<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
--------------- ---------------
COMMISSION FILE NUMBER 0-23034
ENCAD, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of 95-3672088
incorporation or organization) (I.R.S. Employer
Identification No.)
6059 CORNERSTONE COURT WEST 92121
SAN DIEGO, CA
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (619) 452-0882
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of Class)
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 the 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.
-------
Aggregate market value of the voting stock held by nonaffiliates of the
registrant, computed using the closing price as reported by Nasdaq for the
Company's common stock on March 31, 1997: $178,043,528.*
Indicate the number of shares outstanding of the registrant's common stock as of
the latest practicable date:
Outstanding at
Class March 31, 1997
----- -----------------
Common Stock, no par value 11,340,030
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's 1996 Annual Report (the "1996 Annual Report") to
security holders to be furnished to the Securities and Exchange Commission
(the "Commission") pursuant to Rule 14a-3(b) in connection with Registrant's
1997 Annual Meeting of Shareholders scheduled to be held on or about July 17,
1997 (the "1997 Annual Meeting"), as attached hereto as Exhibit 13.1, are
incorporated herein by reference into Parts II and IV of this Annual Report
on Form 10-K (this "Report".)
Portions of Registrant's Definitive Proxy Statement (the "Proxy Statement")
to be filed with the Commission pursuant to Regulation 14A in connection with
the 1997 Annual Meeting are incorporated herein by reference into Part III of
this Report.
Certain Exhibits filed with the Registrant's prior registration statements
and Registrant's Annual Report on Form 10-K for the year ended December
31, 1995 are incorporated herein by reference into Part IV of this Report.
- --------------------------------
* Excludes 5,380,414 shares of Common Stock held by executive officers,
directors and shareholders whose ownership exceeds 5% of the Common Stock
outstanding at March 31, 1997. Exclusion of such shares should not be
construed to indicate that any such person possesses the power, direct or
indirect, to direct or cause the direction of the management or policies of
the Registrant or that such person is controlled by or under common control
with the Registrant.
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ITEM 6: SELECTED FINANCIAL DATA
The information required by this item is included on page 13 of the
1996 Annual Report and is incorporated herein by reference.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is included on pages 16 through 18 of
the 1996 Annual Report and is incorporated herein by reference.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements for December 31, 1996
and 1995, and for each of the three years in the period ended December 31,
1996 and the Report of Deloitte & Touche LLP, Independent Auditors, is
included on pages 19 through 26 of the 1996 Annual Report and are
incorporated herein by reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by this item is incorporated by reference from the
Proxy Statement in the sections entitled "Election of Directors", "Executive
Officers" and Section 16(a) "Beneficial Ownership Reporting Compliance."
ITEM 11: EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
Proxy Statement in the section entitled "Compensation of Executive Officers."
ITEM 12: SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The information required by this item is incorporated by reference from
the Proxy Statement in the section entitled "Security Ownership of Certain
Beneficial Owners and Management."
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
Proxy Statement in the section entitled "Certain Relationships and Related
Transactions."
14
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PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
Number
------
(a) DOCUMENTS FILED AS PART OF THE REPORT:
(1) Consolidated Balance Sheets at December 31, 1996 and 1995... *
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994.......................... *
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.......................... *
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1996, 1995 and 1994........... *
Notes to Consolidated Financial Statements.................. *
Independent Auditors' Report................................ *
(2) Consolidated Financial Statement Schedules
Financial statement schedules have been omitted because they are either
not required, not applicable or the information is otherwise included.
-----------------
* Incorporated herein by reference on pages 19 through 26 of the
1996 Annual Report.
(3) Exhibits:
Exhibit
Number Description
3.1 Amended and Restated Articles of Incorporation of the Company
(filed as Exhibit 3.3). (1)
3.2 Amended and Restated Bylaws of the Company (filed as Exhibit
3.5). (1)
10.1 Form of Distributor Agreement (Domestic)(filed as Exhibit
10.14). (1)
10.2 Form of International Distributor Agreement (filed as
Exhibit 10.15). (1)
10.3 Form of OEM Agreement (filed as Exhibit 10.16). (1)
+ 10.4 The Company's Incentive Stock Option Plan (filed as
Exhibit 10.29). (1)
15
<PAGE>
+ 10.5 The Company's 1986 Non-Qualified Stock Option Plan, as
amended (filed as Exhibit 10.30). (1)
+ 10.6 Form of Incentive Stock Option Agreement (filed as Exhibit
10.31). (1)
+ 10.7 Form of Non-Qualified Stock Option Agreement (filed as
Exhibit 10.32). (1)
+ 10.8 The Company's 1993 Stock Option/Stock Issuance Plan (filed
as Exhibit 99.1). (2)
+ 10.9 Form of Notice of Grant of Stock Option and Stock Option
Agreement (filed as Exhibit 10.34). (1)
+ 10.10 Form of Stock Issuance Agreement (filed as Exhibit
10.35). (1)
+ 10.11 1993 Employee Stock Purchase Plan (filed as Exhibit
99.1). (5)
+ 10.12 Form of Stock Purchase Agreement (filed as Exhibit
10.37). (1)
10.13 Form of Non-Disclosure Agreement (filed as Exhibit
10.38). (1)
10.14 Form of Employee Proprietary Information Agreement (filed
as Exhibit 10.39). (1)
+ 10.15 Form of Indemnification Agreements between the Company and
each of its directors (filed as Exhibit 10.41). (1)
+ 10.16 Form of Indemnification Agreements between the Company and
each of its officers (filed as Exhibit 10.42). (1)
+ 10.17 Sales Incentive Compensation Arrangement with Jiri Modry
dated February 15, 1995 (with certain confidential portions
omitted)(filed as Exhibit 10.46). (3)
10.18 Agreement to Sell Real Estate dated January 31, 1996
between the Registrant and The Chase Manhattan Bank, N.A.,
Real Estate Finance. (4)
+ 10.19 Form of Severance Letter Agreements between the Company
and each of its officers.
+ 10.20 Form of Senior Executive 1997 Annual Performance Bonus
between the Company and each of its officers.
+ 10.21 Select Compensation, Non-Qualified Deferred Compensation
Plan and Related Documents
11.1 Statement regarding computation of net earnings per share.
13.1 Portions of the Registrant's Annual Report to Shareholders
for the year ended December 31, 1996.
16
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21.1 Subsidiaries.
23.1 Independent Auditors' Consent, Deloitte & Touche LLP.
24.1 Power of Attorney (See page 18).
- --------------
(1) Filed as exhibit to the Registrant's Registration Statement on Form S-1
(No. 33-70220) or amendments, except as set forth above, thereto and
incorporated herein by reference.
(2) Filed as exhibit to the Registrant's Registration Statement on Form S-8
(No. 33-95252) and incorporated herein by reference.
(3) Filed as exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference.
(4) Filed as exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference.
(5) Filed as exhibit to the Registrant's Registration Statement on Form S-8
(No. 333-24965) and incorporated herein by reference.
+ Management compensatory plan.
(b) REPORTS ON FORM 8-K
None
(c) EXHIBITS
The exhibits required by this Item are listed under Item 14(a)(3).
(d) FINANCIAL STATEMENT SCHEDULES
The consolidated financial statement schedules required by this Item are
listed under Item 14(a)(2).
17
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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.
ENCAD, INC.
By /s/ David A. Purcell Date: May 2, 1997
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David A. Purcell
Chief Executive Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints David A. Purcell or Thomas L. Green, his
attorney-in-fact, with power of substitution in any and all capacities, to sign
any amendments to this Annual Report on Form 10-K, and to file the same with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that the
attorney-in-fact or his substitute or substitutes may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ David A. Purcell Chairman of the Board and May 2, 1997
- -------------------------- Chief Executive Officer -------------------------
(David A. Purcell) (Principal Executive Officer)
/s/ Richard A. Plante President and May 2, 1997
- -------------------------- Chief Operating Officer -------------------------
(Richard A. Plante)
/s/ Robert V. Adams Director May 2, 1997
- -------------------------- -------------------------
(Robert V. Adams)
/s/ Ronald J. Hall Director May 2, 1997
- -------------------------- -------------------------
(Ronald J. Hall)
/s/ Howard L. Jenkins Director May 2, 1997
- -------------------------- -------------------------
(Howard L. Jenkins)
/s/ Charles E. Volpe Director May 2, 1997
- -------------------------- -------------------------
(Charles E. Volpe)
/s/ Craig S. Andrews Director May 2, 1997
- -------------------------- -------------------------
(Craig S. Andrews)
18
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EXHIBIT A
GENERAL RELEASE
---------------
THIS GENERAL RELEASE (hereinafter "Release") is made and entered into by
and between [NAME] (hereinafter "[LASTNAME]") and ENCAD, Inc. (hereinafter
"EMPLOYER"), and inures to the benefit of each of EMPLOYER's current, former and
future parents, subsidiaries, related entities, employee benefit plans and their
fiduciaries, predecessors, successors, officers, directors, shareholders,
agents, employees and assigns.
RECITALS
--------
A. [LASTNAME] was for a period of time an employee of EMPLOYER, most
recently as its [TITLE];
B. On , 199 , [LASTNAME] and EMPLOYER entered into that
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certain letter agreement (the "Letter Agreement") pursuant to which [LASTNAME]
may become entitled to certain severance benefits upon the (i) termination of
[LASTNAME]'s employment under certain circumstances described in the Letter
Agreement and (ii) [LASTNAME]'s execution of a General Release (as defined in
the Letter Agreement). This Release is that General Release described in the
Letter Agreement.
C. [LASTNAME]'s employment with EMPLOYER ceased effective [DATE];
D. [LASTNAME] and EMPLOYER wish permanently to resolve any and all
disputes arising out of [LASTNAME]'s employment with EMPLOYER or the cessation
of that employment.
NOW, THEREFORE, for and in consideration of the execution of this Release
and the mutual covenants contained in the following paragraphs, EMPLOYER and
[LASTNAME] agree as follows:
1. INCORPORATION OF RECITALS. The recitals set forth above and
identification of the parties to, and beneficiaries of, this Release are
incorporated by references as though fully set forth herein.
2. WAGES AND PAID TIME OFF PAID. [LASTNAME] acknowledges that [S/HE] has
been paid for all of [HIS/HER] wages and [HIS/HER] accrued and unused paid time
off.
3. GENERAL RELEASE. [LASTNAME] for [HIM/HER]self, [HIS/HER] heirs,
executors, administrators, assigns and successors, fully and forever releases
and discharges EMPLOYER and each of its current, former and future parents,
subsidiaries, related entities, employee benefit plans and their fiduciaries,
predecessors, successors, officers, directors, shareholders, agents, employees
and assigns (collectively, "Releasees"), with respect to any and all claims,
liabilities and causes of action, of every nature, kind and description, in law,
equity or otherwise, which have arisen, occurred or existed at any time prior to
the signing of this Release, including, without limitation, any and all claims,
liabilities and causes of action arising out of or relating to [LASTNAME]'s
employment with EMPLOYER or the cessation of that employment.
