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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2010
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10879
AMPHENOL CORPORATION (Exact Name of Registrant as Specified in its Charter)
Delaware 22 -2785165
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
358 Hall Avenue, Wallingford, Connecticut 06492 203-265-8900 (Address of Principal Executive Offices, Zip Code, Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, $.001 par value New York Stock Exchange, Inc.
(Title of each Class) (Name of each Exchange on Which Registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
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 No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer , Accelerated filer ,
Non -accelerated filer , Smaller reporting company .
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act). Yes No
The aggregate market value of Amphenol Corporation Class A Common Stock, $.001 par value, held by non-affiliates was approximately $6,056 million based on the reported last sale price of such stock on the New York Stock Exchange on June 30, 2010.
As of January 31, 2011, the total number of shares outstanding of Registrant’s Class A Common Stock was 175,933,568.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement, which is expected to be filed within 120 days following the end of the fiscal year covered by this report, are incorporated by reference into Part III hereof.
Table of Contents
INDEX Page
PART I 3
Item 1. Business 3
General 3
Business Segments 5
International Operations 6
Customers 6
Manufacturing 6
Research and Development 7
Trademarks and Patents 7
Competition 7
Backlog 7
Employees 8
Environmental Matters 8
Other 8
Cautionary Information for Purposes of Forward Looking Statements 9
Item 1A. Risk Factors 9
Item 1B. Unresolved Staff Comments 12
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Removed and Reserved 13
PART II 13
Item 5. Market for the Registrant ’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 13
Item 6. Selected Financial Data 15
Item 7. Management ’s Discussion and Analysis of Financial Condition and Results of Operations 16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26
Item 8. Financial Statements and Supplementary Data 28
Report of Independent Registered Public Accounting Firm 28
Consolidated Statements of Income 29
Consolidated Balance Sheets 30
Consolidated Statements of Changes in Equity and Other Comprehensive Income 31
Consolidated Statements of Cash Flow 32
Notes to Consolidated Financial Statements 33
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 53
Item 9A. Controls and Procedures 53
Item 9B. Other Information 53
PART III 54
Item 10. Directors, Executive Officers and Corporate Governance 54
Item 11. Executive Compensation 54
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 54 Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence 54
Item 14. Principal Accountant Fees and Services 54
PART IV 55
Item 15. Exhibits and Financial Statement Schedules 55
Signature of the Registrant 57
Signatures of the Directors 57
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PART I
Item 1. Business
General
Amphenol Corporation (“Amphenol” or the “Company”) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems and coaxial and high-speed specialty cable. The Company was incorporated in 1987. Certain predecessor businesses, which now constitute part of the Company, have been in business since 1932. The primary end markets for the Company’s products are:
• communication systems for the converging technologies of voice, video and data communications;
• a broad range of industrial applications including factory automation and motion control systems, medical and industrial instrumentation, mass transportation, alternative and traditional energy generation, natural resource exploration and traditional and hybrid- electrical automotive applications; and
• commercial aerospace and military applications.
The Company’s strategy is to provide its customers with comprehensive design capabilities, a broad selection of products and a high level of service on a worldwide basis while maintaining continuing programs of productivity improvement and cost control. For 2010, the Company reported net sales, operating income and net income attributable to Amphenol Corporation of $3,554.1 million, $700.4 million and $496.4 million, respectively. The table below summarizes information regarding the Company’s primary markets and end applications for the Company’s products in 2010:
Information Technology & Commercial Aerospace Communications Industrial/Automotive & Military
Percentage of Sales 60% 18% 22%
(approximate)
Primary End Applications
Broadband Networks Alternative and traditional energy Military and Commercial • cable modems generation Aircraft • cable television networks Automobile on-board electronics • avionics • high-speed internet and safety systems • engine controls • network switching equipment Factory automation • flight controls Geophysical • set top converters • passenger related Heavy equipment systems High speed and traditional rail Telecommunications and Data • unmanned aerial Hybrid-electrical vehicles Communications vehicles Instrumentation • Military communications computers, personal computers and Mass transportation systems related peripherals Medical equipment • Missile systems data networking equipment Natural resource exploration • routers and switches Ordnance • servers and storage systems Radar systems Satellite and space programs Wireless Communication Systems • base stations • cell sites • smart mobile devices, including tablets • wireless handsets • wireless infrastructure equipment
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The Company designs and manufactures connectors and interconnect systems, which are used primarily to conduct electrical and optical signals for a wide range of sophisticated electronic applications. The Company believes, based primarily on published market research, that it is the second largest connector and interconnect product manufacturer in the world. The Company has developed a broad range of connector and interconnect products for information technology and communications equipment applications including the converging voice, video and data communications markets. The Company offers a broad range of interconnect products for factory automation and motion control systems, machine tools, instrumentation and medical systems, mass transportation applications and automotive applications, including airbags, seatbelt pretensioners and other on-board automotive electronics. In addition, the Company is the leading supplier of high performance, military- specification, circular environmental connectors that require superior reliability and performance under conditions of stress and in hostile environments. These conditions are frequently encountered in commercial and military aerospace applications and other demanding industrial applications such as solar and wind power generation, oil exploration, medical equipment, hybrid-electrical vehicles and off-road construction.
The Company is a global manufacturer employing advanced manufacturing processes. The Company designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia and Africa. The Company sells its products through its own global sales force, independent manufacturers’ representatives and a global network of electronics distributors to thousands of Original Equipment Manufacturers (“OEMs”) in approximately 70 countries throughout the world. The Company also sells certain products to Electronic Manufacturing Services (“EMS”) companies, to Original Design Manufacturing (“ODM”) companies and to communication network operators. For 2010, approximately 39% of the Company’s net sales were in North America, 17% were in Europe and 44% were in Asia and other countries.
The Company generally implements its product development strategy through product design teams and collaboration arrangements with customers which result in the Company obtaining approved vendor status for its customers’ new products and programs. The Company seeks to have its products become widely accepted within the industry for similar applications and products manufactured by other potential customers, which the Company believes will provide additional sources of future revenue. By developing application specific products, the Company has decreased its exposure to standard products which generally experience greater pricing pressure. In addition to product design teams and customer collaboration arrangements, the Company uses key account managers to manage customer relationships on a global basis such that it can bring to bear its total resources to meet the worldwide needs of its multinational customers.
The Company and industry analysts estimate that the worldwide sales of interconnect products were approximately $44 billion in 2010. The Company believes that the worldwide industry for interconnect products and systems is highly fragmented with over 2,000 producers of connectors and interconnect systems worldwide, of which the 10 largest, including Amphenol, accounted for a combined market share of approximately 61% in 2010.
The Company’s acquisition strategy is focused on the consolidation of this highly fragmented industry. The Company targets acquisitions on a global basis in high growth segments that have complementary capabilities to the Company from a product, customer and/or geographic standpoint. The Company looks to add value to smaller companies through its global capabilities and generally expects acquisitions to be accretive to performance in the first year. In 2010, the Company invested approximately $180 million on acquisitions. A significant portion of this investment was made on two acquisitions in target markets, including the military aerospace and industrial markets, which broadened and enhanced the Company’s product offerings in these areas.
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Business Segments
The following table sets forth the dollar amounts of the Company’s net trade sales by business segment and geographic area. For a discussion of factors affecting changes in sales by business segment and additional financial data by business segment and geographic area, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 14 to the Consolidated Financial Statements included in Part II, Item 8 herein.
2010 2009 2008
(dollars in thousands)
Net trade sales by business segment:
Interconnect Products and Assemblies $ 3,293,119 $ 2,566,578 $ 2,950,570 260,982 253,487 285,901 Cable Products
$ 3,554,101 $ 2,820,065 $ 3,236,471
Net trade sales by geographic area (1):
United States $ 1,258,167 $ 1,001,742 $ 1,159,349
China 851,626 611,877 557,243 1,444,308 1,206,446 1,519,879 Other International Locations
$ 3,554,101 $ 2,820,065 $ 3,236,471
(1) Based on customer location to which product is shipped.
Interconnect Products and Assemblies. The Company produces a broad range of interconnect products and assemblies primarily for voice, video and data communication systems, commercial aerospace and military systems, automotive and mass transportation applications, and industrial and factory automation equipment. Interconnect products include connectors, which when attached to an electronic or fiber optic cable, a printed circuit board or other device, facilitate electronic or fiber optic transmission. Interconnect assemblies generally consist of a system of cable and connectors for linking electronic and fiber optic equipment. The Company designs and produces a broad range of connector and cable assembly products used in communication applications, such as: engineered cable assemblies used in base stations for wireless communication systems and internet networking equipment; smart card acceptor and other interconnect devices used in mobile telephones; set top boxes and other applications to facilitate reading data from smart cards; fiber optic connectors used in fiber optic signal transmission; backplane and input/output connectors and assemblies used for servers and data storage devices and linking personal computers and peripheral equipment; sculptured flexible circuits used for integrating printed circuit boards in communication applications and hinge products used in mobile phone and other mobile communication devices. The Company also designs and produces a broad range of radio frequency connector products and antennas used in telecommunications, computer and office equipment, instrumentation equipment, local area networks and automotive electronics. The Company’s radio frequency interconnect products and assemblies are also used in base stations, mobile communication devices and other components of cellular and personal communications networks.
The Company believes that it is the largest supplier of high performance, military-specification, circular environmental connectors. Such connectors require superior performance and reliability under conditions of stress and in hostile environments. High performance environmental connectors and interconnect systems are generally used to interconnect electronic and fiber optic systems in sophisticated aerospace, military, commercial and industrial equipment. These applications present demanding technological requirements in that the connectors are subject to rapid and severe temperature changes, vibration, humidity and nuclear radiation. Frequent applications of these connectors and interconnect systems include aircraft, guided missiles, radar, military vehicles, equipment for spacecraft, energy, medical instrumentation, geophysical applications and off-road construction equipment. The Company also designs and produces industrial interconnect products used in a variety of applications such as factory automation equipment, mass transportation applications including railroads and marine transportation; and automotive safety products including interconnect devices and systems used in automotive airbags, seatbelt pretensioners, antilock braking systems and other on-board automotive electronic systems. The Company also designs and produces highly-engineered cable and backplane assemblies. Such assemblies are specially designed by the Company in conjunction with OEM customers for specific applications, primarily for computer, wired and wireless communication systems, office equipment, industrial and aerospace applications. The cable assemblies utilize the Company’s connector and cable products as well as components purchased from others.
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Cable Products. The Company designs, manufactures and markets coaxial cable primarily for use in the cable television industry. The Company’s Times Fiber Communications subsidiary is the world’s second largest producer of coaxial cable for the cable television market. The Company believes that its Times Fiber Communications unit is one of the lowest cost producers of coaxial cable for cable television. The Company’s coaxial cable and connector products are used in cable television systems including full service cable television/telecommunication systems being installed by cable operators and telecommunication companies offering video, voice and data services. The Company is also a major supplier of coaxial cable to the international cable television market. The Company manufactures two primary types of coaxial cable: semi-flexible, which has an aluminum tubular shield, and flexible, which has one or more braided metallic shields. Semi-flexible coaxial cable is used in the trunk and feeder distribution portion of cable television systems, and flexible cable (also known as drop cable) is used primarily for hookups from the feeder cable to the cable television subscriber’s residence. Flexible cable is also used in other communication applications. The Company has also developed a broad line of radio frequency and fiber optic interconnect components for full service cable television/ telecommunication networks.
The Company is also a leading producer of high speed data cables and specialty cables, which are used to connect internal components in systems with space and component configuration limitations. Such products are used in computer and office equipment applications as well as in a variety of telecommunication applications.
International Operations
The Company believes that its global presence is an important competitive advantage, as it allows the Company to provide quality products on a timely and worldwide basis to its multinational customers. Approximately 65% of the Company’s sales for the year ended December 31, 2010 were outside the United States and approximately 24% of the Company’s sales were sold to customers in China. The Company has international manufacturing and assembly facilities in China, Taiwan, Korea, India, Japan, Malaysia, Europe, Canada, Latin America, Africa and Australia. European operations include manufacturing and assembly facilities in the United Kingdom, Germany, France, the Czech Republic, Slovakia and Estonia and sales offices in most European markets. The Company’s international manufacturing and assembly facilities generally serve the respective local markets and coordinate product design and manufacturing responsibility with the Company’s other operations around the world. The Company has low cost manufacturing and assembly facilities in China, Malaysia, Mexico, India, Eastern Europe and Africa to serve regional and world markets. For a discussion of risks attendant to the Company’s foreign operations, see the risk factor titled “The Company is subject to the risks of political, economic and military instability in countries outside the United States” in Part I, Item 1A herein.
Customers
The Company’s products are used in a wide variety of applications by numerous customers, the largest of which accounted for approximately 6% of net sales for the year ended December 31, 2010. The Company sells its products to over 10,000 customer locations worldwide. The Company’s products are sold directly to OEMs, EMSs, ODMs, cable system operators, telecommunication companies and through manufacturers’ representatives and distributors. There has been a trend on the part of OEM customers to consolidate their lists of qualified suppliers to companies that have a broad portfolio of leading technology solutions, design capability, global presence, and the ability to meet quality and delivery standards while maintaining competitive prices.
The Company has focused its global resources to position itself to compete effectively in this environment. The Company has concentrated its efforts on service and productivity improvements including advanced computer aided design and manufacturing systems, statistical process controls and just-in-time inventory programs to increase product quality and shorten product delivery schedules. The Company’s strategy is to provide comprehensive design capabilities, a broad selection of products and a high level of service in the areas in which it competes. The Company has achieved a preferred supplier designation from many of its customers.
The Company’s sales to distributors represented approximately 14% of the Company’s 2010 sales. The Company’s recognized brand names, including “Amphenol,” “Times Fiber,” “Tuchel,” “Socapex,” “Sine,” “Spectra-Strip,” “Pyle-National,” “Matrix,” “Kai Jack” and others, together with the Company’s strong connector design-in position (products that are specified in customer drawings), enhance its ability to reach the secondary market through its network of distributors.
Manufacturing
The Company employs advanced manufacturing processes including molding, stamping, plating, turning, extruding, die casting and assembly operations as well as proprietary process technology for specialty and coaxial cable production. The Company’s manufacturing facilities are generally vertically integrated operations from the initial design stage through final design and manufacturing.
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Outsourcing of certain fabrication processes is used when cost-effective. Substantially all of the Company’s manufacturing facilities are certified to the ISO9000 series of quality standards, and many of the Company’s manufacturing facilities are certified to other quality standards, including QS9000, ISO14000 and TS16469.
The Company employs a global manufacturing strategy to lower its production costs and to improve service to customers. The Company sources its products on a worldwide basis with manufacturing and assembly operations in the Americas, Europe, Asia, Africa and Australia. To better serve certain high volume customers, the Company has established just-in-time facilities near these major customers.
The Company’s policy is to maintain strong cost controls in its manufacturing and assembly operations. The Company is continually evaluating and adjusting its expense levels and workforce to reflect current business conditions and maximize the return on capital investments.
The Company purchases a wide variety of raw materials for the manufacture of its products, including precious metals such as gold and silver used in plating, aluminum, brass, steel, copper and bimetallic products used for cable, contacts and connector shells, and plastic materials used for cable and connector bodies and inserts. Such raw materials are generally available throughout the world and are purchased locally from a variety of suppliers. The Company is generally not dependent upon any one source for raw materials, or if one source is used the Company attempts to protect itself through long-term supply agreements.
Research and Development
The Company’s research and development expense for the creation of new and improved products and processes was $77.6 million, $64.0 million and $68.1 million for 2010, 2009 and 2008, respectively. The Company’s research and development activities focus on selected product areas and are performed by individual operating divisions. Generally, the operating divisions work closely with OEM customers to develop highly-engineered products and systems that meet specific customer needs. The Company focuses its research and development efforts primarily on those product areas that it believes have the potential for broad market applications and significant sales within a one-to-three year period.
Trademarks and Patents
The Company owns a number of active patents worldwide. The Company also regards its trademarks “Amphenol,” “Times Fiber,” “Tuchel,” “Socapex” and “Spectra-Strip” to be of material value in its businesses. The Company has exclusive rights in all its major markets to use these registered trademarks. The Company has rights to other registered and unregistered trademarks which it believes to be of value to its businesses. While the Company considers its patents and trademarks to be valuable assets, the Company does not believe that its competitive position is dependent on patent or trademark protection or that its operations are dependent on any individual patent or trademark.
Competition
The Company encounters competition in substantially all areas of its business. The Company competes primarily on the basis of technology innovation, product quality, price, customer service and delivery time. Competitors include large, diversified companies, some of which have substantially greater assets and financial resources than the Company, as well as medium to small companies. In the area of coaxial cable for cable television, the Company believes that it and CommScope, Inc. are the primary world providers of such cable; however, CommScope, Inc. is larger than the Company in this market. In addition, the Company faces competition from other companies that have concentrated their efforts in one or more areas of the coaxial cable market.
Backlog
The Company estimates that its backlog of unfilled orders was $680 million and $534 million at December 31, 2010 and 2009, respectively. Orders typically fluctuate from quarter to quarter based on customer demand and general business conditions. Unfilled orders may be cancelled prior to shipment of goods. It is expected that all or a substantial portion of the backlog will be filled within the next 12 months. Significant elements of the Company’s business, such as sales to the communications related markets (including wireless communications, telecom & data communications and broadband communications) and sales to distributors, generally have short lead times. Therefore, backlog may not be indicative of future demand.
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Employees
As of December 31, 2010, the Company had approximately 39,100 employees worldwide of which approximately 31,000 were located in low cost regions. Of these employees, approximately 32,700 were hourly employees and the remainder were salaried employees. The Company believes that it has a good relationship with its unionized and non-unionized employees.
Environmental Matters
Certain operations of the Company are subject to environmental laws and regulations which govern the discharge of pollutants into the air and water, as well as the handling and disposal of solid and hazardous wastes. The Company believes that its operations are currently in substantial compliance with applicable environmental laws and regulations and that the costs of continuing compliance will not have a material effect on the Company’s financial condition or results of operations.
Owners and occupiers of sites containing hazardous substances, as well as generators of hazardous substances, are subject to broad liability under various environmental laws and regulations, including expenditures for cleanup and monitoring costs and potential damages arising out of past disposal activities. Such liability in many cases may be imposed regardless of fault or the legality of the original disposal activity. The Company has performed remediation activities and is currently performing operations and maintenance and monitoring activities at three off-site disposal sites previously utilized by the Company’s facility in Sidney, New York, and others, to wit the Richardson Hill Road landfill, the Route 8 landfill and the Sidney landfill. Actions at the Richardson Hill Road and Sidney landfills were undertaken subsequent to designation as “Superfund” sites on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980. The Route 8 landfill was designated as a New York State Inactive Hazardous Waste Disposal Site, with remedial actions taken pursuant to Chapter 6, Section 375-1 of the New York Code of Rules and Regulations. In addition, the Company is currently performing monitoring activities at, and in proximity to, its manufacturing site in Sidney, New York. The Company is also engaged in remediating or monitoring environmental conditions at certain of its other manufacturing facilities and has been named as a potentially responsible party for cleanup costs at other off-site disposal sites.
Subsequent to the acquisition of Amphenol from Allied Signal Corporation (“Allied Signal”) in 1987 (Allied Signal merged with Honeywell International Inc. in December 1999 (“Honeywell”)), the Company and Honeywell were named jointly and severally liable as potentially responsible parties in connection with several environmental cleanup sites. The Company and Honeywell jointly consented to perform certain investigations and remediation and monitoring activities at the Route 8 landfill and the Richardson Hill Road landfill, and they were jointly ordered to perform work at the Sidney landfill, all as referred to above. All of the costs incurred relating to these three sites are currently reimbursed by Honeywell based on an agreement (the “Honeywell Agreement”) entered into in connection with the acquisition in 1987. Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company’s consolidated financial condition or results of operations. The environmental investigation, remediation and monitoring activities identified by the Company, including those referred to above, are covered under the Honeywell Agreement.
Since 1987, the Company has not been identified nor has it been named as a potentially responsible party with respect to any other significant on-site or off-site hazardous waste matters. In addition, the Company believes that its manufacturing activities and disposal practices since 1987 have been in material compliance with applicable environmental laws and regulations. Nonetheless, it is possible that the Company will be named as a potentially responsible party in the future with respect to additional Superfund or other sites. Although the Company is unable to predict with any reasonable certainty the extent of its ultimate liability with respect to any pending or future environmental matters, the Company believes, based upon information currently known by management about the Company’s manufacturing activities, disposal practices and estimates of liability with respect to known environmental matters, that any such liability will not be material to its financial condition or results of operations.
Other
The Company’s annual report on Form 10-K and all of the Company’s other filings with the Securities and Exchange Commission (“SEC”) are available, without charge, on the Company’s web site, www.amphenol.com, as soon as reasonably practicable after they are filed electronically with the SEC. Copies are also available without charge, from Amphenol Corporation, Investor Relations, 358 Hall Avenue, Wallingford, CT 06492.
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Cautionary Information for Purposes of Forward Looking Statements
Statements made by the Company in written or oral form to various persons, including statements made in this annual report on Form 10-K and other filings with the SEC, that are not strictly historical facts are “forward looking” statements. Such statements should be considered as subject to uncertainties that exist in the Company’s operations and business environment. Certain of the risk factors, assumptions or uncertainties that could cause the Company to fail to conform with expectations and predictions are described below under the caption “Risk Factors” in Part I, Item IA and elsewhere in this annual report on Form 10-K. Should one or more of these risks or uncertainties occur, or should the Company’s assumptions prove incorrect, actual results may vary materially from those described in this annual report on Form 10-K as anticipated, believed, estimated or expected. We do not intend to update these forward looking statements.
Item 1A. Risk Factors
Investors should carefully consider the risks described below and all other information in this annual report on Form 10-K. The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties not presently known to the Company or that it currently deems immaterial may also impair the Company’s business and operations.
If any of the following risks actually occur, the Company’s business and consolidated financial statements could be materially adversely affected. In such case, the trading price of the Company’s common stock could decline and investors may lose all or part of their investment.
The Company is dependent on the communications industry, including telecommunication and data communication, wireless communications and broadband communications.
Approximately 60% of the Company’s 2010 revenues came from sales to the communications industry, including telecommunication and data communication, wireless communications and broadband communications. Demand for these products is subject to rapid technological change (see below—“The Company is dependent on the acceptance of new product introductions for continued revenue growth”). These markets are dominated by several large manufacturers and operators who regularly exert significant price pressure on their suppliers, including the Company. The loss of one or more of the large communications customers could have a material adverse effect on the Company’s business. There can be no assurance that the Company will be able to continue to compete successfully in the communications industry, and the Company’s failure to do so could have an adverse effect on the Company’s financial condition and results of operations.
Approximately 8% of the Company’s 2010 revenues came from sales to the broadband communications industry. Demand for the Company’s broadband communications products depends primarily on capital spending by cable television operators for constructing, rebuilding or upgrading their systems. The amount of this capital spending and, therefore, the Company’s sales and profitability will be affected by a variety of factors, including general economic conditions, acquisitions of cable television operators by non-cable television operators, cable system consolidation within the industry, the financial condition of domestic cable television operators and their access to financing, competition from satellite, telephone and television providers and telephone companies, technological developments and new legislation and regulation of cable television operators. There can be no assurance that existing levels of cable television capital spending will continue or that cable television spending will not decrease.
Changes in defense expenditures may reduce the Company’s sales.
Approximately 17% of the Company’s 2010 revenues came from sales to the military market. The Company participates in a broad spectrum of defense programs and believes that no one program accounted for more than 1% of its 2010 revenues. The substantial majority of these sales are related to both U.S. and foreign military and defense programs. The Company’s sales are generally to contractors and subcontractors of the U.S. or foreign governments or to distributors that in turn sell to the contractors and subcontractors. Accordingly, the Company’s sales are affected by changes in the defense budgets of the U.S. and foreign governments. A decline in U.S. defense expenditures and foreign government defense expenditures generally could adversely affect the Company’s business and have an adverse effect on the Company’s financial condition and results of operations.
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The Company encounters competition in substantially all areas of its business.
The Company competes primarily on the basis of technology innovation, product quality, price, customer service and delivery time. Competitors include large, diversified companies, some of which have substantially greater assets and financial resources than the Company, as well as medium to small companies. There can be no assurance that additional competitors will not enter the Company’s existing markets, nor can there be any assurance that the Company will be able to compete successfully against existing or new competition, and the inability to do so could have an adverse effect on the Company’s business, financial condition and results of operations.
The Company is dependent on the acceptance of new product introductions for continued revenue growth.
The Company estimates that products introduced in the last two years accounted for approximately 25% of 2010 net sales. The Company’s long-term results of operations depend substantially upon its ability to continue to conceive, design, source and market new products and upon continuing market acceptance of its existing and future product lines. In the ordinary course of business, the Company continually develops or creates new product line concepts. If the Company fails to or is significantly delayed in introducing new product line concepts or if the Company’s new products do not meet with market acceptance, its business, financial condition and results of operations may be adversely affected.
Covenants in the Company’s credit agreements may adversely affect the Company.
The Credit Agreement dated as of August 13, 2010 among the Company, certain subsidiaries of the Company, a syndicate of financial institutions and Bank of America, N.A. acting as the administrative agent (the “Revolving Credit Facility”) contains financial and other covenants, such as a limit on the ratio of debt to earnings before interest, taxes, depreciation and amortization, a limit on priority indebtedness and limits on incurrence of liens. Although the Company believes none of these covenants is presently restrictive to the Company’s operations, the ability to meet the financial covenants can be affected by events beyond the Company’s control, and the Company cannot provide assurance that it will meet those tests. A breach of any of these covenants could result in a default under the Revolving Credit Facility. Upon the occurrence of an event of default under any of the Company’s credit facilities, the lenders could elect to declare amounts outstanding thereunder to be immediately due and payable and terminate all commitments to extend further credit. If the lenders accelerate the repayment of borrowings, the Company may not have sufficient assets to repay the Revolving Credit Facility and other indebtedness. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”
Downgrades of the Company’s debt rating could adversely affect the Company’s results of operations and financial condition.
If the credit rating agencies that rate the Company’s debt were to downgrade the Company’s credit rating in conjunction with a deterioration of the Company’s performance, it may increase the Company’s cost of capital and make it more difficult for the Company to obtain new financing, which could adversely affect the Company’s business.
The Company’s results may be negatively affected by changing interest rates .
The Company is subject to market risk from exposure to changes in interest rates based on the Company’s financing activities. As of December 31, 2010, $200.9 million or 25% of the Company’s outstanding borrowings were subject to floating interest rates, primarily LIBOR. In addition, the Company has $600.0 million of unsecured Senior Notes due November 2014 (the “Senior Notes”) outstanding, which were issued at 99.813% of their face value and which have a fixed interest rate of 4.75%.
A 10% change in LIBOR at December 31, 2010 would have no material effect on the Company’s interest expense. The Company does not expect changes in interest rates to have a material effect on income or cash flows in 2011, although there can be no assurances that interest rates will not significantly change.
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The Company’s results may be negatively affected by foreign currency exchange rates.
The Company conducts business in several international currencies through its worldwide operations, and as a result is subject to foreign exchange exposure due to changes in exchange rates of the various currencies. Changes in exchange rates can positively or negatively affect the Company’s sales, gross margins and equity. The Company attempts to minimize currency exposure risk by producing its products in the same country or region in which the products are sold, thereby generating revenues and incurring expenses in the same currency and by managing its working capital. There can be no assurance that this approach will be successful, especially in the event of a significant and sudden decline in the value of any of the international currencies of the Company’s worldwide operations, which could have an adverse effect on the Company’s results of operations and financial condition.
The Company is subject to the risks of political, economic and military instability in countries outside the United States.
Non-U.S. markets account for a substantial portion of the Company’s business. During 2010, non-U.S. markets constituted approximately 65% of the Company’s net sales. The Company employs more than 88% of its workforce outside the United States. The Company’s customers are located throughout the world and it has many manufacturing, administrative and sales facilities outside the United States. Because the Company has extensive non-U.S. operations as well as the amount of cash and cash investments that are held at institutions located outside of the U.S., it is exposed to risks that could negatively affect sales, profitability or the liquidity of such cash and cash investments including:
• tariffs, trade barriers and trade disputes;
• regulations related to customs and import/export matters;
• longer payment cycles;
• tax issues, such as tax law changes, examinations by taxing authorities, variations in tax laws from country to country as compared to the United States and difficulties in repatriating cash generated or held abroad in a tax-efficient manner;
• challenges in collecting accounts receivable;
• challenges in repatriating such cash and cash investments if required;
• employment regulations and local labor conditions;
• difficulties protecting intellectual property;
• instability in economic or political conditions, including inflation, recession and actual or anticipated military or political conflicts; and
• the impact of each of the foregoing on outsourcing and procurement arrangements.
The Company may experience difficulties and unanticipated expense of assimilating newly acquired businesses, including the potential for the impairment of goodwill.
The Company has completed a number of acquisitions in the past few years and anticipates that it will continue to pursue acquisition opportunities as part of its growth strategy. The Company may experience difficulty and unanticipated expense in integrating such acquisitions and the acquisitions may not perform as expected. At December 31, 2010, the total assets of the Company were $4,015.9 million, which included $1,533.3 million of goodwill (the excess of the purchase price over the fair value of net assets of businesses acquired). The Company performs annual evaluations for the potential impairment of the carrying value of goodwill in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Intangibles- Goodwill and Other topic. Such evaluations have not resulted in the need to recognize an impairment. However, if the financial performance of the Company’s businesses were to decline significantly, the Company could incur a non-cash charge to its income statement for the impairment of goodwill.
The Company may experience difficulties in obtaining a consistent supply of materials at stable pricing levels, which could adversely affect its results of operations.
The Company uses basic materials like steel, aluminum, brass, copper, bi-metallic products, silver, gold and plastic resins in its manufacturing processes. Volatility in the prices of such material and availability of supply may have a substantial impact on the price the Company pays for such materials. In addition, to the extent such cost increases cannot be recovered through sales price increases or productivity improvements, the Company’s margin may decline.
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The Company may not be able to attract and retain key employees.
The Company’s continued success depends upon its continued ability to hire and retain key employees at its operations around the world. Any difficulties in obtaining or retaining the management and other human resource competencies that the Company needs to achieve its business objectives may have an adverse effect on the Company’s performance.
Changes in general economic conditions and other factors beyond the Company’s control may adversely impact its business.
The following factors could adversely impact the Company’s business:
• A global economic slowdown in any of the Company’s market segments.
• The effects of significant changes in monetary and fiscal policies in the U.S. and abroad including significant income tax changes, currency fluctuations and unforeseen inflationary pressures.
• Rapid material escalation of the cost of regulatory compliance and litigation.
• Unexpected government policies and regulations affecting the Company or its significant customers.
• Unforeseen intergovernmental conflicts or actions, including but not limited to armed conflict and trade wars.
• Unforeseen interruptions to the Company’s business with its largest customers, distributors and suppliers resulting from but not limited to, strikes, financial instabilities, computer malfunctions, inventory excesses or natural disasters.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
The Company’s fixed assets include plants and warehouses and a substantial quantity of machinery and equipment, most of which is general purpose machinery and equipment using tools and fixtures and in many instances having automatic control features and special adaptations. The Company’s plants, warehouses, machinery and equipment are in good operating condition, are well maintained, and substantially all of its facilities are in regular use. The Company considers the present level of fixed assets along with planned capital expenditures as suitable and adequate for operations in the current business environment. At December 31, 2010, the Company operated a total of 243 plants, warehouses and offices of which (a) the locations in the U.S. had approximately 2.7 million square feet, of which 1.2 million square feet were leased; (b) the locations outside the U.S. had approximately 6.7 million square feet, of which 5.1 million square feet were leased; and (c) the square footage by segment was approximately 8.4 million square feet and 1.0 million square feet for the Interconnect Products and Assemblies segment and the Cable Products segment, respectively.
The Company believes that its facilities are suitable and adequate for the business conducted therein and are being appropriately utilized for their intended purposes. Utilization of the facilities varies based on demand for the products. The Company continuously reviews its anticipated requirements for facilities and, based on that review, may from time to time acquire or lease additional facilities and/or dispose of existing facilities.
Item 3. Legal Proceedings
The Company and its subsidiaries have been named as defendants in several legal actions in which various amounts are claimed arising from normal business activities. Although the amount of any ultimate liability with respect to such matters cannot be precisely determined, in the opinion of management, such matters are not expected to have a material effect on the Company’s financial condition or results of operations.
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Item 4. Removed and Reserved
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company effected the initial public offering of its Class A Common Stock in November 1991. The Company’s common stock has been listed on the New York Stock Exchange since that time under the symbol “APH.” The following table sets forth on a per share basis the high and low sales prices for the common stock for both 2010 and 2009 as reported on the New York Stock Exchange.
2010 2009
High Low High Low
First Quarter $ 47.01 $ 37.78 $ 30.84 $ 21.55
Second Quarter 47.83 38.40 35.39 27.98
Third Quarter 49.98 38.36 40.24 30.69
Fourth Quarter 54.07 47.37 47.14 35.16
The below graph compares the performance of Amphenol over a period of five years ending December 31, 2010 with the performance of the Standard & Poor’s 500 Stock Index and the average performance of a composite group consisting of peer corporations on a line-of-business basis. The Company is excluded from this group. The corporations comprising the composite group are CommScope, Inc., Hubbell Incorporated, Methode Electronics, Inc., Molex, Inc, and Thomas & Betts Corporation. Total Daily Compounded Return indices reflect reinvested dividends and are weighted on a market capitalization basis at the time of each reported data point.
As of January 31, 2011, there were 38 holders of record of the Company’s common stock. A significant number of outstanding shares of common stock are registered in the name of only one holder, which is a nominee of The Depository Trust Company, a securities depository for banks and brokerage firms. The Company believes that there are a significant number of beneficial owners of its common stock.
The Company pays a quarterly dividend on its common stock of $.015 per share and paid such quarterly dividends in 2009 and 2010. Cumulative dividends declared and paid during 2010 were $10.4 million, including those declared in 2009 and paid in 2010, and cumulative dividends declared and paid during 2009 were $10.3 million, including those declared in 2008 and paid in 2009. The Company intends to retain the remainder of its earnings not used for dividend payments to provide funds for the operation and
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The Company’s Revolving Credit Facility dated as of August 13, 2010 contains financial covenants and restrictions, some of which may limit the Company’s ability to pay dividends, and any future indebtedness that the Company may incur could limit its ability to pay dividends.
The following table summarizes the Company’s equity compensation plan information as of December 31, 2010.
Equity Compensation Plan Information
Number of securities to Weighted average be issued upon exercise exercise price of Number of securities of outstanding options, outstanding options, remaining available Plan category warrants and rights warrants and rights for future issuance
Equity compensation plans approved by
security holders 12,706,324 $ 33.93 10,306,800 Equity compensation plans not approved by security holders — — —
Total 12,706,324 $ 33.93 10,306,800
Purchases of Equity Securities
The Company had an open-market stock repurchase program (the “Program”) to repurchase up to 20 million shares of its common stock which expired on January 31, 2010. The Company did not purchase any shares of its common stock under the Program or otherwise in 2010. In January 2011, the Company announced that its Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to 20 million shares of its common stock during the three year period ending January 31, 2014. The price and timing of any such purchases will depend on factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, economic and market conditions and stock price.
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Item 6. Selected Financial Data
(dollars in thousands, except per share data)
2010 2009 2008 2007 2006
Operations
Net sales $ 3,554,101 $ 2,820,065 $ 3,236,471 $ 2,851,041 $ 2,471,430 Net income attributable to Amphenol Corporation 496,405 (1) 317,834(2) 419,151 353,194 255,691 (3)
(1) (2) (3) Net income per common share —Diluted 2.82 1.83 2.34 1.94 1.39
Financial Condition
Cash, cash equivalents and short -term investments $ 624,229 $ 422,383 $ 219,415 $ 186,301 $ 74,135 Working capital 1,337,140 917,236 701,032 703,327 486,946
Total assets 4,015,857 3,219,184 2,994,159 2,675,733 2,195,397
Long -term debt, including current portion 799,992 753,449 786,459 722,636 680,414
Shareholders ’ equity attributable to Amphenol Corporation 2,320,855 1,746,077 1,349,425 1,264,914 902,994
Weighted average shares outstanding —Diluted 176,325,993 173,941,752 178,813,013 182,503,969 183,347,326 Cash dividends declared per share $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06
(1) Includes a one-time tax benefit related to reserve adjustments from the favorable settlement of certain international tax positions and the completion of prior year audits of $20.7 million, or $0.12 per share.
(2) Includes a one-time charge for expenses incurred in the early extinguishment of interest rate swaps of $4.6 million, less tax benefit of $1.2 million, or $0.02 per share after taxes as well as a one-time tax benefit related to a reserve adjustment from the completion of the audit of certain of the Company’s prior year tax returns of $3.6 million, or $0.02 per share.
(3) Includes a one-time charge for expenses incurred in connection with a flood at the Company’s Sidney, NY facility of $20.7 million, less tax benefit of $6.5 million, or $0.08 per share after taxes.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the results of operations for the three fiscal years ended December 31, 2010, 2009 and 2008 has been derived from and should be read in conjunction with the consolidated financial statements included in Part II, Item 8 herein.
Overview
The Company is a global designer, manufacturer and marketer of interconnect and cable products. In 2010, approximately 65% of the Company’s sales were outside the U.S. The primary end markets for our products are:
• communication systems for the converging technologies of voice, video and data communications;
• a broad range of industrial applications including factory automation and motion control systems, medical and industrial instrumentation, mass transportation, alternative energy, natural resource exploration, and traditional and hybrid-electrical automotive applications; and
• commercial aerospace and military applications.
The Company’s products are used in a wide variety of applications by numerous customers, the largest of which accounted for approximately 6% of net sales in 2010. The Company encounters competition in its markets and competes primarily on the basis of technology innovation, product quality, price, customer service and delivery time. There has been a trend on the part of OEM customers to consolidate their lists of qualified suppliers to companies that have a global presence, can meet quality and delivery standards, have a broad product portfolio and design capability and have competitive prices. The Company has focused its global resources to position itself to compete effectively in this environment. The Company believes that its global presence is an important competitive advantage as it allows the Company to provide quality products on a timely and worldwide basis to its multinational customers.
The Company’s strategy is to provide comprehensive design capabilities, a broad selection of products and a high level of service in the areas in which it competes. The Company focuses its research and development efforts through close collaboration with its OEM customers to develop highly-engineered products that meet customer needs and have the potential for broad market applications and significant sales within a one-to-three year period. The Company is also focused on controlling costs. The Company does this by investing in modern manufacturing technologies, controlling purchasing processes and expanding into low cost areas.
The Company’s strategic objective is to further enhance its position in its served markets by pursuing the following success factors:
• Focus on customer needs;
• Design and develop performance-enhancing interconnect solutions;
• Establish a strong global presence in resources and capabilities;
• Preserve and foster a collaborative, entrepreneurial management structure;
• Maintain a culture of controlling costs; and
• Pursue strategic acquisitions
For the year ended December 31, 2010, the Company reported net sales, operating income and net income attributable to Amphenol Corporation of $3,554.1 million, $700.4 million and $496.4 million, respectively; up 26%, 43% and 56%, respectively, from 2009. Sales of interconnect products and assemblies and sales of cable products increased in all of the Company’s major markets and geographic regions. Sales and profitability trends are discussed in detail in “Results of Operations” below. In addition, a strength of the Company is its ability to consistently generate cash. The Company uses cash generated from operations to fund capital expenditures and acquisitions, repurchase shares of its common stock, pay dividends and reduce indebtedness. In 2010, the Company generated operating cash flow of $506.9 million, before a reduction of $82.0 million from the January 1, 2010 adoption of the FASB Accounting Standards Update (“ASU”) No. 2009-16, Accounting for Transfers of Financial Assets (“ASU 2009-16”)(refer to Note 3 to the Consolidated Financial Statements included in Part II, Item 8 herein).
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Results of Operations
The following table sets forth the components of net income attributable to Amphenol Corporation as a percentage of net sales for the periods indicated.
Year Ended December 31,
2010 2009 2008
Net sales 100.0 % 100.0% 100.0%
Cost of sales 67.4 68.6 67.6 12.9 14.1 12.9 Selling, general and administrative expense
Operating income 19.7 17.3 19.5
Interest expense (1.2 ) (1.5) (1.2)
Early extinguishment of interest rate swaps — (0.2) — Other income (expense), net 0.1 — —
Income before income taxes 18.6 15.8 18.3 (4.5 ) (4.2) (5.0) Provision for income taxes
Net income 14.1 11.6 13.3 (0.1 ) (0.3) (0.3) Net income attributable to noncontrolling interests 14.0% 11.3% 13.0% Net income attributable to Amphenol Corporation
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2010 Compared to 2009
Net sales were $3,554.1 million for the year ended December 31, 2010 compared to $2,820.1 million for 2009, an increase of 26% in U.S. dollars and in local currencies and 22% organically (excluding both currency and acquisition impacts). Sales of interconnect products and assemblies in 2010 (approximately 93% of net sales) increased 28% in U.S. dollars and 29% in local currencies compared to 2009 ($3,293.1 million in 2010 versus $2,566.6 million in 2009). Sales increased in all of the Company’s major end markets, including the telecommunications and data communications, wireless communications, industrial, military/aerospace and automotive markets as a result of a broad strengthening from a product, customer and geographic perspective and to a lesser extent from acquisitions. Sales to the telecommunications and data communications market increased (approximately $202.7 million) primarily due to increased sales of high speed interconnect products for servers and switching as well as network and storage equipment. The wireless communications market sales increased (approximately $181.3 million) in all areas, including the mobile device market, primarily related to higher handset and tablet computer demand and in the wireless infrastructure market due to higher cell site installation demand, which also drove higher demand at base station/equipment manufacturers. Industrial market sales increased (approximately $163.9 million) primarily reflecting increased sales to the geophysical and oil and gas, alternative energy, factory automation and instrumentation markets. Sales to the military/aerospace markets increased (approximately $125.2 million), primarily due to higher demand in the defense market and to a lesser extent the commercial market. Sales to the automotive market increased (approximately $42.8 million) primarily due to the increased demand in the European and U.S. automotive markets including the ramp up of new hybrid electric vehicle platforms. Sales of cable products in 2010 (approximately 7% of net sales) increased 3% in U.S. dollars and were relatively flat in local currencies compared to 2009 ($261.0 million in 2010 versus $253.5 million in 2009), primarily attributed to an increase in spending in international broadband markets, partially offset by lower spending in North American broadband markets.
Geographically, sales in the U.S. in 2010 increased approximately 26% both in U.S. dollars and in local currencies ($1,258.2 million in 2010 versus $1,001.7 million in 2009) compared to 2009. International sales for 2010 increased approximately 26% both in U.S. dollars and in local currencies ($2,296.0 million in 2010 versus $1,818.3 million in 2009) compared to 2009. The comparatively weaker U.S. dollar in 2010 had the effect of increasing net sales by approximately $1.1 million when compared to foreign currency translation rates in 2009.
