As filed with the Securities and Exchange Commission on February 28, 2007
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
Frequency Electronics, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-1986657
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553
516-794-4500
(Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive Offices)
2001 Incentive Stock Option Plan
2005 Stock Award Plan of Frequency Electronics, Inc.
Frequency Electronics, Inc. Employee Stock Ownership Plan
(Full Title of the Plan)
Alan Miller
Chief Financial Officer
Frequency Electronics, Inc.
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553
(516) 794-4500
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent For Service)
Copies to:
Dennis J. Block, Esq.
William P. Mills, III, Esq.
Cadwalader, Wickersham & Taft LLP
One World Financial Center
New York, New York 10281
(212) 504-6000
------------------
CALCULATION OF REGISTRATION FEE
==========================================================================================
Title of Each Class Amount to Proposed Maximum Proposed Maximum Amount of
of Securities be Offering Aggregate Registration
to be Registered Registered(1) Price Per Unit Offering Price Fee
Common Stock, par value $1.00 per share 385,200 (2) $10.30 (3) $3,967,560 (3) $121.81
Common Stock, par value $1.00 per share 400,000 (4) $11.25 (5) $4,500,000 (5) $138.15
Common Stock, par value $1.00 per share 374,435 (6) $11.25 (7) $4,212,393.75 (7) $129.32
(1) Plus such indeterminate number of shares pursuant to Rule 416 as may be
issued in respect of stock splits, stock dividends and similar
transactions.
(2) Represents the registration of an aggregate of 385,200 shares of common
stock of Frequency Electronics, Inc. issuable upon exercise of options
granted under the 2001 Incentive Stock Option Plan.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h) and Rule 457(c) under the Securities Act of 1933,
as amended, based on (i) an average exercise price of $10.30 for 385,200
of the shares to be registered pursuant to this Registration Statement.
(4) Represents the registration of an aggregate of 400,000 shares of common
stock of Frequency Electronics, Inc. issuable upon exercise of options
reserved for grant and the settlement of stock appreciation rights granted
under the 2005 Stock Award Plan of Frequency Electronics, Inc.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h) and Rule 457(c) under the Securities Act of 1933,
as amended, based on the average of the high and low sales prices of the
common stock as reported on the Nasdaq Global Market on February 27, 2007.
(6) Represents the registration of an aggregate of 374,435 shares of common
stock of Frequency Electronics, Inc. issuable upon allocation of such
stocks to Employee Stock Ownership Plan participants.
(7) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h) and Rule 457(c) under the Securities Act of 1933,
as amended, based on the average of the high and low sales prices of the
common stock as reported on the Nasdaq Global Market on February 27, 2007.
EXPLANATORY NOTE
Frequency Electronics, Inc. (the "Company") has prepared this Registration
Statement in accordance with the requirements of Form S-8 under the Securities
Act of 1933, as amended (the "Securities Act"), to register (i) issuances of
385,200 shares of common stock, par value $0.01 per share ("Common Stock"), of
the Company upon the exercise of options previously granted under the 2001
Incentive Stock Option Plan (the "2001 Plan"); (ii) future issuances of up to
400,000 shares of Common Stock under the 2005 Stock Award Plan of Frequency
Electronics, Inc. (the "2005 Plan"); and (iii) future issuances of up to 374,435
shares of Common Stock under the Frequency Electronics, Inc. Employee Stock
Ownership Program.
This Registration Statement also includes a reoffer prospectus prepared in
accordance with General Instruction C of Form S-8 and in accordance with the
requirements of Part I of Form S-3. This reoffer prospectus may be used by
certain officers and directors of the Company to sell or otherwise dispose of
securities received as grants under, or as a result of the exercise of stock
options granted under, the 2001 Plan.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information required in Part I of this
Registration Statement will be sent or given to employees as specified in Rule
428(b)(1) of the Securities Act and are not filed as part of this Registration
Statement pursuant to the Note to Part I of Form S-8. Those documents and the
documents incorporated by reference into this Registration Statement, taken
together, constitute prospectuses that meet the requirements of Section 10(a) of
the Securities Act.
The Company will deliver or cause to be delivered promptly, without
charge, to each person to whom information is required to be delivered, upon
written or oral request, a copy of the information that is incorporated by
reference pursuant to Item 3 of this Registration Statement and any other
documents required to be delivered pursuant to Rule 428(b).
I-1
REOFFER PROSPECTUS
Frequency Electronics, Inc.
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553
(516) 794-4500
385,200 Shares of Common Stock
Certain of our employees, all of whom are named in this prospectus (the
"Selling Stockholders"), may offer and sell from time to time, for their own
accounts, up to 385,200 shares of Common Stock (the "Shares") underlying stock
options that they acquired pursuant to the 2001 Incentive Stock Option Plan (the
"2001 Plan"). We will not receive any of the proceeds from the sale of the
Shares.
The Selling Stockholders may offer for sale or sell the Shares in varying
amounts through public or private transactions at prevailing market prices or at
privately negotiated prices. Sales may be made through brokers or to dealers,
who are expected to receive customary commissions or discounts.
The Selling Stockholders and participating brokers and dealers may be
deemed to be "underwriters" within the meaning of the Securities Act, in which
event any profit on the sale of Shares by those Selling Stockholders and any
commissions or discounts received by those brokers or dealers may be deemed to
be underwriting compensation under the Securities Act. We will bear all expenses
incurred in connection with this offering, other than discounts, concessions and
commissions which are to be borne by the Selling Stockholders.
Our common stock is traded on the Nasdaq Global Market under the symbol
"FEIM." On February 27, 2007, the last reported sale price of our Common Stock
was $11.29 per share.
Our business and an investment in our common shares involve significant
risks. These risks are described under the caption "Risk Factors" beginning on
page 4 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is February 28, 2007.
You should only rely on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. Our common stock is not being offered in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
---------------------------------
TABLE OF CONTENTS
Page
The Company...................................................................3
Risk Factors..................................................................4
Forward-Looking Statements....................................................10
Use of Proceeds...............................................................10
Selling Stockholders..........................................................10
Plan of Distribution..........................................................13
Legal Matters.................................................................14
Experts.......................................................................14
Where You Can Find More Information...........................................14
Incorporation of Certain Documents by Reference...............................15
2
THE COMPANY
Frequency Electronics, Inc. (the "Company") was founded in 1961 as a
research and development firm in the technology of time and frequency control.
The Company was incorporated in Delaware in 1968 and became the successor to the
business of Frequency Electronics, Inc., a New York corporation, organized in
1961. The principal executive office of Frequency Electronics is located at 55
Charles Lindbergh Boulevard, Mitchel Field, New York 11553. Its telephone number
is 516-794-4500 and its website is www.frequencyelectronics.com.
In the mid-1990's, the Company transformed itself from primarily a defense
contract manufacturer into a high-tech provider of precision time and frequency
products for commercial applications found in both ground-based communication
stations and on-board satellites. The Company also continues to support the
United States government with products for defense and space applications.
The Company is a world leader in the design, development and manufacture
of high-technology frequency, timing and synchronization products for satellite
and terrestrial voice, video and data telecommunications. The Company's
technologies provide unique solutions that are essential building blocks for the
next generation of broadband wireless and for the ongoing expansion of existing
wireless and wireline networks. The Company's mission is to provide the most
advanced control of frequency and time - essential factors for synchronizing
communication networks and for providing reference frequencies for certain
military, commercial and scientific, terrestrial and space applications.
The Company has divided its operations into four principal market areas:
1. Products for commercial communications which are based either on the
ground or in space. The Company's space and terrestrial commercial
communications programs are produced by its wholly owned subsidiary,
FEI Communications, Inc. ("FEIC"). FEIC was incorporated in Delaware
in December 1991, and was created as a separate subsidiary company
to provide ownership and management of assets and other services
appropriate for commercial clients, both domestic and foreign.
2. Products used by the United States Government for defense or space
applications. The Company's subsidiary, FEI Government Systems, Inc.
("FEI-GSI"), was formed in fiscal year 2002 to focus on supplying
the Company's technology and legacy proprietary products to the
United States military and other U.S. government agencies.
3. Products for wireline and network synchronization systems. These
products are produced by Gillam-FEI, the Company's Belgian
subsidiary, acquired in September 2000. Products delivered by
Gillam-FEI provide essential network monitoring and wireline
synchronization for a variety of industries and telecommunications
providers in Europe, Africa, the Middle East and Asia.
4. Products that incorporate global positioning systems ("GPS")
technology. These precision time and frequency generation and
synchronization products are manufactured by the Company's
subsidiary FEI-Zyfer, Inc. ("FEI-Zyfer"). As described more fully
below, early in fiscal year 2004, the Company acquired the business
and net assets of Zyfer, Inc. forming a new wholly-owned subsidiary.
FEI-Zyfer's GPS capability complements the Company's existing
technologies
3
and permits the combined entities to provide a broader range of
embedded systems for a variety of timing functions.
RISK FACTORS
You should carefully consider each of the following risks, as well as all
of the other information contained in this prospectus, before deciding to invest
in our common stock. If any of these risks occurs, our business, financial
condition and results of operations may be adversely affected, the trading price
of our common stock could decline and you may lose part or all of your
investment.
A variety of factors may cause the price of our stock to be volatile.
In recent years, the stock market in general, and the market for shares of
technology companies in particular, including ours, have experienced price
fluctuations. For example, for fiscal year 2007, the price of our Common Stock
has ranged from a closing high of $14.25 to a closing low of $10.75. The market
price of our Common Stock is likely to continue to fluctuate significantly in
the future, including fluctuations unrelated to our performance. We believe that
fluctuations of our stock price may be caused by a variety of factors,
including:
o fluctuations in our operating results;
o announcements of technological innovations, new commercial products
or other developments by us or our competitors;
o published reports by securities analysts;
o general market conditions, general economic conditions;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships or joint ventures;
o our cash position and cash commitments;
o additions or departures of key personnel;
o sales or purchases of our Common Stock in the marketplace;
o an outbreak of hostilities, diseases, natural disasters or
terrorism;
o developments in patents or other intellectual property rights; and
o developments in our relationships with customers and suppliers.
If we fail to keep pace with rapid technological change and evolving industry
standards, our products could become less competitive or obsolete.
The markets for our products are characterized by technological change,
new product introductions, changes in customer requirements and evolving
industry standards. We may cease to be
4
competitive if we fail to timely introduce new products or product enhancements
that address these factors. To continue to introduce new products and product
enhancements on a timely basis, we must:
o identify emerging technological trends in our target markets;
o accurately define and design new products or product enhancements to
meet market needs;
o develop or license the underlying core technologies necessary to
create new products and product enhancements; and
o respond effectively to technological changes and product
introductions by our competitors.
If we fail to timely identify, develop, manufacture, market or support new
or enhanced products successfully, our competitors could gain market share or
our new or enhanced products might not gain market acceptance.
Delays in the development of new or enhanced products could harm our operating
results and our competitive position.
The development of new, technologically advanced products is a complex and
uncertain process requiring high levels of innovation, highly skilled
engineering and development personnel and accurate anticipation of technological
and market trends. Consequently, product development delays are typical in our
industry. If we fail to timely introduce a product for an emerging standard or
customers defer or cancel orders expecting the release of a new or enhanced
product, our operating results could suffer. Product development delays may
result from numerous factors, including:
o changing product specifications and customer requirements;
o unanticipated engineering complexities;
o difficulties with or delays by contract manufacturers or suppliers
of key components or technologies;
o difficulties in allocating engineering resources and overcoming
resource limitations; and
o difficulties in hiring and retaining necessary technical personnel.
We face uncertainty relating to economic conditions affecting our customers.
We face uncertainty in the degree to which the current global economic
climate will affect the rate of growth for our existing and potential customers.
In particular, the timing and magnitude of capital spending by international
telecommunications companies, including those in China, will materially impact
our business. We may experience instances of customers delaying or deferring
orders and longer lead times to close sales. Similarly, spending on U.S.
Government programs is determined by the annual defense department budget. To
the extent that support for the liberation and rebuilding of Iraq takes
precedence, funding for certain Department of Defense programs may be delayed or
significantly reduced in the near term. Such delays can have a materially
negative impact on our business, our operating results and financial condition.
5
We face competition. Our inability to remain competitive in the industry would
adversely affect our ability to maintain our current sales and growth.
We experience competition in all areas of our business. We compete
primarily on the basis of the accuracy, performance and reliability of our
products, the ability of our products to function under severe conditions, such
as in space or other extreme hostile environments, prompt and responsive
contract performance, technical competence and price. We have a unique and broad
product line which includes all three frequency standards - quartz, rubidium,
and cesium. For our high precision products, we have few competitors, but for
lower precision components, we face significant competition from a number of
suppliers. Certain of our competitors are larger, have greater financial
resources and have larger research and development and marketing staffs. If our
competitors develop more accurate or reliable products, or otherwise improve
their products, we could experience a decline in our sales or loss of market
acceptance of our products.
With respect to our instruments and systems, we compete with Agilent
Technologies Inc., Symmetricom, Inc, E. G. and G., Inc. and others. Systems for
the wireline industry produced by the Gillam-FEI segment compete with
Symmetricom, Inc. Our principal competition for space products is the in-house
capability of our major customers.
Our reliance on third parties could materially adversely affect our business.
In recent years, we have outsourced certain component manufacturing
processes to third parties and more recently to our wholly-owned subsidiary,
FEI-Asia in Tianjin, China and to Russian-based Morion, Inc., in which we are a
minority shareholder. We expect this outsourcing to enhance our competitive
position on cost while maintaining our high quality standards. Any unanticipated
changes in such third parties' ability to perform the component manufacturing
processes or any delay in such manufacturing could materially adversely affect
our business, financial condition and operating results.
Our executive officers and certain key personnel are critical to our business.
We are dependent upon the contributions of our senior corporate management
team, particularly Martin Bloch, President and Chief Executive Officer, who has
been with us since 1961, Oleandro Mancini, Vice President of Business
Development, who has been with us since 2001, Alan Miller, Chief Financial
Officer, who has been with us since 1995, and certain of our other key employees
for our future success. If Messrs. Bloch, Mancini and Miller no longer serve in
their positions, our business, financial conditions and results of operation
could be substantially adversely affected.
Our future operating results also depend in significant part upon our
ability to attract and retain qualified management, manufacturing, technical,
engineering, marketing, sales and support personnel. Competition for qualified
personnel is intense, and we cannot ensure success in attracting or retaining
qualified personnel. There may be only a limited number of persons with the
requisite skills to serve in these positions and it may be increasingly
difficult for us to hire personnel over time. Our business, financial conditions
and results of operation could be substantially adversely affected by our
inability to attract and retain skilled employees.
Economic, political and other risks associated with international sales and
operations could adversely affect sales.
Because we sell our products worldwide, our business is subject to risks
associated with doing business internationally. We recognized 35% of our revenue
from sales to end-users in countries located outside of the United States in the
fiscal year ended April 30, 2006. We anticipate that revenue from
6
international operations will continue to represent a substantial portion of our
revenue. In addition, several of our manufacturers' facilities and suppliers are
located outside the United States of America. Accordingly, our future results
could be harmed by a variety of factors, including:
o changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;
o tariff and trade policies;
o export license requirements and restrictions of the export of
technology;
o import regulations;
o domestic and foreign tax policies;
o foreign governmental regulations;
o difficulty in staffing and managing widespread operations;
o ongoing health epidemics (e.g., Bird Flu);
o fluctuations in foreign currency exchange rates;
o stability of international monetary conditions;
o differing labor regulations;
o political unrest, war, actual or threatened acts of terrorism, other
international conflicts and the resulting military, economic and
political responses (including, without limitation, war between
sovereign nations) as well as heightened security measures which may
cause significant disruption to commerce worldwide;
o differing protection of intellectual property; and
o unexpected changes in regulatory requirements.
Our products may contain defects that cause us to incur significant corrective
costs, divert our attention from product development efforts and result in a
loss of customers.
Highly complex products such as our high-technology frequency, timing and
synchronization products may contain defects when they are installed in our
customers' systems. If any of our products contain defects or have reliability,
quality or compatibility problems, our reputation may be damaged and customers
may be reluctant to buy our products. In addition, these defects could interrupt
or delay sales. We may have to invest significant capital and other resources to
alleviate these problems. If any problem remains undiscovered until after we
have commenced production of a new product, we may be required to incur
additional development costs and product recall, repair or replacement costs.
These problems may also result in claims against us by our customers or others.
In addition, these problems may divert our technical and other resources from
other development efforts.
If we fail to manage our operations effectively, our business could suffer.
7
Our ability to offer products and implement our business plan successfully
in a rapidly evolving market requires effective planning and management. Failure
by our management or personnel to properly allocate resources to meet our
current and existing needs as well as unforeseen complications and
inefficiencies in planning our operations can adversely impact the morale of our
personnel and lead to further complications and operational inefficiencies. If
this were to occur, our profitability or financial position could be negatively
impacted and our operating results could suffer.
Claims that we infringe third-party intellectual property rights could result in
significant expenses or restrictions on our ability to sell our products.
Although our industry is not characterized by frequent claims or
litigation regarding patent rights, we cannot be certain that our products do
not or will not infringe issued patents or the intellectual property rights of
others. Historically, patent applications in the United States of America have
not been publicly disclosed until the patent is issued, and we may not be aware
of filed patent applications that relate to our products or technology. If
patents are later issued in connection with these applications, we may be liable
for infringement. Periodically, other parties, including some of our
competitors, may assert patent, copyright and other rights to technologies in
various jurisdictions that are important to our business. Any claims asserting
that our products infringe or may infringe the rights of third parties,
including claims arising through our contractual indemnification of our
customers, regardless of their merit or resolution, would likely be costly and
time-consuming, divert the efforts of our technical and management personnel,
cause product shipment delays or require us to enter into royalty or licensing
agreements. Royalty or licensing agreements, if required, may not be available
on terms acceptable to us, or at all.
At present, we do not believe that our products infringe any other party's
intellectual property rights in any way that would have a material adverse
effect on our operations. However, if any material claims do arise and if these
claims cannot be resolved through a license or similar arrangement, we could
become a party to litigation. The results of any litigation are inherently
uncertain. In the event of an adverse result in any litigation with third
parties that could arise in the future, we could be required to pay substantial
damages, including treble damages if we are held to have willfully infringed, to
cease the manufacture, use and sale of infringing products, to expend
significant resources to develop non-infringing technology, or to obtain
licenses to the infringing technology. In addition, lawsuits, regardless of
their success, would likely be time consuming and expensive to resolve and would
divert management time and attention from our business.
Any failure to protect our intellectual property adequately may significantly
harm our business.
We protect our proprietary processes, software, know-how and other
intellectual property and related rights through copyrights, patents, trademarks
and the maintenance of trade secrets, including entering into confidentiality
agreements. Our success and ability to compete depend in part on our proprietary
technology. However, we cannot provide any assurance that other companies will
not develop technologies that are similar to our technology. Although we have
patent applications pending, patents may not issue as a result of these or other
patent applications. Any patents that ultimately issue may be successfully
challenged or invalidated, or may not provide us with a significant competitive
advantage. Despite our efforts to protect our intellectual property rights,
existing laws in the United States of America and in differing international
jurisdictions and our contractual arrangements provide only limited protection.
Unauthorized parties may attempt to copy or otherwise obtain and use our
products or technology. Third parties may breach confidentiality agreements or
other protective contracts with us and we may not be able to enforce our rights
in the event of these breaches.
8
Monitoring unauthorized use of our products is difficult and may be
expensive, and we cannot be certain that the steps we have taken will prevent
unauthorized use of our intellectual property, particularly in foreign countries
where the laws may not protect our proprietary rights as fully as in the United
States of America. We may be required to spend significant resources to protect
our intellectual property rights, including pursuing remedies in court. We may
become involved in legal proceedings against other parties, which may also cause
other parties to assert claims against us. In the future we may not be able to
detect infringements and may lose our competitive position in our markets before
we do so. In addition, competitors may design around our technologies or develop
competing technologies. The laws of other countries in which we market our
products might offer little or no effective protection of our proprietary
technology. Reverse engineering, unauthorized copying or other misappropriation
of our proprietary technology could enable third parties to benefit from our
technology without payment, which could significantly harm our business. Our
failure to enforce and protect our intellectual property rights or any adverse
change in the laws protecting intellectual property rights could harm our
business. Furthermore, we may become involved in legal proceedings against other
parties, which may also cause other parties to assert claims against us.
Future sales of substantial amounts of our common stock by us or by our existing
stockholders could cause our stock price to fall.
Additional equity financings or other share issuances by us could
adversely affect the market price of our Common Stock. Sales by existing
stockholders of a large number of shares of our Common Stock in the public
trading market (or in private transactions) such as this offering by the Selling
Stockholders, or the perception that such additional sales could occur, could
cause the market price of our common stock to drop.
Some of our revenue is generated from a limited number of key customers and the
loss of a key customer could substantially reduce our revenues.
A large portion of our sales are generated from a small number of key
customers at each of our segments, including, without limitation, two customers
of our Commercial Communications segment, Motorola Corp. and Lucent
Technologies, which accounted for 13% and 14% of consolidated sales for fiscal
2006, respectively. Major customers of our US Government segment include
Northrop Grumman Corporation, Raytheon Missile Systems, Inc., BAE Systems
Aerospace, Inc. and Lockheed Martin. France Telecom and Belgacom are significant
customers of our Gillam-FEI segment. Our top 10 customers accounted for 63% of
our consolidated sales for fiscal 2006. We expect that our top 10 customers in
the aggregate will continue to account for a large portion of our consolidated
sales in the foreseeable future, and the loss of one or more of these customers
would materially harm our business and operating results. The loss of a key
customer could also be perceived as a loss of momentum in our business and an
adverse impact on our financial results, and this may cause the market price of
our common stock to fall.
We are subject to anti-takeover provisions that could delay or prevent an
acquisition of our Company
We are subject to the anti-takeover provisions of the Delaware General
Corporation Law, which could have the effect of delaying or preventing a change
of control of us. These factors could materially adversely affect the price of
our common stock.
9
FORWARD-LOOKING STATEMENTS
The statements contained in or incorporated by reference in this Reoffer
Prospectus regarding the future constitute "forward-looking" statements pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements inherently involve risks and uncertainties that
could cause actual results to differ materially from the forward-looking
statements. Factors that would cause or contribute to such differences include,
but are not limited to, inability to integrate operations and personnel, actions
by significant customers or competitors, general domestic and international
economic conditions, consumer spending trends, reliance on key customers,
continued acceptance of our products in the marketplace, competitive factors,
new products and technological changes, product prices and raw material costs,
dependence upon third-party vendors, competitive developments, changes in
manufacturing and transportation costs, the availability of capital, and other
risks detailed in our periodic report filings with the Securities and Exchange
Commission. By making these forward-looking statements, we undertake no
obligation to update these statements for revisions or changes after the date of
this Reoffer Prospectus.
USE OF PROCEEDS
The proceeds from the sale of the Shares offered pursuant to this
prospectus are solely for the account of the Selling Stockholders. We will not
receive any proceeds from any sale of shares by the Selling Stockholders.
SELLING STOCKHOLDERS
This prospectus relates to shares of Common Stock underlying stock options
that have been granted to the Selling Stockholders pursuant to the 2001 Plan.
Each of the Selling Stockholders is an officer or other employee. The
following table sets forth:
o the name and principal position or positions of each Selling
Stockholder over the past three years with the Company;
o the number of shares of common stock each Selling Stockholder
beneficially owned as of February 9, 2007;
o the number of shares of Common Stock acquired by each Selling
Stockholder in connection with grants of stock options
pursuant to the 2001 Plan and being registered under this
Registration Statement, some or all of which shares may be
sold pursuant to this prospectus; and
o the number of shares of common stock and the percentage, if 1%
or more, or the total class of common stock outstanding to be
beneficially owned by each Selling Stockholder following this
offering, assuming the sale pursuant to this offering of all
shares acquired by such Selling Stockholder in connection with
grants of stock options pursuant to the 2001 Plan and
registered under this Registration Statement.
There is no assurance that any of the Selling Stockholders will sell any
or all of the shares offered by them under this Registration Statement. The
information included in the table assumes that each selling stockholder will
elect to sell all of his shares set forth under "Shares Covered by this
Prospectus."
10
Shares Beneficially
Owned After
this Offering(3)
----------------------
Shares
Position with the Beneficially Shares Covered by
Selling Stockholder Company Owned(1) this Prospectus(2) Number Percentage(4)
- ------------------- ------------------------- ------------ ------------------ ------ -------------
Hugo Fruehauf Chief Technology Officer 19,053 17,500 6,553 *%
Markus Hechler Executive Vice President 106,003 38,500 73,253 *
Daniel Leonard Technical 5,625 2,500 5,000 *
Manager--Gillam-FEI
Oleandro Mancini Vice President 42,063 44,500 11,688 *
Len Martire Vice President 53,329 15,000 39,579 *
Tom McClelland Vice President 46,958 19,000 32,208 *
Alan Miller Treasurer & CFO 45,042 23,000 25,792 *
Harry Newman Corporate Secretary 35,728 4,000 32,728 *
Charles Stone Vice President 69,667 11,000 59,667 *
Steven Strang President--FEI-Zyfer 11,011 17,500 1,011 *
Giacomo Amendolara Engineer 16,245 1,500 14,745 *
Roman Baransky Engineer 9,021 5,200 4,446 *
Heinz Badura Vice President--FEI-Zyfer 4,699 5,000 949 *
Steve Calceglia Director--Program 13,437 2,000 11,937 *
Management
John Caulfield Director--Commercial 37,310 16,000 23,810 *
Rubidium Mfg
Ran Chen General Manager--FEI-Asia 2,269 4,000 269 *
11
John Cuthbertson Director--Sales & 11,348 3,000 8,348 *
Marketing
Sergio Diaz Director IT 3,991 5,000 741 *
Ron Evans Director Product 2,299 3,000 799 *
Marketing
David Fraine Engineer 12,071 2,000 10,571 *
John Ho Engineer 28,453 13,000 16,453 *
John Jahahn Engineering Manager 2,423 3,000 173
Gerard Klahn Director Microwave 2,500 10,000 0 *
Engineering
Robert Klomp Director Human Resources 20,200 10,000 12,325 *
Peter Klopsis Director--Materials 23,505 6,000 18,005 *
Eugene Kushner Retired 1,750 1,000 750 *
Karen Maganza Material Control Manager 8,200 1,000 7,200 *
Eugene Mauskop Project Manager 960 3,000 210 *
Marvin Meirs Consultant 42,500 9,000 34,250 *
Alwin Michaelson Assistant to the 55,402 5,000 50,402 *
President
Walter Mulvey Program Administrator 6,037 1,000 5,037 *
Sai Padmanabhan Director Microwave 1,254 5,000 4 *
Engineering
Iancu Pascaru Consultant 32,580 12,000 21,580 *
Ramesh Parmoo Engineer 7,955 1,000 6,955 *
Ron Rico Engineer 8,229 4,000 5,229 *
Glen Roosevelt Retired 3,750 5,000 0 *
Brian Sweeny Director--Quality 28,127 10,000 19,752 *
Assurance
12
Csaba Szekely Director--Rubidium Glass 15,974 5,000 11,974 *
Lou Terracciano Director--Operations 22,460 14,000 10,960 *
Al Vulcan Consultant 25,661 15,000 15,411 *
Anatol Walters Manager--Test 12,608 3,000 9,858 *
Jaroslaw Zacharski Senior Physicist 24,171 10,000 15,921 *
* Represents less than 1%.
(1) Each person named in the table has sole voting and investment power with
respect to all common stock listed as owned by that person or entity. Shares
beneficially owned include shares that may be acquired pursuant to options and
warrants exercisable within 60 days of the date of this reoffer prospectus.
(2) Includes all shares registered for the account of each Selling Stockholder
whether or not exercisable within 60 days of the date of this reoffer
prospectus.
(3) Assuming the sale of all shares registered for the account of the Selling
Stockholders whether or not exercisable within 60 days of the date of this
reoffer prospectus.
(4) Ownership percentages are based on 8,658,884 shares of common stock
outstanding as of February 9, 2007. With respect to each person, percentage
ownership is calculated by dividing the number of shares beneficially owned by
such person by the sum of the number of outstanding shares at such date and the
number of shares such person has the right to acquire upon exercise of options
or warrants that are currently exercisable or are exercisable on or before April
10, 2007.
