<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 1999
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to___________________________
Commission file number 0-5374
VARLEN CORPORATION
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
DELAWARE 13-2651100
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
55 Shuman Boulevard, P.O. Box 3089
Naperville, Illinois 60566-7089
- --------------------------------------------------------------------------------
(Address of principal executive offices) Zip Code)
Registrant's telephone number including area code (630) 420-0400
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
At June 1, 1999, approximately 17,020,279 shares, par value $.10 per share, of
common stock of the Registrant were outstanding.
<PAGE>
PART I. FINANCIAL STATEMENTS
VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Thousands of Dollars)
May 1, January 31,
1999 1999
-------- --------
Assets
Cash and cash equivalents $ 18,485 $ 11,618
Accounts receivable, less allowance for doubtful 92,814 87,974
accounts of $2,659 and $1,946
Inventories:
Raw materials 18,993 21,665
Work in process 26,650 24,444
Finished goods 14,480 14,516
-------- --------
60,123 60,625
-------- --------
Deferred and refundable income taxes 8,863 8,884
Other current assets 8,625 9,302
-------- --------
Total current assets 188,910 178,403
-------- --------
Property, plant, and equipment 265,701 255,223
Less: accumulated depreciation 114,986 110,517
-------- --------
150,715 144,706
-------- --------
Goodwill and other intangible assets, net 146,306 149,338
Investments and other assets 2,156 3,077
-------- --------
$488,087 $475,524
======== ========
Liabilities and Stockholders' Equity
Current maturities of long-term debt $ 238 $ 260
Accounts payable 53,469 50,521
Accrued expenses 40,738 46,394
Income taxes payable 12,655 6,434
-------- --------
Total current liabilities 107,100 103,609
-------- --------
Long-term debt 91,599 94,643
Deferred income taxes 15,256 15,153
Other liabilities 21,318 21,199
Common stock (note 5) 1,702 1,699
Other stockholders' equity (note 5) 251,112 239,221
-------- --------
$488,087 $475,524
======== ========
See Notes to Condensed Consolidated Financial Statements
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VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
(In Thousands, Except Per Share Amounts)
Three Months Ended
---------------------
May 1, May 2,
1999 1998
-------- --------
Net sales $193,277 $164,615
Cost of sales 142,709 121,272
-------- --------
Gross profit 50,568 43,343
Selling, general and administrative expenses 24,355 22,276
Interest expense, net 1,389 1,706
-------- --------
Earnings before income taxes 24,824 19,361
Income taxes 10,302 8,325
-------- --------
Net earnings $ 14,522 $ 11,036
======== ========
Earnings per share (notes 5 and 6):
Basic $ 0.85 $ 0.66
======== ========
Diluted $ 0.84 $ 0.63
======== ========
Weighted average number of shares
outstanding - basic (notes 5 and 6) 17,000 16,708
======== ========
Weighted average number of shares
outstanding - diluted (notes 5 and 6) 17,245 17,375
======== ========
Dividends per common share (note 5) $ 0.05 $ 0.05
======== ========
See Notes to Condensed Consolidated Financial Statements
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VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Thousands of Dollars)
Three Months Ended
--------------------
May 1, May 2,
Increase (Decrease) in Cash 1999 1998
-------- --------
Cash flows from operating activities:
Net earnings $ 14,522 $ 11,036
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 5,144 5,067
Amortization 1,123 1,342
Deferred income taxes 318 (161)
Change in assets and liabilities net of effects
from purchased and sold businesses:
Accounts receivable, net (5,677) (11,035)
Inventories (438) 990
Refundable income taxes 3 (50)
Other current assets 635 (543)
Accounts payable 3,380 10,894
Accrued expenses (4,069) (6,056)
Income taxes payable 6,244 7,351
Other noncurrent assets 2,069 (98)
Other noncurrent liabilities 216 742
-------- --------
Total adjustments 8,948 8,443
-------- --------
Net cash provided by operating activities 23,470 19,479
-------- --------
Cash flows from investing activities:
Fixed asset expenditures (12,231) (6,246)
Cost of purchased business, net of cash acquired 0 0
Purchases of long-term investments (725) (500)
Disposals and other changes in property,
plant and equipment 176 212
-------- --------
Net cash used in investing activities (12,780) (6,534)
-------- --------
Cash flows from financing activities:
Proceeds from debt 0 552
Payments of debt (3,056) (2,034)
Issuance of common stock under option plans 285 368
Cash received on stock subscriptions 0 0
Cash dividends paid (851) (807)
-------- --------
Net cash used in financing activities (3,622) (1,921)
-------- --------
Effect of exchange rate changes on cash (201) (60)
-------- --------
Net increase in cash and cash equivalents 6,867 10,964
Cash and cash equivalents at beginning of year 11,618 6,206
-------- --------
Cash and cash equivalents at end of period $ 18,485 $ 17,170
======== ========
See Notes to Condensed Consolidated Financial Statements
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. The unaudited condensed consolidated financial statements of Varlen
Corporation (the "Company") included herein have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. In the opinion of the Company, all adjustments which are
considered necessary for a fair presentation of the results for the
interim periods presented and the balance sheet at May 1, 1999 have been
made. These financial statements, which are condensed and do not include
all disclosures included in annual financial statements, should be read in
conjunction with the consolidated financial statements and notes thereto
incorporated into the Company's latest Annual Report on Form 10-K.
