requirements
permitted under section 410(a)(1)(A) of the Code.
<PAGE>
(ii) QNEC or Refund. If the relationship
of the "actual deferral percentages" does not satisfy
subsection 4(f)(i) for any Plan Year, the Participating Companies may make
"qualified nonelective contributions" (within the meaning of the regulations
promulgated under section 401(k) of the Code) in an equal dollar amount for all
or a class of eligible "nonhighly compensated employees". Such contributions
shall be treated for all purposes of the Plan as contributions made by a Member
under subsection 4(a) for the Plan Year for which they are made and shall be a
subaccount of the Member's Salary Reduction Account. If the Participating
Companies do not make such contributions or such contributions do not result in
satisfaction of subsection 4(f)(i), then the Committee shall direct the Trustee
to distribute the "excess contribution" (as defined below) for such Plan Year
(plus any income and minus any loss allocable thereto for the Plan Year in which
the contributions were made as determined under the Plan's method for allocating
income and loss) within twelve months after the close of the Plan Year to the
"highly compensated employees" on the basis of the amount of contributions
attributable to each until the "excess contribution" is eliminated. The portion
of the "excess contribution" attributable to a "highly compensated employee" is
determined by reducing the dollar amount of contributions paid over to the Fund
on behalf of the "highly compensated employees", starting with the highest
dollar amount of such contributions, until the "excess contribution" is
eliminated. The amount of "excess contributions" to be distributed shall be
reduced by excess deferrals previously distributed for the taxable year ending
in the same Plan Year and excess deferrals to be distributed for a taxable year
shall be reduced by excess contributions previously distributed for the Plan
Year beginning in such taxable year. Any refund made to a Member in accordance
with this subsection shall be drawn from his Salary Reduction Account.
(iii) Additional Definitions. For purposes
of this subsection 4(f), the term "Member" shall mean
each Employee eligible to make contributions under subsection 4(a) at any time
during a Plan Year. The "actual deferral percentage" for a specific group of
Members for a Plan Year shall be the average of the "actual deferral ratio" for
each Member in the group for such Plan Year. The "actual deferral ratio" for a
particular Member for a Plan Year shall be the ratio of the amount of
contributions made under subsection 4(a) no later than twelve months after the
close of the Plan Year for such Member out of amounts that would have been
received by him in the Plan Year but for his election under subsection 4(a) and
which are allocated to the Member on or before the last day of the Plan Year
without regard to participation or performance of services thereafter to the
Member's "compensation" for such Plan Year. For this purpose, "compensation"
means compensation for service performed for a Participating Company which is
currently includable in gross income or which is excludable from gross income
pursuant to an election under a qualified cash or deferred arrangement under
section 401(k) of the Code or a cafeteria plan under section 125 of the Code;
provided, however, the Committee may elect to limit compensation for all Members
to amounts paid during the portion of the Plan Year during which the Member was
eligible to participate in the Plan or use any definition of compensation
permissible under section 414) of the Code and the regulations thereunder. The
"excess contribution" for any Plan Year is the excess of the aggregate amount of
contributions paid over to the Fund pursuant to subsection 4(a) on behalf of
"highly
<PAGE>
compensated employees" for such Plan Year over the maximum amount of such
contributions permitted for "highly compensated employees" under subsection
4(f)(i).
(iv) Aggregation of Contributions. The
"actual deferral ratio" for any Member who is a "highly compensated employee"
for the Plan Year and who is eligible to make elective
contributions excludable from income under sections 401(k) and 402(a)(8) of the
Code to any plan maintained by a Participating Company or a Related Entity shall
be determined as if all such contributions were made under this Plan.
(v) Aggregation of Plans. In the event
that this Plan satisfies the requirements of section
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of section 401(a)(4) or
410(b) of the Code only if aggregated with this Plan, then subsection 4(f)(i)
shall be applied by determining the "actual deferral ratios" of Members as if
all such plans were a single plan.
(vi) Testing Alternatives. To the extent
permitted by the Code, the Plan may treat
contributions made under subsection 4(a) as contributions made under subsection
4(d), and vice versa, to facilitate satisfaction of any applicable
nondiscrimination requirement.
(g) Compliance with Participating Company Matching
Contributions Discrimination Tests.
(i) Rule. In no event shall the "actual
contribution percentage" (as defined below) for
Members who are "highly compensated employees" for any Plan Year bear a
relationship to the "actual contribution percentage" for Members who are not
"highly compensated employees" which does not satisfy either subsection
4(g)(i)(A) or (B) below. The requirement of this subsection shall not apply to
Members who participate in this Plan pursuant to a collective bargaining
agreement, and any such Members shall be excluded from the testing group.
<PAGE>
(A) The requirement shall be
satisfied for a Plan Year if the "actual contribution
percentage" for the Plan Year for the group of Members who are "highly
compensated employees" for the Plan Year is not more than the "actual
contribution percentage" for the preceding Plan Year of all Members who are not
"highly compensated employees" for the preceding Plan Year multiplied by 1.25.
(B) The requirement shall be
satisfied for a Plan Year if (1) the excess of the
"actual contribution percentage" for the Plan Year for the Members who are
"highly compensated employees" for the Plan Year over the "actual contribution
percentage" of all Members who are not "highly compensated employees" for the
preceding Plan Year is not more than two percentage points (or such lower amount
as may be required by applicable regulations under the Code) and (2) the "actual
contribution percentage" for the Plan Year for Members who are "highly
compensated employees" for the Plan Year is not more than the "actual
contribution percentage" for the preceding Plan Year of all Members who are not
"highly compensated employees" for the preceding Plan Year multiplied by two (or
such lower multiple as may be required by applicable regulations under the
Code).
(C) The Plan may test using the
"actual contribution percentage" for non-highly
compensated employees for the current Plan Year rather than the preceding Plan
Year if the Administrator so elects in accordance with applicable rules
promulgated pursuant to the Code. The Administrator may only revoke such an
election in accordance with applicable rules promulgated pursuant to the Code.
For the 1997 Plan Year, the Plan shall use the current Plan Year for the test.
For the 1998 Plan Year, the Plan shall use the preceding Plan Year for the test.
<PAGE>
(D) If the Company elects to
apply section 410(b)(4)(B) of the Code in determining
whether the Plan satisfies the requirements of subsection 4(g) for Plan Years
beginning after December 31, 1998, the Company may exclude from consideration
all non-highly compensated employees who would not have been eligible to
participate if the Plan contained the greatest age and service requirements
permitted under section 410(a)(1)(A) of the Code.
(ii) Refund. If the relationship of the
"actual contribution percentages" does not satisfy
subsection 4(g)(i) for any Plan Year, then the Administrator shall direct the
Trustee to distribute the "excess aggregate contribution" (as defined below) for
such Plan Year (plus any income and minus any loss allocable thereto for the
Plan Year in which the contributions were made as determined under the Plan's
method for allocating income and loss) within twelve months after the close of
the Plan Year to the "highly compensated employees" on the basis of the amount
of contributions attributable to each until the "excess aggregate contribution"
is eliminated. The portion of the "excess aggregate contribution" attributable
to a "highly compensated employee" is determined by reducing the dollar amount
of contributions paid over to the Fund on behalf of the "highly compensated
employees", starting with the highest dollar amount of such contributions, until
the "excess aggregate contribution" is eliminated. Any refund made to a Member
in accordance with this subsection shall be drawn from his Matching Account.
Notwithstanding the foregoing, if a Member does not have a 100% nonforfeitable
right to his Matching Account under subsection 8(d)(ii), the forfeitable portion
of any amount withdrawn from his Matching Account shall be forfeited and the
vested portion shall be distributed to the Member.
(iii) Allocation of Forfeitures. Any
amounts forfeited by "highly compensated employees" under
this subsection shall be applied to reduce Participating Company contributions
made pursuant to subsection 4(d). Notwithstanding the foregoing, no forfeiture
arising under this subsection shall be allocated to the account of any "highly
compensated employee."
<PAGE>
(iv) Additional Definitions. For purposes
of this subsection 4(g), the term "Member" shall mean
each Employee not covered by a collective bargaining agreement eligible to
receive a matching contribution under subsection 4(d) at any time during a Plan
Year. The "actual contribution percentage" for a specific group of Members for a
Plan Year shall be the average of the "actual contribution ratio" for each
Member in the group for such Plan Year. The "actual contribution ratio" for a
particular Member for a Plan Year shall be the ratio of the sum of (A) the
amount of contributions made under subsection 4(d) no later than twelve months
after the close of the Plan Year for such Member which are allocated to the
Member on or before the last day of the Plan Year without regard to
participation or performance of services thereafter plus (B) elective
contributions of a non-highly compensated employee which are permitted to be
treated as matching contributions under regulations promulgated under section
401(m) of the Code and (C) after tax employee contributions which are Annual
Additions, to the Member's "compensation" for such Plan Year. For this purpose,
"compensation" means compensation for service performed for a Participating
Company which is currently includable in gross income or which is excludable
from gross income pursuant to an election under a qualified cash or deferred
arrangement under section 401(k) of the Code or a cafeteria plan under section
125 of the Code; provided, however, the Administrator may elect to limit
compensation for all Members to amounts paid during the portion of the Plan Year
during which the Member was eligible to participate in the Plan or use any
definition of compensation permissible under section 414(s) of the Code and the
regulations thereunder. The "excess aggregate contribution" for any Plan Year is
the excess of the aggregate amount of matching contributions paid over to the
Fund pursuant to subsection 4(d) on behalf of "highly compensated employees" for
such Plan Year over the maximum amount of such matching contributions permitted
for "highly compensated employees" under subsection 4(g)(i).