PLAN OF DISTRIBUTION
The Selling Stockholders, or their pledgees, donees, transferees or other
successors in interest, may sell shares pursuant to this prospectus from time to
time:
o in transactions on the Nasdaq Global Market;
o in the public market off the Nasdaq Global Market;
o in privately negotiated transactions;
o through put or call options transactions relating to the
shares; or
o in a combination of all such transactions.
Each sale may be made either at the market price prevailing at the time of
sale or at a negotiated price. Sales may be made through brokers or to dealers,
and such brokers or dealers may receive compensation in the form of commissions
or discounts not exceeding those customary in similar transactions. Any shares
covered by this prospectus that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus. All expenses of
13
registration incurred in connection with this offering are being borne by us,
but all brokerage commissions and other expenses incurred by a Selling
Stockholder will be borne by that Selling Stockholder.
The Selling Stockholders and any dealer acting in connection with the
offering or any broker executing a sell order on behalf of a Selling Stockholder
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any profit on the sale of shares by a Selling Stockholder and any
commissions or discounts received by any such broker or dealer may be deemed to
be underwriting compensation under the Securities Act. In addition, any such
broker or dealer may be required to deliver a copy of this prospectus to any
person who purchases any of the shares from or through such broker or dealer.
LEGAL MATTERS
The validity of the issuance of shares of the common stock offered by this
reoffer prospectus will be passed upon for us by Cadwalader Wickersham & Taft
LLP, New York, New York.
EXPERTS
The consolidated financial statements of Frequency Electronics, Inc. and
subsidiaries at April 30, 2006 and for the two years ended April 30, 2006,
incorporated by reference into this prospectus have been audited by Holtz
Rubenstein Reminick LLP, an independent registered public accounting firm, and
are included in reliance upon the report of Holtz Rubenstein Reminick LLP,
included herein, and upon the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Frequency Electronics, Inc. and
Subsidiaries for the year ended April 30, 2004 incorporated in this Prospectus
by reference to the Annual Report on Form 10K for the year ended April 30, 2006,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, a independent registered public accounting firm, given on the authority of
said firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file current, quarterly and annual reports, proxy statements and other
information required by the Securities Exchange Act of 1934, as amended (the
"Exchange Act") with the Securities and Exchange Commission (the "SEC"). You may
read and copy any of these filed documents at the SEC's public reference room
located at 100 F. Street, N.E., Room 1580, Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
Our SEC filings are also available to the public from the SEC's internet site at
http://www.sec.gov.
Our website is www.frequencyelectronics.com (which is not intended to be
an active hyperlink in this prospectus). We make available free of charge on our
website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of
directors and executive officers and any amendments to such reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after such
14
material is electronically filed with, or furnished to, the SEC. The information
contained on, connected to or that can be accessed via our website is not part
of this prospectus.
We have filed with the SEC a Registration Statement on Form S-8 under the
Securities Act with respect to the shares of common stock offered by this
prospectus. This prospectus, which constitutes a part of that Registration
Statement, does not include all the information contained in that Registration
Statement and its exhibits. For further information with respect to us and our
common stock, you should consult the Registration Statement and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Statements contained in this prospectus concerning the provisions of any
documents are necessarily summaries of those documents, and each statement is
qualified in its entirety by reference to the copy of the document filed with
the SEC. The Registration Statement and any of its amendments, including
exhibits filed as a part of the Registration Statement or an amendment to the
Registration Statement, are available for inspection and copying through the
entities listed above.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to documents containing that information. The information
incorporated by reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the following documents filed by
us with the SEC and any future filings we will make with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until this offering is
complete or terminated:
(i) the Annual Report on Form 10-K for the fiscal year ended April 30,
2006;
(ii) the Quarterly Report on Form 10-Q for the fiscal quarter ended July
31, 2006;
(iii) the Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 2006;
(iv) the Current Reports on Form 8-K filed on July 31, 2006, September
28, 2006, November 20, 2006 and January 3, 2007; and
(v) the description of the Company's Common Stock, par value $1.00 per
share, contained in the Company's Registration Statement on Form
8-A12B, filed under the Exchange Act on July 31, 2006, including any
amendments or reports filed for the purpose of updating such
description.
We will provide to you without charge a copy of any or all documents
incorporated by reference into this prospectus, including any exhibits to such
documents that are specifically incorporated by reference in those documents.
You may request copies by writing or telephoning us at our Investor Relations
Department, Frequency Electronics, Inc., 55 Charles Lindbergh Blvd., Mitchel
Field, NY 11553; telephone number (516) 794-4500.
15
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents, as filed with the SEC by the Company are
incorporated herein by reference:
(i) the Annual Report on Form 10-K for the fiscal year ended April 30,
2006;
(ii) the Quarterly Report on Form 10-Q for the fiscal quarter ended July
31, 2006;
(iii) the Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 2006;
(iv) the Current Reports on Form 8-K filed on July 31, 2006, September
28, 2006, November 20, 2006 and January 3, 2007; and
(v) the description of the Company's Common Stock, par value $1.00 per
share, contained in the Company's Registration Statement on Form
8-A12B, filed under the Exchange Act on July 31, 2006, including any
amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company with the SEC pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold will be deemed to be incorporated by
reference in this Registration Statement and to be a part thereof from the date
of filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
None.
Item 6. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law permits
indemnification of officers, directors, and other corporate agents under certain
circumstances and subject to certain limitations. The Company's Amended and
Restated Certificate of Incorporation and By-laws provide that the Company will
indemnify its directors and officers, and anyone who is or was serving at the
Company's request as a director, officer, employee, fiduciary, or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, to the fullest extent permitted under Delaware law. These
indemnification provisions may be sufficiently broad to permit indemnification
of the Company's executive officers and directors for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act.
The Company maintains directors' and officers' liability insurance against
any actual or alleged error, misstatement, misleading statement, act, omission,
neglect or breach of duty by any director or officer, excluding certain matters
including fraudulent, dishonest or criminal acts or self dealing.
II-1
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
4.1 Specimen of Common Stock certificate (Filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-1, File No. 2-29609).
4.2 2001 Incentive Stock Option Plan (Filed as Appendix B in the Proxy
Statement filed on August 30, 2001, which appendix is incorporated
herein by reference.)
4.3 2005 Stock Award Plan of Frequency Electronics, Inc. (Filed as
Exhibit 10.1 to the Form 8-K, File No. 1-8061, filed on October 4,
2005, which exhibit is incorporated herein by reference.)
*4.4 Frequency Electronics, Inc. Employee Stock Ownership Plan
*5.1 Opinion of Cadwalader Wickersham & Taft LLP.
*23.1 Consent of Holtz Rubenstein Reminick LLP, independent registered
public accounting firm.
*23.2 Consent of PricewaterhouseCoopers LLP, independent registered public
accounting firm.
*24 Power of Attorney (included on the signature page of this
Registration Statement).
* Filed herewith.
Item 9. Undertakings.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or
II-2
furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
will be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions referred to in this Registration
Statement, or otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Mitchel Field, state of New York, on February 28,
2007.
FREQUENCY ELECTRONICS, INC.
By: /s/ Alan Miller
--------------------------------------
Alan Miller
Treasurer and Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alan Miller his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform such
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
- --------------------------------------------------------------------------------
/s/ Joseph P. Franklin
- ---------------------- Chairman of the Board February 28, 2007
Joseph P. Franklin
/s/ Joel Girsky
- ---------------------- Director February 28, 2007
Joel Girsky
/s/ E. Donald Shapiro
- ---------------------- Director February 28, 2007
E. Donald Shapiro
/s/ S. Robert Foley
- ---------------------- Director February 28, 2007
S. Robert Foley
/s/ Richard Schwartz
- ---------------------- Director February 28, 2007
Richard Schwartz
/s/ Martin B. Bloch
- --------------------- President, CEO and Director February 28, 2007
Martin B. Bloch
Signature Title Date
- --------------------------------------------------------------------------------
/s/ Alan Miller Treasurer and Chief
- --------------------- Financial Officer February 28, 2007
Alan Miller
EXHIBIT INDEX
Paper (P) or
Exhibit No. Description Electronic (E)
- ------------- ------------------------------------------------ -----------------
4.1 Specimen of Common Stock certificate (Filed as
Exhibit 4.1 to the Company's Registration E
Statement on Form S-1, File No. 2-29609).
4.2 2001 Incentive Stock Option Plan (Filed as
Appendix B in the Proxy Statement filed on E
August 30, 2001, which appendix is
incorporated herein by reference.)
4.3 2005 Stock Award Plan of Frequency
Electronics, Inc.(Filed as Exhibit 10.1 to E
the Form 8-K, File No. 1-8061, filed on
October 4, 2005, which exhibit is incorporated
herein by reference.)
*4.4 Frequency Electronics, Inc. Employee Stock
Ownership Plan E
*5.1 Opinion of Cadwalader Wickersham & Taft LLP.
E
*23.1 Consent of Holtz Rubenste in Reminick LLP,
independent registered public accounting firm. E
*23.2 Consent of PricewaterhouseCoopers LLP,
independent registered public accounting firm. E
*24 Power of Attorney (included on the signature
page of this Registration Statement). E
* Filed herewith.
Exhibit 4.4
FREQUENCY ELECTRONICS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
ARTICLE 1..................................................................-2-
DEFINITIONS................................................................-2-
1.1 ADMINISTRATOR..................................................-2-
1.2 ADOPTING EMPLOYER..............................................-2-
1.3 AFFILIATED EMPLOYER............................................-3-
1.4 AGE............................................................-3-
1.5 ANNIVERSARY DATE...............................................-3-
1.6 ANNUITY STARTING DATE..........................................-3-
1.7 BENEFICIARY....................................................-3-
1.8 BREAK IN SERVICE...............................................-4-
1.9 CODE...........................................................-4-
1.10 CODE ss.3401 COMPENSATION......................................-4-
1.11 CODE ss.415 COMPENSATION.......................................-4-
1.12 COMPANY STOCK..................................................-5-
1.13 COMPANY STOCK ACCOUNT..........................................-5-
1.14 COMPENSATION...................................................-5-
1.15 CURRENT OBLIGATIONS............................................-5-
1.16 DISABILITY.....................................................-5-
1.17 EARLY RETIREMENT AGE...........................................-5-
1.18 ELIGIBLE PARTICIPANT...........................................-5-
1.19 EMPLOYEE.......................................................-6-
1.20 EMPLOYER.......................................................-6-
1.21 EXEMPT LOAN....................................................-6-
1.22 FIDUCIARY......................................................-6-
1.23 FISCAL YEAR....................................................-6-
1.24 FORFEITURE.....................................................-6-
1.25 FORM W-2 COMPENSATION..........................................-7-
1.26 HCE............................................................-7-
1.27 HIGHLY COMPENSATED EMPLOYEE....................................-7-
1.28 HOUR OF SERVICE................................................-7-
1.29 KEY EMPLOYEE...................................................-8-
1.30 LEASED EMPLOYEE................................................-8-
1.31 LIMITATION YEAR................................................-9-
1.32 MATERNITY OR PATERNITY LEAVE...................................-9-
1.33 NHCE...........................................................-9-
1.34 NON-HIGHLY COMPENSATED EMPLOYEE................................-9-
1.35 NON-KEY EMPLOYEE...............................................-9-
1.36 NORMAL RETIREMENT AGE..........................................-9-
1.37 NORMAL RETIREMENT DATE.........................................-9-
1.38 OTHER INVESTMENTS ACCOUNT......................................-9-
1.39 PARTICIPANT....................................................-9-
1.40 PARTICIPANT'S ACCOUNT..........................................-9-
1.41 PERMISSIVE AGGREGATION GROUP...................................-9-
1.42 PLAN..........................................................-10-
1.43 PLAN YEAR.....................................................-10-
1.44 POLICY........................................................-10-
1.45 QUALIFIED ELECTION PERIOD.....................................-10-
1.46 QUALIFIED PARTICIPANT.........................................-10-
1.47 REQUIRED AGGREGATION GROUP....................................-10-
1.48 REQUIRED BEGINNING DATE.......................................-10-
1.49 ROLLOVER ACCOUNT..............................................-10-
1.50 ROLLOVER CONTRIBUTION.........................................-10-
1.51 SHAREHOLDER-EMPLOYEE..........................................-10-
1.53 SPOUSE........................................................-10-
1.55 TERMINATED PARTICIPANT........................................-11-
1.56 TOP HEAVY.....................................................-11-
1.57 TOP HEAVY MINIMUM ALLOCATION..................................-11-
1.59 TRUSTEE.......................................................-12-
1.60 TRUST FUND....................................................-12-
1.61 UNALLOCATED COMPANY STOCK ACCOUNT.............................-12-
1.62 VALUATION DATE................................................-12-
1.63 VESTED AGGREGATE ACCOUNT......................................-12-
1.64 VESTED, VESTED INTEREST and VESTING...........................-12-
1.65 YEAR OF SERVICE...............................................-12-
ARTICLE 2.................................................................-15-
PLAN PARTICIPATION........................................................-15-
2.1 ELIGIBILITY REQUIREMENTS......................................-15-
2.2 ENTRY DATE....................................................-15-
2.3 WAIVER OF PARTICIPATION.......................................-15-
2.4 REEMPLOYMENT..................................................-16-
2.6 INCLUSION OF INELIGIBLE EMPLOYEE..............................-16-
ARTICLE 3.................................................................-17-
CONTRIBUTIONS AND ALLOCATIONS.............................................-17-
3.1 EMPLOYER CONTRIBUTIONS........................................-17-
3.2 ALLOCATION OF EMPLOYER CONTRIBUTIONS..........................-18-
3.3 COMPANY STOCK ACCOUNT.........................................-18-
3.4 ALLOCATION OF EARNINGS AND LOSSES.............................-20-
3.5 ALLOCATION OF FORFEITURES.....................................-21-
3.6 TOP HEAVY MINIMUM ALLOCATION..................................-21-
3.7 FAILSAFE ALLOCATION...........................................-21-
3.8 ROLLOVERS.....................................................-22-
ARTICLE 4.................................................................-23-
PLAN BENEFITS.............................................................-23-
4.1 BENEFIT UPON NORMAL OR EARLY RETIREMENT.......................-23-
4.2 BENEFIT UPON LATE RETIREMENT..................................-23-
4.3 BENEFIT UPON DEATH............................................-23-
4.4 BENEFIT UPON DISABILITY.......................................-23-
4.5 BENEFIT UPON TERMINATION......................................-23-
4.6 DETERMINATION OF VESTED INTEREST..............................-23-
ARTICLE 5.................................................................-26-
DISTRIBUTION OF BENEFITS..................................................-26-
5.1 BENEFIT UPON RETIREMENT.......................................-26-
5.2 BENEFIT UPON DEATH............................................-26-
5.3 DISABILITY BENEFITS...........................................-28-
5.4 BENEFIT UPON TERMINATION......................................-28-
5.5 CASH-OUT OF BENEFITS..........................................-29-
5.6 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS.......................-30-
5.7 RESTORATION OF FORFEITED ACCOUNT BALANCE......................-31-
5.8 SPOUSAL CONSENT REQUIREMENTS..................................-32-
5.9 APPLICATION OF CODE SECTION 40 1(a)(9)........................-32-
5.10 STATUTORY COMMENCEMENT OF BENEFITS............................-32-
5.11 DISTRIBUTION IN EVENT OF LEGAL INCAPACITY.....................-32-
5.12 MISSING PARTICIPANTS..........................................-32-
5.13 DIRECT ROLLOVERS..............................................-33-
5.14 FORM OF DISTRIBUTION..........................................-34-
5.15 CASH DIVIDENDS ON COMPANY STOCK...............................-35-
5.16 RIGHT OF FIRST REFUSAL........................................-35-
5.17 PUT OPTION....................................................-36-
5.18 NON-TERMINABLE RIGHTS AND PROTECTIONS.........................-37-
5.19 PRE-RETIREMENT DISTRIBUTIONS..................................-37-
5.21 SPECIAL DISTRIBUTION RULE FOR S-CORPORATIONS..................-37-
ARTICLE 6.................................................................-39-
CODE SECTION 415 LIMITATIONS..............................................-39-
6.1 MAXIMUM ANNUAL ADDITION.......................................-39-
6.2 ADJUSTMENTS TO MAXIMUM ANNUAL ADDITION........................-39-
6.3 MULTIPLE PLANS AND MULTIPLE EMPLOYERS.........................-40-
6.4 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS.....................-40-
6.5 MULTIPLE PLAN REDUCTION.......................................-41-
ARTICLE 7.................................................................-43-
DUTIES OF THE TRUSTEE.....................................................-43-
7.1 APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION..............-43-
7.2 INVESTMENT ALTERNATIVES OF THE TRUSTEE........................-43-
7.3 VALUATION OF THE TRUST........................................-45-
7.4 COMPENSATION AND EXPENSES.....................................-46-
7.5 PAYMENTS FROM THE TRUST FUND..................................-46-
7.6 PAYMENT OF TAXES..............................................-46-
7.7 ACCOUNTS, RECORDS AND REPORTS.................................-46-
7.8 EMPLOYMENT OF AGENTS AND COUNSEL..............................-46-
7.9 DIVISION OF DUTIES AND INDEMNIFICATION........................-47-
7.10 INVESTMENT MANAGER............................................-48-
7.11 ASSIGNMENT AND ALIENATION OF BENEFITS.........................-48-
7.12 EXCLUSIVE BENEFIT RULE........................................-48-
7.13 PURCHASE OF INSURANCE.........................................-48-
7.14 LOANS TO PARTICIPANTS.........................................-48-
7.15 DIRECTED INVESTMENT ACCOUNTS..................................-48-
7.16 VOTING COMPANY STOCK..........................................-50-
7.17 APPLICATION OF CASH...........................................-50-
7.18 RESTRICTIONS ON COMPANY STOCK TRANSACTIONS....................-51-
7.19 EXEMPT LOANS..................................................-51-
7.20 DIVERSIFICATION RIGHTS OF QUALIFIED PARTICIPANTS..............-51-
ARTICLE 8.................................................................-53-
DUTIES OF THE ADMINISTRATOR...............................................-53-
8.1 APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION..............-53-
8.2 GENERAL POWERS AND DUTIES.....................................-53-
8.3 APPOINTMENT OF ADMINISTRATIVE COMMITTEE.......................-53-
8.4 FINALITY OF ADMINISTRATIVE DECISIONS..........................-53-
8.5 MULTIPLE ADMINISTRATORS.......................................-53-
8.6 COMPENSATION AND EXPENSES.....................................-53-
8.7 APPOINTMENT OF AGENTS AND COUNSEL.............................-54-
8.8 CORRECTING ADMINISTRATIVE ERRORS..............................-54-
8.9 PROMULGATING NOTICES AND PROCEDURES...........................-54-
8.10 CLAIMS PROCEDURES.............................................-54-
8.11 QUALIFIED DOMESTIC RELATIONS ORDERS...........................-56-
ARTICLE 9.................................................................-58-
AMENDMENT, TERMINATION AND MERGER.........................................-58-
9.2 TERMINATION OF PLAN BY SPONSOR................................-58-
9.3 TERMINATION OF PARTICIPATION BY ADOPTING EMPLOYER.............-59-
9.4 MERGER OR CONSOLIDATION.......................................-59-
ARTICLE 10................................................................-60-
MISCELLANEOUS PROVISIONS..................................................-60-
10.1 NO CONTRACT OF EMPLOYMENT.....................................-60-
10.2 TITLE TO ASSETS...............................................-60-
10.3 QUALIFIED MILITARY SERVICE....................................-60-
10.4 FIDUCIARIES AND BONDING.......................................-60-
10.5 SEVERABILITY OF PROVISIONS....................................-60-
10.6 GENDER AND NUMBER.............................................-60-
10.8 LEGAL ACTION..................................................-60-
10.9 QUALIFIED PLAN STATUS.........................................-60-
10.10 MAILING OF NOTICES TO ADMINISTRATOR, EMPLOYER OR TRUSTEE......-61-
10.11 NO DUPLICATION OF BENEFITS....................................-61-
10.12 PARTICIPANT NOTICES AND WAIVERS OF NOTICES....................-61-
10.13 EVIDENCE FURNISHED CONCLUSIVE.................................-61-
10.14 RELEASE OF CLAIMS.............................................-61-
10.15 MULTIPLE COPIES OF PLAN AND/OR TRUST..........................-61-
10.16 LIMITATION OF LIABILITY AND INDEMNIFICATION...................-61-
FREQUENCY ELECTRONICS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
THIS AGREEMENT is made and entered into as of this 21st day of
February, 2002, between FREQUENCY ELECTRONICS, INC. (hereafter referred to as
the "Sponsor) and MARVIN MEIRS, MARKUS HECHLER and ROBERT KLOMP (hereafter
referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Sponsor originally established an employee stock
ownership plan (hereafter called the Plan), effective January 1, 1965, that is
designed to invest primarily in employer securities as provided in Code
ss.4975(e)(7) in order to provide retirement and other incidental benefits to
Employees who are eligible to participate in the plan;
WHEREAS, the Sponsor believes that continued contributions to the
Plan will help to strengthen the bonds of loyalty and mutual understanding that
have existed between the Sponsor and its employees, thereby making possible the
continued growth of its business; and
WHEREAS, in accordance with the terms of the Plan, the Sponsor has
the ability at any time, and from time to time, to amend the Plan;
NOW, THEREFORE, effective January 1, 2001 (except for those sections
of the Plan that have a different effective date), the Sponsor hereby amends and
restates the Plan to comply with the requirements of the Employee Retirement
Income Security Act of 1974, and with the requirements of the Internal Revenue
Code of 1986, as amended by the Uruguay Round Agreements Act, the Small Business
Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Uniformed
Services Employment and Reemployment Rights Act of 1994, the Internal Revenue
Service Restructuring and Reform Act of 1998, the Community Renewal Tax Relief
Act of 2000, and all applicable rulings and regulations issued thereunder, and
the Trustee accepts the Plan under the following terms and conditions:
1
ARTICLE 1
DEFINITIONS
1.1 ADMINISTRATOR: The term Administrator means the Sponsor unless another
Administrator is appointed by the Sponsor.
1.2 ADOPTING EMPLOYER: The term Adopting Employer means any entity which
adopts this Plan with the consent of the Sponsor. An Employee's transfer
to or from any Employer or Adopting Employer will not affect his or her
Participant's Account balance, total Years of Service (or Periods of
Service) and total Years of Service as a Participant (or Periods of
Service as a Participant). All Adopting Employers will be subject to the
following provisions:
(a) Multiple Employer Plan Provisions Under Code ss.413(c):
Notwithstanding any other provision in the Plan to the contrary,
unless the Plan is a collectively bargained plan described in
Regulation ss.1.413-1(a), the following provisions will apply with
respect to any Adopting Employer that is not an Affiliated Employer
of the Sponsor:
(1) Instances Of Separate Employer Testing: Employees of any such
Adopting Employer will be treated separately for purposes of
testing under the provisions of Code ss.401(a)(4), Code
ss.401(k), Code ss.401(m) and, if the Sponsor and the Adopting
Employer do not share Employees, Code ss.416. Furthermore, the
terms of Code ss.410(b) will be applied separately on an
employer-by-employer basis by the Sponsor (and the Adopting
Employers which are part of the Affiliated Group which
includes the Sponsor) and each Adopting Employer that is not
an Affiliated Employer of the Sponsor, taking into account the
generally applicable rules described in Code ss.401(a)(5),
ss.414(b) and ss.414(c).
(2) Instances Of Single Employer Testing: Employees of the
Adopting Employer will be treated as part of a single employer
plan for purposes of eligibility to participate under Article
2 and under the provisions of Code ss.410(a). Furthermore, the
terms of Code ss.411 relating to Vesting will be applied as if
all Employees of all such Adopting Employers and the Sponsor
were employed by a single employer, except that the rules
regarding Breaks in Service will be applied under such
regulations as may be prescribed by the Secretary of Labor.
(3) Common Trust: Contributions made by any such Adopting Employer
will be held in a common Trust Fund with contributions made by
the Sponsor, and all such contributions will be available to
pay the benefits of any Participant who is an Employee of the
Sponsor or any such Adopting Employer.
(4) Common Disqualification Provision: The failure of either the
Sponsor or any such Adopting Employer to satisfy the
qualification requirements under the provisions of Code
ss.401(a), as modified by Code ss.413(c), will result in the
disqualification of the Plan for all such Employers
maintaining the Plan.
(b) Termination Of Adoption: An Adopting Employer may terminate
participation in the Plan by delivering written notice to the
Sponsor, the Administrator and the Trustee; but in accordance with
Article 9, only the Sponsor can terminate the Plan. If a request for
and approval of a transfer of assets from this Plan to any successor
qualified retirement plan maintained by the Adopting Employer or its
successor is not made in accordance with Section
2
9.2, Participants who are no longer Employees because the Adopting
Employer terminates its Plan participation will only be entitled to
the commencement of their benefits (a) in the case of Participants
who are no longer Employees of an Adopting Employer that is an
Affiliated Employer of the Sponsor, in accordance with Article 5
after their death, retirement, Disability or Termination of
Employment from the Adopting Employer or former Adopting Employer;
and (b) in the case of Participants who are no longer Employees of
an Adopting Employer that is not an Affiliated Employer of the
Sponsor, within a reasonable time thereafter as if the Plan had been
terminated under Section 9.2.
1.3 AFFILIATED EMPLOYER: The term Affiliated Employer means any of the
following of which the Employer is a part: (1) a controlled group of
corporations as defined in Code ss.414(b); (2) a trade or business
(whether or not incorporated) under common control under Code ss.414(c);
(3) any organization (whether or not incorporated) which is a member of an
affiliated service group under Code ss.414(m); and (4) any other entity
required to be aggregated under Code ss.414(o).
1.4 AGE: The term Age means actual attained age.
1.5 ANNIVERSARY DATE: The term Anniversary Date means December 31st.
1.6 ANNUITY STARTING DATE: The term Annuity Starting Date means 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 as an annuity, the first day all events have
occurred which entitle the Participant to such benefit. The first day of
the first period for which a benefit is to be received by reason of
Disability will be treated as the Annuity Starting Date only if such
benefit is not an auxiliary benefit.
1.7 BENEFICIARY: The term Beneficiary means the recipient designated by the
Participant to receive the Plan benefits payable upon the death of the
Participant, or the recipient designated by a Beneficiary to receive any
benefits which may be payable in the event of the Beneficiary's death
prior to receiving the entire death benefit to which the Beneficiary is
entitled. All such Beneficiary designations will be made in accordance
with the following provisions:
(a) Beneficiary Designations By A Participant: Subject to Section 5.8
regarding the rights of a Participant's Spouse, each Participant may
designate a Beneficiary on a form supplied by the Administrator, and
may change or revoke that designation by filing written notice with
the Administrator. If a Participant completes or has completed a
Beneficiary designation form in which the Participant designates his
or her Spouse as the Beneficiary, and the Participant and the
Participant's Spouse are legally divorced subsequent to the date of
such designation, then the designation of such Spouse as a
Beneficiary hereunder will be deemed null and void unless the
Participant, subsequent to the legal divorce, reaffirms the
designation by completing a new Beneficiary designation form. In the
absence of a written Beneficiary designation form, the Participant
will be deemed to have designated the following Beneficiaries in the
following order: (1) the Participant's Spouse, if then living; (2)
the Participant's issue, per stirpes; and (3) the Participant's
estate.
(b) Beneficiary Designations By A Beneficiary: In the absence of a
Beneficiary designation or other directive from the deceased
Participant to the contrary, any Beneficiary may name his or her own
Beneficiary in accordance with Section 5.2(e) to receive any
benefits which may be payable in the event of the Beneficiary's
death prior to the receipt of all the Participant's death benefits
to which the Beneficiary was entitled.
3
(c) Beneficiaries Considered Contingent Until Death Of Participant:
Notwithstanding any provision in this Section, any Beneficiary named
hereunder will be considered a contingent Beneficiary until the
death of the Participant (or Beneficiary, as the case may be), and
until such time will have no rights granted to Beneficiaries under
the Plan.