<PAGE>
4. KNOWING WAIVER OF EMPLOYMENT-RELATED CLAIMS. [LASTNAME] understands
and agrees that [S/HE] is waiving any and all rights [S/HE] may have had, now
has, or in the future may have, to pursue against any of the Releasees any and
all remedies available to [HIM/HER] under any employment-related causes of
action, including without limitation, claims of wrongful discharge, breach of
contract, breach of the covenant of good faith and fair dealing, fraud,
violation of public policy, defamation, discrimination, personal injury,
physical injury, emotional distress, claims under Title VII of the Civil Rights
Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans
With Disabilities Act, the Federal Rehabilitation Act, the Family and Medical
Leave Act, the California Fair Employment and Housing Act, the California Family
Rights Act, the Equal Pay Act of 1963, the provisions of the California Labor
Code and any other federal, state or local laws and regulations relating to
employment, conditions of employment (including wage and hour laws) and/or
employment discrimination.
5. WAIVER OF CIVIL CODE Section 1542. [LASTNAME] expressly waives any
and all rights and benefits conferred upon [HIM/HER] by Section 1542 of the
Civil Code of the State of California, which states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
[LASTNAME] expressly agrees and understands that this Release applies to all
unknown, unsuspected and unanticipated claims, liabilities and causes of action
which [S/HE] may have against EMPLOYER or any of the other Releasees.
6. SEVERABILITY OF RELEASE PROVISIONS. [LASTNAME] agrees that if any
provision of this Release given by [HIM/HER] is found to be unenforceable, it
will not affect the enforceability of the remaining provisions and the courts
may enforce all remaining provisions to the extent permitted by law.
7. PROMISE TO REFRAIN FROM SUIT OR ADMINISTRATIVE ACTION. [LASTNAME]
promises and agrees that [S/HE] will never sue EMPLOYER or any of the other
Releasees, or otherwise institute or participate in any legal or administrative
proceedings against EMPLOYER or any of the other Releasees, with respect to any
claim covered by the provisions of this Release, including but not limited to
claims arising out of [LASTNAME]'s employment with EMPLOYER or the termination
of that employment, unless [S/HE] is compelled by legal process to do so.
8. PROMISE TO REFRAIN FROM ASSISTING IN SUIT OR ADMINISTRATIVE ACTION.
[LASTNAME] promises and agrees that [S/HE] shall not advocate or incite the
institution of, or assist or participate in, any suit, complaint, charge or
administrative proceeding by any other person against EMPLOYER or any of the
other Releasees,
9. INTEGRATED AGREEMENT. The parties acknowledge and agree that no
promises or
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<PAGE>
representations were made to them which do not appear written herein or in the
Letter Agreement and that this Release and the Letter Agreement contains the
entire agreement of the parties on the subject matter hereof and thereof. The
parties further acknowledge and agree that parol evidence shall not be required
to interpret the intent of the parties.
10. VOLUNTARY EXECUTION. The parties hereby acknowledge that they have
read and understand this Release and that they sign this Release voluntarily and
without coercion.
11. WAIVER, AMENDMENT AND MODIFICATION OF RELEASE. The parties agree that
no waiver, amendment or modification of any of the terms of this Release shall
be effective unless in writing and signed by all parties affected by the waiver,
amendment or modification. No waiver of any term, condition or default of any
term of this Release shall be construed as a waiver of any other term, condition
or default.
12. CALIFORNIA LAW. The parties agree that this Release and its terms
shall be construed under California law without regard to conflict of laws
provisions thereof.
13. DRAFTING. The parties agree that this Release shall be construed
without regard to the drafter of the same and shall be construed as though each
party to this Release participated equally in the preparation and drafting of
this Release.
14. COUNTERPARTS. This Release may be signed in counterparts and said
counterparts shall be treated as though signed as one document.
15. PERIOD TO CONSIDER TERMS OF RELEASE. [LASTNAME] acknowledges that
this Release was presented to [HIM/HER] on [DATE] and that [S/HE] is entitled to
have a twenty-one (21) day period in which to consider this Release. [LASTNAME]
acknowledges that [S/HE] has obtained the advice and counsel from the legal
representative of [HIS/HER] choice and executes this Release having had
sufficient time within which to consider its terms. [LASTNAME] represents that
if [S/HE] executes this Release before twenty-one (21) days have elapsed, [S/HE]
does so voluntarily, upon the advice and with the approval of [HIS/HER] legal
counsel, and that [S/HE] voluntarily waives any remaining consideration period.
16. REVOCATION OF RELEASE. [LASTNAME] understands that after executing
this Release, [S/HE] has the right to revoke it within seven (7) days after
[HIS/HER] execution of it. [LASTNAME] understands that this Release will not
become effective and enforceable unless the seven (7) day revocation period
passes and [LASTNAME] does not revoke the Release in writing. [LASTNAME]
understands that this Release may not be revoked after the seven (7) day
revocation period has passed. [LASTNAME] understands that any revocation of
this Release must be made in writing and delivered to EMPLOYER at 6059
Cornerstone Court West, San Diego, California 92121 within the seven (7) day
period. [LASTNAME] understands that [S/HE] will be entitled to receive the
benefits described in the Letter Agreement only if [S/HE] signs and returns the
Notice of Non-Revocation attached hereto as EXHIBIT A to EMPLOYER. [LASTNAME]
will wait at least seven (7) days after signing this Release before signing
EXHIBIT A.
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[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
17. REPRESENTATION BY COUNSEL. The parties represent that they have been,
or have been strongly encouraged by Employer to have engaged and have been,
represented in negotiations for the preparation of this Release by counsel of
their own choosing, and that they have entered into this Release voluntarily,
without coercion, and based upon their own judgment and not in reliance upon any
representations or promises made by the other party or parties or the
undersigned attorneys, other than those contained within this Release and the
Letter Agreement. The parties further agree that if any of the facts or matters
upon which they now rely in making this Release hereafter prove to be otherwise,
this Release will nonetheless remain in full force and effect.
Dated:
------------------ -------------------------------
[EMPLOYEE]
EMPLOYER
ENCAD, INC.
Dated: BY:
------------------ ----------------------------
APPROVED AS TO FORM AND CONTENT:
----------------------------
Dated: By:
------------------ ----------------------------
Attorneys for [EMPLOYEE]
Dated: By:
------------------ ----------------------------
Attorneys for [EMPLOYER]
[COUNTERPART SIGNATURE PAGE TO GENERAL RELEASE]
<PAGE>
EXHIBIT A TO GENERAL RELEASE
I certify and confirm that I do NOT revoke the General Release executed by
me on [DATE].
I understand that I must sign and return this document to ENCAD, Inc. no
sooner than seven (7) days after my execution of the General Release in order to
receive any of the benefits due me under the Letter Agreement (as defined in the
General Release), and that I shall not begin receiving any such benefits until
ENCAD, Inc. is in receipt of this notice of non-revocation.
Dated:
------------------ -----------------------------
[EMPLOYEE NAME]
A-1
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EXHIBIT 10.21
ENCAD, INC.
Select Compensation, Non-Qualified Deferred Compensation Plan and
Related Documents
4
<PAGE>
SELECT COMPENSATION
NON-QUALIFIED DEFERRED COMPENSATION
PLAN DOCUMENT
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NOTE: THIS PLAN DOCUMENT AND THE ATTACHED ADOPTION AGREEMENT (THE
"DOCUMENTS") ARE INTENDED ONLY TO SUGGEST CERTAIN ALTERNATIVE FORMS FOR AN
UNFUNDED NON-QUALIFIED DEFERRED COMPENSATION PLAN. ALTHOUGH THE USE OF THESE
SUGGESTED DOCUMENTS IS INTENDED TO PROVIDE CERTAIN INCOME TAX DEFERRAL BENEFITS
TO PLAN PARTICIPANTS, SUCH BENEFITS MAY BE ADVERSELY AFFECTED BY THE ACTUAL
OPERATION OF THE PLAN SUBSEQUENT TO ITS ADOPTION. MOREOVER, THESE SUGGESTED
DOCUMENTS HAVE NOT BEEN APPROVED BY THE INTERNAL REVENUE SERVICE AND ARE NOT
INTENDED TO CREATE A "TAX-QUALIFIED" PLAN UNDER SECTION 401(a) OF THE INTERNAL
REVENUE CODE OR ANY SIMILAR PROVISION THEREOF. CONSEQUENTLY, PRUDENTIAL MUTUAL
FUND SERVICES AND ITS AFFILIATES ("PMFS") PROVIDE NO ASSURANCES WITH RESPECT TO
THE AFOREMENTIONED BENEFITS AND ASSUME NO RESPONSIBILITY IN THIS REGARD.
EMPLOYERS ARE URGED TO CONSULT THEIR TAX ADVISER AND THEIR LEGAL COUNSEL
REGARDING THE TAX AND OTHER LEGAL CONSEQUENCES ASSOCIATED WITH THE ADOPTION AND
OPERATION OF THESE SUGGESTED DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE
FEDERAL, STATE AND LOCAL TAX AND SECURITIES LAW CONSEQUENCES ASSOCIATED WITH
SUCH ADOPTION AND OPERATION. PMFS PROVIDES NO ASSURANCES WITH RESPECT TO SUCH
CONSEQUENCES, IF ANY. DEPENDING UPON THE JURISDICTIONS IN WHICH THE EMPLOYER
(AND ITS PARTICIPATING AFFILIATES) OPERATE AND/OR ARE ESTABLISHED, CERTAIN STATE
"BLUE SKY" SECURITIES FILINGS MAY BE REQUIRED IN CONNECTION WITH THE ADOPTION OF
THIS PLAN.
IF THE ATTACHED FORM OF RABBI TRUST AGREEMENT IS USED BY AN EMPLOYER IN
CONNECTION WITH THESE SUGGESTED DOCUMENTS, IT IS INTENDED THAT THE ASSETS OF
SUCH TRUST SHALL BE CONSIDERED PART OF THE GENERAL ASSETS OF THE EMPLOYER AND
SHALL BE SUBJECT TO THE CLAIMS OF THE EMPLOYER'S GENERAL CREDITORS. AGAIN,
EMPLOYERS ARE URGED TO CONSULT WITH THEIR TAX ADVISER AND LEGAL COUNSEL
REGARDING THE CONSEQUENCES OF UTILIZING SUCH A TRUST AGREEMENT SINCE PMFS
PROVIDES NO ASSURANCES IN THIS REGARD.