<PAGE>
(v) Aggregation of Contributions. The
"actual contribution ratio" for any Member who is a
"highly compensated employee" for the Plan Year and who is eligible to make
after-tax contributions to any plan subject to section 415 of the Code
maintained by a Participating Company or a Related Entity or to have employer
matching contributions within the meaning of section 401(m)(4)(A) of the Code
allocated to his account under two or more plans described in section 401(a) of
the Code that are maintained by a Participating Company or a Related Entity
shall be determined as if all such contributions were made under this Plan and
each other plan.
(vi) Aggregation of Plans. In the event
that this Plan satisfies the requirements of section
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of section 401(a)(4) or
410(b) of the Code only if aggregated with this Plan, then subsection 4(g)(i)
shall be applied by determining the "actual contribution ratios" of Members as
if all such plans were a single plan.
(vii) Aggregate Limit -- Multiple Use of
Alternative Limitation. The provisions of section
1.401(m)-2(b) of the regulations under section 401(m) of the Code are hereby
incorporated by reference. If the limitation thereof is exceeded, it shall be
corrected through reduction of the "actual contribution percentage" in the
manner specified in subsection 4(g)(ii) with respect to "highly compensated
employees" eligible under both subsection 4(a) and subsection 4(d) of the Plan.
(viii) Testing Alternatives. To the extent
permitted by the Code, the Plan may treat
contributions made under subsection 4(a) as contributions made under subsection
4(d), and vice versa, to facilitate satisfaction of any applicable
nondiscrimination requirement.
<PAGE>
(h) Payroll Taxes. The Participating Companies
shall withhold from the Compensation of the Members and
remit to the appropriate government agencies such payroll taxes and income
withholding as the Company determines is or may be necessary under applicable
statutes or ordinances and the regulations and rulings thereunder.
(i) Rollovers.
---------
(i) Contributions. Each Employee
eligible under subsection 3(e) and each Member actively
employed by a Participating Company may contribute to the Fund an amount
constituting an "eligible rollover distribution" from a "qualified trust," both
within the meaning of section 402(c)(4) of the Code, from a previous employer's
retirement plan (or an individual retirement account consisting solely of an
"eligible rollover distribution" from a "qualified trust").
(ii) Rollover Account. Each Member's
contributions under subsection 4(i)(i), as adjusted for
investment gain or loss and income or expense, constitute such Member's Rollover
Account. A Member shall at all times have a nonforfeitable interest in the
portion of his Accrued Benefit derived from his Rollover Account.
(iii) Refunds. If an Employee makes a
contribution under this subsection 4(i) which the
Committee subsequently determines is not eligible for contribution under section
402 of the Code, then the Committee shall take such corrective action as it
determines is necessary or appropriate under applicable law.
(j) Other Member Contributions. A Member shall not
be permitted to make contributions to the Plan other
than as permitted under subsection 4(a), 4(i) or 8(d)(iv).
(k) Transferred and Voluntary Contributions Accounts.
A Member's Transferred Account and/or Voluntary
Contributions Account, if any, shall not be allocated any additional
contributions but shall be adjusted for investment gain or loss and income or
<PAGE>
expense. A Member shall at all times have a nonforfeitable interest in the
portion of his Accrued Benefit derived from his Transferred and/or Voluntary
Contributions Accounts.
(l) Deductibility. All Participating Company
contributions are expressly conditioned upon their
deductibility for federal income tax purposes.
Nondeductible contributions shall be abated and to the extent permitted by
applicable law, refunded, starting with contributions made under subsection
4(d).
<PAGE>
50 MAXIMUM CONTRIBUTIONS AND BENEFITS
<PAGE>
(a) Defined Contribution Limitation. In the event
that the amount allocable to a Member from
contributions to the Fund with respect to any Plan Year would cause the Annual
Additions allocated to any Member under this Plan plus the Annual Additions
allocated to such Member under any other plan maintained by a Participating
Company or a Related Entity to exceed for any Limitation Year the lesser of (i)
$30,000 (or an increased amount resulting from a cost-of-living increase
pursuant to subsection 415(d) of the Code) or (ii) 25% of such Member's
compensation (as defined in subsection 5(d)) for such Limitation Year, then such
amount allocable to such Member shall be reduced by the amount of such excess to
determine the actual amount of the contribution allocable to such Member with
respect to such Plan Year. If the excess amount results from a reasonable error
in determining the amount of contribution that may be made under subsection 4(a)
without violating the limitation of this subsection, then the excess amount with
earnings attributable thereto shall be refunded to the Member. If, (i) as a
result of allocation of forfeitures, (ii) a reasonable error in estimating a
Member's annual compensation (as defined in subsection 5(d)), or (iii) under
other limited facts and circumstances that the Commissioner of Internal Revenue
finds justify the availability of the remedy next following, the excess amount
with earnings attributable thereto allocable to a Member's Accrued Benefit shall
be held in a suspense account and shall be used to reduce contributions
allocable to the Member for the next Limitation Year (and succeeding Limitation
Years as necessary) provided the Member is covered by the Plan as of the end of
the Limitation Year. However, if the Member is not covered by the Plan as of the
end of the Limitation Year, then the excess amount shall be held unallocated in
a suspense account and shall be allocated, after adjustment for investment gains
or losses, among all Employees eligible to make contributions under subsection
4(a) for such Limitation Year as an equal percentage of their Compensation for
such Limitation Year. No excess amount may be distributed to a Member or former
Member.
(b) Combined Limitation. In addition to the
limitation of subsection 5(a), if a Participating Company or
a Related Entity maintains or maintained a defined benefit plan and the amount
required to be contributed to the Fund with respect to any Plan Year would cause
the aggregate amount allocated to any Member under all defined contribution
plans maintained by any Participating Company or Related Entity to exceed the
maximum allocation as determined in subsection 5(c), then such amount required
to be contributed with respect to such Member shall be reduced by the amount of
such excess to determine the actual amount of the contribution with respect to
such Member for such Plan Year. Notwithstanding the foregoing, if an excess
amount is contributed with respect to any Member, then the excess allocation
shall be reallocated or held in a suspense account in accordance with subsection
5(a). The limitation of this subsection shall be applied to the Member's benefit
from the defined benefit plan prior to reduction of the Member's Annual
Additions under this Plan.
<PAGE>
(c) Combined Limitation Computation. The maximum
allocation is the amount of Annual Additions which may
be allocated to a Member's benefit without permitting the sum of the defined
benefit plan fraction (as hereinafter defined) and the defined contribution plan
fraction (as hereinafter defined) from exceeding 1.0 for any Limitation Year.
The defined benefit plan fraction applicable to a Member for any Limitation Year
is a fraction, the numerator of which is the projected annual benefit of the
Member under the plan determined as of the close of the Limitation Year and the
denominator of which is the lesser of (i) the product of 1.25 multiplied by the
maximum then permitted dollar amount of straight life annuity payable under the
defined benefit plan maximum benefit provisions of the Code and (ii) the product
of 1.4 multiplied by the maximum permitted amount of straight life annuity,
based on the Member's compensation, payable under the defined benefit plan
maximum benefit provisions of the Code. For purposes of this subsection 5(c), a
Member's projected annual benefit is equal to the annual benefit, expressed in
the form of a straight life annuity, to which the Member would be entitled under
the terms of the defined benefit plan based on the assumptions that (i) the
Member will continue employment until reaching his normal retirement age under
the plan (or current age, if later) at a rate of compensation equal to that for
the Limitation Year under consideration and (ii) all other relevant factors used
to determine benefits under the plan for the Limitation Year under consideration
will remain constant for future Limitation Years. The defined contribution plan
fraction applicable to a Member for any Limitation Year is a fraction, the
numerator of which is the sum of the Annual Additions for all Limitation Years
allocated to the Member as of the close of the Limitation Year and the
denominator of which is the sum of the lesser, separately determined for each
Limitation Year of the Member's employment with a Participating Company or
Related Entity, of (i) the product of 1.25 multiplied by the maximum dollar
amount of Annual Additions which could have been allocated to the Member under
the Code for such Limitation Year and (ii) the product of 1.4 multiplied by the
maximum amount, based on the Member's compensation, of Annual Additions which
could have been allocated to the Member for such Limitation Year. (d) Definition
of "Compensation" for Code Limitations. For purposes of the limitations on the
allocation of Annual Additions to a Member and maximum benefits under a defined
benefit plan as provided for in this Section 5, "compensation" for a Limitation
Year shall mean the sum of amounts paid by a Participating Company or a Related
Entity to the Member with respect to personal services rendered by the Member
during the Limitation Year plus (i) amounts received by the Member (A) through
accident or health insurance or under an accident or health plan maintained or
contributed to by a Participating Company or a Related Entity and which are
includable in the gross income of the Member, (B) through a plan contributed to
by a Participating Company or a Related Entity providing payments in lieu of
wages on account of a Member's permanent and total disability, or (C) as a
moving expense allowance paid by a Participating Company or a Related Entity and
which are not deductible by the Member for federal income tax purposes; (ii) the
value of a non-statutory stock option granted by a Participating Company or a
Related Entity to the Member to the extent included in the Member's gross income
for the taxable year in which it was granted; and (iii) the value of property
transferred by a Participating Company or a Related Entity to the Member which
is includable in the Member's gross income due to an election by the Member
under section 83(b) of the Code. For Plan Years beginning after December 31,
1997, (i) elective deferrals as defined in section 402(g)(3) of the Code, and
(ii) any amount which is contributed or deferred by a Participating Company or
Related Entity at the election of an Employee and which is not included in gross
income of the Employee by reason of section 125 or 457 of the Code shall be
included in "Compensation". "Compensation" shall not include (i) contributions
made by a Participating Company or a Related Entity to a deferred compensation
plan to the extent that, before application of the limitations of section 415 of
the Code to the plan, such contributions are not includable in the Member's
gross income for the taxable year in which contributed, except as provided in
the preceding provision; (ii) Participating Company or Related Entity
contributions made on behalf of a Member to a simplified employee pension plan
to the extent they are deductible by the Member under section 219(b) of the
Code, (iii) distributions from a deferred compensation plan (except from an
unfunded nonqualified plan when includable in gross income), (iv) amounts
realized from the exercise of a nonqualified stock option, or when restricted
stock (or property) held by a Member either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture, (v) amounts realized from
the sale, exchange or other disposition of stock acquired under a qualified or
incentive stock option, and (vi) other amounts which receive special tax
benefits such as premiums for group term life insurance (to the extent
excludable from gross income), except that for periods after December 31, 1997,
elective deferrals under sections 402(g)(3), 125 or 457 of the Code shall not be
excluded.