1.8 BREAK IN SERVICE: The term Break in Service means a Plan Year during which
an Employee does not complete more than 500 Hours of Service for reasons
other than an authorized leave of absence, which is any period in which an
Employee ceases active employment because of illness, military service, or
any other reason approved by the Employer. If a Plan Year is less than 12
months, the 500 Hours of Service requirement will be proportionately
reduced.
1.9 CODE: The term Code means the Internal Revenue Code of 1986, as amended,
and the regulations and rulings promulgated thereunder by the Internal
Revenue Service.
1.10 CODE ss.3401 COMPENSATION: The term Code ss.3401 Compensation means wages
within the meaning of Code ss.3401(a) that are actually paid or made
available in gross income for the purposes of income tax withholding at
the source but determined without regard to any rules under that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Code ss.3401(a)(2).
1.11 CODE ss.415 COMPENSATION: The term Code ss.415 Compensation means Earned
Income, wages, salaries, fees for professional services and other amounts
received (without regard to whether or not an amount is paid in cash) for
personal services actually rendered by an Employee in the course of
employment with the Employer maintaining the Plan, including, but not
limited to, commissions paid to salespersons, compensation for services
based on a percentage of profits, commissions on insurance premiums, tips,
bonuses, fringe benefits, and reimbursements, or other expense allowances
under a non-accountable plan as described in regulation ss.1.62-2(c). Code
ss.415 Compensation will be determined subject to the following
provisions:
(a) Amounts Excluded From Code ss.415 Compensation: Code ss.415
Compensation does not include (1) Employer contributions to a plan
of deferred compensation which are not includible in gross income
for the taxable year in which contributed, or Employer contributions
to a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any distributions
from a plan of deferred compensation; (2) amounts realized from 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; (3) amounts
realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and (4) other amounts which
receive special tax benefits, or contributions made by an Employer
(whether or not under a salary reduction agreement) towards the
purchase of an annuity described in Code ss.403(b) (whether or not
the amounts are excludible from an Employee's gross income).
(b) Treatment Of Elective Deferrals And Certain Other Amounts: For
Limitation Years beginning on or after January 1, 1998, Code ss.415
Compensation will include any elective deferrals as defined in Code
ss.402(g)(3), and any amounts contributed or deferred at the
election of the Employee which were not includible in gross income
by reason of Code ss.125 or ss.457. Code ss.415 Compensation will
also include elective amounts that are not includible in the gross
income of the Employee by reason of Code ss.132(f)(4) for Limitation
Years beginning on or after January 1, 2001 (or if elected by the
Administrator on a non-discriminatory basis, any earlier Limitation
Year beginning on or after January 1, 1998).
4
1.12 COMPANY STOCK: The term Company Stock means common stock issued by the
Employer which is voting common stock (or preferred stock convertible into
voting common stock) and which qualifies under Code ss.409(l) as an
Employer security.
1.13 COMPANY STOCK ACCOUNT: The term Company Stock Account means the account to
which is credited a Participant's share of Company Stock contributed to or
acquired by the Plan.
1.14 COMPENSATION: The term Compensation means wages within the meaning of Code
ss.3401(a) and all other payments of compensation that are actually paid
or made available in gross income during the Plan Year to an Employee by
the Employer (in the course of the Employer's trade or business) for which
the Employer is required to furnish the Employee a written statement (Form
W-2) under Code ss.6041(d), ss.6051(a)(3) and ss.6052. Compensation must
be determined without regard to any rules under Code ss.3401(a) that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Code ss.3401(a)(2). Compensation will also include
amounts not currently includible in gross income by reason of Code ss.125,
ss.402(e)(3), ss.402(h), or ss.403(b). However, Compensation used to
determine Plan benefits will not include a Participant's Compensation in
excess of $48,000.
1.15 CURRENT OBLIGATIONS: The term Current Obligations means obligations of the
Trust Find arising from the extension of credit to the Trust Fund and
which are payable in cash within one year from the date an Employer
contribution is made to the Plan.
1.16 DISABILITY: The term Disability means a physical or mental condition
arising after an Employee has become a Participant which totally and
permanently prevents the Participant from performing his or her specified
duties for the Employer. The determination as to whether a Participant has
suffered a Disability will be made by a physician appointed by the
Administrator. If a difference of opinion arises between the Participant
and the Administrator as to whether the Participant has suffered a
Disability, it will be settled by a majority decision of three physicians,
one to be appointed by the Administrator, one to be appointed by the
Participant, and the third to be appointed by the two physicians first
appointed herein. However, notwithstanding the foregoing, the term
Disability will not include any disability arising from (1) chronic or
excessive use of intoxicants or other substances; (2) intentionally
self-inflicted injury or sickness; (3) an unlawful act or enterprise by
the Participant; or (4) military service where the Participant is eligible
to receive a government sponsored military disability pension.
1.17 EARLY RETIREMENT AGE: The term Early Retirement Age means the first day of
any month coinciding with or following the date a Participant reaches Age
55 and completes 5 Years of Service.
1.18 ELIGIBLE PARTICIPANT: The term Eligible Participant means a Participant
eligible to receive an allocation of Employer contributions allocable for
a Plan Year. Any Participant who is an Employee on the last day of the
Plan Year will be an Eligible Participant if he or she also completes at
least 1,000 Hours of Service during the Plan Year. Any Participant who
terminates employment with the Employer before the last day of the Plan
Year will only be an Eligible Participant for that Plan Year in accordance
with the following provisions:
(a) Retiring Participants: A Participant who terminates employment
before the last day of the Plan Year because of retirement after
Normal or Early Retirement Age will be an Eligible Participant if he
or she completes at least 1,000 Hours of Service during that Plan
Year.
(b) Deceased Participants: A Participant who terminates employment
before the last day of the Plan Year because of death will be an
Eligible Participant if he or she completes at least 1,000 Hours of
Service during that Plan Year.
5
(c) Disabled Participants: A Participant who terminates employment
before the last day of the Plan Year because of Disability will be
an Eligible Participant if he or she completes at least 1,000 Hours
of Service during that Plan Year.
(d) Terminated Participants: A Participant who terminates before the
last day of the Plan Year for reasons other than retirement, death
or Disability will be an Eligible Participant if he or she completes
at least 1,000 Hours of Service during that Plan Year.
1.19 EMPLOYEE: The term Employee means (1) any person reported on the payroll
records of the Employer as an employee who is deemed by the Employer to be
a common law employee; (2) except for purposes of determining eligibility
to participate in this Plan, any person reported on the payroll records of
an Affiliated Employer of the Sponsor or an Adopting Employer as an
employee who is deemed by the Affiliated Employer to be a common law
employee, even if the Affiliated Employer is not an Adopting Employer; (3)
any Self-Employed Individual who derives Earned Income from the Employer;
(4) any Owner-Employee; and (5) any person who is considered a Leased
Employee but who (i) is not covered by a plan described in Code
ss.414(n)(5), or (ii) is covered by a plan described in Code ss.414(n)(5)
but Leased Employees constitute more than 20% of the Employer's non-highly
compensated workforce. The term Employee will not include any individual
who is not reported on the payroll records of the Employer or an
Affiliated Employer as a common law employee. If such person is later
determined by the Sponsor or by a court or governmental agency to be an
Employee or to have been an Employee, he or she will only be eligible for
Plan participation prospectively and may participate in the Plan as of the
next entry date in Section 2.2 following such determination and after the
satisfaction of all other eligibility requirements.
1.20 EMPLOYER: The term Employer means the Sponsor, any Adopting Employer, and
any direct predecessor business entity of the Sponsor or an Adopting
Employer which was or would have been considered an Affiliated Employer of
the Sponsor or an Adopting Employer. Where applicable, such as determining
Hours of Service and Years of Service, the term Employer or Adopting
Employer will also mean any business entity that was an Adopting Employer.
As to any Employee, the term Employer at the time of reference means the
employer of such Employee.
1.21 EXEMPT LOAN: The term Exempt Loan means a loan made to the Plan by a
disqualified person or that is guaranteed by a disqualified person and
which satisfies the requirements of income tax regulation ss.54.4975-7(b)
and Department of Labor regulation ss.2550.408b-3.
1.22 FIDUCIARY: The term Fiduciary means any individual or entity which
exercises any discretionary authority or control over the management of
the Plan or over the disposition of the assets of the Plan; renders
investment advice for a fee or other compensation (direct or indirect);
has any discretionary authority or responsibility over Plan
administration; or acts to carry out a fiduciary responsibility, when
designated by a named Fiduciary pursuant to authority granted by the Plan;
subject, however, to any exception granted directly or indirectly by the
provisions of ERISA or any applicable regulations. The Employer is the
"named Fiduciary" for purposes of ERISA ss.402(a)(2).
1.23 FISCAL YEAR: The term Fiscal Year means the Employer's accounting year
beginning May 1st and ending April 30th.
1.24 FORFEITURE: The term Forfeiture means the amount by which a Participant's
Account balance exceeds his or her Vested Interest upon the earlier to
occur of (1) the date the Participant receives a distribution of his or
her Vested Interest pursuant to Sections 5.4, 5.5, or 5.6; or (2) the date
the Participant incurs 5 consecutive Breaks in Service after Termination
of Employment. No Forfeitures
6
will occur solely as a result of the withdrawal of a Participant's own
contributions to the Plan, or a Participant's transfer to an Affiliated
Employer or Adopting Employer. All Forfeitures will be allocated to the
Forfeiture Account pending allocation pursuant to Section 3.5.
1.25 FORM W-2 COMPENSATION: The term Form W-2 Compensation means wages within
the meaning of Code ss.3401(a) and all other payments of compensation
actually paid or made available in gross income to an Employee by the
Employer in the course of the Employer's trade or business for which the
Employer is required to furnish the Employee a Form W-2 under Code
ss.6041(d), ss.6051(a)(3) and ss.6052. Compensation must be determined
without regard to any rules under Code ss.3401(a) limiting remuneration
included in wages based on the nature or location of the employment or
services performed (such as the exception for agricultural labor in Code
ss.3401(a)(2).
1.26 HCE: The term HCE means a Highly Compensated Employee.
1.27 HIGHLY COMPENSATED EMPLOYEE: The term Highly Compensated Employee means,
for Plan Years beginning after December 31, 1996, any Employee who during
the Plan Year or during the look-back year was a 5% owner as defined in
Code ss.416(i)(1), or who for the look-back year had Code ss.415
Compensation in excess of $80,000 as adjusted in accordance with Code
ss.415(d) (except that the base year will be the calendar quarter ending
September 30, 1996). In determining who is a highly compensated former
Employee, the rules for determining which Employees are Highly Compensated
Employees for the Plan Year or look-back year for which the determination
is being made (in accordance with temporary regulation ss.1.414(q)-1T, A-4
and Notice 97-45) will be applied. In determining if an Employee is a
Highly Compensated Employee for Plan Years beginning in 1997, the
amendments to Code ss.414(q) are deemed to have been in effect for Plan
Years beginning in 1996. If the Employer maintains more than one qualified
retirement plan, the terms of this Section will be applied in a consistent
manner in all such plans.
(a) Determination Of Look Back Year: The look-back year will be the 12
month period immediately preceding the Plan Year for which the
determination is being made, except that in determining if an
Employee is a Highly Compensated Employee based on his or her Code
ss.415 Compensation, the Administrator may elect for any Plan Year
that the look-back year will be the calendar year beginning with or
within the look-back year.
(b) Top Paid Group Election: In determining if an Employee is a Highly
Compensated Employee based on Code ss.415 Compensation, the top paid
group election set forth in Code ss.414(q)(3) is not being applied
by the Plan.
1.28 HOUR OF SERVICE: The term Hour of Service means, and the number of an
Employees's Hour of Service will be determined in accordance with, the
following provisions:
(a) Determination Of Hours: The term Hour of Service means (1) each hour
an Employee is paid, or entitled to payment, for the performance of
duties for the Employer or an Affiliated Employer, which 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 or an Affiliated 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,
except that no more than 501 hours will be credited under this
clause (2) for any single continuous period (whether or not such
period occurs in a single computation period); and (3) each hour for
which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Employer or an Affiliated Employer,
except that the same hours will not be credited both under clause
(1) or clause (2) and under this clause (3), and these
7
hours will be credited 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. Hours of
Service will be calculated and credited pursuant to DOL regulation
2530.200b-2(b) and (c), which are incorporated herein by reference.
(b) Maternity/Paternity Leave: In determining if a Break in Service for
participation and vesting has occurred, an individual on Maternity
or Paternity Leave will receive credit for up to 501 hours which
would otherwise have been credited but for such absence, or in any
case in which such hours cannot be determined, 8 hours per day of
such absence. Hours credited for Maternity of Paternity Leave will
be credited in the computation period in which the absence begins if
the crediting is necessary to prevent a Break in Service in that
period, or in all other cases, in the following computation period.
(c) Use Of Equivalencies: Notwithstanding paragraph (a), the
Administrator may elect for all Employees or for one or more
different classifications of Employees (provided such
classifications are reasonable and are consistently applied) to
apply one or more of the following equivalency methods in
determining the Hours of Service of an Employee paid on an hourly or
salaried basis. Under such equivalency methods, an Employee will be
credited with either (1) 190 Hours of Service for each month in
which he or she is paid or entitled to payment for at least one Hour
of Service; or (2) 95 Hours of Service for each semi-monthly period
in which he or she is paid or entitled to payment for at least one
Hour of Service; or (3) 45 Hours of Service for each week in which
he or she is paid or entitled to payment for at least one Hour of
Service; or (4) 10 Hours of Service for each day in which he or she
is paid or entitled to payment for at least one Hour of Service.
1.29 KEY EMPLOYEE: The term Key Employee means any Employee, Former Employee,
deceased Employee, or Beneficiary who at any time during the Plan Year
containing the Determination Date for the Plan Year in question or any of
the prior 4 Plan Years was one of the following:
(a) Officers: An officer of the Employer whose Code ss.415 Compensation
exceeds 50% of the amount in effect under Code ss.415(b)(1)(A),
except that no more than fifty Employees (or, if lesser, the greater
of three or 10% of the Employees) will be treated as officers.
(b) Owners: An owner (or was considered an owner under Code ss.318) of
one of the ten largest interests in the Employer whose Code ss.415
Compensation exceeds 100% of the dollar limitation in effect under
Code ss.415(c)(1)(A), but if two Employees own the same interest in
the Employer, the Employee with the greater annual Code ss.415
Compensation will be treated as owning a larger interest; or a 5%
owner of the Employer as defined in Code ss.416(i)(1)(B)(i); or a 1%
owner of the Employer as defined in Code ss.416(i)(1)(B)(ii) whose
annual Code ss.415 Compensation is more than $150,000.
1.30 LEASED EMPLOYEE: The term Leased Employee means, for Plan Years beginning
on or after January 1, 1997, any person within the meaning of Code
ss.414(n)(2) and ss.414(o) who is not reported on the payroll records of
the Employer as a common law employee and who provides services to the
Employer if (a) the services are provided under an agreement between the
Employer and a leasing organization; (b) the person has performed services
for the Employer or for the Employer and related persons as determined
under Code ss.ss.414(n)(6) on a substantially full time basis for a period
of at least one year; and (c) the services are performed under the primary
direction and control of the Employer. Contributions or benefits provided
to a Leased Employee by the leasing organization which are attributable to
services performed for the Employer will be treated as provided by the
Employer. A Leased Employee will not be considered an Employee of the
recipient if such Employee is covered by a money purchase plan providing
(a) a non-integrated Employer contribution rate of at least 10% of
8
Code ss.415 Compensation, but including amounts contributed by the
Employer pursuant to a salary reduction agreement which are excludible
from the Employee's gross income under a cafeteria plan covered by Code
ss.125, a cash or deferred plan under Code ss.401(k), a SEP under Code
ss.408(k) or a tax-deferred annuity under Code ss.403(b); (b) immediate
participation; and (c) full and immediate vesting. This exclusion is only
available if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.31 LIMITATION YEAR: The term Limitation Year means the Plan Year.
1.32 MATERNITY OR PATERNITY LEAVE: The term Maternity or Paternity Leave means
that an Employee is absent from work because of the Employee's pregnancy;
the birth of the Employee's child; the placement of a child with the
Employee in connection with the adoption of such child by the Employee; or
the need to care for such child for a period beginning immediately
following the child's birth or placement as set forth above.
1.33 NHCE: The term NHCE means a Non-Highly Compensated Employee.
1.34 NON-HIGHLY COMPENSATED EMPLOYEE: The term Non-Highly Compensated Employee
means any Employee who is not a Highly Compensated Employee.
1.35 NON-KEY EMPLOYEE: The term Non-Key Employee means any Employee who is not
a Key Employee, including former Key Employees.
1.36 NORMAL RETIREMENT AGE: The term Normal Retirement Age means the date a
Participant reaches Age 65. There is no mandatory retirement age.
1.37 NORMAL RETIREMENT DATE: The term Normal Retirement Date means the first
day of the month coinciding with or next following Normal Retirement Age.
1.38 OTHER INVESTMENTS ACCOUNT: The term Other Investments Account means the
account to which is credited a Participant's share of Plan assets other
than Company Stock, including Forfeitures which are not used to pay
administrative expenses or to reduce Employer contributions, earnings and
losses, and the proceeds of any Policies, if any, purchased on the
Participant's life under Section 7.13. Payments to purchase Company Stock
will be debited from this account.
1.39 PARTICIPANT: The term Participant means any Employee who has met the
eligibility and participation requirements of the Plan. However, an
individual who is no longer an Employee will not be deemed a Participant
if his or her entire Plan benefit (1) is fully guaranteed by an insurance
company and is legally enforceable at the sole choice of such individual
against such insurance company, provided that a contract, Policy, or
certificate describing the benefits to which such individual is entitled
under the Plan has been issued to such individual; or (2) is paid in a
lump sum distribution which represents such individual's entire interest
in the Plan; or (3) is paid in some other form of distribution and the
final payment thereunder has been made.
1.40 PARTICIPANT'S ACCOUNT: The term Participant's Account means the aggregate
balance in a Participant's Company Stock Account and Other Investments
Account.
1.41 PERMISSIVE AGGREGATION GROUP: The term Permissive Aggregation Group means
a Required Aggregation Group plus any Employer plan(s) which when
considered as a group with the Required Aggregation Group would continue
to satisfy Code ss.401(a)(4) and ss.410.
9
1.42 PLAN: The term Plan means this profit sharing plan and trust agreement,
which is named the Frequency Electronics, Inc. Employee Stock Ownership
Plan.
1.43 PLAN YEAR: The term Plan Year means the Plan's accounting year beginning
January 1st and ending December 31st.
1.44 POLICY: The term Policy means a life insurance policy or annuity contract
purchased pursuant to the provisions of Section 7.13 of the Plan.
1.45 QUALIFIED ELECTION PERIOD: The term Qualified Election Period means the
five Plan Year period beginning with the later of the Plan Year after the
Plan Year the Participant attains Age 55, or the Plan Year after the Plan
Year the Participant first becomes a Qualified Participant.
1.46 QUALIFIED PARTICIPANT: The term Qualified Participant means a Participant
who has attained Age 55 and who has completed at least 10 Years of Plan
Participation.
1.47 REQUIRED AGGREGATION GROUP: The term Required Aggregation Group means (1)
each qualified deferred compensation Plan of the Employer in which at
least one Key Employee participates or participated at any time during the
determination period (regardless of whether the plan has terminated); and
(2) any other qualified deferred compensation plan of the Employer which
enables a plan described in (1) to satisfy Code ss.401(a)(4) or ss.410.
1.48 REQUIRED BEGINNING DATE: The term Required Beginning Date means
1.49 ROLLOVER ACCOUNT: The term Rollover Account means the account to which a
Participant's Rollover Contributions, if any, are allocated. A Participant
will at all times have a 100% Vested Interest in all amounts credited to
his or her Rollover Account.
1.50 ROLLOVER CONTRIBUTION: The term Rollover Contribution means an amount
transferred to this Plan (a) in a trustee to trustee transfer from another
qualified plan; (b) from another qualified plan as a distribution eligible
for tax free rollover treatment and which is transferred by the
Participant to this Plan within 60 days following his receipt thereof; (c)
from a conduit individual retirement account if the only assets therein
were previously distributed to the Participant by another qualified plan
as a distribution eligible for a tax free rollover within 60 days of
receipt thereof and earnings on said assets; or (d) from a conduit
individual retirement account meeting the requirements of (a) above and
transferred to this Plan within 60 days of receipt thereof. The Plan will
not accept a Rollover Contribution under clause (a) which is subject at
the time of transfer to the Qualified Joint and Survivor Annuity
requirements of Code ss.401(a)(11).
1.51 SHAREHOLDER-EMPLOYEE: The term Shareholder-Employee means, in the case of
an Employer or Affiliated Employer which is an electing small business
corporation, an individual who is an employee or officer of such electing
small business corporation and owns, or is considered as owning within the
meaning of Code ss.318(a)(1), on any day during the taxable year of such
corporation, more than 5% of the outstanding stock of the corporation.
1.52 SPONSOR: The term Sponsor means Frequency Electronics, Inc. (and any
successor thereto that elects to assume sponsorship of this Plan).
1.53 SPOUSE: The term Spouse means the person to whom a Participant is legally
married.
1.54 TERMINATION OF EMPLOYMENT: The term Termination of Employment means that a
Participant has ceased to be an Employee for reasons other than
retirement, death, or Disability.
10
1.55 TERMINATED PARTICIPANT: The term Terminated Participant means a
Participant who has ceased to be an Employee for reasons other than
retirement, death or Disability.
1.56 TOP HEAVY: The term Top Heavy means for any Plan Year beginning after
December 31, 1983 (a) that the Top Heavy Ratio exceeds 60% and the Plan is
not part of a Required Aggregation Group or Permissive Aggregation Group;
or (b) that the Plan is a part of a Required Aggregation Group but not a
Permissive Aggregation Group and the Top Heavy Ratio for the group exceeds
60%; or (c) that the Plan is a part of a Required Aggregation Group and a
Permissive Aggregation Group and the Top Heavy Ratio for the Permissive
Aggregation Group exceeds 60%.
1.57 TOP HEAVY MINIMUM ALLOCATION: The term Top Heavy Minimum Allocation means
an amount of Employer contributions and Forfeitures equal to 3% of an
Employee's Code ss.415 Compensation (or such higher or lesser percentage
as may otherwise be indicated in Section 3.6).
1.58 TOP HEAVY RATIO: In determining if this Plan is Top Heavy or Super Top
Heavy, the Top Heavy Ratio will be determined in accordance with the
following provisions:
(a) Rule 1: If the Employer maintains one or more defined contribution
plans (including SEPs) and has not maintained any defined benefit
plan which during the 5-year period ending on the Determination Date
had accrued benefits, the Top Heavy Ratio for this Plan alone or for
the Required or Permissive Aggregation Group is a fraction, the
numerator of which is the sum of the account balances of all Key
Employees as of the Determination Date (including any part of any
account balance distributed in the 5-year period ending on the
Determination Date), and the denominator of which is the sum of the
account balances (including any part of any account balance
distributed in the 5-year period ending on the Determination Date)
determined under Code ss.416 and the regulation thereunder. Both the
numerator and the denominator of the Top Heavy Ratio will be
increased to reflect any contribution not actually made as of the
Determination Date but which is required to be taken into account
under Code ss.416 and the regulations thereunder.
(b) Rule 2: If the Employer maintains one or more defined contribution
plans (including SEPs) and maintains or has maintained one or more
defined benefit plans which during the 5-year period ending on the
Determination Date has had any accrued benefits, the Top Heavy Ratio
for any Required or Permissive Aggregation Group is a fraction, the
numerator of which is the sum of account balances under the
aggregated defined contribution plans for all Key Employees
determined in accordance with paragraph (a) above, and the present
value of accrued benefits under the aggregated defined benefit plans
for all Key Employees as of the Determination Date, and the
denominator of which is the sum of the account balances under the
aggregated defined contribution plans for all Participants,
determined in accordance with paragraph (a), and the present value
of accrued benefits under the aggregated defined benefit plans for
all Participants as of the Determination Date, all determined under
Code ss.416 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 made in
the 5-year period ending on the Determination Date.
(c) Rule 3: For purposes of paragraphs (a) and (b) 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 Code ss.416 and the regulations thereunder for
the first and second Plan Years of a defined benefit plan. The
account balances and accrued benefits
11
will be disregarded for 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. 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 Code ss.416 and
the regulations thereunder. When aggregating plans, the value of the
account balances and accrued benefits will be calculated with
reference to the Determination Date that falls within the same
calendar year. The accrued benefit of a Participant other than a Key
Employee will be determined under (1) the method, if any, that
uniformly applies for accrual purposes under all defined benefit
plans maintained by the Employer, or (2) effective as of the first
Plan Year beginning after December 31, 1986, 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 Code
ss.411(b)(1)(C). Deductible employee contributions will not be taken
into account in determining the Top Heavy Ratio.
(d) Definition Of Determination Date: In determining the Top Heavy
Ratio, the term Determination Date means the last day of the
preceding Plan Year except for the first Plan Year when the
Determination Date means the last day of such first Plan Year.
1.59 TRUSTEE: The term Trustee means the persons or entity named as trustee or
trustees in this Plan and any successor to such Trustee or Trustees.
1.60 TRUST FUND: The term Trust Fund or Trust means the assets of the Plan.
1.61 UNALLOCATED COMPANY STOCK ACCOUNT: The term Unallocated Company Stock
Account means an account containing Company Stock acquired with the
proceeds of an Exempt Loan and which has not been allocated to the
Participants' Company Stock Accounts. For each Plan Year during the
duration of an Exempt Loan, the number of shares of Company Stock released
from the Company Stock Account will equal the number of shares held
therein immediately before release for the current Plan Year multiplied by
a fraction, the numerator of which is the amount of principal and interest
paid for the Plan Year and the denominator of which is the sum of the
numerator plus the principal and interest to be paid for all future Plan
Years.
1.62 VALUATION DATE: Except as otherwise provided in paragraph (c) of the
definition of Top Heavy Ratio, the term Valuation Date means the date on
which the Trustee determines the value of the Trust Fund. The Trust Fund
must be valued at least annually as of the last day of the Plan Year, but
the Administrator can elect to have all or any portion of the assets of
the Trust Fund valued more frequently, including, but not limited to,
semi-annually, quarterly, monthly, or daily.
1.63 VESTED AGGREGATE ACCOUNT: The term Vested Aggregate Account means the
aggregate amount in a Participant's Account, Rollover Account, Voluntary
Employee Contribution Account, and any other accounts as the Administrator
may determine necessary from time to time, in which the Participant has a
Vested Interest.
1.64 VESTED, VESTED INTEREST and VESTING: The term Vested, Vested Interest and
Vesting mean a Participant's nonforfeitable percentage in any account
maintained on his or her behalf under the terms of the Plan. A
Participant's Vested Interest in his or her Participant's Account will be
determined in accordance with Section 4.6 of the Plan.
1.65 YEAR OF SERVICE: The term Year of Service means a 12-consecutive month
computation period during which an Employee (or Participant) completes a
specified number of Hours of Service for
12
either the Employer or an Affiliated Employer (or any business entity
which was an Adopting Employer), determined in accordance with the
following provisions:
(a) Definition Of Employment Commencement Date: As used in this Section,
the term Employment Commencement Date means the first day on which
an Employee performs an Hour of Service for the Employer or an
Affiliated Employer; and the term Re-employment Commencement Date
means the first day following a Break in Service on which an
Employee performs an Hour of Service for the Employer or an
Affiliated Employer.
(b) Year Of Service For Eligibility: In any Plan Year in which the
eligibility requirements as determined under Section 2.1 are based
on Years of Service, (1) a Year of Service is a 12-consecutive month
period during which an Employee is credited with at least 1,000
Hours of Service; and (2) an Employee's initial eligibility
computation period will begin on his or her Employment Commencement
Date. The second eligibility computation period will begin on the
first day of the Plan Year which begins prior to the first
anniversary of the Employee's Employment Commencement Date
regardless of whether the Employee is credited with at least 1,000
Hours of Service during the initial computation period. If the
Employee is credited with 1,000 Hours of Service in both the initial
eligibility computation period and in the second eligibility
computation period, the Employee will be credited with two Years of
Service for eligibility purposes. If a Plan Year is less than 12
consecutive months and the Hours of Service requirement set forth
herein is greater than one, such requirement will be proportionately
reduced.