Plan Document 1
<PAGE>
TABLE OF CONTENTS
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Page
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE I -- DEFINITIONS . . . . . . . . . . . . . . . . . . . 4
1.1 "Accounting Date". . . . . . . . . . . . . . . . . . . 4
1.2 "Administrator" or "Plan Administrator". . . . . . . . 4
1.3 "Adoption Agreement" . . . . . . . . . . . . . . . . . 4
1.4 "Beneficiary Designation". . . . . . . . . . . . . . . 4
1.5 "Board". . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 "Code" . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 "Compensation" . . . . . . . . . . . . . . . . . . . . 4
1.8 "Contingent Account" . . . . . . . . . . . . . . . . . 4
1.9 "DEFERRAL ACCOUNT" . . . . . . . . . . . . . . . . . . 5
1.10 "Deferral Notice" . . . . . . . . . . . . . . . . . . 5
1.11 "DEFERRED COMPENSATION" . . . . . . . . . . . . . . . 5
1.12 "Designated Beneficiary". . . . . . . . . . . . . . . 5
1.13 "Disability". . . . . . . . . . . . . . . . . . . . . 5
1.14 "Effective Date". . . . . . . . . . . . . . . . . . . 5
1.15 "Employee". . . . . . . . . . . . . . . . . . . . . . 5
1.16 "Employer". . . . . . . . . . . . . . . . . . . . . . 5
1.17 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . 5
1.18 "Participant" . . . . . . . . . . . . . . . . . . . . 5
1.19 "Plan". . . . . . . . . . . . . . . . . . . . . . . . 5
1.20 "Retirement". . . . . . . . . . . . . . . . . . . . . 6
1.21 "Separation from Service" . . . . . . . . . . . . . . 6
1.22 "Unforeseeable Emergency" . . . . . . . . . . . . . . 6
ARTICLE II -- ELIGIBILITY REQUIREMENTS . . . . . . . . . . . . 6
2.1 Participants.. . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III -- DEFERRED COMPENSATION . . . . . . . . . . . . . 6
3.1 Timing and Effect of Deferral Notices. . . . . . . . . 6
3.2 Deferred Compensation. . . . . . . . . . . . . . . . . 6
3.3 Minimum and Maximum Deferrals. . . . . . . . . . . . . 7
ARTICLE IV -- EMPLOYER ALLOCATIONS . . . . . . . . . . . . . . 7
4.1 Employer Allocations.. . . . . . . . . . . . . . . . . 7
ARTICLE V -- ACCOUNTS AND REPORTS. . . . . . . . . . . . . . . 7
5.1 Establishment of Accounts. . . . . . . . . . . . . . . 7
5.2 Accounting Date. . . . . . . . . . . . . . . . . . . . 7
5.3 Participant Rights.. . . . . . . . . . . . . . . . . . 7
ARTICLE VI -- BENEFIT DISTRIBUTIONS. . . . . . . . . . . . . . 7
6.1 Eligibility for Payment. . . . . . . . . . . . . . . . 7
6.2 Benefit Commencement Date. . . . . . . . . . . . . . . 8
6.3 Forms of Payment.. . . . . . . . . . . . . . . . . . . 8
6.4 Death Benefits.. . . . . . . . . . . . . . . . . . . . 9
6.5 Beneficiary Designation. . . . . . . . . . . . . . . . 9
6.6 Failure to Designate a Beneficiary.. . . . . . . . . . 9
6.7 Unforeseeable Emergency --Hardship Withdrawals.. . . . 9
ARTICLE VII -- VESTING . . . . . . . . . . . . . . . . . . . . 9
7.1 Deferral Accounts. . . . . . . . . . . . . . . . . . . 9
Plan Document 2
<PAGE>
7.2 Contingent Accounts. . . . . . . . . . . . . . . . . . 9
7.3 Death or Disability. . . . . . . . . . . . . . . . . .10
7.4 Forfeiture.. . . . . . . . . . . . . . . . . . . . . .10
ARTICLE VIII -- FUNDING. . . . . . . . . . . . . . . . . . . .10
8.1 Investments. . . . . . . . . . . . . . . . . . . . . .10
8.2 Deemed Investment Returns. . . . . . . . . . . . . . .10
8.3 Actual Ownership of Assets.. . . . . . . . . . . . . .10
8.4 Investment Direction.. . . . . . . . . . . . . . . . .10
ARTICLE IX -- PLAN ADMINISTRATION. . . . . . . . . . . . . . .10
9.1 Administrator. . . . . . . . . . . . . . . . . . . . .10
9.2 Powers.. . . . . . . . . . . . . . . . . . . . . . . .11
9.3 Administrative Fees and Expenses.. . . . . . . . . . .11
9.4 Duties of Administrator. . . . . . . . . . . . . . . .11
9.5 Removal of Administrator.. . . . . . . . . . . . . . .11
ARTICLE X -- AMENDMENT AND TERMINATION . . . . . . . . . . . .12
10.1 Amendment and Termination.. . . . . . . . . . . . . .12
ARTICLE XI -- MISCELLANEOUS. . . . . . . . . . . . . . . . . .12
11.1 Limitation of Rights - Employment Relationship. . . .12
11.2 Non-Assignability.. . . . . . . . . . . . . . . . . .12
11.3 Arbitration.. . . . . . . . . . . . . . . . . . . . .13
11.4 Total Agreement.. . . . . . . . . . . . . . . . . . .13
11.5 Gender and Number.. . . . . . . . . . . . . . . . . .14
11.6 Governing Law.. . . . . . . . . . . . . . . . . . . .14
Plan Document 3
<PAGE>
PREAMBLE
- --------
By executing the Adoption Agreement attached hereto as Exhibit A,
which together with this document constitute this non-qualified deferred
compensation plan (the "Plan"), the Employer hereby establishes an unfunded
deferred compensation plan for eligible Employees of the Employer.
The principal purpose of the Plan is to enable eligible Employees of
the Employer to defer the receipt and income taxation of a certain portion of
their Compensation in accordance with the terms of the Plan and the applicable
Deferral Notice.
ARTICLE I -- DEFINITIONS
- ------------------------
1.1 "ACCOUNTING DATE"
shall mean the dates described in Section 5.2 hereof.
1.2 "ADMINISTRATOR" OR "PLAN ADMINISTRATOR"
shall mean the individual or committee designated by the Employer in the
Adoption Agreement to administer the Plan as provided herein. If no such
designation is made, the Employer shall serve as the Administrator.
1.3 "ADOPTION AGREEMENT"
shall mean the executed agreement attached to this document as Exhibit A by
which an Employer elects to establish this non-qualified deferred compensation
plan.
1.4 "BENEFICIARY DESIGNATION"
shall mean the written instrument executed by each Participant, in a form
that is satisfactory to the Administrator, designating such Participant's
Designated Beneficiary or Beneficiaries.
1.5 "BOARD"
shall mean the Board of Directors of the Employer.
1.6 "CODE"
shall mean the Internal Revenue Code of 1986, as amended.
1.7 "COMPENSATION"
has the meaning elected by the Employer pursuant to the Adoption Agreement.
1.8 "CONTINGENT ACCOUNT"
shall mean the memorandum book account maintained by the Administrator for
each Participant who has executed a Deferral Notice and for whom the Employer is
deemed to make discretionary and/or matching allocations in accordance with
Article IV hereof, which accounts are used to record each eligible Participant's
allocable portion of any (i) such matching or discretionary allocations, (ii)
investment earnings or losses deemed attributable to such accounts in accordance
with Article VIII hereof and (iii) Plan expenses allocable to such accounts in
accordance with Section 9.3 hereof.
Plan Document 4
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1.9 "DEFERRAL ACCOUNT"
shall mean the deferred compensation memorandum book account maintained by
the Administrator for each Participant who has executed a Deferral Notice, which
accounts are used to record each eligible Participant's allocable portion of any
(i) Deferred Compensation allocable to such accounts in accordance with Section
3.2 hereof, (ii) investment earnings or losses deemed attributable to such
accounts in accordance with Article VIII hereof and (iii) Plan expenses
allocable to such accounts in accordance with Section 9.3 hereof.
1.10 "DEFERRAL NOTICE"
shall mean the notice by which a Participant irrevocably elects to defer
Compensation in accordance with this Plan, which shall be in writing in form and
substance satisfactory to the Administrator, signed by the Participant, and
delivered to the Administrator only at the times specified in Plan.
1.11 "DEFERRED COMPENSATION"
shall mean the portion of a Participant's Compensation which the
Participant irrevocably elects to defer pursuant to a Deferral Notice.
1.12 "DESIGNATED BENEFICIARY"
shall mean an individual or individuals designated by the Participant in a
Beneficiary Designation to receive such Participant's benefits under the Plan in
the event of such Participant's death. If more than one Designated Beneficiary
survives the Participant, payments shall be made equally to all such
beneficiaries, unless otherwise provided in a Beneficiary Designation. Nothing
herein shall prevent the Participant from designating primary and secondary
beneficiaries.
1.13 "DISABILITY"
shall mean a mental or physical disability which, in the opinion of a
physician selected by the Employer, prevents a Participant from engaging in the
principal duties of his employment for at least six months.
1.14 "EFFECTIVE DATE"
shall mean the date on which the Plan or an amendment to the Plan becomes
effective in accordance with the applicable Adoption Agreement.
1.15 "EMPLOYEE"
shall mean any person employed by the Employer as a common-law employee.
1.16 "EMPLOYER"
shall mean the corporation that adopts this Plan pursuant to the Adoption
Agreement, any successor to all or substantially all of the Employer's assets
that assumes the obligation of the Employer in connection with this Plan, and
each affiliate of the Employer that adopts the Plan with the consent of the
Employer, provided that only the Employer that signs the Adoption Agreement (i)
shall be the Administrator (if no Administrator is appointed in the Adoption
Agreement) and (ii) shall have the power to amend or terminate the Plan.
1.17 "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
1.18 "PARTICIPANT"
shall mean any eligible Employee (as described in Section 2.1) who defers
Compensation under this Plan.
1.19 "PLAN"
shall mean the Plan, as defined in the Preamble hereto.
Plan Document 5
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1.20 "RETIREMENT"
shall mean retirement by the Participant from the Employer at or after
attaining age 65.
1.21 "SEPARATION FROM SERVICE"
shall mean a Participant's Retirement, Disability, death or other
termination of employment with an Employer.
1.22 "UNFORESEEABLE EMERGENCY"
shall mean a severe financial hardship to the Participant resulting from
(i) a sudden and unexpected illness or accident of the Participant or a
dependent (as defined in Section 152(a) of the Code) of the Participant; (ii) a
loss of the Participant's property due to casualty; or (iii) other similar
extraordinary and unforeseeable circumstances caused by events beyond the
Participant's control.