(e) Transition Provision. Notwithstanding the
foregoing provisions of this Section 5, the benefit of a
Member on January 1, 1987 under a defined benefit pension plan shall not be less
than it was on December 31, 1986 by reason of the reduction in the dollar limit
of section 415(b) of the Code which then became effective. However, amounts in
excess of the limitation by reason of changes in the terms and conditions of a
defined benefit pension plan made after May 5, 1986 shall not be preserved.
<PAGE>
60 ADMINISTRATION OF FUNDS
(a) Investment Control. The management and control
of the assets of the Plan shall be vested in the
Trustee designated from time to time by the Company through its Board of
Directors; provided, however, the Company through its Board of Directors may
appoint one or more Investment Managers to manage, acquire or dispose of any
assets of the Plan. The Committee shall instruct the Trustee or an Investment
Manager to establish Investment Categories for selection by the Members and may
at any time add to or delete from the Investment Categories.
(b) Employer Stock. The Committee also shall direct
the Trustee to establish two frozen Investment
Categories, one consisting solely of PrimeSource Stock and the other consisting
solely of the common stock of Tasty Baking Company. Each such Investment
Category shall hold shares of common stock transferred to this Plan from a Prior
Plan. No amounts invested in any other Investment Category and no new
contributions shall be transferred or allocated to such Investment Categories.
All dividends or other distributions, other than distributions of stock, with
respect to a frozen Investment Category shall be invested in accordance with
uniform procedures specified by the Committee, in additional shares or, if the
Committee permits, in one or more of the Investment Categories established under
subsection 6(a). A Member may elect in accordance with subsection 6(c) that all
or a portion of the common stock held for his benefit in a frozen Investment
Category be liquidated for reinvestment in one or more Investment Categories
established under subsection 6(a). Notwithstanding the foregoing, no person who
is an officer of the Company shall be permitted to liquidate his interest in
such Investment Categories until such time as determined by counsel to the
Company that such liquidation can be made without penalty or violation of any
applicable securities law.
<PAGE>
(c Member Elections. In accordance with rules
established by the Committee and subject to subsection
6(b), each Member shall have the right to designate the Investment Category or
Categories in which new contributions allocated to and prior balances held for
such Member are invested. Any designation or change in designation of Investment
Category shall be made in such manner and subject to such limitations as the
Committee shall from time to time specify. The designation or change shall
become effective as of the date specified by the Committee on or after which it
is received. Any election of Investment Category by any Member shall, on its
effective date, cancel any prior election. The right to elect Investment
Categories as set forth herein shall be the sole and exclusive investment power
granted to Members. The Committee may limit the right of a Member (i) to
increase or decrease his contributions to a particular Investment Category, (ii)
to transfer amounts to or from a particular Investment Category or (iii) to
transfer amounts between particular Investment Categories, if such limitation is
required by the rules establishing an Investment Category. The Committee may
promulgate separate accounting and administrative rules to facilitate the
establishment or maintenance of an Investment Category.
(d No Member Election. If a Member does not make a
written election of Investment Category, then, except
as provided at subsection 6(b), the Committee shall direct that all amounts
allocated to such Member be invested in the Investment Category which, in the
opinion of the Committee, best protects principal.
(e Facilitation. Notwithstanding any instruction
from any Member for investment of funds in an
Investment Category as provided for herein, the Trustee shall have the right to
hold uninvested or invested in a short-term investment fund any amounts intended
for investment or reinvestment until such time as investment may be made in
accordance with subsection 6(b) or 6(c) and the Trust Agreement.
<PAGE>
(f Valuations. The Fund and each Investment
Category shall be valued at fair market value as of each Valuation Date.
(g Allocation of Gain or Loss. The Trustee may
maintain separate accounts for each Member's investment
in each Investment Category. If separate accounts are not maintained, then any
increase or decrease in the market value of each Investment Category of the Fund
since the preceding Valuation Date and all accrued income or expense and
realized profit or loss shall be added to or deducted from the account of each
Member in the ratio that each Member's account in such Investment Category at
the prior Valuation Date adjusted on a uniform basis to reflect contributions
and withdrawals during the valuation period bears to the total of all such
adjusted accounts in such Investment Category; provided, however, such
allocation for the first period following the establishment of an Investment
Category shall be made based on the ratio that the amount allocated to each
Member in such Investment Category in the period bears to the total amount
allocated to such Investment Category in the period.
(h Bookkeeping. The Committee shall direct that
separate bookkeeping accounts be maintained to reflect
each Member's Salary Reduction Account, elective contributions under subsection
4(a), Matching Account, Rollover Account, Transferred Account and Voluntary
Contributions Account.
<PAGE>
(i Tender Offers. Upon commencement of a tender
offer for PrimeSource Stock or Tasty Baking Company
common stock, the Trustee shall notify each Member whose Accrued Benefit is
invested in the stock which is the subject of the tender offer and utilize its
best efforts to timely distribute or cause to be distributed to the Member the
same information that is distributed to shareholders of the issuer in connection
with the tender offer. Each affected Member shall have the right to direct the
Trustee in writing to tender or not to tender some or all of the shares credited
to him. The Trustee shall tender or not tender shares as the Member directs. The
Trustee shall not tender shares for which it has received no directions from the
Member.
(j Voting Company Stock. Each Member shall have the
right to direct the Trustee as to the manner in
which the Trustee is to vote that number of shares of PrimeSource Stock or Tasty
Baking Company common stock credited to his accounts in accordance with
procedures established by the Trustee. The Trustee shall vote the shares as the
Member directs. The Trustee shall vote shares for which it has received no
directions from the Member in the same proportion as the shares for which it has
received instructions.
<PAGE>
7. BENEFICIARIES AND DEATH BENEFITS
(a Designation of Beneficiary. Each Member shall
have the right to designate one or more beneficiaries
and contingent beneficiaries to receive any benefit to which such Member may be
entitled hereunder in the event of the death of the Member prior to the complete
distribution of such benefit by filing a written designation with the Committee
on the form prescribed by the Committee. Such Member may thereafter designate a
different beneficiary at any time by filing a new written designation with the
Committee. Notwithstanding the foregoing, if a married Member designates a
beneficiary other than his spouse, such designation shall not be valid unless
the spouse consents thereto in writing witnessed by a notary public or
authorized representative of the Plan. A spouse's consent given in accordance
with the Committee's rules shall be irrevocable by the spouse with respect to
the beneficiary then designated by the Member unless the Member makes a new
beneficiary designation. Any written designation shall become effective only
upon its receipt by the Committee or its designee. If the beneficiary designated
pursuant to this subsection dies on or before the commencement of distribution
of benefits and the Member fails to make a new designation, then his beneficiary
shall be determined pursuant to subsection 7(b). Notwithstanding the above, to
the extent provided in a qualified domestic relations order (within the meaning
of section 414(p) of the Code) the former spouse of the Member may be treated as
the spouse of the Member for purposes of this subsection, and the current spouse
will not be treated as the Member's spouse for such purposes.
(b Beneficiary Priority List.If (i) a Member omits
or fails to designate a beneficiary, (ii) no
designated beneficiary survives the Member or (iii) the Committee determines
that the Member's beneficiary designation is invalid for any reason, then the
death benefits shall be paid to the Member's surviving spouse, or if the Member
is not survived by his spouse, then to the Member's estate. If the Member's
designated
<PAGE>
beneficiary dies after the Member but before distribution of benefits, then the
death benefits shall be paid to the beneficiary's estate.
(c Proof of Death. The Committee may, as a
condition precedent to making payment to any beneficiary,
require that a death certificate, burial certificate or other evidence of death
acceptable to it be furnished.
(d Divorce. If a Member designates his spouse as
beneficiary and subsequent to making the designation a
decree of divorce is issued which terminates the Member's marriage to such
spouse, then the Member's prior beneficiary designation shall be invalid and,
unless the Member makes a new designation, the Member shall be treated as having
died without designating a beneficary.
<PAGE>
8. BENEFITS FOR MEMBERS
The following are the only post-employment benefits provided by the
Plan:
(a Retirement Benefit
(i Valuation. Each Member who retires
on or after his
Normal Retirement Date shall be entitled to a retirement benefit equal to 100%
of the Member's Accrued Benefit on the Valuation Date as of which his Accrued
Benefit is liquidated for distribution. Distribution will be made at the time
and in the manner provided by Section 9. The Accrued Benefit of a Member who
continues in Service after his Normal Retirement Date shall become
nonforfeitable upon his attaining his Normal Retirement Date.