2. Supplemental Cash Flow Information (in thousands):
Three Months Ended
------------------
May 1, May 2,
1999 1998
-------- --------
Cash paid during the year-to-date
period for:
Interest $ 970 $2,248
====== ======
Income taxes (net) $3,189 $1,410
====== ======
3. Business Segment Information (in thousands):
Quarter Ended
------------------
May 1, May 2,
1999 1998
-------- --------
Net Sales:
Vehicular products $106,909 $ 86,337
Railroad products 77,428 68,449
Petroleum analyzers 8,940 9,829
-------- --------
$193,277 $164,615
-------- --------
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Operating profits:
Vehicular products $16,655 $13,356
Railroad products 11,000 8,821
Petroleum analyzers 793 1,322
-------- --------
28,448 23,499
Corporate (2,235) (2,432)
Net interest expense (1,389) (1,706)
-------- --------
Earnings before income taxes $24,824 $19,361
======== ========
4. Acquisitions:
In January 1999, the Company purchased for cash Dynamic Corporation, a
privately held, leading manufacturer of dynamic braking components for
locomotives. The acquisition has been accounted for by the purchase method
of accounting with the excess of the purchase price over the fair value of
net assets amortized over 40 years. The operating results of the business
have been included in the accompanying condensed consolidated results of
operations from its acquisition date.
5. Stockholders' Equity:
On September 28, 1998, the Company's Board of Directors declared a
five-for-four stock split effected in the form of a stock dividend payable
on November 17, 1998, to stockholders of record on October 30, 1998. The
dividend resulted in the issuance of approximately 3.4 million new shares
of Common Stock. All share and per share amounts reflect this stock
dividend.
At the beginning of fiscal 1998, the Company adopted the Financial
Accounting Standards Board Standard No. 130, "Reporting Comprehensive
Income." This Standard expands current disclosures and had no impact on
the Company's reported financial position, results of operations or cash
flows. Comprehensive income for the first quarter is comprised of net
earnings adjusted for unrealized currency translation losses.
Comprehensive income for the three months ended May 1, 1999 and May 2,
1998 was $12,414 and $11,033, respectively.
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6. Computation of Earnings Per Share
Three Months Ended
--------------------
May 1, May 2,
1999 1998
-------- --------
Net earnings $ 14,522 $ 11,036
======== ========
Average shares outstanding - basic 17,000 16,708
Diluted effect of stock options 245 667
-------- --------
Average shares outstanding - diluted 17,245 17,375
======== ========
Basic earnings per share $ 0.85 $ 0.66
======== ========
Diluted earnings per share $ 0.84 $ 0.63
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7. Stock Option and Stock Appreciation Rights
Since January 31, 1999, the Compensation Committee of the Board of
Directors of the Company granted 400 stock options at an exercise price of
$21.38 per option, 174,350 stock options at an exercise price of $22.13
per option and 65,000 stock appreciation rights at a price of $22.13 per
right.
8. New Accounting Standard:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("Statement") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This Statement requires
that all derivative instruments be recognized as either assets or
liabilities in the balance sheet and that derivative instruments be
measured at fair value. This statement also requires changes in the fair
value of derivatives to be recorded each period in current earnings or
comprehensive income, depending on the intended use of the derivatives.
This Statement, subject to the outcome of a current Exposure Draft
regarding the effective date of this Statement, is to be effective for the
Company's first quarter 2001 reporting. The impact of the adoption of this
Statement has not been fully determined.
9. Subsequent Event
On May 24, 1999, Amsted Industries Incorporated, a privately-owned
diversified manufacturer of products for the rail, construction, and
general industrial markets, commenced an unsolicited tender offer for all
of the Company's outstanding Common Stock at $35 per share (the "Amsted
Offer"). The Company has retained Morgan Stanley & Co. Incorporated as its
financial advisor, and Kirkland & Ellis and Richards Layton & Finger as
its legal counsel, to assist the Board of Directors in evaluating the
Amsted Offer.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED MAY 1, 1999
Overview
The Company designs, manufactures and markets products used in the manufacture
of transportation equipment (Railroad Products and Vehicular Products segments)
and petroleum analyzers (Petroleum Analyzers segment). Previously the Company
reported its Railroad Products and Vehicular Products segments as a single
segment named Transportation Products. The demand for the Company's products is
affected by domestic as well as international economic conditions. The Company's
manufacturing operations have a significant fixed cost component. Accordingly,
during periods of changing product demand, the profitability of many of the
Company's operations may change proportionately more than revenues of such
operations.