The gross profit margin as a percentage of net sales was 32.6% in 2010 compared to 31.4% in 2009. The operating margin for interconnect products and assemblies increased approximately 2.3% compared to the prior year, primarily as a result of higher volume levels combined with the proactive and aggressive management of all elements of costs. Cable operating margins decreased 1.7% primarily as a result of higher relative material costs and the impact of market price reductions.
Selling, general and administrative expenses were $457.9 million and $397.6 million in 2010 and 2009, or approximately 13% and 14% of net sales for 2010 and 2009, respectively. The increase in expense in 2010 is primarily attributable to increases in the major components of selling, general and administrative expenses. Selling and marketing expenses increased approximately $17.1 million in 2010 due primarily to the higher sales volume and the impact on related costs such as freight and employee costs. Research and development expenditures increased approximately $13.6 million, reflecting increases in expenditures for new product development and represented approximately 2% of sales for both 2010 and 2009. Administrative expenses increased approximately $29.6 million, primarily related to an increase in stock-based compensation expense, amortization of identified intangible assets and employee incentive payments, and represented approximately 5% of sales for both 2010 and 2009.
Interest expense was $40.7 million for 2010 compared to $36.6 million for 2009. The increase is primarily attributable to the inclusion of fees of $1.5 million in 2010 on the Company’s Receivables Securitization Facility in interest expense (included in other expense, net in 2009) in accordance with the adoption of the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2009-16, Accounting for Transfers of Financial Assets (“ASU 2009-16”), which was effective January 1, 2010 (Note 3) and is also attributable to one- time expenses of $0.5 million for the early extinguishment of the Company’s previous credit facility (Note 3) and a full year of deferred debt issue costs in the 2010 related to the Senior Notes issuance in November 2009.
The provision for income taxes was at an effective rate of 24.3% in 2010 and 26.7% in 2009. The 2010 tax rate reflects a reduction in tax expense of $20.7 million relating primarily to reserve adjustments from the favorable settlement of certain international tax positions and the completion of prior year audits. The 2009 tax rate reflects a reduction in tax expense of $3.6 million for tax reserve adjustments relating to the completion of the audit of certain of the Company’s prior year tax returns. Excluding these adjustments, the Company’s effective tax rate for 2010 and 2009 was 27.4% and 27.5%, respectively.
The Company is present in over fifty taxable jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years
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2007 and after. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of December 31, 2010, the amount of the liability for unrecognized tax benefits, which if recognized would impact the effective tax rate, was approximately $23.3 million, the majority of which is included in other long-term liabilities in the accompanying Consolidated Balance Sheets. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statute of limitations. Based on information currently available, management anticipates that over the next twelve month period, audit activity could be completed and statutes of limitations may close relating to existing unrecognized tax benefits of approximately $4.8 million.
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2009 Compared to 2008
Net sales were $2,820.1 million for the year ended December 31, 2009 compared to $3,236.5 million for 2008, a decrease of 13% in U.S. dollars, 12% in local currencies and 16% organically (excluding both currency and acquisition impacts). Sales of interconnect products and assemblies in 2009 (approximately 91% of net sales) decreased 13% in U.S. dollars and 12% in local currencies compared to 2008 ($2,566.6 million in 2009 versus $2,950.6 million in 2008). Sales decreased in the Company’s major end markets, including the industrial, telecommunications and data communications, automotive, wireless communications and military/aerospace markets as a result of the global economic downturn. The industrial market sales decreased (approximately $113.9 million) reflecting significantly lower demand for a broad range of industrial equipment including factory automation, natural resource exploration, heavy equipment and railway/mass transit. The telecommunications and data communications market sales decreased (approximately $164.8 million) primarily due to reduced sales of high speed interconnect products for servers and switching as well as network and storage equipment reflecting significantly lower enterprise and data center equipment demand. Sales to the automotive market decreased (approximately $42.3 million) primarily due to the general softness in the domestic and European automotive markets. The wireless communications market sales decreased (approximately $46.1 million) in primarily all areas, including the mobile device market, primarily related to lower handset demand and the wireless infrastructure market due to lower demand at base station/equipment manufacturers, partially offset by increased sales to cell site installation customers primarily due to the impact of acquisitions. Sales to the military/aerospace markets decreased (approximately $20.8 million), primarily due to lower demand in the commercial aircraft market and to a lesser extent the defense market, partially offset by the impact of acquisitions. Sales of cable products in 2009 (approximately 9% of net sales) decreased 11% in U.S. dollars and 9% in local currencies compared to 2008 ($253.5 million in 2009 versus $285.9 million in 2008). This decrease is primarily attributable to a slowdown in spending in domestic and international broadband and cable television markets resulting from weak economic conditions.
Geographically, sales in the U.S. in 2009 decreased approximately 14% in U.S. dollars ($1,001.7 million in 2009 versus $1,159.3 million in 2008) and decreased approximately 13% in local currencies. International sales for 2009 decreased approximately 12% in U.S. dollars ($1,818.3 million in 2009 versus $2,077.2 million in 2008) and decreased approximately 11% in local currencies compared to 2008. The comparatively stronger U.S. dollar in 2009 had the effect of decreasing net sales by approximately $38.2 million when compared to foreign currency translation rates in 2008.
The gross profit margin as a percentage of net sales was 31.4% in 2009 compared to 32.4% in 2008. The operating margin for interconnect products and assemblies decreased approximately 2.3% compared to the prior year, primarily as a result of reduced volume levels given the current economic environment, partially offset by effective cost control programs. Cable operating margins increased 3.9% primarily as a result of the positive impacts of lower material costs and operational cost reduction actions, which more than offset the impact of lower sales volume.
Selling, general and administrative expenses were $397.6 million and $416.9 million in 2009 and 2008, or approximately 14% and 13% of net sales for 2009 and 2008, respectively. The decrease in expense in 2009 is primarily attributable to lower sales volume and the positive effects of cost reduction actions. Selling and marketing expenses decreased approximately $12.9 million in 2009 due primarily to the lower sales volume and the impact on sales related costs such as freight and employee related costs. Research and development expenditures decreased approximately $4.1 million. Administrative expenses decreased approximately $2.3 million and represented approximately 5.0% and 4.5% of sales for 2009 and 2008, respectively.
Interest expense was $36.6 million for 2009 compared to $39.6 million for 2008. The decrease is primarily attributable to lower average interest rates in 2009 partially offset by higher average debt levels. The Company incurred a $4.6 million charge (or $.02 per share) for the early extinguishment of certain interest rate swaps in 2009.
The provision for income taxes was at an effective rate of 26.7% in 2009 and 27.5% in 2008. The lower effective tax rate in 2009 results primarily from a smaller decrease in income during 2009 in lower rate jurisdictions and includes a reduction in tax expense of $3.6 million for tax reserve adjustments relating to the completion of the audit of certain of the Company’s prior year tax returns.
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Liquidity and Capital Resources
Cash flow provided by operating activities was $424.9 million for 2010. Cash flow provided by operating activities was reduced by $82.0 million related to the effect of adoption of ASU 2009-16 (refer to Note 3 to the Consolidated Financial Statements). Cash flow provided by operating activities excluding the effect of adoption of ASU 2009-16 was $506.9 million compared to $582.3 million and $481.5 million 2009 and 2008, respectively. Excluding the effect of adoption, the decrease in cash flow provided by operating activities in 2010 compared to 2009 is primarily attributable to an increase in the components of working capital compared to decreases in these components in 2009 offset by an increase in net income and an increase in non-cash expenses, including depreciation and stock-based compensation expense. The increase in cash flow provided by operating activities in 2009 compared to 2008 is primarily attributable to decreases in the components of working capital compared to increases in these components in 2008 and an increase in depreciation and amortization partially offset by a decrease in net income.
The components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $120.1million in 2010 due primarily to a $157.7 million increase in accounts receivable, an increase of $65.2 million in inventory and an increase of $5.6 million in other current assets partially offset by a $76.9 million increase in accounts payable and a $31.5 million increase in accrued liabilities.
The components of working capital decreased $125.6 million in 2009 due primarily to decreases in accounts receivable, inventory and other current assets of $96.6 million, $76.3 million and $6.0 million, respectively, offset by a $31.7 million decrease in accounts payable, a $3.0 million decrease in accounts receivable sold under the Company’s receivable securitization program and a $2.6 million decrease in accrued liabilities.
The components of working capital increased $40.0 million in 2008 due primarily to increases in inventory of $47.6 million and other current assets of $7.5 million partially offset by a $32.2 million increase in accrued liabilities, a $2.7 million increase in accounts payable and a $1.5 million decrease in accounts receivable.
The following represents the significant changes in the amounts as presented on the accompanying Consolidated Balance Sheets in 2010. Accounts receivable increased $269.0 million to $718.5 million, resulting from the inclusion of $82.0 million of receivables previously sold under the Company’s Receivables Securitization Facility in accordance with the adoption of ASU 2009-16 (refer to Note 3 to the Consolidated Financial Statements) and also reflecting higher sales levels, the impact of acquisitions of $22.0 million and translation resulting from the comparatively weaker U.S. dollar at December 31, 2010 compared to December 31, 2009 (“Translation”). ( For further discussion of the adoption of ASU 2009-16, refer to Note 3 to the Consolidated Financial Statements). Days sales outstanding increased to approximately 68 days from 64 days in 2009. Inventory increased $87.4 million to $549.2 million, primarily due to the impact of higher sales activity, the impact of acquisitions of $18.8 million and Translation. Inventory days at December 31, 2010 and 2009 were 77 and 80, respectively. Land and depreciable assets, net, increased $34.1 million to $367.0 million reflecting capital expenditures of $109.5 million, as well as assets from acquisitions of approximately $14.2 million and Translation offset by depreciation of $86.1 million and disposals. Goodwill increased $164.6 million to $1,533.3 million, primarily as a result of two acquisitions in the Interconnect Products and Assemblies segment completed during the year. Other long -term assets increased $26.2 million to $123.4 million primarily due to an increase in identifiable intangible assets resulting from 2010 acquisitions partially offset by a decrease in long-term deferred tax assets of $9.2 million. Accounts payable increased $92.8 million to $385.0 million primarily as a result of an increase in purchasing activity during the year related to higher sales levels and due to the impact of acquisitions of $14.8 million. Accrued acquisition-related obligations increased $32.4 million to $39.6 million, primarily reflecting contingent consideration obligations of $39.6 million relating to an acquisition completed in 2010 partially offset by payments and adjustments to accrued acquisition-related obligations relating to previous acquisitions. Other long-term liabilities increased $14.0 million to $41.9 million, primarily due to contingent consideration obligations expected to be paid in 2012 associated with the aforementioned acquisition in 2010.
In 2010, cash flow provided by operating activities of $424.9 million, proceeds from the exercise of stock options including excess tax benefits from stock-based payment arrangements of $61.3 million, net borrowings of $45.4 million and proceeds from disposal of fixed assets of $1.9 million were used to fund acquisition-related payments of $180.4 million, capital expenditures of $109.5 million, purchases of short-term investments of $60.2 million, payments to shareholders of noncontrolling interests of $24.6 million, dividend payments of $10.4 million, and to fund fees and expenses in connection with refinancing the Company’s Revolving Credit Facility of $7.0 million, which resulted in an increase in cash and cash equivalents of $141.3 million. In 2009, cash flow provided by from operating activities of $582.3 million, proceeds from the issuance of Senior Notes of $598.9 million, proceeds from the exercise of stock options including excess tax benefits from stock-based payment arrangements of $41.6 million and proceeds from disposal of fixed assets of $3.2 million were used to fund $280.0 million of acquisitions, including payments for performance-based additional cash consideration, capital expenditures of $63.1 million, purchases of short-term investments of $33.3 million, payments to shareholders of noncontrolling interests of $23.3 million, dividend payments
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Table of Contents of $10.3 million, net repayments of the Revolving Credit Facility and foreign debt of $631.9 million, costs related to the issuance of Senior Notes and the early extinguishment of interest rate swap agreements of $4.7 million and $4.6 million, respectively, which resulted in an increase in cash and cash equivalents on hand of $169.6 million. At December 31, 2010 and 2009, the Company had cash, cash equivalents and short- term investments of $624.2 million and $422.4 million, respectively. The majority of these amounts are located outside of the U.S.
In November 2009, the Company issued $600.0 million in principal amount of its unsecured 4.75% Senior Notes due in November 2014 (the “Senior Notes”) at 99.813% of their face value ($0.9 million unamortized at December 31, 2010). Net proceeds from the sale of the Senior Notes were used to repay borrowings under the Company ’s senior credit facility. In addition, the Company incurred fees and expenses related to the Senior Notes of $4.7 million, which were deferred and are being amortized using the effective interest method over the term of the Senior Notes as interest expense. Interest on the Senior Notes is payable semi -annually on May 15 and November 15 of each year to the holders of record as of the immediately preceding May 1 and November 1. The Company may, at its option, redeem some or all of the Senior Notes at any time by paying a make-whole premium, plus accrued and unpaid interest, if any, to the date of repurchase. The Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. The fair value of the Senior Notes at December 31, 2010 was approximately $638.7 million based on recent bid prices.
In August 2010, the Company refinanced its senior credit facility. The new $1,000.0 million unsecured revolving credit facility (the “Revolving Credit Facility”) matures in August 2014. The net proceeds from the refinancing were used to repay $247.0 million of borrowings outstanding under the Company’s previous senior unsecured credit facility. At December 31, 2010, borrowings and availability under the facility were $103.6 million and $896.4 million, respectively. The Company’s interest rate on borrowings under the Revolving Credit Facility is LIBOR plus 225 basis points. The Company also pays certain annual agency and commitment fees. The Revolving Credit Facility requires that the Company satisfy certain financial covenants. At December 31, 2010, the Company was in compliance with such financial covenants. In connection with the refinancing, the Company incurred one-time expenses for the early extinguishment of debt of $0.5 million relating to unamortized deferred debt issue costs. These costs are included in interest expense on the accompanying Consolidated Statements of Income. The Company also paid fees and expenses of $6.9 million in conjunction with the new Revolving Credit Facility, which are deferred and amortized into interest expense through its maturity.
A subsidiary of the Company has an agreement with a financial institution whereby the subsidiary can sell an undivided interest of up to $100.0 million in a designated pool of qualified accounts receivable (the “Receivables Securitization Facility”). The Company services, administers and collects the receivables on behalf of the purchaser. The Receivables Securitization Facility includes certain covenants and provides for various events of termination and expires in May 2013. In accordance with previous accounting guidance, the receivables sold under the Receivables Securitization Facility were accounted for off-balance sheet as a sale of receivables. As discussed in Note 3 to the Consolidated Financial Statements, the Company adopted ASU 2009-16 on January 1, 2010. As a result, the Company no longer accounts for the value of the outstanding undivided interest held by investors under the Receivables Securitization Facility as a sale. In addition, transfers of receivables occurring on or after January 1, 2010 are reflected as debt issued in the Company’s Consolidated Statements of Cash Flows, and the value of the outstanding undivided interest held by investors at December 31, 2010 is accounted for as a secured borrowing and is included in the Company’s Consolidated Balance Sheets as long-term debt. At December 31, 2010, borrowings under the Receivables Securitization Facility were $92.0 million. At December 31, 2009, $82.0 million of receivables were sold and were therefore not reflected in accounts receivable and long-term debt in the accompanying Consolidated Balance Sheets. Additionally, in accordance with ASU 2009-16, fees incurred in connection with the Receivables Securitization Facility, which were included in other expense, net for prior periods, are now included in interest expense. Such fees were approximately $1.5 million for both 2010 and 2009.
The carrying value of the Company’s Revolving Credit Facility and Receivables Securitization Facility approximated their fair value at December 31, 2010.
The Company’s primary ongoing cash requirements will be for operating and capital expenditures, product development activities, repurchase of its common stock, funding of pension obligations, dividends and debt service. The Company may also use cash to fund all or part of the cost of acquisitions. The Company expects that capital expenditures in 2011 will be approximately $120.0 to $140.0 million. The Company pays a quarterly dividend on its common stock of $.015 per share. Cumulative dividends declared and paid during 2010 were $10.4 million, including those declared in 2009 and paid in 2010. The Company’s debt service requirements consist primarily of principal and interest on Senior Notes, the Revolving Credit Facility and its Receivables Securitization Facility.
The Company’s primary sources of liquidity are internally generated cash flow, the Revolving Credit Facility, the Receivables Securitization Facility and cash, cash equivalents and short-term investments. The Company expects that ongoing cash
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Table of Contents requirements will be funded from these sources; however, the Company’s sources of liquidity could be adversely affected by, among other things, a decrease in demand for the Company’s products, a deterioration in certain of the Company’s financial ratios or a deterioration in the quality of the Company’s accounts receivable. However, management believes that the Company’s cash, cash equivalents and short-term investment position, ability to generate strong cash flow from operations, availability under its Revolving Credit Facility and its Receivables Securitization Facility will allow it to meet its obligations for the next twelve months.
The Company had an open-market stock repurchase program (the “Program”) to repurchase up to 20 million shares of its common stock which expired on January 31, 2010. The Company did not purchase any shares of its common stock under the Program or otherwise in 2010. In January 2011, the Company announced that its Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to 20 million shares of its common stock during the three year period ending January 31, 2014. The price and timing of any such purchases will depend on factors such as debt levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, economic and market conditions and stock price.
Environmental Matters
Subsequent to the acquisition of Amphenol from Allied Signal Corporation (“Allied Signal”) in 1987 (Allied Signal merged with Honeywell International Inc. in December 1999 (“Honeywell”)), the Company and Honeywell were named jointly and severally liable as potentially responsible parties in connection with several environmental cleanup sites. The Company and Honeywell jointly consented to perform certain investigations and remediation and monitoring activities at two sites, the “Route 8” landfill and the “Richardson Hill Road” landfill, and they were jointly ordered to perform work at another site, the “Sidney” landfill. All of the costs incurred relating to these three sites are currently reimbursed by Honeywell based on an agreement (the “Honeywell Agreement”) entered into in connection with the acquisition in 1987. Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company’s consolidated financial condition or results of operations. The environmental investigations, remediation and monitoring activities identified by the Company, including those referred to above, are covered under the Honeywell Agreement.
Inflation and Costs
The cost of the Company’s products is influenced by the cost of a wide variety of raw materials, including precious metals such as gold and silver used in plating; aluminum, copper, brass and steel used for contacts; shells and cable; and plastic materials used in molding connector bodies, inserts and cable. In general, increases in the cost of raw materials, labor and services have been offset by price increases, productivity improvements and cost saving programs.
Risk Management
The Company has, to a significant degree, mitigated its exposure to currency risk in its business operations by manufacturing and procuring its products in the same country or region in which the products are sold so that costs generally reflect local economic conditions. In other cases involving U.S. export sales, raw materials are a significant component of product costs for the majority of such sales, and raw material costs are generally dollar based on a worldwide scale, such as basic metals and petroleum-derived materials.
Adoption of New Accounting Pronouncements
In June 2009, the FASB issued ASU 2009-16, which limits the circumstances in which transferred financial assets can be derecognized and requires enhanced disclosures regarding transfers of financial assets and a transferor’s continuing involvement with transferred financial assets. The Company adopted ASU 2009-16 on January 1, 2010. As a result, the Company no longer accounts for the value of the outstanding undivided interest held by investors under the Company’s Receivables Securitization Facility as a sale. In addition, transfers of receivables occurring on or after January 1, 2010 are reflected as debt issued in the Company’s Consolidated Statements of Cash Flow (resulting in a reduction of cash flow provided by operating activities, and increase in cash provided by financing activities, of $82.0 million for the year ended December 31, 2010) and recognized as long-term debt in the Company’s Consolidated Balance Sheets. Refer to the discussion of the Company’s Receivables Securitization Facility in Note 3 to the Consolidated Financial Statements.
In January 2010, the FASB issued new guidance to enhance disclosure requirements related to fair value measurements by requiring certain new disclosures and clarifying certain existing disclosures. This new guidance requires disclosure of the amounts of significant transfers in and out of Level 1 and Level 2 recurring fair value measurements and the reasons for the transfers. In addition, the new guidance requires additional information related to activities in the reconciliation of Level 3 fair
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Table of Contents value measurements. The new guidance also expands the disclosures related to the disaggregation of assets and liabilities and information about inputs and valuation techniques. The new guidance related to Level 1 and Level 2 fair value measurements was effective for interim and annual reporting periods beginning after December 15, 2009 and the new guidance related to Level 3 fair value measurements was effective for fiscal years beginning after December 15, 2010 and interim periods during those fiscal years. Effective January 1, 2010, the Company adopted the new guidance related to Level 1 and Level 2 fair value measurements. The Company’s adoption of the new guidance did not have a material impact on its consolidated financial statements and related notes. Refer to the Fair Value Measurements disclosure in Note 4 to the Consolidated Financial Statements.
Pensions
The Company and certain of its domestic subsidiaries have two defined benefit pension plans (“U.S. Plans”), which subject to the curtailment described below, cover its U.S. employees and which represent the majority of the plan assets and benefit obligations of the aggregate defined benefit plans of the Company. The U.S. Plans’ benefits are generally based on years of service and compensation and are generally noncontributory. Certain U.S. employees not covered by the U.S. Plans are covered by defined contribution plans. Certain foreign subsidiaries also have defined benefit plans covering their employees (the “International Plans”). The pension expense for the U.S. Plans and International Plans (the “Plans”) approximated $18.0 million, $16.5 million and $12.2 million in 2010, 2009 and 2008, respectively, and is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, including a weighted — average discount rate, rate increase of future compensation levels, and an expected long-term rate of return on the respective Plans’ assets.
The discount rate used by the Company for valuing pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations. The discount rate for the U.S. Plans on this basis was 5.20% at December 31, 2010 and 5.75% at December 31, 2009. Although future changes to the discount rate are unknown, had the discount rate increased or decreased 50 basis points, the accrued benefit obligation would have decreased or increased by approximately $19.8 million.
In developing the expected long-term rate of return assumption for the U.S. Plans, the Company evaluated input from its external actuaries and investment consultants as well as long-term inflation assumptions. Projected returns by such consultants are based on broad equity and bond indices. The Company also considered its historical twenty-year compounded return of approximately 10%, which has been in excess of these broad equity and bond benchmark indices. The expected long-term rate of return on the U.S. Plans’ assets is based on an asset allocation assumption of 60% with equity managers, with an expected long-term rate of return of approximately 9% and 40% with fixed income managers, with an expected long-term rate of return of approximately 7%. As of December 31, 2010, the asset allocation was 59% with equity managers and 36% with fixed income managers and 5% in cash. As of December 31, 2009, the asset allocation was 59% with equity managers and 38% with fixed income managers and 3% in cash. The Company believes that the long-term asset allocation on average will approximate 60% with equity managers and 40% with fixed income managers. The Company regularly reviews the actual asset allocation and periodically rebalances investments to its targeted allocation when considered appropriate. Based on this methodology, the Company’s expected long-term rate of return assumption to determine the accrued benefit obligation of the U.S. Plans at both December 31, 2010 and 2009 is approximately 8.25%.
Effective January 1, 2007, the Company effected a curtailment related to one of the U.S. Plans, which resulted in no additional benefits being credited to salaried employees who had less than 25 years of service with the Company, or who had not attained age 50 and who had less than 15 years of service with the Company. For affected employees, the curtailment in additional U.S. Plan benefits was replaced with a Company match defined contribution plan to which the Company contributed approximately $2.2 million and $2.0 million in 2010 and 2009, respectively.
The Company made cash contributions to the Plans of $17.3 million and $2.6 million in 2010 and 2009, respectively. The total liability for accrued pension and post-employment benefit obligations under the Company’s pension and post-retirement benefit plans increased in 2010 to $179.9 million ($3.3 million of which is included in other accrued expenses representing required contributions to be made during 2011 for unfunded foreign plans) from $176.5 million in 2009 primarily due to a reduction of the discount rate assumption compared to 2009 offset by an increase in plan assets. The Company estimates that, based on current actuarial calculations, it will make a cash contribution to the Plans in 2011 of approximately $19.4 million, the majority of which is related to the U.S. Plans. Cash contributions in subsequent years will depend on a number of factors including the investment performance of the respective Plans’ assets.
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Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are adjusted as new information becomes available. The Company’s significant accounting policies are set forth below.
Revenue Recognition - The Company’s primary source of revenues is from product sales to its customers. Revenue from sales of the Company’s products is recognized at the time the goods are delivered and title passes, provided the earning process is complete and revenue is measurable. Delivery is determined by the Company’s shipping terms, which are primarily freight on board shipping point. Revenue is recorded at the net amount to be received after deductions for estimated discounts, allowances and returns. These estimates and reserves are determined and adjusted as needed based upon historical experience, contract terms and other related factors. The shipping costs for the majority of the Company’s sales are paid directly by the Company’s customers. In the broadband communication market (approximately 7% of consolidated sales), the Company pays for shipping cost to the majority of its customers. Shipping costs are also paid by the Company for certain customers in the Interconnect Products and Assemblies segment. Amounts billed to customers related to shipping costs are immaterial and are included in net sales. Shipping costs incurred to transport products to the customer which are not reimbursed are included in selling, general and administrative expense.
Inventories - Inventories are stated at the lower of standard cost, which approximates average cost, or market. Provisions for slow-moving and obsolete inventory are made based on historical experience and product demand. Should future product demand change, existing inventory could become slow-moving or obsolete, and provisions would be increased accordingly.
Depreciable Assets - Property, plant and equipment are carried at cost less accumulated depreciation. The appropriateness and the recoverability of the carrying value of such assets are periodically reviewed taking into consideration current and expected business conditions. The Company has not recorded any significant impairments.
Goodwill - The Company performs its annual evaluation for the impairment of goodwill for the Company’s reporting units in accordance with ASC topic Intangibles — Goodwill and Other as of each June 30. The Company has defined its reporting units as the two reportable business segments “Interconnect Products and Assemblies” and “Cable Products”, as the components of these reportable business segments have similar economic characteristics. Goodwill impairment for each reporting unit is evaluated using a two-step approach requiring the Company to determine the fair value of the reporting unit and to compare that to the carrying value of the reporting unit. If the carrying value exceeded the fair value, the goodwill of the reporting unit would be potentially impaired and a second step of testing would be performed to measure the impairment loss. The second step of the goodwill impairment test would require the comparison of the implied fair value of reporting unit goodwill to the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds its fair value, an impairment loss would be recognized in an amount equal to the excess. The second step of the goodwill impairment test was not required.
As of June 30, 2010, and for each previous year in which the impairment test has been performed, the fair market value of the Company’s reporting units exceeded their carrying values and therefore no impairment was recognized.
Defined Benefit Plan Obligation - The defined benefit plan obligation is based on significant assumptions such as mortality rates, discount rates and plan asset rates of return as determined by the Company in consultation with the respective benefit plan actuaries and investment advisors.
Income Taxes - Deferred income taxes are provided for revenue and expenses which are recognized in different periods for income tax and financial statement purposes. Deferred income taxes are not provided on undistributed earnings of foreign affiliated companies which are considered to be permanently invested. It is not practicable to estimate the amount of tax that might be payable if undistributed earnings were to be repatriated. Deferred tax assets are regularly assessed for recoverability based on both historical and anticipated earnings levels and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. The tax effects of an uncertain tax position taken or expected to be taken in income tax returns are recognized only if it is “more likely than not” to be sustained on examination by the taxing authorities, based on its technical merits as of the reporting date. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes.
The significant accounting policies are more fully described in Note 1 to the Company’s Consolidated Financial Statements.
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Disclosures about contractual obligations and commitments
The following table summarizes the Company’s known obligations to make future payments pursuant to certain contracts as of December 31, 2010, as well as an estimate of the timing in which such obligations are expected to be satisfied.
Payment Due By Period
Contractual Obligations Less than 1-3 3-5 More than (dollars in thousands) Total 1 year years years 5 years
Debt (1) $ 799,992 $ 352 $ 92,548 $ 706,252 $ 840
Interest related to Senior Notes 114,000 28,500 57,000 28,500 —
Operating leases 83,526 24,988 33,483 16,278 8,777
Purchase obligations 166,019 163,023 2,996 — —
Accrued acquisition -related obligations (2) 59,000 40,000 19,000 — — 50,809 17,122 10,740 8,384 14,563 Accrued pension and post employment benefit obligations (3) $ 1,273,346 $ 273,985 $ 215,767 $ 759,414 $ 24,180 Total (4)
(1) The Company has excluded expected interest payments on the Revolving Credit Facility and the Receivables Securitization Facility from the above table, as this calculation is largely dependent on average debt levels the Company expects to have at the end of each of the years presented. The actual interest payments made related to the Revolving Credit Facility and Receivables Securitization Facility in 2010 were $11.1 million. Expected debt levels, and therefore expected interest payments, are difficult to predict, as they are significantly impacted by such items as future acquisitions, repurchases of treasury stock, dividend payments as well as payments or additional borrowing made to reduce or increase the underlying revolver balance.
(2) Accrued acquisition-related obligations consist of obligations for additional purchase price and performance-based cash consideration.
(3) Included in this table are estimated benefit payments expected to be made under the Company’s unfunded pension and post-retirement benefit plans. The Company also maintains several funded pension and post-retirement benefit plans, the most significant of which covers its U.S. employees. Over the past several years, there has been no minimum requirement for Company contributions to the U.S. Plans due to prior contributions made in excess of minimum requirements, however, the Company did make a voluntary contribution of approximately $15 million in 2010. The Company anticipates making a contribution to the U.S. Plans of approximately $15 million in 2011. An anticipated minimum required contribution of approximately $13 million was included in the above table related to the U.S. Plans for 2011. It is not possible to reasonably estimate expected required contributions in the above table after 2011 since several assumptions are required to calculate minimum required contributions, such as the discount rate and expected returns on pension assets.
(4) As of December 31, 2010, the Company has non-current liabilities of approximately $23.3 million recognized in accordance with the Income Taxes topic of the ASC. These liabilities have been excluded from the above table due to the high degree of uncertainty regarding the timing of potential future cash flows; it is difficult to make a reasonably reliable estimate of the amount and period in which these liabilities might be paid.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company, in the normal course of doing business, is exposed to a variety of risks, including market risks associated with foreign currency exchange rates and changes in interest rates.
Foreign Currency Exchange Rate Risk
The Company conducts business in several international currencies through its worldwide operations, and as a result is subject to foreign exchange exposure due to changes in exchange rates of the various currencies. Changes in exchange rates can positively or negatively affect the Company’s sales, gross margins and retained earnings. The Company attempts to minimize currency exposure risk by producing its products in the same country or region in which the products are sold, thereby generating revenues and incurring expenses in the same currency and by managing its working capital although there can be no assurance that this approach will be successful, especially in the event of a significant and sudden decline in the value of any of the international currencies of the Company’s worldwide operations. The Company does not engage in purchasing forward exchange contracts for trading or speculative purposes.
Interest Rate Risk
At December 31, 2010, the Company’s average LIBOR rate was 0.28%. A 10% change in the LIBOR interest rate at December 31, 2010 would have no material effect on interest expense. The Company does not expect changes in interest rates to have a material effect on income or cash flows in 2011, although there can be no assurances that interest rates will not significantly change.
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In November 2009, the Company issued $600.0 million of the Senior Notes at 99.813% of their face value due in November 2014 with a fixed interest rate of 4.75%.
Refer to Note 6 of the Consolidated Financial Statements for a discussion of derivative financial instruments.
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Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Amphenol Corporation Wallingford, Connecticut
We have audited the accompanying consolidated balance sheets of Amphenol Corporation and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, changes in equity and other comprehensive income, and cash flow for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15. We also have audited the Company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Amphenol Corporation and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ DELOITTE & TOUCHE LLP
Hartford, Connecticut February 28, 2011
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Consolidated Statements of Income (dollars in thousands, except per share data)
Year Ended December 31,
2010 2009 2008
Net sales $ 3,554,101 $ 2,820,065 $ 3,236,471 2,395,873 1,933,511 2,187,318 Cost of sales
Gross profit 1,158,228 886,554 1,049,153
457,871 397,641 416,914 Selling, general and administrative expenses
Operating income 700,357 488,913 632,239
Interest expense (40,741 ) (36,586 ) (39,627 )
Early extinguishment of interest rate swaps — (4,575 ) — 4,072 (1,225) (32 ) Other income (expense), net
Income before income taxes 663,688 446,527 592,580 (161,275 ) (119,311 ) (163,003 ) Provision for income taxes
Net income 502,413 327,216 429,577 (6,008 ) (9,382) (10,426 ) Less: Net income attributable to noncontrolling interests $ 496,405 $ 317,834 $ 419,151 Net income attributable to Amphenol Corporation $ 2.86 $ 1.85 $ 2.39 Net income per common share – Basic
Weighted average common shares outstanding – Basic 173,785,650 171,607,643 175,663,797
$ 2.82 $ 1.83 $ 2.34 Net income per common share – Diluted
Weighted average common shares outstanding - Diluted 176,325,993 173,941,752 178,813,013
$ 0.06 $ 0.06 $ 0.06 Dividends declared per common share
See accompanying notes to consolidated financial statements.
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Consolidated Balance Sheets (dollars in thousands, except per share data)
December 31 ,
2010 2009
Assets
Current Assets:
Cash and cash equivalents $ 525,888 $ 384,613 98,341 37,770 Short -term investments
Total cash, cash equivalents and short -term investments 624,229 422,383
Accounts receivable, less allowance for doubtful accounts of $14,946 and $18,785, respectively (Note 3) 718,545 449,591
Inventories, net:
Raw materials and supplies 162,439 124,192
Work in process 231,719 215,883 155,011 121,675 Finished goods
549,169 461,750 100,187 86,671 Other current assets 1,992,130 1,420,395 Total current assets
Land and depreciable assets:
Land 19,400 20,008
Buildings and improvements 158,426 152,265 800,178 735,789 Machinery and equipment
978,004 908,062 (611,008) (575,187 ) Accumulated depreciation
366,996 332,875
Goodwill 1,533,299 1,368,672 123,432 97,242 Other long -term assets $ 4,015,857 $ 3,219,184
Liabilities & Equity
Current Liabilities:
Accounts payable $ 384,963 $ 292,122
Accrued salaries, wages and employee benefits 75,183 64,143
Accrued income taxes 65,311 57,272
Accrued acquisition -related obligations 39,615 7,244
Other accrued expenses 89,566 81,979 352 399 Short -term debt 654,990 503,159 Total current liabilities
Long -term debt (Note 3) 799,640 753,050
Accrued pension and post -employment benefit obligations 176,636 172,235
Other long -term liabilities 41,876 27,922
Commitments and contingent liabilities (Notes 3, 11 and 16)
Equity: Class A Common Stock, $.001 par value; 500,000,000 shares authorized; 175,550,683 and 173,209,928
shares issued and outstanding at December 31, 2010 and 2009, respectively 176 174
Additional paid -in capital 144,855 71,368
Accumulated earnings 2,260,581 1,774,625 (84,757) (100,090 ) Accumulated other comprehensive loss
Total shareholders ’ equity attributable to Amphenol Corporation 2,320,855 1,746,077 21,860 16,741 Noncontrolling interests 2,342,715 1,762,818 Total equity
$ 4,015,857 $ 3,219,184
See accompanying notes to consolidated financial statements.
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Consolidated Statements of Changes in Equity and Other Comprehensive Income (dollars in thousands, shares in millions)
Additional Paid in Accum. Other Common Stock Capital Comprehensive Accumulated Comprehensive Treasury Noncontrolling Total
Shares Amount (Deficit) Income (Loss) Earnings Income (Loss) Stock Interests Equity
Balance January 1, 2008 181 $ 181 $ (43,647 ) $ 1,431,635 $ (43,644 ) $ (79,611) $ 14,834 $ 1,279,748
Comprehensive income:
Net income $ 429,577 419,151 10,426 429,577
Other comprehensive income, net of tax: Translation adjustments (39,518 ) (36,589 ) (2,929 ) (39,518 )
Revaluation of interest rate derivatives (8,691 ) (8,691 ) (8,691 )
Defined benefit plan liability adjustment (51,667 ) (51,667 ) (51,667 )
Other comprehensive loss (99,876 )
Comprehensive income $ 329,701
Purchase of noncontrolling interests (445 ) (445 )
Acquisitions resulting in noncontrolling interests 197 197
Distributions to shareholders of noncontrolling interests (2,939 ) (2,939 )
Purchase of treasury stock (293,626) (293,626 )
Retirement of treasury stock (11) (11) (373,226 ) 373,237 —
Stock compensation 198 198
Stock options exercised, including tax benefit 1 1 49,879 49,880
Dividends declared (10,461 ) (10,461 ) 16,316 16,316 Stock -based compensation expense
Balance December 31, 2008 171 $ 171 $ 22,746 $ 1,467,099 $ (140,591 ) $ — $ 19,144 $ 1,368,569
Comprehensive income:
Net income $ 327,216 317,834 9,382 327,216
Other comprehensive income, net of tax:
Translation adjustments 22,521 23,793 (1,272 ) 22,521
Revaluation of interest rate derivatives 13,354 13,354 13,354
Defined benefit plan liability adjustment 3,354 3,354 3,354
Other comprehensive income 39,229
Comprehensive income $ 366,445
Purchase of noncontrolling interests (14,529 ) (1,367 ) (15,896 )
Acquisitions resulting in noncontrolling interests 983 983
Distributions to shareholders of noncontrolling interests (10,129 ) (10,129 ) Stock compensation 131 131
Stock options exercised, including tax benefit 2 3 42,780 42,783
Dividends declared (10,308 ) (10,308 )
20,240 20,240 Stock -based compensation expense
Balance December 31, 2009 173 $ 174 $ 71,368 $ 1,774,625 $ (100,090 ) $ — $ 16,741 $ 1,762,818
Comprehensive income: Net income $ 502,413 496,405 6,008 502,413
Other comprehensive income, net of tax:
Translation adjustments 18,504 17,465 1,039 18,504
Revaluation of interest rate derivatives 2,363 2,363 2,363 (4,495 ) Defined benefit plan liability adjustment (4,495 ) (4,495 ) 16,372 Other comprehensive income Comprehensive income $ 518,785
Purchase of noncontrolling interests (12,375 ) (7,792 ) (20,167 ) Acquisitions resulting in noncontrolling interests 10,285 10,285
Distributions to shareholders of noncontrolling interests (4,421 ) (4,421 )
Stock options exercised, including tax benefit 3 2 60,477 60,479
Dividends declared (10,449 ) (10,449 )
25,385 25,385 Stock -based compensation expense Balance December 31, 2010 176 $ 176 $ 144,855 $ 2,260,581 $ (84,757 ) $ — $ 21,860 $ 2,342,715
See accompanying notes to consolidated financial statements.
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Consolidated Statements of Cash Flow (dollars in thousands)
Year Ended December 31,
2010 2009 2008
Net income $ 502,413 $ 327,216 $ 429,577
Adjustments for cash from operating activities:
Depreciation and amortization 102,846 98,524 91,302
Net change in receivables sold under Receivables Securitization Facility (Note 3) (82,000) (3,000) —
Stock -based compensation expense 25,385 20,240 16,316
Net change in operating assets and liabilities:
Accounts receivable (157,657 ) 96,588 1,419
Inventory (65,179) 76,332 (47,570 )
Other current assets (5,637) 6,017 (7,504)
Excess tax benefits from stock -based payment arrangements (14,692) (16,085) (21,307 )
Accounts payable 76,932 (31,709) 2,699
Accrued income taxes (3,996) 16,920 13,623
Other accrued liabilities 35,466 (19,494) 18,644
Accrued pension and post employment benefits (1,247) 6,526 (15,940 )
Other long -term assets 11,658 8,842 1,900 601 (4,620) (1,636) Other 424,893 582,297 481,523 Cash flow provided by operating activities
Cash flow from investing activities:
Additions to property, plant and equipment (109,458 ) (63,058) (108,280 )
Proceeds from disposal of fixed assets 1,851 3,224 940
Purchases of short -term investments (198,228 ) (46,786) (26,260 )
Sales and maturities of short -term investments 138,012 13,444 23,322 (180,402 ) (280,014) (135,807 ) Acquisitions, net of cash acquired (348,225 ) (373,190) (246,085 ) Cash flow used in investing activities
Cash flow from financing activities:
Long -term borrowings under credit facilities (Note 3) 793,406 609,648 469,000
Repayments of long -term debt (748,017 ) (1,241,582) (407,086 )
Borrowings under senior notes — 598,878 —
Settlement of interest rate swap agreements — (4,575) —
Payment of fees and expenses related to debt financing (6,975) (4,650) —
Purchase of treasury stock — — (293,625)
Proceeds from exercise of stock options 46,616 25,481 27,081
Excess tax benefits from stock -based payment arrangements 14,692 16,085 21,307
Distributions to and purchases of noncontrolling interests (24,588) (23,328) — (10,413) (10,279) (10,617 ) Dividend payments 64,721 (34,322) (193,940 ) Cash flow provided by (used in) financing activities (114) (5,159) (10,152 ) Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents 141,275 169,626 31,346 384,613 214,987 183,641 Cash and cash equivalents balance, beginning of year $ 525,888 $ 384,613 $ 214,987 Cash and cash equivalents balance, end of year
Cash paid during the year for:
Interest $ 40,124 $ 38,532 $ 39,180
Income taxes 133,068 117,122 124,929
See accompanying notes to consolidated financial statements.
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Notes to Consolidated Financial Statements (dollars in thousands, except per share data)
Note 1 -Summary of Significant Accounting Policies
Operations
Amphenol Corporation (“Amphenol” or the “Company”) operates two business segments which consist of manufacturing and selling interconnect products and assemblies, and manufacturing and selling cable products. The Company sells its products to customer locations worldwide.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include the fair value of acquired assets and liabilities, stock- based compensation, pension obligations, gains or losses on derivative instruments, accounting for income taxes and other matters that affect the consolidated financial statements and related disclosures. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and liquid investments with an original maturity of less than three months. The carrying amounts approximate fair values of those instruments, the majority of which are in non-U.S. accounts.
Accounts Receivable
Accounts receivable is stated at net realizable value. The Company regularly reviews accounts receivable balances and adjusts the carrying value as necessary whenever events or circumstances indicate the carrying value may not be recoverable.
Inventories
Inventories are stated at the lower of standard cost, which approximates average cost, or market. The principal components of cost included in inventories are materials, direct labor and manufacturing overhead. The Company regularly reviews inventory quantities on hand and evaluates the realizability of inventories and adjusts the carrying value as necessary based on forecasted product demand.
Depreciable Assets
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the respective asset lives determined on a composite basis by asset group or on a specific item basis using the estimated useful lives of such assets which range from 3 to 12 years for machinery and equipment and 20 to 40 years for buildings. Leasehold building improvements are depreciated over the shorter of the lease term or estimated useful life. It is the Company’s policy to periodically review fixed asset lives. Depreciation expense is included in both costs of sales and selling, general and administrative expense in the Consolidated Statements of Income based on the specific categorization and use of the underlying asset being depreciated. In accordance with the Property, Plant and Equipment topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), the Company assesses the impairment of property and equipment subject to depreciation, whenever events or changes in circumstances indicate the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review, include significant changes in the manner of our use of the asset, significant changes in historical trends in operating performance, significant changes in projected operating performance, and significant negative economic trends. There have been no significant impairments recorded as a result of such reviews during any of the periods presented.