(c) Year Of Service For Vesting: In any Plan Year in which a
Participant's Vested Interest as determined under Section 4.6 is
based on Years of Service, (1) a Year of Service is a 12-consecutive
month period during which an Employee is credited with at least at
least 1,000 Hours of Service; and (2) the Vesting computation period
will be the Plan Year. If a Plan Year is less than 12 consecutive
months and the Hours of Service requirement set forth herein is
greater than one, such requirement will be proportionately reduced.
(d) Prior Service Credit: An Employee will not receive credit for Years
of Service with any other entity for any purpose under the terms of
this Plan except as otherwise set forth herein with respect to an
Affiliated Employer or an Adopting Employer.
(e) Reemployment Before A Break In Service: If an Employee terminates
employment but is re-employed by the Employer before incurring a
Break in Service, his or her Years of Service and his or her
employment will not be deemed to have been interrupted during such
Plan Year and, if he or she was a Participant in the Plan (or
otherwise satisfied the requirements for participation specified in
Section 2.1), he or she will remain (or become) a Participant
immediately upon his or her re-employment by the Employer. If an
Employee was not a Participant in the Plan but otherwise satisfied
the requirements for participation specified in the Plan, he or she
will become a Participant on the later of the date the Employee
would have entered the Plan had he or she not terminated employment
with the Employer, or upon the Employee's reemployment date.
(f) Reemployment After A Break In Service: If an Employee terminates
employment and is subsequently re-employed by the Employer or an
Affiliated Employer after incurring a Break in Service, Years of
Service that were completed prior to the Break in Service will be
counted retroactively only after such Employee has completed a Year
of Service from his or her Reemployment Commencement Date, subject
to the following:
13
(1) Determination Of Periods Of Service For Eligibility: For
eligibility purposes if such Employee did not have a Vested
Interest in his or her Participant's Account before the Break
in Service and the number of the Employee's consecutive Breaks
in Service equals or exceeds the greater of five or the
aggregate number of Years of Service, Years of Service that
were completed prior to the Break in Service will not be
counted. The aggregate number of Years of Service will not
include any Years of Service previously disregarded hereunder
by reason of prior Breaks in Service. If such former
Employee's Years of Service are disregarded under this
paragraph, he or she will be treated as a new Employee for
eligibility purposes.
(2) Determination Of Years Of Service For Purposes Other Than
Eligibility: For all purposes other than eligibility, if the
Employee has incurred 5 consecutive Breaks in Service, Years
of Service completed prior to such 5 consecutive Breaks in
Service will not be counted if the Employee did not have a
Vested Interest in his or her Participant's Account and the
number of consecutive Breaks in Service equals or exceeds the
aggregate number of Years of Service before such period.
(3) Entry Or Reentry Into The Plan: Regardless of whether or not
such Employee was a Plan Participant before incurring the
Break in Service, he or she will be eligible to enter the Plan
as a Participant upon satisfaction of the eligibility
requirements set forth in Article 2 as though he or she was a
new Employee upon the Employee's Re-employment Commencement
Date, or if earlier upon satisfaction of the eligibility
requirements set forth in Article 2 and the completion of an
additional Year of Service after the Employee's Re-employment
Commencement Date, at which time the Employee's participation
in the Plan will be deemed to have been reinstated as of his
or her Re-employment Commencement Date (provided the Employee
is re-employed by the Employer).
(4) Re-Entry For Purposes Of Making Deferrals: Notwithstanding
subparagraph (3) to the contrary, such Employee, solely for
the purpose of making Elective Deferrals, will re-enter the
Plan immediately upon re-employment by the Employer.
(g) Employees Under 2-Year Full And Immediate Vesting: If this Plan at
any time (1) provides in Section 2.1 that an Employee must complete
2 Years of Service for eligibility purposes, and (2) provides in
Section 4.6 that an Employee will have a 100% Vested Interest in his
or her Participant's Account upon becoming a Participant, then the
Years of Service of an Employee who incurs a Break in Service before
satisfying such 2 Years of Service eligibility requirement will not
be counted for eligibility purposes.
14
ARTICLE 2
PLAN PARTICIPATION
2.1 ELIGIBILITY REQUIREMENTS: Any Employee who is not in an ineligible class
of Employees will be eligible to become a Participant in the Plan in
accordance with the following provisions:
(a) Service Requirement: Anyone who is a Participant on January 1, 2001
will continue to participate. Any other Employee who is not a member
of an ineligible class of Employees will be eligible to enter the
Plan as a Participant upon completing 1 Year of Service.
(b) Ineligible Classes Of Employees: All Employees are eligible to
participate in the Plan except for the following ineligible classes
of Employees: (1) Employees whose employment is governed by the
terms of a collective bargaining agreement between Employee
representatives and the Employer in which retirement benefits were
the subject of good faith bargaining, unless such collective
bargaining agreement expressly provides for the inclusion of such
Employees as Participants in the Plan; and (2) Employees who are
non-resident aliens who do not receive any earned income from the
Employer which constitutes income from sources within the United
States.
(c) Participation By Ineligible Employees: If an Employee who is not a
member of the eligible class of Employees becomes a member of the
eligible class, such Employee will participate in the Plan
immediately if he or she has satisfied the minimum age and service
requirements and would have previously become a Participant had he
or she been a member of the eligible class. The participation of a
Participant who becomes a member of an ineligible class will be
suspended, and such Participant will be entitled to an allocation of
Employer contributions and Forfeitures for the Plan Year only to the
extent of Hours of Service completed while a member of an eligible
class of Employees. Upon returning to an eligible class of
Employees, a suspended Participant will immediately participate
again in the Plan. The Vested Interest of a Participant who ceases
to be a member of an eligible class will continue to increase in
accordance with Section 4.6.
(d) Participation By Former Participants: A Participant who terminates
employment with the Employer for any reason but is subsequently
reemployed as an Eligible Employee will again become a Participant
in the Plan as provided in the definition of Year of Service.
2.2 ENTRY DATE: An Employee who has satisfied the eligibility requirements in
Section 2.1 will enter the Plan as a Participant on the January 1st or the
July 1st which coincides with or next follows the date on which he or she
satisfies such requirements.
2.3 WAIVER OF PARTICIPATION: An Employee who is otherwise eligible to
participate in the Plan may elect to waive such participation in
accordance with the following provisions:
(a) Irrevocable Election: An Eligible Employee may make a one-time
irrevocable election to waive participation in the Plan. However,
the Administrator may in its sole discretion elect not to make this
option available to one or more Eligible Employees if the Eligible
Employee is not an HCE and is not likely to become an HCE and if the
Administrator determines that such waiver may cause the Plan for any
Plan Year to fail to satisfy one of the tests set forth in Code
ss.410(b)(1)(A) or Code ss.410(b)(1)(B) and (C). The Employee's
election to waive participation in the Plan must be in writing and
must be delivered to the
15
Administrator on or before the date the Employee first becomes
eligible to participate in the Plan. Notwithstanding the foregoing
however, once an Employee has become a Participant in the Plan, no
waiver can be made, except as provided in paragraph (b).
(b) Election To Waive Allocation: Notwithstanding paragraph (a) above,
and subject to the Top-Heavy Minimum Benefit requirements of Section
3.6, a Participant may agree to forego an allocation of Employer
contributions to his or her Participant's Account for all or any
Plan Years if such Participant is an HCE for such Plan Year.
(c) Administrative Requirements: The Employee's election to waive
participation or forego an allocation must be in writing and must be
delivered to the Administrator on or before the date the Employee
first becomes eligible to participate in the Plan in the case of a
waiver under paragraph (a), and before the Participant is entitled
to an allocation to his or her Participant's Account in the case of
foregoing such allocation under paragraph (b) for a Plan Year. The
Administrator will furnish any form required to make an election
under this Section, which may include the requirement for consent by
the Employee's Spouse.
2.4 REEMPLOYMENT: If an Employee terminates employment and is subsequently
re-employed by the Employer or an Affiliated Employer, such Employee's
Years of Service for purposes of eligibility (as well as the time such
Employee enters or re-enters the Plan as a Participant) will be determined
in accordance with the rules described in the definition of Years of
Service.
2.5 EXCLUSION OF ELIGIBLE EMPLOYEE: If, in any Plan Year, any Employee who
should be included as a Participant in the Plan is erroneously excluded,
and discovery of such omission is not made until after a contribution for
that Plan Year has been made, the Employer will make a subsequent
contribution to the Plan (if necessary after the application of available
forfeitures, if any), or may correct such omission by any other method of
correction specified in Revenue Procedure 2000-16 (or in any subsequent
Revenue Procedure or guidance issued by the Internal Revenue Service) so
that the omitted Employee receives the same amount which the Employee
would have received had he or she not been omitted from the Plan.
2.6 INCLUSION OF INELIGIBLE EMPLOYEE: If, in any Plan Year, any person who
should not have been included as a Participant in the Plan is erroneously
included, and discovery of that incorrect inclusion is not made until
after a contribution for the year has been made, and such ineligible
Employee has not received a distribution of the amount erroneously
allocated to him or her, the Employer will not be entitled to recover the
contribution made with respect to the ineligible person, but the amount
erroneously contributed will be applied as a forfeiture (except for
elective deferrals in the case of a Code ss.401(k) plan which will be
distributed to the ineligible Employee) for the Plan Year in which the
error is discovered.
16
ARTICLE 3
CONTRIBUTIONS AND ALLOCATIONS
3.1 EMPLOYER CONTRIBUTIONS: Each Plan Year, the Employer will contribute to
the Plan such amount as it may in its sole discretion determine, subject
to the following provisions:
(a) Amount Of Contribution: The Employer, in its sole discretion, will
determine the amount of the contribution and will notify the Trustee
in writing of the amount contributed. The Employer's determination
of the amount of its contribution will be binding on the Trustee,
the Administrator and all Participants and may not be reviewed in
any manner.
(b) Contribution Period: Each Plan Year, any contribution made under the
terms of the Plan may, at the election of the Administrator, be
contributed to the Plan (1) each payroll period; (2) each month; (3)
each Plan quarter; (4) on an annual basis; or (5) on any other less
than annual contribution period basis as determined by the Employer,
provided such contribution period does not discriminate in favor of
Highly Compensated Employees. The Employer may elect a different
contribution period for each type of contribution.
(c) Contribution For Mistakenly Excluded Employees: Notwithstanding
paragraphs (a) and (b), if an Employee should have been included as
a Participant but is mistakenly excluded for any reason, the
omission will be corrected as specified in Section 2.5.
(d) Form Of Payment: Employer contributions may be paid to the Plan in
cash, Company Stock, or any other property permitted under Code
ss.4975 that is acceptable to the Trustee. However, to the extent
the Plan has Current Obligations, the Employer's contribution must
will be paid to the Plan in cash sufficient to satisfy the Plan's
Current Obligations.
(e) Refund Of Contributions: Contributions made to the Plan by the
Employer can only be returned to the Employer in accordance with the
following provisions:
(1) Failure To Initially Qualify: If the Plan fails to initially
satisfy the requirements of Code ss.401(a) and the Employer
declines to amend the Plan to satisfy such requirements,
contributions made prior to the date such qualification is
denied must be returned to the Employer within 1 year of the
date of such denial, but only if the application for the
qualification is made by the time prescribed by law for filing
the Employer's tax return for the taxable year in which the
Plan is adopted, or by such later date as the Secretary of the
Treasury may prescribe.
(2) Contributions Made Under A Mistake Of Fact: If a contribution
is attributable in whole or in part to a good faith mistake of
fact, including a good faith mistake in determining the
deductibility of the contribution under Code ss.404, then an
amount may be returned to the Employer which is equal to the
excess of the amount contributed over the amount which would
have been contributed had the mistake not occurred. Earnings
attributable to any such excess contribution will not be
returned, but losses attributable to the excess contribution
will reduce the amount so returned. Such amount will be
returned within one year of the date the contribution was made
or the deduction disallowed, as the case may be.
(3) Nondeductible Contributions: Except to the extent an Employer
may intentionally make a nondeductible contribution, for
example in order to correct an administrative error or restore
a Forfeiture, any contribution by the Employer is conditioned
on its deductibility and will otherwise be returned to the
Employer.
17
3.2 ALLOCATION OF EMPLOYER CONTRIBUTIONS: Subject to the Top Heavy allocation
requirements of Section 3.5 and the Code ss.415 limitations of Article 6,
Employer contributions will be allocated on the annual Valuation Date to
each Eligible Participant's Account as follows:
(a) Allocation Of Company Stock: Subject to the requirements of Section
3.3, Company Stock contributed to or otherwise purchased by the Plan
will be allocated to each Eligible Participant's Company Stock
Account in the ratio that each Eligible Participant's Compensation
bears to the total Compensation of all Eligible Participants.
However, Company Stock acquired by the Plan with the proceeds of an
Exempt Loan shall only be allocated to each Participant's Company
Stock Account upon release from the Unallocated Company Stock
Suspense Account as provided in Section 3.3(b) below. Company Stock
acquired with the proceeds of an Exempt Loan shall be an asset of
the Trust Fund and maintained in the Unallocated Company Stock
Suspense Account. Company Stock which has been released from the
Unallocated Company Stock Account during the Plan Year will be
allocated on the annual Valuation Date to each Eligible
Participant's Company Stock Account in the same ratio as described
above.
(b) Allocation Of Other Investments: Each Eligible Participant's share
of cash or property, other than Company Stock and any dividends
attributable thereto, will be allocated to the Participant's Other
Investments Account in the ratio that his or her Compensation bears
to the total Compensation of all Eligible Participants.
(c) Allocation Of Cash Dividends: Any cash dividends received by the
Plan which are attributable to shares of Company Stock allocated to
a Participant's Company Stock Account and which are not currently
distributed in accordance with Section 5.14 will be allocated to the
Participant's Other Investments Account.
3.3 COMPANY STOCK ACCOUNT: Company Stock allocable under Section 3.2 to an
Eligible Participant's Company Stock Account, or Company Stock released
from the Unallocated Company Stock Account during the Plan Year, will be
allocated to an Eligible Participant's Company Stock Account on the annual
Valuation Date in accordance with the following provisions:
(a) Company Stock: Each Eligible Participant's Company Stock Account
will be credited with his or her allocable share of Company Stock
(including fractional shares) purchased and paid for by the Plan or
contributed in kind by the Employer. However, all Company Stock
acquired by the Plan with the proceeds of an Exempt Loan must be
added to and maintained in the Unallocated Company Stock Suspense
Account. Such Company Stock shall be released and withdrawn from
that account as if all Company Stock in that account were
encumbered. In the case of a Sponsor that is an electing small
business corporation, the Plan may not use any dividends on any
allocated shares of Company Stock to pay an Exempt Loan that was
used to purchase Company Stock. Cash dividends paid on Company Stock
in a Participant's Company Stock Account will, in the sole
discretion of the Administrator, either be credited to the
Participant's Account or will be used to repay an Exempt Loan.
However, (1) when cash dividends are used to repay an Exempt Loan,
Company Stock will be released from the Unallocated Company Stock
Suspense Account and will be allocated to each Eligible
Participant's Company Stock Account in the ratio that each Eligible
Participant's Compensation for the Plan Year bears to the total
Compensation of all Eligible Participants for the Plan Year; and (2)
Company Stock allocated to a Participant's Company Stock Account
will have a fair market value not less than the amount of cash
dividends which would have been allocated to such Participant's
Account for the Plan Year.
18
(b) Unallocated Company Stock Account: Any Company Stock which is
acquired with an Exempt Loan and is in the Unallocated Company Stock
Account will only be withdrawn and allocated to Participants'
Accounts in accordance with the following provisions:
(1) Method Of Withdrawing Company Stock From The Account: For each
Plan Year during the duration of an Exempt Loan, the number of
shares of Company Stock released from the Company Stock
Account will equal the number of shares held therein
immediately before release for the current Plan Year
multiplied by a fraction, the numerator of which is the amount
of principal and interest paid for the Plan Year and the
denominator of which is the sum of the numerator plus the
principal and interest to be paid for all future Plan Years.
(2) Method Of Allocating Withdrawn Company Stock To Participants:
As of each Anniversary Date, the Plan must consistently
allocate to each Participant's Account, in the same manner as
Employer contributions under Section 3.1 are allocated,
non-monetary units (shares and fractional shares of Company
Stock) representing each Participant's interest in Company
Stock withdrawn from the Unallocated Company Stock Suspense
Account. However, Company Stock released from the Unallocated
Company Stock Account with cash dividends pursuant to
paragraph (a) will be allocated to each Eligible Participant's
Company Stock Account in the same proportion that each such
Participant's number of shares of Company Stock sharing in
such cash dividends bears to the total number of shares of all
Eligible Participants' Company Stock sharing in such cash
dividends.
(3) Allocation Of Income: Income earned on Company Stock in the
Unallocated Company Stock Account will be used, at the
discretion of the Administrator, to repay the Exempt Loan used
to purchase such Company Stock. Company Stock released from
the Unallocated Company Stock Account with such income, and
any income which is not so used, will be allocated on the
annual Valuation Date in the same proportion that each
Eligible Participant's Compensation for the Plan Year bears to
the total Compensation of all Eligible Participants for the
Plan Year.
(c) Code ss.1042 Stock: Notwithstanding the foregoing to the contrary,
any portion of the Plan's assets which are attributable to (or
allocable in lieu of) Company Stock acquired by the Plan in a sale
to which Code ss.1042 or ss.2057 applies will be allocated as
follows:
(1) No Allocation Permitted To Certain Participants: No portion of
any such assets may be allocated directly or indirectly under
this Plan or any other qualified plan of the Employer during
the Non-Allocation Period for the benefit of any taxpayer who
makes an election under Code ss.1042(a) with respect to
Company Stock or any decedent if the executor of the estate of
such decedent makes a qualified sale to which Code ss.2057
applies; for the benefit of any individual who is related to
the taxpayer or the decedent within the meaning of Code
ss.267(b); or for the benefit of any other person who owns,
after applying Code ss.318(a), more than 25% of any class of
outstanding stock of the Employer or of any corporation which
is a member of the same controlled group of corporations
within the meaning of Code ss.409(l)(4) as the Employer; or
the total value of any class of outstanding stock of the
Employer. For purposes hereof, Code ss.318(a) will be applied
without regard to the employee trust exception in Code
ss.318(a)(2)(B)(i); and a person will be treated as failing to
meet the stock ownership limitation set forth in herein if
such person fails such limitation at any time during the
1-year period ending on the date of sale of qualified
securities to the Plan, or on the date as of which such
qualified securities are allocated to Participants in the
Plan.
19
(2) Exception For Certain Lineal Descendants: The restrictions set
forth in subparagraph (1) will not apply to any individual who
is a lineal descendant of the taxpayer if the aggregate amount
allocated to the benefit of all lineal descendants during the
Non-Allocation Period does not exceed more than 5% of the
Company Stock (or amounts allocated in lieu thereof) held by
the Plan which are attributable to a sale to the Plan by any
person related to such descendants within the meaning of Code
ss.267(c)(4) in a transaction to which Code ss.1042 applied.
(3) Definition Of Non-Allocation Period: For purposes of this
paragraph (c), the term Non-Allocation Period as used above
means the 10-year period beginning on the later of (1) the
date of the sale of the qualified securities, or (2) the date
of the Plan allocation attributable to the final payment of
acquisition indebtedness incurred in connection with such
sale.
3.4 ALLOCATION OF EARNINGS AND LOSSES: As of each Valuation Date, accounts
which have not been distributed since the prior Valuation Date will have
the net income of the Trust Fund earned since the prior Valuation Date
allocated in accordance with such rules and procedures as may be
established by the Administrator, and applied in a uniform and
nondiscriminatory manner; or accounts will be valued and adjusted as
hereinafter set forth in this Section.
(a) Definition Of Net Income: For purposes of this Section, the term
"net income" means the net of any interest, dividends, unrealized
appreciation and depreciation (other than the unrealized
appreciation or depreciation of the Company Stock allocated to the
Participants' Company Stock Accounts), capital gains and losses, and
investment expenses of the Trust Fund as determined on each
Valuation Date. Net income does not include (1) the interest paid
under any installment contract for the purchase of Company Stock by
the Plan or the interest paid on any loan used by the Plan to
purchase Company Stock; or (2) income received by the Trust Fund
with respect to Company Stock acquired with an Exempt Loan to the
extent such income is used to repay the loan. All income received by
the Trust Fund from Company Stock acquired with the proceeds of an
Exempt Loan may, at the discretion of the Administrator, be used to
repay such loan.
(b) Allocations To Non-Segregated Accounts: All accounts (other than
Company Stock Accounts) which have not been segregated from the
general Trust Fund for investment purposes will for investment
purposes have net income allocated thereto in the ratio that the
value of each non-segregated account as of the preceding Valuation
Date bears to the total value of all non-segregated accounts as of
the preceding Valuation Date. The Forfeiture Account will not share
in the allocation made under this paragraph.
(c) Allocations To Segregated Accounts: Accounts (other than Company
Stock Accounts) which have been segregated from the general Trust
Fund for investment, including any Directed Investment Accounts that
may be established in accordance with Section 7.15 and any other
accounts, including Directed Investment Accounts, which are valued
on a daily basis will only have the net income earned thereon
allocated thereto. Any Policy dividends or credits will be allocated
to the Participant's Account for whose benefit the Policy is held.
3.5 ALLOCATION OF FORFEITURES: As of the annual Valuation Date, any portion of
the Forfeiture Account which has not been used to pay administrative
expenses of the Plan will be added to the Employer's contribution to be
allocated therewith under Section 3.2.
20
3.6 TOP HEAVY MINIMUM ALLOCATION: In any Top Heavy Plan Year in which a Key
Employee receives an allocation of Employer contributions (including
Elective Deferrals and/or Qualified Matching Contributions) or
Forfeitures, each Employee who is described in paragraph (a) below will
receive the Top Heavy benefit required under the provisions of Code
ss.416, such benefit to be determined in accordance with the following
provisions:
(a) Participants Who Must Receive The Top Heavy Minimum Allocation: For
each Plan Year in which a Top Heavy contribution is required, the
Top Heavy Minimum Allocation (or such lesser amount as may be
permitted under paragraph (b) below) will be made for each
Participant who is a Non-Key Employee and is employed by an Employer
on the last day of the Plan Year and is in an eligible class of
Employees as described in Section 2.1, even if such Participant (1)
fails to complete any minimum Hours of Service or Period of Service
required to receive an allocation of Employer contributions or
Forfeitures for the Plan Year; (2) fails to make elective
contributions to the Plan in the case of a cash or deferred
arrangement; (3) receives Compensation that is less than a stated
amount; or (4) declines to make a mandatory Employee contribution to
the Plan.
(b) Lesser Allocation Allowed: If the amount of Employer contributions
and Forfeitures allocated to the Participant's Account of each Key
Employee for the Plan Year is less than 3% of his or her
Compensation, and if this Plan is not required to be included in an
Aggregation Group to enable a defined benefit plan to meet the
requirements of Code ss.401(a)(4) or ss.410, then the allocation
made under this Section for each Participant who is described in
paragraph (a) above must be equal to the largest percentage of
Employer contributions and Forfeitures allocated to the
Participant's Account of a Key Employee for that Plan Year
(determined after taking into account elective contributions made by
a Key Employee to a cash or deferred arrangement maintained by the
Employer).
(c) Participation In Multiple Defined Contribution Plans: If a
Participant described in paragraph (a) above participates in this
Plan and in one or more defined contribution plans that are included
with this Plan in a Required Aggregation Group, and if the
allocation of Employer contributions and Forfeitures in this Plan or
any other such defined contribution plan is insufficient to satisfy
the Top Heavy requirement with respect to such Participant, such
requirement will nevertheless be deemed to be satisfied if the
aggregate allocation of Employer contributions and Forfeitures under
this Plan and all other such plans on behalf of the Participant is
sufficient to satisfy the Top Heavy requirement. If not, the
Employer will make an additional contribution to this Plan and/or to
one or more such plans on behalf of the Participant in order that
the aggregate allocation of Employer contributions and Forfeitures
to this Plan and all such plans satisfies the Top Heavy
requirements.
3.7 FAILSAFE ALLOCATION: For any Plan Year in which the Plan fails to benefit
at least 70% of Non-Highly Compensated Employees who are eligible to
participate in the Plan, or in which the Plan fails to benefit a
percentage of Non-Highly Compensated Employees who are eligible to
participate in the Plan that is at least 70% of the percentage of Highly
Compensated Employees who benefit under the Plan, an additional Employer
contribution may be made and allocated to those Employees who were
Participants but not Eligible Participants for the Plan Year. Such
Participants will be ranked by service, and the individuals receiving an
allocation will be those with the highest number of Hours of Service
during the Plan Year. Allocations will be made under this Section only to
the extent necessary to insure that the Plan satisfies one of the ratio
percentage tests set forth in Code ss.ss.410(b)(1)(A) or (B) as described
above.
3.8 ROLLOVERS: Rollover Contributions are not permitted.
21
ARTICLE 4
PLAN BENEFITS
4.1 BENEFIT UPON NORMAL OR EARLY RETIREMENT: Every Participant who has reached
Normal Retirement Age (or Early) Retirement Age) and who does not remain
employed by the Employer will be entitled upon termination of employment
to receive his or her Vested Aggregate Account balance determined as of
the most recent Valuation Date coinciding with or immediately preceding
the date of distribution. Distribution will made under Section 5.1.
4.2 BENEFIT UPON LATE RETIREMENT: A Participant who reaches Normal (or Early)
Retirement Age and who remains employed by the Employer will continue to
participate in the Plan and will continue to receive allocations under
Article 3 until he or she terminates employment with the Employer.
However, notwithstanding Section 4.1 to the contrary, such Participant may
at any time after reaching Normal (or Early) Retirement Age (1) choose to
have distributed prior to actual retirement all or part of his or her
Vested Aggregate Account balance determined as of the most recent
Valuation Date coinciding with or immediately preceding the date of
distribution (but any portion thereof which is attributable to elective
contributions made to a cash or deferred arrangement can only be
distributed if the Participant has also reached Age 59 1/2); or (2) choose
to have such Vested Aggregate Account balance transferred to another
qualified retirement plan maintained by the Employer. Upon actual
retirement, the Participant will be entitled to his or her undistributed
Vested Aggregate Account balance determined as of the most recent
Valuation Date coinciding with or immediately preceding the date of
distribution. Distribution will be under Section 5.1.
4.3 BENEFIT UPON DEATH: Upon the death of a Participant prior to Termination
of Employment, or upon the death of a Terminated Participant prior to
distribution of his or her Vested Aggregate Account, his or her
Beneficiary will be entitled to the Participant's Vested Aggregate Account
balance determined as of the most recent Valuation Date coinciding with or
immediately preceding the date of distribution. If any Beneficiary who is
alive on the date of the Participant's death dies before receiving the
entire death benefit to which he or she is entitled, the balance of the
death benefit will be distributed to the Beneficiary's beneficiary in
accordance with Section 5.2. The Administrator's determination that a
Participant has died and that a particular person has a right to receive a
death benefit will be final. Distribution will be made under Section 5.2.
4.4 BENEFIT UPON DISABILITY: If a Participant suffers a Disability prior to
Termination of Employment and terminates employment with the Employer as a
result of that Disability, or if a Terminated Participant suffers a
Disability prior to a distribution of his or her Vested Aggregate Account
balance, he or she will be entitled to his or her Vested Aggregate Account
balance determined as of the most recent Valuation Date coinciding with or
immediately preceding the date of distribution. Distribution will be made
under Section 5.3.
4.5 BENEFIT UPON TERMINATION: A Participant who incurs a Termination of
Employment will be entitled to his or her Vested Aggregate Account
determined as of the most recent Valuation Date coinciding with or
immediately preceding the date of distribution. A Terminated Participant's
Vested Aggregate Account will be distributed under Section 5.4 unless,
prior to the time of distribution set forth therein, the Participant (1)
dies, in which case distribution will be made under 5.2; or (2) suffers a
Disability, in which case distribution will be made under Section 5.3.
4.6 DETERMINATION OF VESTED INTEREST: A Participant's Vested Interest in his
or her Participant's Account will be determined in accordance with the
following provisions:
22
(a) 100% Vesting Upon Retirement, Death Or Disability: A Participant
will have a 100% Vested Interest in his Participant's Account upon
reaching Normal or Early Retirement Age prior to Termination of
Employment, or upon death or Disability prior to that date.