Results of Operations
The Company's sales in the three months ended May 1, 1999, were $193.3 million,
up $28.7 million or 17.4% from sales of $164.6 million in 1998. Sales increased
in both the vehicular products and railroad products businesses as a result of
increased demand, broader product offerings, and for the railroad products
segment, also as a result of an acquisition. The petroleum analyzer segment
experienced a decline in revenues during this period.
Net earnings for the first three months of 1999 increased 31.6% to $14.5 million
from $11.0 million in the first quarter of 1998. Earnings were $.84 per share on
a diluted basis for the first quarter of 1999 compared to $.63 per share in
1998. For the business segments, operating profit followed the trend in revenues
with year-to-year increases in the vehicular products and railroad products
segments along with a decline in the petroleum analyzer segment.
Railroad products revenues increased 13.1% to $77.4 million in the first quarter
of 1999, as compared to $68.4 million in the comparable 1998 period. The revenue
increase resulted primarily from strong domestic industry demand for railcars
and locomotives and also contribution from an acquisition completed in late
1998. Operating profit was $11.0 million (14.2% of segment sales) for the first
three months in 1999 compared to $8.8 million (12.9% of segment sales) during
1998's first quarter. Operating profit increased proportionally more than sales
primarily due to cost reduction efforts, greater facility throughput, and a
favorable mix of products sold. The effects of foreign currency translation were
not significant in this or any other business segment.
First quarter 1999 vehicular products revenues increased 23.8% to $106.9 million
compared to $86.3 million in the first quarter of 1998. Increased revenues
resulted from strong demand for both heavy-duty trucks and light trucks,
additional product content at existing customers, and
<PAGE>
new customers. Demand for the Company's products for use on both light vehicles
and heavy-duty vehicles exceeded industry demand. For the 1999 period, operating
profit was $16.7 million (15.6% of segment sales) compared to $13.4 million
(15.5% of segment sales) in the prior year. Operating profit increased
proportionately to revenues as cost reduction efforts and greater facility
throughput offset lower margins on selected components.
Sales in the petroleum analyzers segment for 1999 first quarter declined 9.0% to
$8.9 million compared to $9.8 million in the comparable 1998 period. Order
levels continued to be impacted by lower crude oil demand, the soft Asian
markets, and several industry mergers that have caused customers to defer
capital spending. Operating profit of $.8 million (8.9% of segment sales) in the
1999 period declined from the previous year's $1.3 million (13.5% of segment
sales) due to the lower sales volumes.
Consolidated gross margin was 26.2% in the first quarter of 1999 compared to
26.3% in 1998. Gross margins declined slightly in the vehicular products and
petroleum analyzer segments but increased in the railroad products segment. In
the vehicular products segment, the decline resulted from a higher percentage of
heavy-truck component sales made to customers on a "pass through" or low margin
basis partially offset by an increase in higher margin automotive products
sales. For railroad products, the increase was the result of improved facility
throughput, cost reductions, and the positive effect of a late-1998 plant
consolidation.
Selling, general and administrative expenses in the first three months of 1999
were $24.4 million (12.6% of sales) compared to $22.3 million (13.5% of sales)
in same 1998 period. The increase in the 1999 expenditure amount was primarily
due to higher expenses to support significantly increased revenues. As a percent
of sales, selling, general and administrative expenses declined in the vehicular
products and railroad products segments to provide operating profit leverage
from higher sales. In the petroleum analyzer segment, selling, general, and
administrative expenses were unchanged from the prior year but increased as a
percent of sales due to the lower revenues.
Gross interest expense for the first quarter of 1999 was $1.5 million compared
to $2.0 million for the prior year's period. This resulted from a combination of
lower outstanding average debt and lower average rates in 1999 compared to 1998.
Interest income declined in the 1999 period due to lower temporary investments
compared to the prior year's period.
Income taxes were provided at an effective rate of 41.5% in the 1999 quarter
compared to 43.0% in the comparable 1998 period. The higher than statutory
federal rate reflects non-deductible goodwill amortization, higher taxes on
foreign operations, and state income taxes.
Capital Resources and Liquidity
During the three-month period ended May 1, 1999, the Company generated $32.5
million of cash flow defined as earnings before interest, taxes, depreciation
and amortization ("EBITDA"). As of May 1, 1999, the Company's working capital
was $81.8 million, its total assets were $488.1 million, its total debt was
$91.8 million and stockholders' equity was $252.8 million.