ARTICLE II -- ELIGIBILITY REQUIREMENTS
- --------------------------------------
2.1 PARTICIPANTS.
Any "select management or highly compensated" Employee (as contemplated by
Department of Labor regulation Section 2520.104-23(d)) of the Employer who,
pursuant to the Adoption Agreement, has been designated by the Employer as
eligible to participate in the Plan may elect to become a Participant under the
Plan by filing a Deferral Notice with the Administrator in the form prescribed
by the Administrator in accordance with the terms of this Plan; provided,
however, that no more than 50 employees, each of whom is an "accredited
investor" within the meaning of Rule 501 of the Securities Act of 1933, as
amended, will be entitled to become a participant under the Plan.
ARTICLE III -- DEFERRED COMPENSATION
- ------------------------------------
3.1 TIMING AND EFFECT OF DEFERRAL NOTICES.
The initial Deferral Notice filed by a Participant in accordance with this
Section 3.1 must be delivered by the Participant to the Administrator no later
than 30 days after first becoming eligible to participate in the Plan and shall
be effective with respect to Compensation earned by the Participant on or after
the first day of the month following the month during which such Deferral Notice
is delivered to the Administrator. Any subsequent Deferral Notice must be
delivered prior to January 1 of the calendar year in which the Compensation to
be deferred is otherwise earned by the Participant. The initial Deferral Notice
(and any subsequent Deferral Notice) will continue in effect until terminated or
modified by a subsequent Deferral Notice. Any subsequent Deferral Notice shall
only apply to Compensation otherwise earned by the Participant after the end of
the calendar year in which such subsequent Deferral Notice is delivered to the
Administrator. Any Deferral Notice delivered by the Participant shall be
irrevocable with respect to any Compensation earned in the calendar year with
respect to which such Deferral Notice relates.
3.2 DEFERRED COMPENSATION.
Each Deferral Notice shall specify a fixed percentage or a fixed dollar
amount of Compensation to be deferred in accordance with the terms of the
Adoption Agreement. Such Deferred Compensation shall be recorded by the
Administrator in a Deferral Account. Each Participant's Deferral Account shall
be deemed credited on the date or dates for payment of Compensation, in
accordance with the Employer's normal practices, with a dollar amount equal to
Plan Document 6
<PAGE>
(a) the Participant's total amount of Deferred Compensation elected for the
calendar year, divided by
(b) the total number of dates for payment of Compensation during the
calendar year with respect to the particular Participant.
3.3 MINIMUM AND MAXIMUM DEFERRALS.
A Participant must comply with any minimum and maximum deferral
requirements which may be established by the Employer in the Adoption Agreement.
ARTICLE IV -- EMPLOYER ALLOCATIONS
- ----------------------------------
4.1 EMPLOYER ALLOCATIONS.
The Employer may credit additional discretionary and/or matching
allocations to the Participant's Contingent Account in accordance with the terms
of the Adoption Agreement. Unless otherwise provided in the Adoption Agreement,
matching allocations shall be deemed credited at the same time and in the same
manner as Deferred Compensation is deemed credited to the Deferral Accounts in
accordance with Section 3.2 hereof.
ARTICLE V -- ACCOUNTS AND REPORTS
- ---------------------------------
5.1 ESTABLISHMENT OF ACCOUNTS.
The Administrator shall establish and maintain a Deferral Account and a
Contingent Account on behalf of each Participant for purposes of determining
each Participant's interest under the Plan; provided, however, that if the
Employer makes no matching or discretionary allocations in accordance with
Article IV hereof, the Employer shall have no obligation to establish or
maintain Contingent Accounts for Participants.
5.2 ACCOUNTING DATE.
The total amounts deemed credited to Deferral Accounts and Contingent
Accounts (if any) shall be determined not less often than once during each
calendar quarter (in each case, an "Accounting Date") at which time each
Participant shall be provided by the Administrator with a written report of the
total amounts deemed credited to his Deferral Account and Contingent Account (if
any) as of such Accounting Date.
5.3 PARTICIPANT RIGHTS.
The right of a Participant or Designated Beneficiary to receive a
distribution under the Plan for the total amounts deemed credited to (i) his
Deferral Account and/or (ii) the vested portion of his Contingent Account shall
be an unsecured claim against the general assets of the Employer, and neither a
Participant nor a Designated Beneficiary shall have any rights in or against any
specific assets of the Employer. The Employer, in its discretion, may establish
one or more accounts, including grantor trusts, to which certain amounts may be
contributed by the Employer from time to time. All such amounts contributed to
such accounts shall constitute general assets of the Employer and shall be
subject to the claims of the Employer's general creditors.
ARTICLE VI -- BENEFIT DISTRIBUTIONS
- -----------------------------------
6.1 ELIGIBILITY FOR PAYMENT.
Distributions under the Plan to a Participant or Designated Beneficiary
shall be made or shall begin only upon the following events:
Plan Document 7
<PAGE>
(a) the earlier to occur of a Participant's Separation From Service or the
date elected by the Participant on his Deferral Notice; or
(b) a Participant's Unforeseeable Emergency.
Such distributions shall be based on the total amounts deemed credited to
the Participant's Deferral Account and the vested portion of the total amounts
deemed credited to his Contingent Account on the Accounting Date immediately
following the event described in this Section 6.1(a) or (b) and such
distributions shall reduce the total amounts deemed credited to the Deferral
Account and the vested portion of the Contingent Account.
6.2 BENEFIT COMMENCEMENT DATE.
Distributions to a Participant shall be made, or commence, as applicable,
within 30 days of the Accounting Date described in the last paragraph of Section
6.1.
6.3 FORMS OF PAYMENT.
Except as provided in Section 6.7 and in the last paragraph of this Section
6.3, a Participant's distribution under the Plan will be payable in the form
specified by the Employer in the Adoption Agreement and, if applicable, elected
by a Participant in his Deferral Notice.
If installment distributions over a certain number of years are permitted
by the Employer pursuant to the Adoption Agreement, the Participant or
Designated Beneficiary shall receive an annual installment distribution as
determined by applying a fraction to the sum of the total amounts deemed
credited to (i) the Participant's Deferral Account and (ii) the vested portion
of his Contingent Account. For the first distribution year, the denominator of
such fraction shall be the number of years (maximum 10) selected by the
Participant in his Deferral Notice and the numerator shall be one. For each
subsequent distribution year the numerator shall remain at one but the
denominator shall be reduced by one until at the end of the specified number of
years the sum of the total amounts deemed credited to the Deferral Account and
the vested portion of the Contingent Account equals zero. The sum of the total
amounts deemed credited to the Deferral Account and the vested portion of the
Contingent Account for this purpose shall be determined on the Accounting Date
immediately preceding the required annual installment distribution.
The annual installment distribution may be divided by "twelve" to determine
a monthly, or by "four" to determine a quarterly, amount in the case of monthly
or quarterly installments elected by the Participant in his Deferral Notice.
If the Employer elects to terminate this Plan in accordance with Section
10.1 hereof, the Employer may make any distribution contemplated by this Section
6.3 on such earlier date or dates as it may determine in its sole discretion.
Plan Document 8
<PAGE>
6.4 DEATH BENEFITS.
If a Participant dies while employed by the Employer, or dies before the
amounts to which the Participant is entitled under the Plan have been completely
distributed, the amounts payable under the Plan shall be paid to the
Participant's Designated Beneficiary in accordance with Section 6.3 hereof.
6.5 BENEFICIARY DESIGNATION.
A Participant shall have the right to designate one or more Designated
Beneficiaries, jointly or successively, and amend or revoke such designation at
any time in writing by filing a Beneficiary Designation. Such designation,
amendment or revocation shall be effective upon receipt of the Beneficiary
Designation by the Administrator.
6.6 FAILURE TO DESIGNATE A BENEFICIARY.
If no Designated Beneficiary is designated by the Participant or survives
the survivor of the Participant or last surviving Designated Beneficiary and
amounts remain payable under the Plan following such event, the Administrator
shall direct that payment of amounts owing under the Plan be made to the person
or persons in the first category listed below in which there is a survivor of
the Participant. Such categories, in order, are as follows:
(a) Participant's spouse;
(b) Participant's issue, per stirpes; and
(c) Participant's estate.
6.7 UNFORESEEABLE EMERGENCY --HARDSHIP WITHDRAWALS.
The Employer may elect to permit Participant hardship withdrawals pursuant
to the Adoption Agreement. If the Employer so elects, a Participant may request
a withdrawal for hardship by submitting a written request to the Administrator,
accompanied by written evidence that (i) his financial condition warrants an
advance release of amounts otherwise credited to the Participant's Deferral
Account and/or the vested portion of his Contingent Account and (ii) such
hardship results from an Unforeseeable Emergency. Whether a particular
circumstance constitutes an Unforeseeable Emergency shall be determined by the
Administrator, in his sole discretion, and depends on the facts of each case.
However, payment may not be made to the extent that such hardship is or may be
relieved:
(a) through reimbursement or compensation by insurance or otherwise;
(b) by liquidation of the Participant's assets, to the extent that
liquidation itself would not cause severe financial hardship; or
(c) by cessation of deferrals under the Plan.
If a financial hardship is established in accordance with the foregoing
criteria, the hardship withdrawal amount shall be limited to the amount
reasonably needed to meet the Unforeseeable Emergency. The Administrator shall
determine the amount and the form of the payment and such determination shall be
final. Any amounts remaining in the Participant's Deferral Account and/or
Contingent Account after such withdrawal shall continue to be administered in
accordance with the provisions of this Plan.
ARTICLE VII -- VESTING
- ----------------------
7.1 DEFERRAL ACCOUNTS.
A Participant shall have a 100% vested interest in his Deferral Account.
7.2 CONTINGENT ACCOUNTS.
Plan Document 9
<PAGE>
Except as provided in Section 7.3 hereof, a Participant shall acquire a
vested interest in his Contingent Account at the time and in accordance with the
method selected by the Employer in the Adoption Agreement.
7.3 DEATH OR DISABILITY.
A Participant shall become fully vested in his Contingent Account upon such
Participant's death or Disability.
7.4 FORFEITURE.
Any nonvested balance in the Contingent Account of a Participant who has
Separated from Service shall be forfeited.