Goodwill
The Company performs its annual evaluation for the impairment of goodwill for the Company’s reporting units in accordance
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Table of Contents with ASC topic Intangibles — Goodwill and Other as of each June 30. The Company has defined its reporting units as the two reportable business segments “Interconnect Products and Assemblies” and “Cable Products”, as the components of these reportable business segments have similar economic characteristics. Goodwill impairment for each reporting unit is evaluated using a two-step approach requiring the Company to determine the fair value of the reporting unit and to compare that to the carrying value of the reporting unit. If the carrying value exceeded the fair value, the goodwill of the reporting unit would be potentially impaired and a second step of testing would be performed to measure the impairment loss. The second step of the goodwill impairment test would require the comparison of the implied fair value of reporting unit goodwill to the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds its fair value, an impairment loss would be recognized in an amount equal to the excess. The second step of the goodwill impairment test was not required during any of the periods presented in the accompanying Consolidated Financial Statements. As of June 30, 2010, and for each previous year in which the impairment test has been performed, the fair market value of the Company’s reporting units exceeded their carrying values and therefore no impairment was recognized.
Intangible Assets
Intangible assets are included in other long-term assets and consist primarily of proprietary technology, customer relationships and license agreements and are amortized over the estimated periods of benefit. The Company assesses the impairment of long-lived assets, other than goodwill, including identifiable intangible assets subject to amortization, whenever significant events or significant changes in circumstances indicate the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review, include significant changes in the manner of our use of the asset, changes in historical trends in operating performance, significant changes in projected operating performance, and significant negative economic trends. There have been no impairments recorded during any of the periods presented as a result of such reviews.
Revenue Recognition
The Company’s primary source of revenues is from product sales to its customers.
Revenue from sales of the Company’s products is recognized at the time the goods are delivered and title passes, provided the earning process is complete and revenue is measurable. Delivery is determined by the Company’s shipping terms, which are primarily FOB shipping point. Revenue is recorded at the net amount to be received after deductions for estimated discounts, allowances and returns. These estimates and reserves are determined and adjusted as needed based upon historical experience, contract terms and other related factors.
The shipping costs for the majority of the Company’s sales are paid directly by the Company’s customers. In the broadband communication market (approximately 8% of consolidated sales), the Company pays for shipping costs to the majority of its customers. Shipping costs are also paid by the Company for certain customers in the Interconnect Products and Assemblies segment. Amounts billed to customers related to shipping costs are immaterial and are included in net sales. Shipping costs incurred to transport products to the customer which are not reimbursed are included in selling, general and administrative expense.
Retirement Pension Plans
Costs for retirement pension plans include current service costs and amortization of prior service costs over periods of up to thirty years. It is the Company’s policy to fund current pension costs taking into consideration minimum funding requirements and maximum tax deductible limitations. The expense of retiree medical benefit programs is recognized during the employees’ service with the Company as well as amortization of a transition obligation previously recognized. The recognition of expense for retirement pension plans and medical benefit programs is significantly impacted by estimates made by management such as discount rates used to value certain liabilities, expected return on assets and future health care costs. The Company uses third-party specialists to assist management in appropriately measuring the expense associated with pension and other post-retirement plan benefits.
Stock Options
The Company accounts for its option awards based on the fair value of the award at the date of grant in accordance with the Equity and Compensation topics of the ASC and recognizes compensation expense in the accompanying Consolidated Statements of Income over the service period that the awards are expected to vest. The Company recognizes expense for stock-based compensation with graded vesting on a straight-line basis over the vesting period of the entire award. Stock-based compensation expense includes the estimated effects of forfeitures, and estimates of forfeitures will be adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ from such estimates. Changes in estimated forfeitures will be recognized
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Table of Contents in the period of change and will also impact the amount of expense to be recognized in future periods. The Company’s income before income taxes was reduced by $25,385, $20,240 and $16,316 for the years ended December 31, 2010, 2009 and 2008, respectively, related to the expense incurred for stock-based compensation plans, which is included in selling, general and administrative expenses on the accompanying Consolidated Statements of Income.
The fair value of stock options has been estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
2010 2009 2008
Risk free interest rate 2.2% 2.2% 3.2%
Expected life 5.6 years 5.6 years 5.5 years
Expected volatility 33.0% 34.0 % 28.0%
Expected dividend yield 0.1% 0.2% 0.1%
Income Taxes
Deferred income taxes are provided for revenue and expenses which are recognized in different periods for income tax and financial statement purposes. Deferred income taxes are not provided on undistributed earnings of foreign affiliated companies which are considered to be permanently invested. It is not practicable to estimate the amount of tax that might be payable if undistributed earnings were to be repatriated. Deferred tax assets are regularly assessed for recoverability based on both historical and anticipated earnings levels and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. The tax effects of an uncertain tax position taken or expected to be taken in income tax returns are recognized only if it is “more likely than not” to be sustained on examination by the taxing authorities, based on its technical merits as of the reporting date. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes.
Foreign Currency Translation
The financial position and results of operations of the Company’s significant foreign subsidiaries are measured using local currency as the functional currency. Assets and liabilities of such subsidiaries have been translated at current exchange rates and related revenues and expenses have been translated at weighted average exchange rates. The aggregate effect of translation adjustments is included as a component of accumulated other comprehensive income (loss) within equity. Transaction gains and losses related to operating assets and liabilities are included in selling, general and administrative expense, and those related to non-operating assets and liabilities are included in other expense, net.
Research and Development
Costs incurred in connection with the development of new products and applications are expensed as incurred. Research and development expenses for the creation of new and improved products and processes were $77,570, $63,978 and $68,058, for the years 2010, 2009 and 2008, respectively.
Environmental Obligations
The Company recognizes the potential cost for environmental remediation activities when site assessments are made, remediation efforts are probable and related amounts can be reasonably estimated; potential insurance reimbursements are not recorded. The Company assesses its environmental liabilities as necessary and appropriate through regular reviews of contractual commitments, site assessments, feasibility studies and formal remedial design and action plans.
Net Income per Common Share
Basic income per common share is based on the net income attributable to Amphenol Corporation for the year divided by the weighted average number of common shares outstanding. Diluted income per common share assumes the exercise of outstanding, dilutive stock options using the treasury stock method.
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Derivative Financial Instruments
Derivative financial instruments, which are periodically used by the Company in the management of its interest rate and foreign currency exposures, are accounted for as cash flow hedges. Gains and losses on derivatives designated as cash flow hedges resulting from changes in fair value are recorded in accumulated other comprehensive income, and subsequently reflected in net income in a manner that matches the timing of the actual income or expense of such instruments with the hedged transaction.
Adoption of New Accounting Pronouncements
In June 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-16, Accounting for Transfers of Financial Assets (“ASU 2009-16”). ASU 2009-16 limits the circumstances in which transferred financial assets can be derecognized and requires enhanced disclosures regarding transfers of financial assets and a transferor’s continuing involvement with transferred financial assets. The Company adopted ASU 2009-16 on January 1, 2010. As a result, the Company no longer accounts for the value of the outstanding undivided interest held by investors under the Company’s Receivables Securitization Facility as a sale. In addition, transfers of receivables occurring on or after January 1, 2010 are reflected as debt issued in the Company’s Consolidated Statements of Cash Flow (resulting in a reduction of cash flow provided by operating activities, and increase in cash provided by financing activities, of $82,000 for the year ended December 31, 2010) and recognized as long-term debt in the Company’s Consolidated Balance Sheets. Refer to the discussion of the Company’s Receivables Securitization Facility in Note 3.
In January 2010, the FASB issued new guidance to enhance disclosure requirements related to fair value measurements by requiring certain new disclosures and clarifying certain existing disclosures. This new guidance requires disclosure of the amounts of significant transfers in and out of Level 1 and Level 2 recurring fair value measurements and the reasons for the transfers. In addition, the new guidance requires additional information related to activities in the reconciliation of Level 3 fair value measurements. The new guidance also expands the disclosures related to the disaggregation of assets and liabilities and information about inputs and valuation techniques. The new guidance related to Level 1 and Level 2 fair value measurements is effective for interim and annual reporting periods beginning after December 15, 2009 and the new guidance related to Level 3 fair value measurements is effective for fiscal years beginning after December 15, 2010 and interim periods during those fiscal years. Effective January 1, 2010, the Company adopted the new guidance related to Level 1 and Level 2 fair value measurements. The Company’s adoption of the new guidance did not have a material impact on its consolidated financial statements and related notes. Refer to the Fair Value Measurements disclosure in Note 5.
Note 2 —Reclassifications
In 2010, the Company has changed the presentation of the Consolidated Balance Sheets to separately present short-term investments, which had been included in other current assets in prior years. In addition, the Company changed the presentation of the Consolidated Statements of Cash Flow to present borrowings and repayments under its revolving credit facilities and purchases and sales/maturities of short-term investments on a gross basis, which had been presented on a net basis in prior years. As a result, amounts in the 2009 Consolidated Balance Sheets as well as the amounts in the 2009 and 2008 Consolidated Statements of Cash Flow have been reclassified to conform with the current year presentation.
Note 3 —Long-Term Debt
Long-term debt consists of the following:
December 31, Average Interest Rate at December 31, 2010 Maturity 2010 2009
4.75% Senior Notes due November 2014 (less unamortized discount of $860
and $1,085 at December 31, 2010 and December 31, 2009, respectively) 4.75% 2014 $ 599,140 $ 598,915
Revolving Credit Facility 2.70% 2014 103,600 150,000
Receivables Securitization Facility 1.47% 2013 92,000 — 5,252 4,534 Notes payable to foreign banks and other debt 6.43% 2011 -2018
799,992 753,449 Less current portion 352 399
$ 799,640 $ 753,050 Total long -term debt
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Senior Notes
In November 2009, the Company issued $600,000 principal amount of its unsecured 4.75% Senior Notes due November 2014 (the “Senior Notes ”) at 99.813% of their face value. Net proceeds from the sale of the Senior Notes were used to repay borrowings under the Company’s senior credit facility. In addition, the Company incurred fees and expenses related to the Senior Notes of $4.7 million, which were deferred and are being amortized using the effective interest method over the term of the Senior Notes as interest expense. Interest on the Senior Notes is payable semi-annually on May 15 and November 15 of each year to the holders of record as of the immediately preceding May 1 and November 1. The Company may, at its option, redeem some or all of the Senior Notes at any time by paying a make-whole premium, plus accrued and unpaid interest, if any, to the date of repurchase. The Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. The fair value of the Senior Notes at December 31, 2010 was approximately $638,700 based on recent bid prices.
Revolving Credit Facility
In August 2010, the Company refinanced its senior credit facility. The new $1,000,000 unsecured revolving credit facility (the “Revolving Credit Facility”) matures in August 2014. The net proceeds from the refinancing were used to repay $247,000 of borrowings outstanding under the Company’s previous senior unsecured credit facility. At December 31, 2010, borrowings and availability under the facility were $103,600 and $896,400, respectively. The Company’s interest rate on borrowings under the Revolving Credit Facility is LIBOR plus 225 basis points. The Company also pays certain annual agency and commitment fees. The Revolving Credit Facility requires that the Company satisfy certain financial covenants. At December 31, 2010, the Company was in compliance with the financial covenants under the Revolving Credit Facility. In connection with the refinancing, the Company incurred one-time expenses for the early extinguishment of debt of $542 relating to unamortized deferred debt issue costs. These costs are included in interest expense on the accompanying Consolidated Statements of Income. The Company also paid fees and expenses of $6,900 in conjunction with the new Revolving Credit Facility, which are deferred and amortized into interest expense through its maturity.
Receivables Securitization Facility
A subsidiary of the Company has entered into the Receivables Securitization Facility with a financial institution whereby the subsidiary can sell an undivided interest of up to $100,000 in a designated pool of qualified accounts receivable. The Company services, administers and collects the receivables on behalf of the purchaser. The Receivables Securitization Facility includes certain covenants and provides for various events of termination and expires in May 2013. In accordance with previous accounting guidance, the receivables sold under the Receivables Securitization Facility were accounted for off-balance sheet as a sale of receivables. As discussed in Note 1, the Company adopted ASU 2009- 16 on January 1, 2010. As a result, the Company no longer accounts for the value of the outstanding undivided interest held by investors under the Receivables Securitization Facility as a sale. In addition, transfers of receivables occurring on or after January 1, 2010 are reflected as debt issued in the Company’s Consolidated Statements of Cash Flow, and the value of the outstanding undivided interest held by investors at December 31, 2010 is accounted for as a secured borrowing and is included in the Company’s Consolidated Balance Sheets as long-term debt. At December 31, 2010, borrowings under the Receivables Securitization Facility were $92,000. At December 31, 2009, $82,000 of receivables were sold and were therefore not reflected in accounts receivable and long-term debt in the accompanying Consolidated Balance Sheets. Additionally, in accordance with ASU 2009-16, fees incurred in connection with the Receivables Securitization Facility, which are included in other expense, net for prior periods, are now included in interest expense. Such fees were approximately $1,500 for both 2010 and 2009.
The carrying value of borrowings under the Company’s Revolving Credit Facility and Receivables Securitization Facility approximated their fair value at December 31, 2010.
The maturity of the Company’s debt over each of the next five years ending December 31 and thereafter, is as follows:
2011 $ 352
2012 271
2013 92,277
2014 702,973
2015 3,279 Thereafter 840
$ 799,992
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Note 4 —Contingent Consideration
In connection with an acquisition made during the year ended December 31, 2010, the Company will be required to make contingent consideration payments to the sellers in 2011 based on certain 2010 profitability levels of the acquired company, and the Company may be required to make contingent consideration payments to the sellers in 2012, based on certain 2011 profitability levels of the acquired company, up to a maximum undiscounted amount of $59,000. The Company determined the fair value of the liability for these contingent consideration payments based on a probability-weighted approach. The probability-weighted approach resulted in a scenario that the Company believes is most likely and will result in the maximum $59,000 contingent consideration being paid in accordance with the purchase agreement entered into in connection with the acquisition, of which $40,000 would be paid in 2011 and $19,000 in 2012. These amounts were discounted to their fair value at December 31, 2010. The fair value of the first contingent consideration payment due in 2011 ($39,615) is included in accrued acquisition-related obligations, and the fair value of the second contingent consideration payment due in 2012 ($18,092) is included in other long-term liabilities on the accompanying Consolidated Balance Sheets.
Note 5 —Fair Value Measurements
The Company follows the framework within the Fair Value Measurements and Disclosures topic of the ASC, which requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. These standards establish market or observable inputs as the preferred source of values. Assumptions based on hypothetical transactions are used in the absence of market inputs. The Company does not have any non-financial instruments accounted for at fair value on a recurring basis.
The valuation techniques required are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1 Quoted prices for identical instruments in active markets.
Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Significant inputs to the valuation model are unobservable.
The Company believes that the assets or liabilities subject to such standards with fair value disclosure requirements are short-term investments, which are independently valued using market observable Level 1 inputs; derivative instruments , which represent interest rate swaps which expired in July 2010, which are independently valued using market observable Level 2 inputs including interest rate yield curves; acquired identifiable intangible assets of $44,100 (Note 13) which are independently valued using the excess earnings method and Level 3 unobservable inputs within the fair value hierarchy and contingent consideration payments (Note 4) of $56,668 which are valued using the income approach and Level 3 unobservable inputs within the fair value hierarchy. The primary level 3 inputs used to value the acquired intangible assets was the estimated free cash flow to be generated by the underlying assets over their remaining useful life which were then discounted to their present value. To distinguish between the cash flows attributable to the underlying asset and cash flows attributable to other contributory assets, adjustments were made to provide a fair return to other assets. The primary Level 3 inputs used to value the contingent consideration payments were probability weighted payout projections and discount rates. The Company’s Level 1 short-term investments consist primarily of certificates of deposit with original maturities of twelve months or less. As of December 31, 2010 and 2009, the fair values of short-term investments were $98,341 and $37,770, respectively. As of December 31, 2010 and 2009, the fair values of derivative instruments were $0 and $3,664, respectively, which were included in other accrued expenses (Note 6) in the accompanying Consolidated Balance Sheets. The impact of the credit risk related to these financial assets is immaterial.
The Company does not have any other significant financial or non-financial assets and liabilities that are measured at fair value on a non- recurring basis.
Note 6 - Derivative Instruments
The Company is exposed to certain risks related to its ongoing business operations. The primary risk managed by using derivative instruments is interest rate risk. Forward interest rate swap agreements are entered into to manage interest rate risk associated with the Company’s variable-rate borrowings.
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Derivative instruments are required to be recognized as either assets or liabilities at fair value in the Consolidated Balance Sheets. The Company designates forward interest rate swap agreements on variable-rate borrowings as cash flow hedges. All of the Company’s interest rate swap agreements expired in July 2010.
As of December 31, 2010 and 2009, the Company had the following derivative activity related to cash flow hedges:
Fair Value Liabilities
Balance Sheet Location December 31, 2010 December 31, 2009
Derivatives designated as cash flow hedges: $ — $ 3,664 Interest rate contracts Other accrued expenses $ — $ 3,664 Total derivatives designated as cash flow hedging instruments
For the years ended December 31, 2010 and 2009, a gain of $2,363 and $13,354, respectively, was recognized in accumulated other comprehensive loss associated with interest rate contracts. Approximately $3,700 was reclassified from accumulated other comprehensive loss to interest expense in the accompanying Consolidated Statements of Income during the year ended December 31, 2010.
Note 7 —Income Taxes
The components of income before income taxes and the provision for income taxes are as follows:
Year Ended December 31,
2010 2009 2008
Income before income taxes:
United States $ 225,334 $ 98,170 $ 179,292 438,354 348,357 413,288 Foreign $ 663,688 $ 446,527 $ 592,580
Current provision:
United States $ 77,590 $ 38,621 $ 63,052 79,607 89,969 100,744 Foreign $ 157,197 $ 128,590 $ 163,796
Deferred provision (benefit):
United States $ 3,020 $ (2,295) $ 2,564 1,058 (6,984) (3,357) Foreign 4,078 (9,279) (793)
$ 161,275 $ 119,311 $ 163,003 Total provision for income taxes
At December 31, 2010, the Company had $57,214 and $3,447 of foreign tax loss and credit carryforwards, and state tax loss and credit carryforwards net of federal benefit, respectively, of which $31,317 and $211, respectively, expire or will be refunded at various dates through 2025 and the balance can be carried forward indefinitely.
A valuation allowance of $20,091 and $13,816 at December 31, 2010 and 2009, respectively, has been recorded which relates to the foreign net operating loss carryforwards and state tax credits. The net change in the valuation allowance for deferred tax assets was an increase of $6,275 and $3,870 in 2010 and 2009, respectively, which was related to foreign net operating loss and foreign and state credit carryforwards.
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Differences between the U.S. statutory federal tax rate and the Company’s effective income tax rate are analyzed below:
Year Ended December 31,
2010 2009 2008
U.S. statutory federal tax rate 35.0 % 35.0 % 35.0 %
State and local taxes .8 .9 .6
Foreign earnings and dividends taxed at different rates (11.5 ) (9.6 ) (8.4 )
Valuation allowance (1.0 ) 1.0 .4 1.0 (.6 ) (.1 ) Other 24.3 % 26.7 % 27.5 % Effective tax rate
The 2010 tax rate reflects a reduction in tax expense of $20,700 relating primarily to reserve adjustments from the favorable settlement of certain international tax positions and the completion of prior year audits. The 2009 tax rate reflects a reduction in tax expense of $3,600 for tax reserve adjustments relating to the completion of the audit of certain of the Company’s prior year tax returns. Excluding these adjustments, the Company’s effective tax rate for 2010 and 2009 was 27.4% and 27.5%, respectively.
The Company’s deferred tax assets and liabilities included in Other Current Assets, Other Long-Term Assets and in Other Long-Term Liabilities in the accompanying Consolidated Balance Sheets, excluding the valuation allowance, comprised the following:
December 31,
2010 2009
Deferred tax assets relating to:
Accrued liabilities and reserves $ 15,192 $ 14,075
Operating loss and tax credit carryforwards 18,604 16,758
Pensions, net 38,184 37,278
Interest rate derivatives — 1,355
Depreciation 2,637 (1,591 )
Inventory reserves 17,426 13,724 22,942 18,463 Employee benefits $ 114,985 $ 100,062
Deferred tax liabilities relating to: $ 59,922 $ 45,657 Goodwill
At December 31, 2010 and 2009, the amount of the liability for unrecognized tax benefits, including penalties and interest, which if recognized would impact the effective tax rate, was approximately $23,271 and $40,208.
A tabular reconciliation of the gross amounts of unrecognized tax benefits excluding interest and penalties at the beginning and end of the year for both 2010 and 2009 is as follows:
2010 2009
Unrecognized tax benefits as of January 1 $ 35,528 $ 31,272
Gross increases and gross decreases for tax positions in prior periods 2,036 4,576
Gross increases - current period tax position 2,968 6,027
Settlements (11,880) — (6,092) (6,347) Lapse of statute of limitations $ 22,560 $ 35,528 Unrecognized tax benefits as of December 31
The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the year ended December 31, 2010, the provision for income taxes included a net benefit of $4,566 in estimated interest and penalties. As of December 31, 2010, the liability for unrecognized tax benefits included $2,591 for tax-related interest and penalties.
The Company is present in over fifty taxable jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years
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2007 and after. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of December 31, 2010, the amount of the liability for unrecognized tax benefits, which if recognized would impact the effective tax rate, was $23,271, the majority of which is included in other long-term liabilities in the accompanying Consolidated Balance Sheets. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statute of limitations. Based on information currently available, management anticipates that over the next twelve month period, audit activity could be completed and statutes of limitations may close relating to existing unrecognized tax benefits of $4,827.
Note 8 —Equity
Stock-Based Compensation:
In May 2009, the Company adopted the 2009 Stock Purchase and Option Plan (the “2009 Option Plan”) for Key Employees of the Company and its subsidiaries. The Company currently also maintains the 2000 Stock Purchase and Option Plan (the “2000 Option Plan”). As of April 2009, all previously awarded options under the Company’s 1997 Option Plan (the “1997 Option Plan”) had been exercised or forfeited, and the 1997 Option Plan has been terminated per the terms of the 1997 Option Plan. The 2000 Option Plan and the 2009 Option Plan authorize the granting of additional stock options by a committee of the Company’s Board of Directors, although the Board of Directors has indicated that it does not intend to make any additional option grants under the 2000 Option Plan. As of December 31, 2010, there were 10,166,800 shares of common stock available for the granting of additional stock options under the 2009 Option Plan. Options granted under the 2000 Option Plan and the 2009 Option Plan vest ratably over a period of five years and are exercisable over a period of ten years from the date of grant.
In 2004, the Company adopted the 2004 Stock Option Plan for Directors of Amphenol Corporation (the “Directors Option Plan”). The Directors Option Plan is administered by the Company’s Board of Directors. As of December 31, 2010, the maximum number of shares of common stock available for the granting of additional stock options under the Directors Option Plan was 140,000. Options granted under the Directors Option Plan vest ratably over a period of three years and are exercisable over a period of ten years from the date of grant.
The grant-date fair value of each option grant under the 2000 Option Plan, the 2009 Option Plan and the Directors Option Plan is estimated using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected share price volatility was calculated based on the historical volatility of the stock of Amphenol Corporation and implied volatility derived from related exchange traded options. The average expected life was based on the contractual term of the option and expected employee exercise and historical post-vesting employment termination experience. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The expected annual dividend per share is based on the Company’s dividend rate.
Stock-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ or are expected to differ from such estimates. Changes in estimated forfeitures are recognized in the period of change and impact the amount of expense to be recognized in future periods.
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Stock option activity for 2008, 2009 and 2010 was as follows:
Weighted
Average
Weighted Remaining Aggregate
Average Contractual Intrinsic Options Exercise Price Term (in years) Value
Options outstanding at December 31, 2007 11,279,898 $ 19.72 6.55
Options granted 2,142,700 45.93
Options exercised (2,063,881 ) 13.12 (128,880 ) Options forfeited 28.94
Options outstanding at December 31, 2008 11,229,837 25.82 6.69
Options granted 3,736,500 32.01
Options exercised (2,029,874 ) 12.55 (232,160 ) Options forfeited 35.89
Options outstanding at December 31, 2009 12,704,303 29.58 7.16
Options granted 2,602,500 43.00
Options exercised (2,331,429 ) 19.99 (269,050 ) Options forfeited 37.18 12,706,324 Options outstanding at December 31, 2010 33.93 7.18 $ 239,534
Vested and non -vested expected to vest at December 31, 2010 11,607,463 33.53 7.08 $ 223,387
Exercisable at December 31, 2010 5,082,348 $ 28.05 5.59 $ 125,695
A summary of the status of the Company’s non-vested options as of December 31, 2010 and changes during the year then ended is as follows:
Weighted Average Fair Options Value at Grant Date
Non -vested options at December 31, 2009 7,509,986 $ 11.45
Options granted 2,602,500 14.69 (1)
Options vested (2,238,660 ) 10.59 (249,850 ) Options forfeited 12.31 7,623,976 Non -vested options at December 31, 2010 $ 12.78
(1) The weighted-average fair value at the grant date of options granted during 2009 and 2008 was $11.12 and $14.79, respectively.
During the years ended December 31, 2010 and 2009, the following activity occurred under the Company’s option plans:
2010 2009
Total intrinsic value of stock options exercised $ 67,841 $ 56,900
Total fair value of stock options vested 23,714 17,360
On December 31, 2010 the total compensation cost related to non-vested options not yet recognized is approximately $70,753, with a weighted average expected amortization period of 3.45 years.
Stock Repurchase Program:
The Company had an open-market stock repurchase program (the “Program”) to repurchase up to 20,000,000 shares of its common stock which expired on January 31, 2010. The Company did not purchase any shares of its common stock under the Program or otherwise in 2010. In January 2011, the Company announced that its Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to 20,000,000 shares of its common stock during the three year period ending January 31, 2014. The price and timing of any such purchases will depend on factors such as levels of cash generation
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Dividends:
The Company pays a quarterly dividend on its common stock of $.015 per share and paid such quarterly dividends in 2009 and 2010. The Company paid its fourth quarterly dividend in the amount of $2,632 or $.015 per share on January 5, 2011 to shareholders of record as of December 15, 2010. Cumulative dividends declared during 2010 and 2009 were $10,449 and $10,307, respectively. Total dividends paid in 2010 were $10,413, including those declared in 2009 and paid in 2010, and total dividends paid during 2009 were $10,279, including those declared in 2008 and paid in 2009.
Accumulated Other Comprehensive Loss:
Balances of related after-tax components comprising accumulated other comprehensive loss included in equity at December 31, 2008, 2009 and 2010 are as follows:
Accumulated Foreign Currency Revaluation of Defined Benefit Other Comprehensive Translation Interest Rate Plan Liability Income Adjustment Derivatives Adjustment (Loss)
Balance at January 1, 2008 $ 36,937 $ (7,026 ) $ (73,555 ) $ (43,644 )
Translation adjustments (36,589 ) — — (36,589 )
Revaluation of interest rate derivatives, net of tax of $5,104 — (8,691) — (8,691 ) Defined benefit plan liability adjustment, net of tax of $30,344 — — (51,667) (51,667 )
Balance at December 31, 2008 348 (15,717 ) (125,222) (140,591 )
Translation adjustments 23,793 — — 23,793
Revaluation of interest rate derivatives, net of tax of $7,843 — 13,354 — 13,354 — — 3,354 3,354 Defined benefit plan liability adjustment, net of tax of $1,970 Balance at December 31, 2009 24,141 (2,363 ) (121,868) (100,090 )
Translation adjustments 17,465 — — 17,465 Revaluation of interest rate derivatives, net of tax of $1,486 — 2,363 — 2,363
— — (4,495 ) (4,495 ) Defined benefit plan liability adjustment, net of tax of $2,639 Balance at December 31, 2010 $ 41,606 $ — $ (126,363) $ (84,757 )
Note 9 —Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income attributable to Amphenol Corporation by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing net income attributable to Amphenol Corporation by the weighted- average number of common shares and dilutive common shares outstanding, which relates to stock options. A reconciliation of the basic average common shares outstanding to diluted average common shares outstanding as of December 31 is as follows (dollars in thousands, except per share amounts):
2010 2009 2008
$ 496,405 $ 317,834 $ 419,151 Net income attributable to Amphenol Corporation shareholders
Basic average common shares outstanding 173,785,650 171,607,643 175,663,797 2,540,343 2,334,109 3,149,216 Effect of dilutive stock options
Dilutive average common shares outstanding 176,325,993 173,941,752 178,813,013
Earnings per share:
Basic $ 2.86 $ 1.85 $ 2.39
Diluted $ 2.82 $ 1.83 $ 2.34
Excluded from the computations above were anti-dilutive shares of 2,570,500, 2,062,700 and 5,939,750 for the years ended December 31, 2010, 2009 and 2008, respectively.
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Note 10 —Benefit Plans and Other Postretirement Benefits
The Company and certain of its domestic subsidiaries have two defined benefit pension plans (the “U.S. Plans”), which, subject to the curtailment described below, cover its U.S. employees and which represent the majority of the plan assets and benefit obligations of the aggregate defined benefit plans of the Company. The U.S. Plans’ benefits are generally based on years of service and compensation and are generally noncontributory. Certain U.S. employees not covered by the U.S. Plans are covered by defined contribution plans. Certain foreign subsidiaries have defined benefit plans covering their employees (the “International Plans”). The largest international pension plan, in accordance with local custom, is unfunded and had a projected benefit obligation of approximately $51,000 and $53,000 at December 31, 2010 and 2009, respectively. Total required contributions to be made during 2011 for the unfunded International Plans amount to $3,250. This amount, which is classified as other accrued expenses, and the obligations discussed above, are included in the accompanying Consolidated Balance Sheets and in the tables below.
The following is a summary of the Company’s defined benefit plans’ funded status as of the most recent actuarial valuations; for each year presented below, projected benefits exceed assets.
December 31,
2010 2009
Change in benefit obligation:
Benefit obligation at beginning of year $ 429,800 $ 373,894
Service cost 7,542 7,043
Interest cost 23,100 23,276
Plan participants ’ contributions 26 339
Plan amendments 5,452 346
Acquisitions — 6,050
Actuarial loss 17,675 33,525
Foreign exchange translation (3,947) 6,418 (22,327) (21,091) Benefits paid 457,321 429,800 Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year 268,177 222,632
Actual return on plan assets 29,878 48,163
Employer contributions 17,267 2,565
Plan participants ’ contributions 26 339
Acquisitions — 5,953
Foreign exchange translation 636 7,404 (19,454) (18,879) Benefits paid 296,530 268,177 Fair value of plan assets at end of year
$ 160,791 $ 161,623 Accrued benefit obligation
Year Ended December 31,
2010 2009 2008
Components of net pension expense:
Service cost $ 5,907 $ 7,043 $ 7,337
Interest cost 23,100 23,276 23,000
Expected return on plan assets (28,016) (25,026 ) (26,256 ) 17,051 11,238 8,106 Net amortization of actuarial losses
$ 18,042 $ 16,531 $ 12,187 Net pension expense
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Weighted-average assumptions used to determine benefit obligations at December 31,
Pension Benefits Other Benefits
2010 2009 2010 2009
Discount rate:
U.S. plans 5.20 % 5.75 % 4.85 % 5.40%
International plans 5.26 % 5.46 % n/a n/a
Expected long -term return on assets
U.S. plans 8.25 % 8.25 % n/a n/a
International plans 6.30 % 6.63 % n/a n/a
Rate of compensation increase:
U.S. plans 3.00 % 3.00 % n/a n/a
International plans 2.97 % 2.96 % n/a n/a
Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31,
Pension Benefits Other Benefits
2010 2009 2008 2010 2009 2008
Discount rate:
U.S. plans 5.75 % 6.25% 6.25% 5.4% 6.25% 6.25%
International plans 5.46 % 6.20% 5.57% n/a n/a n/a
Expected long -term return on assets:
U.S. plans 8.25 % 8.25% 9.25% n/a n/a n/a
International plans 6.63 % 6.74% 8.11% n/a n/a n/a
Rate of compensation increase:
U.S. plans 3.00 % 3.00% 3.00% n/a n/a n/a
International plans 2.96 % 2.43% 2.61% n/a n/a n/a
The pension expense for the U.S. Plans and the International Plans (the “Plans”) approximated $18,000, $16,500 and $12,200 in 2010, 2009 and 2008, respectively, and is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, detailed in the table above, including a weighted-average discount rate, rate of increase in future compensation levels and an expected long-term rate of return on the respective Plans’ assets.
The discount rate used by the Company for valuing pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations. The Company’s U.S. Plans comprised the majority of the accrued benefit obligation, pension assets and pension expense. The discount rate for the U.S. Plans was 5.2% at December 31, 2010 and 5.75% at December 31, 2009. Although future changes to the discount rate are unknown, had the discount rate increased or decreased by 50 basis points, the accrued benefit obligation would have decreased or increased by approximately $19,800.
The Company’s investment strategy for the Plans’ assets is to achieve a rate of return on plan assets equal to or greater than the average for the respective investment classification through prudent allocation and periodic rebalancing between fixed income and equity instruments. The current investment policy includes a strategy to maintain an adequate level of diversification, subject to portfolio risks. The target allocations for the U.S. Plans, which represent the majority of the Plans’ assets, are 60% equity and 40% fixed income. Short-term strategic ranges for investments are established within these long term target percentages. The Company invests in a diversified investment portfolio through various investment managers and evaluates its plan assets for the existence of concentration risks. As of December 31, 2010, there were no significant concentrations of risks in the Company’s defined benefit plan assets. The Company does not invest pension assets nor instructs investment managers to invest pension assets in Amphenol securities. The Plans may indirectly hold the Company’s securities as a result of external investment management in certain comingled funds. Such holdings would not be material relative to the Plans’ total assets.
In developing the expected long-term rate of return assumption for the U.S. Plans, the Company evaluated input from its external actuaries and investment consultants as well as long-term inflation assumptions. Projected returns by such consultants are based on broad equity and bond indices. The Company also considered its historical twenty-year compounded return of
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Table of Contents approximately 10%, which has been in excess of these broad equity and bond benchmark indices. As described above, the expected long-term rate of return on the U.S. Plans’ assets is based on an asset allocation assumption of 60% with equity managers, with an expected long-term rate of return of approximately 9% and 40% with fixed income managers, with an expected long-term rate of return of approximately 7%. As of December 31, 2010, the asset allocation was 59% with equity managers and 36% with fixed income managers and 5% in cash. As of December 31, 2009, the asset allocation was 59% with equity managers and 38% with fixed income managers and 3% in cash. The Company believes that the long-term asset allocation on average will approximate 60% with equity managers and 40% with fixed income managers. The Company regularly reviews the actual asset allocation and periodically rebalances investments to its targeted allocation when considered appropriate. Based on this methodology, the Company’s expected long-term rate of return assumption to determine the accrued benefit obligation of the U.S. Plans at both December 31, 2010 and 2009 is approximately 8.25%.
Effective January 1, 2007, the Company effected a curtailment related to one of the U.S. Plans, which resulted in no additional benefits being credited to salaried employees who had less than 25 years of service with the Company, or who had not attained age 50 and who had less than 15 years of service with the Company. For affected employees, the curtailment in additional U.S. Plan benefits was replaced with a Company match defined contribution plan to which the Company contributed approximately $2,200 and $2,000 in 2010 and 2009, respectively.
The Company’s plan assets are reported at fair value and classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The process requires judgment and may have effect on the placement of the plan assets within the fair value measurement hierarchy. The fair values of the Company’s pension plans’ assets at December 31, 2010 by asset category are as follows (refer to Note 5 for definitions of Level 1, 2 and 3 inputs):
Fair Value Measurements at December 31, 2010
Significant Quoted Prices in Active Observable Significant Markets for Identical Inputs Unobservable Inputs Total Assets (Level 1) (Level 2) (Level 3)
Asset Category
Equity securities:
U.S. securities $ 84,675 $ 77,107 $ 7,568 $ — 91,754 50,983 40,771 — International securities
176,429 128,090 48,339 —
Fixed income securities:
U.S. securities 75,165 56,707 18,458 — 31,531 — 31,531 — International securities
106,696 56,707 49,989 —
13,405 13,405 — — Cash and cash equivalents $ 296,530 $ 198,202 $ 98,328 $ — Total
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Fair Value Measurements at December 31, 2009
Significant Quoted Prices in Active Observable Significant Markets for Identical Inputs Unobservable Inputs Total Assets (Level 1) (Level 2) (Level 3)
Asset Category
Equity securities:
U.S. companies $ 74,238 $ 74,183 $ 55 $ —
International companies 39,759 39,759 — — 11,582 11,582 — — Emerging markets
125,579 125,524 55 —
Fixed income securities:
U.S. securities 60,130 45,100 15,030 — 24,683 24,683 — — International securities
84,813 69,783 15,030 —
Pooled foreign separate accounts 30,759 — 30,759 —
Cash and cash equivalents 26,882 26,882 — — 144 — — 144 Other $ 268,177 $ 222,189 $ 45,844 $ 144 Total
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Total Other
Beginning balance as of December 31, 2009 $ 144 $ 144 (144) (144) Purchases, (sales and settlements) $ — $ — Ending balance as of December 31, 2010
Equity securities consist primarily of publicly traded U.S and Non-US equities. Publicly traded securities are valued at the last trade or closing price reported in the active market in which the individual securities are traded. Certain equity securities held in commingled funds are valued at unitized net asset value (“NAV”) based on the fair value of the underlying net assets owned by the funds.
Fixed income securities consist primarily of government securities and corporate bonds. They are valued at the closing price in the active market or using quotes obtained from brokers/dealers or pricing services. Certain fixed income securities held within commingled funds are valued using NAV as determined by the custodian of the funds based on the fair value of the underlying net assets of the funds.
The Company also has an unfunded Supplemental Employee Retirement Plan (“SERP”), which provides for the payment of the portion of annual pension which cannot be paid from the retirement plan as a result of regulatory limitations on average compensation for purposes of the benefit computation. The obligation related to the SERP is included in the accompanying Consolidated Balance Sheets and in the tables above.
As of December 31, 2010, the amounts for unrecognized net loss, net prior service cost and net transition asset in accumulated
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The Company made cash contributions to the Plans of $17,300 and $2,600 in 2010 and 2009, respectively, and estimates that, based on current actuarial calculations, it will make a cash contribution to the Plans in 2011 of approximately $19,400, the majority of which is to the U.S. Plans. Cash contributions in subsequent years will depend on a number of factors, including the investment performance of the Plan assets.
Benefit payments related to the Plans above, including those amounts to be paid out of Company assets and reflecting future expected service as appropriate, are expected to be as follows:
2011 $ 18,300
2012 18,600
2013 18,900
2014 19,900
2015 20,700
2016 -2020 118,400
The Company offers various defined contribution plans for U.S. and foreign employees. Participation in these plans is based on certain eligibility requirements. Effective January 1, 2007, in conjunction with the curtailment of certain additional U.S. Plan benefits for salaried employees described above, the Company began matching the majority of employee contributions to the U.S. defined contribution plans with cash contributions up to a maximum of 5% of eligible compensation. The Company provided matching contributions of approximately $2,200 for the year ended December 31, 2010.
The Company maintains self-insurance programs for that portion of its health care and workers compensation costs not covered by insurance. The Company also provides certain health care and life insurance benefits to certain eligible retirees through post-retirement benefit (OPEB) programs. The Company’s share of the cost of such plans for most participants is fixed, and any increase in the cost of such plans will be the responsibility of the retirees. The Company funds the benefit costs for such plans on a pay-as-you-go basis. Since the Company’s obligation for postretirement medical plans is fixed and since the accumulated postretirement benefit obligation (“APBO”) and the net postretirement benefit expense are not material in relation to the Company’s financial condition or results of operations, the Company believes any change in medical costs from that estimated will not have a significant impact on the Company. The discount rate used in determining the APBO was 4.85% and 5.40% at December 31, 2010 and 2009, respectively. Summary information on the Company’s OPEB programs is as follows:
December 31,
2010 2009
Change in benefit obligation:
Accrued benefit obligation at beginning of year $ 14,832 $ 14,627
Service cost 165 160
Interest cost 786 836
Paid benefits and expenses (2,003) (1,456 ) 5,315 665 Actuarial loss
$ 19,095 $ 14,832 Accrued benefit obligation at end of year
Year ended December 31,
2010 2009 2008
Components of net post -retirement benefit cost:
Service cost $ 165 $ 160 $ 173
Interest cost 786 836 888
Amortization of transition obligation 62 62 62 882 773 984 Net amortization of actuarial losses
$ 1,895 $ 1,831 $ 2,107 Net postretirement benefit cost
As of December 31, 2010, the amounts for unrecognized net loss, net prior service cost and net transition obligation in accumulated other comprehensive income related to OPEB programs are $13,335, $0, and $125 respectively. The estimated net loss, prior service cost and net transition obligation for the OPEB programs that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are expected to be $1,355, $0 and $62, respectively.
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Benefit payments for the OPEB plan, including those amounts to be paid out of Company assets and reflecting future expected service as appropriate are expected to be approximately $1,500 per year for the next ten years.
Note 11 —Leases
At December 31, 2010, the Company was committed under operating leases which expire at various dates. Total rent expense under operating leases for the years 2010, 2009, and 2008 was $31,948, $27,376 and $24,044, respectively.
Minimum lease payments under non-cancelable operating leases are as follows:
2011 $ 24,988
2012 19,421
2013 14,062
2014 9,091
2015 7,187 8,777 Beyond 2015 $ 83,526 Total minimum obligation
Note 12 — Business Combinations
Effective January 1, 2009, the Company adopted amended standards set forth in the Business Combinations topic of the ASC. Such standards are applicable to the Company for acquisitions completed on or after January 1, 2009 and establish principles and requirements for how the acquirer: (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (2) recognizes and measures the goodwill acquired in the business combination; and (3) determines what information to disclose in the financial statements. The principles in the Business Combinations topic that are most applicable to the Company are: (1) companies are required to expense transaction costs as incurred; (2) any subsequent adjustments to a recorded performance-based liability after its recognition are adjusted through income as opposed to goodwill; and (3) any noncontrolling interests are recorded at fair value.
During the year ended December 31, 2010, goodwill of approximately $165,000 attributable to the Interconnect Products and Assemblies segment was recognized related primarily to two businesses acquired during the period, which was not material to the Company either individually or in the aggregate.
Note 13 —Goodwill and Other Intangible Assets
As of December 31, 2010, the Company has goodwill totaling $1,533,299, of which $1,459,750 related to the Interconnect Products and Assemblies segment with the remainder related to the Cable Products segment. In 2010, goodwill and intangible assets increased by approximately $165,000 and $43,900, respectively, primarily as a result of two acquisitions in the Interconnect Products and Assemblies segment made during the year. In 2009, goodwill and intangible assets increased by approximately $136,000 and $34,000, respectively, primarily as a result of two acquisitions in the Interconnect Products and Assemblies segment made during the year. The Company is in the process of completing its analysis of fair value attributes of the assets acquired related to its 2010 acquisitions and anticipates that the final assessment of values will not differ materially from the preliminary assessment.