<PAGE>
Investing activities during the three-month period ended May 1, 1999 included
capital expenditures of $12.2 million. These capital expenditures were primarily
for machinery and equipment to support new products and to improve productivity
and efficiency. At May 1, 1999, the Company had $20.7 million of non-cancelable
commitments for the acquisition of capital equipment. To support its investing
activities, the Company has a term loan and revolving credit agreement that was
entered into in 1996 and expires on July 19, 2002. The term loan portion of this
facility ($87 million) was used to finance a large acquisition in 1996. The $80
million revolving credit facility will be used by the Company as the principal
source of acquisition funding. At May 1, 1999, the Company had no borrowings
outstanding under this portion of the facility. The percentage of debt to total
capitalization at May 1, 1999, was 26.6% down from 28.3% at January 31, 1999.
The Company believes that internally generated funds will be sufficient to
satisfy its anticipated working capital needs, capital expenditures and
scheduled debt repayments.
Year 2000
General: The Year 2000 problem concerns the inability of information systems or
embedded computer chips to properly recognize and process date-sensitive
information beginning January 1, 2000. The Company's senior management
recognizes the importance of the Year 2000 issue and has given it a high
priority. Since the Company operates its businesses in a decentralized manner,
each business unit has been required to develop a Year 2000 plan to become fully
compliant. The Company's approach to conduct its Year 2000 project includes the
key steps of planning, assessment, remediation, implementation, testing, and
contingency planning. In addition, the Company has utilized its internal audit
resources to monitor the progress of the Year 2000 project. Overall, the Company
believes that the project is proceeding on schedule and that all appropriate
actions have been or will be taken to maintain business continuity.
Readiness: The Company's Year 2000 project has focused on eight risk areas as
noted in the table below:
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Risk Areas Technologies / Systems
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Business Computer Systems Financial, human resource, purchasing,
engineering, manufacturing, sales and marketing
systems
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Manufacturing, Warehousing, Manufacturing execution systems, shop floor
Servicing Equipment controls (PLC's, CNC/NC, robots, assembly line
systems, cell controllers)
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Technical Infrastructure Workstations, mainframes, servers, operating
systems, voice, data, video (local & long
distance, WAN's, LAN's)
- --------------------------------------------------------------------------------
End-User Computing Personal computers
- --------------------------------------------------------------------------------
Customers, Agents, Systems which interface to other customers
Suppliers, Service Providers including the after-market buyers and other
OEM's; EDI interfaces
- --------------------------------------------------------------------------------
<PAGE>
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Environmental Operations Fire, security, electrical power control,
emission and waste controls, automatic lighting
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Dedicated R&D Test CAD/CAE/CAM systems, third party analytical
Facilities systems for engineering; research and
development technologies, product testing
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The Organization's Products Computer hardware and software utilized in the
organization's products
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Within these risk areas, the Company's business units are currently at varying
stages of readiness and are primarily working through the implementation,
testing, and contingency planning stages. Business systems are being updated
through a combination of approaches including modification, version upgrading,
and replacement. Other equipment with embedded chips or processors are being
evaluated with the assistance of the equipment manufacturers. Those systems and
processes considered most critical to maintaining business continuity are being
given priority. The Company believes that its Year 2000 project is currently
approximately 92% complete with each business unit at 65% or greater. The
business units will be completing their respective projects at various dates
with the latest slated for October 1999.
Another component of the Year 2000 project is the readiness of key third parties
that conduct business with the Company. Reasonable efforts have been made to
assess their readiness through questionnaires, interviews and other means. The
Company believes that it has completed 93% of its third party assessment and
evaluation process.
Costs: It is currently estimated that the total cost of the Company's Year 2000
compliance project will approximate $2,000,000 (cumulative over several years)
and will be funded with cash flows from operations. Of this amount, the Company
expects to spend approximately $660,000 from May 1, 1999 through the end of the
project. These cost amounts include certain hardware and software costs
associated with the replacement of systems that will be capitalized. In total,
these costs are not expected to differ substantially from the normal costs
typically incurred for system development, enhancement and implementation. While
some external assistance has been utilized throughout this project, the work has
primarily been performed using internal resources.
Risk Assessment / Contingency Planning: At this time, the Company believes its
most reasonably likely worst case scenario would include (i) problems with
delivery of materials, components, or services by a key material vendor or
service provider, and (ii) the failure of infrastructure services provided by
government agencies and other third parties (e.g. electricity, phone,
transportation, Internet services, etc.). As noted above, the Company is
evaluating the Year 2000 compliance status of its key third party vendors to
identify potential risks for contingency planning purposes. As of this date,
certain business units of the Company have begun to prepare contingency plans
and the Company anticipates that the contingency planning process will continue
throughout 1999.