ARTICLE VIII -- FUNDING
- -----------------------
8.1 INVESTMENTS.
The Employer may, in its sole and absolute discretion, establish one or
more accounts, including grantor trusts, to provide itself with a source of
funds to satisfy its payment obligations hereunder, although it shall have no
obligation to use any assets set aside as a primary or sole source of such
payments. All amounts contributed to such accounts shall constitute general
assets of the Employer and shall be subject to the claims of the Employer's
general creditors. The Employer's payment obligations under the Plan shall be
reduced to the extent such obligations are met by payments or deliveries by any
such account to Participants and/or Designated Beneficiaries. The Participants
and Designated Beneficiaries shall have no right to, control over or incidence
of ownership with respect to, any such account or any other asset of the
Employer.
8.2 DEEMED INVESTMENT RETURNS.
Amounts credited to Deferral Accounts and Contingent Accounts (if any)
shall be deemed to earn the amount of income and be reduced by the amount of
losses and any fees and expenses charged against such accounts pursuant to
Section 9.3 that such credited amounts would have earned (or would have been
reduced by) if actually invested in the manner elected by the Employer pursuant
to the Adoption Agreement until (i) all distributions with respect to Deferral
Accounts and the vested portion of Contingent Accounts, if any, have been made
and (ii) with respect to the nonvested portion of any Contingent Accounts, such
Contingent Accounts have been forfeited.
8.3 ACTUAL OWNERSHIP OF ASSETS.
All amounts credited to Deferral Accounts and Contingent Accounts and all
assets set aside and/or invested by the Employer in order to provide a source of
funding for its various obligations under the Plan shall remain (until actually
distributed to the Participants and/or Designated Beneficiaries) solely the
property of the Employer and shall be subject to the claims of the Employer's
general creditors.
8.4 INVESTMENT DIRECTION.
Any assets of the Employer that are invested by the Employer to provide a
source of funding for its obligations under the Plan shall only be invested as
directed by the Employer or by an agent of the Employer selected by the Employer
in its sole discretion. Such assets shall not be subject to the investment
direction of any Participant.
ARTICLE IX -- PLAN ADMINISTRATION
- ---------------------------------
9.1 ADMINISTRATOR.
Plan Document 10
<PAGE>
The Plan shall be administered by the Administrator selected by the
Employer and designated by the Employer pursuant to the Adoption Agreement.
Unless otherwise specified in the Adoption Agreement, the Employer shall be the
Administrator. The Administrator shall have responsibility for the operation
and administration of the Plan and shall direct distributions under the Plan.
9.2 POWERS.
The Administrator shall have the power and authority to adopt, interpret,
alter, amend or revoke rules and regulations necessary to administer the Plan
and to delegate ministerial duties and employ such outside professionals as may
be required for the prudent administration of the Plan. The Employer and the
Administrator shall also have authority to enter into agreements necessary to
implement the Plan.
9.3 ADMINISTRATIVE FEES AND EXPENSES.
Except as hereinafter provided in this Section 9.3, any and all reasonable
costs, charges and expenses incurred in connection with the Plan, including,
without limitation, expenses incurred by any grantor, trustee, or Prudential
Mutual Fund Services and its affiliates in connection with the administration of
any grantor trust, investment or fund referred to in Article VIII hereof shall
be paid by the Employer. Pursuant to the Adoption Agreement, the Employer may
elect to automatically charge any or all of such expenses and fees against the
Deferral Accounts and Contingent Accounts under the Plan and may direct that any
or all of such expenses and fees be paid out of any grantor trust established by
the Employer.
9.4 DUTIES OF ADMINISTRATOR.
The Administrator's duties shall include, but may not be limited to, the
following responsibilities:
(a) appointing the Plan's attorney, accountant or any other party that is
useful or appropriate in administering the Plan or any investment or
investment vehicle associated therewith;
(b) communicating with Employees and Participants regarding their
participation and benefits under the Plan, including the administration of
requests for hardship withdrawals, all claim procedures and providing
reports to Participants and the Employer;
(c) filing any returns, reports or other documents required under the
Code, ERISA or any other applicable law;
(d) reviewing and approving any financial reports, investment reviews, or
other reports prepared by any party referred to in Section 9.4(a) above;
(e) maintaining records setting forth which Employees are eligible to
participate in the Plan and the date on which such participation begins and
terminates;
(f) maintaining Participant Deferral Accounts, Contingent Accounts and
records with respect to any allocations and deemed investment returns
attributable thereto; and
(g) interpreting and construing the Plan in its discretion and resolving
any question of Plan interpretation, including, without limitation,
eligibility for participation and for distribution of Plan benefits.
The Administrator's interpretation of Plan provisions, including, without
limitation, eligibility for participation and for distribution of benefits under
the Plan is final, and, unless such interpretation can be shown to be arbitrary
and capricious, will not be subject to "de novo" review by any court of
competent jurisdiction.
9.5 REMOVAL OF ADMINISTRATOR.
Plan Document 11
<PAGE>
The Administrator may resign by written notice to the Employer which shall
be effective 30 days after delivery, or earlier if agreed to by the parties.
The Employer may remove the Administrator effective 30 days (or earlier if
agreed to by the parties) after receipt by the Administrator of a written
notice. The Employer may select and designate a new Administrator through an
amendment to the Adoption Agreement.
ARTICLE X -- AMENDMENT AND TERMINATION
- --------------------------------------
10.1 AMENDMENT AND TERMINATION.
The Employer, by action of the Board, may amend or terminate the Plan at
any time and in any manner, in accordance with the Employer's established rules
of procedure, but no such amendment shall adversely affect the rate at which a
Participant's (or Designated Beneficiary's) rights with respect to his Deferral
Account or Contingent Account vest pursuant to Article VII hereof. In the event
the Plan is terminated, the Administrator shall continue to be responsible for,
among other things, the supervision of the payment of distributions required or
permitted under the terms of the Plan. In the event of a Plan termination, no
additional credits shall be made to the Contingent Accounts or the Deferral
Accounts, except with respect to deemed investment returns related thereto
pursuant to Section 8.2. Any portion of any Contingent Account that is not
vested as of the effective date of such Plan termination shall be forfeited,
unless otherwise provided by the Employer in connection with such termination.
ARTICLE XI -- MISCELLANEOUS
- ---------------------------
11.1 LIMITATION OF RIGHTS - EMPLOYMENT RELATIONSHIP.
Neither the establishment of this Plan nor any modification thereof, nor
the creation of any fund or account, nor the distribution of any benefits, shall
be construed as giving a Participant, Designated Beneficiary or any other person
any legal or equitable right against the Employer or any funding vehicle except
as provided in the Plan. In no event shall the terms of employment of any
Employee be modified or in any way affected by the Plan. Nothing contained in
this Plan shall be construed as conferring upon any Employee the right to
continue in the employ of the Employer.
11.2 NON-ASSIGNABILITY.
Neither the Participant nor any Designated Beneficiary shall have any right
to commute, sell, assign, transfer or otherwise convey any of his rights with
respect to his Deferral Account or Contingent Account and any rights relating
thereto are expressly declared to be non-assignable and non-transferable, except
as provided in the Beneficiary Designation. In the event of any such attempted
assignment or transfer, the Employer and Administrator shall have no liability
hereunder to make payments to any person other than the Participant or his
Designated Beneficiary at the appropriate times specified in the Plan.
Plan Document 12
<PAGE>
11.3 ARBITRATION.
This Plan requires that certain controversies be arbitrated as provided
below. In this regard it is to be noted that:
(a) arbitration is final and binding on the parties;
(b) the parties are waiving their right to seek remedies in court
including the right to jury trial;
(c) pre-arbitration discovery is generally more limited than and different
from court proceedings;
(d) the arbitrator's award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited; and
(e) the panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry.
Any controversy arising out of or relating to the involvement of Prudential
Securities, Incorporated ("PSI") PSI, Prudential Mutual Fund Services ("PMFS"),
Prudential Mutual Fund Distributors ("PMFD") or the Prudential Savings Bank,
F.S.B. ("PSB") with respect to the Plan (a "Prudential Controversy") shall be
settled by arbitration. The arbitration of a Prudential Controversy may be
before either the National Association of Securities Dealers, Inc. or the New
York Stock Exchange, Inc., as Employer/Employee, as the case may be, may elect
and shall be governed by the laws of the State of New York. If the
Employer/Employee does not make the above election by registered mail addressed
to PMFS, PMFD or PSI at its main office within 5 business days after demand by
PMFS, PMFD, PSB or PSI that the Employer/Employee make such election then PMFS,
PMFD, PSB or PSI shall have the right to elect the arbitration tribunal of its
choice.
Notice preliminary to, in conjunction with or incident to such arbitration,
may be sent to the Employer/Employee by mail and personal service is hereby
waived. Judgment upon any award rendered by the arbitrators may be entered in
any court having jurisdiction thereof, without notice to the Employer/Employee.
No person shall bring a putative or certified class action to arbitration,
nor seek to enforce any pre-dispute arbitration agreement against any person who
has initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until: (i) the class certification is denied; (ii)
the class is decertified; or (iii) the person is excluded from the class by the
court.
11.4 TOTAL AGREEMENT.
This Plan (including the executed Adoption Agreement), the Deferral
Notices, the Beneficiary Designations and any other administrative forms
necessary for the implementation of the Plan shall constitute the total
agreement or contract between the Employer and a Participant regarding the Plan.
No oral statement regarding the Plan may be relied upon by a Participant.
Plan Document 13
<PAGE>
11.5 GENDER AND NUMBER.
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and wherever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
11.6 GOVERNING LAW.
Construction, validity and administration of this Plan, as well as Deferral
Notices, and Beneficiary Designations shall be governed by the laws of the State
of New York unless otherwise specified by the Employer in the Adoption
Agreement.
Plan Doucment 14
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SELECT COMPENSATION
NON-QUALIFIED DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
TRUST AGREEMENT
- --------------------------------------------------------------------------------
NOTICE: THIS TRUST AGREEMENT IS BASED UPON THE MODEL GRANTOR TRUST SET
FORTH IN IRS REVENUE PROCEDURE 92-64, 1992-2 C.B. 422. BECAUSE THIS
AGREEMENT CONTAINS CERTAIN ADDITIONAL PROVISIONS NOT SET FORTH IN THE REVENUE
PROCEDURE, THE PRUDENTIAL SAVINGS BANK, F.S.B. AND ITS AFFILIATES PROVIDE NO
ASSURANCES AS TO THE LEGAL STANDING OR TAX CONSEQUENCES OF THIS AGREEMENT IN
CONNECTION WITH YOUR DEFERRED COMPENSATION PLAN OR PLANS. YOU MUST CONSULT
WITH YOUR LEGAL AND TAX ADVISORS BEFORE USING THIS AGREEMENT.