(ii Late Retirement. A Member who
continues employment beyond his Normal Retirement Date shall
continue to participate in the Plan.
(b Death Benefit. In the event of the death of a
Member, 100% of the Member's Accrued Benefit on the
Valuation Date after his death as of which his Accrued Benefit is liquidated for
distribution shall constitute his death benefit and shall be distributed
pursuant to Sections 7 and 9 (i) to his designated beneficiary or (ii) if no
designation of beneficiary is then in effect, to the beneficiary determined
pursuant to subsection 7(b).
(c Disability Benefit. In the event a Member
suffers a Disability before actual retirement, 100% of the
Member's Accrued Benefit on the Valuation Date after his Disability occurs as of
which his Accrued Benefit is liquidated for distribution shall constitute his
Disability benefit.
(d Termination of Employment Benefit
<PAGE>
(i Valuation. In the event a Member
terminates employment with all Participating Companies
and all Related Entities for reasons other than those covered by subsections
8(a)-8(c) above, the Member shall be entitled to receive a benefit equal to 100%
of his Accrued Benefit derived from his Salary Reduction, Rollover, Transferred
and Voluntary Contributions Accounts and the nonforfeitable portion (as
determined under the vesting schedule at subsection 8(d)(ii)) of the Member's
Matching Account, on the Valuation Date on which his Accrued Benefit is
liquidated for distribution.
(ii Vesting Schedule. The nonforfeitable
portion of a Member's Accrued Benefit derived from
his Matching Account is determined from the table below.
Nonforfeitable
Period of Service Percentage
Less than 1 year 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or more 100%
(iii) Special Vesting Rules
(A) Any Member who was a
participant in the Plan on January 1, 1994 shall have a 100%
nonforfeitable right to his Matching Account without regard to his length of
Service.
(B) Any Member who was a
participant in the Dixie Type and Supply Co. Inc. 401(k)
Retirement Plan on September 30, 1998 shall have a 100% nonforfeitable right to
his Matching Account without regard to his length of Service.
(iii Crediting Service. For purposes of
determining Service under subsection 8(d)(ii), the
following rules shall apply.
(A0 If a Member has a Break in
Service, then his Period of Service thereafter shall
not be taken into account for purposes of determining the nonforfeitable
percentage of the Member's Accrued Benefit derived from Participating Company
contributions which accrued prior to such Break in Service.
<PAGE>
(B0 If a Member has a Break in
Service and no nonforfeitable interest, then his
Periods of Service prior to such Break in Service shall not be credited for any
purpose.
(C0 In all other cases, a Member
shall receive credit for all his Periods of Service.
(iv Cashouts. If a Member has no
nonforfeitable interest in his Matching Account upon
termination of employment or if distribution of his Matching Account is made to
a Member on account of termination of employment prior to the date on which the
Member has a Break in Service and the Member returns to employment covered by
the Plan, the Member's Matching Account shall subsequently be determined without
regard to the portion thereof derived from predistribution employment provided
the Member (A) received distribution of the entire present value of the
nonforfeitable portion of his Matching Account at the time of distribution, (B)
the amount of the distribution was not more than $5,000 or the Member
voluntarily elected to receive the distribution, and (C) the Member upon return
to employment covered by the Plan does not repay the full amount of the
distribution before the earlier of suffering a Break in Service commencing after
the withdrawal or five years after the first date on which the Member is
subsequently reemployed by a Participating Company. If timely repayment is made,
the Member's Matching Account shall equal the sum of the repayment and the
forfeitable portion of the Member's Matching Account on the date of
distribution, unadjusted by gains or losses subsequent to the distribution. If a
Member who had no nonforfeitable interest in his Matching Account returns to
employment, he shall be deemed to have made repayment on the date he first again
is credited with an Hour of Service. Restoration shall be made first from
forfeitures in the Plan Year of repayment and second from Participating Company
contributions.
<PAGE>
(v Transition Rules. No Member's
nonforfeitable percentage shall be less on the Restatement
Effective Date that it was on the day before the Restatement Effective Date for
any reason other than a forfeiture which occurred on such date. For Plan Years
prior to 1999, "$3,500" shall be substituted for "$5,000" in subsection
8(d)(iv).
(e Time of Forfeiture. The nonvested portion of the
Matching Account of a Member (i) who separates with
no vested interest therein or (ii) who receives a distribution prior to a Break
in Service shall be forfeited on the date of (i) separation or (ii)
distribution, as the case may be, subject to the right to restoration. The
nonvested portion of the Matching Account of any other Member shall be forfeited
on the last day of the Plan Year in which the Member suffers a Break in Service.
Forfeitures shall be applied to offset the Participating Company matching
contributions for the Plan Year in which the forfeiture occurs or to pay Plan
expenses.
<PAGE>
9. DISTRIBUTION OF BENEFITS
(a Commencement
(i Vested and Retirement Benefits.
Generally, vested and retirement benefits shall begin to
be paid as soon after the Member's termination of employment as the Member
requests in writing, but not sooner than 30 days after the Member receives the
notice required by section 1.411(a)-11(c) of the regulations under section
411(a)(11) of the Code unless the Member receives written notice that he has a
right to a period of at least 30 days after receipt of the notice to consider
whether or not to elect a distribution and affirmatively elects after receipt of
the notice to accept a distribution rather than the rollover provided for under
subsection 9(i).
(ii Limitation and Required Commencement
Date. In no event other than with the written consent
of the Member shall the payment of benefits commence later than the 60th day
after the close of the Plan Year in which the latest of the following occurs:
(A0 The Member's Normal Retirement
Date;
(B0 The Member's termination of
employment; or
(C0 The tenth anniversary of the
year in which the Member first
commenced
participation in the Plan.
Furthermore, distribution of benefits must commence on or before the April 1st
of the calendar year following the calendar year in which the Member attains age
70-1/2 or has a Severance Date, whichever is later; provided, however, if a
Member was a 5% owner (as defined in section 416 of the Code) with respect to
the Plan at any time during the Plan Year ending in the calendar year in which
he attained age 70-1/2, then distribution of benefits must commence no later
than the April 1st of the calendar year following the calendar year in which the
Member attains age 70-1/2.
<PAGE>
(iii Death Benefits. The payment of death
benefits under the Plan shall be made at such time as
the Member's beneficiary shall request but not later than the December 31st of
the fifth calendar year following the calendar year of the Member's date of
death.
(b Benefit Forms
(i Vested and Retirement Benefits. A
Member entitled to benefit distribution under subsection
8(a), 8(c) or 8(d) may elect a lump sum distribution, installment payments over
a period not to exceed the life expectancy of the Member and his beneficiary, or
a portion paid as a lump sum and a portion paid in installments over a period
not to exceed life expectancy of the Member and his beneficiary commencing
before the required commencement date under subsection 9(a)(ii).
(ii Transferred Accounts. Subsection 15
(c) provides additional forms of distribution for certain Transferred Accounts.
(iii Death Benefits. Death benefits shall
be distributed in one lump sum; provided, however, if
distribution in installments commenced before the Member's death, then the
installment payments shall continue unless the Member's beneficiary elects a
lump sum payment.
(c Benefit Election. The election or change of
election of a time or method of distribution of benefits
shall be in writing on forms prescribed by the Committee.
(d Distributions in Kind. A Member may direct that
the portion of his Accrued Benefit held in
PrimeSource Stock or Tasty Baking Company common stock be distributed to him in
kind, except that the value of a fractional share shall be distributed in cash.
<PAGE>
(e Deferred Payments and Installments. If benefits
are to be paid directly by the Trustee in
installments or if the payment of benefits is to be deferred, the undistributed
value of the benefit shall be retained in the Fund subject to the administrative
provisions of the Plan and the Trust Agreement.
(f Withholding. All distributions under the Plan
are subject to federal, state and local tax withholding
as required by applicable law as in effect from time to time.
(g Compliance with Code Requirements. All forms of
benefit distributions and required benefit
commencement dates shall be subject to and in compliance with section 401(a)(9)
of the Code and the regulations thereunder, including the minimum distribution
incidental benefit requirement. Unless the Member irrevocably elects to the
contrary at the time required distributions under section 401(a)(9) of the Code
begin, required minimum distributions shall be based on the life expectancy of
the Member, as determined under the Code, without recalculation. The provisions
of section 401(a)(9) of the Code and the regulations thereunder, including
proposed regulation sections 1.401(a)(9)-1 and 2, shall override any provision
of the Plan inconsistent therewith.
(h Distribution Limitations. Amounts contributed
pursuant to subsection 4(a) of the Plan shall not be
distributed earlier than upon occurrence of one of the following events:
(i) The Member's retirement, death,
disability or separation from service (within the meaning
of sections 401(a) and (k) of the Code);
(ii) The termination of the Plan without
establishment or maintenance of another defined
contribution plan (other than an ESOP or SEP);
(iii) The Member's attainment of age 59-1/2
or suffering hardship;
<PAGE>
(iv) The sale or other disposition by a
Participating Company to an unrelated corporation of
substantially all of the assets used in a trade or business, but only with
respect to employees who continue employment with the acquiring corporation and
provided the acquiring corporation does not maintain the Plan after the
disposition; and
(v) The sale or other disposition by a
Participating Company of its interest in a subsidiary to
an unrelated entity but only with respect to employees who continue employment
with the subsidiary and provided the acquiring entity does not maintain the Plan
after the disposition. Subsections 9(h)(ii), (iv) and (v), above, apply only if
the distribution is in the form of a lump sum. Subsections 9(h)(iv) and (v),
above, apply if the transferor corporation continues to maintain the Plan. This
subsection 9(h) shall not be construed as giving a Member a right to a
distribution not otherwise expressly provided for by another subsection of the
Plan.