The estimates and conclusions of this Year 2000 discussion contain
forward-looking statements and are based on management's best estimates of
future events. Risks to completing the project include the ability to discover
and correct Year 2000 problems, the continued availability of
<PAGE>
certain internal and external resources, and the ability of suppliers and
customers to bring their systems into compliance. These and other unforeseen
factors could have a material adverse effect on results of operations or the
Company's financial condition.
Other Matters
The Company utilizes derivatives from time to time to mitigate both interest
rate risk and foreign currency risk. Derivatives are not used for speculative
purposes. The Company's derivatives at May 1, 1999, consist solely of interest
rate swap agreements which fix the interest rate on $20 million of its floating
rate term loan. In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which revises standards on
accounting for derivative instruments and hedging transactions. This Statement,
subject to the outcome of a current Exposure Draft regarding the effective date
of this Statement, is to be effective beginning in the Company's 2001 fiscal
year. The impact of the adoption of SFAS No. 133 has not been fully determined.
<PAGE>
PART II - OTHER INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk exposure at May 1, 1999 is consistent with the types
of market risk and amount of exposure presented in its 1998 Annual Report on
Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders on May 26, 1999, in which 17,010,934
shares were eligible to be voted, the stockholders voted to elect the board of
directors. The results of the voting were as follows:
Board of Directors:
For Against Withheld Abstain
--- ------- -------- -------
Ernest H. Lorch 15,851,852 -- 68,390 --
Richard L. Wellek 15,718,873 -- 201,369 --
Raymond A. Jean 15,851,852 -- 68,390 --
L. William Miles 15,851,852 -- 68,390 --
Greg A. Rosenbaum 15,851,852 -- 68,390 --
Joseph J. Ross 15,851,852 -- 68,390 --
Theodore A. Ruppert 15,851,852 -- 68,390 --
Item 5. Other Information
On May 24, 1999, Amsted Industries Incorporated, a privately-owned diversified
manufacturer of products for the rail, construction, and general industrial
markets, commended an unsolicited tender offer for all of the Company's
outstanding Common Stock at $35 per share (the "Amsted Offer"). The Company has
retained Morgan Stanley & Co. Incorporated as its financial advisor, and
Kirkland & Ellis and Richards Layton & Finger as its legal counsel, to assist
the Board of Directors in evaluating the Amsted Offer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10(a) Varlen Corporation Profit Sharing and Retirement
Savings Plan as Amended May 1, 1999
Exhibit 10(b) Varlen Corporation 1989 Incentive Stock Option Plan as
Amended May 14, 1999
Exhibit 10(c) Varlen Corporation Excess Benefits Plan as Amended and
Restated May 14, 1999
Exhibit 10(d) Varlen Corporation Supplemental Executive Retirement
Plan as Amended and Restated May 14, 1999
<PAGE>
Exhibit 10(e) Varlen Corporation 1993 Incentive Stock Option Plan as
Amended May 14, 1999
Exhibit 10(f) Varlen Corporation 1998 Contingent Stock Award Plan as
Amended May 14, 1999
Exhibit 10(g) Varlen Corporation 1998 Long-Term Equity Incentive
Plan as Amended May 14, 1999
Exhibit 10(h) William Rotenberry Employment Agreement Dated November
9, 1998
Exhibit 10(i) Raymond Jean Change in Control Agreement Dated April
8, 1999
Exhibit 10(j) Raymond Jean Amendment of Change in Control Agreement
Dated May 14, 1999
Exhibit 10(k) Richard Nunemaker Change in Control Agreement Dated
May 14, 1999
Exhibit 10(l) George Hoffman Change in Control Agreement Dated May
14, 1999
Exhibit 10(m) Vicki Casmere Change in Control Agreement Dated May
14, 1999
Exhibit 10(n) Raymond Jean SERP Plan Agreement Dated April 8, 1999
Exhibit 10(o) Raymond Jean SERP Plan Gross-Up Letter Dated May 14,
1999
Exhibit 10(p) Richard Nunemaker SERP Plan Amendment Dated May 14,
1999
Exhibit 10(q) Richard Nunemaker SERP Plan Gross-Up Letter Dated May
14, 1999
Exhibit 10(r) Richard Wellek Amendment to Consulting Agreement Dated
May 14, 1999
Exhibit 10(s) Raymond Jean Consent Dated May 14, 1999
Exhibit 10(t) Richard Nunemaker Consent Dated May 14, 1999
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
Safe Harbor Provision
This Quarterly Report contains outlook and other forward-looking statements
which are not historical facts. These forward-looking statements are based upon
certain assumptions about a number of important factors. While the Company
believes that its assumptions are reasonable, it cautions that there are
inherent difficulties in predicting these factors, that they are subject to
change at any time and that any such change could cause actual events and the
Company's actual results to differ materially from those predicted or projected
in its forward-looking statements. Among the factors that could cause actual
results to differ materially are: the growth and size of the markets in which
the Company operates; the demand for the products of the Company and those that
incorporate Company products and other market acceptance risks; the presence in
the Company's market of competitors with greater financial resources, and the
impact of competitive products and pricing; actual product purchases under
existing purchase agreements and the loss of any significant customers; general
market conditions; the ability of the Company to develop new products; capacity
and supply constraints or difficulties; the ability of the Company to maintain
and improve the productivity and efficiency of operations and reduce costs;
availability of resources; litigation results; the results of the Company's
financing efforts; the effect of the Company's accounting policies; and the
effects of general economic, trade, legal, regulatory, social and economic
conditions. In addition, from time to time the Company may engage in certain
extraordinary transactions, such as a significant acquisition or divestiture,
which could also cause actual events and the Company's actual results to differ
materially from those predicted or projected in its forward-looking statements.