- --------------------------------------------------------------------------------
This Agreement made this day of , by and between
----- -----------
(the "Company") and The Prudential Savings Bank,
- ----------------------------
F.S.B. (the "Trustee");
WHEREAS, the company has adopted the non-qualified deferred compensation
plan or plans, listed in Appendix A of this Trust Agreement, (herein called
the "Plan", although more than one plan may be so listed);
WHEREAS, the Company has incurred or expects to incur liability under
the terms of such Plan with respect to the individuals participating in such
Plan;
WHEREAS, the Company wishes to establish a trust (hereinafter called the
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event of the
Company's Insolvency, as herein defined, until paid to Plan participants and
their beneficiaries in such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of
1974;
WHEREAS, it is the intention of the company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF THE TRUST.
Plan Document (5/28/96) - Page 1
<PAGE>
(a) Company hereby deposits with the Trustee in trust [INSERT
---------
AMOUNT DEPOSITED], which shall become the principal of the Trust to be held,
administered and disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable until such time
as all liabilities with respect to Plan participants have been satisfied.
(c) The Trust is intended to be a grantor trust, of which the Company
is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be
held separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries
shall have no preferred claim on, or any beneficial ownership interest in,
any assets of the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan participants and
their beneficiaries against the Company. Any assets held by the Trust will
be subject to the claims of the Company's general creditors under federal
and/or state law in the event of insolvency, as defined in Section 3(a)
herein.
(e) The Company, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other property acceptable
to the Trustee in trust with the Trustee to augment the principal to be held,
administered and disposed of by the Trustee as provided in this Trust
Agreement. Neither the Trustee nor any Plan participant or beneficiary shall
have any right to compel such additional deposits. The Trustee shall have no
obligation to receive property other than cash unless prior to such receipt
the Trustee (i) has agreed that such property is acceptable to it and (ii)
has received such information, representations or indemnities concerning such
property as it deems reasonable or necessary under the circumstances. The
Trustee shall have no obligation to (i) require any deposits to be made to
the Trust pursuant to the terms of the Plan, (ii) compute the required amount
of deposits, if any, required to be made to the Trust pursuant to the terms
of the Plan or (iii) determine whether amounts received by it comply with the
terms of the Plan.
(f) In the event of any conflict between this Trust Agreement and any
provision of the Plan relating to any of the Trustee's responsibilities,
obligations or duties with respect to the Trust, the provisions of this Trust
Agreement shall control.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
Trust Document (5/28/96) - Page 2
<PAGE>
(a) Except as otherwise provided herein, for the purpose of paying
Plan participants and their beneficiaries, the Trustee shall make payments to
the company in accordance with a schedule (the "Distribution Instruction")
provided by the Company. The Company shall deliver to the Trustee a
Distribution Instruction that indicates the amounts payable in respect of
each Plan participant (and his or her beneficiaries), that provides a formula
or other instructions acceptable to the Trustee for determining the amounts
so payable, the form in which such amount is to be paid (as provided for or
available under the Plan), and the time of commencement for payment of such
amounts. Such Distribution Instruction must be provided at least 15 business
days prior to the first date on which a payment must be delivered to the
Company by the Trustee on behalf of any such Plan participant. Any change to
a Distribution Instruction shall be delivered to the Trustee not less than 15
days prior to the date on which the first payment is to be made in accordance
with the revised Distribution Instruction.
(b) The Company shall be responsible for payments to the Plan
participants and beneficiaries and for reporting, withholding and payment of
all taxes associated with distributions made from the Trust established under
this Trust Agreement, including the withholding and deposit of each Plan
participant's federal, state, and local income taxes, payments and deposit of
all payroll, employment and other taxes, and filing all related tax reports.
In the event that the federal government or any state, local or other
governmental body shall assess any tax, penalty or interest against the
Trustee with respect to any benefit provided under the Plan, any duty or
obligation imposed under this Trust Agreement, any transaction required under
the Plan or the Trust Agreement, or any transaction directed by the Company,
including (without limiting the generality of the foregoing) any benefit
payable under the Plan, any contribution made by the Company to the Trust, or
any services provided or fees payable under this Trust Agreement (but
excluding any tax on income earned by the Trustee), the Company shall, upon
demand, pay to the Trustee or reimburse the Trustee for the amount of such
taxes, penalties and interest assessed, reasonable attorney's fees, and other
expenses or costs incurred (including expenses associated with any court or
administrative agency action or proceeding) in connection with such
assessment. The Company's obligations under this Section 2(b) shall survive
termination of the Trust.
(c) The entitlement of a Plan participant or his or her beneficiaries
to benefits under the Plan shall be determined by the Company or such party
as it shall designate under the Plan, and any claim for such benefits shall
be considered and reviewed under the procedures set out in the Plan. The
Trustee shall have no responsibility to intervene in such process, to
interpret the provisions of the Plan or to administer the Plan in any way.
Trust Document (5/28/96) - Page 3
<PAGE>
(d) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. The Company shall notify the Trustee of its decision to make payment
of benefits directly prior to the time amounts are payable to participants or
their beneficiaries. In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Company shall make the balance of
each such payment as it falls due. The Trustee shall notify the Company
where principal and earnings are not sufficient.
(e) If the Trust has insufficient assets from which to make all
distributions called for under any Distribution Instruction on or as of a
certain distribution date, all distributions paid out on or as of such date
shall be paid out of the Trust on a PRO RATA basis with respect to all
applicable accounts.
SECTION 3. TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY
WHEN COMPANY IS INSOLVENT.
(a) The Trustee shall cease payment of benefits to the Company on
behalf of Plan participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Company is unable to pay its debts as they become
due, or (ii) the Company is subject to a pending proceeding as a debtor under
the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of the Company under federal and state law as
set forth below.
(i) The Board of Directors and the Company's chief
executive officer shall have the duty to inform the Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of company
alleges in writing to the Trustee that Company has become Insolvent, the
Trustee shall independently determine, within a reasonable time after receipt
of such notice, whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits to the
Company on behalf of Plan participants or their beneficiaries. The Trustee
may take such action as it in its discretion deems advisable to determine if
the Company is Insolvent, including applying to a court of competent
jurisdiction, and all costs or expenses incurred by the Trustee in
determining whether the Company is Insolvent shall be paid from the Trust as
an administration expense.
(ii) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or a person
claiming to be a creditor alleging that the
Trust Document (5/28/96) - Page 4
<PAGE>
Company is Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent and shall administer the trust as though the Company
were solvent. Trustee may in all events rely on such evidence concerning the
Company's solvency as may be furnished to the Trustee and that provides the
Trustee with a reasonable basis for making a determination concerning the
Company's solvency.
(iii) If at any time the Trustee has determined that the
Company is Insolvent, the Trustee shall discontinue payments to the Company
on behalf of Plan participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of the Company with respect to benefits due under the Plan or
otherwise.
(iv) The Trustee shall resume the payment of benefits to the
Company on behalf of Plan participants or their beneficiaries in accordance
with Section 2 of this Trust Agreement only after the Trustee has determined
that Company is not insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits to the Company on behalf of Plan
participants or their beneficiaries from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following
such discontinuance may be adjusted to include the aggregate amount of all
payments due to Plan participants or their beneficiaries under the terms of
the Plan for the period of such discontinuance, less the aggregate amount of
any payments made to Plan participants or their beneficiaries by the Company
in lieu of the payments provided for hereunder during any such period of
discontinuance. Prior to such resumption of payments by the Trustee to the
Company on behalf of Plan participants or their beneficiaries, the Company
shall provide the Trustee with a Distribution Instruction regarding such
payments and such other information as the Trustee may reasonably request.
SECTION 4. PAYMENTS TO THE COMPANY.
Except as provided in Section 3 hereof, the Trust being irrevocable in
accordance with Section 1(b) hereof, the Company shall have no right or power
to direct the Trustee to return the Company or to divert to others any of the
Trust assets before all payment of benefits have been made to the Company on
behalf of Plan participants and their beneficiaries pursuant to the terms of
the Plan.
Trust Document (5/28/96) - Page 5
<PAGE>
SECTION 5. INVESTMENT AUTHORITY.
(a) The Company shall have the duty and responsibility at all times
to direct the Trustee in writing 9using the "Employer Investment Selection")
as to the investment of the assets of the Trust. In the absence of written
direction from the Company, the Trustee shall have no duty to invest Trust
assets and the Trustee shall have no responsibility or liability with respect
to the investments, if any, made at the direction of the Company.
Notwithstanding the foregoing, in no event may the Trustee invest in
securities (including stock or rights to acquire stock) or obligations issued
by the Company, other than a de minimis amount held in common investment
vehicles in which the Trustee invests. All rights associated with assets of
the Trust shall be exercised by the Trustee or the person designated by the
Trustee, and shall in no event be exercisable by or rest with Plan
participants, except that voting rights with respect to Trust assets will be
exercised by the Company. In the absence of voting instructions from the
Company, the Trustee shall have the authority to vote any stocks, bonds or
other securities; to give general or special proxies or powers of attorney
with or without power of substitution; and to exercise any conversion
privileges, subscription rights or other options, and to make any payments
incidental thereto.
(b) The Trustee shall invest and reinvest the assets of the Trust
pursuant to the directions provided by the Company in the applicable Plan
documents and Plan investment direction forms. The Trustee shall invest and
reinvest the principal and income without distinction between principal and
income in accordance with the written directions provided to the Trustee by
the Company. Subject to the directions provided by the Company, the Trustee
or its designee shall have the following additional powers and authority in
its discretion:
(i) To purchase, subscribe for, invest and reinvest in
shares or units of investment companies (notwithstanding the Trustee or any
affiliate of the Trustee acting as investment advisor, custodian, transfer
agent, registrar, sponsor, distributor or manager or in any other capacity)
and annuity contracts without being limited to the classes of property in
which the Trustee is authorized to invest by any law or any rule of court of
any state and without regard to the proportion any such property may bear to
the entire amount of the Trust assets;
(ii) To retain any property at any time received or held in
the Trust;
(iii) To sell or exchange any securities or property of the
Trust at public or private sale, for cash or on credit, to grant and exercise
all conversion or subscription rights pertaining to any such property and to
enter into any covenant or agreement to purchase any property in the future;
Trust Document (5/28/96) - Page 6
<PAGE>
(iv) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar plan
relating to property held by it and to consent to or oppose any such plan or
any action thereunder or any contract, lease, mortgage, purchase, sale or
other action by any person;
(v) To register any investment held as a part of the Trust
in its own name or in the name of a nominee, and to hold any investment in
bearer form or through or by a central clearing corporation maintained by
institutions active in the securities markets, but the books and records of
the Trustee shall at all times show that all investments are part of the
Trust; to deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary power thereto,
and to pay part of the expenses and compensation thereof and any assessments
levied with respect to any such property so deposited; and generally to
exercise any of the powers of any owner with respect to securities or
property held as part of the Trust;
(vi) To keep such portions of the Trust in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interest of the Trust until such moneys shall be invested, reinvested or
disbursed, it being understood that the Trustee shall not be required to pay
any interest on cash so held.