(i Rollover Election. Notwithstanding any provision
of the Plan to the contrary that would otherwise
limit a "distributee's" election under this subsection, a "distributee" may
elect, at the time and in the manner prescribed by the Committee, to have any
portion of an "eligible rollover distribution" paid directly to an "eligible
retirement plan" specified by the "distributee" in a "direct rollover". For
purposes of this subsection, the definitions specified below shall apply:
<PAGE>
(i) Eligible Rollover Distribution. An
eligible rollover distribution is any distribution of
all or any portion of the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under section 401(a)(9)
of the Code; any hardship distribution described in section 401(k)(2)(B)(i)(IV)
of the Code made after December 31, 1999; and the portion of any distribution
that is not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer securities).
(ii) Eligible Retirement Plan. An eligible
retirement plan is an individual retirement account
described in section 408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity plan described in section
403(a) of the Code, or a qualified trust described in section 401(a) of the
Code, that accepts the distributee's eligible rollover distribution. However, in
the case of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or an individual
retirement annuity.
(iii) Distributee. A distributee includes
an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or former
Employee's spouse 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.
(iv) Direct Rollover. A direct rollover
is a payment by the Plan to the eligible retirement
plan specified by the distributee.
<PAGE>
10. IN-SERVICE DISTRIBUTIONS
(a General Rule. Except as provided in subsections
10(b)-10(d) below or in Section 15, a Member shall
not be permitted to receive any distribution from the Plan prior to his
Severance Date.
(b Elective Distributions. A Member may elect that
all or a portion of his Rollover and Voluntary
Contributions Accounts be distributed to him by delivery of a request to the
Committee on the form or in the manner the Committee prescribes for that
purpose.
(c Age 59-1/2. A Member who has attained age 59-1/2
may elect that all or a portion of his
nonforfeitable Accrued Benefit be distributed to him by delivery of a request to
the Committee on the form or in the manner the Committee prescribes for that
purpose.
(d Hardship.A Member shall have the right to
receive an in-service distribution from his nonforfeitable
Accrued Benefits on account of hardship. A distribution is on account of
hardship only if the distribution both (i) is made on account of an immediate
and heavy financial need of the Member and (ii) is necessary to satisfy such
financial need.
<PAGE>
(i Need. A distribution shall be deemed
to be made on account of an immediate and heavy
financial need of the Member if the distribution is on account of (A) medical
expenses described in section 213(d) of the Code incurred or to be incurred by
the Member, the Member's spouse or any dependent of the Member (as defined in
section 152 of the Code); (B) purchase (excluding mortgage payments) of a
principal residence for the Member; (C) payment of tuition and related
educational fees, including room and board expenses, for the next twelve months
of post-secondary education for the Member, the Member's spouse, child or any
dependent of the Member (as defined in section 152 of the Code); (D) the need to
prevent the eviction of the Member from his principal residence or foreclosure
on the mortgage of the Member's principal residence; or (E) such other reason as
the Commissioner of Internal Revenue specifies as a deemed immediate and heavy
financial need through the publication of regulations, revenue rulings, notices
or other documents of general applicability.
(ii Satisfaction of Need. A distribution
shall be deemed to be necessary to satisfy an
immediate and heavy financial need of a Member only if all of the requirements
or conditions set forth below are satisfied or agreed to by the Member, as
appropriate.
(A0 The distribution is not in
excess of the amount of the immediate and heavy
financial need of the Member, which amount shall be deemed to include
anticipated federal, state and local income taxes and penalties.
(B0 The Member has obtained all
distributions, other than hardship distributions, and
all nontaxable loans currently available under all plans subject to section 415
of the Code maintained by any Participating Company or any Related Entity.
(C0 The Member's elective
contributions under this Plan and each other deferred
compensation plan (within the meaning of regulations under section 401(k) of the
Code) maintained by a Participating Company or a Related Entity in which the
Member participates shall be suspended for twelve full calendar months after
receipt of the distribution.
(D0 The Member does not (and
is not permitted to) make elective contributions under
this Plan or any other plan maintained by a Participating Company or a Related
Entity for the year immediately following the taxable year of the hardship
distribution in excess of the applicable limit under section 402(g) of the Code
for
<PAGE>
such next taxae year reduced by the amount of the Member's elective
contributions for the taxable year of the hardship distribution.
(iii Limitations. Distributions on account
of hardship shall be limited to the sum of (A) the
-----------
Member's elective contributions under subsection 4(a) plus elective
contributions to a Prior Plan, (B) income credited to the Member's Transferred
Account for elective contributions as of December 31, 1988, (C) the
nonforfeitable portion of the Member's Matching Account and (D) the Member's
Rollover Account. A distribution under subsection 10(d) shall be charged first
against the Member's Rollover Account then against the nonforfeitable portion of
the Member's Matching Account and then against the Member's Salary Reduction
Account. The Committee may prescribe rules with respect to the order of
Investment Category from which the distribution shall be paid.
(iv Prior Withdrawal. A Member shall not
be permitted to receive a distribution under this
subsection 10(d) until he has withdrawn all amounts which are withdrawable under
subsections 10(b) and (c).
(e Special Vested Balance Calculation Rule. If a
distribution is made to a Member under this Section
from a Member's Matching Account at a time when his interest therein is not 100%
nonforfeitable, then a separate bookkeeping account and calculation shall be
established for such Member and be retained until the earlier of the date on
which the Member's Matching Account becomes 100% nonforfeitable or the Member
forfeits the forfeitable portion of his Matching Account to reflect the Member's
nonforfeitable interest in the remainder of his Matching Account. Under such
separate accounting, the Member's nonforfeitable interest at any relevant time
shall be determined according to the formula X = P [AB + (RxD)] - (RxD) where:
P = the Member's nonforfeitable
percentage under subsection 8(d) at the relevant time;
AB = the Member's Accrued Benefit
derived from his Matching Account at the relevant time;
<PAGE>
D = the amount of the distribution
from the Member's Accrued Benefit deriving from his
Matching Account; and
R = the ratio of the Member's
Accrued Benefit derived from
his Matching Account at the
relevant time to such Accrued
Benefit after the
distribution.
<PAGE>
11. LOANS
(a Availability. The Committee shall direct that a
bona fide loan be made from the Fund to any Member
who requests the same, provided the Member (i) pays any application or
processing fee which the Committee uniformly charges with respect to loan
requests and (ii) on the date the loan would be disbursed is employed by a
Participating Company or Related Entity. All such loans shall be subject to the
requirements of this Section which shall be deemed to include written rules
prescribed by the Committee from time to time with respect to loans. Eligibility
for and the rules with respect to loans shall be uniformly applied.
(b Minimum Requirements. Loans shall be subject to
the following rules:
(i Principal Amount.The principal amount
of the loan to a Member may not be less than $1,000
----------------
and may not exceed, when added to the outstanding balance of all other loans to
the Member from the Plan, the lesser of (A) $50,000, reduced by the excess of
the highest outstanding balance of loans to the Member from the Plan during the
one-year period ending on the day before the date on which such loan was made
over the outstanding balance of loans to the Member from the Plan on the date on
which such loan is made or (B) 50% of the Member's nonforfeitable Accrued
Benefit on the date on which the loan is made.
(ii Maximum Term. The term of the loan
may not exceed five years. If a Member's employment
with all Participating Companies and Related Entities terminates for any reason,
the loan shall be due and payable on the last day of the calendar quarter
following the calendar quarter in which employment terminated.
<PAGE>
(iii Interest Rate. The interest rate
shall be a rate charged by commercial lenders for comparable loans on the date
the loan request is approved, as determined by the Committee.
(iv Repayment. The loan shall be repaid
over its term in level installment payments
corresponding to the Member's payroll period. As a condition precedent to
approval of the loan, the Member shall be required to authorize payroll
withholding in the amount of each installment for all periods he is employed by
a Participating Company. Notwithstanding the foregoing, the loan repayment of a
Member who is in qualified military service within the meaning of section 414(u)
of the Code shall be suspended to the extent permitted by section 414(u) of the
Code.
(v Collateral. The loan shall be secured
by 50% of the Member's nonforfeitable Accrued Benefit.
(vi Distribution of Accrued Benefit. If
the nonforfeitable portion of a Member's Accrued
Benefit is to be distributed prior to the Member's payment of all principal and
accrued interest due on any loan to such Member, the distribution shall include
as an offset the amount of unpaid principal and interest due on the loan and the
note shall be distributed.
(vii Notes. All loans shall be evidenced
by a note containing such terms and conditions as the Committee shall require.
(viii Multiple Loans. A Member shall be
permitted only one outstanding loan at any time.
(ix) Fees. The Committee may adopt a rule
pursuant to subsections 2(h) and 11(a) of the Plan
imposing a reasonable fee on a Member who borrows under this Section 11 for
processing his loan application, preparing his loan documentation or
administering his loan.
<PAGE>
(c Accounting. The Committee may prescribe rules
with respect to the order of the accounts and
Investment Categories from which the principal amount of any loan shall be
drawn. The loan shall be treated as a separate Investment Category of the
borrowing Member. All payments of principal and interest with respect to such
loan shall be credited to the borrowing Member, with repayment of principal
credited to the Member's accounts from which it was withdrawn in the order the
Committee prescribes. The repayment shall be invested in accordance with the
Member's current election for new contributions.