(b) Vesting Prior To Retirement, Death Or Disability: Except as
otherwise provided in paragraph (a) above, a Participant's Vested
Interest in his or her Participant's Account at any given time,
including Termination of Employment prior to Normal or Early
Retirement Age, death or Disability, will be determined in a non-Top
Heavy Plan Year by the vesting schedule which immediately follows
this paragraph based on the number of Years of Service the
Participant has completed on the date of determination.
Years Of Service Vested Interest
3 . . . . . . . . . . . . 20%
4 . . . . . . . . . . . . 40%
5 . . . . . . . . . . . . 60%
6 . . . . . . . . . . . . 80%
7 . . . . . . . . . . . . 100%
(c) Vesting In A Top Heavy Plan Year: Notwithstanding the vesting
schedule in paragraph (b), the Vested Interest of a Participant's
Account in a Top Heavy Plan Year will be determined by the vesting
schedule which immediately follows this paragraph. If this Plan
ceases to be Top Heavy and the vesting schedule in paragraph (b)
becomes effective, a Participant's Vested Interest as determined
under the vesting schedule in this paragraph cannot be reduced.
Furthermore, any such reversion to the vesting schedule in paragraph
(b) will be considered an amendment to this Section and will be
treated in accordance with the provisions paragraph (d) of this
Section pertaining to such amendments.
Years Of Service Vested Interest
2 . . . . . . . . . . . . 20%
3 . . . . . . . . . . . . 40%
4 . . . . . . . . . . . . 60%
5 . . . . . . . . . . . . 80%
6 . . . . . . . . . . . . 100%
(d) Amendments To Vesting Schedule: No amendment may directly or
indirectly reduce a Participant's Vested Interest in his or her
Participant's Account. If the Plan is amended in any way that
directly or indirectly affects the computation of a Participant's
Vested Interest in his or her Participant's Account or the Plan is
deemed amended by an automatic change to or from a Top Heavy vesting
schedule, the following provisions will apply:
(1) Participant Election: Any Participant with at least three
Years of Service may, by filing a written request with the
Administrator, elect to have the Vested Interest in his or her
Participant's Account computed by the vesting schedule in
effect prior to the amendment. A Participant who fails to make
an election will have his or her Vested Interest computed
under the new schedule. The period during in the election may
be made will begin on the date the amendment is adopted or is
deemed to be made and will end on the latest of (l) 60 days
after the amendment is adopted; (2) 60 days after the
amendment becomes effective; or (3) 60 days after the
Participant is issued written notice of the amendment by the
Employer or Administrator.
(2) Preservation Of Vested Interest: Notwithstanding the foregoing
to the contrary, if the vesting schedule is amended, then in
the case of an Employee who is a Participant
23
as of the later of the date such amendment is adopted or the
date it becomes effective, the Vested Interest in his or her
Participant's Account determined as of such date will not be
less than his or her Vested Interest computed under the Plan
without regard to such amendment.
24
ARTICLE 5
DISTRIBUTION OF BENEFITS
5.1 BENEFIT UPON RETIREMENT: Unless a cash-out occurs under Section 5.5, the
retirement benefit a Participant is entitled to receive under Section 4.1
or 4.2 will be distributed as follows:
(a) Form Of Distribution: A Participant may elect to have his or her
retirement benefit distributed (1) in one lump-sum; or (2) in
monthly, quarterly, semi-annual or annual installments over a period
certain that does not extend beyond the Participant's life, or
beyond the lives of the Participant and a designated Beneficiary (or
beyond the life expectancy of the Participant or the joint and last
survivor expectancy of the Participant and a designated
Beneficiary). The Trustee may make the installment payments by
segregating and separately investing the lump sum value of the
Participant's retirement benefit and paying the installments from
the Plan, or by purchasing a nontransferable annuity which provides
for the installment payments.
(b) Special Rule For Company Stock: Unless the Participant elects in
writing a longer distribution period under paragraph (a)(2) above,
distribution of a Participant's Company Stock Account will be in
substantially equal monthly, quarterly, semiannual, or annual
installments over a period not longer than 5 years. If the
Participant's Company Stock Account balance exceeds $500,000, the 5
year period will be extended 1 additional year (but not more than 5
additional years) for each $100,000 or fraction thereof by which the
Participant's Company Stock Account balance exceeds $500,000. The
dollar limits herein will be adjusted at the same time and in the
same manner as provided in Code ss.415(d).
(c) Time Of Distribution: Distribution under this Section will be made
within a reasonable time after the Participant's actual retirement
date, or within a reasonable time after a Participant who elects
late retirement requests payment, but distribution must begin no
later than the Participant's Required Beginning Date.
Notwithstanding the foregoing, distribution of a Participant's
Company Stock Account will begin no later than 1 year after the
close of the Plan Year in which the Participant actually retires
unless the Participant otherwise elects, except that Company Stock
acquired with the proceeds of an Exempt Loan will be excluded until
the close of the Plan Year in which such loan is repaid in full.
5.2 BENEFIT UPON DEATH: Unless a cash-out occurs under Section 5.5, a deceased
Participant's death benefit as determined under Section 4.3 will be
distributed as follows:
(a) Surviving Spouse: Notwithstanding any other Beneficiary designation
made by a Participant, if a Participant is married on the date of
death, the surviving spouse will be entitled to receive 100% of the
deceased Participant's death benefit unless the surviving spouse has
waived that right under Section 5.8. The benefit will be distributed
in monthly, quarterly, semi-annual or annual installments over a
period certain that does not extend beyond the life of the surviving
spouse or beyond the life expectancy of the surviving spouse. The
Trustee may make the installment payments by segregating and
separately investing the lump sum value of the benefit and paying
the installments from the Plan, or by purchasing a nontransferable
annuity which provides for the installment payments.
(b) Time Of Distribution To A Surviving Spouse: The surviving spouse may
(1) elect to have any death benefit to which he or she is entitled
distributed within a reasonable time after the death of the
Participant; or (2) elect to defer distribution of the death
benefit, but distribution may not be deferred beyond December 31st
of the calendar year in which the deceased Participant would have
attained Age 70 1/2.
25
(c) Death Of Surviving Spouse Before Distribution Begins: If the
surviving spouse dies before distribution of the death benefit
begins, then distribution of the benefit will be made as if the
surviving spouse were the Participant. Distribution will be
considered as having commenced when the deceased Participant would
have reached Age 70 1/2 even if payments have been made to the
surviving spouse before that date.
(d) Non-Spouse Beneficiary: A non-spouse Beneficiary may elect to have
his or her death benefit distributed by one of the following methods
unless a different method has been chosen by the Participant: (1) in
one lump-sum; or (2) in monthly, quarterly, semi-annual or annual
installments over a period certain that does not extend beyond the
life of the Beneficiary or beyond the life expectancy of the
Beneficiary. The Trustee may make the installment payments by
segregating and separately investing the lump sum value of the death
benefit and paying the installments from the Plan, or by purchasing
a nontransferable annuity which provides for installments.
Distribution will be made within a reasonable time after the death
of the Participant; but distribution must begin no later than
December 31st of the calendar year immediately following the
calendar year in which the Participant died.
(e) Special Rule For Company Stock: If a Beneficiary elects to receive a
lump sum payment, distribution of the Company Stock Account will
begin no later than 1 year after the close of the Plan Year in which
the Participant dies unless the Beneficiary otherwise elects. If a
Beneficiary elects installments, distribution of the Company Stock
Account will be in substantially equal monthly, quarterly,
semiannual, or annual installments over a period not longer than 5
years unless the Beneficiary elects in writing a longer distribution
period. If the deceased Participant's Company Stock Account balance
exceeds $500,000, the 5 year period will be extended 1 additional
year (but not more than 5 additional years) for each $100,000 or
fraction thereof by which the Participant's Company Stock balance
exceeds $500,000. The dollar limits herein will be adjusted at the
same time and in the same manner as provided in Code ss.415(d).
Notwithstanding the foregoing, Company Stock acquired with the
proceeds of an Exempt Loan will be excluded from distribution until
the close of the Plan Year in which such loan is repaid in full.
(f) Participants In Pay Status: If a Participant who has started
receiving distribution of his or her retirement benefit dies before
the entire benefit has been distributed, the balance of the benefit
will be distributed to the Participant's Beneficiary at least as
rapidly as under the method of distribution being used on the date
of the Participant's death.
(g) Payments To A Beneficiary Of A Beneficiary: In the absence of a
Beneficiary designation or other directive from the deceased
Participant to the contrary, any Beneficiary may name his or her own
Beneficiary to receive any benefits payable in the event of the
Beneficiary's death prior to receiving the entire death benefit to
which the Beneficiary is entitled. If a Beneficiary has not named
his or her own Beneficiary, the Beneficiary's estate will be the
Beneficiary. If any benefit is payable under this paragraph to a
Beneficiary of the deceased Participant's Beneficiary or to the
estate of the deceased Participant's Beneficiary, or to any other
Beneficiary or the estate thereof, subject to the limitations
regarding the latest dates for benefit payment in paragraphs (a) and
(c), the Administrator may (1) continue to pay the remaining value
of such benefits in the amount and form already commenced, or pay
such benefits in any other manner permitted under the Plan for a
Participant or Beneficiary, and (2) if payments have not already
commenced, pay such benefits in any other manner permitted under the
Plan. Distribution to the Beneficiary of a Beneficiary must begin no
later than the date distribution would have been made to the
Participant's Beneficiary. The Administrator's
26
determination under this paragraph will be final and will be applied
in a manner that does not discriminate in favor of Highly
Compensated Employees.
5.3 DISABILITY BENEFITS: Unless a cash-out occurs under Section 5.5, a
Participant's Disability benefit as determined under Section 4.4 will be
distributed as follows:
(a) Form Of Distribution: A Participant may elect to have his or her
Disability benefit distributed (1) in one lump-sum; or (2) in
monthly, quarterly, semi-annual or annual installments over a period
certain that does not extend beyond the Participant's life, or
beyond the lives of the Participant and a designated Beneficiary (or
beyond the life expectancy of the Participant or the joint and last
survivor expectancy of the Participant and a designated
Beneficiary). The Trustee may make the installment payments by
segregating and separately investing the lump sum value of the
Participant's Disability benefit and paying the installments from
the Plan, or by purchasing a nontransferable annuity which provides
for the installment payments.
(b) Special Rule For Company Stock: Unless the Participant elects in
writing a longer distribution period under paragraph (a)(2) above,
distribution of a Participant's Company Stock Account will be in
substantially equal monthly, quarterly, semiannual, or annual
installments over a period not longer than 5 years. If the
Participant's Company Stock Account balance exceeds $500,000, the 5
year period will be extended 1 additional year (but not more than 5
additional years) for each $100,000 or fraction thereof by which the
Participant's Company Stock Account balance exceeds $500,000. The
dollar limits herein will be adjusted at the same time and in the
same manner as provided in Code ss.415(d).
(c) Time Of Distribution: Distribution under this Section will be made
within a reasonable time after the date on which the Participant who
suffers the Disability actually retires, but distribution must begin
no later than the Participant's Required Beginning Date.
Notwithstanding the foregoing, distribution of a Participant's
Company Stock Account will begin no later than 1 year after the
close of the Plan Year in which the Participant who suffers a
Disability actually retires unless the Participant otherwise elects,
except that Company Stock acquired with the proceeds of an Exempt
Loan will be excluded until the close of the Plan Year in which such
loan is repaid in full.
5.4 BENEFIT UPON TERMINATION: Unless a cash-out occurs under Section 5.5 or a
prior distribution has been made under Section 5.2 or Section 5.3, the
benefit a Terminated Participant is entitled to receive under Section 4.5
will be distributed as follows:
(a) Form Of Distribution: A Terminated Participant may elect to have his
or her benefit distributed (1) in one lump-sum; or (2) in monthly,
quarterly, semi-annual or annual installments over a period certain
that does not extend beyond such Participant's life, or beyond the
lives of the Participant and a designated Beneficiary (or beyond the
life expectancy of the Participant or the joint and last survivor
expectancy of the Participant and a designated Beneficiary). The
Trustee may make the installment payments by segregating and
separately investing the lump sum value of a Terminated
Participant's benefit and paying the installments from the Plan, or
by purchasing a nontransferable annuity which provides for the
installment payments.
(b) Special Rule For Company Stock: Unless a Terminated Participant
elects in writing a longer distribution period under paragraph
(a)(2)above, distribution of his or her Company Stock Account will
be in substantially equal monthly, quarterly, semiannual, or annual
installments over a period not longer than 5 years. If a Terminated
Participant's Company
27
Stock Account exceeds $500,000, the 5 year period will be extended 1
additional year (but not more than 5 additional years) for each
$100,000 or fraction thereof by which the Participant's Company
Stock Account balance exceeds $500,000. The dollar limits herein
will be adjusted at the same time and in the same manner as provided
in Code ss.415(d).
(c) Time Of Distribution: Distribution under this Section will be made
within a reasonable time after the last day of the Plan Year in
which a Terminated Participant incurs a Break in Service, but no
later than the Required Beginning Date. Notwithstanding the
foregoing, if a Terminated Participant is not reemployed by the
Employer at the end of the 5th Plan Year following the Plan Year of
his or her Termination of Employment, distribution of his or her
Company Stock Account will begin not later than 1 year after the
close of the 5th Plan Year following the Plan Year in which the
Participant incurs such Termination of Employment. However, if a
Terminated Participant is reemployed by the Employer as of the last
day of the 5th Plan Year following the Plan Year of such Termination
of Employment, distribution of his or her Company Stock Account will
be postponed until the Participant is otherwise entitled to a
distribution under the Plan. For purposes of this paragraph, Company
Stock acquired with the proceeds of an Exempt Loan will be excluded
until the close of the Plan Year in which such loan is repaid in
full.
5.5 CASH-OUT OF BENEFITS: The Administrator, without the consent of the
Participant, may distribute a Participant's Vested Aggregate Account in a
lump sum any time after a Participant terminates employment, subject to
the following provisions:
(a) General Rule: The Administrator can only make distribution under
this Section (1) with regard to distributions made for Plan Years
beginning prior to August 6, 1997 (or such later date as determined
by the Administrator), if the Participant's Vested Aggregate Account
on the date he or she terminates employment with the Employer does
not exceed, or at the time of any prior distribution did not exceed,
$3,500 (or such lesser amount as may be designated by the
Administrator); and (2) for Plan Years beginning on or after August
6, 1997 (or such later date as determined by the Administrator), if
a Participant's Vested Aggregate Account on the date he or she
terminates employment with the Employer does not exceed, or at the
time of any prior distribution did not exceed, $5,000 (or such
lesser amount as may be designated by the Administrator). Any such
distribution will be made as soon as administratively feasible after
the date the Participant terminates employment, and any portion of
the Participant's Account which is not Vested will be treated as a
Forfeiture.
(b) Later Distribution If Account Falls To $5,000: With regard to
distributions made for Plan Years beginning on or after October 17,
2000, if a Participant would have received a distribution under
paragraph (a) but for the fact that the Participant's Vested
Aggregate Account exceeded $5,000 (or such lesser amount as may be
designated by the Administrator) when the Participant terminated
employment, and if at a later time the Participant's Vested
Aggregate Account is reduced to an amount not greater than $5,000
(or such lesser amount as may be designated by the Administrator),
the Administrator may distribute such remaining amount in a lump sum
without the Participant's consent as soon as administratively
feasible after the date the Participant terminates employment, and
any portion of the Participant's Account which is not Vested will be
treated as a Forfeiture.
28
(c) Deemed Distribution: If a Participant's Vested Interest in his or
her Participant's Account is zero on the date the Participant
terminates employment, the Participant will be deemed to have
received a distribution of such Vested Interest on the date of such
termination.
5.6 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS: If a Participant's Vested
Aggregate Account exceeds the amount set forth in paragraph (a) of this
Section and is immediately distributable, such account can only be
distributed in accordance with the following provisions:
(a) General Rule: If a Participant's Vested Aggregate Account balance
exceeds $5,000, or if there are remaining payments to be made with
respect to a particular distribution option that previously
commenced, and such amount is immediately distributable, the
Participant must consent to any distribution of such amount. Any
portion of the Participant's Account which is not Vested will be
treated as a Forfeiture. If less than the entire Vested Aggregate
Account balance is distributed, the part of the non-Vested portion
that will be treated as a Forfeiture is the total non-Vested portion
multiplied by a fraction, the numerator of which is the amount of
the distribution attributable to Employer contributions and the
denominator of which is the total value of the Vested Interest in
the Participant's Account.
(b) Transition Rule: Notwithstanding paragraph (a), with regard to
distributions made prior to October 17, 2000, if a Participant's
Vested Aggregate Account balance exceeded $3,500 (or exceeded $3,500
at the time of any prior distribution) for Plan Years beginning
before August 6, 1997 (or such later date as determined by the
Administrator), or (2) exceeded $5,000 (or exceeded $5,000 at the
time of any prior distribution) for Plan Years beginning after
August 5, 1997 (or such later date as determined by the
Administrator) and for a distribution made prior to October 17,
2000; or (3) either exceeded $5,000 or was a remaining payment under
a selected optional form of payment that exceeded $5,000 at the time
the selected payment began for Plan Years beginning after August 5,
1997 (or such later date as determined by the Administrator) and for
a distribution made after October 16, 2000, and if the account
balance is immediately distributable, then the Participant must
consent to any distribution of such account balance.
(c) Definition Of Immediately Distributable: A Participant's benefit is
immediately distributable if any part of the benefit could be
distributed to the Participant (or the Participant's surviving
spouse) before the Participant reaches (or would have reached if not
deceased) the later of his or her Normal Retirement Age or Age 62.
(d) General Consent Requirement: The consent of the Participant to any
benefit that is immediately distributable must be obtained in
writing within the 90-day period ending on the Annuity Starting
Date. However, the Participant will not be required to consent to a
distribution that is required by Code ss.401(a)(9) or ss.415.
(e) Notification Requirements: The Administrator must notify the
Participant of the right to defer any distribution until the benefit
is no longer immediately distributable. Notification will include a
general explanation of the material features and relative values of
the optional forms of benefit available under the Plan in a manner
that would satisfy the notice requirements of Code ss.417(a)(3); and
will be provided no less than 30 days or more than 90 days prior to
the Annuity Starting Date.
(f) Waiver Of 30-Day Requirement: For Plan Years beginning on or after
January 1, 1997, distribution of the Participant's benefit may begin
less than 30 days after the notice described in paragraph (c) is
given if (1) the Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after
receiving notice to consider the
29
decision of whether or not to elect a distribution; (2) the
Participant, after receiving the notice, affirmatively elects a
distribution (or a particular distribution option).
(g) Consent Not Needed On Plan Termination: If upon Plan termination
neither the Employer nor an Affiliated Employer maintains another
defined contribution plan other than an employee stock ownership
plan (ESOP) as defined in Code ss.4975(e)(7), the Participant's
benefit will, without the Participant's consent, be distributed to
the Participant. If the Employer or an Affiliated Employer maintains
another defined contribution plan other than an ESOP, the
Participant's benefit will, without the Participant's consent, be
transferred to the other plan if the Participant does not consent to
an immediate distribution hereunder.
5.7 RESTORATION OF FORFEITED ACCOUNT BALANCE: If a Participant who does not
have a 100% Vested Interest in his or Participant's Account terminates
employment with the Employer and receives (or is deemed to have received)
a distribution of such Vested Interest from the Plan, and such Participant
is subsequently rehired by the Employer, his or her Participant's Account
upon such reemployment will be administered in accordance with the
following provisions:
(a) Reemployment Before Five Consecutive Breaks In Service: If a
terminated Participant is reemployed by the Employer before
incurring five consecutive Breaks in Service, such Participant's
Account balance will be restored in accordance with the following:
(1) Partially Vested Participants: If upon termination of
employment a Participant has a partially Vested Participant's
Account, upon reemployment by the Employer prior to incurring
five consecutive Breaks in Service, such Participant's Account
balance will be restored to the amount on the date of
distribution if the Participant repays to the Plan the full
amount of the distribution attributable to Employer
contributions before the earlier of five years after the first
date on which the Participant is subsequently re-employed by
the Employer or the date on which the Participant incurs five
consecutive Breaks in Service following the date of
distribution.
(2) Non-Vested Participants: If upon termination of employment a
Participant's Vested Interest in his or her Participant's
Account is zero and such Participant is deemed to have
received a distribution of such Vested Interest before the
date on which he or she incurs five consecutive Breaks in
Service, then upon re-employment prior to incurring five
consecutive Breaks in Service, such Participant's Account
balance which was attributable to Employer contributions will
be restored to the amount on the date of the deemed
distribution.
(3) Source Of Funds: The Administrator, on a case by case basis,
may elect to restore a Participant's Account balance under
this Section by the use of Forfeitures, by the use of earnings
from non-segregated Trust Fund accounts, by the use of
Employer contributions, or by the use of any combination
thereof.
(b) Reemployment After Five Consecutive Breaks In Service: If a
terminated Participant is reemployed by the Employer after incurring
five consecutive Breaks in Service, that portion, if any, of his or
her Participant's Account which is (or is deemed to be) a Forfeiture
will be permanently forfeited under the terms of this Plan.
30
5.8 SPOUSAL CONSENT REQUIREMENTS: A surviving spouse's election not to receive
a death benefit under Section 5.2 will not be effective unless (1) the
election is in writing; (2) the election designates a specific Beneficiary
or form of benefit which may not be changed without spousal consent (or
the spouse's consent expressly permits designations by the Participant
without any requirement of further spousal consent); and (3) the spouse's
consent acknowledges the effect of the election and is witnessed by the
Administrator or a notary public.
5.9 APPLICATION OF CODE SECTION 40 1(a)(9): All distributions made under the
terms of the Plan will be determined and made in accordance with the
regulations issued under Code ss.401(a)(9), including the minimum
distribution incidental benefit requirement of regulation
ss.1.401(a)(9)-2, and any provisions in this Plan which reflect Code
ss.401(a)(9) will override any distribution options which are inconsistent
with such Code section and regulations. If Participant's Vested Aggregate
Account is paid in a form that is based on life expectancies through other
than the purchase of an immediate annuity, the joint life expectancies of
the Participant and his or her Spouse will be recalculated annually unless
the Participant elects the non-recalculation method of determining life
expectancy. In the case of any other Beneficiary, life expectancy will be
calculated when payment first commences, and payments for any
12-consecutive month period will be based on such life expectancy minus
the number of whole years passed since distribution commenced.
5.10 STATUTORY COMMENCEMENT OF BENEFITS: Unless the Participant otherwise
elects, distribution of a Participant's benefit must begin no later than
the 60th day after the latest of the close of the Plan Year in which the
Participant (1) reaches the earlier of Age 65 or Normal Retirement Age;
(2) reaches the 10th anniversary of the year the Participant commenced
Plan participation; or (3) terminates service with the Employer. However,
the failure of a Participant and the Participant's spouse to consent to a
distribution while a benefit is immediately distributable within the
meaning of Section 5.6 above will be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy this Section.
In addition, if this Plan provides for early retirement, a Participant who
satisfied the service requirement for early retirement prior to
Termination of Employment will be entitled to receive his or her Vested
Aggregate Account balance, if any, upon satisfaction of the age
requirement for early retirement.
5.11 DISTRIBUTION IN EVENT OF LEGAL INCAPACITY: If any person who is entitled
to receive a distribution of benefits (the "Payee") suffers from a
Disability or is under a legal incapacity, payments may be made in one or
more of the following ways as directed by the Administrator: (a) to the
Payee directly; (b) to the guardian or legal representative of the Payee's
person or estate; (c) to a relative of the Payee, to be expended for the
Payee's benefit; or (d) to the custodian of the Payee under any Uniform
Transfers to Minors Act or under any Uniform Gifts To Minors Act. The
Administrator's determination of the minority or incapacity of any payee
will be final.
5.12 MISSING PARTICIPANTS: Neither the Trustee nor the Administrator will be
required to search for or ascertain the whereabouts of any Participant or
Beneficiary. With respect to a Participant or Beneficiary who has not
claimed any benefit (the "missing payee") to which such missing payee is
entitled, and with respect to any Participant or Beneficiary who has not
satisfied the administrative requirements for benefit payment, the
following provisions will apply:
(a) Attempt To Contact And Forfeiture Of Benefit: The Administrator will
notify a missing payee that he or she is entitled to a distribution
under the Plan, by certified or registered mail addressed to the
missing payee's last known address. The Administrator, in its sole
discretion, may also utilize other methods of locating a missing
payee, including letter forwarding programs offered by the Internal
Revenue Service or the Social Security Administration, or internet
or other search services offered by the Pension Benefit Guaranty
Corporation (PBGC) if such services are made available to defined
contributions plans; or by placing
31
public notices in a local newspaper. If a missing payee fails to
make his or her whereabouts known in writing to the Trustee or
Administrator or otherwise fails to claim a benefit, or the
administrative requirements for benefit payment for any payee are
not satisfied, upon the earlier to occur of (1) the later of the
date the Plan is terminated or discontinued or six months from the
date the notice was mailed or (2) the date which is two years from
the date the notice was mailed, the Administrator may, but will not
be required to, treat the payee's benefit as a forfeiture, subject
to paragraphs (b) and (c).
(b) Alternative Methods To Forfeiture: In lieu of Forfeiture under
paragraph (a), the Administrator may elect one the following
alternatives described below:
(1) Direct Rollover To IRA: If a Participant's Vested Aggregate
Account balance (determined before taking into account his or
her Rollover Account) on the date he or she terminated
employment with the Employer does not exceed $5,000 (or such
lesser amount as may be designated by the Administrator), the
Administrator may elect to make distribution under this
Section in the form of a direct rollover to an individual
retirement account (IRA) if it can be established by the
Administrator at a qualified financial institution. In
establishing any such IRA, the Administrator will select an
IRA trustee, custodian or issuer that is unrelated to the
Employer or Administrator and will make the initial investment
choices for the IRA. The default direct rollover will occur
not less than 30 days and not more than 90 days after the Code
ss.402(f) notice with the explanation of the default direct
rollover is provided to the Participant or other payee.
(2) Escheat To The State: The Administrator may elect to escheat
the payee's benefit to the state in which the Sponsor's
principal place of business is located.
(3) Other Methods Of Distribution: The Administrator may elect to
distribute a payee's benefit by any other method approved by
the United States Department of the Treasury and/or by the
United States Department of Labor.
(c) Conditions For Restoration Of Forfeited Benefit: If a payee whose
benefit has been forfeited under paragraph (a) is located, or if a
payee whose benefit has been forfeited under paragraph (a) for
failure to satisfy the administrative requirements for benefit
payment subsequently satisfies the administrative requirements for
benefit payment and claims the benefit, and if the Plan has not
terminated (or if the Plan has, all benefits have not yet been
paid), then the benefit will be restored. The Administrator, on a
case by case basis, may elect to restore the benefit by the use of
either earnings from non-segregated Trust Fund assets, or Employer
contributions, or any combination thereof. However, if such missing
payee has not been located by the time the Plan terminates and all
benefits have been distributed therefrom, the Forfeiture of such
unpaid benefit will be irrevocable.
5.13 DIRECT ROLLOVERS: A distributee may elect to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover, which is a payment
by the Plan to the eligible retirement plan specified by the distributee.
(a) Eligible Rollover Distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit
of the distributee, except that an eligible rollover distribution
does not include any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee
or the joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a specified
period of ten years or more; any
32
distribution to the extent such distribution is required under Code
ss.401(a)(9); 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); and
for Plan Years beginning on or after January 1, 2000, the portion of
any distribution which is attributable to a hardship distribution
described in Code ss.401(k)(2)(B)(i)(IV).
(b) Eligible Retirement Plan: An eligible retirement plan is an
individual retirement account described in Code ss.408(a), an
individual retirement annuity described in Code ss.408(b), an
annuity plan described in Code ss.403(a), or a qualified trust
described in Code ss.401(a), that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is
an individual retirement account or individual retirement annuity.
(c) Definition Of Distributee: For purposes of this Section, a
distributee includes an Employee or former Employee. In addition, an
Employee's or former Employee's Surviving Spouse and an Employee's
or former Employee's spouse or former Spouse who is the alternate
payee under a qualified domestic relations order as defined in Code
ss.414(p), are distributees with regard to the interest of the
Spouse or former Spouse.