(c) The Company agrees to indemnify the Trustee and any agents of the
Trustee, including affiliates of the Trustee, against and hold each of them
harmless from any cost, claim, liability, loss or expense including
reasonable attorney's fees, imposed upon or incurred by any of them as a
result of following the Company's directions as to the investment of Trust
assets, or in the absence of directions from the Company, failing to invest
Trust assets. The Company shall be primarily liable for such obligations
under this section and shall make prompt payment thereof, or the Trustee may
satisfy the Company's obligations from the Trust without the Company's
direction. The Company's obligations under this section shall survive
termination of the Trust.
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes (other than the Company's income taxes) shall be
accumulated and reinvested. All income, losses, deductions and credits
attributable to the Trust belong to the Company as owner for income tax
purposes and will be included on the Company's income tax returns. Taxes
attributable to the Trust shall be paid by the Company. The parties hereto
agree that
Trust Document (5/28/96) - Page 7
<PAGE>
any federal, state or local tax returns required to be filed with respect to
the Trust shall be prepared and filed by the Trustee.
SECTION 7. ACCOUNTING BY THE TRUSTEE.
(a) The Trustee shall keep, or cause to be kept, accurate and
detailed records of all investments, receipts, disbursements, and all other
transactions required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee or the Trustee's
affiliates or agents.
(b) Within 120 days following the close of each calendar year and
within 120 days after the removal or resignation of the Trustee, the Trustee
shall deliver to the Company a written account of its administration of the
Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities
and other proeprty held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be.
(c) At the end of regular calendar periods, but not less frequently
than quarterly, the Trustee shall deliver to the Company a written account,
in the Trustee's standard form in effect from time to time, of the Trustee's
administration of the Trust during the preceding period.
(d) Each account referred to in Section 7(b) and 7-C- shall be deemed
to be an account stated
Trust Document (5/28/96) - Page 8
<PAGE>
SELECT COMPENSATION
NON-QUALIFIED DEFERRED
COMPENSATION PLAN
ADOPTION AGREEMENT
- --------------------------------------------------------------------------------
EMPLOYERS MUST CONSULT WITH THEIR TAX ADVISER AND THEIR LEGAL COUNSEL
REGARDING THE TAX AND OTHER LEGAL CONSEQUENCES ASSOCIATED WITH THE ADOPTION
AND OPERATION OF THE UNFUNDED DEFERRED COMPENSATION PLAN OF WHICH THIS
ADOPTION AGREEMENT FORMS A PART, INCLUDING, WITHOUT LIMITATION, THE FEDERAL,
STATE AND LOCAL TAX AND SECURITIES LAW CONSEQUENCES ASSOCIATED WITH THE
ADOPTION AND OPERATION OF SUCH A PLAN. PRUDENTIAL MUTUAL FUND SERVICES AND
ITS AFFILIATES PROVIDE NO ASSURANCES WITH RESPECT TO SUCH CONSEQUENCES, IF
ANY. DEPENDING UPON THE JURISDICTIONS IN WHICH THE EMPLOYER (AND ITS
PARTICIPATING AFFILIATES) OPERATE AND/OR ARE ESTABLISHED, CERTAIN STATE "BLUE
SKY" SECURITIES FILINGS MAY BE REQUIRED IN CONNECTION WITH THE ADOPTION OF
THE PLAN. THIS ADOPTION AGREEMENT AND THE OTHER PLAN DOCUMENTS ARE INTENDED
ONLY FOR USE BY AN EMPLOYER THAT IS A CORPORATION SUBJECT TO SUBCHAPTER C OF
CHAPTER 1 OF SUBTITLE A OF THE INTERNAL REVENUE CODE (I.E., A "C
CORPORATION"). ANY OTHER TYPE OF ENTITY THAT IS CONSIDERING THE USE OF THIS
PLAN (INCLUDING THIS ADOPTION AGREEMENT) IS URGED TO CONSULT WITH THEIR TAX
ADVISOR AND LEGAL COUNSEL AS TO WHETHER THIS PLAN IS APPROPRIATE FOR USE BY
SUCH AN ENTITY, DUE TO THE ADVERSE TAX AND OTHER LEGAL CONSEQUENCES THAT
MIGHT ARISE FROM THE USE OF THIS PLAN BY SUCH AN ENTITY.
- --------------------------------------------------------------------------------
ALL CAPITALIZED TERMS, UNLESS OTHERWISE DEFINED HEREIN, ARE DEFINED IN
THE PLAN TO WHICH THIS ADOPTION AGREEMENT IS ATTACHED AS EXHIBIT A.
The employer named below hereby establishes an unfunded Non-qualified
Deferred Compensation Plan for eligible Employees as provided in this
Adoption Agreement and the accompanying Plan.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Employer or Business Name:
---------------------------------------
Address:
-----------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
(City) (State) (Zip Code)
(b) Telephone Number:
------------------------------------------------
Facsimile Number:
------------------------------------------------
(c) Employer Tax Identification Number:
------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. PLAN NAME & EFFECTIVE DATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Adoption Agreement 1
<PAGE>
(a) Name of the Plan:
--------------------------------------------------
(b) This Adoption Agreement is
/ / the Employer's first adoption of the Plan.
The Effective Date of the Plan is:
---------------
/ / Amendment No. to the Plan. It replaces all prior
----------
amendments to the Plan and the first Adoption Agreement. The
provisions of this amendment are effective on ________19______.
The Effective Date of the original Plan was: _______________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. DEFINITIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) "Administrator or Plan Administrator"
shall be the Employer unless a person is named by the Employer to serve as
Administrator.
The Plan Administrator shall be:
---------------------------------------
(b) "Compensation":
(i) Compensation shall be determined on the basis of the calendar year.
(ii) Except as otherwise provided in clause (iii) below, Compensation
under the Plan shall mean (SELECT ONLY ONE):
/ / (A) The regular or base salary earned by the Participant and
payable by the Employer, plus any commissions and bonuses
earned by and paid to the Participant.
/ / (B) The regular or base salary earned by the Participant and
payable by the Employer, excluding commissions and bonuses.
(iii) Maximum Compensation:
For purposes of the Plan, Compensation shall (SELECT ONLY ONE):
/ / Not be limited.
/ / Be limited to: $ per Participant.
------------------
Compensation will be determined before giving effect to any deferrals by
Participants pursuant to a Deferral Notice and before any other compensation
reduction amounts which are not included in the Participant's gross income
pursuant to Code Sections 125, 401(k), 402(h) or 403(b).
Adoption Agreement 2
<PAGE>
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- --------------------------------------------------------------------------------
4. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Subject to the provisions of Section 2.1 of the Plan, the following Employees or
the Employees within the following categories shall be eligible to become
Participants in the Plan:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
REPRESENTATIONS:
1. The Employer represents that, in order for this Plan to be subject to the
more limited requirements associated with so-called "top hat" plans
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), participation in the Plan is limited to a select group of
management or highly compensated employees as contemplated by Department
of Labor Regulation 29 CFR 2520.104-23(d). The Employer understands it
is urged to consult with its legal advisors regarding the requirements
of ERISA with respect to interests in the Plan.
2. The Employer represents that the offering of interests in the Plan
will be made by the Employer pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), provided by Section 4(2) thereof.
Accordingly, interests in the Plan have been and will be offered to
no more than 50 Employees, all of whom the Employer has reason to
believe are "Accredited Investors" within the meaning of Rule 501
of the Securities Act and only in a manner complying with the
requirements of Section 4(2). The Employer acknowledges that
neither Prudential Mutual Fund Services nor any of its affiliates
have provided or will provide any advice as to the availability
to the Employer of the exemption provided by Section 4(2) of
the Securities Act.
The Employer understands that compliance with the Federal securities
laws, including the Securities Act, and any applicable State securities
laws is the sole responsibility of the Employer. The Employer
represents that it is not relying on Prudential Mutual Fund Services or
any of its affiliates with respect to such matters. The Employer
understands it is urged to consult with its legal advisors regarding the
requirements of the Federal securities laws, including the Securities
Act, and any applicable Sate securities laws with respect to interests
in the Plan.
Adoption Agreement 3
<PAGE>
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- --------------------------------------------------------------------------------
5 PARTICIPANT DEFERRED COMPENSATION/DEFERRAL ACCOUNTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If you selected option "A" under Section 3(b)(ii) above, you may permit
Participants to defer a specified amount or percentage, if any, of their
regular or base salary and another amount or percentage of their commissions
and bonuses, if any.
If you selected option "B" under Section 3(b)(ii) above, you may permit
Participants to defer a specified amount or percentage of regular or base
salary ONLY.
Pursuant to the Deferral Notices filed by Participants, Participants shall be
permitted to defer (IF OPTION "A" UNDER SECTION 3(b)(ii) WAS SELECTED, SELECT
ONE OPTION UNDER "A" AND ONE OPTION UNDER "B" OR, IF YOU WANT TO LIMIT A
PARTICIPANT'S DEFERRAL TO ONLY BONUSES, SELECT ONE OPTION UNDER "C" ONLY AND
DO NOT SELECT AN OPTION UNDER "A" OR "B". IF OPTION "B" UNDER SECTION
3(b)(ii) WAS SELECTED, SELECT ONE OPTION UNDER "A" ONLY AND DO NOT SELECT AN
OPTION UNDER "B" OR "C"):
A. Regular or Base Salary (SELECT ONLY ONE)
/ / at least % but up to % of that portion of Compensation
------ ------
that consists of regular or base salary.
/ / at least $ but up to $ of that portion of
-------- --------
Compensation that consists of regular or base salary.
B. Commissions and Bonuses (SELECT ONLY ONE)
/ / at least % but up to % of that portion of
------ ------
Compensation that consists of commissions and bonuses.
/ / at least $ but up to $ of that portion of
-------- --------
Compensation that consists of commissions and bonuses.
Bonuses Only (SELECT ONLY ONE)
/ / at least % but up to % of that portion of
------ ------
Compensation that consists of bonuses.
/ / at least $ but up to $ of that portion of
-------- --------
Compensation that consists of bonuses.
Regardless of the option selected under Section 3(b)(ii) above, in no event
shall a Participant be permitted to defer more than $____________ pursuant to a
Deferral Notice. Deferred Compensation shall be credited to the Participant
Deferral Accounts in accordance with Section 3.2 of the Plan.