<PAGE>
12. TITLE TO ASSETS
No person or entity shall have any legal or equitable right or
interest in the contributions made by any Participating Company, or otherwise
received into the Fund, or in any assets of the Fund, except as expressly
provided in the Plan.
<PAGE>
13. AMENDMENT AND TERMINATION
(a Amendment. The provisions of this Plan may be
amended by the Board of Directors (or its delegee as
authorized by subsection 2(d)) from time to time and at any time in whole or in
part, provided that no amendment shall be effective unless the Plan as so
amended shall be for the exclusive benefit of the Members and their
beneficiaries, and that no amendment shall operate to deprive any Member of any
rights or benefits accrued to him under the Plan prior to such amendment.
Further, no amendment to the Plan's vesting schedule shall reduce the
nonforfeitable percentage of any Member to an amount less than it was on the
later of the amendment's effective date or adoption date as determined without
regard to such amendment. Further, each Member who has completed three years of
Service on the later of the date an amendment to the Plan's vesting schedule is
adopted or effective shall have his nonforfeitable percentage determined without
regard to the amendment if such disregard provides a greater nonforfeitable
percentage.
(b Termination. While it is the Company's intention
to continue the Plan in operation indefinitely, the
Company nevertheless expressly reserves the right by action of the Board of
Directors to terminate the Plan in whole or in part or discontinue
contributions. Any such termination, partial termination or discontinuance of
contributions shall be effected only upon condition that such action is taken as
shall render it impossible for any part of the corpus of the Fund or the income
therefrom to be used for, or diverted to, purposes other than the exclusive
benefit of the Members and their beneficiaries.
<PAGE>
(c Conduct on Termination. If the Plan is to be
terminated at any time, the Company shall give written
notice to the Trustee which shall thereupon revalue the assets of the Fund and
the accounts of the Members as of the date of termination, partial termination
or discontinuance of contributions and, after discharging and satisfying any
obligations of the Plan, shall allocate all unallocated assets to the Accrued
Benefits of the Members at the date of termination, partial termination or
discontinuance of contributions in accordance with subsection 6(g). Upon
termination, partial termination or discontinuance of contributions, the Accrued
Benefits of Members affected thereby shall become fully vested and shall not
thereafter be subject to forfeiture in whole or in part. The Committee shall
instruct the Trustee to continue to control and manage the Fund for the benefit
of Members to whom distributions will be made at the time and in the manner
provided in Section 9. Notwithstanding the foregoing, incident to a termination
or a discontinuance of contributions, the Company may amend the Plan and the
Trust Agreement to provide for distribution of Accrued Benefits to each affected
Member provided such distribution does not violate any applicable provision of
subsection 9(h) of the Plan or section 401(a) or 401(k) of the Code.
<PAGE>
14. LIMITATION OF RIGHTS
(a Alienation. None of the payments, benefits or
rights of any Member shall be subject to any claim of
any creditor of such Member and, in particular, to the fullest extent permitted
by law, shall be free from attachment, garnishment, trustee's process, or any
other legal or equitable process available to any creditor of such Member. No
Member shall have the right to alienate, anticipate, commute, pledge, encumber
or assign any of the benefits or payments which he may expect to receive,
contingently or otherwise, under this Plan, except the right to designate a
beneficiary or beneficiaries in accordance with the Plan. This subsection shall
not apply to the enforcement of a federal tax levy made pursuant to the Code,
the collection by the United States on a judgment resulting from an unpaid tax
assessment, the pledging of a Member's Accrued Benefit as security for a loan
made to such Member under Section 11 or any other exception set forth in the
regulations under section 401(a)(13) of the Code.
(b Qualified Domestic Relations Order Exception.
Subsection 14(a) shall not apply to the creation,
assignment or recognition of a right to any benefit payable with respect to a
Member under a qualified domestic relations order within the meaning of section
414(p) of the Code. Notwithstanding Sections 8-10, distribution to an alternate
payee pursuant to a qualified domestic relations order shall be made (i) at the
time specified in such order or (ii) if the order permits, as soon after the
Committee approves the order as is administratively feasible provided such
distribution is permitted under applicable provisions of the Code.
<PAGE>
(c Employment. Neither the establishment of the
Plan, nor any modification thereof, nor the creation of
any fund, trust or account, nor the payment of any benefit shall be construed as
giving any Member or Employee, or any person whomsoever, any legal or equitable
right against any Participating Company, the Trustee or the Committee, unless
such right shall be specifically provided for in the Trust Agreement or the Plan
or conferred by affirmative action of the Company, the Trustee or the Committee
in accordance with the terms and provisions of the Plan or as giving any Member
or Employee the right to be retained in the employ of any Participating Company.
All Members and other Employees shall remain subject to discharge to the same
extent as if the Plan had never been adopted.
<PAGE>
15. MERGERS, CONSOLIDATIONS OR TRANSFERS OF PLAN ASSETS
(a General Rule. In the case of any Plan merger or
Plan consolidation with, or transfer of assets or
liabilities of the Plan to, any other plan, each Member in the Plan must be
entitled to receive a benefit immediately after the merger, consolidation, or
transfer (if the Plan were then to terminate) which is equal to or greater than
the benefit he would have been entitled to receive immediately before the
merger, consolidation, or transfer (if the Plan had been terminated).
(b Protected Benefits. A Member shall have all of
the benefits, rights or features provided by the Prior
Plan which are protected under section 411(d)(6) of the Code with respect to a
Transferred Account. The Committee shall provide for separate recordkeeping for
a Member's Transferred Account and such additional subaccounts as may be
necessary to comply with the requirements of this subsection. Except to the
extent necessary to comply with the requirements of this subsection or an
express provision of the Plan, all Transferred Accounts shall be subject to the
general provisions of the Plan applicable to the type of account to which they
would have been credited had the amounts initially been contributed to this
Plan.
(c Special Provisions Applicable to Transferred
Accounts from the Momentum Money-Maker 401(k) Retirement Plan and the Onondaga
Litho Supply Co., Inc. Employees' Profit Sharing and Retirement Plan.
(i Distribution Options. The following
additional distribution options shall apply to Transferred Accounts from the
Momentum and Onondaga Plans.
(A0 a straight life annuity for the
Member's life;
<PAGE>
(B0 a joint and survivor annuity
with the Member's spouse as
contingent annuitant for an
amount at least equal to 50% but not
more than 100% of the monthly amount
which is payable to the Member during
his lifetime; (C0 a life annuity for
the Member's life, with a minimum of
60, 120 or 180 monthly
payments guaranteed;
(D0 approximately equal monthly or
quarterly payments over a period
certain; (E0 a joint and survivor
annuity with any contingent annuitant
for an amount at least
equal to 50% but not more than 100% of the
amount which is payable to the Member
during his lifetime; (F0 a lump sum
payment; or (G0 any combination of
the foregoing.
Notwithstanding the foregoing, payments may not extend beyond the Member's life
expectancy on the date of the Member's election, or, if the Member has a
designated beneficiary, the joint life expectancy of the Member and the Member's
designated beneficiary. For purposes of this subsection, unless the Member
irrevocably elects to the contrary at the time benefit payments commence, life
expectancy shall be determined based on the life expectancy of the Member,
without recalculation, as determined under section 401(a)(9) of the Code and the
regulations thereunder.
Death benefits shall be distributed as the Member's beneficiary shall elect (A)
in one lump sum or (B) in installments over a period not extending beyond five
years of the Member's date of death unless payment of benefit commenced before
the Member's date of death in which case continuing payments to the Member's
beneficiary shall be made at least as rapidly as under the method of
distribution in effect on the Member's date of death; provided,
<PAGE>
however, if any portion of the Member's Accrued Benefit is payable to or for the
benefit of a designated beneficiary, such portion may be distributed over a
period of time not exceeding the life expectancy of such designated beneficiary,
provided distribution begins not later than one year after the date of the
Member's death or such later date as applicable regulations under the Code may
permit; or if the designated beneficiary referred to above is the Member's
surviving spouse, the date on which distribution is required to begin shall not
be earlier than the date on which the Member would have attained age 70-1/2, the
benefit amount will be used to purchase a straight life annuity for the spouse's
life commencing as soon after the Member's date of death as is administratively
feasible unless the spouse elects another form of settlement permitted under the
Plan and if the surviving spouse should die before distribution to such spouse
begins, this provision shall apply as if the surviving spouse were the Member.
(ii Married Member's Annuity. If a Member
is married to his then spouse for at least one year
on the date on which benefit payments are to commence and his Transferred
Account exceeds $5,000, the Member may not elect that benefits be distributed in
any form of settlement other than the form of annuity described in subsection
15(c)(i)(B) unless the Member receives the written consent of his spouse for
such election witnessed by a notary public or authorized representative of the
Plan on forms prescribed by the Committee. A Member may change his election at
any time during the election period set forth herein. No less than 30 days and
no more than 90 days before the payment of benefits begins, the Committee shall
furnish to the Member a written notification of the availability of the benefit
election hereunder, including the joint and survivor annuity and the effect of
electing not to take such annuity. A Member may at any time after receipt of the
written notification and prior to his actual retirement elect in writing the
form of benefit he desires. A Member may change his election at any time prior
to the expiration of the election period described above. If a Member requests
additional information within 60 days after receipt of the notification of
election, the minimum election period shall be extended an additional 60 days
following his receipt of such additional information.
<PAGE>
(iii Single Member's Annuity. If, on the
date benefits are to commence, a Member is single or
has not been married to his then spouse for at least one year and his
Transferred Account exceeds $5,000, benefits will be distributed in the form
described in subsection 15(c)(i)(A) unless the Member elects an alternate form
of settlement.