Other risk factors may be detailed from time to time in the Company's Securities
and Exchange Commission filings. The Company assumes no obligation to update its
forward-looking statements or advise of changes in the assumptions and factors
on which they are based.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Varlen Corporation
(Registrant)
June 4, 1999 By: /s/ Richard A. Nunemaker
---------------------------------
Richard A. Nunemaker
Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No.
- ----------- --------
Exhibit 10(a) Varlen Corporation Profit Sharing and 19
Retirement Savings Plan as Amended May 1, 1999
Exhibit 10(b) Varlen Corporation 1989 Incentive Stock Option 118
Plan as Amended May 14, 1999
Exhibit 10(c) Varlen Corporation Excess Benefits Plan as 131
Amended and Restated May 14, 1999
Exhibit 10(d) Varlen Corporation Supplemental Executive 153
Retirement Plan as Amended and Restated May
14, 1999
Exhibit 10(e) Varlen Corporation 1993 Incentive Stock Option 182
Plan as Amended May 14, 1999
Exhibit 10(f) Varlen Corporation 1998 Contingent Stock Award 190
Plan as Amended May 14, 1999
Exhibit 10(g) Varlen Corporation 1998 Long-Term Equity 195
Incentive Plan as Amended May 14, 1999
Exhibit 10(h) William Rotenberry Employment Agreement Dated 211
November 9, 1998
Exhibit 10(i) Raymond Jean Change in Control Agreement Dated 213
April 8, 1999
Exhibit 10(j) Raymond Jean Amendment of Change in Control 222
Agreement Dated May 14, 1999
Exhibit 10(k) Richard Nunemaker Change in Control Agreement 224
Dated May 14, 1999
Exhibit 10(l) George Hoffman Change in Control Agreement 233
Dated May 14, 1999
Exhibit 10(m) Vicki Casmere Change in Control Agreement Dated 242
May 14, 1999
Exhibit 10(n) Raymond Jean SERP Plan Agreement Dated April 8, 251
1999
Exhibit 10(o) Raymond Jean SERP Plan Gross-Up Letter Dated 253
May 14, 1999
Exhibit 10(p) Richard Nunemaker SERP Plan Amendment Dated May 255
14, 1999
Exhibit 10(q) Richard Nunemaker SERP Plan Gross-Up Letter 257
Dated May 14, 1999
<PAGE>
Exhibit No. Page No.
- ----------- --------
Exhibit 10(r) Richard Wellek Amendment to Consulting 259
Agreement Dated May 14, 1999
Exhibit 10(s) Raymond Jean Consent Dated May 14, 1999 263
Exhibit 10(t) Richard Nunemaker Consent Dated May 14, 1999 265
Exhibit 27 Financial Data Schedule 267
<PAGE>
- --------------------------------------------------------------------------------
Varlen Corporation
------------
VARLEN CORPORATION
PROFIT SHARING AND
RETIREMENT SAVINGS PLAN
------------
As Amended and Restated Generally Effective
May 1, 1999
- --------------------------------------------------------------------------------
<PAGE>
Varlen Corporation Profit Sharing and Retirement Savings Plan
- --------------------------------------------------------------------------------
Varlen Corporation established the Varlen Corporation Profit Sharing and
Retirement Savings Plan (the "Plan") for the benefit of eligible employees of
the Company and its participating affiliates. The Plan is intended to constitute
a qualified profit sharing plan, as described in Code Section 401(a), which
includes a qualified cash or deferred arrangement, as described in Code Section
401(k).