Adoption Agreement4
<PAGE>
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- --------------------------------------------------------------------------------
6. EMPLOYER ALLOCATIONS/CONTINGENT ACCOUNTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Matching Allocations (SELECT ONLY ONE):
/ / Not applicable. Matching allocations will not be made.
/ / Percentage Match: The Employer shall allocate to each
Participant's Contingent Account an amount equal to ______% of
such Participant's Compensation that is deferred by such
Participant pursuant to a Deferral Notice. In no event shall
the Employer match the Participant's compensation deferraL
to the extent that such matching allocation would exceed
______ % of the Participant's Compensation.
/ / Discretionary Match: The Employer will decide from year to
year whether and to what extent matching allocations will be
made and will notify Participants annually of each such
decision and the manner in which such matching allocations
will be made.
/ / Other (please specify):
-------------------------------------
If you will be making matching allocations, such allocations shall be
credited to Contingent Accounts (SELECT ONLY ONE):
/ / monthly
/ / quarterly
/ / semi-annually
/ / annually
/ / at the same time as Deferred Compensation is credited to
Deferral Accounts in accordance with Section 3.2 of the
Plan.
/ / Other (please specify)
-----------------------------
(b) Discretionary Allocations:
The Employer may make additional discretionary allocations in any
amount determined by the Employer, which shall be allocated to one
or more eligible Participant's Contingent Accounts at a time and
in a manner determined by the Employer. These discretionary
allocations shall be unrelated to and in addition to any other
allocations or deferrals made hereunder.
The Employer (SELECT ONLY ONE) / / may / / may not make such
discretionary allocations.
(c) All matching allocations and discretionary allocations shall be subject
to the "Vesting" provisions set forth in Section 7 below.
Adoption Agreement 5
<PAGE>
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- --------------------------------------------------------------------------------
7. VESTING OF MATCHING AND/OR DISCRETIONARY ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Years of Service:
Unless otherwise indicated below, the extent to which a Participant has
a vested interest in his or her Contingent Account will depend on a
Participant's "Years of Service" with the Employer. A "Year of Service"
shall mean (SELECT ONLY ONE):
/ / Not applicable, since Participants are always fully vested in
their Contingent Accounts.
/ / Not applicable, since no Employer matching or discretionary
allocations will be made to Contingent Accounts.
/ / each consecutive 12-month period during which an Employee is
credited with at least
(SELECT ONLY ONE)
/ / 1,000 / / 700 / / other hours of service with
---------
the Employer, beginning with (SELECT ONLY ONE)
/ / the first day on which a Participant is credited with at
least one hour of service with the Employer
/ / other (describe)
-----------------------------------.
(b) Matching Allocations:
Matching allocations by the Employer to Participants' Contingent Accounts
shall vest (SELECT ONLY ONE):
/ / Not applicable since no Employer matching allocations will be
made to Contingent Accounts.
/ / Fully and immediately.
/ / 100% after _____ Years of Service, but 0% before the completion
of such Years of Service.
(c) Discretionary Allocations:
Discretionary allocations by the Employer to Participants' Contingent
Accounts shall vest (SELECT ONLY ONE):
/ / Not applicable since no Employer discretionary allocations will
be made to Contingent Accounts.
/ / Fully and immediately.
/ / 100% after Years of Service, but 0% before the completion
-----
of such Years of Service.
NOTE: Even though a Participant may be vested in his or her Contingent
Account and/or Deferral Account, any assets invested by the Employer in
anticipation of satisfying its unfunded obligations with respect to such
accounts shall remain the sole property of the Employer and shall be subject
to the claims of the Employer's general creditors.
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8. UNFORESEEABLE EMERGENCIES (SELECT ONLY ONE)
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Adoption Agreement 6
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/ / Hardship withdrawals due to Unforeseeable Emergencies, as provided for in
Section 6.7 of the Plan, are permitted; OR
/ / Hardship withdrawals due to Unforeseeable Emergencies, as provided for in
Section 6.7 of the Plan, are not permitted.
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9. PLAN EXPENSES
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Pursuant to Section 9.3 of the Plan, the Employer is responsible for expenses
associated with the establishment and administration of the Plan. The Employer
hereby elects (SELECT ONLY ONE):
/ / To allocate such expenses on a pro rata basis among Participant
Deferral Accounts and Contingent Accounts as such expenses are incurre
from time to time; OR
/ / Not to allocate such expenses among Participant Deferral
Accounts and Contingent Accounts.
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10. DEEMED INVESTMENTS
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(a) Although the Plan shall be unfunded, the Participant's Deferral
Accounts and Contingent Accounts, if any, shall, in accordance with
Section 8.2 of the Plan, be deemed to earn whatever income, gains and
losses (including expenses) are attributable to one or more of the
annuities or mutual funds selected by the Employer and available through
Prudential Mutual Fund Services ("PMFS"). The Employer shall select
from among the available investments by completing the Select
Compensation Employer Investment Selection form. Unless otherwise
indicated with respect to each selection, the Participants' Deferral
Accounts and Contingent Accounts, if any, shall, in accordance with
Section 10(b) below, be allocated equally among all such investments
selected by the Employer:
(b) The Employer may elect that (i) the Deferral Accounts and Contingent
Accounts are deemed to be separately invested, on a Participant by
Participant basis as determined by the Employer, in accordance with
Section 10(a) above or (ii) the Deferral Accounts and Contingent
Accounts of all Participants, in the aggregate, are deemed to be
invested in accordance with Section 10(a) above. (SELECT ONLY ONE):
/ / Such accounts are deemed to be invested on a Participant by
Participant basis.
/ / Such accounts are deemed to be invested on an aggregate basis.
(c) The Employer may choose to establish a Rabbi Trust. The Employer (SELECT
ONLY ONE):
/ / Will not establish a Rabbi Trust.
/ / Will establish a Rabbi Trust.
NOTE: If the Employer that signs this Adoption Agreement elects to
establish a Rabbi Trust, each affiliate of such Employer that also
adopts the Plan shall establish a separate Rabbi Trust, subject to such
other terms and conditions as such Employer may require.
Adoption Agreement 7
<PAGE>
NOTE: The mutual funds which are available through PMFS and are referred to
above carry their own fees and expenses, which may include sales commissions,
management fees, Rule 12b-1 fees and/or other fees and expenses, which are
described in detail in each mutual fund's prospectus. Persons that invest in
one or more of these mutual funds will, as shareholders of those mutual
funds, bear their pro-rata portion of each mutual fund's fees and expenses
and may also pay a sales charge or contingent deferred sales charge in
connection with their purchase of fund shares. The Employer acknowledges
that PMFS and its affiliates may be deemed to benefit from advisory and other
fees paid to affiliates in connection with the management and operation of
the mutual funds and from sales charges and contingent deferred sales charges
imposed as described in the applicable prospectus.
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11. DISTRIBUTION OPTIONS
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(a) Pursuant to his or her Deferral Notice, a Participant may elect to
receive distributions from the Plan in accordance with the following
method or methods (SELECT BOTH OR EITHER):
/ / Single lump sum.
/ / Installment payments (not to exceed 10 years), which shall be
paid on an annual, quarterly or monthly basis, as designated by
the Participant in his or her Deferral Notice and which
installments shall be calculated in accordance with Section 6.3
of the Plan.
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12. CHOICE OF LAW
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The construction, validity and administration of this Plan, as well as Deferral
Notices and Beneficiary Designations shall be governed by the laws of the
State/Commonwealth of
------------------------------------.
NOTE: Unless you select a jurisdiction in the immediately preceding paragraph,
the construction, validity and administration of this Plan, as well as Deferral
Notices and Beneficiary Designations shall be governed by the laws of the State
of New York in accordance with Section 11.6 of the Plan. You should consult
with your attorney before making any such selection.
Adoption Agreement 8
<PAGE>
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13. SIGNATURES
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Employer:
If the Employer elects to invest assets in mutual funds available
through PMFS, either directly or through a Rabbi Trust, all in
accordance with Section 10 of this Adoption Agreement, the Employer
understands that there are fees associated with the establishment and
maintenance of such a Rabbi Trust, and any investment in any mutual
fund. The Plan document contains a pre-dispute arbitration clause
found in Article XI, Section 11.3 "Arbitration."
ALTHOUGH THIS PLAN IS INTENDED TO PROVIDE CERTAIN INCOME TAX DEFERRAL
BENEFITS TO PARTICIPANTS, SUCH BENEFITS MAY BE ADVERSELY AFFECTED BY THE
ACTUAL OPERATION OF THE PLAN SUBSEQUENT TO ITS ADOPTION. MOREOVER, THE
FORM OF THIS PLAN (INCLUDING THIS ADOPTION AGREEMENT) HAS NOT BEEN
APPROVED BY THE INTERNAL REVENUE SERVICE AND IS NOT INTENDED TO BE A
"TAX QUALIFIED" PLAN UNDER SECTION 401(A) OF THE INTERNAL REVENUE CODE
OR ANY SIMILAR PROVISION THEREOF. CONSEQUENTLY, NEITHER PMFS NOR ANY OF
ITS AFFILIATES PROVIDE ANY ASSURANCES WITH RESPECT TO SUCH BENEFITS AND
ASSUME NO RESPONSIBILITY IN THIS REGARD. EMPLOYERS ARE URGED TO CONSULT
THEIR TAX ADVISER AND LEGAL COUNSEL REGARDING THE TAX AND OTHER LEGAL
CONSEQUENCES ASSOCIATED WITH THE ADOPTION AND OPERATION OF THIS PLAN.
BY SIGNING THIS ADOPTION AGREEMENT THE EMPLOYER ACKNOWLEDGES THAT
NEITHER PMFS NOR ANY OF ITS AFFILIATES HAVE MADE ANY REPRESENTATION OR
WARRANTY TO THE EMPLOYER OR ANY PARTICIPANT REGARDING ANY TAX OR OTHER
LEGAL CONSEQUENCES ASSOCIATED WITH THIS PLAN IN FORM OR IN OPERATION.
IN WITNESS WHEREOF, the Company, acting by and through its duly
authorized officers, has caused this Agreement and the corresponding
provisions of the Plan to be adopted on the____day of_____________,
19_____.
Signed for the Employer by:
Print Name and Title:
-----------------------------
Signature:
------------------------------
ATTEST:
Print Name and Title:
-----------------------------
Signature:
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Adoption Agreement 9
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders of
ENCAD, Inc.
We consent to the incorporation by reference in Registration Statements
No. 33-72978, No. 33-95252 and No. 333-24965 of ENCAD, Inc. on Form S-8 of
our report dated February 4, 1997, incorporated by reference in this Annual
report on Form 10-K/A of ENCAD, Inc. for the year ended December 31, 1996.
/s/ DELOITTE & TOUCHE LLP
San Diego, California
May 2, 1997