The Company does not have any intangible assets not subject to amortization other than goodwill. A summary of the Company’s amortizable intangible assets as of December 31, 2010 and 2009 is as follows:
December 31, 2010 December 31, 2009
Gross Carrying Accumulated Gross Carrying Accumulated Amount Amortization Amount Amortization
Customer relationships $ 104,100 $ 27,800 $ 60,000 $ 17,700
Proprietary technology 39,800 12,100 39,800 9,300
License agreements 6,000 3,800 6,000 3,100 9,200 7,800 9,400 7,400 Trade names and other $ 159,100 $ 51,500 $ 115,200 $ 37,500 Total
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Customer relationships, proprietary technology, license agreements and trade names and other amortizable intangible assets have weighted average useful lives of approximately 10 years, 14 years, 8 years and 15 years, respectively, for an aggregate weighted average useful life of approximately 11 years.
Intangible assets are included in other long-term assets in the accompanying Consolidated Balance Sheets. The aggregate amortization expense for the years ended December 31, 2010 and 2009 was approximately $14,000 and $12,400, respectively. Amortization expense estimated for each of the next five fiscal years is approximately $14,100 in each of 2011 and 2012, $10,800 in 2013, $8,900 in 2014 and $8,400 in 2015.
Note 14 —Reportable Business Segments and International Operations
The Company has two reportable business segments: (i) Interconnect Products and Assemblies and (ii) Cable Products. The Interconnect Products and Assemblies segment produces connectors and connector assemblies primarily for the communications, aerospace, industrial and automotive markets. The Cable Products segment produces coaxial and flat ribbon cable and related products primarily for communication markets, including cable television. The accounting policies of the segments are the same as those for the Company as a whole and are described in Note 1 herein. The Company evaluates the performance of business units on, among other things, profit or loss from operations before interest, headquarters’ expense allocations, stock-based compensation expense, income taxes, amortization related to certain intangible assets and nonrecurring gains and losses.
Interconnect Products and Assemblies Cable Products Tota l
2010 2009 2008 2010 2009 2008 2010 2009 2008
Net sales
—external $ 3,293,119 $ 2,566,578 $ 2,950,570 $ 260,982 $ 253,487 $ 285,901 $ 3,554,101 $ 2,820,065 $ 3,236,471
—intersegment 3,002 3,158 3,844 19,722 12,041 15,932 22,724 15,199 19,776
Depreciation and amortization 93,641 88,027 80,404 3,493 3,714 5,257 97,134 91,741 85,661
Segment operating income 725,946 505,772 648,605 35,472 38,751 32,535 761,418 544,523 681,140
Segment assets 2,253,638 1,623,556 1,490,695 83,961 77,319 87,113 2,337,599 1,700,875 1,577,808
Additions to property, plant and equipment 106,267 61,001 106,004 3,165 1,851 2,017 109,432 62,852 108,021
Reconciliation of segment operating income to consolidated income before income taxes:
2010 2009 2008
Segment operating income $ 761,418 $ 544,523 $ 681,140
Interest expense (40,741 ) (36,586 ) (39,627 )
Interest income 5,046 2,154 4,657
Early extinguishment of interest rate swaps — (4,575 ) —
Stock -based compensation expense (25,385 ) (20,240 ) (16,316 ) (36,650 ) (38,749 ) (37,274 ) Other costs, net $ 663,688 $ 446,527 $ 592,580 Consolidated income before income taxes
Reconciliation of segment assets to consolidated total assets:
2010 2009
Segment assets $ 2,337,599 $ 1,700,875
Goodwill 1,533,299 1,368,672 144,959 149,637 Other assets $ 4,015,857 $ 3,219,184 Consolidated total assets
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Geographic information:
Net sales Land and depreciable assets, net
2010 2009 2008 2010 2009
United States $ 1,258,167 $ 1,001,742 $ 1,159,349 $ 116,591 $ 109,229
China 851,626 611,877 557,243 131,805 98,730 1,444,308 1,206,446 1,519,879 118,600 124,916 Other International Locations $ 3,554,101 $ 2,820,065 $ 3,236,471 $ 366,966 $ 332,875 Total
Revenues by geographic area are based on the customer location to which the product is shipped.
Note 15 —Other Income (Expense), net
The components of other income (expense) are set forth below:
Year Ended December 31,
2010 2009 2008
Program fees on sale of accounts receivable (Note 3) $ — $ (1,539 ) $ (3,093)
Agency and commitment fees (1,656 ) (1,842) (1,785)
Interest income 5,046 2,154 4,657 682 2 189 Other $ 4,072 $ (1,225) $ (32 )
Note 16 —Commitments and Contingencies
The Company and its subsidiaries have been named as defendants in several legal actions in which various amounts are claimed arising from normal business activities. Although the amount of any ultimate liability with respect to such matters cannot be precisely determined, in the opinion of management, such matters are not expected to have a material effect on the Company’s financial condition or results of operations.
Certain operations of the Company are subject to environmental laws and regulations which govern the discharge of pollutants into the air and water, as well as the handling and disposal of solid and hazardous wastes. The Company believes that its operations are currently in substantial compliance with applicable environmental laws and regulations and that the costs of continuing compliance will not have a material effect on the Company’s financial condition or results of operations.
Subsequent to the acquisition of Amphenol from Allied Signal Corporation (“Allied Signal”) in 1987 (Allied Signal merged with Honeywell International Inc. in December 1999 (“Honeywell”)), the Company and Honeywell were named jointly and severally liable as potentially responsible parties in connection with several environmental cleanup sites. The Company and Honeywell jointly consented to perform certain investigations and remediation and monitoring activities at two sites, the “Route 8” landfill and the “Richardson Hill Road” landfill, and they were jointly ordered to perform work at another site, the “Sidney” landfill. All of the costs incurred relating to these three sites are currently reimbursed by Honeywell based on an agreement (the “Honeywell Agreement”) entered into in connection with the acquisition in 1987. Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company’s consolidated financial condition or results of operations. The environmental investigation, remediation and monitoring activities identified by the Company, including those referred to above, are covered under the Honeywell Agreement.
The Company also has purchase obligations related to commitments to purchase certain goods and services. At December 31, 2010, the Company had commitments to purchase $163,023 in 2011 and $2,996 in 2012.
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Note 17 —Selected Quarterly Financial Data (Unaudited)
Three Months Ended
March 31 June 30 September 30 December 31
2010
Net sales $ 770,954 $ 884,798 $ 948,463 $ 949,886
Gross profit 249,192 289,299 309,717 310,020
Operating income 145,044 175,625 189,134 190,554 (1) (2) (3) Net income attributable to Amphenol Corporation 98,353 129,671 137,268 131,113 (1) (2) (3) Net income per share —Basic 0.57 0.75 0.79 0.75 (1) (2) (3) Net income per share —Diluted 0.56 0.74 0.78 0.74
2009
Net sales $ 660,012 $ 685,184 $ 716,573 $ 758,296
Gross profit 206,379 214,150 224,393 241,632
Operating income 110,685 115,478 124,290 138,460 (4) (5) Net income attributable to Amphenol Corporation 74,410 74,870 80,915 87,639 (4) (5) Net income per share —Basic 0.43 0.44 0.47 0.51 (4) (5) Net income per share —Diluted 0.43 0.43 0.47 0.50
(1) Includes a one-time tax benefit related to reserve adjustments from the favorable settlement of certain international tax positions and the completion of prior year audits of approximately $1,900, or $0.01 per share.
(2) Includes a one-time tax benefit related to reserve adjustments from the favorable settlement of certain international tax positions and the completion of prior year audits of approximately $10,300, or $0.06 per share.
(3) Includes a one-time tax benefit related to reserve adjustments from the favorable settlement of certain international tax positions and the completion of prior year audits of approximately $8,500, or $0.05 per share.
(4) Includes a one-time tax benefit related to a reserve adjustment from the completion of the audit of certain of the Company’s prior year tax returns of approximately $3,600, or $0.02 per share.
(5) Includes a one-time charge for expenses incurred in the early extinguishment of interest rate swaps of approximately $4,600, less tax benefit of approximately $1,200, or $0.02 per share after taxes.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the period covered by this report. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded as of December 31, 2010 that these disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and such information is accumulated and communicated to management, including the Company’s principal executive and financial officers, to allow timely decisions regarding required disclosure. There has been no change in the Company’s internal controls over financial reporting during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
Management Report on Internal Control
Management is responsible for establishing and maintaining adequate internal control over financial reporting of Amphenol Corporation and its subsidiaries (the “Company”). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the internal control over financial reporting based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Framework. Based on that evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2010 as there were no material weaknesses identified.
Deloitte and Touche LLP has audited the Company’s internal control over financial reporting as of December 31, 2010 in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). Those standards require that Deloitte and Touche LLP plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Deloitte and Touche LLP has issued an unqualified report stating the Company has maintained effective internal control over financial reporting as of December 31, 2010.
February 28, 2011
Item 9B. Other Infor mation
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 10 with respect to the Directors of the Registrant is incorporated by reference from the Company’s definitive proxy statement which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 10 with respect to the Executive Officers of the Registrant is incorporated by reference from the Company’s definitive proxy statement which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Information regarding the Company’s Code of Business Conduct and Ethics is available on the Company’s website, www.amphenol.com. In addition a copy may be requested by writing to the Company’s World Headquarters at:
358 Hall Avenue P.O. Box 5030 Wallingford, CT 06492 Attention: Investor Relations
Item 11. Executive Compensation
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 11 is incorporated by reference from the Company’s definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 12 is incorporated by reference from the Company’s definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 13 is incorporated by reference from the Company’s definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Item 14. Principal Accountant Fees and Services
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 14 is incorporated by reference from the Company’s definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm 28
Consolidated Statements of Income —Years Ended December 31, 2010, 2009 and 2008 29
Consolidated Balance Sheets —December 31, 2010 and 2009 30
Consolidated Statements of Changes in Equity and Other Comprehensive Income —Years Ended December 31, 2010, 2009 and 2008 31
Consolidated Statements of Cash Flow —Years Ended December 31, 2010, 2009 and 2008 32
Notes to Consolidated Financial Statements 33
Management Report on Internal Control 53
(a)(2) Financial Statement Schedules for the Three Years Ended December 31, 2010
Schedule
II —Valuation and Qualifying Accounts 56
Schedules other than the above have been omitted because they are either not applicable or the required information has been disclosed in the consolidated financial statements or notes thereto.
(a)(3) Listing of Exhibits
See the Index of Exhibits immediately following the signature page of this annual report on Form 10-K.
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SCHEDULE II AMPHENOL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 2010, 2009 and 2008 (Dollars in thousands)
Balance at Charged to Balance at beginning cost and Additions end of of period expenses (Deductions) period
Receivable Reserves:
Year ended 2010 $ 18,785 $ 498 $ (4,337) $ 14,946
Year ended 2009 14,982 4,392 (589) 18,785
Year ended 2008 12,468 2,089 425 14,982
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Signatures
Pursuant to the requirements of Section 13 or 15d 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 in the Town of Wallingford, State of Connecticut on the 28th day of February, 2011.
AMPHENOL CORPORATION
/s/ R. Adam Norwitt
R. Adam Norwitt
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and as of the date indicated below.
Signature Title Date
/s/ R. Adam Norwitt President and Chief Executive Officer February 28, 2011
(Principal Executive Officer) R. Adam Norwitt
Executive Vice President and Chief February 28, 2011
/s/ Diana G. Reardon Financial Officer
(Principal Financial Officer and Diana G. Reardon
Principal Accounting Officer)
/s/ Martin H. Loeffler Chairman of the Board of Directors February 28, 2011
Martin H. Loeffler
/s/ Ronald P. Badie Director February 28, 2011
Ronald P. Badie
/s/ Stanley L. Clark Director February 28, 2011
Stanley L. Clark
/s/ Edward G. Jepsen Director February 28, 2011
Edward G. Jepsen
/s/ Andrew E. Lietz Director February 28, 2011
Andrew E. Lietz
/s/ John R. Lord Director February 28, 2011
John R. Lord
/s/ Dean H. Secord Director February 28, 2011
Dean H. Secord
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Index of Exhibits
3.1 By -Laws of the Company as of May 19, 1997 — NXS Acquisition Corp. By -Laws (filed as Exhibit 3.2 to the June 30, 1997 10 -Q).* 3.2 Amended and Restated Certificate of Incorporation, dated April 24, 2000 (filed as Exhibit 3.1 to the Form 8 -K filed on April 28, 2000).* 3.3 Certificate of Amendment of Amended and Restated Certificate of Incorporation, dated May 26, 2004 (filed as Exhibit 3.1 to the June 30, 2004 10 -Q).* 3.4 Second Certificate of Amendment of Amended and Restated Certificate of Incorporation, dated May 23, 2007 (filed as Exhibit 3.4 to the December 31, 2007 10 -K).* 4.1 Indenture, dated as of November 5, 2009, between Amphenol Corporation and the Bank of New York Mellon, as trustee (filed as Exhibit 4.1 to the Form 8 -K filed on November 5, 2009).* 4.2 Officers ’ Certificate, dated November 5, 2009, establishing the 4.75% Senior Notes due 2014 pursuant to the Indenture (filed as Exhibit 4.2 to the Form 8 -K filed on November 5, 2009).* 10.1 Receivables Purchase Agreement dated as of July 31, 2006 among Amphenol Funding Corp., the Company, Atlantic Asset Securitization LLC and Calyon New York Branch, as Agent (filed as Exhibit 10.10 to the June 30, 2006 10 -Q).* 10.2 Amendment to Receivables Purchase Agreement dated as of May 26, 2009 among Amphenol Funding Corp., the Company, Atlantic Asset Securitization LLC and Calyon New York Branch, as Agent (filed as Exhibit 10.2 to the June 30, 2009 10 -Q).* 10.3 Amendment to Receivables Purchase Agreement dated as of May 25, 2010 among Amphenol Funding Corp., the Company, Atlantic Asset Securitization LLC and Calyon New York Branch, as Agent (filed as Exhibit 10.2 to the June 30, 2010 10 -Q)* 10.4 Amendment to Receivables Purchase Agreement dated February 1, 2011 among Amphenol Funding Corp., the Company, Atlantic Asset Securitization LLC and Calyon New York Branch, as Agent. ** 10.5 Purchase and Sales Agreement dated as of July 31, 2006 among the Originators named therein, Amphenol Funding Corp. and the Company (filed as Exhibit 10.13 to the June 30, 2006 10 -Q).* 10.6 Fourth Amended 2000 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries (filed as Exhibit 10.20 to the June 30, 2007 10 -Q).* 10.7 Form of 2000 Management Stockholders ’ Agreement as of May 24, 2007 (filed as Exhibit 10.25 to the June 30, 2007 10 -Q).* 10.8 Form of 2000 Non-Qualified Stock Option Grant Agreement Amended as of May 24, 2007 (filed as Exhibit 10.28 to the June 30, 2007 10 -Q).* 10.9 2009 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries (field as Exhibit 10.7 to the June 30, 2009 10 -Q).* 10.10 Form of 2009 Non -Qualified Stock Option Grant Agreement dated as of May 20, 2009 (filed as Exhibit 10.8 to the June 30, 2009 10 - Q).* 10.11 Form of 2009 Management Stockholders ’ Agreement dated as of May 20, 2009 (filed as Exhibit 10.9 to the June 30, 2009 10 -Q).* 10.12 Management Agreement between the Company and Martin H. Loeffler, dated July 28, 1987 (filed as Exhibit 10.7 to the 1987 Registration Statement).* 10.13 Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.7 to the December 31, 2001 10 -K).* 10.14 First Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.42 to the December 31, 2006 10-K).* 10.15 Second Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.43 to the December 31, 2006 10-K).* 10.16 Third Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.44 to the December 31, 2006 10-K).* 10.17 Fourth Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.45 to the December 31, 2006 10-K).* 10.18 Fifth Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.46 to the December 31, 2006 10-K).* 10.19 Sixth Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.47 to the December 31, 2006 10-K).* 10.20 Seventh Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.38 to the December 31, 2007 10-K).* 10.21 Eighth Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.22 to the June 30, 2008 10 -Q).* 10.22 Ninth Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective
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January 1, 2002 (filed as Exhibit 10.20 to the September 30, 2009 10 -Q).* 10.23 Tenth Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (filed as Exhibit 10.21 to the December 31, 2009 10-K).* 10.24 Eleventh Amendment to the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002.** 10.25 Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2011.** 10.26 Amphenol Corporation Supplemental Employee Retirement Plan formally adopted effective January 25, 1996 (filed as Exhibit 10.18 to the December 31, 1996 10 -K).* 10.27 First Amendment (2000 -1) to the Amphenol Corporation Supplemental Employee Retirement Plan (filed as Exhibit 10.18 to the September 30, 2004 10 -Q).* 10.28 Second Amendment (2004-1) to the Amphenol Corporation Supplemental Employee Retirement Plan (filed as Exhibit 10.19 to the September 30, 2004 10 -Q).* 10.29 Third Amendment (2006-1) to the Amphenol Corporation Supplemental Employee Retirement Plan (filed as Exhibit 10.51 to the December 31, 2006 10 -K).* 10.30 Amended and Restated Amphenol Corporation Supplemental Employee Retirement Plan (filed as Exhibit 10.24 to the December 31, 2008 10 -K).* 10.31 Amphenol Corporation Directors ’ Deferred Compensation Plan (filed as Exhibit 10.11 to the December 31, 1997 10 -K).* 10.32 The 2004 Stock Option Plan for Directors of Amphenol Corporation (filed as Exhibit 10.44 to the June 30, 2004 10 -Q).* 10.33 The Amended 2004 Stock Option Plan for Directors of Amphenol Corporation (filed as Exhibit 10.29 to the June 30, 2008 10 -Q).* 10.34 2008 Amphenol Corporation Management Incentive Plan (filed as Exhibit 10.30 to the June 30, 2008 10 -Q).* 10.35 2009 Amphenol Corporation Management Incentive Plan (filed as Exhibit 10.31 to the March 31, 2009 10 -Q).* 10.36 2010 Amphenol Corporation Management Incentive Plan (filed as Exhibit 10.33 to the December 31, 2009 10 -K).* 10.37 2011 Amphenol Corporation Management Incentive Plan.** 10.38 2009 Amphenol Corporation Executive Incentive Plan (filed as Exhibit 10.32 to the March 31, 2009 10 -Q).* 10.39 Credit Agreement, dated as of July 15, 2005, among the Company, certain subsidiaries of the Company, a syndicate of financial institutions and Bank of America, N.A. acting as the administrative agent (filed as Exhibit 10.1 to the Form 8-K filed on July 20, 2005).* 10.40 First Amendment to Credit Agreement dated as of December 14, 2005 among the Company, certain subsidiaries of the Company, a syndicate of financial institutions and Bank of America, N.A. acting as the administrative agent (filed as Exhibit 10.45 to the June 30, 2007 10 -Q).* 10.41 Second Amendment to Credit Agreement dated as of August 1, 2006 among the Company, certain subsidiaries of the Company, a syndicate of financial institutions and Bank of America, N.A. acting as the administrative agent (filed as Exhibit 10.55 to the June 30, 2006 10 -Q).* 10.42 Third Amendment to Credit Agreement dated as of October 28, 2009 among the Company, certain subsidiaries of the Company, a syndicate of financial institutions and Bank of America, N.A. acting as the administrative agent (filed as Exhibit 10.38 to the December 31, 2009 10 -K).* 10.43 Credit Agreement, dated as of August 13, 2010, among the Company, certain subsidiaries of the Company, a syndicate of financial institutions and Bank of America, N.A. acting as the administrative agent (filed as Exhibit 10.1 to the Form 8-K filed on August 18, 2010).* 10.44 Continuing Agreement for Standby Letters of Credit between Amphenol Corporation and Deutsche Bank dated March 4, 2009 (filed as Exhibit 10.36 to the March 31, 2009 10 -Q).* 10.45 Agreement and Plan of Merger among Amphenol Acquisition Corporation, Allied Corporation and the Company, dated April 1, 1987, and the Amendment thereto dated as of May 15, 1987 (filed as Exhibit 2 to the 1987 Registration Statement).* 10.46 Settlement Agreement among Allied Signal Inc., the Company and LPL Investment Group, Inc. dated November 28, 1988 (filed as Exhibit 10.20 to the 1991 Registration Statement).* 10.47 Amphenol Corporation Employee Savings/401(k) Plan Document (filed as Exhibit 10.58 to the June 30, 2006 10 -Q).* 10.48 Amphenol Corporation Employee Savings/401(k) Plan Adoption Agreement (filed as Exhibit 10.59 to the June 30, 2006 10 -Q).* 10.49 First Amendment (2006 -1) to Amphenol Corporation Employee Savings/401(k) Plan Adoption Agreement (filed as Exhibit 10.68 to the December 31, 2006 10 -K).* 10.50 Second Amendment (2006-2) to Amphenol Corporation Employee Savings/401(k) Plan Adoption Agreement (filed as Exhibit 10.69 to the December 31, 2006 10 -K).* 10.51 Third Amendment (2008-1) to Amphenol Corporation Employee Savings/401(k) Plan Adoption Agreement (filed as Exhibit 10.43 to the June 30, 2008 10 -Q).*
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10.52 Fourth Amendment (2008 -2) to Amphenol Corporation Employee Savings/401(k) Plan Adoption Agreement (filed as Exhibit 10.44 to the June 30, 2008 10 -Q).* 10.53 Fifth Amendment (2009-1) to the Amphenol Corporation Employee Savings/401(k) Plan Adoption Agreement (filed as Exhibit 10.45 to the September 30, 2009 10 -Q).* 10.54 Sixth Amendment (2009-2) to the Amphenol Corporation Employee Savings/401(k) Plan Adoption Agreement (filed as Exhibit 10.46 to the September 30, 2009 10 -Q).* 10.55 The Amphenol Corporation Employee Savings/401(k) Plan Adoption Agreement as amended and restated effective March 1, 2010 (filed as Exhibit 10.50 to the March 31, 2010 10 -Q).* 10.56 Amphenol Corporation Supplemental Defined Contribution Plan (filed as Exhibit 10.54 to the June 30, 2007 10 -Q).* 10.57 Restated Amphenol Corporation Supplemental Defined Contribution Plan Adoption Agreement (filed as Exhibit 10.44 to the December 31, 2008 10 -K).* 10.58 First Amendment (2007 -1) to the Amphenol Corporation Supplemental Defined Contribution Plan (filed as Exhibit 10.55 to the June 30, 2007 10 -Q).* 21.1 Subsidiaries of the Company.** 23.1 Consent of Deloitte & Touche LLP.** 31.1 Certification pursuant to Exchange Act Rules 13a-14 and 15d-14; as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ** 31.2 Certification pursuant to Exchange Act Rules 13a -14 and 15d -14; as adopted pursuant to Section 302 of the Sarbanes -Oxley Act of 2002. ** 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes -Oxley Act of 2002. ** 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes -Oxley Act of 2002. ** 101.INS XBRL Instance Document.** 101.SCH XBRL Taxonomy Extension Schema Document.** 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.** 101.DEF XBRL Taxonomy Extension Definition Document.** 101.LAB XBRL Taxonomy Extension Label Linkbase Document.** 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.**
* Incorporated herein by reference as stated. ** Filed herewith.
60 Exhibit 10.4
EXECUTION VERSION
AMENDMENT AGREEMENT
Dated as of February 1, 2011
by and among
AMPHENOL FUNDING CORP., as Seller,
AMPHENOL CORPORATION, as Servicer,
ATLANTIC ASSET SECURITIZATION LLC, as Conduit Purchaser,
and
CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK as Administrative Agent for the Purchasers and Related Committed Purchaser
This AMENDMENT AGREEMENT (this “ Agreement ”), dated as of February 1, 2011 (the “ Amendment Effective Date ”), is by and among Amphenol Funding Corp., a Delaware corporation, as Seller (“ AFC ”), Amphenol Corporation, a Delaware corporation, as Servicer (“ Amphenol ”), Atlantic Asset Securitization LLC, a Delaware limited liability company, as Conduit Purchaser (“ Atlantic ”), and Crédit Agricole Corporate and Investment Bank, f/k/a Calyon New York Branch, a French banking corporation, duly licensed under the laws of the State of New York, as Administrative Agent for the Purchasers and as the sole Related Committed Purchaser as of the date hereof (“ Crédit Agricole ”).
Reference is hereby made to that certain Receivables Purchase Agreement, dated as of July 31, 2006 (as amended or otherwise modified, the “ Receivables Purchase Agreement ”), among AFC, Amphenol, Atlantic and Crédit Agricole.
RECITALS
WHEREAS, the parties hereto entered into the Receivables Purchase Agreement, pursuant to which AFC agreed to sell to Atlantic, as Conduit Purchaser, undivided percentage ownership interests in the Pool Receivable Assets, as defined in the Receivables Purchase Agreement, and Crédit Agricole, as Committed Purchaser, agreed to purchase the Pool Receivables Assets upon Atlantic’s refusal to so purchase and the satisfaction of certain conditions set forth in the Receivables Purchase Agreement;
WHEREAS, the parties hereto wish to amend the Receivables Purchase Agreement to provide for the establishment of the Term-Out Accounts and certain other matters, as herein set forth;
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I DEFINED TERMS
SECTION 1.1 Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Receivables Purchase Agreement.
ARTICLE II AMENDMENTS TO THE AFFECTED DOCUMENTS
SECTION 2.1 Amendments to Receivables Purchase Agreement .
(a) Section 1.12 of the Receivables Purchase Agreement is hereby amended in its entirety to read as follows:
“Section 1.12. Termination Date; Term -Out Accounts .
(a) Extension of Termination Date. The Seller may request the extension of any Related Committed Purchaser’s Commitment Expiry Date for an additional three hundred and sixty four (364) days from time to time by providing
the Administrative Agent with a written request for such extension no fewer than sixty (60) days prior to such Related Committed Purchaser’s Commitment Expiry Date then in effect. The Administrative Agent shall provide written notice to the Seller on or prior to the thirtieth (30th) day (the “ Consent Date ”) before the applicable Related Committed Purchaser’s Commitment Expiry Date then in effect of its desire to extend (any such Committed Purchaser an “ Extending Committed Purchaser ”) or not to so extend such date (any such Committed Purchaser a “ Non -Extending Committed Purchaser ”); provided, however, that notwithstanding anything to the contrary herein, failure to provide such notice shall be deemed to be a refusal by such Related Committed Purchaser to so extend its Commitment Expiry Date. If Related Committed Purchasers holding less than 100% of the aggregate Commitment of all Commitments consent to such extension, then at the direction of the Seller, in its sole discretion, the Purchase Limit may be reduced to an amount equal to the aggregate of the Commitments of all Related Committed Purchasers other than the Non-Extending Committed Purchasers. Notwithstanding any Non- Extending Committed Purchaser’s rejection of a request to extend its Commitment or anything to the contrary in this Receivables Purchase Agreement, the Commitment Expiry Date shall not occur with respect to the other Related Committed Purchasers as a result of such Non-Extending Committed Purchaser’s failure to agree to extend its Commitment Expiry Date and shall not occur until the earlier to occur of (i) the date on which the Facility Termination Date occurs pursuant to Section 2.2, (ii) the Commitment Expiry Date set forth in the Seller’s request to extend the Commitment Expiry Date (provided, however, that the Commitment Expiry Date shall not be extended beyond the Facility Termination Date), and (iii) the end of the Term-Out Period.
(b) Term-Out Period Deposits. By 11:00 a.m. (New York time) on the Commitment Expiry Date, each Non- Extending Committed Purchaser (other than those Non-Extending Committed Purchasers for which, at the option of the Seller, there has been a reduction of its related Commitment to zero as described in Section 1.12(a) above) shall, subject to the satisfaction of the applicable conditions set forth in Section 3 of Exhibit II, (A) establish such Non-Extending Committed Purchaser’s Term-Out Period Account and (B) make a Term-Out Period Deposit by depositing, in same day funds to such Non-Extending Committed Purchaser’s Term-Out Period Account, an amount equal to such Non-Extending Committed Purchaser’s full Commitment (i.e., notwithstanding any previous Purchases) as of such date. The Non-Extending Committed Purchaser shall direct the investment of the amounts on deposit in such Non-Extending Committed Purchaser’s Term-Out Period Account, and the proceeds of such investments, in Permitted Investments (it being understood that the full amount deposited by any such Non-Extending Committed Purchaser shall at all times be available for withdrawal from such Term-Out Deposit Account in accordance with the terms of this Receivables Purchase Agreement). For the avoidance of doubt, in the event that the conditions set forth in Section 3 of Exhibit II are not satisfied on the Commitment Expiry Date, no Non- Extending Committed Purchaser shall be required to establish a Term-Out Period Account.
2
(c) Term-Out Period Account Funded Purchases. No later than 12:00 noon (New York time), on the Commitment Expiry Date on which any Non-Extending Committed Purchaser makes the initial deposit into the related Term- Out Period Accounts in accordance with Section 1.12(b), the Administrative Agent will withdraw from such Non-Extending Committed Purchaser’s Term-Out Period Account an amount equal to such Non-Extending Committed Purchaser’s share of the Aggregate Investment and cause such funds to be immediately applied to purchase the Investments of the Conduit Purchaser (or Related Committed Purchaser or Liquidity Provider, if applicable). During the Term-Out Period, all additional Purchases to be made by any Non-Extending Committed Purchaser pursuant to Section 1.1 shall be made by such Non- Extending Committed Purchaser by withdrawing funds from such Non-Extending Committed Purchaser’s Term-Out Period Account. Section 1.2 shall be applicable in respect of Term-Out Period Account Funded Purchases.
(d) Maturity. All Term-Out Period Deposits shall be due and payable in full on the Facility Termination Date.
(e) Use of Proceeds; Security Interest in Term-Out Period Account. The Seller hereby agrees that (i) amounts withdrawn from each Term-Out Period Account shall be used solely for the purpose of funding Purchases from time to time and (ii) the making of any Purchases from any Term-Out Period Account shall be subject to satisfaction of the applicable conditions set forth in Section 2 of Exhibit II. The Seller hereby grants to each Non-Extending Committed Purchaser a security interest in such Non-Extending Committed Purchaser’s Term-Out Period Account, all funds from time to time credited to the Term-Out Period Account, all financial assets (including, without limitation, Permitted Investments) from time to time acquired with any such funds or otherwise credited to the Term-Out Period Account, all interest, dividends, cash, instruments and other investment property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such funds or such financial assets, and all proceeds of, collateral for, and supporting obligations relating to any and all of the foregoing. The grant of a security interest by the Seller to each such Non-Extending Committed Purchaser pursuant to this Section secures the payment of the Seller’s obligation to repay the Term-Out Period Deposits, and to pay interest thereon, pursuant to the terms of this Credit Agreement.
(f) Payments during the Term-Out Period. Notwithstanding anything herein to the contrary, all payments of Collections with respect to any Term-Out Period Account Funded Purchases distributed and applied pursuant to Section 1.5 during the Term-Out Period, other than payments of Yield, fees, expenses and Indemnified Amounts, shall be made to the related Term-Out Period Account and be part of the related Term-Out Period Deposit of the related Non-Extending Committed Purchaser, and all other payments (including Yield, Fees, and, to the extent such amounts are payable under Section 1.4(a), expenses and Indemnified
3
Amounts) shall be remitted to the Concentration Account to be held and paid out pursuant to Section 1.4(a).
(g) Earnings in Term-Out Period Accounts. Earnings on any Permitted Investments in a Term-Out Period Account shall be retained by or paid to the applicable Non-Extending Committed Purchaser. Such Non-Extending Committed Purchaser shall also be entitled to payment from the Seller of the Unused Fee as described in the Fee Letter in all respects with respect to amounts on deposit in the Term-Out Period Account. Such Non-Extending Committed Purchaser shall also be entitled to payment of Yield on all Term-Out Period Account Funded Purchases but shall not be entitled to payment of Yield on any amounts while such amounts are retained in the Term-Out Period Account. Upon the occurrence of the Facility Termination Date, amounts on deposit in each Term-Out Period Account shall be withdrawn by and repaid to the applicable Non-Extending Committed Purchaser as repayment of the related Term-Out Period Deposit.”
(b) Section 6.3 of the Receivables Purchase Agreement is hereby amended by adding a new clause (g) at the end thereof to read as follows:
“(g) Nothing in this Section 6.3 or any other provision in this Agreement to the contrary shall restrict an assignment or other transfer of any Purchase or Investment or portion thereof, or a participating interest in any Purchase or Investment or portion thereof, by any Purchaser to a Federal Reserve Bank (provided, for the avoidance of doubt, that no Commitment or any portion thereof may be assigned except in compliance with Section 6.03(c)), but no such assignment to a Federal reserve Bank shall release the assigning Purchaser from its obligations hereunder.”
(c) The definition of “Yield” in Exhibit I to the Receivables Purchase Agreement is hereby amended by restating clause (b) therein in its entirety to read as follows:
“(b) for each day during such Fixed Period to the extent such Purchased Interest (i) will be funded on such day by the Conduit Purchaser under the Liquidity Facility, (ii) has been purchased by the Liquidity Agent as agent for the Liquidity Banks, or (iii) is funded out of a Term-Out Period Account, the Alternate Rate;”
(d) The following definitions are hereby added to Exhibit I to the Receivables Purchase Agreement in the appropriate alphabetic sequence:
“Non-Extending Committed Purchaser” means any Related Committed Purchaser that does not consent to a request to extend its Commitment Expiry Date pursuant to Section 1.12(a) of the Receivables Purchase Agreement.
“Term-Out Period” means, with respect to any Non-Extending Committed Purchaser, the period commencing on the date, if any, on which such Non-Renewing Purchaser establishes its Term-Out Period Account and makes the
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initial deposit therein pursuant to Section 1.12(b) of the Receivables Purchase Agreement and ending on the Facility Termination Date.
“Term-Out Period Account” means, for any Related Committed Purchaser, the Term-Out Period Account in the name of the Seller maintained by such Related Committed Purchaser during the Term-Out Period, if any, and under the control and dominion of such Related Committed Purchaser, to secure the Seller’s obligation to repay the Term-Out Period Deposit made by the Related Committed Purchaser.
“Term-Out Period Account Funded Purchase” means any Purchase made by a Related Committed Purchaser which is funded by a withdrawal from such Related Committed Purchaser’s Term-Out Period Account.
“Term-Out Period Deposit” shall mean, as of any date of determination in respect of any Related Committed Purchaser, the amount deposited by such Related Committed Purchaser into such Related Committed Purchaser’s Term-Out Period Account pursuant to Section 1.12(b) of the Receivables Purchase Agreement, minus any Term-Out Period Account Funded Purchases made by such Related Committed Purchaser, plus any Collections that are paid to such Term-Out Period Account. The term “Term-Out Period Deposit” does not include any Term-Out Period Account Funded Purchase.
(e) Clause 2(c)(v) of Exhibit II to the Receivables Purchase Agreement is hereby restated in its entirety to read as follows:
“(v) the Facility Termination Date shall not have occurred, and either
(i) at least one Related Committed Purchaser shall have a Commitment in full force and effect, or
(ii) at least one Term-Out Period Account shall have been established and funded, and the Term-Out Period Deposit shall not have been repaid to the applicable Related Committed Purchaser.”
(f) A new Section 3 is hereby added at the end of Exhibit II to the Receivables Purchase Agreement to read as follows:
“3. Conditions Precedent to Funding the Term -Out Period Account . Any Related Committed Purchaser’s obligation to fund its Term-Out Period Account in accordance with Section 1.12(b) hereunder shall be subject to the conditions precedent that, on the date on which such Term-Out Period Account is funded:
(a) the following statements shall be true (and acceptance of the proceeds of such funding of the Term-Out Period Account shall be deemed a representation and warranty by the Seller and the Servicer that such statements are then true):
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(i) no event has occurred and is continuing that constitutes a Termination Event or an Unmatured Termination Event;
(ii) the Facility Termination Date shall not have occurred; and
(iii) the representations and warranties set forth in Sections 1(a)-(d) of Exhibit III to the Agreement are true and correct in all material respects on and as of the date of such purchase or reinvestment as though made on and as of such date and shall be deemed to have been made on such date; and
(b) the Seller, the Administrative Agent, the Related Committed Purchaser and Crédit Agricole Corporate and Investment Bank, as account bank, shall have entered into a written agreement setting forth that the account bank will only accept instructions with respect to the Term-Out Period Account from the Administrative Agent without further action from the Seller, and that the Seller will have no right to direct the disposition of funds in the Term-Out Period Account.
ARTICLE III CONDITIONS TO EFFECTIVENESS
SECTION 3.1 Amendment Effective Date . This Agreement and the provisions contained herein shall become effective as of the date hereof, provided that Crédit Agricole shall have, in form and substance satisfactory to it, received an original counterpart (or counterparts) of this Agreement executed by each of the parties hereto.
ARTICLE IV NOTICE, CONFIRMATION, ACKNOWLEDGEMENT, RELEASE AND REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Notice . Each party hereto hereby acknowledges timely notice of the execution of this Agreement and of the transactions and amendments contemplated hereby. Each party hereto hereby waives any notice requirement contained in the Transaction Documents with respect to the execution of this Agreement.
SECTION 4.2 Confirmation of the Subject Documents . The parties hereto each hereby acknowledge and agree that, except as herein expressly amended, the Receivables Purchase Agreement and each other Transaction Document are each ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms.
SECTION 4.3 Representations and Warranties . By its signature hereto, each party hereto hereby represents and warrants that, before and after giving effect to this Agreement, as follows:
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(a) Its representations and warranties set forth in the Transaction Documents (as amended hereby) are true and correct as if made on the date hereof, except to the extent they expressly relate to an earlier date, and except for matters that have been disclosed to Crédit Agricole in writing; and
(b) No Termination Event (as defined in the Receivables Purchase Agreement) has occurred and is continuing.
ARTICLE V MISCELLANEOUS
SECTION 5.1 GOVERNING LAW . THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).
SECTION 5.2 Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original, and all of which, when taken together, shall constitute one and the same agreement.
SECTION 5.3 WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
SECTION 5.4 Entire Agreement . This Agreement, the Receivables Purchase Agreement, as amended by this Agreement, and the other Transaction Documents, as amended by this Agreement, embody the entire agreement and understanding of the parties hereto and supersede any and all prior agreements, arrangements and understandings relating to the matters provided for herein.
SECTION 5.5 Headings . The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation hereof or thereof.
SECTION 5.6 Severability . If any provision of this Agreement, or the application thereof to any party or any circumstance, is held to be unenforceable, invalid or illegal (in whole
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or in part) for any reason (in any jurisdiction), the remaining terms of this Agreement, modified by the deletion of the unenforceable, invalid or illegal portion (in any relevant jurisdiction), will continue in full force and effect, and such unenforceability, invalidity or illegality will not otherwise affect the enforceability, validity or legality of the remaining terms of this Agreement so long as this Agreement, as so modified, continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the deletion of such portion of this Agreement will not substantially impair the respective expectations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.
SECTION 5.7 SUBMISSION TO JURISDICTION . ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8 Exhibit 10.24
ATTACHMENT A
ELEVENTH AMENDMENT (2010-1) TO THE PENSION PLAN FOR EMPLOYEES OF AMPHENOL CORPORATION AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2002
Pursuant to Section 12.1 of the Pension Plan for Employees of Amphenol Corporation as amended and restated effective January 1, 2002 (the “Plan”), the Plan is hereby amended as follows:
1. Effective December 1, 2010, Section 4.1(a)(1) of Exhibit H ( Sidney Hourly: Accrued Benefit ) is amended by (a) adding the following new subsection (i), (b) substituting the following subsection (ii) for the existing subsection (i), and (c) renumbering existing subsections (ii) — (x) as subsections (iii) — (xi). As amended, the provision reads as follows:
(i) $37.00 for Participants terminating employment in the Eligible Class on or after December 1, 2010;
(ii) $34.00 for Participants terminating employment in the Eligible Class on or after January 1, 2008, but prior to December 1, 2010;
(iii) $30.00 for Participants terminating employment in the Eligible Class on or after January 1, 2005, but prior to January 1, 2008;
(iv) $26.50 for Participants terminating employment in the Eligible Class on or after January 1, 2002, but prior to January 1, 2005;
(v) $23.50 for Participants terminating employment in the Eligible Class on or after January 1, 1999, but prior to January 1, 2002;
(vi) $20.50 for Participants terminating employment in the Eligible Class on or after November 1, 1997 but prior to January 1, 1999;
(vii) $20.00 for Participants terminating employment in the Eligible Class on or after November 1, 1996 but prior to November 1, 1997;
(viii) $19.00 for Participants terminating employment in the Eligible Class subsequent to October 31, 1993 but prior to November 1, 1996;
(ix) $18.50 for Participants terminating employment in the Eligible Class subsequent to October 31, 1990 but prior to November 1, 1993;
(x) $18.00 for Participants terminating employment in the Eligible Class subsequent to November 4, 1989 but prior to November 1, 1990; or
(xi) $17.00 for Participants terminating employment in the Eligible Class subsequent to October 31, 1987 but prior to November 5, 1989.
2 Exhibit 10.25
Pension Plan for Employees of Amphenol Corporation
(Amended and Restated as of January 1, 2011)
PENSION PLAN FOR EMPLOYEES OF AMPHENOL CORPORATION
This Plan document restates the Pension Plan for Employees of Amphenol Corporation that was effective January 1, 2002, by incorporating the First Amendment generally effective January 1, 2002, the Second Amendment effective January 1, 2002, the Third Amendment effective January 1, 2003 and January 1, 2004, the Fourth Amendment effective January 1, 2005, the Fifth Amendment generally effective January 1, 2005, the Sixth Amendment generally effective January 1, 2007, the Seventh Amendment generally effective January 1, 2007, the Eight Amendment effective January 1, 2008, the Ninth Amendment generally effective March 20, 2009, the Tenth Amendment generally effective January 1, 2008 and the Eleventh Amendment effective December 1, 2010.
TABLE OF CONTENTS
Page
ARTICLE I.
ELIGIBILITY
1.1. Eligibility 3
ARTICLE II.
EMPLOYER CONTRIBUTIONS
2.1. Payment of Contributions 4 2.2. Limitation on Contribution 4 2.3. Time of Payment 4 2.4. No Additional Liability 4
ARTICLE III.
EMPLOYEE CONTRIBUTIONS
3.1. Required Contributions 5
ARTICLE IV.
PLAN BENEFITS
4.1. Plan Benefits 6 4.2. Minimum Benefit for Top Heavy Plan 9 4.3. Non -Duplication of Benefits 11 4.4. Transfers; Service with Affiliated Employers 11
ARTICLE V.
LIMITATIONS ON BENEFITS
5.1. Limitation of Benefits to Comply With Section 415 12 5.2 Minimum Funding Requirements 12 5.3 Funding Based Restrictions 13
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ARTICLE VI.
VESTING
6.1. Vesting Rights 21 6.2. Top -Heavy Vesting 21 6.3. Service Computation Period; Service Credit 21 6.4. Amendment of Vesting Schedule 21 6.5. Amendments Affecting Vested and/or Accrued Benefit 22 6.6. No Divestiture for Cause 22
ARTICLE VII.