5.14 FORM OF DISTRIBUTION: All distributions made under the other provisions of
this Article 5 will be in the form of cash or Company Stock, or both,
subject to the following provisions:
(a) Participant May Demand Company Stock: Prior to making any
distribution from the Plan, the Administrator will advise a
Participant or Beneficiary in writing of his or her right to demand
that benefits be distributed solely in Company Stock. If the
Participant or Beneficiary fails to make such demand in writing
within 90 days after receipt of such written notice, the
Participant's Vested Aggregate Account will be distributed in the
form of Company Stock to the extent it is allocated to the
Participant's Company Stock Account, and the balance, if any, of the
Vested Aggregate Account will be distributed in cash.
(b) Stock Must Be Distributed In Whole Shares: If a Participant or
Beneficiary demands that benefits be distributed solely in Company
Stock, distribution will be made entirely in whole shares of Company
Stock. Any balance in a Participant's Account not attributable to
Company Stock will be applied by the Trustee to acquire for
distribution the maximum number of whole shares of Company Stock at
the then fair market value. Any unexpended balance in the
Participant's Account will be distributed in cash. If the Trustee is
unable to purchase the Company Stock required for the distribution,
the Trustee will make distribution in cash within one year after the
date the distribution was to have been made, except in the case of a
retirement distribution which must be made within 60 days after the
close of the Plan Year in which retirement occurs.
(c) Restrictions On Distributed Stock: Except as provided herein,
distributed Company Stock may be restricted as to sale or transfer
by the by-laws or articles of incorporation of the Employer if the
restrictions are applicable to all Company Stock of the same class.
If a Participant is required to offer the sale of his Company Stock
to the Employer before offering it to a third party, the Employer
may not pay a price less than that offered to the distributee by
another potential buyer making a bona fide offer, and the Trustee
may not pay a price less than the fair market value of the Company
Stock.
33
(d) Multiple Classes Of Company Stock Acquired With Exempt Loan: If
Company Stock which was acquired with an Exempt Loan and which is
available for distribution consists of more than one class of stock,
a Participant's or Beneficiary's distribution must receive
substantially the same proportion of each such class of such stock.
5.15 CASH DIVIDENDS ON COMPANY STOCK: At the Administrator's discretion, cash
dividends received on Company Stock allocated to Participants' Company
Stock Accounts may be distributed currently (or within 90 days after the
end of the Plan Year in which such dividends are paid to the Plan) in cash
to such Participants on a nondiscriminatory basis. Any such distribution
of cash dividends will be limited to Participants who are still Employees,
and will be further limited to dividends on shares of Company Stock in
which each such Participant has a Vested Interest.
5.16 RIGHT OF FIRST REFUSAL: If Company Stock which is not readily tradeable on
an established securities market is distributed to a Participant, then
except as otherwise provided in this Section, if any Participant,
Beneficiary, or any other person to whom shares of Company Stock are
distributed (all such persons hereafter called the Selling Participant) at
any time desires to sell some or all of such shares (such shares hereafter
called the Offered Shares) to a third party (such third party hereafter
called the Third Party), then the Selling Participant must give written
notice of such desire to the Employer and the Administrator, subject to
the following provisions:
(a) Requirements Of Written Notice: The written notice required to be
given hereunder must contain the number of shares offered for sale,
the proposed terms of the sale, and the names and addresses of both
the Selling Participant and the Third Party.
(b) Trust Fund And Employer: Both the Plan and the Employer will have
the right of first refusal for a period of 14 days from the date the
Selling Participant gives written notice to the Employer and
Administrator (such 14 day period to run concurrently against the
Plan and the Employer) to acquire the Offered Shares. As between the
Plan and the Employer, the Plan will have priority to acquire the
shares pursuant to the right of first refusal. The selling price and
terms will be the same as offered by the Third Party.
(c) Third Parties: If the Plan and the Employer do not exercise their
respective rights of first refusal within the required 14 day period
provided above, the Selling Participant will have the right, at any
time following the expiration of such 14 day period, to dispose of
the Offered Shares to the Third Party, provided, however, that no
disposition will be made to the Third Party on terms more favorable
to the Third Party than those set forth in the written notice
delivered by the Selling Participant. If a Third Party is offered
terms more favorable than those set forth in the written notice
delivered to the Plan and the Employer, then the Offered Shares will
again be subject to the right of first refusal.
(d) Time Of Closing: The closing pursuant to the exercise of the right
of first refusal will take place at such place as is agreed upon
between the Administrator and the Selling Participant, but not later
than 10 days after the Employer or the Plan has notified the Selling
Participant of the exercise of the right of first refusal. At
closing, the Selling Participant will deliver certificates
representing the Offered Shares duly endorsed in blank for transfer,
or with stock powers attached duly executed in blank with all
required transfer tax stamps attached or provided for, and the
Employer or the Trustee will deliver the purchase price, or an
appropriate portion thereof, to the Selling Participant.
34
(e) Stock Acquired With An Exempt Loan: Notwithstanding the foregoing,
Company Stock acquired with an Exempt Loan will be subject to a
right of first refusal only for so long as such stock is not
publicly traded on an established securities market. The selling
price and other terms under the right of first refusal must not be
less favorable to the seller than the greater of (1) the value of
the stock determined under regulation ss.54.4975-11(d)(5), or (2)
the purchase price and other terms offered by a buyer (other than
the Employer or the Plan) making a good faith offer to purchase the
stock. The right of first refusal must lapse no later than 14 days
after the Selling Participant gives written notice to the
Administrator and Employer that an offer from a Third Party has been
received for the Offered Shares. The right of first refusal will
comply with paragraphs (a) through (c) above, except to the extent
they conflict with this paragraph.
5.17 PUT OPTION: If Company Stock which is not readily tradeable on an
established securities market is distributed to a Participant, he will
have a right to require the Employer to repurchase such Company Stock
under a fair valuation formula, subject to the following provisions:
(a) Stock Acquired With An Exempt Loan: Company Stock acquired with an
Exempt Loan will be subject to a put option if (1) such stock is not
readily tradeable as set forth above, or (2) if such stock is
subject to a trading limitation when distributed. For purposes of
this Section, a trading limitation is a restriction under any
federal or state securities law, or an agreement, not prohibited by
this Section, which would make such stock not as freely tradeable as
stock not subject to such restriction.
(b) Conditions Of Exercise: The put option may only be exercised by a
Participant, by the Participant's donees, or by a person (including
an estate or its distributee) to whom the Company Stock passes upon
a Participant's death. The put option must permit a Participant to
put the Company Stock to the Employer. Under no circumstances may
the put option bind the Plan, but it must grant the Plan an option
to assume the rights and obligations of the Employer at the time the
put option is exercised. If it is known at the time a loan is made
that federal or state law will be violated by the Employer's
honoring such put option, the put option must permit the Company
Stock to be put, in a manner consistent with law, to a third party
(for example, an affiliate of the Employer or a shareholder other
than the Plan) that has substantial net worth at the time the Exempt
Loan is made and whose net worth is reasonably expected to remain
substantial.
(c) Duration Of Put Option: The put option will begin as of the day
following the date the Company Stock is distributed, and end 60 days
thereafter. If not exercised within such 60-day period, an
additional 60 day-period will begin on the first day after the new
determination of the value of the Company Stock by the Trustee in
the following Plan Year. With respect to Company Stock that is
publicly traded without restrictions when distributed but ceases,
after distribution, to be so traded within either of the 60-day
periods described herein, the Employer must notify each holder
thereof in writing on or before the 10th day after the date such
stock ceases to be so traded that for the remainder of the
applicable 60-day period such stock is subject to the put option.
The notice must inform distributees of the terms of the put option
that they are to hold, and such terms must satisfy the requirements
of this Section. The period during which a put option is exercisable
does not include any time when a distributee is unable to exercise
it because the party bound by the option is prohibited from honoring
it by federal or state law.
(d) Manner Of Exercise: The put option will be exercised by the holder
notifying the Employer in writing that the put option is being
exercised. The notice will state the name and address of the holder
and the number of shares to be sold.
35
(e) Payment Terms: The price at which a put option must be exercised is
the value of the Company Stock determined under regulation
ss.54.4975-11(d)(5). The provisions for payment must be reasonable.
The deferral of payment is reasonable if adequate security and a
reasonable interest rate are provided for any credit extended and if
the cumulative payments at any time are not less than the aggregate
of reasonable periodic payments as of such time. Periodic payments
are reasonable if annual installments, beginning 30 days after the
date the put option is exercised, are substantially equal.
Generally, the payment period may not be more than 5 years after the
date the put option is exercised. However, it may be extended to a
date no later than the earlier of 10 years from the date the put
option is exercised or the date the proceeds of the loan used by the
Plan to acquire the Company Stock subject to the put option are
entirely repaid.
(f) Payment Restrictions: Payment under a put option cannot be
restricted by the provisions of a loan or any other arrangement,
including the terms of the Employer's articles of incorporation or
bylaws, unless so required under applicable state law. An
arrangement involving the Plan that creates a put option cannot
provide for the issuance of put options other than provided for
under this Section. The Plan cannot otherwise obligate itself to
acquire Company Stock from a particular holder thereof at an
indefinite time determined upon the happening of an event such as
the death of the holder.
(g) Payment Requirements For Total Distributions: Notwithstanding the
foregoing, and with respect to Company Stock which is not readily
tradeable and which is acquired after December 31, 1986, if a
distribution of such stock constitutes a Total Distribution, payment
of the fair market value of a Participant's Company Stock Account
will be made in 5 substantially equal annual payments. The first
installment will be paid not later than 30 days after the
Participant exercises the put option. The Plan will pay a reasonable
rate of interest and provide adequate security on amounts not paid
after 30 days. For purposes of this Section, the term Total
Distribution means the distribution with one taxable year to the
recipient of the balance of his Company Stock Account.
(h) Payment Requirements For Installment Distributions: Notwithstanding
paragraph (g) above, if the distribution does not constitute a Total
Distribution, the Plan will pay the Participant an amount equal to
the fair market value of the Company Stock repurchased no later than
30 days after the Participant exercises the put option.
5.18 NON-TERMINABLE RIGHTS AND PROTECTIONS: Except as otherwise provided in
Section 5.16 and 5.17, no Company Stock acquired with an Exempt Loan may
be subject to a put, call, or other option, or buy-sell or similar
arrangement when held by and distributed from the Plan, whether or not the
Plan is then an Employee Stock Ownership Plan (ESOP). The rights and
protections granted in this Section and in Section 5.16 and 5.17 are
non-terminable and will continue to exist under the terms of the Plan as
long as any Company Stock acquired with an Exempt Loan is held by the Plan
or by any Participant or any other person for whose benefit such
protections and rights have been created, and neither the repayment of
such loan nor the failure of the Plan to be an ESOP, nor any amendment of
the Plan, will cause a termination of said protections and rights.
5.19 PRE-RETIREMENT DISTRIBUTIONS: Except as may otherwise be permitted under
Section 4.2, no distributions are permitted before a Participant
terminates employment with the Employer
5.20 FINANCIAL HARDSHIP DISTRIBUTIONS: Hardship distributions are not
permitted.
36
5.21 SPECIAL DISTRIBUTION RULE FOR S-CORPORATIONS: In the case of an Employer
that is an electing small business corporation, such Employer may elect to
distribute a Participant's benefit solely in the form of cash,
notwithstanding a Participant's right as otherwise set forth in this Plan
to receive a distribution in the form of Company Stock.
37
ARTICLE 6
CODE SECTION 415 LIMITATIONS
6.1 MAXIMUM ANNUAL ADDITION: The maximum Annual Addition (as defined in
paragraph (c) below) made to a Participant's various accounts maintained
under the Plan for any Limitation Year beginning after December 31, 1986
will not exceed the lesser of the Dollar Limitation set forth in Section
6.1(a) or the Compensation Limitation set forth in Section 6.1(b), as
follows:
(a) Dollar Limitation: For Limitation Years beginning after December 31,
1994, the Dollar Limitation is $30,000 as annually adjusted in
accordance with Code ss.415(d).
(b) Compensation Limitation: The Compensation Limitation is an amount
equal to 25% of the Participant's Code ss.415 Compensation for the
Limitation Year. However, this limitation will not apply to any
contribution made for medical benefits within the meaning of Code
ss.401(h) or Code ss.419A(f)(2) after separation from service which
is otherwise treated as an Annual Addition under Code ss.415(l)(1)
or Code ss.419A(d)(2).
(c) Determination Of Employer Contributions: For purposes of paragraphs
(a) and (b), the amount of Employer contributions will be determined
based upon the lesser of (1) the fair market value of the Company
Stock allocated to the Participant's Account from Employer
contributions to the Plan (determined at the time of the
contribution by the most recent valuation) plus any contributions
which are not used to purchase Company Stock or pay on an Exempt
Loan; and (2) the amount of the Employer's cash contribution to the
Plan.
(d) Annual Additions: The term Annual Additions means the sum of the
following amounts credited to a Participant's Account for the
Limitation Year: (1) Employer contributions; (2) Employee
contributions; (3) Forfeitures; (4) amounts allocated, after March
31, 1984, to an individual medical account, as defined in Code
ss.415(l)(2), which is part of a pension or annuity plan maintained
by the Employer; and (5) amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending after such
date, which are attributable to post-retirement medical benefits,
allocated to the separate account of a key employee, as defined in
Code ss.419A(d)(3), under a welfare fund, as defined in Code
ss.419(e), maintained by the Employer. Notwithstanding the
foregoing, a Participant's Annual Additions do not include his or
her rollovers, loan repayments, repayments of prior Plan
distributions or prior distributions of mandatory contributions,
direct transfers of contributions from another plan to this Plan,
deductible contributions to a simplified employee pension plan, or
voluntary deductible contributions.
(e) Special Rule For ESOPs: If no more than one-third of Employer
contributions for the Plan Year which are deductible under Code
ss.404(a)(9) are allocated to Highly Compensated Employees, the
limitations of this Section will not apply to Forfeitures of Company
Stock that was acquired with Exempt Loan or to Employer
contributions which are deductible under Code ss.404(a)(9)(B) and
are charged against a Participant's Account.
6.2 ADJUSTMENTS TO MAXIMUM ANNUAL ADDITION: In applying the limitation on
Annual Additions set forth in Section 6.1, the following adjustments must
be made:
(a) Short Limitation Year: In a Limitation Year of less than 12 months,
the Defined Contribution Dollar Limitation in Section 6.1(a) will be
adjusted by multiplying it by the ratio that the number of months in
the short Limitation Year bears to 12.
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(b) Multiple Defined Contribution Plans: If a Participant participates
in multiple defined contribution plans sponsored by the Employer
which have different Anniversary Dates, the maximum Annual Addition
in this Plan for the Limitation Year will be reduced by the Annual
Additions credited to the Participant in the other defined
contribution plans during the Limitation Year. If a Participant
participates in multiple defined contribution plans sponsored by the
Employer which have the same Anniversary Date, then (1) if only one
of the plans is subject to Code ss.412, Annual Additions will first
be credited to the Participant's account in the plan subject to Code
ss.412; and (2) if more than one of the plans is subject to Code
ss.412, the maximum Annual Addition in this Plan for a given
Limitation Year will be equal to the product of the maximum Annual
Addition for such Limitation Year minus any other Annual Additions
previously credited to the Participant's account under clause (1)
above, multiplied by the ratio that the Annual Additions which would
be credited to a Participant's accounts hereunder without regard to
the limitations in Section 6.1 bears to the Annual Additions for all
plans described in this clause (2).
6.3 MULTIPLE PLANS AND MULTIPLE EMPLOYERS: All defined benefit plans (whether
terminated or not) of the Employer will be treated as one defined benefit
plan, and all defined contribution plans (whether terminated or not) of
the Employer will be treated as one defined contribution plan. In
addition, all Affiliated Employers will be considered a single employer.
6.4 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS: If for any Limitation Year the
Annual Additions allocated to a Participant's Account exceeds the maximum
amount permitted under Section 6.1 above because of an allocation of
Forfeitures, a reasonable error in estimating a Participant's
Compensation, a reasonable error in determining the amount of elective
contributions (within the meaning of Code ss.402(g)(3)), or because of
other limited facts and circumstances that the Commissioner finds justify
the availability of the rules set forth in this Section, then such
Participant's Account will be adjusted as follows in order to reduce the
excess Annual Additions:
(a) Return Of Employee Contributions: First, Voluntary Employee
Contributions, if any, and second, the amount of elective deferrals
and corresponding Employer matching contributions, if any, to the
extent that they would reduce the excess amount, will be calculated.
Such elective deferrals and Voluntary Employee Contributions plus
attributable earnings, will be returned to the Participant. Any
Employer matching contribution amount will be applied as described
in (b) or (c) below, depending on whether the Participant is covered
by the Plan at the end of the Limitation Year.
(b) Excess Used To Reduce Employer Contributions If Participant Is Still
Covered By The Plan: If, after the application of paragraph (a), an
excess amount still exists and the Participant is covered by the
Plan at the end of the Limitation Year, the excess amount in the
Participant's Account plus applicable earnings thereon, if any, will
be used to reduce Employer contributions (including any allocation
of Forfeitures) for such Participant in the next Limitation Year,
and in each succeeding Limitation Year if necessary.
(b) Excess Used To Reduce Employer Contributions If Participant Is Not
Covered By The Plan: If, after the application of paragraph (a), an
excess amount still exists and the Participant is not covered by the
Plan at the end of a Limitation Year, the excess amount, plus
applicable earnings thereon, if any, will be held unallocated in a
suspense account. The suspense account will be applied to reduce
future Employer contributions (including the allocation of any
Forfeitures) for all remaining Participants in the next Limitation
Year, and in each succeeding Limitation Year if necessary.
39
(d) Suspense Account: If a suspense account is in existence at any time
during a Limitation Year pursuant to this Section, such suspense
account will not participate in the allocation of the Trust's
investment gains and losses. If a suspense account is in existence
at any time during a particular Limitation Year, all amounts in the
suspense account must be allocated and reallocated to Participants'
Accounts before any Employer Contributions or any Employee
contributions may be made to the Plan for that Limitation Year.
Excess amounts may not be distributed to Participants or former
Participants.
6.5 MULTIPLE PLAN REDUCTION: For Limitation Years beginning before January 1,
2000, if an Employee is, or has been, a Participant in one or more
Employer-sponsored defined benefit plans and in one or more
Employer-sponsored defined contribution plans, the sum of the defined
benefit plan fraction and the defined contribution plan fraction for any
Limitation Year may not exceed 1.0, determined in accordance with the
following provisions:
(a) Defined Benefit Fraction: The Defined Benefit Fraction is a fraction
which has as its numerator the Participant's Projected Annual
Benefits determined as of the close of the Limitation Year and which
has as its denominator the lesser of 125% of the dollar limitation
for the Limitation Year determined under Code ss.415(b) and (d), or
140% of the amount taken into account under Code ss.415(b)(1)(B) for
such Limitation Year. Notwithstanding the foregoing, with respect to
anyone who was a Participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more
defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of the defined benefit
fraction will not be less than 125% of the Current Accrued Benefit.
(b) Definitions: As used in paragraph (a) above, (1) the term Projected
Annual Benefits means the annual benefits payable to a Participant
under all defined benefit plans (whether terminated or not) of the
Employer as determined under income tax regulation ss.1.415-7(b)(3);
and (2) the term Current Accrued Benefit means a Participant's
accrued benefit under a defined benefit plan, determined as if the
Participant had separated from service as of the close of the last
Limitation Year beginning before January 1, 1987, when expressed as
an annual benefit within the meaning of Code ss.415(b)(2). In
determining a Participant's Current Accrued Benefit, the
Administrator will disregard any changes in the terms and conditions
of the Plan after May 5, 1986, and any cost of living adjustment
occurring after May 5, 1986. The Current Accrued Benefit will only
be used as set forth above if the defined benefit plans individually
and in the aggregate satisfied the requirements of Code ss.415 for
all Limitation Years beginning before January 1, 1987.
40
(c) Defined Contribution Fraction: The Defined Contribution Fraction is
a fraction the numerator of which is the sum of the Annual Additions
to the Participant's account under all the defined contribution
plans (whether terminated or not) maintained by the Employer for the
current Limitation Year and all prior Limitation Years (including
the Annual Additions attributable to the Participant's
non-deductible contributions to all Employer maintained defined
benefit plans, whether terminated or not, and the Annual Additions
attributable to all welfare benefit funds, as defined in Code
ss.419(e), and individual medical accounts, as defined in Code
ss.415(1)(2) maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current
Limitation Year and all prior Limitation Years the Employee was
employed by the Employer (regardless of whether a defined
contribution plan was maintained by the Employer). The maximum
permissible aggregate amount in any Limitation Year is the lesser of
(1) 125% of the dollar limitation in effect in Code ss.415(c)(1)(A)
for such Limitation Year determined without regard to Code
ss.415(c)(6) and adjusted per regulation ss.1.415-7(d)(1) and Notice
83-10, or (2) 35% of the Participant's Code ss.415 Compensation.
(d) Transition Rule: For defined contribution plans in effect on or
before July 1, 1982, the Administrator may elect for any Limitation
Year ending after December 31, 1982 that the denominator will be the
product of the denominator for the Limitation Year ending in 1982
determined under the law in effect for such Limitation Year,
multiplied by the Transition Fraction, which is a fraction which has
as its numerator the lesser of $51,875 or 1.4 multiplied by 25% of
the Participant's Code ss.415 Compensation for the Plan Year ending
in 1981, and which has as its denominator the lesser of $41,500 or
25% of the Participant's Code ss.415 Compensation for the Plan Year
ending in 1981. In any Top Heavy Limitation Year, $41,500 will be
substituted for $51,875 in determining the Transition Fraction
unless the Extra Minimum Allocation is being provided in Section
3.5. In a Super Top Heavy Limitation Year, $41,500 will always be
substituted for $51,875. A Super Top Heavy Limitation Year is any
Limitation Year in which the Top Heavy Ratio exceeds 90%.
(e) Adjustment Of Fraction: If an Employee was a Participant as of the
end of the first day of the first Limitation Year beginning after
December 31, 1986 in one or more defined contribution plans
maintained by the Employer which were in existence on May 6, 1986,
the numerator of the defined contribution fraction will be adjusted
if the sum of such defined contribution fraction and the defined
benefit fraction would otherwise exceed 1.0 under the terms of this
Plan. Under the adjustment, an amount equal to the product of the
excess of the sum of the defined benefit fraction and the defined
contribution fraction over 1.0 multiplied by the denominator of the
defined contribution fraction will be permanently subtracted from
the numerator of the defined contribution fraction. The adjustment
will be calculated using the fractions as they would be computed as
of the end of the last Limitation Year beginning before January 1,
1987, disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Code ss.415 limitation
applicable to the first Limitation Year beginning on or after
January 1, 1987.
(f) Top Heavy Adjustments To Multiple Plan Fraction: In any Top Heavy
Limitation Year, 100% will be substituted for 125% in paragraphs (a)
and (c) unless an eligible Non-Key Employee (1) is being provided a
7.5% allocation under Section 3.5(d); or (2) is being provided a
retirement benefit under a defined benefit plan equal to 3% of
average monthly Code ss.415 Compensation. However, in any Super Top
Heavy Limitation Year (which means the Top Heavy Ratio exceeds 90%
for that Limitation Year), 100% will be substituted for 125% in any
event. If the 100% limitation is exceeded for any
41
Participant in any Limitation Year, then (1) the Participant's
accrued benefit in the defined benefit plan will not be increased;
no (2) Annual Additions may be credited to the Participant's
accounts under this Plan; and (3) the Participant may not make any
contributions, whether voluntary or mandatory, to this Plan or any
other Employer-sponsored qualified plan.
42
ARTICLE 7
DUTIES OF THE TRUSTEE
7.1 APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION: This Plan will have one
or more individual Trustees, a corporate Trustee, or any combination
thereof, appointed as follows:
(a) Appointment Of Trustee: Each Trustee will be appointed by the
Sponsor and will serve until its successor has been named or until
such Trustee's resignation, death, incapacity, or removal, in which
event the Employer will name a successor Trustee. The term Trustee
will include the original and any successor Trustees.
(b) Resignation Of Trustee: A Trustee may resign any time by giving 30
days written notice in advance to the Sponsor, unless such notice is
waived by the Sponsor. The Sponsor may remove a Trustee any time,
with or without cause, by giving written notice of the removal to
the Trustee. Unless waived in writing by the Sponsor, if any Trustee
who is an Employee, a Self-Employed Individual or an Owner-Employee
resigns or terminates employment with, or ownership of, the Sponsor
or an Adopting Employer for any reason, such termination will
constitute an immediate resignation as a Trustee of the Plan.
(c) Successor Trustee: Each successor Trustee will succeed to the title
to the Trust by filing a written acceptance of appointment with the
former Trustee and the Sponsor. The former Trustee, upon receipt of
such acceptance, will execute all documents and perform all acts
necessary to vest the Trust Fund's title of record in any successor
Trustee. No successor Trustee will be personally liable for any act
or failure to act of any predecessor Trustee.
(d) Merger Of Corporate Trustee: If any corporate Trustee, before or
after qualification, changes its name, consolidates or merges with
another corporation, or otherwise reorganizes, any resulting
corporation which succeeds to the fiduciary business of such Trustee
will become a Trustee hereunder in lieu of such corporate Trustee.
7.2 INVESTMENT ALTERNATIVES OF THE TRUSTEE: The Trustees will implement an
investment program to invest primarily in Company Stock and to accomplish
the Employer's other investment objectives. In addition to powers given by
law, the Trustees may:
(a) Property: Invest the Trust Fund in any form of property, including
common and preferred stocks, exchange covered call options, bonds,
money market instruments, mutual funds, savings accounts,
certificates of deposit, Treasury bills, insurance policies and
contracts, or in any other property, real or personal, foreign or
domestic, having a ready market including securities issued by an
institutional Trustee and/or affiliate of the institutional Trustee.
The Trustee may invest on margin. An institutional Trustee may
invest in its own deposits if they bear a reasonable interest rate.
The Trustee may retain, manage, operate, repair, improve and
mortgage or lease for any period on such terms as it deems proper
any real estate or personal property held by the Trustee, including
the power to demolish any building or other improvements in whole or
part. The Trustee may erect buildings or other improvements, make
leases that extend beyond the term of this Trust, and foreclose,
extend, renew, assign, release or partially release and discharge
mortgages or other liens.
(b) Pooled Funds: The Trustee may transfer any assets of the Trust Fund
to a collective trust established to permit the pooling of funds of
separate pension and profit-sharing trusts provided the Internal
Revenue Service has ruled such collective trust to be qualified
under Code ss.401(a) and exempt under Code ss.501(a) (or the
applicable corresponding provision of
43
any other Revenue Act) or to any other common, collective, or
commingled trust fund which has been or may hereafter be established
and maintained by the Trustee and/or affiliates of an institutional
Trustee. Such commingling of assets of the Fund with assets of other
qualified trusts is specifically authorized, and to the extent of
the investment of the Trust Fund in such a group or collective
trust, the terms of the instrument establishing the group or
collective trust will be a part hereof as though set forth herein.
(c) Employer Stock: The Trustee may invest the Trust Fund in the common
stock, debt obligations, or any other security issued by the
Employer or by an affiliate of the Employer within the limitations
provided under ss.406, ss.407, and ss.408 of ERISA provided that
such investment does not constitute a prohibited transaction under
Code ss.4975. Any such investment will only be made upon written
direction of the Employer who will be solely responsible for the
propriety of such investment.
(d) Cash Reserves: The Trustee may retain in cash as much of the Trust
Fund as the Trustee may deem advisable to satisfy the liquidity
needs of the Plan and to deposit any cash held in the Trust Fund in
a bank account without liability for the highest rate of interest
available. If a bank is acting as Trustee, such Trustee is
specifically given authority to invest in deposits of such Trustee.
The Trustee may also hold cash un-invested at any time and from time
to time and in such amount or to such extent as the Trustee deems
prudent, and the Trustee will not be liable for any losses which may
be incurred as the result of the failure to invest same, except to
the extent provided herein or in ERISA.
(e) Reorganizations, Recapitalizations, Consolidations, Sales And
Mergers: The Trustee may join in or oppose the reorganization,
recapitalization, consolidation, sale or merger of corporations or
properties, upon such terms as the Trustee deems wise.