Varlen Corporation originally established the Varlen Corporation Retirement
Security and Savings Plan and Trust effective as of January 1, 1986. Effective
December 1, 1992, the Varlen Corporation Retirement Security and Savings Plan
and Trust, the National Metalwares Profit Sharing Plan and Trust, the Precision
Scientific 401(k) Tax Deferred Savings Plan, the Precision Scientific Profit
Sharing Plan and the Consolidated Metco Profit Sharing and Retirement Savings
Plan were amended and restated into the Varlen Corporation Profit Sharing and
Retirement Savings Plan and the Varlen Corporation Profit Sharing and Retirement
Savings Trust. The Plan was subsequently amended and restated effective August
1, 1993 and July 1, 1994. Effective May 1, 1999, the Brenco Supplemental Pension
Plan was merged into the Plan.
The Varlen Corporation Profit Sharing and Retirement Savings Plan, as set forth
in this document, is hereby generally effective as amended and restated as of
May 1, 1999, except to the extent provided herein or to the extent that failure
to retroactively make any provision effective prior to May 1, 1999 would result
in the Varlen Corporation Profit Sharing and Retirement Savings Plan (as it
existed prior to May 1, 1999) containing a disqualifying provision, as defined
in Treas. Reg. ss.1.401(b)-1(b)(2) (as modified by Rev. Proc. 89-65, Notice
90-73 and any other subsequent publication modifying the term "disqualifying
provision"), in which case such provision (and any definitions pertinent to the
application of such provision) shall be retroactively effective to a date which
will result in no such disqualifying provision in the Plan prior to May 1, 1999.
(C) Katten Muchin & Zavis 1999
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Page
ARTICLE I.............................................................. 1
Definitions...................................................... 1
1.1 "Accounting Period"..................................... 1
1.2 "Accounts".............................................. 1
1.3 "Accrued Benefit"....................................... 3
1.4 "Appendix".............................................. 3
1.5 "Authorized Leave of Absence"........................... 3
1.6 "Beneficiary"........................................... 4
1.7 "Board of Directors" or "Board"......................... 4
1.8 "Break in Service"...................................... 4
1.9 "Change Date"........................................... 4
1.10 "Committee"............................................. 4
1.11 "Commonly Controlled Entity"............................ 4
1.12 "Company"............................................... 5
1.13 "Company Stock"......................................... 5
1.14 "Compensation".......................................... 5
1.15 "Computation Period".................................... 6
1.16 "Continuous Service".................................... 6
1.17 "Contributions"......................................... 6
1.18 "Contribution Dollar Limit"............................. 6
1.19 "Contribution Election" or "Election"................... 7
1.20 "Contribution Percentage"............................... 7
1.21 "Conversion Election"................................... 7
1.22 "Custodial Agreement"................................... 7
1.23 "Custodian"............................................. 7
1.24 "Direct Rollover"....................................... 7
1.25 "Disability" or "Disabled".............................. 7
1.26 "Distributee"........................................... 7
1.27 "Effective Date"........................................ 7
1.28 "Elective Deferral"..................................... 8
1.29 "Eligible Employee"..................................... 8
1.30 "Eligible Retirement Plan".............................. 8
1.31 "Eligible Rollover Distribution"........................ 8
1.32 "Employee".............................................. 8
1.33 "Employer".............................................. 9
1.34 "Employment Date"....................................... 9
1.35 "ERISA"................................................. 9
1.36 "Fair Market Value"..................................... 9
1.37 "Forfeiture"............................................ 9
1.38 "Forfeiture Account".................................... 9
1.39 "Highly Compensated Eligible Employee" or "HCE"......... 9
- i -
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Table of Contents
- --------------------------------------------------------------------------------
Page
1.40 "Hour of Service"....................................... 10
1.41 "Internal Revenue Code" or "Code"....................... 11
1.42 "Investment Election"................................... 11
1.43 "Investment Fund" or "Fund"............................. 11
1.44 "Limited Deferrals"..................................... 11
1.45 "Maternity/Paternity Absence"........................... 11
1.46 "Named Fiduciary"....................................... 11
1.47 "Non-Highly Compensated Employee" or "NHCE"............. 12
1.48 "Normal Retirement Date"................................ 12
1.49 "Notice Date"........................................... 12
1.50 "Participant"........................................... 12
1.51 "Payment Date".......................................... 12
1.52 "Period of Severance"................................... 12
1.53 "Plan".................................................. 13
1.54 "Plan Year"............................................. 13
1.55 "QDRO".................................................. 13
1.56 "Qualified Matching Contribution"....................... 13
1.57 "Related Plan".......................................... 13
1.58 "Rollover Contribution"................................. 13
1.59 "Settlement Date"....................................... 13
1.60 "Spousal Consent"....................................... 13
1.61 "Spouse"................................................ 14
1.62 "Sweep Date"............................................ 14
1.63 "Termination of Employment"............................. 14
1.64 "Trade Date"............................................ 15
1.65 "Trust"................................................. 15
1.66 "Trust Agreement"....................................... 15
1.67 "Trust Fund"............................................ 15
1.68 "Trustee"............................................... 15
1.69 "Trustee Transfer"...................................... 15
1.70 "Valuation Date"........................................ 15
1.71 "Vesting Service"....................................... 15