PAYMENT OF BENEFITS
7.1. Notice 23 7.2. Waiver of Thirty (30) Day Notice Period 23 7.3. Form of Payment 23 7.4. Actuarial Equivalent Benefit 24 7.5. Payment Without Participant Consent 24 7.6. Restrictions on Immediate Distributions 25 7.7. Limitation of Benefits on Plan Termination 26 7.8. Early Plan Termination Restrictions 28 7.9. Suspension of Benefits 30 7.10. Restrictions on Commencement of Retirement Benefits 32 7.11. Minimum Distribution Requirements 32 7.12. TEFRA Election Transitional Rule 35 7.13. Distribution of Death Benefit 37 7.14. Date Distribution Deemed to Begin 38 7.15. Distribution Pursuant to Qualified Domestic Relations Orders 38 7.16. Payment to a Person Under a Legal Disability 38 7.17. Unclaimed Benefits Procedure 39 7.18. Direct Rollovers 40 7.19. Certain Highly Compensated Employees 40
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ARTICLE VIII.
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1. Applicability of Provisions 41 8.2. Payment of Qualified Joint and Survivor Annuity 41 8.3. Payment of Qualified Pre -Retirement Survivor Annuity 41 8.4. Notice Requirements For Qualified Joint and Survivor Annuity 41 8.5. Notice Requirements For Qualified Pre -Retirement Survivor Annuity 42 8.6. Qualified Election 43 8.7. Election Period 44 8.8. Pre -age Thirty -five (35) Waiver 44 8.9. Transitional Joint And Survivor Annuity Rules 44
ARTICLE IX.
QUALIFIED DOMESTIC RELATIONS ORDERS
9.1. Qualified Domestic Relations Orders 47
ARTICLE X.
TRANSFERS FROM OTHER QUALIFIED PLANS; DIRECT ROLLOVERS
10.1. Transfers from Other Qualified Plans, Direct Rollovers 49
ARTICLE XI.
TRANSFERS FROM OTHER QUALIFIED PLANS; DIRECT ROLLOVERS
11.1. Transfers 50
ARTICLE XII.
AMENDMENT, TERMINATION, MERGER OR CONSOLIDATION
12.1. Amendment of the Plan 51 12.2. Termination 51 12.3. Merger or Consolidation of the Plan 55
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ARTICLE XIII.
PARTICIPATING EMPLOYERS
13.1. Adoption by Other Employers 56 13.2. Requirements of Participating Employers 56 13.3. Designation of Agent 56 13.4. Employee Transfers 57 13.5. Participating Employer ’s Contribution 58 13.6. Discontinuance of Participation 59 13.7. Plan Administrator ’s Authority 59
ARTICLE XIV.
ADMINISTRATION OF THE PLAN
14.1. Appointment of Plan Administrator and Trustee 60 14.2. Plan Administrator 60 14.3. Delegation of Powers 60 14.4. Trust Agreement 61 14.5. Appointment of Advisers 61 14.6. Records and Reports 61 14.7. Information From Employer 62 14.8. Majority Actions 62 14.9. Expenses 62 14.10. Discretionary Acts 62 14.11. Responsibility of Fiduciaries 62 14.12. Indemnity by Employer 63 14.13. Claims Procedures 63 14.14. Recovery of Benefit Overpayments 64
ARTICLE XV.
GENERAL
15.1. Bonding 65 15.2. Action by the Employer 65 15.3. Employment Rights 65
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15.4. Nonalienation of Benefits 66 15.5. Governing Law 67 15.6. Conformity to Applicable Law 67 15.7. Usage 67 15.8. Legal Action 67 15.9. Exclusive Benefit 68 15.10. Prohibition Against Diversion of Funds 68 15.11. Return of Contribution 68 15.12. Employer ’s Protective Clause 69 15.13. Insurer ’s Protective Clause 69 15.14. Receipt and Release for Payments 69 15.15. Headings 69
ARTICLE XVI.
DEFINITIONS
16.1. Accrued Benefit 70 16.2. Actuarial Equivalent 70 16.3. Administrative Committee 71 16.4. Affiliated Employer 71 16.5. Aggregation Group 71 16.6. Anniversary Date 72 16.7. Annual Benefit 72 16.8. Annuity 73 16.9. Annuity Starting Date 73 16.10. Average Monthly Compensation 73 16.11. Beneficiary 73 16.12. Break in Service 74 16.13. Code 75 16.14. Compensation 75 16.15. Controlled Group 78 16.16. Determination Date 79 16.17. Direct Rollover 79
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16.18. Disability 79 16.19. Distributee 79 16.20. Earliest Retirement Date 79 16.21. Early Retirement Age 79 16.22. Early Retirement Date 79 16.23. Eligible Class 79 16.24. Eligible Retirement Plan 82 16.25. Eligible Rollover Distribution 83 16.26. Employee 83 16.27. Employer 84 16.28. Employment Commencement Date 84 16.29. Exhibit 84 16.30. ERISA 84 16.31. Family Member 84 16.32. Fiscal Year 84 16.33. Foreign Subsidiary 84 16.34. Forfeiture 85 16.35. Highly Compensated Employee 85 16.36. Highly Compensated Participant 86 16.37. Hour of Service 87 16.38. Inactive Participant 89 16.39. Key Employee 89 16.40. Late Retirement Date 90 16.41. Leased Employee 90 16.42. Limitation Year 91 16.43. Non -Highly Compensated Employee 91 16.44. Non -Key Employee 91 16.45. Normal Form of Benefit 91 16.46. Normal Retirement Age 91 16.47. Normal Retirement Date 92 16.48. Participant 92 16.49. Participating Employer 92
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16.50. Period of Military Duty 92 16.51. Period of Service 92 16.52. Period of Severance 92 16.53. Plan 92 16.54. Plan Administrator 94 16.55. Plan Year 94 16.56. Predecessor Employer 94 16.57. Present Value of Accrued Benefit 94 16.58. Primary Social Security Retirement Benefit 94 16.59. Qualified Domestic Relations Order 95 16.60. Qualified Joint and Survivor Annuity 95 16.61. Qualified Pre -Retirement Survivor Annuity 95 16.62. Re -employment Commencement Date 96 16.63. Re -entry Date 96 16.64. Regulation 96 16.65. Retirement 96 16.66. Social Security Retirement Age 96 16.67. Spouse 96 16.68. Straight Life Annuity 96 16.69. Super Top -Heavy Plan 96 16.70. Top -Heavy Group 97 16.71. Top -Heavy Plan 97 16.72. Top -Heavy Ratio 98 16.73. Top -Paid Group 99 16.74. Trust Agreement 100 16.75. Trust Fund 100 16.76. Trustee 100 16.77. Valuation Date 100 16.78. Year of Accrual Service 100 16.79. Year of Eligibility Service 101 16.80. Year of Service 101 16.81. Year of Vesting Service 101
vii
PENSION PLAN FOR EMPLOYEES OF
AMPHENOL CORPORATION
PREAMBLE
The Board of Directors of AMPHENOL CORPORATION, a Delaware corporation, approved and adopted a defined benefit pension plan for certain Employees, effective as of December 31, 1997, which amended and restated the Salaried Employees Pension Plan of the Amphenol Corporation, as previously amended effective January 1, 1989 (hereinafter referred to as the “Predecessor Plan”); and which now serves as the single plan to pay benefits to Employees previously participating in certain other plans maintained by the Employer or its affiliates, which plans were merged and consolidated into the Plan effective as of December 31, 1997.
Prior to December 31, 1997, Amphenol Corporation and certain of its affiliates maintained the following defined benefit pension plans for eligible employees:
• Salaried Employee’s Pension Plan of the Amphenol Corporation
• The Hourly Employees’ Pension Plan of Amphenol Corporation
• Pension Plan for Hourly Paid Employees of Chatham Cable Company
• Pyle-National Retirement Plan for Salaried Employees
• LPL Technologies Inc. Retirement Plan
• Pyle-National Retirement Plan for Hourly Employees
• Pension Plan for Salaried Employees of the Sidney Division of the Amphenol Corporation
• Pension Plan for Hourly Employees of the Sidney Division of the Amphenol Corporation
All of the aforesaid plans were merged and consolidated effective as of December 31, 1997. All benefits previously provided under the plans are provided under the Plan subsequent to the merger and consolidation. All assets of the plans were transferred to the Plan and Trust and are, on an ongoing basis, available to pay benefits to employees and their beneficiaries;
The Employer continues to desire to retain the distinct benefit structures that applied to the participants of the plans prior to the merger and consolidation to the greatest extent possible. To accomplish this, the Plan document cross-references certain Exhibits which constitute the text of the pre-merger plans with subsequent amendments. The persons eligible to participate in the Plan are defined by the language of the Plan document which cross-references the Exhibits. To the extent there is a discrepancy between the Plan document and any Exhibit
1
with respect to any matter, including but not limited to the definition of the Eligible Class of employees, the Plan document will govern. The Exhibits do not reflect amendments required to be made pursuant to the applicable laws referenced on the cover page. All such amendments have been made to the Plan document, and apply to the Exhibits. In other respects, to the extent practicable the Exhibits shall govern the nature, form and timing of benefits under the Plan.
It is the intention of Amphenol Corporation to restate the Plan as of the date set forth on the cover page, and that the Plan continue to meet the requirements of Section 401(a) of the Internal Revenue Code.
2
ARTICLE I.
ELIGIBILITY
1.1. Eligibility:
(a) General . An Employee shall be eligible to participate in this Plan only to the extent that he or she is in an Eligible Class. Except as otherwise provided in subsection (b) below, the terms and conditions of eligibility shall be determined by reference to the Exhibit attached hereto which corresponds to the Employee’s Eligible Class.
(b) January 1, 2007 Plan Freeze . Notwithstanding any provision of this Plan, including any applicable Exhibit, to the contrary, no salaried Employee shall become a Participant in the Plan after December 31, 2006. An Inactive Participant who is reemployed by the Employer or a Participating Employer as a salaried Employee after December 31, 2006 shall not accrue additional benefits under the Plan.
3
ARTICLE II.
EMPLOYER CONTRIBUTIONS
2.1. Payment of Contributions: The Employer shall contribute to the Plan from time to time such amounts as the Plan Administrator and the Employer shall determine are necessary to provide Plan benefits. Such amounts shall be determined under accepted actuarial methods and assumptions, and may be contributed in cash or property.
2.2. Limitation on Contribution: Notwithstanding the foregoing, the Employer’s contribution for any Plan Year will not exceed the maximum amount allowable as a deduction to the Employer under Code Section 404, except to the extent necessary to satisfy the minimum funding standard required under Code Section 412 or to correct an error, in which event, the Employee shall make a contribution to the Plan even if it causes the limitation under Code Section 404 to be exceeded.
2.3. Time of Payment: The Employer will pay to the Trustee its contribution to the Plan for each Plan Year, within the time prescribed by law, including extensions of time, for the filing of the Employer’s federal income tax return for the Fiscal Year. In no event, however, will payment to the Trustee be made after the expiration of the time limit prescribed for satisfaction of the minimum funding requirements of Code Section 412.
2.4. No Additional Liability: The pension benefits to be provided under the Plan shall be only such as can be provided by the assets of the Trust Fund and, except as provided by law, there shall be no liability or obligation on the part of the Employer to make any further contributions to the Plan in the event of its termination. Except as otherwise required by ERISA or other applicable law, no liability for the payment of benefits hereunder shall be imposed upon the Employer, or the officers, directors or stockholders of the Employer.
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ARTICLE III.
EMPLOYER CONTRIBUTIONS
3.1. Required Contributions: The amount of contributions required of Participants as a condition for receiving benefits provided hereunder shall be determined by reference to the Exhibit that corresponds to the Participant’s classification and status.
5
ARTICLE IV.
PLAN BENEFITS
4.1. Plan Benefits:
(a) General . A Participant’s benefits, including death and disability benefits, shall be determined by reference to the Exhibit corresponding to the Participant’s classification and status; provided, however, notwithstanding any provision of this Plan to the contrary, including any applicable Exhibit, (i) effective December 12, 1994, benefits with respect to qualified military service will be provided in accordance with section 414(u) of the Code, and (ii) effective January 1, 2007, benefits for Participants in salaried portions of the Plan, including death and disability benefits, shall be subject to the modifications set forth in this Section 4.1.
(b) Definitions .
(i) Grandfathered Participant . A Participant in a salaried portion of the Plan who, as of December 31, 2006, is actively employed (including on short term disability or an authorized leave of absence) or on long term disability at a participating division or location of Amphenol Corporation or a Participating Employer and is either:
a. age 50 or older, with 15 or more Years of Vesting Service; or
b. has 25 or more Years of Vesting Service.
Solely for purposes of determining a Participant’s grandfathered status pursuant to this Section, Years of Vesting Service shall be determined using the rules set forth in the applicable Exhibit; provided, however, that references therein to, and provisions of, prior plan documents shall be disregarded.
(ii) Non -Grandfathered Participant . A Participant in a salaried portion of the Plan who is not a Grandfathered Participant.
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(c) Accrued Benefit . Effective December 31, 2006, a Non-Grandfathered Participant’s Accrued Benefit shall be frozen. The following limitations shall apply when determining the Accrued Benefit of a Non-Grandfathered Participant under the Exhibit corresponding to the Non-Grandfathered Participant’s classification and status:
(i) Compensation . No Compensation paid after December 31, 2006 shall count under the Plan when determining a Non-Grandfathered Participant’s Average Monthly Compensation.
(ii) Years of Accrual Service . No period of employment with the Employer or a Participating Employer after December 31, 2006 shall count under the Plan when determining a Non-Grandfathered Participant’s Years of Accrual Service.
(iii) Primary Social Security Retirement Benefit . The Primary Social Security Retirement Benefit of a Non- Grandfathered Participant shall be determined as of December 31, 2006.
The foregoing freeze shall not apply to Grandfathered Participants.
(d) Amphenol Salaried (Exhibit A) Disability Benefit . Effective January 1, 2007, no Participant shall be eligible to commence a disability retirement benefit pursuant to Section 4.5 of Exhibit A. Effective January 1, 2007, a Grandfathered Participant who participates in the Amphenol Salaried portion of the Plan, shall be eligible for the disability retirement benefit set forth in Section 4.6 of Exhibit C if he or she meets the requirements thereof, provided that the amount of his or her disability retirement benefit at Normal Retirement Date or Early Retirement Date, which shall include supplemental credits for the period of disability, shall otherwise be determined in accordance with Section 4.1 or 4.3 of Exhibit A, as applicable.
(e) Amphenol Salaried (Exhibit A) Death Benefit . Effective January 1, 2007, no Participant shall be eligible for a death benefit pursuant to Section 4.6 of Exhibit A. Effective January 1, 2007, a Participant who dies prior to his or her Annuity Starting Date shall instead be eligible for the death benefits set forth in Section 4.7 of Exhibit C if he or she meets the requirements thereof, provided that the amount of the Qualified Pre-Retirement
7
Survivor Annuity or the Pre-Retirement Survivor Annuity shall be determined in accordance with Section 4.1 or 4.3 of Exhibit A, as applicable.
(f) LPL (Exhibit C) Disability Benefit . Effective January 1, 2007, no Non-Grandfathered Participant shall be eligible to commence a disability retirement benefit pursuant to Section 4.6 of Exhibit C or any other provision of the Plan.
(g) Sidney Salaried (Exhibit G) Disability Benefit . Effective December 31, 2006, the Accrued Benefit of a Participant, for purposes of determining his or her disability retirement benefit pursuant to Section 4.5 of Exhibit G, shall be frozen. The following limitations shall apply when determining such Accrued Benefit:
(i) Compensation . No Compensation paid after December 31, 2006 shall count under the Plan when determining a Participant’s Average Monthly Compensation.
(ii) Years of Accrual Service . No period of employment with the Employer or a Participating Employer and no period of disability after December 31, 2006 shall count under the Plan when determining a Participant’s Years of Accrual Service.
Effective January 1, 2007, a Grandfathered Participant who participates in the Sidney Salaried portion of the Plan, shall be eligible, if he or she meets the requirements thereof, for the greater of:
(x) the December 31, 2006 frozen disability retirement benefit set forth above, and
(y) the disability retirement benefit set forth in Section 4.6 of Exhibit C, provided that the amount of his or her disability retirement benefit at Normal Retirement Date or Early Retirement Date, which shall include supplemental credits for the period of disability, shall otherwise be determined in accordance with Section 4.1 or 4.3 of Exhibit G, as applicable.
(h) Sidney Salaried (Exhibit G) Death Benefits . Effective January 1, 2007, a Participant, other than a Participant who has commenced benefits under the Plan on or before December 31, 2006, shall not be eligible for any of the death benefits set forth in
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Section 4.6 of Exhibit G. Effective January 1, 2007, a Participant who dies prior to his or her Annuity Starting Date shall instead be eligible for the death benefits set forth in Section 4.7 of Exhibit C if he or she meets the requirements thereof, provided that the amount of the Qualified Pre-Retirement Survivor Annuity or the Pre-Retirement Survivor Annuity shall be determined in accordance with Section 4.1 or 4.3 of Exhibit G, as applicable.
(i) Sidney Salaried (Exhibit G) Special Medicare Benefit . Effective January 1, 2007, a Participant, other than a Participant who has commenced benefits under the Plan on or before December 31, 2006, shall not be eligible for the Special Medicare Benefit set forth in Section 4.8 of Exhibit G.
(j) USERRA .
(i) Without limitation, in the case of a death occurring on or after January 1, 2007, if a Participant dies while performing qualified military service (as defined in Code Section 414(u)), the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan as if the Participant has resumed and then terminated employment on account of death.
(ii) For years beginning after December 31, 2008, an individual receiving a differential wage payment, as defined by Code Section 3401(h)(2), is treated as an Employee of the Employer making the payment. Such differential wage payment is treated as Compensation, and the Plan is not treated as failing to meet the requirements of any provision described in Code Section 414(u)(1)(C) by reason of any contribution or benefit which is based on the differential wage payment.
4.2. Minimum Benefit for Top-Heavy Plan:
(a) The minimum Accrued Benefit derived from Employer contributions to be provided under this Section for each Non -Key Employee who is a Participant during a Plan Year in which the Plan is Top-Heavy Plan shall equal the product of (1) said Participant’s Compensation averaged over the five (5) consecutive Limitation Years (or actual number of Limitation Years, if less) which produce the highest average and (2) the lesser of (i) two percent (2%) multiplied by Years of Service or (ii) twenty percent (20%).
(b) For purposes of providing the aforesaid minimum benefit under Code Section 416, a Non-Key Employee who is not a Participant solely because (1) his
9
Compensation is below a stated amount or (2) he declined to make required contributions (if required) to the Plan will be considered to be a Participant. Furthermore, such minimum benefit shall be provided regardless of whether such Non-Key Employee is employed on a specified date.
(c) For purposes of this Section, Years of Service for any Plan Year beginning before January 1, 1984, or for any Plan Year during which the Plan was not a Top-Heavy Plan shall be disregarded. Furthermore, for Plan Years beginning after December 31, 2001, for purposes of satisfying the minimum benefit requirements of Section 416(c)(1) of the Code and the Plan, in determining years of service with the Company, any service with the Company shall be disregarded to the extent that such service occurs during a Plan Year when the Plan benefits (within the meaning of Section 410(b) of the Code) no Key Employee or former Key Employee.
(d) For purposes of this Section, Compensation for any Limitation Year ending in a Plan Year which began prior to January 1, 1984, subsequent to the last Limitation Year during which the Plan is a Top-Heavy Plan, or in which the Participant failed to complete a Year of Service, shall be disregarded.
(e) For the purposes of determining the top-heavy minimum benefit under this Section, Compensation shall be limited to $200,000 (as adjusted in such manner as permitted under Code Section 415(d)).
(f) If the Article herein entitled “Payment of Benefits” provides for the Normal Retirement Benefit to be paid in form other than a single life annuity, the Accrued Benefit under this Section shall be the Actuarial Equivalent of the minimum Accrued Benefit under (a) above.
(g) If payment of the minimum Accrued Benefit commences at a date other than Normal Retirement Date, the minimum Accrued Benefit shall be the Actuarial Equivalent of the minimum Accrued Benefit commencing at Normal Retirement Date.
(h) If a Non-Key Employee participants in this Plan and a defined contribution plan included in a Required Aggregation Group which is top-heavy, the minimum benefits shall be provided under this Plan.
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(i) The preceding provisions of this Section shall be inapplicable to the extent not required of this Plan pursuant to Code Section 416(i)(4).
4.3. Non-Duplication of Benefits: If an Inactive Participant who is no longer actively employed by the Employer again becomes actively employed by the Employer in the same Eligible Class, any such renewed participation shall not result in duplication of benefits. Accordingly, if such Participant has received or was deemed to have received a distribution of a vested Accrued Benefit under the Plan by reason of prior participation (and such distribution has not been repaid to the Plan with interest as described in the preceding paragraph within a period of the earlier of five (5) years after the first date on which the Participant is subsequently reemployed by the Employer or the close of the first period of five (5) consecutive Breaks in Service commencing after the distribution), his Accrued Benefit shall be reduced by the Accrued Benefit determined as of the date of distribution.
4.4. Transfers, Service with Affiliated Employers: The benefits provided hereunder as to an Employee who transfers employment to or from an Affiliated Employer or into another Eligible Class shall be determined by reference to this Article and the Article herein entitled “TRANSFERS; SERVICE WITH AFFILIATED EMPLOYERS.”
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ARTICLE V.
LIMITATIONS ON BENEFITS
5.1 Limitation of Benefits to Comply With Section 415. Effective for Limitation Years beginning on or after July 1, 2007, and notwithstanding any Plan provisions to the contrary, in no event may the maximum annual retirement benefit payable to a Participant under the Plan and any other defined benefit plan of the Employer or an Affiliated Employer at any time within the Limitation Year exceed the limitations contained in Code Section 415 (as amended from time to time, including, without limitation, P.L. 108-218, the Pension Funding Equity Act of 2004, P.L. 109-280, the Pension Protection Act of 2006, and P.L. 110-458, the Worker, Retiree, and Employer Recovery Act of 2008) and the regulations and guidance issued thereunder, which are hereby incorporated by reference, including, without limitation, the following definition of compensation as set out therein:
The term “compensation” for purposes of compliance with the limitations under Code Section 415 shall include the following:
(i) wages as reported for purposes of federal income tax on Form W-2;
(ii) elective deferrals as defined in Section 402(g)(3) of the Code and salary reduction contributions of the Participant not includible in his or her gross income by reason of Section 125 (including amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage) or Section 132(f) of the Code; and
(iii) compensation paid after severance from employment as set out in Treas. Reg. § 1.415(c)-2(e)(3).
5.2 Minimum Funding Requirements. Notwithstanding any provisions of the Plan to the contrary, effective for Plan Years beginning after December 31, 2007 (or such later applicable effective date as permitted for the Plan by any applicable guidance issued by the IRS) the minimum funding requirements for the Plan shall be determined under the applicable provisions of Code Sections 412 and 430.
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5.3 Funding Based Restrictions. Notwithstanding any provisions of the Plan to the contrary, effective for Plan Years beginning after December 31, 2007 (or such later applicable effective date as permitted for the Plan under the Pension Protection Act of 2006 for plans maintained pursuant to a collective bargaining agreement and/or any applicable guidance issued by the IRS), funding based limits on Plan benefits and distributions from the Plan shall be determined in accordance with Section 436 of the Code and the regulations thereunder, the applicable provisions of which are hereby incorporated by reference. Specifically, with respect to and in furtherance of the foregoing incorporation:
(a) Restriction on Payment of Contingent Event Benefits. Notwithstanding any provisions of the Plan to the contrary, and except as otherwise permitted by Code Sections 436(b)(2), the Plan shall not provide any Participant with an Unpredictable Contingent Event Benefit with respect to an Unpredictable Contingent Event occurring during a Plan Year if the AFTAP for such Plan Year is less than 60 percent (or the AFTAP would be less than 60 percent as a result of payment of such Unpredictable Contingent Event benefit). Unpredictable Contingent Event Benefits disallowed under the Plan during a Code Section 436(b) restriction period shall not be paid to Participants upon expiration of the restriction period, except as authorized by a Plan amendment that satisfies the requirements of Code Section 436(c), or as otherwise required under Treasury Regulation 1.436-1.
The provisions of this Subsection 5.3(a) will cease to apply as of the date the plan sponsor (i) makes a contribution described in Code Section 436(b)(2), or (ii) provides security to the Plan, or elects, or is deemed to elect, to reduce funding balances as described in Code Section 436(f), to enable the AFTAP for the Plan Year to reach 60%, as certified by the enrolled actuary and as otherwise required under Treasury Regulation 1.436-1(f).
(b) Restriction on Amendments Increasing Plan Liabilities. Notwithstanding any provisions of the Plan to the contrary, and except as otherwise permitted by Code Sections 436(c)(2), (c)(3), and (f), no amendment to the Plan that has the effect of increasing liabilities of the Plan by reason of increases in benefits,
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establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable is permitted to take effect if the AFTAP for the Plan Year is less than 80 percent (or is 80 percent or more but would be less than 80 percent if the benefits attributable to the amendment were taken into account in determining the AFTAP), or as otherwise required under Treasury Regulation 1.436-1.
The provisions of this Subsection 5.3(b) will not apply to any amendment which provides for an increase in benefits under a formula which is not based on the Participant’s compensation, but only if the rate of such increase in benefits does not exceed the contemporaneous rate of increase in average wages of Participants covered by the amendment.
The provisions of this Subsection 5.3(b) will cease to apply as of the date the plan sponsor (i) makes a contribution described in Code Section 436(c)(2), or (ii) provides security to the Plan, or elects, or is deemed to elect, to reduce funding balances as described in Code Section 436(f) to enable the AFTAP for the Plan Year to reach 80%, as certified by the enrolled actuary and as otherwise required under Treasury Regulation 1.436-1(f).
(c) Limitations on accelerated benefit distributions. Notwithstanding any provisions of the Plan to the contrary, and except as otherwise permitted by Code Section 436(f):
(i) Funding percentage less than 60 percent. In accordance with Code Section 436(d)(1), if the Plan’s AFTAP for a Plan Year is less than 60 percent, a Participant or beneficiary shall not be permitted to elect an optional form of benefit that includes a Prohibited Payment and the Plan shall not pay any Prohibited Payment with an Annuity Commencement Date on or after the applicable Measurement Date. If a Participant or beneficiary requests such a Prohibited Payment distribution, the Plan shall permit the Participant or beneficiary to elect another form of benefit payment available under the Plan that is not a Prohibited Payment or to defer payment to a later date to the extent permissible under the Code. The
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provisions of this Subsection 5.3(c)(i) will not apply with respect to benefits payable to a Participant whose Annuity Commencement Date is on or after the date the enrolled actuary certifies that the AFTAP for the Plan Year is at least 60%.
(ii) Bankruptcy. In accordance with Code Section 436(d)(2), a Participant or beneficiary shall not be permitted to elect an optional form of benefit that includes a Prohibited Payment and the Plan shall not pay any Prohibited Payment with respect to an Annuity Commencement Date occurring during any period in which the Company is a debtor in a case under Title 11, United States Code (or similar federal or state law), until the date on which the enrolled actuary certifies that the Plan’s AFTAP is not less than 100 percent.
(iii) Limited payment if percentage at least 60 percent but less than 80 percent. The following rules shall apply:
(A) General. In accordance with Code Section 436(d)(3)(A), in any case in which the Plan’s AFTAP for a Plan Year is 60 percent or greater but less than 80 percent, a Participant or beneficiary shall not be permitted to elect an optional form of benefit that includes a Prohibited Payment and the Plan may not pay any Prohibited Payment to a Participant or beneficiary after the applicable Measurement Date unless it qualifies as an “unrestricted portion”, meaning the present value of the portion of the benefit that is being paid in a Prohibited Payment does not exceed the lesser of (i) 50 percent of the present value of the Participant’s Plan benefits under the optional form of benefit which includes the prohibited payment, or (ii) 100 percent of the present value of the maximum PBGC guarantee with respect to the Participant under Section 4022 of ERISA (as described in Treasury Regulation 1.436-1(d)(3)(iii)(B)). For this purpose, present values are determined using the rules of Code Section 417(e).
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(B) Bifurcation Rules. Reserved.
(C) Reserved.
(D) Reserved.
(E) For purposes of determining the limitations on accelerated payments under Code Section 436(d)(3), a Participant and his or her beneficiary shall be treated as a single Participant, and the Participant’s accrued benefit shall be allocated as set forth in Code Section 436(d)(3)(B)(ii).
(F) The provisions of this Subsection 5.3(c)(iii) will not apply with respect to benefits payable to a Participant whose Annuity Commencement Date is on or after the date the enrolled actuary certifies that the AFTAP for the Plan Year is at least 80%.
(d) Restriction on Accruals. Notwithstanding any provisions of the Plan to the contrary, and except as otherwise permitted by Code Sections 436(e)(2) and (f), if the Plan’s AFTAP is less than 60 percent for a Plan Year, all benefit accruals under the Plan shall cease as of the applicable Measurement Date pursuant to Code Section 436(e)(1); provided, however, for the 2009 Plan Year, this paragraph (d) shall be applied by substituting the Plan’s AFTAP for the preceding Plan Year for the Plan’s AFTAP for the 2009 Plan Year, but only if the AFTAP for the preceding Plan Year is greater. If the Plan is required to cease benefit accruals pursuant to Code Section 436(e):
(i) During such restriction period, the Plan may not be amended in a manner that would increase the liabilities of the Plan by reason of an increase in benefits or establishment of new benefits, regardless of whether such amendment would otherwise be permissible under Code Section 436(c)(3); and
(ii) Unless the Plan has been duly amended to provide otherwise, benefit accruals shall resume under the Plan as of the Measurement Date on which benefit accruals are no longer restricted, as set forth in the regulations promulgated under Code Section 436.
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(iii) Benefit accruals disallowed under the Plan during a Code Section 436(e) restriction period shall not be credited under the Plan upon expiration of the restriction period except as authorized by a duly adopted Plan amendment, which amendment must satisfy the requirements of Code Section 436(c) and Treasury Regulation 1.436-1.
(iv) The provisions of this Subsection 5.3(d) will cease to apply as of the date the plan sponsor (i) makes a contribution described in Code Section 436(e)(2), or (ii) provides security to the Plan, or elects, or is deemed to elect, to reduce funding balances as described in Code Section 436(f), to enable the AFTAP for the Plan Year to reach 60%, as certified by the enrolled actuary and as otherwise required under Treasury Regulation 1.436-1(f).
(e) Special Rules of Operation for Periods Prior to and After Certification.
(i) Periods Prior to Certification During Which a Presumption Applies. For any period during which a presumption under Code Section 436(h) and Treasury Regulation Sections 1.436-1(h)(1), (2) or (3) applies to the Plan, the limitations under Sections 5.3(a), (b), (c) and (d) shall be applied to the Plan as if the AFTAP for the year were the presumed AFTAP determined under the rules of Code Section 436(h) and Treasury Regulation Sections 1.436-1(h)(1), (2) or (3), as applicable, updated to take into account certain Unpredictable Contingent Event Benefits and Plan amendments in accordance with Code Section 436 and Treasury Regulation Section 1.436-1(g).
(ii) Periods After Certification of AFTAP. Subsection 5.3(e)(i) shall no longer apply for a Plan Year on and after the date an enrolled actuary for the Plan issues a certification of the AFTAP of the Plan for the current Plan Year, provided that the certification is issued before the first day of the tenth (10 th ) month of the Plan Year. For example, the limitations on Prohibited Payments under Subsection 5.3(e)(i) shall apply for distributions with Annuity Starting Dates on and after the date of such
17
certification using the certified AFTAP of the Plan for the Plan Year. Similarly, the prohibitions on accruals under Subsection 5.3(d) as a result of the enrolled actuary’s certification that the AFTAP of the Plan for the Plan Year is less than sixty percent (60%) shall be effective as of the date of the certification, and any prohibition on accruals shall cease to be effective on the date the enrolled actuary issues a certification that the AFTAP for the Plan for the Plan Year is at least sixty percent (60%).
(f) Anticutback Code Section 411(d)(6) Relief. As provided in Section 1107 of the Pension Protection Act of 2006, application of the restrictions set forth in this Section 5.3 shall not cause the Plan to fail to meet the requirements of Code Section 411(d) (6). In the event of a restriction under the Plan pursuant to Code Section 436 that affects a Participant’s right to receive a benefit or distribution of a benefit, or to elect an optional form of payment under the Plan, or that reduces the amount of benefit payable to a Participant, such restrictions shall not constitute an impermissible cutback within the meaning of Code Section 411(d)(6).
(g) Definitions. For purposes of this Section 5.3, the following capitalized terms shall have the meanings ascribed below:
(i) “AFTAP” means the adjusted funding target attainment percentage as defined in Code Section 436(j)(2) and Treasury Regulation 1.436-1(j).
(ii) “Annuity Commencement Date” means for purposes of Code Section 436(d):
(A) The first day of the first period for which an amount is payable as an annuity as described in Code Section 417(f) (2)(A)(i),
(B) In the case of a benefit not payable in the form of an annuity, the annuity starting date for the qualified joint and survivor annuity that is payable under the Plan at the same time as the benefit that is not payable as an annuity,
(C) In the case of an amount payable under a retroactive annuity start date, the benefit commencement date,
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(D) The date of any payment for the purchase of an irrevocable commitment from an insurer to pay benefits under plan, and
(E) The date of any transfer to another plan described in (g)(iv)(C) below.
(iii) “Measurement Date” means any applicable Code Section 436 measurement date, which is a date that is used to stop or start the application of the limitations of Code Sections 436(d) and 436(e), and used for calculations with respect to applying the limitations of Code Section 436(b) and (c), as such dates are defined for a Plan Year under Code Section 436 and the regulations promulgated thereunder.
(iv) “Prohibited Payment” means:
(A) Any payment for a month that is in excess of the monthly amount paid under a single life annuity (plus any social security supplements described in the last sentence of Code Section 411(a)(9)), to a Participant or beneficiary whose Annuity Commencement Date occurs during any period that a limitation on accelerated benefit payments is in effect,
(B) Any payment for the purchase of an irrevocable commitment from an insurer to pay benefits,
(C) Any transfer of assets and liabilities to another plan maintained by the same employer (or by any member of the employer’s controlled group) that is made in order to avoid or terminate the application of section 436 benefit limitations, and
(D) Any other payment that is identified as a prohibited payment by the Commissioner of the Internal Revenue Service in revenue rulings and procedures, notices and other guidance published in the Internal Revenue Bulletin.
A Prohibited Payment shall not include the payment of a benefit which under Code Section 411(a)(11) may be immediately distributed without the consent of the Participant.
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(v) “Unpredictable Contingent Event” means:
(A) A plant shutdown (whether full or partial) or a similar event, or
(B) An event (including the absence of an event) other than attainment of any age, performance of any service, receipt or derivation of compensation, or the occurrence of death or disability.
(vi) “Unpredictable Contingent Event Benefit” means a benefit payable solely by reason of an Unpredictable Contingent Event.”
(h) Special Rule for Certain Years .
(i) With respect to an applicable provision, the determination of AFTAP shall be subject to Section 203(a)(2) of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010.
(ii) For purposes of this paragraph (h), the term “applicable provision” means:
(A) Paragraph (c) of this Section 5.3, but only for purposes of applying such paragraph to a payment which, as determined under the rules prescribed by the Secretary of Treasury, is a payment under a Social Security leveling option which accelerates payments under the Plan before, and reduces payments after a Participant start receiving Social Security benefits in order to provide substantially similar aggregate payments both before and after such benefits are received; and
(B) Paragraph (d) of this Section 5.3.
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ARTICLE VI.
VESTING
6.1. Vesting Rights: A Participant will acquire a vested and nonforfeitable interest in his or her Accrued Benefit attributable to Employer contributions in accordance with the Exhibit attached hereto which corresponds to the Participant’s classification and status.
6.2. Top-Heavy Vesting: Notwithstanding the vesting provided for above, for any Top-Heavy Plan Year, the vested portion of the Accrued Benefit of any Participant who has one (1) Hour of Service after the Plan becomes a Top-Heavy Plan will be a percentage of the Participant’s Accrued Benefit determined on the basis of the Participant’s number of Years of Vesting Service according to the schedule included in the Exhibit corresponding to the Participant’s classification and status.
6.3. Service Computation Period; Service Credit
For vesting purposes, Years of Vesting Service, Breaks in Service and any other conditions relative to vesting shall be determined by reference to the Exhibit corresponding to the Participant’s classification and status.
6.4. Amendment of Vesting Schedule: If the Plan’s vesting schedule is amended, or the Plan is amended in any way that directly or indirectly affects the computation of the Participant’s nonforfeitable percentage or if the Plan is deemed amended by an automatic change to or from a top-heavy vesting schedule, each Participant with at least three (3) Years of Service with the Employer may elect, within a reasonable period after the adoption of the amendment or change, to have the nonforfeitable percentage computed under the Plan without regard to such amendment or change. For Participants who do not have at least one (1) Hour of Service in any Plan Year beginning after December 31, 1988, the preceding sentence will be applied by the substitution of “5 Years of Service” for “3 Years of Service” where such language appears.
The period during which the election may be made will commence with the date the amendment is adopted or deemed to be made and will end on the latest of:
(a) sixty (60) days after the amendment is adopted;
(b) sixty (60) days after the amendment becomes effective; or
21
(c) sixty (60) days after the Participant is issued written notice of the amendment by the Employer or Plan Administrator.
Notwithstanding the foregoing, no such change in the Plan’s vesting schedule or computation of a Participant’s nonforfeitable percentage shall apply to a Participant unless such Participant is credited with an Hour of Service on or after the date of the change.
6.5. Amendments Affecting Vested and/or Accrued Benefit. No amendment to the Plan will be effective to the extent that it has the effect of decreasing a Participant’s Accrued Benefit. Notwithstanding the preceding sentence, a Participant’s Accrued Benefit may be reduced to the extent permitted under Section 412(c) (8) of the Code. For purposes of this Section, a Plan amendment which has the effect of decreasing a Participant’s Accrued Benefit or eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment will be treated as reducing an Accrued Benefit. Furthermore, if the vesting schedule of a Plan is amended, in the case of an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such Employee’s right to his or her Employer-provided Accrued Benefit will not be less than the percentage computed under the Plan without regard to such amendment.
6.6. No Divestiture for Cause: Amounts vested pursuant to this Section shall not be subjected to divestiture for cause.
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ARTICLE VII.
PAYMENT OF BENEFITS
7.1. Notice: The Plan Administrator shall provide the Participant with a notice of rights of payment no less than thirty (30) and no more than one hundred and eighty (180) days before the Participant’s Annuity Starting Date. Such notice shall be in writing and shall set forth the following information:
(a) an explanation of the eligibility requirements for, the material features of, and the relative values of the alternate forms of benefits available hereunder; and
(b) the Participant’s right to defer receipt of a Plan distribution. Such notice shall be given to the Participant in person or shall be mailed to the Participant’s current address as reflected in the Employer’s records.
7.2. Waiver of Thirty (30) Day Notice Period:
Notwithstanding the provisions of Section 7.1 above, such distribution may commence less than thirty (30) days after the notice required under Regulation Section 1.411(a)-11(c) is given, provided that:
(a) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option);
(b) the Participant, after receiving the notice, affirmatively elects the distribution; and
(c) to the extent applicable, the requirements of Section 8.4 are satisfied.
7.3. Form of Payment. The automatic form of retirement benefit, and any optional forms of benefits shall be determined by reference to the Exhibit corresponding to the Participant’s classification and status; provided, however, that in addition to such optional forms of benefits set forth in the applicable Exhibit, effective January 1, 2008, a Participant in any portion of the Plan may elect a joint & 75% survivor annuity, in accordance with the Qualified Optional Survivor Annuity rules of Internal Revenue Code § 417.
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7.4. Actuarial Equivalent Benefit:
Except to the extent a Participant’s benefits are suspended in accordance with the rules set forth in the Section below captioned “Suspension of Benefits”, or as otherwise specifically set forth herein, the amount of any form of benefit under the terms of this Plan will be the Actuarial Equivalent of the Participant’s Accrued Benefit in the Normal Form commencing at Normal Retirement Age.
7.5. Payment Without Participant Consent:
(a) Effective for Plan Years beginning after December 31, 1997, with respect to Accrued Benefits payable by reference to an Exhibit which provided for the immediate cash-out of de minimis benefits prior to January 1, 1998, if the Actuarial Equivalent present value of Participant’s vested Accrued Benefit derived from Employer and Employee contributions does not exceed $5,000, the Participant or beneficiary entitled to such benefit will receive a single sum distribution of cash or property of the Actuarial Equivalent value of the entire vested Accrued Benefit ; provided, however, that effective March 28, 2005, in the event of a mandatory distribution to a Participant in excess of $1,000, the Plan Administrator will pay the distribution in a direct rollover to an individual retirement plan designated by the Plan Administrator if the Participant does not elect to receive the distribution in cash or have such distribution paid directly to an eligible retirement plan that he or she specifies. If the value of a Participant’s Vested Accrued Benefit exceeded $5,000 at the time of any distribution under the Plan, the value of the benefit shall be deemed to exceed $5,000 at all times thereafter until March 22, 1999. If the Participant has no vested interest in a benefit, the Participant shall be deemed to have a distribution of zero dollars on the Participant’s termination from service date. This provision is applicable to all distributions under the Plan, including any death benefit.
(b) In the event that the Participant has terminated employment and the Participant (and the Participant’s Spouse, if applicable) neither consents to receive a Plan distribution nor elects to defer receipt of a Plan distribution, the Participant’s Accrued Benefit shall be distributed in the Automatic Form as soon as practicable thereafter, but in no event before the date the Participant attains Normal Retirement Age, if such vested Accrued Benefits
24
exceeds $3,500, or, effective January 1, 1998, $5,000 or such greater amount as permitted under the Code.
(c) Notwithstanding the foregoing, the Plan Administrator may, upon the Participant’s termination of employment, distribute an annuity contract to the Participant which provides that payments thereunder shall not commence until a later date if such annuity contract satisfies the requirements of Sections 401(a)(11) and 417 of the Code.
7.6. Restrictions on Immediate Distributions:
(a) An Accrued Benefit is immediately distributable if any part of the Accrued Benefit could be distributed to the Participant (or surviving Spouse) before the Participant attains (or would have attained whether or not deceased) the later of the Normal Retirement Age or age sixty-two (62).
(b) If the present value of a Participant’s vested Accrued Benefit derived from Employer and Employee contributions exceeds $3,500, or, effective January 1, 1998, $5,000 or such greater amount as permitted under the Code, and the Accrued Benefit is immediately distributable, the Participant and his or her Spouse (or where either the Participant or the Spouse has died, the survivor) must consent to any distribution of such Accrued Benefit. The consent of the Participant and the Spouse shall be obtained in writing within the 180- day period ending on the Annuity Starting Date. The Plan Administrator shall notify the Participant and the Participant’s Spouse of the right to defer any distribution until the Participant’s Accrued Benefit is no longer immediately distributable. Such notification shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under the Plan in a manner that would satisfy the notice requirements of Code Section 417(a)(3), and shall be provided no less than 30 days and no more than 180 days prior to the Annuity Starting Date
(c) Notwithstanding the foregoing, only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the Accrued Benefit is immediately distributable. Neither the consent of the Participant nor the Participant’s Spouse shall be required to the extent that a distribution is required to satisfy Code Section 401(a)(9) or Code Section 415.