(f) Registration of Securities: The Trustee may cause any securities or
other property to be registered in the Trustee's own name or in the
name of the Trustee's nominee or nominees, and may hold any
investments in bearer form, but the records of the Trustee will at
all times show all such investments as part of the Trust Fund.
(g) Proxies: The Trustee may vote proxies and if appropriate pass them
on to any investment manager which may have directed the investment
in the equity giving rise to the proxy.
(h) Ownership Rights: The Trustee may exercise all ownership rights with
respect to any assets held in the Trust Fund.
(i) Other Investments: The Trustee may accept and retain for such time
as the Trustee deems advisable any securities or other property
received or acquired as Trustee, whether or not such securities or
property would normally be purchased as investments hereunder.
(j) Key Man Insurance: The Trustee, with the consent of the
Administrator, may purchase insurance Policies on the life of any
Participant whose employment is deemed to be key to the Employer's
financial success. Such key man Policies will be deemed to be an
investment of the Trust Fund and will be payable to the Trust Fund
as the beneficiary thereof. The Trustee may exercise any and all
rights granted under such Policies. Neither the Trustee, Employer,
Administrator, nor any Fiduciary will be responsible for the
validity of any Policy or the failure of any insurer to make
payments thereunder, or for the action of any person which delays
payment or renders a Policy void in whole or in part. No insurer
which issues a Policy will be deemed a party to this Plan for any
purpose or to be responsible for its validity; nor will it be
required to look into the terms of the Plan nor to question any
action of the Trustee.
44
The obligations of the insurer will be determined solely by the
Policy's terms and any other written agreements between it and the
Trustee. The insurer will act only at the written direction of the
Trustee, and will be discharged from all liability with respect to
any amount paid to the Trustee. The insurer will not be obligated to
see that any money paid by it to the Trustee or any other person is
properly distributed or applied.
(k) Loans To The Trust: The Trustee may borrow or raise money for
purposes of the Plan in such amounts, and upon such terms and
conditions, as the Trustee deems advisable; and for any sum so
borrowed, the Trustee may issue a promissory note as Trustee, and
secure repayment of the loan by pledging all, or any part, of the
Trust Fund as collateral. No person lending money to the Trustee
will be bound to see to the application of the money lent or to
inquire into the validity or propriety of any borrowing.
(l) Agreements With Banks: The Trustee may, upon such terms as the
Trustee deems necessary, enter into an agreement with a bank or
trust company providing for (a) the deposit of all or part of the
funds and property of the Trust with such bank or trust company, (b)
the appointment of such bank or trust company as the agent or
custodian of the Trustees for investment purposes, with such
discretion in investing and reinvesting the funds of the Trust as
the Trustees deem it necessary or desirable to delegate.
(m) Litigation: The Trustee may begin, maintain, or defend any
litigation necessary in connection with the administration of the
Plan, except that the Trustee will not be obliged or required to do
so unless indemnified to its satisfaction.
(n) Claims, Debts or Damages: The Trustee may settle, compromise, or
submit to arbitration any claims, debts, or damages due or owing to
or from the Plan.
(o) Margin Accounts, Options And Commodities Trading: The Trustee may
engage in the following activities: borrowing on margin, buying
options, writing covered options, options spreads/straddles, and
future/commodities trading.
(p) Miscellaneous: The Trustee may do all such acts and exercise all
such rights, although not specifically mentioned herein, as the
Trustee deems necessary to carry out the purposes of the Plan. The
Trustee will not be restricted to securities or other property of
the character expressly authorized by applicable law for trust
investments, subject to the requirement that the Trustee discharge
his duties with the care, skill, prudence, and diligence, under the
circumstances then prevailing, that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of
an enterprise of similar character and with similar aims by
diversifying the investments to minimize the risks of large losses
unless under the circumstances it is clearly prudent not to do so.
7.3 VALUATION OF THE TRUST: On each Valuation Date, the Trustee will determine
the net worth of the Trust Fund. The fair market value of securities that
are listed on a registered stock exchange will be the prices at which they
were last traded on such exchange preceding the close of business on the
Valuation Date. If the securities were not traded on the Valuation Date,
or if the exchange on which they are traded was not open for business on
the Valuation Date, then the securities will be valued at the prices at
which they were last traded prior to the Valuation Date. Any unlisted
security will be valued at its bid price next preceding the close of
business on the Valuation Date, which bid price will be obtained from a
registered broker or an investment banker. To determine the fair market
value of assets other than securities for which trading or bid prices can
be obtained, the Trustee may use any reasonable method to determine the
value of such assets, or may elect to employ one or more appraisers for
that purpose and rely on the values established by such appraiser or
appraisers.
45
7.4 COMPENSATION AND EXPENSES: The Trustee, either from the Trust Fund or from
the Employer, will be reimbursed for all of its expenses and will be paid
reasonable compensation as agreed upon from time to time with the
Employer; but no person who receives full-time pay from the Employer will
receive any fees for services to the Plan as Trustee or in any other
capacity. Expenses will be paid by each Adopting Employer in the ratio
that each Adopting Employer's Participants' Accounts bears to the total of
all the Participants' Accounts maintained by this Plan.
7.5 PAYMENTS FROM THE TRUST FUND: The Trustee will pay Plan benefits and other
payments as the Administrator directs, and except as provided by ERISA,
the Trustee will not be responsible for the propriety of such payments.
Any payment made to a Participant, or a Participant's legal representative
or Beneficiary in accordance with the terms of the Plan will, to the
extent of such payment, be in full satisfaction of all claims arising
against the Trust, the Trustee, the Employer, and the Administrator. Any
payment or distribution made from the Trust is contingent on the recipient
executing a receipt and release acceptable to the Trustee, Administrator,
or Employer.
7.6 PAYMENT OF TAXES: The Trustee will pay all taxes of the Trust Fund,
including property, income, transfer and other taxes which may be levied
or assessed upon or in respect of the Trust Fund or any money, property or
securities forming a part of the Trust Fund. The Trustee may withhold from
distributions to any payee such sum as the Trustee may reasonably estimate
as necessary to cover federal and state taxes for which the Trustee may be
liable, which are, or may be, assessed with regard to the amount
distributable to such payee. Prior to making any payment, the Trustee may
require such releases or other documents from any lawful taxing authority
and may require such indemnity from any payee or distributee as the
Trustee deems necessary.
7.7 ACCOUNTS, RECORDS AND REPORTS: The Trustee will keep accurate records
reflecting its administration of the Trust Fund and will make such records
available to the Employer for review and audit. At the request of the
Employer, the Trustee will, within 90 days of such request, file with the
Employer an accounting of its administration of the Trust Fund during such
period or periods as the Employer determines. The Employer will review the
accounting and notify the Trustee within 90 days if the report is
disapproved, providing the Trustee with a written description of the items
in question. The Trustees will have 60 days to provide the Employer with a
written explanation of the items in question. If the Employer again
disapproves of the report, the Trustee will file its accounting in a court
of competent jurisdiction for audit and adjudication.
7.8 EMPLOYMENT OF AGENTS AND COUNSEL: The Trustee may employ such agents,
counsel, consultants, or service companies as it deems necessary and may
pay their reasonable expenses and compensation. The Trustee will not be
liable for any action taken or omitted by the Trustee in good faith
pursuant to the advice of such agents and counsel. Any agent, counsel,
consultant, service company and/or its successors will exercise no
discretionary authority over investments or the disposition of Trust
assets, and their services and duties will be ministerial only and will be
to provide the Plan with those things required by law or by the terms of
the Plan without in any way exercising any fiduciary authority or
responsibility under the Plan. The duties of a third party administrator
will be to safe-keep the individual records for all Participants and to
prepare all required actuarial services and disclosure forms under the
supervision of the Administrator and any Fiduciaries of the Plan. It is
expressly stated that the third party administrator's services are only
ministerial in nature and that under no circumstances will such third
party administrator exercise any discretionary authority whatsoever over
Participants, investments, or benefits.
7.9 DIVISION OF DUTIES AND INDEMNIFICATION: The division of duties and the
indemnification of the Trustees of this Plan will be governed by the
following provisions:
46
(a) No Guarantee Against Loss: The Trustees will have the authority and
discretion to manage and control the Fund to the extent provided in
this instrument, but do not guarantee the Fund in any manner against
investment loss or depreciation in asset value, or guarantee the
adequacy of the Fund to meet and discharge all or any liabilities of
the Plan. Furthermore, the Trustees will not be liable for the
making, retention or sale of any investment or reinvestment made by
it, as herein provided, or for any loss to or diminution of the
Fund, or for any other loss or damage which may result from the
discharge of its duties hereunder, except to the extent it is
judicially determined that the Trustees have failed to exercise the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise
of a like character and like aims.
(b) Representations Of The Employer: The Employer warrants that all
directions issued to the Trustees by it or the Plan Administrator
will be in accordance with the terms of the Plan and not contrary to
the provisions of the Employee Retirement Income Security Act of
1974 and the regulations issued thereunder.
(c) Directions By Others: The Trustees will not be answerable for any
action taken pursuant to any direction, consent, certificate, or
other paper or document on the belief that the same is genuine and
signed by the proper person. All directions by the Employer, a
Participant or the Plan Administrator will be in writing. The Plan
Administrator will deliver to the Trustees certificates evidencing
the individual or individuals authorized to act as the Administrator
and will deliver to the Trustees specimens of their signatures.
(d) Duties And Obligations Limited By The Plan: The duties and
obligations of the Trustees will be limited to those expressly
imposed upon it by this Plan or subsequently agreed upon by the
parties. Responsibility for administrative duties required under the
Plan or applicable law not expressly imposed upon or agreed to by
the Trustees, will rest solely with the Employer and with the
Administrator.
(e) Indemnification Of Trustees: The Trustees will be indemnified and
saved harmless by the Employer against any and all liability to
which the Trustees may be subjected, including all expenses
reasonably incurred in its defense, for any action or failure to act
resulting from compliance with the Employer's instructions, the
Employer's employees or agents, the Administrator, or any other Plan
Fiduciary, and for any liability arising from the actions or
non-actions of any predecessor Trustees or Plan Fiduciary.
(f) Trustees Not Responsible For Application Of Payments: The Trustees
will not be responsible in any way for the application of any
payments it is directed to make or for the adequacy of the Fund to
meet and discharge any and all liabilities under the Plan.
(g) Multiple Trustees: If more than one Trustee is appointed, all acts
and/or transactions taken on behalf of the Trust can only be taken
with the consent of a majority of the Trustees unless the Trustees
have agreed by a majority of their number that a particular act
and/or transaction can be taken or approved by a single Trustee.
(h) Limitation Of Liability: No Trustee will be liable for the act of
any other Trustee or Fiduciary unless the Trustee has knowledge of
such act.
47
(i) Trustees As Participants Or Beneficiaries: Trustees will not be
prevented from receiving any benefits to which they may be entitled
as Participants or Beneficiaries in the Plan, so long as the
benefits are computed and paid on a basis which is consistent with
the terms of the Plan as applied to all other Participants and
Beneficiaries.
(j) No Self-Dealing: The Trustees will not (1) deal with the assets of
the Trust Fund in their own interest or for their own account; (2)
in their individual or in any other capacity, act in any transaction
involving the Trust Fund on behalf of a party (or represent a party)
whose interests are adverse to the interests of the Plan, or its
Participants or Beneficiaries; or (3) receive any consideration for
their own personal accounts from any party dealing with the Plan in
connection with a transaction involving assets of the Trust Fund.
7.10 INVESTMENT MANAGER: The Trustee, if directed by the Sponsor, will appoint
an Investment Manager to manage and control the investment of all or any
portion of the Trust Fund. Each Investment Manager will be either (a) an
investment advisor registered under the Investment Advisors Act of 1940;
(b) a bank as defined in that Act; or (c) an insurance company qualified
to manage, acquire or dispose of any asset of the Trust under the laws of
more than one state. An Investment Manager must acknowledge in writing
that it is a Fiduciary. The Sponsor will enter into an agreement with an
Investment Manager specifying the duties and compensation of the
Investment Manager and further specifying any other terms and conditions
under which the Investment Manager will be retained. The Trustee will not
be liable for any act or omission of an Investment Manager, and will not
be liable for following the advice of an Investment Manager with respect
to any duties delegated by the Sponsor to the Investment Manager. The
Sponsor will determine the portion of the Trust Fund to be invested by an
Investment Manager and will establish investment objectives and guidelines
for the Investment Manager to follow.
7.11 ASSIGNMENT AND ALIENATION OF BENEFITS: Except as may otherwise be
permitted under Code ss.401(a)(13)(C) effective August 5, 1997, or as
otherwise be permitted under a Qualified Domestic Relations Order as
provided in Section 8.11 or as otherwise be permitted under Section 7.14
if Participant loans are permitted, no right or claim to, or interest in,
any part of the Trust Fund, or any payment therefrom, will be assignable,
transferable, or subject to sale, mortgage, pledge, hypothecation,
commutation, anticipation, garnishment, attachment, execution, or levy of
any kind, and the Trustees will not recognize any attempt to assign,
transfer, sell, mortgage, pledge, hypothecate, commute, or anticipate the
same, except to the extent required by law.
7.12 EXCLUSIVE BENEFIT RULE: All contributions made by an Employer (whether or
not the Employer is an Affiliated Employer with one or more other Adopting
Employers) to the Trust will be used for the exclusive benefit of all
Participants and their Beneficiaries and will not be used for nor diverted
to any other purpose except the payment of the costs of maintaining the
Plan.
7.13 PURCHASE OF INSURANCE: The purchase of insurance Policies on the life of a
Participant, other than key man insurance under Section 7.2(j), is not
currently permitted in this Plan.
7.14 LOANS TO PARTICIPANTS: Loans to Participants are not currently permitted
in this Plan.
7.15 DIRECTED INVESTMENT ACCOUNTS: Subject to any rules or procedures that may
be established by the Administrator under paragraph (f) below, the Trustee
may permit Participants to direct the investment of one or more of their
accounts, and subject to any such rules or procedures, investment
directives will be given in accordance with the following provisions:
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(a) Accounts Which Can Be Directed: The Administrator will designate
which accounts a Participant or other payee can direct, and whether
the Participant or other payee can direct all or only a portion of
each such account. Any such designation can be changed by the
Administrator from time to time by communicating new procedures to
the Participants.
(b) Investment Funds: Any amount a Participant or other payee directs
will be put into a segregated investment selected by the Participant
or other payee; or among alternative investment funds established as
part of the overall Trust Fund. Such alternative investment funds
will be under the full control and management of the Trustees.
Alternatively, if investments outside the Trustee's control are
allowed, Participants and other payees may not direct that
investments be made in collectibles, other than U.S. Government gold
and silver coins. The Administrator or Trustee will have the
authority to refuse any investment directed by the Participant or
other payee if that investment would be administratively burdensome,
or if for any reason the Administrator or Trustee believes such
investment would or might constitute a prohibited transaction as
defined in ERISA ss.406 or Code ss.4975. In the event a Participant
or other payee fails to make a timely investment election, at the
Administrator's discretion either no election will be deemed to have
been made or the Participant or other payee will be considered to
have made an election to invest 100% of his or her account in an
investment option, the primary objective of which is the
preservation of principal, until such time as an investment decision
by the Participant or other payee becomes effective.
(c) Investment Form: A Participant's investment direction will be made
in a form acceptable to, and in accordance with procedures
established by, the Administrator. Unless changed by procedures
established by the Plan Administrator and communicated to
Participants and other payees, (1) a Participant or other payee may
change his or her investment election by filing a new investment
designation form with the Administrator or the Administrator's
designee; (2) any such change will be effective no later than the
first day of the next investment election period; and (3) investment
election periods will be established at the discretion of the
Administrator but in any event will occur no less frequently than
once in every 12-month period or, at the discretion of the
Administrator and the Trustee, once in every 3-month or 6-month
period or at such other more frequent time which is uniformly
available as determined and promulgated by the Administrator and the
Trustee.
(d) Transfers Between Funds: Unless changed by procedures established by
the Plan Administrator and communicated to Participants and other
payees, if multiple investment fund options are made available, a
Participant or other payee may elect to transfer all or part of his
or her Account balance in one or more of the investment funds from
one investment fund to another investment fund by filing an
investment designation form with the Administrator or with the
Administrator's designee within a reasonable administrative period
prior to the next period for which investment options may be elected
to be transferred. The funds will be transferred by the Trustee or
the Administrator's designee as soon as practicable prior to, or by
the start of, the new election period. If made available, telephone
or other electronic or computer transfers will be permitted under
uniform procedures approved adopted by the Administrator and agreed
to by the Trustee.
(e) Administrator Responsibility: Either the Administrator or the
Administrator's designee will be responsible when transmitting
Employer and Employee contributions or other Trust Fund assets to
indicate the dollar amount which is to be credited to each
investment fund on behalf of each Participant or other payee.
49
(f) No Administrator Liability: Except as otherwise provided herein,
neither the Trustee, nor the Administrator, nor the Employer, nor
any Fiduciary of the Plan will be liable to the Participant or other
payee (or to his or her Beneficiaries) for any loss resulting from
action taken under this Section at the direction of the Participant
or other payee.
(g) Charges And Fees: Any charge or fee which may be imposed by the
Trustee or by any broker, investment advisor, or otherwise,
including legal fees, incurred in connection with a Participant's
direction under this Section of any Plan account maintained on the
Participant's behalf may be charged to and paid from the assets of
such account.
(h) Establishment Of Administrative Procedures: All investment
designations made by Participants are to be made subject to and in
accordance with such rules or procedures as the Administrator may
adopt. At the discretion of the Administrator and the Trustee, such
rules or procedures will permit sufficient selection among
investment alternatives to satisfy the provisions of DOL Regulations
2550.404(c)-1. Such rules or procedures, when properly executed in a
written document, will be deemed to be incorporated in this Plan.
The rules or procedures may be modified or amended by the
Administrator without the necessity of amending this Section of the
Plan, but any such modifications must be communicated to
Participants in the manner described in Section 8.9. Notwithstanding
the foregoing, (1) a summary plan description or summary of material
modifications thereto in which the rules or procedures regarding
investment designations are described will be considered a separate
written document sufficient to satisfy the requirements (including
the execution requirement) of this paragraph; and (2) any such rules
or procedures established under this paragraph must be applied in a
uniform nondiscriminatory manner.
7.16 VOTING COMPANY STOCK: The Trustee will vote all Company Stock held by it
at such time and in such manner as the Trustee, subject to the following:
(a) Company Stock Pledged As Security: If any agreement entered into by
the Trustee provides for voting of any Company Stock pledged as
security for any obligation of the Plan, such Company Stock will be
voted in accordance with such agreement. If the Administrator fails
or refuses to give the Trustee timely instructions as to how to vote
any Company Stock as to which the Trustee otherwise has the right to
vote, the Trustee may not exercise its power to vote such Company
Stock.
(b) Registration-Type Stock: Notwithstanding paragraph (a), each
Participant may direct to Trustee as to the manner in which Company
Stock allocated to his Company Stock Account is to be voted provided
such Company Stock is a registration-type class of security (as
defined in section 12 of the Securities Exchange Act of 1934).
(c) Non-Registration-Type Stock: With respect to Company Stock which is
not a registration-type class of security, each Participant may
direct the Trustee as to the manner in which Company Stock which is
allocated to his Company Stock Account is to be voted on any
corporate matter which involves the voting of such stock with
respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation,
dissolution, sale of substantially all assets of a trade or
business, or such similar transaction as may be prescribed in
Treasury regulations.
7.17 APPLICATION OF CASH: Employer contributions made to the Plan in cash and
other cash received by the Trustee will first be applied to pay Current
Obligations.
50
7.18 RESTRICTIONS ON COMPANY STOCK TRANSACTIONS: The Plan may not obligate
itself to acquire Company Stock from a particular holder thereof at an
indefinite time determined upon the happening of an event such as the
death of the holder. Furthermore, the Plan may not obligate itself to
acquire Company Stock under a put option binding upon the Plan. However,
the Plan may be given an option to assume, at the time a put option is
exercised, the rights and obligations of the Employer under a put option
binding upon the Employer. In addition, all purchases of Company Stock
will be made at a price which, in the judgment of the Administrator, does
not exceed the fair market value thereof. All sales of Company Stock will
be made at a price which, in the judgment of the Administrator, is not
less than the fair market value thereof.
7.19 EXEMPT LOANS: All loans to the Plan which are made or guaranteed by a
disqualified person must satisfy all requirements applicable to Exempt
Loans set forth in income tax regulation ss.54.4975-(b) and Department of
Labor regulation ss.2550.408b-3, and all provisions of those regulations
applicable to Company Stock purchased with the proceeds of an Exempt Loan
or which is used as collateral for an Exempt Loan must be complied with.
For purposes of this Section, a disqualified person is any person who is a
disqualified person or party in interest under ERISA. A loan for purposes
of this Section includes a direct loan of cash, a purchase-money
transaction, or an assumption of the obligation of the Trust. A guarantee
for purposes of this Section includes an unsecured guarantee and the use
of assets of a disqualified person as collateral for a loan, even though
the use of assets may not be a guarantee under applicable state law.
7.20 DIVERSIFICATION RIGHTS OF QUALIFIED PARTICIPANTS: Notwithstanding anything
herein to the contrary, a Qualified Participant will be permitted to
direct the Trustee as to the investment of amounts credited to his Company
Stock Account, in accordance with the following provisions:
(a) Method Of Directing Investments: The Participant's direction will be
provided to the Administrator in writing, and will be effective no
later than 180 days after the close of the Plan Year to which the
direction applies.
(b) Limitations: A Participant's rights under this Section will be
limited to 25% of the balance in his or her Company Stock Account
attributable to Company Stock acquired by the Plan after December
31, 1986, within 90 days after the last day of each Plan Year,
during the Participant's Qualified Election Period. Within 90 days
after the close of the last Plan Year in a Participant's Qualified
Election Period, a Qualified Participant may direct the Plan as to
the investment of 50% of the value of such Company Stock Account
balance.
(c) Amount Subject to Diversification: The portion of a Participant's
Company Stock Account attributable to Company Stock acquired by the
Plan after December 31, 1986 will be determined by multiplying the
number of shares of such stock held in the Participant's Account by
a fraction, the numerator of which is the number of such shares
acquired after December 31, 1986 and allocated to Participants'
Company Stock Accounts (not to exceed the number of shares held by
the Plan on the date of distribution) and the denominator of which
is the total number of such shares of Company Stock held by the Plan
on the date the individual becomes a Qualified Participant.
(d) Exception For Small Accounts: Notwithstanding paragraph (b), if the
fair market value of a Qualified Participant's Company Stock Account
is $500 or less on the Valuation Date immediately preceding the
first day the Qualified Election Period, then such Company Stock
Account will not be subject to the diversification rights under
paragraph (b). In determining if the fair market value exceeds $500,
Company Stock held in all employee stock ownership plans and tax
credit employee stock ownership plans maintained by the Employer or
any Affiliated Employer will be considered as held by the Plan.
51
(e) Investment Options: Subject to a written policy adopted the
Administrator, the portion of a Qualified Participant's Company
Stock Account that is covered by the diversification election set
forth in this Section will either (1) be distributed to the
Qualified Participant within 90 days after the last day of the
period during which the election can be made, but any part of such
distribution consisting of Company Stock will be subject to the put
option requirements of the Plan, and the entire such distribution,
if it is in excess of $5,000, will be subject to the consent
requirements under Section 5.8; (2) be transferred no later than 90
days after the last day of the period during which the election can
be made to another qualified defined contribution plan of the
Employer which accepts such transfers, provided that such plan
permits Employee-directed investments in at least three distinct
investment options and does not invest in Company Stock to a
substantial degree; or (3) be invested, at the election of the
Qualified Participant, in one or more alternative investments,
provided that if the Administrator elects to offer this option as
part of the written policy adopted hereunder, the Plan must provide
at least three distinct investment options.
7.21 SUPERSEDING TRUST OR CUSTODIAL AGREEMENT: If any assets of the Plan are
invested in a separate trust or custodial account maintained by a
corporate Trustee or custodian, the provisions of such separate trust or
custodial agreement will supersede the provisions set forth in this
Article 7, except (where applicable) with respect to those provisions of
this Article that pertain to the purchase of insurance Policies and to the
making of loans to Participants. In the absence of a specific provision in
such separate trust or custodial agreement regarding the valuation of
securities held by the Trust Fund, Section 7.3 will apply. Moreover, if
such separate trust or custodial account should for any reason fail, be
found invalid or terminate prior to the termination of this Plan and the
distribution of all the assets hereof, this Article 7 will be deemed to
have again become effective immediately prior to such failure, invalidity
or termination.
52
ARTICLE 8
DUTIES OF THE ADMINISTRATOR
8.1 APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION: Each Administrator
appointed by the Sponsor will continue until his death, resignation, or
removal at any time, with or without cause, by the Sponsor, and any
Administrator may resign by giving 30 days written notice to the Sponsor.
If an Administrator dies, resigns, or is removed by the Sponsor, its
successor will be appointed as promptly as possible, and such appointment
will become effective upon its acceptance in writing by such successor.
Pending the appointment and acceptance of any successor Administrator, any
then acting or remaining Administrator will have full power to act.
8.2 GENERAL POWERS AND DUTIES: The powers and duties of the Administrator will
include (a) appointing the Plan's attorney, accountant, actuary, or any
other party needed to administer the Plan; (b) directing the Trustees with
respect to payments from the Trust Fund; (c) deciding if an applicant is
entitled to a benefit from the Plan, which will be paid only if the
Administrator in its sole discretion decides that the applicant is
entitled to it; (d) communicating with Employees regarding their
participation and benefits under the Plan, including the administration of
all claims procedures; (e) filing any returns and reports with the
Internal Revenue Service, Department of Labor, or any other governmental
agency; (f) reviewing and approving any financial reports, investment
reviews, or other reports prepared by any party under (a) above; (g)
establishing a funding policy and investment objectives consistent with
the purposes of the Plan and the Employee Retirement Income Security Act
of 1974; (h) construing and resolving any question of Plan interpretation;
and (i) making any findings of fact the Administrator deems necessary to
proper Plan administration.
8.3 APPOINTMENT OF ADMINISTRATIVE COMMITTEE: The Sponsor may appoint one or
more members to an Administrative/Advisory Committee (to be known as the
"Committee"), to which the Sponsor may delegate certain of its
responsibilities as Plan Administrator. Members of the Committee need not
be Participants or Beneficiaries, and officers and directors of the
Sponsor will not be precluded from serving as members. A member will serve
until his or her resignation, death, or disability, or until removed by
the Sponsor. In the event of any vacancy arising by reason of the death,
disability, removal, or resignation of a member of the Committee, the
Sponsor may, but is not required to, appoint a successor to serve in his
or her place. The Committee will select a chairman and a secretary from
among its members. Members of the Committee will serve in such capacity
without compensation. The Committee will act by majority vote.
8.4 FINALITY OF ADMINISTRATIVE DECISIONS: The Administrator's interpretation
of Plan provisions, and any findings of fact, including eligibility to
participate and eligibility for benefits, are final and will not be
subject to "de novo" review unless shown to be arbitrary and capricious.
8.5 MULTIPLE ADMINISTRATORS: If there is more than one Administrator, the
Administrators may delegate specific responsibilities among themselves,
including the authority to execute documents unless the Sponsor revokes
such delegation. The Sponsor and Trustee will be notified in writing of
any such delegation of responsibilities, and the Trustee thereafter may
rely upon any documents executed by the appropriate Administrator.
8.6 COMPENSATION AND EXPENSES: The Administrator, the Committee and any party
appointed by the Administrator under Section 8.7 may receive such
compensation as agreed upon by the Sponsor, provided that any person who
already receives full-time pay from the Employer may not receive any fees
for services to the Plan as Administrator or in any other capacity. The
Sponsor will pay all "settlor" expenses (as described in DOL Advisory
Opinion 2001-01-A) incurred by the Administrator,
53
the Committee or any party appointed under Section 8.7 in the performance
of their duties. The Sponsor may, but is not required to pay, all
"non-settlor" expenses incurred by the Administrator, the Committee, or
any party appointed under Section 8.7 in the performance of their duties.