(iv Annuity Purchases. If benefits are to
be paid in a form of an annuity, the Committee shall
direct the Trustee to apply the Member's Transferred Account to purchase an
appropriate nontransferable annuity contract and to deliver it to the Member.
(v In-Service Distributions and Loans.
If a Member is married to his then spouse for at least
one year on the date on which an in-service distribution or loan is to be made
from his Transferred Account and his Transferred Account then exceeds $5,000,
the Member may not receive a distribution or a loan from his Transferred Account
without the prior written consent of his spouse given in accordance with
subsection 15(c)(ii) no more than 90 days before the distribution or loan is
made.
(vi Explanation of Death Benefit. The
Committee shall provide to the Member within the
"applicable period" a written explanation of the terms and conditions of the
spouse's right to death benefits with respect to the Transferred Account. For
purposes of this subsection "applicable period" shall mean whichever of the
following periods ends last:
(A0 the period beginning with the
first day of the Plan Year in which
the Member attains
age 32 and ending with the close of
the Plan Year preceding the Plan Year
in which the Member attains age 35;
(B0 a reasonable period after the
Member commences participation in the
Plan; or
<PAGE>
(C0 in the case of a Member who
separates from service before attaining age 35, a reasonable period after such
separation from service.
(vii Transition Rule. For periods prior
to January 1, 1999, "$3,500" shall be substituted for
"$5,000" each place it appears in this Section.
(d In-Service Distribution from Certain Transferred
Accounts. A Member may withdraw all or a portion of
his Transferred Account reflecting matching contributions or employer
contributions from a Prior Plan sponsored by Tasty Baking Company by submitting
a request for distribution to the Committee on a form and in a manner which the
Committee prescribes for that purpose.
(e Vesting -- Dixie Plan. All Transferred Accounts
from the Dixie Type and Supply Co., Inc. 401(k)Retirement Plan are 100%
nonforfeitable.
(f Code Requirements. The Plan shall be deemed an
amendment to each plan which merges into this Plan on
or after January 1, 1997 to the extent necessary for such plan to satisfy
applicable provisions of section 401(a) of the Code which became effective with
respect to such plan on or after January 1, 1997.
<PAGE>
16. PARTICIPATION BY RELATED ENTITIES
(a Commencement Any entity which is a Related
Entity with respect to the Company may, with the
permission of the Board of Directors, elect to adopt this Plan and the
accompanying Trust Agreement. If the Board of Directors designates a Related
Entity as a Participating Company, then it shall be deemed a Participating
Company without the necessity for action by its separate board of directors.
(b Termination. The Company may, by action of the
Board of Directors, determine at any time that any
such Participating Company shall withdraw and establish a separate plan and
fund. The withdrawal shall be effected by a duly executed instrument delivered
to the Trustee instructing the Trustee to segregate the assets of the Fund
allocable to the Employees of such Participating Company and pay them over to
the separate fund. On the date a Participating Company ceases to be a Related
Entity, its participation in the Plan shall terminate and Members in its employ
shall be treated as having a Severance Date; however, no affected Member shall
be eligible for distribution of his Accrued Benefit unless the Committee
determines that distribution will not adversely affect the Plan's qualified
status under the Code. Alternatively, the Board of Directors may, but is not
required to, provide for a transfer in accordance with Section 15 of the Accrued
Benefits of affected Members to a separate plan which the former Related Entity
adopts.
(c) Single Plan. The Plan shall at all times be
administered and interpreted as a single plan for the
benefit of the Employees of all Participating Companies.
(d) Delegation of Authority. Each Participating
Company, by adopting (or being deemed to have adopted)
the Plan, acknowledges that the Company has all the rights and duties thereof
under the Plan and the Trust Agreement, including the right to amend the same.
<PAGE>
17. TOP-HEAVY REQUIREMENTS
(a) General Rule. For any Plan Year in which the
Plan is a top-heavy plan or included in a top-heavy
group, as determined under subsection 17(b), the special requirements of this
Section shall apply.
(b) Calculation of Top-Heavy Status. The Plan shall
be a top-heavy plan (if it is not included in an
"aggregation group") or a plan included in a top-heavy group (if it is included
in an "aggregation group") with respect to any Plan Year if the sum as of the
"determination date" of the "cumulative accounts" of "key employees" for the
Plan Year exceeds 60% of a similar sum determined for all "employees," excluding
"employees" who were "key employees" in prior Plan Years only.
(c) Definitions. For purposes of this Section 17,
the following definitions shall apply to be interpreted in accordance with the
provisions of section 416 of the Code and the regulations thereunder.
(i) "Aggregation Group" shall mean the
plans of a Participating Company or a Related Entity
included below within the following categories:
(A) each such plan in which a
"key employee" is a participant including a terminated
plan in which a "key employee" was a participant within the five-years ending on
the "determination date";
(B) each other such plan which
enables any plan in subsection (A) above to meet the
requirements of section 401(a)(4) or 410 of the Code; and
(C) each other plan not required
to be included in the "aggregation group" which the
Company elects to include in the "aggregation group" in accordance with the
"permissive aggregation group" rules of the Code if such group would continue to
meet the requirements of sections 401(a) and 410 of the Code with such plan
being taken into account.
<PAGE>
(ii) "Cumulative Account" for any
"employee" shall mean the sum of the amount of his accounts
under this Plan plus all defined contribution plans included in the "aggregation
group" (if any) as of the most recent valuation date for each such plan within a
twelve-month period ending on the "determination date," increased by any
contributions due after such valuation date and before the "determination date"
plus the present value of his accrued benefit under all defined benefit pension
plans included in the "aggregation group" (if any) as of the "determination
date." For a defined benefit plan, the present value of the accrued benefit as
of any particular "determination date" shall be the amount determined under (A)
the method, if any, that uniformly applies for accrual purposes under all plans
maintained by the Participating Companies and all Related Entities, or (B) if
there is no such method, as if such benefit accrued not more rapidly than under
the slowest accrual rate permitted under the fractional accrual rule of section
411(b)(1)(C) of the Code, as of the most recent valuation date for the defined
benefit plan, under actuarial equivalent factors specified therein, which is
within a twelve-month period ending on the "determination date." For this
purpose, the valuation date shall be the date for computing plan costs for
purposes of determining the minimum funding requirement under section 412 of the
Code. "Cumulative accounts" of "employees" who have not performed services for
any Participating Company or a Related Entity for the five-year period ending on
the "determination date" shall be disregarded. An "employee's" "cumulative
account" shall be increased by the aggregate distributions during the five-year
period ending on the "determination date" made with respect to him under any
plan in the aggregation group. Rollovers and direct plan-to-plan transfers to
this Plan or to a plan in the "aggregation group" shall be included in an
"employee's" "cumulative account" unless the transfer is initiated by the
"employee" and made from a plan maintained by an employer which is not a
Participating Company or a Related Entity.
<PAGE>
(iii) "Determination Date" shall mean with
respect to any Plan Year the last day of the preceding Plan Year.
(iv) "Employee" shall mean any person
(including a beneficiary thereof) who has or had an
accrued benefit held under this Plan or a plan in the "aggregation group"
including this Plan at any time during the current or any one of the four
preceding Plan Years. Any "employee" other than a "key employee" described in
subsection 17(c)(v) shall be considered a "non-key employee" for purposes of
this Section 17.
(v) "Key Employee" shall mean any
"employee" or former "employee" (including a beneficiary
thereof) who is, at any time during the Plan Year, or was, during any one of the
four preceding Plan Years any one or more of the following:
(A) an officer of a Participating
Company or a Related Entity whose compensation (as
defined in subsection 5(d)) exceeds 50% of the dollar limitation in effect under
section 415(b)(1)(A) of the Code, unless 50 other such officers (or, if lesser,
a number of such officers equal to the greater of three or 10% of the
"employees") have higher annual compensation;
(B) one of the ten persons
employed by a Participating Company or a Related Entity
both having annual compensation (as defined in subsection 5(d)) greater than the
limitation in effect under section 415(c)(1)(A) of the Code, and owning (or
considered as owning within the meaning of section 318 of the Code) the largest
interests (but at least more than a 0.5% interest) in the Participating
Companies and all Related Entities. For purposes of this subsection (B), if two
"employees" have the same interest, the one with the greater compensation shall
be treated as owning the larger interest;
(C) any person owning (or
considered as owning within the meaning of section 318 of
the Code) more than 5% of the outstanding stock of all
<PAGE>
Participating Companies or Related Entities or
stock possessing more than 5% of the
total combined voting power of such
stock; (D) a person who would be
described in subsection (C) above if
1% were substituted for
5% each place the same appears in subsection (C) above, and who has annual
compensation of more than $150,000.
For purposes of determining ownership under this subsection, section
318(a)(2)(C) of the Code shall be applied by substituting 5% for 50%.
(d) Combined Benefit Limitation. For purposes of
the calculation of the combined limitation of subsection
5(c), "1.0" shall be substituted for "1.25" each place the same appears in that
subsection.
(e) Vesting. The nonforfeitable portion of a
Member's Accrued Benefit derived from his Matching Account shall continue to
vest according to the schedule set forth in subsection 8(d)(ii).