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7.7. Limitation of Benefits on Plan Termination: The restrictions of paragraphs (a) and (b) below are included solely to meet the requirements of Proposed Treasury Regulation Section 1.401(a)4-5(c). If the provisions of paragraphs (a) and (b) below are no longer necessary to qualify the Plan under said Proposed Regulation or the Code, said paragraphs (a) and (b) shall be ineffective without the necessity of further amendment.
(a) In the event that the Plan is terminated, the benefit of each Highly Compensated Participant and each former Highly Compensated Employee shall be limited to a benefit which is nondiscriminatory within the meaning of Code Section 401(a)(4) and the Regulations thereunder.
(b) For Plan Years beginning on or after January 1, 1993, the monthly payments made from the Plan to Highly Compensated Employees and to former Highly Compensated Employees who are among the twenty-five most highly paid Employees with the greatest Compensation in the current or any prior year, shall be limited to an amount equal to the monthly payments that would be made on behalf of the Employee under a Straight Life Annuity that is the Actuarial Equivalent of the sum of the Employee’s Accrued Benefit, the Employee’s other benefits under the Plan (other than a social security supplement, within the meaning of Section 1.411(a)-7(c)(4)(ii) of the Regulations), and the amount the Employee is entitled to receive under a social security supplement.
The restrictions of this paragraph (b) shall not apply, however, if
(1) after payment of benefits to an Employee described above, the value of Plan assets equals or exceeds one hundred ten percent (110%) of the value of current liabilities, as defined in Code Section 412(d)(7),
(2) the value of benefits provided under the Plan for an Employee described above is less than one percent (1%) of the value of current liabilities before distribution, or
(3) the value of the benefits payable under the Plan to any Employee described above does not exceed $3,500, or, effective January 1, 1998, $5,000 or such greater amount as permitted under the Code.
(c) For purposes of this Section, the term “benefit” shall include loans in excess of the amounts set forth in Code Section 72(p)(2)(A), any periodic income, any
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withdrawal values payable to a living Employee and any death benefits not provided for by insurance on the Employee’s life.
An Employee’s otherwise restricted benefit may be distributed in full to the affected Employee if prior to receipt of the restricted amount the Employee enters into a written agreement with the Plan Administrator to secure repayment to the Plan of the restricted amount. The restricted amount is the excess of the amounts distributed to the Employee (accumulated with reasonable interest) over the amounts that could have been distributed to the Employee under the Normal Form described in Section 4.1 of the Plan (accumulated with reasonable interest). The Employee may secure repayment of the restricted amount upon distribution by: (1) entering into an agreement for promptly depositing in escrow with an acceptable depositary property having a fair market value equal to at least one hundred twenty-five percent (125%) of the restricted amount, (2) providing a bank letter of credit in an amount equal to at least one hundred percent (100%) of the restricted amount, or (3) posting a bond equal to at least one hundred percent (100%) of the restricted amount. If the Employee elects to post bond, the bond will be furnished by an insurance company, bonding company or other surety for federal bonds.
The escrow arrangement may provide that an Employee may withdraw amounts in excess of one hundred twenty-five percent (125%) of the restricted amount. If the market value of the property in an escrow account falls below one hundred ten percent (110%) of the remaining restricted amount, the Employee must deposit additional property to bring the value of the property held by the depositary up to one hundred twenty-five percent (125%) of the restricted amount. The escrow arrangement may provide that Employee may have the right to receive any income from the property placed in escrow, subject to the Employee’s obligation to deposit additional property, as set forth in the preceding sentence.
A surety or bank may release any liability on a bond or letter of credit in excess of one hundred percent (100%) of the restricted amount.
If the Plan Administrator certifies to the depositary, surety or bank that the Employee (or the Employee’s estate) is no longer obligated to repay any restricted amount, a depositary
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may redeliver to the Employee any property held under an escrow agreement, and a surety or bank may release any liability on an Employee’s bond or letter of credit.
7.8. Early Plan Termination Restrictions: Notwithstanding any provision in this Plan to the contrary, prior to the Plan Year beginning on January 1, 1993, and during the first ten (10) years after the effective date hereof, and if full current costs had not been met at the end of the first ten (10) years, until said full current costs are Net, the benefits provided by the Employer’s contributions for the Participants whose anticipated annual retirement benefit at Normal Retirement Date exceeds $1,500 and who at the effective date of the Plan were among the twenty-five (25) highest paid Employees of the Employer will be subject to the conditions set forth in the following provisions.
(a) The benefit payable to a Participant described in this Section or his Beneficiary shall not exceed the greater of the following:
(1) those benefits purchasable by the greater of (i) $20,000, or (ii) an amount equal to 20% of the first $50,000 of the Participant’s annual Compensation multiplied by the number of years from the effective date of the Plan to the earlier of (A) the date of termination of the Plan, or (B) the date the benefit of the Participant becomes payable or (C) the date of a failure on the part of the Employer to meet the full current costs of the Plan; or
(2) if a Participant is a “substantial owner” (as defined in ERISA Section 4022(b)(5)(A)), the present value of the benefit guaranteed for “substantial owners” under ERISA Section 4022, or
(3) if the Participant is not a “substantial owner”, the present value of the maximum benefit provided in ERISA Section 4022(b)(3)(B), determined on the date the Plan terminates or on the date benefits commence, whichever is earlier and in accordance with regulations of the Pension Benefit Guaranty Corporation.
(b) If the Plan is terminated or the full current costs thereof have not been met at any time within ten (10) years after the effective date, the benefits which any of the Participants described in this Section may receive from the Employer’s contribution shall not exceed the benefits set forth in paragraph (a) above. If at the end of the first ten (10) years the full current costs are not met, the restrictions will continue to apply until the full current costs are funded for the first time.
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(c) If a Participant described in this Section leaves the employ of the Employer of withdraws from participation in the Plan when the full current costs have been met, the benefits which he may receive from the Employer contributions shall not at any time within the first ten (10) years after the effective date exceed the benefits set forth in paragraph (a) above, except as provided in paragraph (i) below.
(d) These conditions shall not restrict the full payment of any survivor’s benefits on behalf of a Participant who dies while in the Plan and the full current costs have been met.
(e) These conditions shall not restrict the current payment of full retirement benefits called for by the Plan for any retired Participant while the Plan is in full effect and its full current costs have been met, provided an agreement, adequately secured, guarantees the repayment of any part of the distribution that is or may become restricted.
(f) If the benefits of, or with respect to, any Participant shall have been suspended or limited in accordance with the limitations of paragraphs (a), (b), and (c) above because the full current costs of the Plan shall not then have been met, and if such full current costs shall thereafter be met, then the full amount of the benefits payable to such Participant shall be resumed and the parts of such benefits which have been suspended shall then be paid in full.
(g) Notwithstanding anything in paragraphs (a), (b) and (c) above, if on the termination of the Plan within the first ten (10) years after the effective date, the funds, contracts, or other property under the Plan are mot than sufficient to provide Accrued Benefits for Participants and their Beneficiaries including full benefits for all Participants other than such of the twenty-five (25) highest paid Employees as are still in the service of the Employer and also including Accrued Benefits as limited by this Section for such twenty-five (25) highest paid Employees, then any excess of such funds, contracts, and property shall be used to provide Accrued Benefits for the twenty-five (25) highest paid Employees in excess of such limitations of this Section up to the Accrued Benefits to which such Employees would be entitled without such limitations.
(h) In the event that Congress should provide by statutes, or the Treasury Department or the Internal Revenue Services should provide by regulation or ruling, that the
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limitations provided for in this Article are not longer necessary in order to meet the requirement for a qualified plan under the Code as then in effect, the limitations in this Article shall become void and shall no longer apply without the necessity of amendment to this Plan.
(i) In the event a lump-sum distribution is made to any Employee subject to the above restrictions in an amount in excess of that amount otherwise permitted under this Article, an agreement shall be made, with adequate security guaranteeing repayment of any amount of the distribution that is restricted. Adequate security shall mean property having a fair market value of at least one hundred twenty- five percent (125%) of the amount which would be repayable if the Plan had terminated on the date of distribution of such lump sum. If the fair market value of the property falls below on hundred ten percent (110%) of the amount which would then be repayable if the Plan were then to terminate, the distributee shall deposit additional property to bring the value of the property to one hundred twenty-five percent (125%) of such amount.
In the event of the termination of partial termination of this Plan, the rights of all affected Employees to benefits accrued to the date of such termination or partial termination (to the extent funded as of such date) shall be nonforfeitable.
7.9. Suspension of Benefits:
(a) Normal or early retirement benefits in pay status will be suspended for each calendar month during which the Employee completes at least 40 Hours of Service as defined in Section 203(a)(3)(B) of ERISA. Consequently, the amount of benefits which are paid later than Normal Retirement Age will be computed without regard to amounts which were suspended under the preceding sentence, i.e. as if the Employee had been receiving benefits since Normal Retirement Age.
(b) Resumption of Payment. If benefit payments have been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the Employee ceases to be employed in “service” as defined in ERISA Section 203(a)(3)(B). This initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of “service” under Section 203(a)(3)(B) of ERISA and the resumption of payments.
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(c) Notification. No payment shall be withheld by the Plan pursuant to this Section unless the Plan Administration notifies the Employee by personal delivery or first class mail during the first calendar month or payroll period in which the Plan withholds payments that such Employee’s benefits are suspended. Such notification shall contain a description of the specific reasons why benefit payments are being suspended, a description of the Plan provision relating to the suspension of payments, a copy of such provisions, and a statement to the effect that applicable Department of Labor regulations may be found in Section 2530.203-3 of Title 29 of the Code of Federal Regulations.
In addition, the notice shall inform the Employee of the Plan’s procedures for affording a review of the suspension of benefits. Requests for such reviews may be considered in accordance with the claims procedure adopted by the Plan pursuant to Section 503 of ERISA and applicable regulations.
(d) Amount Suspended.
(1) Annuity Payments. In the case of benefits payable periodically as a monthly basis for as long as a life (or lives) continues, such as a Straight Life Annuity of a Qualified Joint and Survivor Annuity, an amount equal to the portion of a monthly benefit payment derived from Employer contributions.
(2) Other Benefit Forms. In the case of a benefit payable in a form other than the form described in subsection (1) above, an amount equal to the Employer-provided portion of benefit payments for a calendar month in which the Employee is employed in ERISA Section 203(a)(3)(B) service, equal to the lesser of
(i) The amount of benefits which would have been payable to the Employee if he or she had been receiving monthly benefits under the Plan since actual retirement based on a Straight Life Annuity commencing at actual retirement age; or
(ii) The actual amount paid or scheduled to be paid to the Employee for such month.
Payments which are scheduled to be paid less frequently than monthly may be converted to monthly payments.
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(e) Minimum Benefits. This Section does not apply to the minimum benefit to which the participant is entitled under the top-heavy rules of the Section entitled “Minimum Benefit for Top-Heavy Plan”.
7.10. Restrictions on Commencement Of Retirement Benefits:
(a) Unless the Participant elects otherwise, distribution of benefits will begin no later than the 60 th day after the later of the close of the Plan Year in which:
(1) the Participant attains Normal Retirement Age;
(2) occurs the 10 th anniversary of the Plan Year in which the Participant commenced participated in the Plan; or
(3) the Participant terminates services with the Employer.
(b) Notwithstanding the foregoing, the failure of a Participant and the Participant’s Spouse, if any, to consent to a distribution while a benefit is payable under the Article entitled “Plan Benefits”, will be deemed an election to defer commencement of payment of any benefit sufficient to satisfy this paragraph.
7.11. Minimum Distribution Requirements: All distributions required under this Article will be determined and made in accordance with the minimum distribution requirements of Code Section 401(a)(9) and the Regulations thereunder, including the minimum distribution incidental benefit rules found at Regulations Section 1.401(a)(9)-2. Notwithstanding the preceding sentence, for Plan Years beginning after December 31, 1996, the term “required beginning date” means the pre-Small Business Job Protection Act required 1 beginning date of April 1 of the calendar year following the calendar year in which the Participant attains age 70 / 2 regardless of whether the Participant is a 5-percent owner (as defined in Code Section 416). Life expectancy and joint and last survivor life expectancy are computed by using the expected return multiples found in Tables V and VI of Regulations Section 1.72-9.
(a) Required Beginning Date: The entire interest of a Participant must be distributed or begin to be distributed no later than the Participant’s required beginning date.
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(1) General Rule: The “required beginning date” of a Participant is the first day of April of the calendar year following 1 the calendar year in which the Participants attains age 70 / 2 .
1 (2) Transitional Rules: The required beginning date of a Participant who attains age 70 / 2 before 1988 will be determined in accordance with (i) or (ii) below:
(i) Non-5-percent owners: The required beginning date of a Participant who is not a 5-percent owner is the 1 first day of April of the calendar year following the calendar year in which occurs the later of requirement or attainment of age 70 / 2 . The 1 required beginning date of a Participant who is not a 5-percent owner who attains age 70 / 2 during 1988 and who has not retired as of January 1, 1989, is April 1, 1990.
(ii) 5-percent owners: The required beginning date of a Participant who is a 5-percent owner during any year beginning after December 31, 1979 is the first day of April following the later of:
1 (A) the calendar year in which the Participant attains age 70 / 2 , or
(B) the earlier of the calendar year with or within which ends the Plan Year in which the Participant becomes a 5-percent owner, or the calendar year in which the Participant retires.
(3) A Participant is treated as a 5-percent owner for purposes of this paragraph if such Participant is a 5-percent owner as defined in Code Section 416(i) (determined in accordance with Code Section 416 but without regard to whether the Plan is a Top-Heavy Plan) at 1 any time during the Plan Year ending with or within the calendar year in which such owner attains age 66 / 2 or at any subsequent Plan Year.
(4) Once distributions have begun to a 5-percent owner under this paragraph, distributions must continue, even if the Participant ceases to be a 5-percent owner in a subsequent year.
(b) Limits On Distribution Periods: As of the first distribution calendar year, distributions, if not made in a single sum, may only be made over one of the following periods (or a combination thereof):
(1) the life of the Participant;
(2) the life of the Participant and a designated Beneficiary;
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(3) a period certain not extending beyond the life expectancy of the Participant; or
(4) a period certain not extending beyond the joint and last survivor expectancy of the Participant and a designated Beneficiary.
(c) Required Distributions On Or After The Required Beginning Date:
(1) If a Participant’s benefit is to be distributed over (i) a period not extending beyond the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and the Participant’s designated Beneficiary, or (ii) a period not extending beyond the life expectancy of the designated Beneficiary, the amount required to be distributed for each calendar year, beginning with distributions for the first distribution calendar year, must at least equal the quotient obtained by dividing the Participant’s Accrued Benefit by the Applicable Life Expectancy.
(2) For calendar years beginning before 1989, if the Participant’s Spouse is not the designated Beneficiary, the method of distribution selected must have assured that at least 50% of the Present Value of the Accrued Benefit available for distribution was to be paid within the life expectancy of the Participant.
(3) For calendar years beginning after 1988, the amount to be distributed each year, beginning with distributions for the first distribution calendar year, will not be less than the quotient obtained by dividing the Participant’s Accrued Benefit by the lesser of (i) the applicable life expectancy, or (ii) if the Participant’s Spouse is not the designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of the Proposed Regulations Section 1.401(a)(9)-2. Distributions after the death of the Participant will be distributed using the “applicable life expectancy” as the relevant divisor without regard to Proposed Regulations Section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant’s first distribution calendar year must be made on or before the Participant’s required beginning date. The minimum distribution for other calendar years, including the minimum distribution for the distribution calendar year in which the Participant’s required beginning date occurs, must be made on or before December 31 of that distribution calendar years.
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(5) If the Participant’s Accrued Benefit is to be distributed in the form of an annuity purchased from an insurance company, no such annuity contract will be purchased unless the distributions thereunder will be made in accordance with the requirements of Code Section 401(a)(9) and the Proposed Regulations thereunder.
(6) For purposes of determining the amount of the required distribution for the first distribution calendar year, the Accrued Benefit to be used will be the Accrued Benefit as of the last Valuation Date in the calendar year immediately preceding the first distribution calendar year. For all other years, the Accrued Benefit will be determined as of the last Valuation Date preceding such distribution calendar year.
For purposes of this paragraph, if any portion of the minimum distribution for the first distribution calendar is made in the second distribution calendar year on or before the required beginning date, the amount of the minimum distribution made in the second distribution calendar year will be treated as if it had been made in the immediately preceding distribution calendar year for purposes of determining the Accrued Benefit.
7.12. TEFRA Election Transitional Rule:
(a) Notwithstanding the other requirements of this Article and subject to the requirements of the Article herein entitled “Joint and Survivor Annuity Requirements”, distribution on behalf of any Participant, including 5-percent owner, will be made in accordance with all of the following requirements (regardless of when such distribution commences):
(1) The distribution by the Trust Fund is one which would not have disqualified the Trust Fund under Code Section 401(a)(9) as in effect prior to amendment by the Deficit Reduction Act of 1984;
(2) The distribution is in accordance with a method of distribution designated by the Participant whose interest in the Trust Fund is being distributed or, if the Participants is deceased, by the Beneficiary of the Participant.
(3) Such designation was made in writing, was signed by the Participant or the Beneficiary, and was made before January 1, 1984;
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(4) The Participant has accrued a benefit under the Plan as of December 31, 1983; and
(5) The method of distribution designated by the Participant or the Beneficiary specifies the time at which distributions will commence, the period over which distributions will be made, and in the case of any distribution upon the Participant’s death, the beneficiaries of the Participant listed in order of priority.
(b) A distribution upon death will not be covered by this transitional rule unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Participant.
(c) For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the Participant or the Beneficiary to whom such distributions is being made will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirements in the sub-paragraphs of (a) above.
(d) If a designation is revoked, any subsequent distribution must satisfy the requirements of Code Section 401 (a)(9) and the Proposed Regulations thereunder. If a designation is revoked subsequent to the date distributions are required to begin, the Plan must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy Code Section 401(a)(9) and the Proposed Regulations thereunder, but for an election under the Tax Equity and Fiscal Responsibility Act (“TEFRA”) Section 242(b)(2). For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in Regulations Section 1.401(a)(9)-2. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation so long as such substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life). If an amount is transferred or rolled over from one plan
36
to another plan, the rules in Q&A 1-2 and Q&A 1-3 of Proposed Treasury Regulations 1.401(a)(9)-2 will apply.
7.13. Distribution of Death Benefit
(a) Beneficiary Designation: Each Participant will file a written designation of Beneficiary with the Employer upon becoming a Participant in the Plan. Such designation will remain in force until revoked by the Participant by filing a new Beneficiary form with the Employer.
(b) Distribution Beginning Before Death: If the Participant dies after distribution of benefits has begun, the remaining portion of such Participant’s Accrued Benefit will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant’s death.
(c) Distribution Beginning After Death: If the Participant dies before distribution of benefits begins, distribution of the Participant’s Accrued Benefit will be completed by December 31 of the calendar year in which occurs the fifth anniversary of the Participant’s death except to the extent that an election is made to receive distributions as provided below:
(1) If any portion of the Participant’s Accrued Benefit is payable to a designated Beneficiary, distributions may be made over the life of, or over a period certain not greater than the life expectancy of, the designated Beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the Participant died.
(2) If the designated Beneficiary is the Participant’s surviving Spouse, the date distributions are required to begin in accordance with (1) above will not be earlier than the later of (i) December 31 of the calendar year immediately following 1 the calendar year in which the Participant died, or (ii) December 31 of the calendar year in which the Participant would have attained age 70 / 2 .
If the Participant has not made an election pursuant to this paragraph prior to death, the Participant’s designated Beneficiary must elect the method of distribution no later than the earlier of (1) December 31 of the calendar year in which distributions would be required to begin under this Section, or (2) December 31 of the calendar year in which occurs
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the fifth anniversary of the Participant’s death. If the Participant has no designated Beneficiary, or if the designated Beneficiary does not elect a method of distribution, distribution of the Participant’s Accrued Benefit must be completed by December 31 of the calendar year in which occurs the fifth anniversary of the Participant’s death.
For purposes of this paragraph, if the surviving Spouse dies after the Participant but before payments to such Spouse begin, the provisions of this paragraph, with the exception of such paragraph (2) therein, will be applied as if the surviving Spouse were the Participant.
For purposes of this Section, any amount paid to a child of the Participant will be treated as if it had been paid to the surviving Spouse if the amount becomes payable to the surviving Spouse when the child attains the age of majority.
7.14. Date Distribution Deemed to Begin: For purposes of this Article, distribution of a Participant’s interest is considered to begin on the Participant’s required beginning date (or, if the surviving Spouse dies after the Participant but before payments to such Spouse begin, the date distribution is required to begin to the surviving Spouse pursuant to Section 7.14(c)). If distribution in the form of an annuity irrevocably commences to the Participant before the required beginning date, the date distribution is considered to begin is the date distribution actually commences.
7.15. Distribution Pursuant to Qualified Domestic Relations Orders: Notwithstanding any other provision regarding distributions or payment of benefits, an Alternate Payee, as defined in Code Section 414(p), will be entitled to receive a distribution not in excess of a Participant’s vested Accrued Benefit pursuant to any final judgment, decree or order determined by the Plan Administrator to be a Qualified Domestic Relations Order (“QDRO”) as defined in ERISA and Code Section 414 (p). Such distribution will be made only in a form of benefit available under the Plan.
7.16. Payment to a Person Under a Legal Disability: Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally competent until the date on which the Plan Administrator receives a written notice, in a form and manner acceptable to the Plan Administrator, that such person is incompetent, and that a guardian, conservator or other person legally vested with the care of the person or estate has been appointed; provided, however, that if the Plan Administrator shall find that any person to
38
whom a benefit is payable under the Plan is unable to care for such person’s affairs because of incompetency, any payment due (unless a prior claim therefore shall have been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent, a brother or sister, or to any person or institution deemed by the Plan Administrator to have incurred expense for such person otherwise entitled to payment. Any such payment so made shall be a complete discharge of liability thereof under the Plan. In the event a guardian or conservator of the estate of any person receiving or claiming benefits under the Plan shall be appointed by a court of competent jurisdiction, retirement payments may be made to such guardian or conservator provided that proper proof of appointment and continuing qualification is furnished in a form and manner acceptable to the Plan Administrator. Any payment made on behalf of any such person as provided in this Section shall be binding on such person and shall be in full discharge of any obligation of such payment to such person.
7.17. Unclaimed Benefits Procedure: The Plan does not require either the Trustees or the Employer to search for, or ascertain the whereabouts of, any Participant or beneficiary. The Employer, by certified or registered mail addressed to the Participant’s last known address of record with the Employer, shall notify any Participant or beneficiary that he or she is entitled to a distribution under the Plan. In the event that all consecutive checks in payment of benefits under the Plan remain outstanding for a period of six (6) months, payment of all such outstanding checks shall be stopped and the issuance of any further checks shall be suspended until such time as the payee reestablishes contact and claims benefits. In any event, if the Participant or Beneficiary fails to claim benefits or make his or her whereabouts known in writing to the Employer within twelve (12) months of the date of mailing of the notice, or before the termination or discontinuance of the Plan, whichever should first occur, the Employer shall treat the Participant’s or Beneficiary’s unclaimed Accrued Benefit as a Forfeiture. If a Participant or Beneficiary who has incurred a Forfeiture of his Accrued Benefit under the provisions of this Section makes a claim at any time for his or her forfeited Accrued Benefit, the Employer shall restore the Participant’s or Beneficiary’s forfeited Accrued Benefit within sixty (60) days after the Plan Year in which the Participant or Beneficiary makes the claim.
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7.18. Direct Rollovers:
(a) This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee’s election under this part, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
(b) A non-spouse Beneficiary who is a “designated beneficiary” under Code Section 401(a)(9)(E) and the regulations thereunder, by a Direct Rollover, may roll over all or any portion of his or her distribution to an individual retirement account that the Beneficiary establishes for purposes of receiving the distribution and for such purposes shall be a Distributee. In order to roll over the distribution, the distribution otherwise must satisfy the definition of an Eligible Rollover Distribution.
7.19 Certain Highly Compensated Employees: Effective January 1, 1998, to the extent necessary to comply with the non- discrimination provisions of Section 401(a)(4) of the Code and regulations issued thereunder, the monthly payments from the Plan to Highly Compensated Employees and to former Highly Compensated Employees who are among the twenty-five most highly paid Employees with the greatest Compensation in the current or any prior year, shall be limited to an amount equal to the monthly payments that would be made on behalf of the Employee under a Straight Life Annuity that is the Actuarial Equivalent of the sum of the Employee’s other benefits under the Plan (other than a social security supplement) and the amount the Employee is entitled to receive under a social security supplement.
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ARTICLE VIII.
JOINT AND SURVIVOR ANNITY REQUIREMENTS
8.1. Applicability Of Provisions: The provisions of this Article will apply to any Participant who is credited with at least one Hour of Service with the Employer on or after August 23, 1984 and such other Participants as provided in this Article to the extent not inconsistent with the terms and provisions of the Exhibit corresponding to the Participant’s classification and status.
8.2. Payment Of Qualified Joint and Survivor Annuity: Unless an optional form of benefit is selected pursuant to a qualified election, defined herein, within the 180-day period ending on the Annuity Starting Date, the vested Accrued Benefit of a married Participant will be paid in the form of a Qualified Joint and Survivor Annuity. Any other Participant’s vested Accrued Benefit will be paid in the form of a Straight Life Annuity.
8.3. Payment Of Qualified Pre-Retirement Survivor Annuity: Unless an optional form of benefit has been selected within the election period pursuant to a qualified election, as defined herein, if a Participant dies before the Annuity Starting Date, the Participant’s vested Accrued Benefit will be paid to the surviving Spouse in the form of a Qualified Pre-Retirement Survivor Annuity if the Participant has been married to the same Spouse for at least 12-consecutive months. The surviving Spouse shall receive benefits commencing on the Earliest Retirement Date benefits could have been paid to the Participant if he has ceased to be an Employee on the date of his death and survived to retire.
8.4. Notice Requirements For Qualified Joint and Survivor Annuity: In the case of a Qualified Joint and Survivor Annuity, the Plan Administrator shall, no less than thirty (30) days and no more than one hundred and eighty (180) days prior to the Annuity Starting Date, as defined below, provide each Participant a written explanation of:
(a) the terms and conditions of a Qualified Joint and Survivor Annuity;
(b) the Participant’s right to make, and the effect of, an election to waive the Qualified Joint and Survivor Annuity form of benefit;
(c) the rights of a Participant’s Spouse; and
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(d) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity ;
(e) the right to defer a distribution, including a description of how much larger benefits will be if commencement of distributions is deferred; and
(f) the relative values of the various optional forms of benefit.
For the purposes of this Section, the Annuity Starting Date will mean the first day of the first period for which an amount is paid as an annuity, whether by reason of retirement or disability.
Notwithstanding the above, a distribution to a Participant may commence less than 30 days after the notice required by Code Section 417(a)(3) is given, provided that the following requirements are met:
(1) The Plan Administrator provides information to the Participant clearly indicating that the Participant has a right to a period of at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and consent to a form of distribution other than a Qualified Joint and Survivor Annuity.
(2) The Participant is permitted to revoke an affirmative distribution election at least until the Annuity Staring Date, or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant;
(3) The Annuity Staring Date is after the date that the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant. However, the Annuity Starting Date may be before the date that any affirmative distribution election is made by the Participant and before the date that the distribution is permitted to commence under (4) below, and
(4) Distribution in accordance with the affirmative election does not commence before the expiration of the 7-day period that begins the day after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant.
8.5. Notice Requirements For Qualified Pre-Retirement Survivor Annuity: In the case of a Qualified Pre-Retirement Survivor Annuity, the Plan Administrator will provide each Participant within the applicable period for such Participant a written explanation
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of the Qualified Pre-Retirement Survivor Annuity in such terms and in such manner as would be comparable to the explanation provided for meeting the requirements of the above Section applicable to a Qualified Joint and Survivor Annuity. The applicable period for a Participant is whichever of the following periods ends last:
(a) the period beginning with the first day of the Plan Year in which the Participant attains age thirty-two (32) and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age thirty-five(35);
(b) a reasonable period ending after the individual becomes a Participant;
(c) a reasonable period ending after this paragraph ceases to apply to the Participant;
(d) a reasonable period ending after this Article first applies to the Participant.
Notwithstanding the foregoing, notice must be provided within a reasonable period ending after separation from service in the case of a Participant who separates from service before attaining age thirty-five (35).
For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in paragraphs (b), (c) and (d) is the end of the two (2) year period beginning one (1) year prior to the date the applicable event occurs, and ending one (1) year after that date. In the case of a Participant who separates from service before the Plan Year in which age thirty-five (35) is attained, notice will be provided within the two (2) year period beginning one (1) year prior to separation and ending one (1) year after separation from service. If such a Participant thereafter returns to employment with the Employer, the applicable period for such Participant will be re- determined.
8.6. Qualified Election: A qualified election will mean a waiver of a Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity. Any waiver of a Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity will not be effective unless:
(a) the Participant’s Spouse consents in writing to the election;
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(b) the election designates a specific Beneficiary, including any class of Beneficiaries or any contingent Beneficiaries, which may not be changed without spousal consent (or the Spouse expressly permits designations by the Participant without any further spousal consent);
(c) the election designates a form of benefit payment which may not be changed without spousal consent (or the Spouse expressly permits designations by the Participant without any further spousal consent);
(d) the Spouse’s consent acknowledges the effect of the election; and
(e) the Spouse’s consent is witnessed by a Plan representative or notary public.
If it is established to the satisfaction of the Plan Administrator that there is no Spouse or that the Spouse cannot be located, a waiver which complies with (b) and (c) above will be deemed a qualified election. Any consent by a Spouse obtained under this provision (or establishment that the consent of a Spouse can not be obtained) will be effective only with respect to such Spouse. A consent that permits designations by the Participant without any requirement of further consent by such Spouse must acknowledge that the Spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the Spouse voluntarily elects to relinquish either or both of such rights. A revocation of a prior waiver may be made by a Participant without the consent of the Spouse at any time before the commencement of benefits. The number of revocations will not be limited. No consent obtained under this provision will be valid unless the Participant has received notice as provided in the paragraphs below.
8.7 Election Period: The period which begins on the first day of the Plan Year in which the Participant attains age thirty- five (35) and ends on the date of the Participant’s death. If a Participant separates from service prior to the first day of the Plan Year in which age thirty-five (35) is attained, with respect to the Accrued Benefit as of the date of separation, the election period shall begin on the date of separation.
8.8. Pre-age Thirty-five (35) Waiver: Not applicable.
8.9. Transitional Joint and Survivor Annuity Rules: Special transition rules apply to Participants who were not receiving benefits on August 23, 1984.
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(a) Any living Participant not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the previous paragraphs of this Article, must be given the opportunity to elect to have the prior Sections of this Article apply if such Participant is credited with at least one (1) Hour of Service under this Plan or a predecessor plan in a Plan Year beginning on or after January 1, 1976, and if such Participant had at least ten (10) Years of Service for vesting purposes when the Participant separated from service.
(b) Any living Participant not receiving benefits on August 23, 1984, who was credited with at least one Hour of Service under this Plan or a predecessor plan on or after September 2, 1974, and who is not otherwise credited with any service in a Plan Year beginning on or after January 1, 1976, must be given the opportunity to have Accrued Benefits paid in accordance with subparagraph (d) below.
(c) The respective opportunities to elect (as described in (a) and (b) above) must be afforded to the appropriate Participants during the period commencing on August 23, 1984, and ending on the date benefits would otherwise commence to said Participants.
(d) Any Participant who has elected pursuant to subparagraph (b) and any Participant who does not elect under subparagraph (a) or who meets the requirements of subparagraph (a) except that such Participant does not have at least ten (10) Years of Service for vesting purposes on separation from service, will have his or her Accrued Benefit distributed in accordance with all of the following requirements if benefits would have been payable in the form of a life annuity:
(1) Automatic Joint and Survivor Annuity. If benefits in the form of a life annuity become payable to a married Participant who:
(i) begins to receive payments under the Plan on or after Normal Retirement Age;
(ii) dies on or after Normal Retirement Age while still working for the Employer;
(iii) begins to receive payments under the Plan on or after the Qualified Early Retirement Age; or
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(iv) separates from service on or after attaining Normal Retirement Age (or the Early Retirement Age) and after satisfying the eligibility requirements for the payment of benefits under the Plan and thereafter dies before beginning to receive such benefits, such benefits will be paid in the form of a Qualified Joint and Survivor Annuity, unless the Participant has elected otherwise during the election period. The election period must begin at least six (6) months before the Participant attains Qualified Early Retirement Age and end no more than ninety (90) days before the commencement of benefits. Any election hereunder must be in writing and may be changed by the Participant at any time.
(2) Election of Early Survivor Annuity. A Participant who is employed after attaining the Qualified Early Retirement Age will be given the opportunity to elect, during the election period, to have an early survivor annuity payable on death. If the Participant elects the early survivor annuity, payments under such annuity must not be less than the payments which would have been made to the Spouse under the Qualified Joint and Survivor Annuity if the Participant has retired on the day after his or her death. Any election under this provision will be in writing and may be changed by the Participant at any time. The election period begins on the later of:
(i) the 90 th day before the Participant attains the Qualified Early Retirement Age, or
(ii) the date on which participation begins, and ends on the date the Participant terminates employment with the Employer.
(3) Qualified Early Retirement Age. For purposes of this Section, Qualified Early Retirement Age is the latest of;
(i) the earliest date, under the Plan, on which the Participant may elect to receive retirement benefits,
(ii) the first day of the 120 th month beginning before the Participant reaches Normal Retirement Age, or
(iii) the date the Participant begins participation.
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ARTICLE IX.
QUALIFIED DOMESTIC RELATIONS ORDERS
9.1. Qualified Domestic Relations Orders: Notwithstanding any of the provisions herein concerning alienation of Plan benefits, the Plan will honor and abide by the terms of a domestic relations order determined by the Plan Administrator to be a Qualified Domestic Relations Order as defined in Code Section 414(p) (“QDRO”) providing for the assignment to a Spouse or former Spouse of the Participant of all or any portion of the Participant’s vested Accrued Benefit under the Plan. The Employer will adopt guidelines for determining the qualified status of a domestic relations order (the “Order”) which states the requirements for such Order, the procedures for review of such Order and all other provisions for such Order to be determined to be a QDRO.
(a) An Order shall specifically state all of the following in order to be deemed a QDRO:
(1) The name and last known mailing address (if any) of the Participant and of each alternate payee covered by the Order. However, if the Order does not specify the current mailing address of the alternate payee, but the Plan Administrator has independent knowledge of that address, the Order may still be a valid QRDO.
(2) The dollar amount or percentage of the Participant’s benefit to be paid by the Plan to each alternate payee; or the manner in which the amount or percentage will be determined.
(3) The number of payments or period for which the Order applies.
(4) The specific plan (by name) to which the Order applies.
(b) An Order shall not be deemed a QDRO if it requires the Plan to provide:
(1) any type or form of benefit, or any option not already provided for in the Plan;
(2) increased benefits, or benefits in excess of the Participant’s vested rights;
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(3) payment of a benefit earlier than allowed by the Plan’s earliest retirement provisions; or
(4) payment of benefits to an alternate payee which are required to be paid to another alternate payee under another QDRO.
(c) Promptly, upon receipt of an Order which may or may not be “Qualified”, the Plan Administrator shall notify the Participant and any alternate payee(s) named in the Order of such receipt. The Plan Administrator may then forward the Order to the Plan’s legal counsel for an opinion as to whether or not the Order is in fact “Qualified” as defined in Code Section 414(p). Within a reasonable time after receipt of the Order, not to exceed 60 days, the Plan’s legal counsel shall make a determination as to its “Qualified” status and the Participant and any alternate payee(s) shall be promptly notified in writing of the determination.
(d) If the “Qualified” status of the Order is in question, there will be a delay in any payout to any payee including the Participant, until the status is resolved. In such event, the Plan Administrator shall separately account for the amount that would have been payable to the alternate payee(s) if the Order has been deemed a QDRO. If the Order is not Qualified, or the status is not resolved (for example, it has been sent back to the Court for clarification or modification) within 18 months beginning with the date the first payment would have to be made under the Order, the Plan Administrator shall pay the separately accounted for amounts to the person(s) who would have been entitled to the benefits had there been no Order. If a determination as to the Qualified status of the Order is made after the 18-month period described above, then the Order shall only be applied on a prospective basis. If the Order is determined to be a QDRO, the Participant and alternate payee(s) shall again be notified promptly after such determination. Once an Order is deemed a QDRO, the Plan Administrator shall pay to the alternate payee(s) all the amounts due under the QDRO, including separately accounted for amounts during a dispute as to the Order’s qualification.
(e) The Earliest Retirement Age with regard to the Participant against whom the Order is entered shall be the date the Participant would otherwise first be eligible for benefits under the Plan.
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ARTICLE X.
TRANSFERS FROM OTHER QUALIFIED PLANS; DIRECT ROLLOVERS
10.1. Transfers From Other Qualified Plans; Direct Rollovers: Transfers or Direct Rollovers from other qualified plans are not permitted.
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ARTICLE XI.
TRANSFERS; SERVICE WITH AFFILIATED EMPLOYERS
11.1. Transfers:
In the event any Employee transfers out of an Eligible Class or from one Eligible Class to another, such Employee shall receive credit for service and compensation for determining eligibility, benefit accrual and vesting as set forth in the Exhibit attached hereto corresponding to each respective Eligible Class.
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ARTICLE XII.
AMENDMENT, TERMINATION, MERGER OR CONSOLIDATION
12.1. Amendment of the Plan: The Employer, acting by its Board of Directors, has the right to amend, modify, suspends, or terminate the Plan at any time. However, no amendment will authorize or permit any part of the Trust Fund (other than any part that is required to pay taxes and administration expenses) to be used for or diverted to purposes other than for the exclusive benefit of the Participants or their Beneficiaries or estates; no amendment will cause any reduction in the Accrued Benefit of any Participant or cause or permit any portion of the Trust Fund to revert to or become the property of the Employer; except to the extent such amendment is required to qualify or maintain the qualification of the Plan or to deduct or maintain the deductibility of contributions made to the Plan under the applicable sections of the Code. Any amendment will become effective as provided therein upon its execution.
For the purposes of this paragraph, an amendment to the Plan which has the effect of:
(a) eliminating or reducing an early retirement benefit or a retirement-type subsidy;
(b) eliminating an optional form of benefit (as provided in Regulations under the Code); or
(c) restricting, directly or indirectly, the benefits provided to any Participant prior to the amendment will be treated as reducing the Accrued Benefit of a Participant, except that an amendment described in clause (b) (other than an amendment having an effect described in clause (a)) will not be treated as reducing the Accrued Benefit of a Participant to the extent so provided in Regulations or under the Code.
12.2. Termination:
(a) The Employer, acting by its Board of Directors, shall have the right to terminate the Plan by delivering to the Trustee and the Plan Administrator written notice of such termination. However, any termination (other than a partial termination or an involuntary termination pursuant to ERISA Section 4042) must satisfy the requirements and follow the procedures outlined herein and in ERISA Section 4041 for a Standard Termination
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or a Distress Termination. Upon any termination (full or partial), all amounts shall be allocated in accordance with the provisions hereof and the Accrued Benefit, to the extent funded as of such date, of each affected Participant shall become fully vested and shall not thereafter be subject to Forfeiture.
Upon termination of the Plan, the Employer, by notice to the Trustee and Plan Administrator, may direct:
(1) complete distribution of the Trust Fund to the Participants, in cash or in kind, in a manner consistent with the requirements of the Plan;
(2) the purchase of insurance company annuity contracts;
(3) continuation of the Trust Fund for the Plan and the distributions of benefits at such time and in such manner as though the Plan had not been terminated; or
(4) transfer of the assets of the Plan to another qualified plan, provided that the trust to which the assets are transferred permits the transfer to be made and, in the opinion of legal counsel for the Employer, the transfer will not jeopardize the tax-exempt status of the plan or create adverse tax consequences for the Employer. The amounts transferred will be fully vested at all times and will not be subject to forfeiture for any reason.
(b) Standard Termination Procedure —
(1) The Plan Administrator shall first notify all “affected parties” (as defined in ERISA Section 4001(a)(21)) of the Employer’s intention to terminate the Plan and the proposed date of termination. Such termination notice must be provided at least sixty (60) days prior to the proposed termination date. However, in the case of a standard termination, it shall not be necessary to provide such notice to the Pension Benefit Guaranty Corporation (PBGC). As soon as practicable after the termination notice is given, the Plan Administrator shall provide a follow-up notice to the PBGC setting forth the following:
(i) a certification of an enrolled actuary of the projected amount of the assets of the Plan as of the proposed date of final distribution of assets, the actuarial present value of the “benefit liabilities” (as defined in ERISA Section 4001(a)(16)) under the Plan as of the proposed termination date, and confirmation that the Plan is projected to be sufficient for such “benefit liabilities” as of the proposed date of final distribution;
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(ii) a certification by the Plan Administrator that the information provided to the PBGC and upon which the enrolled actuary based his certification is accurate and complete; and
(iii) such other information as the PBGC may prescribe by regulation.
The certification of the enrolled actuary and of the Plan Administrator shall not be applicable in the case of a Plan funded exclusively by individual insurance contracts.
(2) No later than the date on which the follow-up notice is sent to PBGC, the Plan Administrator shall provide all Participants and Beneficiaries under the Plan with an explanatory statement specifying each such person’s “benefit liabilities”, the benefit form on the basis of which such amount is determined, and any additional information used in determining “benefit liabilities” that may be required pursuant to regulations promulgated by the PBGC.
(3) A standard termination may only take place if at the time the final distribution of assets occurs, the Plan is sufficient to meet all “benefit liabilities” determined as of the termination date.
(c) Distress Termination Procedure
(1) The Plan Administrator shall first notify all “affected parties” of the Employer’s intention to terminate the Plan and the proposed date of termination. Such termination notice must be provided at least 60 days prior to the proposed termination date. As soon as practicable after the termination notice is given, the Plan Administrator shall also provide a follow-up notice to the PBGC setting forth the following:
(i) a certification of an enrolled actuary of the amount, as of the proposed termination date, of the current value of the assets of the Plan, the actuarial present value (as of such date) of the “benefit liabilities” under the Plan, whether the Plan is sufficient for “benefit liabilities” as of such date, the actuarial present value (as of such date) of benefits under the Plan guaranteed under ERISA Section 4022, and whether the plan is sufficient for guaranteed benefits as of such date;
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(ii) in any case in which the Plan is not sufficient for “benefit liabilities” as of such date, the name and address of each Participant and Beneficiary under the Plan as of such date;
(iii) a certification by the Plan Administrator that the information provided to the PBGC and upon which the enrolled actuary based his certification is accurate and complete; and
(iv) such other information as the PBGC may prescribe by regulation.
The certification of the enrolled actuary and of the Plan Administrator shall not be applicable in the case of a Plan funded exclusively by individual insurance contracts.