"Non-settlor" expenses incurred by the Administrator, the Committee or any
party appointed under Section 8.7 that the Sponsor elects not to pay will
be reimbursed from Trust Fund assets. Any expenses paid from the Trust
will be charged to each Adopting Employer in the ratio that each Adopting
Employer's Participants' Accounts bears to the total of all the
Participants' Accounts maintained by this Plan, or in any other reasonable
method elected by the Administrator.
8.7 APPOINTMENT OF AGENTS AND COUNSEL: The Administrator (or Committee) may
appoint such actuaries, accountants, custodians, counsel, agents,
consultants, and other persons the Administrator (or Committee) deems
necessary to the administration and operation of the Plan. The actions of
any such third parties will be subject to the limitations described in
Section 7.8 of the Plan; and no such third parties will be given any
authority or discretion concerning the management and operation of the
Plan that would cause them to become Fiduciaries of the Plan.
8.8 CORRECTING ADMINISTRATIVE ERRORS: The Administrator may take such steps as
it considers necessary and appropriate in its discretion to remedy
administrative or operational errors. Such steps may include, but will not
be limited to the following: (a) taking any action required under the
employee plans compliance resolution system of the Internal Revenue
Service, any asset management or fiduciary conduct error correction
program available through the Internal Revenue Service, United States
Department of Labor or other governmental administrative agency; (b) a
reallocation of Plan assets; (c) adjustments in amounts of future payments
to Participants, Beneficiaries or Alternate Payees; and (d) institution
and prosecution of actions to recover benefit payments made in error or on
the basis of incorrect or incomplete information.
8.9 PROMULGATING NOTICES AND PROCEDURES: The Sponsor and Administrator are
given the power and responsibility to promulgate certain written notices,
policies and/or procedures under the terms of the Plan and disseminate
same to the Participants, and the Administrator may satisfy such
responsibility by the preparation of any such notice, policy and/or
procedure in a written form which can be published and communicated to a
Participant in one or more of the following ways: (a) by distribution in
hard copy; (b) through distribution of a summary plan description or
summary of material modifications thereto which sets forth the policy or
procedure with respect to a right, benefit or feature offered under the
Plan; (c) by e-mail, either to a Participant's personal e-mail address or
his or her Employer-maintained e-mail address; and (d) by publication on a
web-site accessible by the Participant, provided the Participant is
notified of said web-site publication. Any notice, policy and/or procedure
provided through an electronic medium will only be valid if the electronic
medium which is used is reasonably designed to provide the notice, policy
and/or procedure in a manner no less understandable to the Participant
than a written document, and under such medium, at the time the notice,
policy and/or procedure is provided, the Employee may request and receive
the notice, policy and/or procedure on a written paper document at no
charge.
8.10 CLAIMS PROCEDURES: The procedures set forth in this Section will be the
sole and exclusive remedy for an Employee, Participant or Beneficiary
("Claimant") to make a claim for benefits under the Plan. These procedures
will be administered and interpreted in a manner consistent with the
requirements of ERISA ss.503 and the regulations thereunder. Any
electronic notices provided by the Administrator will comply with the
standards imposed under regulations issued by the Department of Labor. All
claims determinations made by the Administrator (and when applicable by
the Committee if one has been appointed under Section 8.3) and will be
made in accordance with the provisions of this Section and the Plan, and
will be applied consistently to similarly situated Claimants. For purposes
of this Section 8.10, if a Committee has not been appointed under Section
8.3, any reference to Committee will be considered a reference to the
Administrator.
54
(a) Written Claim: A Claimant, or the Claimant's duly authorized
representative, may file a claim for a benefit to which the Claimant
believes that he or she is entitled under the Plan. Any such claim
must be filed in writing with the Administrator.
(b) Denial Of Claim: The Administrator, in its sole and complete
discretion, will make all initial determinations as to the right of
any person to benefits. If the claim is denied in whole or in part,
the Administrator will send the Claimant a written or electronic
notice, informing the Claimant of the denial. The notice must be
written in a manner calculated to be understood by the Claimant and
must contain the following information: the specific reason(s) for
the denial; a specific reference to pertinent Plan provisions on
which the denial is based; if additional material or information is
necessary for the Claimant to perfect the claim, a description of
such material or information and an explanation of why such material
or information is necessary; and an explanation of the Plan's claim
review (i.e., appeal) procedures, the time limits applicable to such
procedures, and the Claimant's right to request arbitration if the
claim denial is upheld in whole or in part on appeal. Written or
electronic notice of the denial will be given within a reasonable
period of time (but no later than 90 days) from the date the
Administrator receives the claim, unless special circumstances
require an extension of time for processing the claim. In no event
may the extension exceed 90 days from the end of the initial 90-day
period. If an extension is necessary, prior to the expiration of the
initial 90-day period, the Administrator will send the Claimant a
written notice, indicating the special circumstances requiring an
extension and the date by which the Administrator expects to render
a decision.
(c) Request for Appeal: If the Administrator denies a claim in whole or
in part, the Claimant may elect to appeal the denial. If the
Claimant does not appeal the denial pursuant to the procedures set
forth herein, the denial will be final, binding and unappealable. A
written request for appeal must be filed by the Claimant (or the
Claimant's duly authorized representative) with the Committee within
60 days after the date on which the Claimant receives the
Administrator's notice of denial. If a request for appeal is timely
filed, the Claimant will be afforded a full and fair review of the
claim and the denial. As part of this review, the Claimant may
submit written comments, documents, records, and other information
relating to the claim, and the review will take into account all
such comments, documents, records, or other information submitted by
the Claimant, without regard to whether such information was
submitted or considered in the Administrator's initial benefit
determination. The Claimant also may obtain, free of charge and upon
request, records and other information relevant to the claim,
without regard to whether such information was relied upon by the
Administrator in making the initial benefit determination.
(d) Review Of Appeal: The Committee will determine, in its sole and
complete discretion, whether to uphold all or a portion of the
initial claim denial. If, on appeal, the Committee determines that
all or a portion of the initial denial should be upheld, the
Committee will send the Claimant a written or electronic notice
informing the Claimant of its decision to uphold all or a portion of
the initial denial, written in a manner calculated to be understood
by the Claimant and containing the following information: the
specific reason(s) for the denial; a specific reference to pertinent
Plan provisions on which the denial is based; a statement that the
Claimant is entitled to receive, upon request and free of charge,
reasonable access to and copies of all documents and other
information relevant to the claim; and an explanation of the
Claimant's right to request arbitration and the applicable time
limits for doing so. Written or electronic notice will be given
within a reasonable period of time (not later than 60 days) from the
date the Committee receives the request for appeal, unless special
circumstances require an extension of time for reviewing the claim,
but in no event may the extension exceed 60
55
days from the end of the initial 60-day period. If an extension is
necessary, prior to the expiration of the initial 60-day period, the
Committee will send the Claimant a written notice, indicating the
special circumstances requiring an extension and the date by which
the Committee expects to render a decision.
(e) Alternative Time For An Appeal To Be Decided: Notwithstanding
paragraph (d), if the Committee holds regularly scheduled meetings
on a quarterly or more frequent basis, the Committee may make its
determination of the claim on appeal at its next regularly scheduled
meeting if the Committee receives the written request for appeal
more than 30 days prior to its next regularly scheduled meeting or
at the regularly scheduled meeting immediately following the next
regularly scheduled meeting if the Committee receives the written
request for appeal within 30 days of the next regularly scheduled
meeting. If special circumstances require an extension, the decision
may be postponed to the third regularly scheduled meeting following
the Committee's receipt of the written request for appeal if, prior
to the expiration of the initial time period for review, the
Claimant is provided with written notice, indicating the special
circumstances requiring an extension and the date by which the
Committee expects to render a decision. If the extension is required
because the Claimant has not provided information that is necessary
to decide the claim, the Committee may suspend the review period
from the date on which notice of the extension is sent to the
Claimant until the date on which the Claimant responds to the
request for additional information.
(f) Right Of Arbitration: If a Claimant wishes to contest a final
decision of the Committee, the Claimant may request arbitration. If
the Claimant does not request arbitration pursuant to the procedures
set forth herein, the decision of the Committee will be final,
binding and unappealable. A written request for arbitration must be
filed by the Claimant (or the Claimant's duly authorized
representative) with the Committee within 15 days after the date on
which the Claimant receives the written decision of the Committee.
If a request for arbitration is timely filed, the Claimant and the
Committee will each name an arbitrator within 20 days after the
Committee receives the Claimant's written request for arbitration.
The two arbitrators will jointly name a third arbitrator within 15
days after their appointment. If either party fails to select an
arbitrator within the 20 day period, or if the two arbitrators fail
to select a third arbitrator within 15 days after their appointment,
then the presiding judge of the county court (or its equivalent) in
the county in which the principal office of the Sponsor is located
will appoint such other arbitrator or arbitrators. The arbitrators
will render a decision within 60 days after their appointment and
will conduct all proceedings pursuant to the laws of the state in
which the Sponsor's principal place of business is located and the
then current Rules of the American Arbitration Association governing
commercial transactions, to the extent that such rules are not
inconsistent with applicable state law. The cost of the arbitration
procedure will be borne by the losing party or, if the decision is
not clearly in favor of one party or the other, in the manner
determined by the arbitrators. The arbitration proceeding provided
for in this Section will be the sole and exclusive remedy of a
Claimant to contest decisions of the Committee under this Plan, and
the arbitrators' decision will be final and unappealable.
8.11 QUALIFIED DOMESTIC RELATIONS ORDERS: A Qualified Domestic Relations Order,
or QDRO, is 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 Plan benefit. An alternate payee is
a Spouse, former Spouse, child, or other dependent of a Participant who is
treated as a Beneficiary under the Plan as a result of the QDRO. The
Administrator may establish QDRO procedures, but in the absence of such
procedures, the Administrator will determine if a domestic relations order
is a Qualified Domestic Relations Order in accordance with the following:
56
(a) Administrator's Determination: Promptly upon receipt of a domestic
relations order, the Administrator will notify the Participant and
any alternate payee(s) named in the order of such receipt, and will
include a copy of this Section. Within a reasonable time after
receipt of the order, the Administrator will make a determination as
to whether or not the order is a Qualified Domestic Relations Order
as defined in Code ss.414(p) and will promptly notify the
Participant and any alternate payee(s) in writing of the
determination.
(b) Specific Requirements Of QDRO: In order for a domestic relations
order to be a QDRO, it must specifically state all of the following:
(1) the name and last known mailing address (if any) of the
Participant and each alternate payee covered by the order; (2) the
dollar amount or percentage of the benefit to be paid 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; and (4) the name of the plan to which the order
applies. The domestic relations order will not be deemed a QDRO if
it requires the Plan to provide any type or form of benefit, or any
option not already provided for in the Plan, or increased benefits,
or benefits in excess of the Participant's Vested Interest, or
payment of benefits to an alternate payee required to be paid to
another alternate payee under another QDRO.
(c) Disputed Orders: If there is a question as whether or not a domestic
relations order is a Qualified Domestic Relations Order, there will
be a delay in any payout to any payee including the Participant,
until the status is resolved. In such event, the Administrator will
segregate the amount that would have been payable to the alternate
payee(s) if the order had been deemed a QDRO. If the order is not
determined to be a QDRO, 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 Administrator
will pay the segregated amounts plus interest 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, then the order will only be applied on a
prospective basis. If the order is determined to be a QDRO, the
Participant and alternate payee(s) will again be notified promptly
after such determination. Once an order is deemed a QDRO, the
Administrator will pay to the alternate payee(s) all the amounts due
under the QDRO, including segregated amounts plus interest which may
have accrued during a dispute as to the order's qualification.
(d) Payment Prior To Termination Of Employment: A QDRO may provide for
the payment of benefits to an alternative payee prior to the time a
Participant has terminated employment. Further, such payment can be
made even if the affected Participant has not yet reached the
Earliest Retirement Age. For purposes of this paragraph, the term
Earliest Retirement Age means the earlier of (1) the date on which
the Participant is entitled to a distribution under this Plan, or
(2) the later of (i) the date the Participant attains age 50, or
(ii) the earliest date on which the Participant could receive
benefits under this Plan if the Participant terminated employment
with the Employer.
57
ARTICLE 9
AMENDMENT, TERMINATION AND MERGER
9.1 AMENDMENT: The Sponsor, or, if there is no Sponsor, the Trustee, will have
the right to amend the Plan at any time subject to the following
provisions:
(a) General Requirements: Amendments must be in writing and cannot (1)
increase the responsibilities of the Trustee or Administrator
without written consent; (2) deprive any Participant or Beneficiary
of Plan benefits to which he or she is entitled; (3) decrease the
amount of any Participant's Account balance except as permitted
under Code ss.412(c)(8); (4) permit any part of the Trust Fund to be
used for or diverted to purposes other than the exclusive benefit of
the Participants or their Beneficiaries except as required to pay
taxes and administration expenses, or cause or permit any portion of
the Trust Fund to revert to or become the property of the Employer;
or (5) have the effect of eliminating or restricting the ability of
a Participant or other payee to receive payment of his or her
Account balance or benefit entitlement under a particular optional
form of benefit provided under the Plan unless the provisions of
subparagraphs (1) and (2) below are satisfied:
(1) Lump Sum Requirement: The amendment provides a lump sum
distribution form that is otherwise identical to the optional
form of benefit that is restricted or eliminated. For this
purpose, a lump sum distribution form is otherwise identical
only if it is identical in all respects to the eliminated or
restricted optional form of benefit (or would be identical
except that it provides greater rights to the payee) except
with respect to the timing of payments after commencement.
(2) Effective Date: The amendment cannot apply to any distribution
with an Annuity Starting Date which is earlier than the
earlier of (A) the 90th day after a Participant has been
furnished with a summary plan description or other summary
that reflects the amendment and that satisfies the ERISA
requirements at 29 CFR 2520.104b-3 relating to a summary of
material modifications; or (B) the first day of the second
Plan Year following the Plan Year in which this amended Plan
is adopted
(b) Certain Corrective Amendments: For purposes of satisfying the
minimum coverage requirements of Code ss.410(b), the
nondiscriminatory amount requirement of regulation
ss.1.401(a)(4)-1(b)(2), or the nondiscriminatory plan amendment
requirement of regulation ss.1.401(a)(4)-1(b)(4), a corrective
amendment may retroactively increase allocations for Employees who
benefited under the Plan during the Plan Year being corrected, or
may grant allocations to Employees who did not benefit under the
Plan during the Plan Year being corrected. In addition, to satisfy
the nondiscriminatory current availability requirement of regulation
ss.1.401(a)(4)-4(b) for benefits, rights or features, a corrective
amendment may make a benefit, right or feature available to
Employees to whom it was previously not available. A corrective
amendment will not be taken into account prior to the date of its
adoption unless it satisfies the applicable requirements of
regulation ss.1.401(a)(4)-11(g)(3)(ii) through (vii), including the
requirement that, in order to be effective for the preceding Plan
Year, such amendment must be adopted by the 15th day of the 10th
month after the close of the preceding Plan Year.
9.2 TERMINATION OF PLAN BY SPONSOR: The Sponsor at any time can terminate the
Plan and Trust in whole or in part in accordance with the following
provisions:
58
(a) Termination Of Plan: The Sponsor can terminate the Plan and Trust by
filing written notice thereof with the Administrator and Trustee and
by completely discontinuing contributions to the Plan. Upon any such
termination, the Trustee will continue to administer the Trust until
distribution has been made to the Participants and other payees,
which distribution must occur as soon as administratively feasible
after the termination of the Plan, and must be made in accordance
with the provisions of Article 5 of the Plan, including Section
5.6(g) where applicable. However, the Administrator may elect not to
distribute the Accounts of Participants and other payees upon
termination of the Plan but instead to transfer the entire Trust
Fund assets and liabilities attributable to this terminated Plan to
another qualified plan maintained by the Employer or its successor.
(b) Vesting Requirement: Upon complete termination of the Plan, or upon
a complete discontinuance of contributions to the Plan, any
Participant who is affected by such termination all Participants who
have not incurred a Termination of Employment and all Participants
who have incurred a Termination of Employment but have not incurred
a five (5) year Break in Service will have a 100% Vested Interest in
his or her unpaid Participant Account. Upon partial termination of
the Plan only those Participants who have incurred a Termination of
Employment on account of the event which caused the partial
termination but have not incurred a five (5) year Break in Service
shall automatically have a 100% Vested Interest in his or her unpaid
Participant Account to the date of partial termination.
(c) Discontinuance Of Contributions Only: The Sponsor may elect at any
time to completely discontinue contributions to the Plan but
continue the Plan in operation in all other respects, in which event
the Trustee will continue to administer the Trust until eventual
full distribution of all benefits has been made to the Participants
and other payees in accordance with Article 5 after their death,
retirement, Disability or Termination of Employment. Any such
discontinuance of contributions without an additional notice of
termination from the Sponsor to the Administrator and Trustee will
not constitute a termination of the Plan.
9.3 TERMINATION OF PARTICIPATION BY ADOPTING EMPLOYER: Any Adopting Employer
may by written resolution terminate its participation in the Plan at any
time by notification to the Sponsor, the Administrator, and the Trustee.
Such Adopting Employer may thereupon request a transfer of Trust Fund
assets attributable to its Employees from this Plan to any successor
qualified retirement plan maintained by the Adopting Employer or its
successor. The Administrator may, however, refuse to make such transfer if
in its considered opinion such transfer would operate to the detriment of
any Participant, jeopardize the continued qualification of the Plan, or if
such transfer does not comply with any requirements of the Internal
Revenue Service. If no such transfer is made, the provisions in the
definition of Adopting Employer in Article 1 will apply with respect to
the payment of benefits for Employees of such Adopting Employer.
9.4 MERGER OR CONSOLIDATION: This Plan and Trust may not be merged or
consolidated with, nor may any of its assets or liabilities be transferred
to, any other plan, unless the benefits payable to each Participant if the
Plan was terminated immediately after such action would be equal to or
greater than the benefits to which such Participant would have been
entitled if this Plan had been terminated immediately before such action.
59
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 NO CONTRACT OF EMPLOYMENT: Except as otherwise provided by law, neither
the establishment of this Plan, any modification hereto, the creation of
any fund or account, nor the payment of any benefits, will be construed as
giving any Participant or other person any legal or equitable rights
against the Employer, any officer or Employee thereof, or the Trustee,
except as herein provided. Further, under no circumstances will the terms
of employment of any Participant be modified or otherwise affected by this
Plan.
10.2 TITLE TO ASSETS: No Participant or Beneficiary will have any right to, or
any interest in, any assets of the Trust upon separation from service with
the Employer, Affiliated Employer, or Adopting Employer, except as
otherwise provided by the terms of the Plan.
10.3 QUALIFIED MILITARY SERVICE: Notwithstanding any provision of this Plan to
the contrary, effective December 12, 1994, contributions, benefits and
service credit with respect to qualified military service will be provided
in accordance with Code ss.414(u).
10.4 FIDUCIARIES AND BONDING: The Fiduciaries of this Plan will have only those
duties which are specifically given to the Fiduciaries under the terms of
this Plan. In addition, every Fiduciary other than a bank, an insurance
company, or a Fiduciary of an Employer which has no common-law employees,
will be bonded in an amount not less than 10% of the amount of funds under
such Fiduciary's supervision, but such bond will not be less than $1,000
or more than $500,000. The bond will provide protection to the Plan
against any loss for acts of fraud or dishonesty by a Fiduciary acting
alone or in concert with others. The cost of such bond will be an expense
of either the Employer or the Trust, at the election of the Employer.
10.5 SEVERABILITY OF PROVISIONS: If any Plan provision is held invalid or
unenforceable, such invalidity or unenforceability will not affect any
other provision of this Plan, and this Plan will be construed and enforced
as if such provision had not been included.
10.6 GENDER AND NUMBER: Words used in the masculine gender will be construed as
though they were also used in the feminine or neuter gender where
applicable, and words used in the singular form will be construed as
though they were also used in the plural form where applicable.
10.7 HEADINGS AND SUBHEADINGS: Headings and subheadings are inserted for
convenience of reference. They constitute no part of this Plan and are not
to be considered in its construction.
10.8 LEGAL ACTION: In any claim, suit or proceeding concerning the Plan and/or
Trust which is brought against the Trustee or the Administrator, this Plan
and Trust will be construed and enforced according to the laws of the
state in which the Employer maintains its principal place of business, to
the extent that is not preempted by the provisions of ERISA. Furthermore,
unless otherwise prohibited by law, either the Employer or the Trust, in
the sole discretion of the Employer, will reimburse the Trustee and/or the
Administrator for all costs, attorneys fees and other expenses associated
with any such claim, suit or proceeding.
10.9 QUALIFIED PLAN STATUS: This Plan and the related Trust Agreement are
intended to be a qualified retirement plan under the provisions of Code
ss.401(a) and ss.501(a).
60
10.10 MAILING OF NOTICES TO ADMINISTRATOR, EMPLOYER OR TRUSTEE: Notices,
documents or forms required to be given to or filed with the
Administrator, the Employer or the Committee will be either hand delivered
or mailed by first class mail, postage prepaid, to the Committee or the
Employer, at the Employer's principal place of business. Any notices,
documents or forms required to be given to or filed with the Trustee will
be either be hand delivered or mailed by first class mail, postage
prepaid, to the Trustee at its principal place of business.
10.11 NO DUPLICATION OF BENEFITS: There will be no duplication of benefits under
the Plan because of employment by more than one participating employer.
10.12 PARTICIPANT NOTICES AND WAIVERS OF NOTICES: Whenever written notice is
required to be given under the terms of this Plan, such notice will be
deemed to be given on the date that such written notice is either hand
delivered to the recipient or deposited at a United States Postal Service
Station, first class mail, postage paid. Notice may be waived by any party
otherwise entitled to receive written notice concerning any matter under
the terms of this Plan.
10.13 EVIDENCE FURNISHED CONCLUSIVE: Anyone required to give evidence under the
terms of the Plan may do so by certificate, affidavit, document or other
information which the person to act in reliance may consider pertinent,
reliable and genuine, and to have been signed, made or presented by the
proper party or parties. The Fiduciaries under the Plan will be fully
protected in acting and relying upon any evidence described under this
Section.
10.14 RELEASE OF CLAIMS: Any payment to any Participant or Beneficiary, his or
her legal representative, or to any guardian or committee appointed for
such Participant or Beneficiary, will, to the extent thereof, be in full
satisfaction of all claims hereunder against the Administrator and the
Trustee, either of whom may require such Participant, legal
representative, Beneficiary, guardian or committee, as a condition
precedent to such payment, to execute a receipt and release thereof in
such form as determined by the Administrator or the Trustee.
10.15 MULTIPLE COPIES OF PLAN AND/OR TRUST: This Plan and the related Trust
Agreement may be executed in any number of counterparts, each of which
will be deemed an original, but all of which will constitute one and the
same Agreement or Trust Agreement, as the case may be, and will be binding
on the respective successors and assigns of the Employer and all other
parties.
10.16 LIMITATION OF LIABILITY AND INDEMNIFICATION: In addition to and in
furtherance of any other limitations provided in the Plan, and to the
extent permitted by applicable law, the Employer will indemnify and hold
harmless its board of directors (collectively and individually), if any,
the Administrative/Advisory Committee (collectively and individually), if
any, and its officers, Employees, and agents against and with respect to
any and all expenses, losses, liabilities, costs, and claims, including
legal fees to defend against such liabilities and claims, arising out of
their good-faith discharge of responsibilities under or incident to the
Plan, excepting only expenses and liabilities resulting from willful
misconduct. This indemnity will not preclude such further indemnities as
may be available under insurance purchased by the Employer or as may be
provided by the Employer under any by-law, agreement, vote of shareholders
or disinterested directors, or otherwise, as such indemnities are
permitted under state law. Payments with respect to any indemnity and
payment of expenses or fees under this Section will be made only from
assets of the Employer, and will not be made directly or indirectly from
assets of the Trust Fund.
61
IN WITNESS WHEREOF, this Plan and Trust have been executed by the
Employer and the Trustees as of the day, month and year set forth on page 1 of
this Agreement.
FREQUENCY ELECTRONICS, INC.
By
TRUSTEES
/s/ Marvin Meirs
---------------------------
Marvin Meirs
/s/ Markus Hechler
---------------------------
Markus Hechler
/s/ Robert Klomp
---------------------------
Robert Klomp
62
Exhibit 5.1
[Letterhead of Cadwalader, Wickershan & Taft LLP]
February 27, 2007
Frequency Electronics, Inc.
55 Charles Lindbergh Blvd.
Mitchel Field, NY 11553
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as special counsel to Frequency Electronics, Inc., a
Delaware corporation (the "Company") in connection with the preparation and
filing by the Company with the Securities and Exchange Commission (the
"Commission") of a Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act").
The Registration Statement relates to the registration of up to 1,159,635 shares
of common stock, par value $1.00 per share, of the Company (the "Shares") to be
issued and sold under the 2001 Incentive Stock Option Plan, the 2005 Stock Award
Plan of Frequency Electronics, Inc. and the Frequency Electronics, Inc. Employee
Stock Ownership Plan (collectively, the "Plans").
In rendering the opinion set forth below, we have examined and relied upon
the originals, copies or specimens, certified or otherwise identified to our
satisfaction, of the Registration Statement, the Plans and such certificates,
corporate and public records, agreements and instruments and other documents,
including, among other things, the documents delivered on the date hereof, as we
have deemed appropriate as a basis for the opinion expressed below. In such
examination we have assumed the genuineness of all signatures, the authenticity
of all documents, agreements and instruments submitted to us as originals, the
conformity to original documents, agreements and instruments of all documents,
agreements and instruments submitted to us as copies or specimens, the
authenticity of the originals of such documents, agreements and instruments
submitted to us as copies or specimens, the conformity of the text of each
document filed with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval System to the printed document reviewed by us,
and the accuracy of the matters set forth in the documents, agreements and
instruments we reviewed. As to matters of fact relevant to the opinion expressed
herein, we have relied upon, and assumed the accuracy of, the statements and
representations of officers and other representatives of the Company and we have
relied upon certificates and oral or written statements and other information
obtained from the Company and public officials. Except as expressly set forth
herein, we have not undertaken any independent investigation (including, without
limitation, conducting any review, search or investigation of any public files,
records or dockets) to determine the existence or absence of the facts that are
material to our opinion, and no inference as to our knowledge concerning such
facts should be drawn from our reliance on the representations of the Company
and others in connection with the preparation and delivery of this letter.
We express no opinion concerning the laws of any jurisdiction other than
the laws of the State of New York and the General Corporation Law of the State
of Delaware. While we are not licensed to practice law in the State of Delaware,
we have reviewed applicable provisions of the Delaware General Corporation Law
as we have deemed appropriate in connection with the opinion expressed herein.
Except as described, we have neither examined nor do we express any opinion with
respect to Delaware law.
Based upon and subject to the foregoing, we are of the opinion that the
Shares, when issued and delivered by the Company pursuant to the Plans, will be
validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In doing so, we do not admit that we are in the category
of persons whose consent is required under Section 7 of the Securities Act or
the rules and regulations of the Commission promulgated thereunder. Without our
prior written consent, this letter is not to be relied upon, used, circulated,
quoted or otherwise referred to by, or assigned to, any other person (including
any person that acquires any Shares from you or that seeks to assert your rights
in respect of this letter (other than your successor in interest by means of
merger, consolidation, transfer of a business or other similar transaction)) or
for any other purpose. In addition, we disclaim any obligation to update this
letter for changes in fact or law or otherwise.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft LLP
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
We have issued our report dated July 10, 2006 accompanying the consolidated
financial statements of Frequency Electronics, Inc. and Subsidiaries appearing
in the 2006 Annual Report on Form 10-K for the year ended April 30, 2006, which
is incorporated by reference in this Registration Statement on Form S-8. We
consent to the incorporation by reference in the Registration Statement of the
aforementioned report and to the use of our name as it appears under the caption
"Experts".
/s/ Holtz Rubenstein Reminick LLP
Holtz Rubenstein Reminick LLP
Melville, New York
February 27, 2007
Exhibit 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------- We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated July 6, 2004, except for Note 10 as to which the date is September 28, 2004, relating to the consolidated financial statements and financial statement schedule for the year ended April 30, 2004, which appears in the Frequency Electronics, Inc. and Subsidiaries' Annual Report on Form 10K for the year ended April 30, 2006. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Melville, New York February 27, 2007