<PAGE>
(f) Minimum Contribution. Minimum Participating
Company contributions for a Member who is not a "key
employee" shall be required in an amount equal to the lesser of 3% of
compensation (as defined in subsection 5(d)) or the highest percentage of such
compensation limited to $150,000 (or an increased amount resulting from a cost
of living adjustment under section 415(d) of the Code) contributed for any "key
employee" under subsections 4(a) and 4(d). For purposes of meeting the minimum
contribution requirement, employer social security contributions and elective
contributions on behalf of "employees" other than "key employees" shall be
disregarded. Each "non-key employee" of a Participating Company who has not
separated from service at the end of the Plan Year and who has satisfied the
eligibility requirements of subsection 3(a) shall receive any minimum
contribution provided under this Section 17 without regard to (i) whether he is
credited with 1,000 Hours of Service in the Plan Year, (ii) earnings level for
the Plan Year or (iii) whether he elects to make contributions under subsection
4(a). If an "employee" participates in both this Plan and another defined
contribution plan maintained by a Participating Company or a Related Entity, the
minimum benefit shall be provided under the other plan. Furthermore, if an
"employee" participates in both this Plan and a defined benefit plan maintained
by a Participating Company or a Related Entity, the minimum benefit shall be
provided under the defined benefit plan.
<PAGE>
18. MISCELLANEOUS
(a) Incapacity. If the Committee receives a copy of
a certified court order, or other binding legal
certification, that a person entitled to receive any benefit payment is under a
legal disability or is incapacitated in any way so as to be unable to manage his
financial affairs, the Committee shall direct that payments be made to such
person's legally appointed guardian or other representative. Any payment of a
benefit in accordance with the provisions of this subsection shall be a complete
discharge of any liability to make such payment.
(b) Reversions. In no event, except as provided
herein, shall the Trustee return to a Participating
Company any amount contributed by it to the Plan.
(i) Mistake of Fact. In the case of a
contribution made by a good faith mistake of fact, the
Trustee shall return the erroneous portion of the contribution, without increase
for investment earnings, but with decrease for investment losses, if any, within
one year after payment of the contribution to the Fund.
(ii) Deductibility. To the extent
deduction of any contribution determined by the Company to be
deductible is disallowed, the Trustee shall return that portion of the
contribution, without increase for investment earnings but with decrease for
investment losses, if any, for which deduction has been disallowed within one
year after the disallowance of the deduction.
(iii) Limitation. No return of contribution
shall be made under this subsection which adversely
affects the Plan's qualified status under regulations, rulings or other
published positions of the Internal Revenue Service or reduces a Member's
Accrued Benefit below the amount it would have been had such contributions not
been made.
(iv) Compliance Refunds. This subsection
shall not preclude refunds made in accordance with
subsection 4(b)(i), 4(f)(ii), 4(g)(ii) or 4(i)(iii).
<PAGE>
(c) Employee Data. The Committee or the Trustee may
require that each Employee provide such data as it
deems necessary upon his becoming a Member in the Plan. Each Employee, upon
becoming a Member, shall be deemed to have approved of and to have acquiesced in
each and every provision of the Plan for himself, his personal representatives,
distributees, legatees, assigns, and beneficiaries.
(d) In Writing Requirement. Unless otherwise
required by law, a requirement that a transaction or consent
under the Plan be "in writing" may, at the discretion of the Committee, be
effected through an interactive telephone system or by other types of electronic
communication.
(e) Doubt as to Right to Payment. If at any time
any doubt exists as to the right of any person to any
payment under the Plan or the amount or time of such payment (including, without
limitation, any case of doubt as to identity, or any case in which any notice
has been received from any other person claiming any interest in amounts payable
hereunder, or any case in which a claim from other persons may exist by reason
of community property or similar laws), the Committee may direct the Trustee to
hold such sum as a segregated amount in trust until such right or amount or time
is determined or until order of a court of competent jurisdiction, or to pay
such sum into court in accordance with appropriate rules of law or to make
payment only upon receipt of a bond or similar indemnification (in such amount
and in such form as is satisfactory to the Committee).
(f) Inability to Locate Distributee. Notwithstanding
any other provision of the Plan, if the Committee
cannot locate any person to whom a payment is due under this Plan, the benefit
in respect of which such payment is to be made shall be forfeited at such time
as the Committee shall determine in its sole discretion (but in all events prior
to
<PAGE>
the time such benefit would otherwise escheat under any applicable state law);
provided, that such benefit shall be reinstated if such person subsequently
makes a valid claim for such benefit.
(g) Estoppel of Members and Their Beneficiaries.
The Participating Companies, Committee and Trustee may
rely upon any certificate, statement or other representation made to them by an
Employee, Member or beneficiary with respect to age, length of service, leave of
absence, date of cessation of employment, marital status, or other fact required
to be determined under any other provisions of this Plan, and shall not be
liable on account of the payment of any moneys or the doing of any act in
reliance upon any such certificate, statement or other representation. Any such
certificate, statement or other representation made by an Employee or Member
shall be conclusively binding upon such Employee or Member and his beneficiary,
and such Employee, Member or beneficiary shall thereafter and forever be
estopped from disputing the truth and correctness of such certificate, statement
or other representation. Any such certificate, statement or other representation
made by a Member's beneficiary shall be conclusively binding upon such
beneficiary and such beneficiary shall thereafter and forever be estopped from
disputing the truth and correctness of such certificate, statement or other
representation.
(h) Law Governing. This Plan shall be construed,
administered and applied in a manner consistent with the laws of the
Commonwealth of Pennsylvania where those laws are not superseded by federal law.
(i) Pronouns. The use of the masculine pronoun
shall be extended to include the feminine gender wherever appropriate.
(j) Interpretation. The Plan is a profit sharing
plan including a qualified, tax exempt trust under
sections 401(a) and 501(a) of the Code and a qualified cash
<PAGE>
or deferred arrangement under section 401(k)(2) of the Code. The Plan shall be
interpreted in a manner consistent with its satisfaction of all requirements of
the Code applicable to such a plan.
IN WITNESS WHEREOF, and as evidence of the adoption of this Plan by
the Company, it has caused the same to be signed by its officers thereunto duly
authorized, and its corporate seal to be affixed hereto, this day of , 1999.
PRIMESOURCE CORPORATION
Attest:
By:Corporate
- ----------------------------------------- -------------------------
(Corporate Seal)
<PAGE>
PRIMESOURCE CORPORATION 401(k) SAVINGS PLAN
(Amended and Restated Effective January 1, 1997)
Schedule A
(September 1, 1999)
[Intentionally Left Blank]
A-1
PARENTS & SUBSIDIARIES OF THE REGISTRANT
There is no parent of the registrant.
The Registrant owns 100% of the outstanding capital stock of the following
subsidiary:
Business Name of Corporation Jurisdiction of Incorporation
Dixie Type & Supply Company, Inc. Alabama
(merged into Registrant effective January 1, 1998)
The aforementioned is included in the Consolidated Financial Statements of the
Registrant filed herewith.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (File Nos. 33-71638 and 33-87360) of PrimeSource
Corporation and its subsidiaries (the "Company") of our report dated February
22, 2000, relating to the financial statements and financial statement schedule,
which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 86,139
<ALLOWANCES> 3,127
<INVENTORY> 68,379
<CURRENT-ASSETS> 166,145
<PP&E> 22,760
<DEPRECIATION> 10,697
<TOTAL-ASSETS> 196,807
<CURRENT-LIABILITIES> 71,909
<BONDS> 62,500
0
0
<COMMON> 65
<OTHER-SE> 59,480
<TOTAL-LIABILITY-AND-EQUITY> 196,807
<SALES> 545,273
<TOTAL-REVENUES> 545,273
<CGS> 452,396
<TOTAL-COSTS> 452,396
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,186
<INTEREST-EXPENSE> 5,484
<INCOME-PRETAX> 8,772
<INCOME-TAX> 3,663
<INCOME-CONTINUING> 5,109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,109
<EPS-BASIC> .78
<EPS-DILUTED> .78
</TABLE>
TO BE INCORPORATED BY REFERENCE INTO FORM S-8
REGISTRATION STATEMENTS NO. 33-71638 AND 33-87360
UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) To include
any prospectus required by section 10(a)(3) of the Securities Act of
1933; (ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in the registration statement; (iii) To include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement; Provided, however, that
paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration
statement is on Form S-3 or Form S-8 and the information required to be
included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) Filings incorporating subsequent Exchange Act documents by reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(f) Employee plans on Form S-8.
(1) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus to each employee to whom the prospectus
is sent or given a copy of the registrant's annual report to
stockholders for its last fiscal year, unless such employee otherwise
has received a copy of such report, in which case the registrant shall
state in the prospectus that it will promptly furnish, without charge,
a copy of such report on written request of the employee. If the last
fiscal year of the registrant has ended within 120 days prior to the
use of the prospectus, the annual report of the registrant for the
preceding fiscal year may be so delivered, but within such 120 days
period the annual report for the last fiscal year will be furnished to
each such employee.
(2) The undersigned registrant hereby undertakes to transmit or cause to be
transmitted to all employees participating in the plan who do not
otherwise receive such material as stockholders of the registrant, at
the time and in the manner such material is sent to its stockholders,
copies of all reports, proxy statements and other communications
distributed to its stockholders generally.
(3) Where interests in a plan are registered herewith, the undersigned
registrant and plan hereby undertake to transmit or cause to be
transmitted promptly, without charge, to any participant in the plan
who makes a written request, a copy of the then latest annual report of
the plan filed pursuant to section 15(d) of the Securities Exchange Act
of 1934 (Form 11-K). If such report is filed as part of the
registrant's annual report on Form 10-K, that entire report (excluding
exhibits) shall be delivered upon written request. If such report is
filed as part of the registrant's annual report to stockholders
delivered pursuant to paragraph (1) or (2) of this undertaking,
additional delivery shall not be required.
(i) Acceleration of effectiveness.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other that the payment by the registrant of expenses incurred or paid
by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