(2) A “distress termination” may only take place if:
(i) the Employer demonstrates to the PBGC that such termination is necessary to enable the Employer to pay its debts while staying in business, or to avoid unreasonably burdensome pension costs caused by a decline in the Employer’s work force;
(ii) the Employer is the subject of a petition seeking liquidation in a bankruptcy or insolvency proceeding which has not been dismissed as of the proposed termination date; or
(iii) the Employer is the subject of a petition seeking reorganization in a bankruptcy or insolvency proceeding which has not been dismissed as of the proposed termination date, and the bankruptcy court (or such other appropriate court) approves the termination and determines that the Employer will be unable to continue in business outside a Chapter 11 reorganization process and that such termination is necessary to enable the Employer to pay its debts pursuant to a plan of reorganization.
(d) Priority and Payment of Benefits
In the case of a distress termination, upon approval by the PBGC that the Plan is sufficient for “benefit liabilities” or for “guaranteed benefits”, or in the case of a “standard termination”, a letter of non-compliance has not been issued within the sixty (60) day period (as extended) following the receipt by the PBGC of the follow-up notice, the Plan Administrator shall allocate the assets of the Plan among Participants and Beneficiaries pursuant to ERISA Section
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4044(a). As soon as practicable thereafter, the assets of the Plan shall be distributed to the Participants and Beneficiaries, in cash, in property, or through the purchase or irrevocable commitments from an insurer. However, if all liabilities with respect to Participants and Beneficiaries under the Plan have been satisfied and there remains a balance in the Plan due to erroneous actuarial computation or any other reason, such balance, if any, shall be returned to the Employer. In the case of a “distress termination” in which the PBGC is unable to determine that the Plan is sufficient for guaranteed benefits, the assets of the Plan shall only be distributed in accordance with proceedings instituted by the PBGC.
(e) The termination of the Plan shall comply with such other requirements and rules as may be promulgated by the PBGC under authority of Title IV of the ERISA including any rules relating to time periods or deadlines for providing notice or for making a necessary filing.
12.3. Merger or Consolidation of the Plan: The Plan and Trust Fund for the Plan may be merged or consolidated with, or its assets and/or liabilities may be transferred to, any other plan and trust. In the event of a merger, consolidation or transfer, each Participant must receive a benefit immediately after the merger, consolidation or transfer (as if the Plan had then been terminated) which is at least equal to the benefit each Participant would have received if the Plan had terminated immediately before the transfer, merger or consolidation. Such transfer, merger or consolidation may not otherwise result in the elimination or reduction of any benefit protected under Code Section 411(d)(6).
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ARTICLE XIII.
PARTICIPATING EMPLOYERS
13.1. Adoption by Other Employers: Notwithstanding anything herein to the contrary, with the consent of the Employer, any other corporation or entity, whether an affiliate or subsidiary or not, may adopt this Plan and all of the provisions hereof, and participate herein and be known as a Participating Employer, by a properly executed document evidencing said intent and will of such Participating Employer.
13.2. Requirements of Participating Employers:
(a) Each Participating Employer will use the same Trustee as provided in this Plan.
(b) The Trustee may, but will not be required to, commingle, hold and invest as one Trust Fund all contributions made by Participating Employers, as well as any earnings thereon.
(c) The transfer of any Participant from or to any Employer participating in this Plan, whether an Employee of the Employer or a Participating Employer, will not affect such Participant’s rights under the Plan, and all amounts credited to the Participant’s account as well as to the Participant’s accumulated service time with the transferor or predecessor and length of participation in the Plan, will continue to the Participant’s credit.
(d) All rights and values forfeited by termination of employment will inure only to the benefit of the Participants of the Employer or Participating Employer for which the forfeiting Participant was employed.
(e) Any expenses of the Plan which are to be paid by the Employer or borne by the Trust Fund will be paid by each Participating Employer in the same proportion that the total amount standing to the credit of all Participants employed by such employer bears to the total amount standing to the credit of all Participants in the Plan.
13.3. Designation of Agent. Each Participating Employer will be deemed to be a part of this Plan; provided, however, that with respect to all of its relations with the Trustee and Plan Administrator for purposes of this Plan, each Participating Employer will be deemed to have designated irrevocably the Employer as its agent. Unless the context of the
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Plan clearly indicates the contrary, “Employer” will be deemed to include each Participating Employer as related to its adoption of the Plan.
13.4. Employee Transfers.
(a) General . It is anticipated that an Employee may be transferred between Participating Employers, and in the event of any such transfer, the Employee involved will transfer any accumulated service and eligibility. No such transfer will effect a termination of employment hereunder, and the Participating Employer to which the Employee is transferred will thereupon become obligated hereunder with respect to such Employee in the same manner as was the Participating Employer from whom the Employee was transferred. As provided in Section 4.1 and (b) below, a Participant in an hourly portion of the Plan who transfers to a salaried position on or after January 1, 2007 shall not accrue any benefit after such transfer date.
(b) Hourly to Salaried . The Accrued Benefit of a Participant with an Annuity Starting Date on or after January 1, 2007 who transferred, prior to January 1, 2007, from an hourly portion of the Plan to an Eligible Class under a salaried portion of the Plan, shall, upon retirement, be calculated as follows:
(1) Non -Grandfathered Participant . A Non-Grandfathered Participant’s Accrued Benefit shall be the sum of (x) his or her Accrued Benefit under the applicable hourly portion of the Plan (calculated based on Years of Accrual Service up to the date of transfer and the benefit formula in effect under the applicable hourly portion of the Plan as of his or her date of transfer), and (y) his or her Accrued Benefit under the applicable salaried portion of the Plan (calculated based on the sum of (i) his or her Accrued Benefit calculated based on Years of Accrual Service commencing upon the date of transfer through December 31, 2006 and the benefit formula in effect under the applicable salaried portion of the Plan as of December 31, 2006, and (ii) his or her Accrued Benefit calculated based on Years of Accrual Service up to the date of transfer and the difference between the rate of benefit in effect under the applicable hourly portion of the Plan as of December 31, 2006 and the rate of benefit in effect under the applicable hourly portion of the Plan as of his or her date of transfer).
(2) Grandfathered Participant . A Grandfathered Participant’s Accrued Benefit shall be the sum of (x) his or her Accrued Benefit under the applicable hourly portion of the Plan (calculated based on Years of Accrual Service up to the date of transfer and the benefit formula in effect under the applicable hourly portion of the Plan as of the date of
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transfer) and (y) his or her Accrued Benefit under the applicable salaried portion of the Plan (calculated based on the sum of (i) his or her Accrued Benefit calculated based on Years of Accrual Service commencing upon the date of transfer through his or her termination from service date and the benefit formula in effect under the applicable salaried portion of the Plan as of his or her termination from service date, and (ii) his or her Accrued Benefit calculated based on Years of Accrual Service up to the date of transfer and the difference between the rate of benefit in effect under the applicable hourly portion of the Plan as of his or her termination from service date and the rate of benefit in effect under the applicable hourly portion of the Plan as of his or her date of transfer).
13.5. Participating Employer’s Contribution: All contributions made by a Participating Employer, as provided for in this Plan, will be determined separately by each Participating Employer, and will be paid to and held by the Trustee for the exclusive benefit of the Employees of such Participating Employer and the Beneficiaries of such Employees, subject to all the terms and conditions of this Plan. On the basis of the information furnished by the Plan Administrator, the Trustee will keep separate books and records concerning the affairs of each Participating Employer hereunder and as to the accounts and credits of the Employees of each Participating Employer. The Trustee may, but need not, register contracts so as to evidence that a particular Participating Employer is the interested Employer hereunder, but in the event of an Employee transfer from one Participating Employer to another, the employing Employer will immediately notify the Trustee thereof.
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13.6. Discontinuance of Participation: Any Participating Employer will be permitted to discontinue or revoke its participation in the Plan. At the time of any such discontinuance or revocation, satisfactory evidence thereof and of any applicable conditions imposed will be delivered to the Trustee. The Trustee will thereafter transfer, deliver and assign Trust Fund assets allocable to the Participants of such Participating Employer to such new trustee as will have been designated by such Participating Employer, in the event that it has established a separate pension plan for its Employees; provided, however, that no such transfer will be made if the result is the elimination or reduction of any protected benefits under Section 411(d) or (e) of the Code. If no successor is designated, the Trustee will retain such assets for the Employees of said Participating Employer. In no such event will any part of the Trust Fund as it relates to such Participating Employer be used for or diverted for purposes other than for the exclusive benefit of the Employees for such Participating Employer.
13.7. Plan Administrator’s Authority: The Plan Administrator will have authority to make all necessary rules and regulations, binding upon all Participating Employers and all Participants, to effectuate the purpose of this Article.
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ARTICLE XIV.
ADMINISTRATION OF THE PLAN
14.1. Appointment of Plan Administrator and Trustee: The Employer is authorized to appoint the Trustee and the Plan Administrator as it deems necessary for the proper administration of the Plan. The Employer will from time to time informally review the performance of the Trustee, Plan Administrator or other persons to whom duties have been delegated or allocated by it. Any person serving as Plan Administrator may resign upon thirty (30) days prior written notice to the Employer. The Employer is authorized to remove any person serving as Plan Administrator at any time and in its sole discretion appoint a successor whenever a vacancy occurs.
14.2. Plan Administrator: The Plan Administrator is responsible for administering the Plan for the exclusive benefit of the Participants and their Beneficiaries, subject to the specific terms of the Plan. The Plan Administrator will manage, operate and administer the Plan in accordance with the terms of the Plan and will have full power and authority to construe and resolve all questions arising in connection with the administration, interpretation, and application of the Plan. Any determination by the Plan Administrator will be final and binding upon all persons, and unless it can be shown to be arbitrary and capricious will not be subject to “de novo” review. The Plan Administrator may establish procedures, correct any defect, supply any information, or reconcile any inconsistency in any manner and to any extent as it deems necessary to carry out the purpose of the Plan; provided, however, that any procedure, discretionary act, interpretation or construction be nondiscriminatory and based upon principles consistent with the intent of the Plan to continue to be deemed a qualified plan under the terms of Code Section 401(a). The Plan Administrator will have all powers necessary or appropriate to accomplish its duties under this Plan.
14.3. Delegation of Powers: The Plan Administrator may appoint such assistants or representatives as it deems necessary for the effective exercise of its duties. The Plan Administrator may delegate to such assistants and representatives any powers and duties, both ministerial and discretionary, as it deems expedient or appropriate.
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14.4. Trust Agreement
(a) The Employer shall execute a Trust Agreement with a Trustee or Trustees chosen by the Employer to hold and manage the assets of the Trust Fund, and to receive, hold and disburse contributions, interest and other income for the purpose of paying the pensions under the Plan and the expenses incident to the operation and maintenance of the Plan. From time to time, one or more investment managers may be appointed by the Employer to manage assets of the Trust Fund, which investment managers shall be solely responsible for investing, reinvesting and managing the assets of the Trust Fund. A Trustee may also be an investment manager and in the absence of any separate agreement with an investment manager, the Trustee shall be the investment manager.
Each Trustee and investment manager so appointed shall acknowledge that it is a fiduciary within the meaning of ERISA, and shall be either (i) an investment advisor registered under the Investment Advisors Act of 1940, (ii) a bank as defined in the Investment Advisors Act of 1940, or (iii) an insurance company qualified to manager, acquire or dispose of assets under the laws of more than one state.
(b) The Employer shall determine the form and terms of any Trust Agreement or investment management agreement, which may authorize the inclusion of obligations and stock of the Employer and its subsidiaries and affiliates among the investments of the Trust Fund (subject to the provisions of any applicable law), and which may authorize the pooling of the Trust Fund for investment purposes with other Internal Revenue Service qualified pension funds of the Employer and its subsidiaries and affiliates. The Employer may modify such Trust Agreement or investment management agreement from time to time, or terminate them pursuant to the terms thereof. In case of a conflict between the Plan and the Trust Agreement, the provisions of the Trust Agreement shall be deemed controlling.
14.5. Appointment of Advisers: The Plan Administrator may appoint counsel, specialists, advisers, and other persons as the Plan Administrator deems necessary or desirable in connection with the administration of the Plan.
14.6. Records and Reports: The Plan Administrator will keep a record of all actions taken. In addition, it will keep all other books, records, and other data that are necessary for administration of the Plan, and it will be responsible for supplying all
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information and reports to Participants, Beneficiaries, the Internal Revenue Service, the Department of Labor and others as required by law.
14.7. Information from Employer: The Employer will supply the Plan Administrator with full and timely information on all matters relating to the Compensation of all Participants, their Hours of Service, their Years of Service, their retirement, death, Disability, or termination of employment, and such other pertinent facts as the Plan Administrator may require from time to time. The Plan Administrator will advise the Trustee of the foregoing facts as may be pertinent to the Trustee’s duties under the Plan. The Plan Administrator and Trustee may rely on information supplied by the Employer and will have no duty or responding to verify the information.
14.8. Majority Actions: Except where there has been an allocation and delegation of administrative authority or where specifically expressed herein to the contrary, if there shall be more than one Plan Administrator, they shall act by a majority of their number, but may authorize one or more of them to sign any documents on their behalf.
14.9. Expenses: All expenses and costs of administering the Plan may be paid out of the Trust Fund unless actually paid by the Employer. Expenses will include any expenses incident to the functioning of the Plan Administrator, including, but not limited to, fees of accountants, counsel, and other specialists and their agents, and other costs of administering the Plan. Until paid, the expenses will be considered a liability of the Trust Fund. However, the Employer may reimburse the Trust Fund for any administrative expense incurred. Any administrative expense paid to the Trust Fund as a reimbursement will not be considered an Employer contribution.
14.10. Discretionary Acts: Any discretionary actions of the Plan Administrator with respect to the administration of the Plan shall be made in a manner which does not discriminate in favor of stockholders, officers and Highly Compensated Employees.
14.11. Responsibility of Fiduciaries: The Plan Administrator and members of the Administrative Committee, and their assistants and representatives shall be free from all liability for their acts and conduct in the administration of the Plan except for acts of willful misconduct, provided, however, that the foregoing shall not relieve any of them from any
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liability for any responsibility, obligation or duty they may have pursuant to ERISA or the Code.
14.12. Indemnity by Employer: In the event of and to the extent not insured against by any insurance company pursuant to provisions of any applicable insurance policy, the Employer shall indemnify and hold harmless, to the extent permitted by law, any individual Trustee, the Plan Administrator, and their assistants and representatives from any and all claims, demands, suits or proceedings which may in connection with the Plan or Trust Agreement be brought by the Employer’s Employees, Participants or their Beneficiaries or legal representatives, or by any other person, corporation, entity, government or agency thereof; provided, however, that such indemnification shall not apply to any such person for such person’s acts of willful misconduct in connection with the Plan or Trust Agreement.
14.13. Claims Procedure: Claims may be filed with the Plan Administrator. Written or electronic notice of the disposition of a claim will be furnished to the claimant within ninety (90) days (or 180 days in the event of special circumstances, in which case written notice of the extension will be furnished to the claimant before the expiration of the initial ninety (90) day period) after the application is filed. In addition, in the event the claim is denied, the Plan Administrator shall:
(a) state the specific reason or reasons for the denial,
(b) provide specific reference to pertinent Plan provisions on which the denial is based,
(c) provide a description of any additional material or information necessary for the Participant or his representative to perfect the claim and an explanation of why such material or information is necessary, and
(d) explain the Plan’s claim review procedure as contained in this Plan.
Any claimant who has been denied a benefit by the Plan Administrator will be entitled to request the Plan Administrator to give further consideration to the claim by filing with the Plan Administrator a request for a hearing. The request, together with a written statement of the reasons why the claimant believes the claim should be allowed, must
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be filed with the Plan Administrator within sixty (60) days after the claimant receives written or electronic notification from the Plan Administrator regarding the denial of the claimant’s claim. The Plan Administrator may conduct a hearing within the next sixty (60) days, at which time the claimant may be represented by an attorney or any other representative of his or her choosing and at which time the claimant will have an opportunity to submit written and oral evidence and arguments in support of the claim. At the hearing (or prior thereto upon five (5) business days written notice to the Plan Administrator) the claimant or his or her representative will have an opportunity to review all documents in the possession of the Plan Administrator which are pertinent to the claim at issue and its disallowance. Either the claimant or the Plan Administrator may cause a court reporter to attend the hearing and record the proceedings, in which event a complete written transcript of the proceedings will be furnished to both parties by the court reporter. The full expense of the court reporter and transcripts will be borne by the party causing the court reporter to attend the hearing. A final decision as to the allowance of the claim will be made by the Plan Administrator within sixty (60) days of the Plan’s receipt of a request for review, unless there has been an extension of time due to special circumstances (such as the need to hold a hearing), in which case a decision will be rendered as soon as possible but not later than 120 days after receipt of a request for review. The final decision will be written and will include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based.
14.14 Recovery of Benefit Overpayments: If it is determined that any benefit(s) paid to a Participant or Beneficiary under the Plan should not have been paid or should have been paid in a lesser amount, written notice thereof shall be given to such Participant or Beneficiary and the Participant or Beneficiary shall repay the amount. If the Participant or Beneficiary fails to repay such amount of overpayment promptly, the Plan Administrator shall arrange to recover the amount of such overpayment from any other benefits then payable, or which may become payable, to the Participant or Beneficiary under the Plan.
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ARTICLE XV.
GENERAL
15.1. Bonding: Every fiduciary, except a bank or an insurance company, unless exempted by the Act and regulations thereunder, shall be bonded in an amount not less than 10% of the amount of the funds such fiduciary handles; provided, however, that the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of funds handled by such person, group, or class to be covered and their predecessors, if any, during the preceding Plan Year, or if there is not preceding Plan Year, then by the amount of the funds to be handled during the then current year. The bond shall provide protection to the Plan against any loss by reason of acts of fraud or dishonesty by the fiduciary alone or in connivance with others. The surety shall be a corporate surety company (as such term is used in ERISA Section 412(a) (2)), and the bond shall be in a form approved by the Secretary of Labor. Notwithstanding anything in the Plan to the contrary, the cost of such bonds shall be an expense of and may, at the election of the Plan Administrator, be paid from the Trust fund or by the Employer.
15.2. Action by the Employer: Whenever the Employer under the terms of the Plan is permitted or required to do or perform any act or matter or thing, it shall be done and performed by a person duly authorized by its legally constituted authority.
15.3. Employment Rights: The Plan is not to be deemed to constitute a contract of employment between the Employer and any Participant or to be a consideration for, or an inducement or condition of, the employment of any Participant or Employee. Nothing contained in the Plan is to be deemed
(a) to give any Participant the right to be retained in the service of the Employer,
(b) to interfere with the right of the Employer to discharge any Participant at any time,
(c) to give the Employer the right to require any Employee to remain in its employ, or
(d) to affect any Employee’s right to terminate employment at any time.
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15.4. Nonalienation of Benefits.
(a) Except as permitted by section 401(a)(13) of the Code or (b) below, no benefit at any time under the Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, or encumbrances of any kind. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefits, whether presently or thereafter payable shall be void. No retirement benefit nor the Fund shall in any manner be liable for or subject to the debts or liability of any Employee, Terminated Vested Participant, Participant, Beneficiary or pensioner entitled to any retirement benefit. If the Employee, Participant, former Participant, Beneficiary or pensioner shall attempt to or shall alienate, sell, transfer, assign, pledge or otherwise encumber his benefit under the Plan or any part thereof, or if by reason of his bankruptcy or other event happening at any time, such benefits would devolve upon anyone else or would not be enjoyed by him, then the Employer, in its discretion, may terminate such third party’s interest in any such benefit, and hold or apply it to or for the benefit of such Employee, Participant, former Participant, Beneficiary or pensioner, his Spouse, children, or other dependent or any of them, in such manner as the Employer may deem proper. This Section shall also apply to the creation, assignment or recognition of a right to any benefit payable with respect to a Participant pursuant to a domestic relations order, unless such order is determined to be a Qualified Domestic Relations Order or any domestic relations order entered before January 1, 1985.
(b) For all judgments, orders or decrees issued, or settlements entered into, on or after August 5, 1997:
A Participant’s benefits provided under the Plan may be offset by an amount that the Participant is ordered or required to pay to the Plan if:
(i) the order or requirement to repay arises (1) under a judgment of conviction for a crime involving such Plan, (2) under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of Title I of the Employee Retirement Income Security Act of 1974, or (3) pursuant to a settlement agreement between the Secretary of Labor and the Participant, or a settlement agreement between the Pension Benefit Guaranty
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Corporation and the Participant, in connection with a violation (or alleged violation) of part 4 of such subtitle by a fiduciary or any other person,
(ii) the judgment, order, decree, or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the Plan against the participant’s benefits provided under the Plan, and
(iii) in a case in which distributions to the Participant are subject to the survivor annuity requirements of IRC section 401(a)(11), if the Participant has a spouse at the time at which the offset is to be made, the spouse has: (1) either consented to the offset (with such consent obtained in accordance with the requirements of IRC section 417(a)) or previously elected to waive the qualified joint and survivor annuity or qualified preretirement survivor annuity, (2) been ordered or required in such judgment, order, decree or settlement to pay an amount to the Plan in connection with a violation of part 4 of subtitle B, or (3) retained the right to receive a survivor annuity form of benefit pursuant to IRC section 401(a)(11) under such judgment, order, decree or settlement.
15.5. Governing Law: This Plan will be construed and enforced according to ERISA and the laws of the state in which the Employer has its principal office, other than its laws respecting choice of law, to the extent not preempted by ERISA.
15.6. Conformity to Applicable Law: It is the intention of the Employer that the Plan and the trust established by the Employer to implement the Plan, be in compliance with the provisions of Sections 401 and 501 of the Code and the requirements of ERISA, and the corresponding provisions of any subsequent laws, and the provisions of the Plan shall be construed to effectuate such intention.
15.7. Usage: Any term used herein in the singular or plural or in the masculine, feminine or neuter form will be construed in the singular or plural, or in the masculine, feminine or neuter form as proper reading requires.
15.8. Legal Action: In the event any claim, suit, or proceeding is brought regarding the Plan or Trust for the Plan established hereunder to which the Trustee or the Plan Administrator may be a party, and the claim, suit, or proceeding is resolved in favor of the Trustee or Plan Administrator, they will be entitled to reimbursement from the Trust Fund for
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any and all costs, attorneys’ fees, and other expenses pertaining thereto incurred by them for which they will have been liable.
15.9. Exclusive Benefit: Except as provided below and otherwise specifically permitted by law, the Trust Fund maintained pursuant to the Plan may not be diverted to or used for other than the exclusive benefit of the Participants, retired Participants or their Beneficiaries.
15.10. Prohibition Against Diversion of Funds: Except as provided below and otherwise specifically permitted herein or by law, it shall be impossible by operation of the Plan by power of revocation or amendment, by the happening of any contingency, by collateral arrangement or by any other means, for any part of the corpus or income of any fund maintained pursuant to the Plan or any funds contributed thereto to be used for, or diverted to, purposes other than the exclusive benefit of former or current Participants, retired Participants, or their Beneficiaries.
15.11. Return of Contribution: Employer contributions to the fund shall be irrevocable except as provided below:
(a) In the event the Employer makes an excessive contribution because of a mistake of fact (pursuant to Section 403(c)(2)(A) of ERISA), the Employer may demand repayment of such excessive contribution at any time within one year following the time of payment and the Trustee thereupon will return the excessive amount to the Employer within the one-year period. Earnings of the Plan attributable to the excess contribution will not be returned to the Employer but any losses attributable thereto will reduce the amount so returned.
(b) In the event the Plan receives an adverse determination from the Commissioner of the Internal Revenue with respect to its initial qualification, any contribution made incident to the initial qualification by the Employer may be returned to the Employer within one-year after such determination, provided the application for the determination is made by the time prescribed by law for filing the Employer’s return for the taxable year in which the Plan was adopted, or such later date as the Secretary of the Treasury may prescribe.
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(c) Notwithstanding any provisions of the Plan to the contrary, all contributions by the Employer are conditioned upon the deductibility of the contributions by the Employer under the Code and, to the extent any such deduction is disallowed, the Employer may, within one year following the disallowance of the deduction, demand repayment of such disallowed contribution and the Trustee must return the contribution within one year following the disallowance. Earnings of the Plan attributable to the contribution for which such deduction is disallowed may not be returned to the Employer, but any losses attributable thereto must reduce the amount so returned.
15.12. Employer’s Protective Clause: Neither the Employer nor the Trustee, nor their successors, will be responsible for the validity of any insurance or annuity contract issued hereunder or for the failure on the part of the insurer to make payments provided by any contract, or for the action of any person which may delay payment or render a contract null and void or unenforceable in whole or in part.
15.13. Insurer’s Protective Clause: Any insurer who will issue contracts hereunder will not have any responsibility for the validity of this Plan or for the tax or legal aspects of this Plan. The insurer will be protected and held harmless in acting in accordance with any written direction of the Trustee, and will have no duty to see to the application of any funds paid to the Trustee, nor will be required to question any actions directed by the Trustee.
15.14. Receipt and Release for Payments: Any payment to a Participant, a Participant’s legal representative or Beneficiary, or to any guardian appointed for the Participant or Beneficiary will, to the extent thereof, be in full satisfaction of all claims hereunder against the Trustee and the Employer, either of whom may require the Participant, legal representative or Beneficiary or guardian, as a condition precedent to such payment, to execute a receipt and release thereof in such form as determined by the Trustee or Employer.
15.15. Headings: The headings and subheadings of this Plan have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.
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ARTICLE XVI.
DEFINITIONS
For purposes of the Plan, the following words and phrases will have the following meaning unless a different meaning is expressly stated or ascribed to them in the Exhibit corresponding to the Participant’s classification and status.
16.1 Accrued Benefit: The Retirement Benefit payable at Normal Retirement Age determined pursuant to the Exhibit corresponding to the Employee’s classification and status accrued as of any date.
Notwithstanding the above, a Participant’s Accrued Benefit derived from Employer contributions shall not be less than the minimum Accrued Benefit provided pursuant to the Section entitled “Minimum Benefit for Top-Heavy Plan.”
16.2. Actuarial Equivalent: The conversion to a form of benefit differing in time, period, or manner of payment from the specific benefit provided under the Article herein entitled “Plan Benefits” accomplished by applying the actuarial assumptions set forth in Schedule A attached to the Exhibit corresponding to the Employee’s classification and status. Notwithstanding the preceding sentence, effective with the Plan Year beginning after December 31, 1997, the mortality table and the interest rate used for the purposes of determining an Actuarial Equivalent amount (other than non-decreasing life annuities payable for a period not less than the life of a Participant, or, in the case of a Qualified Pre-Retirement Survivor Annuity, the life of the surviving spouse) shall be the “Applicable Mortality Table” and the “Applicable Interest Rate” described below.
(1) The “Applicable Mortality Table” means :
(a) for Plan Years through 2007, the mortality table published in Revenue Ruling 95-6, which is based upon a fixed blend of 50 percent of the male mortality rates and 50 percent of the female mortality rates determined under the 1983 Group Annuity Mortality Table, or such other mortality table as is prescribed under Section 417 of the Code. Effective for distributions with Annuity Starting Dates on or after December 31, 2002, notwithstanding any other Plan provisions to the contrary, any reference in the Plan to the mortality table prescribed in Rev. Rul. 95-6 shall be construed as a reference to the mortality table prescribed in Rev. Rul. 2001-62 for all purposes under the Plan.
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(b) for Plan Years 2008 and thereafter, the mortality table published in Revenue Ruling 2007-67, which is based upon a fixed blend of 50 percent of the static male combined mortality rates and 50 percent of the static female combined mortality rates published in proposed Treasury Regulation Section 1.430(h)(3)-1 for valuation dates occurring in 2008, or such other mortality table as is prescribed under Section 417 of the Code.
(2) The “Applicable Interest Rate” means:
(a) for Plan Years through 2007, the annual rate of interest on 30-year Treasury securities determined as of the second calendar month (the lookback month) preceding the first day of the Plan Year during which the Annuity Starting Date occurs.
(b) for Plan Years 2008 and thereafter, the adjusted first, second, and third segment rates prescribed under Section 417 of the Code applied under rules similar to the rules of section 430(h)(2)(C) of the Code for the second calendar month preceding the Plan Year in which the Annuity Starting Date occurs.
The Applicable Interest Rate shall remain consistent for the Plan Year stability period.
Notwithstanding anything contained in the Plan to the contrary, a Participant’s Accrued Benefit shall not be considered to be reduced in violation of Code Section 411(d)(6) merely because of the above changes in the interest rate and mortality assumption used to calculate Actuarial Equivalent amounts.
16.3. Administrative Committee: The person or persons or entity appointed by the Plan Administrator to administer the Plan.
16.4. Affiliated Employer: The Employer and any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Code Section 414(c)) with the Employer; and any other entity required to be aggregated with the Employer pursuant to Regulations under Code Section 414(o).
16.5. Aggregation Group: Either a Required Aggregation Group or a Permissive Aggregation Group.
(a) Required Aggregation Group: The group of plans consisting of the following, which are required to be aggregated:
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(1) all the plans of the Employer in which a Key Employee is a Participant during the Plan Year containing the Determination Date or any of the preceding four Plan Years; and
(2) any other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Section 401(a)(4) or 410.
If the Required Aggregation Group is a Top-Heavy Group, all plans in the Required Aggregation Group in which the Determination Dates fall within the same calendar year will be considered Top-Heavy Plans. If the Required Aggregation is not a Top-Heavy Group, no plan in the Required Aggregation Group will be considered a Top-Heavy Plan.
(b) Permissive Aggregation Group: The group of plans consisting of the following:
(1) the Required Aggregation Group; and
(2) any plan not in the Required Aggregation Group which the Employer wishes to treat as being aggregated with the Required Aggregation Group, provided that the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a) and 410.
If the Permissive Aggregation Group is a Top-Heavy Group, only those plans which are part of the Required Aggregation Group and in which the Determination Dates fall within the same calendar year will be considered Top-Heavy Plans. If the Permissive Aggregation Group is not a Top-Heavy Group, then no plan in the Permissive Aggregation Group will be considered a Top-Heavy Plan.
(c) Any terminated plan maintained by the Employer within the last five Plan Years ending on the Determination Date will be included in determining the Aggregation Group.
16.6. Anniversary Date: The first day of the Plan Year.
16.7. Annual Benefit: The benefit payable annually under the terms of the Plan (exclusive of any benefit not required to be considered for purposes of applying the limitations of Code Section 415 to the Plan) payable in the form of a Straight Life Annuity
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with no ancillary benefits. If the benefit under the Plan is payable in any other form, the Annual Benefit shall be adjusted to be the Actuarial Equivalent of a Straight Life Annuity.
16.8. Annuity: A single premium annuity contract or an annuity under a group annuity contract purchased by the Trustee on behalf of a Participant or Beneficiary from an insurance company for purposes of providing the benefits payable under the terms of the Plan.
16.9. Annuity Starting Date: The first day of the first period for which an amount is paid as an annuity or, in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred that entitles the Participant to such benefit. In the case of a deferred annuity, the Annuity Starting Date shall be the date on which the annuity payments are scheduled to commence.
16.10. Average Monthly Compensation: See Exhibit corresponding to Participant’s classification and status.
16.11. Beneficiary:
(a) The last person or persons designated by the Participant to receive benefits payable under the Plan in the event of death. In the event a Beneficiary is not designated, the Participant’s surviving Spouse will be the deemed Beneficiary. If neither a designated Beneficiary nor the Participant’s Spouse survives the Participant the Participant’s estate will be deemed the Beneficiary.
(b) Subject to the terms of any life insurance policy, any designated Beneficiary may be changed from time to time. To change a beneficiary in a policy the Participant must inform the Plan Administrator and the Trustee in writing. The Trustee must take immediate steps to complete the change with the insurer but will not be liable for any delay in making the change, unless caused by its gross negligence. No change of Beneficiary will be binding upon the insurer until forms properly executed by the Trustee have been filed with and acknowledged by the insurer at its home office.
(c) No designation of Beneficiary or change of designation of Beneficiary made under this Section will be effective until the Plan Administrator and the Trustee actually receive a written notice of such designation or change, signed by the Participant, and, if the Participant is married and the designated Beneficiary is not the
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Participant’s Spouse, consented to by the Participant’s Spouse. The Spouse’s written consent will acknowledge the effect of the consent and will be witnessed by the Plan Administrator or by a notary public.
(d) No spousal consent to a Beneficiary designation is required if
(1) The Participant’s Spouse has waived the right to be the Participant’s Beneficiary and such waiver is in accordance with the last sentence of paragraph (c) above;
(2) it is established to the satisfaction of the Plan Administrator that
(i) the Participant has no Spouse, or
(ii) the Participant’s Spouse cannot be located;
(3) no spousal consent is required in accordance with applicable Treasury or Department of Labor Requirements.
In such event, the designation of a Beneficiary shall be made on a form satisfactory to the Plan Administrator. A Participant may at any time revoke his designation of a Beneficiary or change his Beneficiary by filing written notice of such revocation or change with the Plan Administrator. However, the Participant’s Spouse must again consent in writing to any change in Beneficiary unless the original consent acknowledged that the Spouse had the right to limit consent only to a specific Beneficiary and that the Spouse voluntarily elected to relinquish such right.
16.12. Break in Service: A Period of Severance of at least twelve (12) consecutive months.
In the case of an individual who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date of such absence will not constitute a Break in Service. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence:
(1) by reason of the pregnancy of the individual,
(2) by reason of the birth of a child of the individual,
(3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or
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(4) for purposes of caring for such child for a period beginning immediately following such birth or placement.
If the Employer is a member of an affiliated service group (under Code Section 414(m)), a controlled group of corporations (under Code Section 414(b)), a group of trades or businesses under common control (under Code Section 414 (c)) or any other entity required to be aggregated with the Employer pursuant to Code Section 414(o) and the regulations thereunder, service will be credited for any employment for any period of time for any other member of such group. Service will also be credited for any individual required under Code Section 414 (n) or 414(o) and the Regulations thereunder to be considered an Employee of any employer aggregated under Code Section 414(b), (c) or (m).
Effective December 12, 1994, notwithstanding any provision of this Plan to the contrary, no Break in Service shall occur if the sole basis for the Period of Severance is attributable to qualified military service as defined in Section 414(u) of the Code.
16.13. Code: The Internal Revenue Code of 1986, including any amendments thereto.
16.14. Compensation: A Participant’s wages and salaries received during the calendar year for personal services rendered to the Employer as an Employee in the Eligible Class, as may be modified in the Exhibit corresponding to the Employee’s classification and status.
Compensation shall also include any amount which is contributed by the Employer pursuant to a salary reduction agreement under Code Section 401(k), Section 402(e)(3) and Section 402(h), a simplified employee pension plan under Code Section 408(k), a cafeteria plan under Code Section 125 (including, effective for any Plan Years beginning after December 31, 1997, deemed Section 125 amounts not available to a Participant in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage), a tax-deferred annuity under Code Section 403(b) or a qualified transportation program under Code Section 132(f).
For years beginning after December 31, 1988, the Compensation of each Participant which may be taken into account for determining all benefits provided under the Plan for any Plan Year will not exceed $200,000, as adjusted under Code Section 415(d) of
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the Code, except that the dollar increase in effect on January 1 of any calendar year is effective for years beginning in such calendar year and the first adjustment to the $200,000 limitation is effected on January 1, 1990.
Notwithstanding the foregoing,
(i) for Plan Years beginning after December 31, 1993, the Compensation of each Participant which may be taken into account under the Plan will not exceed $150,000, except as adjusted as follows. For any Plan Year beginning after December 31, 1994, such $150,000 annual compensation limit shall be adjusted as provided under Code Section 415(d), except that such adjustments shall only be made in increments of $10,000, rounded down to the next lowest multiple of $10,000. Notwithstanding the foregoing, if the Plan is maintained pursuant to one or more collective bargaining agreements ratified before August 10, 1993, the above provision limiting Compensation to $150,000 shall not apply to contributions made or benefits accrued pursuant to such collective bargaining agreements for Plan Years beginning before the earlier of:
(1) January 1, 1997, or
(2) the latest of
(a) January 1, 1994, or
(b) the date on which the last of such collective bargaining agreements terminates, without regard to any extension, amendment, or modification made on or after August 10, 1993.
(ii) for Plan Years beginning after December 31, 2001, the Compensation taken into consideration under the Plan will be limited to $200,000. For purposes of determining benefit accruals in a Plan Year beginning after December 31, 2001, Compensation for any prior year shall be limited to $200,000. The $200,000 limit on Compensation shall be adjusted for cost-of-living increases in accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year.
If the period for determining compensation used in calculating an Employee’s allocation for a determination period is a short plan year (i.e. shorter than 12 months), the annual compensation limit is an amount equal to the otherwise applicable annual compensation
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limit multiplied by the fraction, the numerator of which is the number of months in the short plan year, and the denominator of which is 12. In determining the compensation of a Participant for purposes of this limitation, the rules of section 414(q)(6) of the Code shall apply except in applying such rules, the term Family Member shall include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the Plan Year. If, as a result of the application of such rules the adjusted, applicable annual compensation limit is exceeded, then (except for purposes of determining the portion of compensation up to the integration level if this plan provides for permitted disparity), the limitation shall be prorated among the affected individuals in proportion to each such individual’s compensation as determined under this Section prior to the application of this limitation or, the limitation shall be adjusted in accordance with any other method permitted by Regulation.
Notwithstanding anything to the contrary in this Plan, effective for Plan Years beginning after December 31, 1996, if an individual is employed by the Employer and is a member of the family of a 5-percent owner, then such individual shall be considered a separate Employee and any Compensation paid to such individual and any applicable contribution or benefit on behalf of such individual shall be treated as if it were attributable solely to that individual. Except as provided in Treasury Regulations, this provision shall be applied in determining the Compensation of or contributions or benefits on behalf of any Employee for purposes of any section with respect to which a Highly Compensated Employee is defined by reference to Section 414(q) of the Code. For purposes of determining whether an Employee is a Highly Compensated Employee for the 1997 Plan Year only, the family aggregation rules are considered to have been repealed for 1996.
If compensation for any prior determination period is taken into account in determining an Employee’s benefit for the current determination period, the compensation for such prior year is subject to the applicable annual compensation limit in effect for that prior year. For this purpose, for years beginning before January 1, 1990, the applicable annual compensation limit is $200,000.
For purposes of applying the limitations of Code Section 415, “Code Section 415 Compensation” will include the Participant’s wages, salaries, fees for professional
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service, (including for Plan Years beginning after December 31, 1997, elective deferrals as defined in Section 402(g)(3) of the Code and salary reduction contributions of the Participant not includable in his or her gross income by reasons of Section 125 or Section 132 of the Code), and other amounts for personal services actually rendered in the course of employment with an Employer maintaining the Plan (including, but not limited to, commissions paid to salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses and, in the case of a Participant who is an Employee within the meaning of Code Section 401(c)(1) and the Regulations thereunder, the Participant’s Earned Income (as described in Code Section 401(c)(2) and the Regulations thereunder)) paid during the Limitation Year. “415 Compensation” will exclude:
(a) Employer contributions to a plan of deferred compensation which are not includible in the Employee’s gross income for the taxable year in which contributed, or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation;
(b) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and
(d) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Internal Revenue Code (whether or not the amounts are actually excludable from the gross income of the Employee).
For purposes of applying the limitations of Code Section 415, “415 Compensation” for a Limited Year is the compensation actually paid or includible in gross income during such Limitation Year.
16.15. Controlled Group: Any group of business entities under common control, including but not limited to proprietorships and partnerships, or a controlled group of corporations within the meaning of Code Sections 414(b), (c) and (d).
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16.16. Determination Date: For any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year, the last day of that Plan Year.
16.17. Direct Rollover: A direct rollover is a payment by the Plan to an Eligible Retirement Plan specified by the Distributee.
16.18. Disability: A bodily injury, disease or mental condition which prevents the individual from engaging in any employment or occupation for wage or profit on a continued and permanent basis for the remainder of the individual’s life, for which such individual is eligible for and receiving a disability benefit under Title II of the Federal Social Security Act. The permanence and degree of such incapacity will be supported by medical evidence. No Participant shall be deemed to have incurred a Disability, if disability results from engaging in a criminal act, a self-inflicted injury, service in the armed forces of any county, or war, insurrection or rebellion.
16.19. Distributee: A distributee includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving Spouse and the Employee’s or former Employee’s former Spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the Spouse or former Spouse.
16.20. Earliest Retirement Date: The earliest date on which the Participant could elect to receive retirement benefits under the Plan.
16.21. Early Retirement Age: The age on which a Participant shall have attained the age and completed the requisite Years of Service as set forth in the Exhibit corresponding to the Participant’s classification and status.
16.22. Early Retirement Date: The first day of the month next following a Participant’s attainment of Early Retirement Age on which the Participant elects to begin receiving his retirement benefits hereunder.
16.23. Eligible Class:
(a) With respect to benefits described in Exhibit A: Employment as a salaried Employee at a participating division or participating location of Amphenol
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Corporation or any other Participating Employer who receives a regular stated compensation other than a retirement payment, retainer or fee, excluding however:
(i) Any person in any other Eligible Class currently accruing credits under the Plan or any other defined benefit pension plan to which the Employer or any Affiliated Employer is contributing;
(ii) Any employee whose conditions of employment are determined by collective bargaining, unless such employment shall be included in the Plan by the express terms of a collective bargaining agreement;
(iii) Any person whose employment is not for at least 1,000 Hours of Service during any Plan Year;
(iv) Any Employee of a Foreign Subsidiary if such Employee is not a citizen of the United States;
(v) Any Employee of a Foreign Subsidiary if contributions under a funded plan of deferred compensation are provided by a person or corporation, other than the Employer, with respect to the remuneration paid to such Employee by such Foreign Subsidiary; and
(vi) Any Employee of a Foreign Subsidiary if such Employee was not transferred by the Employer to employment with the Foreign Subsidiary directly from employment with the Employer.
Without limitation, Sine Systems Corporation, Amphenol T&M Antennas, Inc., Advanced Printed Circuit, Inc., Amphenol Connex Corporation, Amphenol PCD, Inc., Amphenol Antel, Inc., Amphenol Optimize Manufacturing Company, Fiber Systems International, Inc., SV Microwave Technologies, Inc., Amphenol Alden Products Company, Amphenol Steward Enterprises, Inc., Times Microwave Systems, Inc., Borisch Manufacturing Corp. and Amphenol Adronics, Inc. are not Participating Employers, and Amphenol Aerospace Operations, Amphenol Assemble Tech, Amphenol TCS and Amphenol Nexus Technologies are not participating divisions or locations of Amphenol Corporation.
(b) With respect to benefits described in Exhibit B: Employees at a participating division or location of Amphenol Corporation or another Participating Employer employed on an hourly basis; excluding, however,
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(i) Any Employee in any other Eligible Class who is an active participant of the Plan or any plan maintained by a Participating Employer;
(ii) Any Employee whose conditions of employment are determined by collective bargaining, unless such Employee shall be included in the Plan by the express terms of a collective bargaining agreement;
(iii) Any Employee who is not a Spectra Strip Employee whose regularly scheduled employment is for less than 1,000 Hours of Service during a Plan Year;
(iv) Any Employee of a Foreign Subsidiary if such Employee is not a citizen of the United States; and
(v) Any Employee of a Foreign Subsidiary if contributions under a funded plan of deferred compensation are provided by any person or corporation, other than the Employer, with respect to the remuneration paid to such Employee by such Foreign Subsidiary; and
(vi) Any Employee of a Foreign Subsidiary if such Employee was not transferred by the Employer to employment with the Foreign Subsidiary directly from employment with the Employer.
Without limitation, Sine Systems Corporation, Amphenol T&M Antennas, Inc., Advanced Printed Circuit, Inc., Amphenol Connex Corporation, Amphenol PCD Inc., Amphenol Antel, Inc., Amphenol Optimize Manufacturing Company, Fiber Systems International, Inc., SV Microwave Technologies, Inc., Amphenol Alden Products Company, Amphenol Steward Enterprises, Inc., Times Microwave Systems, Inc., Borisch Manufacturing Corp. and Amphenol Adronics, Inc. are not Participating Employers, and Amphenol Aerospace Operations, Amphenol Assemble Tech, Amphenol TCS and Amphenol Nexus Technologies are not participating divisions or locations of Amphenol Corporation.
(c) With respect to benefits described in Exhibit C: Employment on the salaried payroll of LPL Technologies, Inc., Times Fiber Communications, Inc. or Amphenol Corporation Headquarters; excluding, however any Amphenol operations employee hired prior to June 1, 1987.
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(d) With respect to any benefits described in Exhibit D: Hourly Employees at a participating division or location of Times Fiber Communications, Inc. (Chatham, Virginia, Phoenix, Arizona and Liberty, North Carolina).
(e) With respect to any benefits described in Exhibit E: Salaried Employees of Sine Systems*Pyle Connectors Corporation who shall have been employed at Pyle-National, Inc. on the date before the date of the merger with The Sine Companies, Inc.
(f) With respect to benefits described in Exhibit F: Employment at the Pyle-National Division, represented by the General Service Employees’ Union, Local No. 73 of the Service Employees’ International Union, AFL-CIO.
(g) With respect to benefits described in Exhibit G: Employment as a salaried Employee at a participating division or location of Amphenol Aerospace Operations.
(h) With respect to benefits described in Exhibit H: Employment at a participating division or location of Amphenol Aerospace Operations on an hourly basis, including employment as an hourly rated person on incentive pay plan, within the scope of the collective bargaining agreement between the Employer and the Participating Unit.
16.24. Eligible Retirement Plan:
(a) An individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401 (a) of the Code, that accepts the Distributee’s Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving Spouse, an Eligible Retirement Plan is only an individual retirement account or individual retirement annuity.
(b) Effective after December 31, 2001, an Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 414 (p) of the Code.
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(c) Effective after December 31, 2007, a Participant or Beneficiary may elect to roll over directly an Eligible Rollover Distribution to a Roth IRA described in Code Section 408A(b). For this purpose, the term Eligible Rollover Distribution includes a rollover distribution of after-tax contributions, if applicable.
16.25. Eligible Rollover Distribution:
(a) Any distribution of all or any portion of the balance to the credit of the Distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or for a specified period of ten (10) years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Internal Revenue Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).
(b) Notwithstanding (a) above, effective after December 31, 2001, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be paid only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. Effective after December 31, 2006, such portion also may be paid to such a 403(b) plan.
16.26. Employee: Any person in the employ of the Employer or of any other employer required to be aggregated with the Employer under Sections 414(b), (c), (m) or (o) of the Code, excluding any person who is designated, or otherwise determined to be: (i) an independent contractor, regardless of whether such individual is ultimately determined to be an employee pursuant to the Code or any other applicable law, or (ii) a member of the substitute
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work force, as distinguished from a regular full-time or part-time employee, that is a separate employment classification based on availability of work.
The term Employee will also include any Leased Employee deemed to be an Employee of any employer described in the previous paragraph as provided in Sections 414(n) or (o) of the Code.
16.27. Employer: Amphenol Corporation, any successor which will maintain this Plan and any predecessor which has maintained this Plan. The Employer is a corporation, with principal offices in the State of Connecticut.
16.28. Employment Commencement Date: The date the Employee first performs an Hour of Service for the Employer.
16.29. Exhibit: The attachment to this Plan which forms a part of this Plan which describes the benefits, rights and features applicable to Employees within a certain Eligible Class. Notwithstanding the distinct benefit structures, rights and features described in any Exhibit, the Plan is to be treated as a single plan as described in Regulation Section 1.414(1)-1(b)(1) and all provisions shall be construed in a manner consistent with such treatment.
16.30. ERISA: The Employee Retirement Income Act of 1974, as it may from time to time be amended or supplemented.
16.31. Family Member: The Employee’s spouse, any of the Employee’s lineal descendants and ascendants and the spouses of the Employee’s lineal descendants and ascendants, all as described in Code Section 414(q)(6)(B).
16.32. Fiscal Year: The Employer’s accounting year of 12 months commencing on January 1 of each year and ending the following December 31.
16.33. Foreign Subsidiary: Any corporation organized or created otherwise than in or under the laws of the United States or any State therein or territory thereof if:
(a) twenty percent (20%) or more of such foreign corporation’s voting stock is owned by the Employer; or
(b) fifty percent (50%) or more of such foreign corporation’s voting stock is owned by a foreign corporation described in subparagraph (a) immediately above; provided, in either case, that an agreement which remains in effect has been entered into by
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the Employer to have the insurance system established under Title II of the Social Security Act, as amended, extended to cover all United States citizens who are employed by such foreign corporation; and it is not an Affiliated Employer.
16.34. Forfeiture: That portion of a Participant’s Accrued Benefit that is not vested, and occurs on the earlier of:
(a) the distribution of the entire vested portion of a Participant’s Accrued Benefit; or
(b) the last day of the Plan Year in which the Participant incurs five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a Participant who has terminated employment with the Employer, and whose vested Accrued Benefit is zero, such Participant shall be deemed to have received a distribution of his vested Accrued Benefit upon his termination of employment. In addition, the term Forfeiture shall also include amounts deemed to be Forfeitures pursuant to any other provision of this Plan.
16.35. Highly Compensated Employee:
An Employee who, on the snapshot day:
(a) is a five percent (5%) owner (as defined in the definition of “Key Employee”);
(b) received Compensation from the Employer in excess of the amount set forth in Code Section 414(q)(1) (B) (as adjusted pursuant to Section 415(d) of the Code);
(c) received Compensation from the Employer in excess of the amount set forth in Code Section 414(q)(1) (C) and was a member of the Top-Paid Group; or
(d) was an officer of the Employer described in Code Section 414(q)(1)(D).
Notwithstanding the above, for Plan Years beginning after December 31, 1996 (except that for purposes of determining whether an Employee is a Highly Compensated Employee for the Plan Year beginning in 1997, this provision shall be treated as having been in effect for Plan Years beginning in 1996), “Highly Compensated Employee” means any employee who:
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(a) was a 5-percent owner at any time during the Plan Year or the preceding year, or
(b) for the preceding year had Compensation from the Employer in excess of $80,000.
If the determination on Employee’s status as a Highly Compensated Employee is made earlier than the last day of the Plan Year, Compensation shall be projected for the Plan Year under a reasonable method established by the Employer.
In the event there are Employees not employed on the snapshot day that are taken into account for purposes of the “nondiscrimination requirements” identified in Rev. Proc. 93-42, the term Highly Compensated Employee shall include any eligible Employee for the Plan Year who:
(a) terminated employment prior to the snapshot day and was a Highly Compensated Employee in the prior year;
(b) terminated prior to the snapshot day and
(i) was a five percent (5%) owner;
(ii) has Compensation for the Plan Year greater than or equal to the projected Compensation of any Employee who is treated as a Highly Compensated Employee on the snapshot day (except for Employees who are Highly Compensated Employees solely because they are five percent (5%) owners or officers); or
(iii) is an officer and has Compensation greater than or equal to the projected Compensation of any other officer who is a Highly Compensated Employee on the snapshot day solely because that person is an officer.
In applying the above method in determining Highly Compensated Employees, the terms and provisions of Regulation Section 1.414(q)-IT shall apply to the extent that they are not inconsistent with the methods specifically provided above and in Rev. Proc. 93-42.
16.36. Highly Compensated Participant: A Highly Compensated Employee who has satisfied the eligibility requirements and is participating in the Plan.
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16.37. Hours of Service:
(1) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. These hours will be credited to the Employee for the computation period in which the duties are performed.
(2) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence, during the applicable computation period. These hours include the normally scheduled work hours for the Employee during the first six (6) months of disability or while the Employee is receiving any short-term or long-term disability benefits under any insured or non-insured disability plan to which the Employer contributes. Notwithstanding the above,
(a) no more than 501 Hours of Service shall be credited to an Employee on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single computation period);
(b) an hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed shall not be credited to the Employee if such payment is made or due under a plan maintained solely for the purposes of complying with applicable worker’s compensation, or unemployment compensation or disability insurance laws; and
(c) Hours of Service shall not be credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or due from the Employer regardless of whether such payment is made by or due from the Employer directly, or indirectly through, among others, a trust fund, or insurer, to which the Employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer, or other entity are for the benefit of particular Employees or are on behalf of a group of Employees in the aggregate.
(3) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service will not
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be credited both under paragraph (1) or paragraph (2), as the case may be, and under this paragraph (3). These hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made.
(4) Each hour of the normally scheduled work hours for each week during any period the Employee is on any leave of absence from work with the Employer for military service with the armed forces of the United States, but not to exceed the period required under the law pertaining to veteran’s reemployment rights: provided, however, if the Employee fails to report to work at the end of such leave during which the Employee has reemployment rights, the Employee shall not receive credit for hours on such leave.
(5) The number of normally scheduled work hours for each day of authorized leave of absence, granted by the Employer for which the Employee is not compensated.
Hours of Service will be credited for employment with other members of an affiliated service group (under Code Section 414(m)), a controlled group of corporations (under Code Section 414(b)), or a group of trades or businesses under common control (under Code Section 414 (c)) of which the adopting Employer is a member, and any other entity required to be aggregated with the Employer pursuant to Code Section 414(o) and the Regulations thereunder.
Hours of Service will also be credited for any individual considered an Employee for purposes of this Plan under Code Section 414(n) or Code Section 414(o) and the Regulations thereunder.
The provisions of Department of Labor Regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
Solely to determine whether a one Year Break in Service has occurred for eligibility or vesting purposes for an Employee who is absent on maternity or paternity leave, a Break in Service will not be deemed to occur until the second anniversary of the first day of the maternity or paternity leave. The period between the first and second anniversaries of the maternity or paternity leave neither counts as a Break in Service nor as a Year of Service.
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Service will be determined on the basis of actual hours for which an Employee is paid or entitled to payment. When no time records are available, the Employee shall be given credit for Hours of Service based on the number of normally scheduled work hours for each week the Employee is on the Employer’s payroll (which shall not be less than 40 hours per week for exempt salaried Employees), as determined in accordance with reasonable standards and policies from time to time adopted by the Plan Administrator pursuant to Department of Labor Regulations Section 2530.200b-2(b) and (c).
16.38. Inactive Participants: A former active Participant who has an Accrued Benefit.
16.39. Key Employee: Except as provided in the final paragraph hereof, an Employee who, at any time during the Plan Year or any of the four preceding Plan Years, is
(a) an officer of the Employer having Compensation greater than fifty percent (50)% of the amount in effect under Section 415(b)(1)(A) of the Code for any Plan Year;
(b) one of the ten (10) Employees having Compensation from the Employer of more than the limitation in effect under Section 415(c)(1)(A) of the Code and owning (or considered as owning within the meaning of Code Section 318) the largest interest in the Employer;
(c) a five percent (5%) owner of the Employer. “Five percent (5%) owner” means any person who owns (or is considered within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Employer, or in the case of an unincorporated business, any person who owns more than five percent (5%) of the capital or profits interest in the Employer; or
(d) a one percent (1%) owner of the Employer having Compensation from the Employer of more than $150,000. “One percent (1%) owner” means any person who owns (or is considered as owning within the meaning of Code Section 318) more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than one percent (1%) of the total combined voting power of all Stock of the Employer, or in the case
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of an unincorporated business, any person who owns more than one percent (1%) of the capital or profits interest in the Employer.
For purposes of paragraph (a), no more than the lesser of (i) fifty (50) Employees, or (ii) the greater of ten percent (10%) of the Employees or three Employees will be treated as officers. For purposes of paragraph (b), if two (2) Employees have the same interest in the Employer, the Employee having greater Compensation from the Employer will be treated as having a larger interest. Such term will not include any officer or Employee of an entity referred to in Section 414(d) of the Code (relating to governmental plans). For purposes of determining the number of officers taken into account under paragraph (a), Employees described in Section 414(q)(5) of the Code will be excluded.
Notwithstanding the foregoing, for Plan Years beginning after December 31, 2001, Key Employee means any Employee or former Employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the Company having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the Company, or a 1-percent owner of the Company having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.
16.40. Late Retirement Date: The first day of the month coinciding with or next following the date the Participant retires after attaining his or her Normal Retirement Age.
16.41. Leased Employee: Any person (other than an Employee of the Employer) who pursuant to an agreement between the Employer and any other person (“leasing organization”) has performed for the Employer (or for the Employer and related persons determined in accordance with Section 414(n)(6) of the Code) services of a type historically performed by employees in the business field of the Employer on a substantially full-time basis for a period of at least one year. Contributions or benefits provided a Leased
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Employee by the leasing organization which are attributable to services performed for the Employer will be treated as provided by the Employer.
Notwithstanding the aforesaid, for Plan Years beginning after December 31, 1996, for all purposes in the Plan, “Leased Employee” means any person who is not a common law employee of the recipient and who provides services to the recipient if:
(a) such services are provided pursuant to an agreement between the recipient and any other person (in this Section referred to as the “Leasing Organization”);
(b) such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of at least one (1) year; and
(c) such services are performed under primary direction or control by the recipient.
A Leased Employee will not be considered an Employee of the Employer if:
(a) such Leased Employee is covered by a money purchase pension plan providing:
(1) a nonintegrated employer contribution rate of at least ten percent (10%) of compensation, as defined in Section 415(c)(3) of the Code, but including amounts contributed pursuant to a salary reduction agreement which are excludable from the employee’s gross income under Section 125, Section 402(e)(3), Section 402(h) or Section 403(b) of the Code,
(2) immediate participation, and
(3) full and immediate vesting; and
(b) Leased Employees do not constitute more than twenty percent (20%) of the Employer’s Non-Highly Compensated Employees.
16.42. Limitation Year: The Plan Year.
16.43. Non-Highly Compensated Employee: Any Employee who is not a Highly Compensated Employee.
16.44. Non-Key Employee: Any Employee who is not a Key Employee.
16.45. Normal Form of Benefit: The form of benefit set forth in the Exhibit corresponding to the Participant’s classification and status.
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16.46. Normal Retirement Age: Age sixty-five (65), or such other age set forth in Exhibit corresponding to the Participant’s classification and status.
16.47. Normal Retirement Date: The first day of the month coinciding with or next following the date a Participant attains Normal Retirement Age.
16.48. Participant: Any Employee who has satisfied the eligibility requirements and is participating in the Plan.
16.49. Participating Employer: Any corporation or entity, other than the Employer, whether an affiliate or subsidiary of the Employer or not, who, with the consent of the Employer and the Trustee, adopts the Plan and all of the provisions hereof by a properly executed document evidencing said intent of such Participating Employer.
16.50. Period of Military Duty: The period of time from the date the Employee was first absent from active work for the Employer because of duty in the armed forces of the United States to the date the Employee was re-employed by the Employer at a time when the Employee had a right to re-employment in accordance with seniority rights as protected under Section 2021 through 2026 of Title 38 of the U.S. Code.
16.51. Period of Service: The aggregate of all time period(s) commencing with the Employee’s Employment Commencement Date and ending on the date a Break in Service begins.
16.52. Period of Severance: A continuous period of time of at least twelve (12) months during which the Employee is not employed by the Employer. Such period begins on the date the Employee retires, quits or is discharged, or if earlier, the twelve (12) month anniversary of the date on which the Employee was otherwise first absent from service.
16.53 Plan: The Employer’s qualified retirement plan as set forth in this document, including the Exhibits attached hereto and made a part hereof and as hereafter amended, known as the Pension Plan for Employees of Amphenol Corporation.
Effective February 12, 1975, the Eltra Corporation Pension Plan for Salaried Employees was formed by the merger of the seven pension plans then sponsored by the Eltra Corporation. Effective December 31 1979, this plan was amended to provide benefits to Spectra Strip employees. Effective January 1, 1982, this plan was renamed the Bunker
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Ramo/Eltra Corporation Pension Plan for Salaried Employees — former Eltra Salaried Plan (the “Eltra Plan”).
Effective January 1, 1976, the Bunker Ramo Profit Sharing Retirement Plan (the “Profit Sharing Plan”) was integrated and merged with the Bunker Ramo Corporation Pension Plan, which was subsequently renamed the Bunker Ramo/Eltra Corporation Pension Plan for Salaried Employees (the “Bunker Plan”).
Effective December 9, 1985, all assets and liabilities of the Bunker Plan, except for those related to active employees, were spunoff into the Bunker Ramo/Eltra Corporation Retirement Plan (“B/E Retirement Plan”).
Effective December 30, 1985, all assets and liabilities of the Eltra Plan, except for those related to active and former employees of the Mergenthaler and Spectra Strip divisions, were spunoff into five additional plans, one of which was the NARCO Retirement Plan (“NARCO Plan”).
Effective June 17, 1986, the Eltra Plan was merged with the Bunker Plan, with each plan’s structure preserved. Effective August 1, 1986, the merged plan was renamed the Allied Corporation Pension Plan for Salaried Employees (the “Allied Plan”).
Prior to December 10, 1986, all liabilities and assets of the Bunker Ramo/Eltra Corporation Pension Plan for Hourly Rated Mergenthaler Employees Represented by Local 365 UAW (the “Mergenthaler Plan”) were merged into the Allied Plan, with benefits for active participants equal to those under the Eltra Plan.
Prior to December 31, 1986, all liabilities and certain assets of the NARCO Plan and the B/E Retirement Plan were merged into the Allied Plan.
Effective January 1, 1987, assets and liabilities related to active, terminated and retired employees of the Amphenol Corporation were spun off to the Salaried Employees’ Pension Plan of the Amphenol Corporation.
Effective January 1, 1987, assets and liabilities related to active, terminated and retired employees of the Linotype Company were spun off to the Linotype Company Pension Plan.
Effective December 31, 1997, all liabilities and assets of the defined benefit pension plans then sponsored by the Employer and its affiliates were merged with the Plan
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(formerly known as the Salaried Employees Pension Plan of Amphenol Corporation) which was subsequently renamed Pension Plan for Employees of Amphenol Corporation.
16.54. Plan Administrator: The Employer or such persons or entities designated by the Employer to administer the Plan on behalf of the Employer. The Plan Administrator shall be a named “fiduciary”, as referred to in Section 402(a) of ERISA, with respect to the management, operation and administration of the Plan.
16.55. Plan Year: The 12-consecutive month period designated by the Employer beginning January 1 of each year ending the following December 31.
16.56. Predecessor Employer: A firm absorbed by the Employer by change of name, merger, acquisition or a change of corporate status, or a firm of which the Employer was once a part.
16.57. Present Value of Accrued Benefit: The lump sum value of a Participant’s Accrued Benefit at a valuation date, calculated by reference to the actuarial assumptions set forth in Schedule A attended to the corresponding Exhibit hereto.
16.58. Primary Social Security Retirement Benefit: A Participant’s Primary Social Security Retirement Benefit is the estimated Primary Insurance Amount to which the Participant is entitled at his Normal Retirement Date of Late Retirement Date, if later. If a Participant’s Normal Retirement Date or Late Retirement Date precedes his Social Security Retirement Age, his Primary Insurance Amount will be decreased by the applicable reduction factor provided under Title II of the federal Social Security Act for the period between Normal Retirement Date or Late Retirement Date and his Social Security Retirement Age. If a Participant retires after his Social Security Retirement Age, his Primary Insurance Amount will be increased by the applicable delayed retirement credit provided under Title II of the federal Social Security Act for the period between his Social Security Retirement Age and his actual retirement date or age seventy (70), whichever is earlier. The failure of the Participant to receive such amount or any portion thereof for whatever reason shall be disregarded. When determining the Participant’s Primary Insurance Amount, it will be assumed that the Participant received Compensation for all prior years by applying a retrospective salary scale to the Participant’s Compensation which he received during the plan year preceding his last day of employment. This retrospective salary scale will be based on the actual past changes in
94
the national average wages from year to year as determined by the Social Security Administration. The application of this retrospective salary scale to the Participant’s Compensation which he received during the plan year preceding his last day of employment will produce an estimate of Compensation from the Participant’s last day of employment backwards to the calendar year of the Participant’s eighteen birthday. If a Participant’s last day of employment occurs before his 65 th birthday, his Compensation which he received during the plan year preceding his last day of employment will be assumed to continue from his last day of employment to his 65 th birthday for purposes of determining his Primary Insurance Amount. However, if the Participant provides the Employer with satisfactory evidence of the Participant’s actual past compensation for such prior years and if such past compensation is treated as wages under the Social Security Act, the Plan must use such actual past compensation. The Plan must provide written notice to each Participant of the Participant’s right to supply actual compensation history and of the financial consequences of failing to supply such history. The notice must be given each time the summary plan description is provided to the Participant and must also be given upon the Participant’s separation from service. The notice must also state that the Participant can obtain the actual compensation history from the Social Security Administration.
16.59. Qualified Domestic Relations Order: A signed domestic relations order issued by a state court which creates, recognizes or assigns to an alternate payee(s) the right to receive all or part of a Participant’s Accrued Benefit and which meets the requirements of Code Section 414(p).
16.60. Qualified Joint and Survivor Annuity: An annuity for the life of the Participant with a survivor annuity for the life of the Participant’s Spouse equal to fifty percent (50%) of the amount of the annuity payable during the joint lives of the Participant and the Participant’s Spouse, and which is the Actuarial Equivalent of the Normal Form of Benefit.
16.61. Qualified Pre-Retirement Survivor Annuity: An annuity form of payment for the life of the surviving Spouse of the Participant who dies prior to his Annuity Starting Date in an amount equal to the benefit that would have been payable if the Participant had:
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(a) separated from service on the date of death (or date of separation from service, if earlier),
(b) survived to the Earliest Retirement Age,
(c) retired as of the Earliest Retirement Age with an immediate Qualified Joint and Survivor Annuity, and
(d) died on the day after the Earliest Retirement Age.
16.62. Re-employment Commencement Date: The date the Employee is first credited with an Hour of Service for performing duties following a Break in Service or Period of Severance.
16.63. Re-entry Date: The date an Inactive Participant re-enters the Plan.
16.64. Regulation: Income Tax Regulations as promulgated by the Secretary of the Treasury or his delegate, and as amended from time to time.
16.65. Retirement: Termination of employment while in the Eligible Class:
(a) after the Participant attains Normal Retirement Age;
(b) after the Participant attains Early Retirement Age; or
(c) due to disability.
16.66. Social Security Retirement Age: The age used as the retirement age under Section 216(I) of the Social Security Act, except that such Section shall be applied without regard to the age increase factor and as if the early retirement age under Section 216 (I)(2) of such Act were sixty-two (62).
16.67. Spouse: The husband or wife, or surviving husband or wife, of the Participant under applicable law; provided that a person who was formerly legally married to a Participant will be treated as the Spouse or surviving Spouse, and a person who is currently legally married to a Participant will not be treated as the Spouse or surviving Spouse, to the extent provided under a Qualified Domestic Relations Order.
16.68. Straight Life Annuity: An annuity payable in equal installments for the life of the Participant that terminates upon the Participant’s death.
16.69. Super Top-Heavy Plan: This Plan for any Plan Year in which, as of the Determination Date, “90%” were substituted for “60%” where it appears in the definition of “Top-Heavy Plan”.
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16.70. Top-Heavy Group: Any Aggregation Group for which the sum as of the Determination Date of
(a) the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in the Aggregation Group, and
(b) the aggregate of the accrued benefit of Key Employees under all defined contribution plans in the Aggregation Group, exceeds sixty percent (60%) of the similar sum determined for all Employees.
16.71. Top-Heavy Plan: This Plan for any Plan Year in which, as of the Determination Date, the sum of:
(a) the Accrued Benefits of Key Employees under this Plan and any other defined benefit plan of the Employer which is included with this Plan in an Aggregation Group, plus
(b) the present value of the cumulative accrued benefits for Key Employees under any defined contribution pension plan of Employer which is included with this Plan in an Aggregation Group, exceeds sixty percent (60%) of a similar sum determined for all Key Employees and Non-Key Employees.
To the extent required by Code Section 416(g)(3), distributions from such plans during the five-year period ending on the Determination Date will be added to said Accrued Benefits and said aggregate of present values of the cumulative accrued benefits (both for Key Employees and all Key Employees and Non-Key Employees).
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For purposes of this Section and to the extent required by Code Section 416(g)(4)(A) and (B), rollover contributions or similar transfers initiated by an Employee and made after December 31, 1983, and benefits and accounts of an Employee who was a Key Employee but who will have ceased to be a Key Employee will not be taken into account for purposes of determining whether the Plan is a Top- Heavy Plan.
To the extent required by Code Section 416(g)(4)(E), if an Employee has not performed services for the Employer at any time during the five (5) year period ending on the Determination Date, any Accrued Benefits and present value of cumulative accrued benefits for such Employee will not be taken into account in determining whether the Plan is a Top-Heavy Plan.
16.72. Top-Heavy Ratio:
(a) If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of account balances under the aggregated defined contribution plan or plans for all Key Employees, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all participants, and the present value of accrued benefits under the defined plan or plans for all participants as of the Determination Date(s), all determined in accordance with Section 416 of the Code and the Regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the 5-year period ending on the Determination Date.
(b) For purposes of paragraph (a) above the value of account balances and the Present Value of Accrued Benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Section 416 of the Code and the Regulations thereunder for the
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first and second plan years of a defined benefit plan. The account balances and accrued benefits of a Participant (1) who is not a Key Employee but who was a Key Employee in a prior year, or (2) who has not been credited with at least one Hour of Service with any Employer maintaining the Plan at any time during the 5-year period ending on the Determination Date will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Section 416 of the Code and the Regulations thereunder. Deductible Employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall be determined under (a) the method, if any, that uniformly applied for accrual purposes under all defined benefit plans maintained by the Employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(I)(C) of the Code.
For Plan Years beginning after December 31, 2001, the present values of accrued benefits and the amounts of account balances of an Employee as of the determination date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “5-year period” for “1-year period.” The accrued benefits and accounts of any individual who has not performed services for the Company during the 1-year period ending on the determination date shall not be taken into account.
16.73. Top-Paid Group: The group consisting of the top twenty percent (20%) of Employees when ranked on the basis of Compensation paid during such year. For purposes
99
of determining the number of Employees in the group (but not for purposes of determining who is in it), the following Employees will be excluded:
(a) Employees who have not completed six (6) months of service with the Employer.
(b) Employees who normally work for the Employer less than seventeen and one-half (17 ½) hours per week.
(c) Employees who normally do not work for the Employer more than six (6) months during any Plan Year.
(d) Employees who have not attained age twenty-one (21).
(e) Employees included in a collective bargaining unit who are covered by an agreement between Employee representatives and the Employer, where retirement benefits were the subject of good faith bargaining, provided that ninety percent (90%) or more of the Employer’s Employees are covered by this agreement.
(f) Employees who are nonresident aliens and who receive no earned income which constitutes income from sources within the United States.
16.74. Trust Agreement. The instrument executed by the Employer and the Trustee fixing the rights and liabilities of each with respect to holding and administering Plan assets for the purposes of the Plan.
16.75. Trust Fund. The assets of the Plan as held and administered by the Trustee.
16.76. Trustee. The trustees named in the Trust Agreement and their successors.
16.77. Valuation Date. The Anniversary Date of the Plan or such other date as agreed to by the Employer and the Trustee on which Participant Accrued Benefits are revalued.
16.78. Year of Accrual Service: As defined in the Exhibit corresponding to the Participant’s classification and status; provided, however, effective December 12, 1994, notwithstanding any provision of this Plan to the contrary, including any Exhibit, service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Internal Revenue Code.
100
16.79. Year of Eligibility Service: A twelve (12) consecutive month period (computation period) described in the Exhibit corresponding to the Employee’s classification and status; provided, however, effective December 12, 1994, notwithstanding any provision of this Plan to the contrary, including any Exhibit, service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Internal Revenue Code.
16.80. Year of Service: The total years of employment of an Employee with the Employer commencing with the Employee’s Employment Commencement Date, and ending with the date such Employee Quits, retires, or is discharged or released, or the date of expiration of an Employee’s authorized leave of absence; provided, however, effective December 12, 1994, notwithstanding any provision of this Plan to the contrary, including any Exhibit, service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Internal Revenue Code.
The computation period shall be the twelve (12) month period commencing of the Employee’s Employment Commencement Date or Re-Employment Commencement Date, and anniversaries thereof unless a different computation period is expressly stated.
16.81. Year of Vesting Service: As defined in the Exhibit corresponding to the Employee’s classification and status; provided, however, effective December 12, 1994, notwithstanding any provision of this Plan to the contrary, including any Exhibit, service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Internal Revenue Code.
The computation period shall be the twelve (12) month period commencing on the Employee’s Employment Commencement Date or Re-Employment Commencement Date, and anniversaries thereof unless a different computation period is expressly stated.
101 Exhibit 10.37
2011 AMPHENOL MANAGEMENT INCENTIVE PLAN
I. Purpose
The purpose of the Plan is to reward eligible key employees of Amphenol Corporation and affiliated operations with performance based cash bonus payments provided certain individual, operating unit and Company goals are achieved.
II. Eligibility
Key management personnel and target bonuses are as recommended by the CEO. Generally, participation includes senior management positions, corporate staff managers, general managers and their designated direct reports. Participation, target bonuses and bonus payments are as approved by the Compensation Committee of the Board of Directors.
III. Plan Components
Payments under the Incentive Plan are based primarily on performance against quantitative measures established at the beginning of each year. In addition, consideration will be given, when appropriate, to certain qualitative factors as further discussed below. The quantitative portion of the 2011 Management Incentive Plan is contingent upon the Company’s achievement and/or each Group’s achievement, and/or each operating unit’s achievement and/or each individual’s achievement of performance targets and/or goals. These targets and/or goals include revenue, operating income, operating cash flow, return on investment, return on sales, organic growth and contribution to EPS growth. For 2011 quantitative performance criteria are based primarily on sales and income growth in 2011 over 2010 and actual performance in 2011 as compared to 2011 budget. Performance based payments pursuant to the 2011 Management Incentive Plan may be adjusted if unusual and unanticipated market conditions materially impact the Company’s, a Group’s, an operating unit’s, or an individual’s growth and/or performance. Qualitative factors considered in establishing performance based payment pursuant to the 2011 Management Incentive Plan include the following: accomplishments against budget, balance sheet management including cash flow, new market/new product positioning, operating unit and group contribution to total Company performance, other specific individual objective impacting Company performance, customer satisfaction, cost reductions and productivity improvement and quality management.
IV. Administration
• Payments are based upon average base salary during the Plan year (new hires will be prorated accordingly if hired after February 1 st of the plan year).
• The maximum allowable payout under the Plan is 2x the target bonus as applied to average base salary.
• To be eligible for the bonus payment, a participant must be an active employee on the payroll and in good standing as of December 31, 2011. Exceptions must be recommended by the CEO and be approved by the Compensation Committee. th • Payments are made not later than March 15 of the calendar year immediately following the Plan year. All payments are subject to the recommendation of the CEO and the approval of the Compensation Committee.
• The Plan is intended to be exempt from the requirements of the Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other applicable guidance issued thereunder (“Section 409A”) or if not exempt, to satisfy the requirements of Section 409A, and the provisions of the Plan shall be construed in a manner consistent therewith.
Exhibit 21.1
State/ Country of Name(s) under which Subsidiary does List of Subsidiaries Incorporation business (1)
Amphenol Adronics, Inc. Delaware, U.S.A. Amphenol Adronics
Amphenol Air LB North America, Inc. Canada Amphenol Air LB
Amphenol Air LB GmbH Germany Amphenol Air LB
Air LB International Development S.A. Luxembourg Amphenol Air LB
Amphenol Air LB S.A.S. France Amphenol Air LB
Amphenol Alden Products Company Delaware, U.S.A. Alden
Amphenol Alden Products Mexico, S.A. de C.V. Mexico Alden
Amphenol Antenna Solutions, Inc. Illinois, U.S.A. Amphenol Antel
Amphenol Assembletech Xiamen Co., Ltd. China Amphenol Assembletech China
Amphenol Australia Pty Ltd. Australia Amphenol Australia
Amphenol Benelux B.V. The Netherlands Amphenol ABEN
Amphenol Borg Limited England Amphenol Borg
Amphenol Borg Pension Trustees Ltd. England Amphenol Borg Pension
Amphenol Cables On Demand Corp. Delaware, U.S.A. Cables on Demand
Amphenol Canada Corp. Canada Amphenol Amphenol Commercial Products (Chengdu) China Amphenol Chengdu
Co., Ltd. Amphenol (Changzhou) Connector Systems Co. China Amphenol (Changzhou) TCS Co., Ltd.
Ltd.
Amphenol (Changzhou) Electronics Co. Ltd. China Amphenol (Changzhou) TCS Co., Ltd.
Amphenol CNT (Xian) Technology Co., Ltd. China Amphenol CNT
Amphenol Connex Corporation Delaware, U.S.A. Connex
Amphenol do Brasil LTDA. Brazil Amphenol Amphenol Commercial and Industrial UK, England Amphenol
Limited
Amphenol Connexus AB Sweden Connexus
Amphenol Connexus Ou Estonia Amphenol Amphenol-Daeshin Electronics and Precision Korea Amphenol Dae Shin, Dae Shin, Amphenol
Co., Ltd. Amphenol East Asia Electronic Technology China AEAL, Amphenol
(Shenzen) Co. Ltd.
Amphenol East Asia Limited Hong Kong Amphenol
Amphenol RF Asia Limited Hong Kong Amphenol
Amphenol Finland OY Finland Amphenol Finland
Amphenol France Acquisition SAS France Amphenol
Amphenol France SAS France Amphenol
Amphenol Funding Corporation Delaware U.S.A. Amphenol
Amphenol Germany GmbH Germany Amphenol
Amphenol Gesellschaft m.b.H. Austria Amphenol, AVIN
Amphenol Holding UK, Limited England Amphenol
Amphenol Intercon Systems, Inc. Delaware, U.S.A. Intercon
Amphenol Interconnect India Private Limited India Amphenol India
Amphenol Interconnect Products Corporation Delaware, U.S.A. AIPC, Amphenol Amphenol Interconnect South Africa South Africa Amphenol Interconnect
(Proprietary) Limited
Amphenol International Ltd. Delaware, U.S.A. Amphenol International
Amphenol Italia, S.R.L. Italy Amphenol
Amphenol Japan Ltd. Japan Amphenol
Amphenol -Kai Jack Industrial Co., Ltd. Taiwan Amphenol RF, Kai Jack
Amphenol -Kai Jack (Shenzen), Inc. China Kai Jack
Amphenol Limited England Amphenol, LTD
Amphenol LTW Technology Co., Ltd. Taiwan Amphenol LTW Technology
(1) Each Subsidiary also does business under the corresponding corporate name listed in column 1.
Amphenol Malaysia Sdn Bhd. Malaysia T&M Antennas
Amphenol Middle East Enterprises U.A.E. Amphenol Amphenol Mobile Communication Products India Amphenol MCP India
India Private Limited
Amphenol Netherlands Holdings 1B.V. Netherlands Amphenol
Amphenol Netherlands Holdings 2B.V Netherlands Amphenol
Amphenol Omniconnect India Private Limited India Amphenol
Amphenol Optimize Manufacturing Co. Arizona, U.S.A. Optimize
Amphenol Optimize Mexico S.A. de C.V. Mexico Optimize
Amphenol PCD, Inc. Delaware, U.S.A. Amphenol PCD
Amphenol PCD (Shenzen) Co., Ltd. China PCD
Amphenol Phoenix Co., Ltd. Korea Phoenix Korea
Amphenol Printed Circuits, Inc. Delaware, U.S.A. Amphenol Amphenol Shouh Min Enterprise (Hong Kong) Hong Kong Amphenol Shouh Min
Company Limited
Amphenol Singapore Pte. Ltd. Singapore Amphenol Singapore Amphenol Shouh Min Industry (Shenzhen) China Shouh Min
Co., Ltd.
Amphenol Steward Enterprises, Inc. Texas, U.S.A. Steward
Amphenol Singapore Pte Ltd. Singapore AEAL
Amphenol Socapex S.A.S. France Socapex
Amphenol SV Microwave Acquisition Corp. Delaware, U.S.A. Amphenol SV Microwave
Amphenol T&M Antennas, Inc. Delaware, U.S.A. T&M Antennas, Amphenol T&M
Amphenol TCS Ireland Limited Ireland Amphenol TCS Ireland Limited
Amphenol TCS (Malaysia) Sdn Bhd Malaysia Amphenol TCS (Malaysia) Sdn Bhd
Amphenol TCS de Mexico S.A. de C.V. Mexico Amphenol TCS de Mexico S.A. de C.V.
Amphenol Technology (Zhuhai) Co. Ltd. China Amphenol Amphenol-TFC (Changzhou) Communications China Amphenol, Times Fiber, TFC
Equipment Co., Ltd.
Amphenol TFC do Brasil Ltda. Brazil Amphenol
Amphenol TFC Fios E Cabos do Brasil Ltda. Brazil Amphenol
Amphenol TFC MDE Participacoes Ltda. Brazil Amphenol
Amphenol Taiwan Corporation Taiwan Amphenol Amphenol Technical Products International Co. Canada Technical Products International, TPI
Amphenol TPI
Amphenol Technology (Shenzen) Co. Ltd. China Amphenol Amphenol Times Microwave Electronics China Amphenol Times Microwave Electronics
(Shanghai) Ltd.
Amphenol Tianjin Co., Ltd. China HTEC
Amphenol Tuchel Electronics GmbH Germany Tuchel
Amphenol Tunisia L.L.C. Tunisia Amphenol Tunisia
Amphenol USHoldco Inc. Delaware, U.S.A. Amphenol
Asia Connector Services, Ltd. Delaware, U.S.A. Asia Connector Service
Borisch Manufacturing Corporation Michigan, U.S.A. Borisch Manufacturing
Asia Connector Services, Ltd. Delaware, U.S.A. Asia Connector Services
C&S Antennas, Inc. Delaware, U.S.A. Amphenol
C&S Antennas Antennas, Ltd U.K. Amphenol
ContactServe (Proprietary) Limited South Africa ContactServe
CSA Ltd. U.K. Amphenol Changzhou Amphenol Fuyang Communication China Fuyang
Equipment Company Limited
Contactserve (Proprietary) Limited South Africa Contactserve
East Asia Connector Services, Ltd. China East Asia Connector Services Amphenol Fiber Optic Technology (Shenzen) China ETD
Co., Ltd.
Fiber Systems International, Inc. Texas, U.S.A. FSI
Filec Europe Centrale s.r.o. Czech Republic Filec
Filec Production SAS France France Filec
Filec SAS France Filec
(1) Each Subsidiary also does business under the corresponding corporate name listed in column 1.
FSI Holdings, Inc. Nevada, U.S.A. Amphenol
Guangzhou Amphenol Electronics Co. Ltd. China Amphenol Guangzhou Amphenol Electronics China Amphenol, GEC
Communication Co., Ltd. Guangzhou Amphenol Sincere Flex Circuits China Sincere
Co., Ltd. Hangzhou Amphenol Phoenix Telecom Parts China Phoenix
Co. Ltd. Kunshan Amphenol Zhengri Electronics Co. China Kunsham Amphenol Zhengri Electronics
Ltd.
Jaybeam Wireless SAS France Jaybeam Wireless
KE Ostrov — Elektrik, s.r.o. Czech Republic Konfektion E.
Konfektion E Elektronik GmbH Germany Konfektion E.
Konfection E — SK, s.r.o. Slovakia Konfektion E.
Konnektech, Ltd. Michigan, U.S.A. Amphenol KAE dba Korea Air Electronics Co., Ltd., KAE Korea KAE
and/or Amphenol KAE
LPL Technologies Holding GmbH Germany Amphenol
Lectric SARL Tunisia Amphenol
LTW Technology (Samoa) Co., Ltd. Samoa LTW Technology
LTW top Tech (Samoa) Co., Ltd. Samoa LTW Top Tech
Matir, S.A. Uruguay Amphenol Precision Cable Manufacturing Corporation de Mexico Amphenol
Mexico, S.A. de C.V.
Pyle -National Ltd. England Pyle -National
RSI International Ltd. U.K. Amphenol Shanghai Amphenol Airwave Communication China Shanghai Airwave, T&M Antennas
Co., Ltd.
Amphenol Sine Systems Corporation Delaware, U.S.A. Sine Societe d ’Etudes et de Fabrication Electroniques France SEFEE
et Electriques SAS
Spectra Strip Limited England Amphenol
SV Microwave Components Group, Inc. Florida, U.S.A. SV Microwave
SV Microwave, Inc. Florida, U.S.A. SV Microwave
SV Microwave Technologies, Inc. Delaware, U.S.A. SV Microwave
TCS Japan K.K. Japan TCS Japan
TFC South America S.A. Argentina Times Fiber
Tianjin Amphenol KAE Co., Ltd. China KAE
Times Fiber Canada Limited Canada Times Fiber
Times Fiber Communications, Inc. Delaware, U.S.A. Times Fiber
Times Microwave Systems, Inc. Delaware, U.S.A. Times Microwave Systems
Times Wire and Cable Company Delaware, U.S.A. Amphenol
U-Jin Cable Industrial Co., Ltd. Korea U-JIN
(1) Each Subsidiary also does business under the corresponding corporate name listed in column 1.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-162722 on Form S-3 and Registration Statement Nos. 333- 163015 and 333-163017 on Form S-8, of our report dated February 28, 2011, relating to the consolidated financial statements and financial statement schedule of Amphenol Corporation and subsidiaries (“Amphenol”), and the effectiveness of Amphenol’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Amphenol for the year ended December 31, 2010.
/s/ DELOITTE & TOUCHE LLP
Hartford, Connecticut February 28, 2011
Exhibit 31.1
Amphenol Corporation Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification
I, R. Adam Norwitt, as the principal executive officer of the registrant, certify that:
1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2010 of Amphenol Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report,
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 28, 2011
/s/ R. Adam Norwitt
R. Adam Norwitt
President and Chief Executive Officer
Exhibit 31.2
Amphenol Corporation Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification
I, Diana G. Reardon, as the principal financial officer of the registrant, certify that:
1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2010 of Amphenol Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report,
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 28, 2011
/s/ Diana G. Reardon
Diana G. Reardon
Executive Vice President and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Amphenol Corporation (the “Company”) on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Adam Norwitt, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 28, 2011
/s/ R. Adam Norwitt
R. Adam Norwitt
President and Chief Executive Officer
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Amphenol Corporation and will be retained by Amphenol Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Amphenol Corporation (the “Company”) on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Diana G. Reardon, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 28, 2011
/s/ Diana G. Reardon
Diana G. Reardon
Executive Vice President and Chief Financial Officer
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Amphenol Corporation and will be retained by Amphenol Corporation and furnished to the Securities and Exchange Commission or its staff upon request.