1.72 "Year of Service"....................................... 16
ARTICLE II............................................................. 17
Participation.................................................... 17
2.1 Eligibility............................................. 17
2.2 Reemployment............................................ 17
2.3 Participation Upon Change of Job Status................. 17
ARTICLE III............................................................ 18
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Table of Contents
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Page
Participant Contributions........................................ 18
3.1 Pre-Tax Contribution Election........................... 18
3.2 Election Procedures..................................... 18
3.3 Limitation of Elective Deferrals for all Participants... 19
ARTICLE IV............................................................. 21
Employer Contributions and Allocations........................... 21
4.1 Pre-Tax Contributions................................... 21
4.2 Matching Contributions.................................. 21
4.3 Special Contributions................................... 22
4.4 Profit Sharing Contributions............................ 22
4.5 Miscellaneous........................................... 23
ARTICLE V.............................................................. 25
Rollovers........................................................ 25
5.1 Rollovers............................................... 25
ARTICLE VI............................................................. 26
Accounting for Participants' Accounts and
for Investment Funds............................................. 26
6.1 Individual Participant Accounting....................... 26
6.2 Accounting for Investment Funds......................... 27
6.3 Accounts for QDRO Beneficiaries......................... 28
6.4 Special Accounting During Conversion Period............. 29
6.5 Accounting for Merging Brenco Supplemental Pension
Plan Account Balances................................... 29
ARTICLE VII............................................................ 30
Investment Funds and Elections................................... 30
7.1 Investment Funds........................................ 30
7.2 Investment of Contributions............................. 30
7.3 Investment of Accounts.................................. 31
7.4 Establishment of Investment Funds....................... 31
7.5 Transition Rules........................................ 32
7.6 Investment of Brenco Supplemental Pension Plan
Account Balances........................................ 32
ARTICLE VIII........................................................... 33
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<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Page
Vesting and Forfeitures.......................................... 33
8.1 Fully Vested Contribution Accounts...................... 33
8.2 Vesting; Payment of Accrued Benefit On or After
Retirement or Disability................................ 33
8.3 Vesting Schedule and Forfeitures........................ 33
8.4 Forfeitures............................................. 34
8.5 Forfeiture Account...................................... 35
ARTICLE IX............................................................. 36
Participant Loans................................................ 36
9.1 Participant Loans Permitted............................. 36
9.2 Loan Funding Limits..................................... 36
9.3 Maximum Number of Loans................................. 37
9.4 Source of Loan Funding.................................. 37
9.5 Interest Rate........................................... 37
9.6 Repayment............................................... 37
9.7 Repayment Hierarchy..................................... 37
9.8 Loan Application, Note and Security..................... 37
9.9 Default, Suspension and Acceleration.................... 38
ARTICLE X.............................................................. 39
In-Service Withdrawals........................................... 39
10.1 Withdrawals for 401(k) Hardship......................... 39
10.2 Rollover Account Withdrawals............................ 41
10.3 Withdrawals for Participants over Age 59?............... 41
10.4 Withdrawal Processing................................... 42
ARTICLE XI............................................................. 43
Distributions On and After Termination of Employment............. 43
11.1 Request for Distribution of Benefits.................... 43
11.2 Deadline for Distribution............................... 44
11.3 Payment Form and Medium................................. 44
11.4 Small Amounts Paid Immediately.......................... 44
11.5 Payment Within Life Expectancy.......................... 45
11.6 Incidental Benefit Rule................................. 45
11.7 QJSA and QPSA Information and Elections................. 45
11.8 Continued Payment of Amounts in Payment Status on
January 1, 1992......................................... 47
11.9 TEFRA Transitional Rule................................. 47
11.10 Direct Rollover......................................... 48
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<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Page
ARTICLE XII............................................................ 49
Distribution of Accrued Benefits On Death........................ 49
12.1 Payment to Beneficiary.................................. 49
12.2 Beneficiary Designation................................. 49
12.3 Benefit Election........................................ 49
12.4 Payment Form............................................ 50
12.5 Time Limit for Payment to Beneficiary................... 50
12.6 Direct Rollover......................................... 51
12.7 QPSA Information and Election........................... 51
12.8 Small Amounts Paid Immediately.......................... 51
ARTICLE XIII........................................................... 52
Maximum Contributions............................................ 52
13.1 Definitions............................................. 52
13.2 Avoiding an Annual Excess............................... 53
13.3 Correcting an Annual Excess............................. 53
13.4 Correcting a Multiple Plan Excess....................... 54
13.5 Two-Plan Limit.......................................... 54
13.6 Short Plan Year......................................... 55
13.7 Grandfathering of Applicable Limitations................ 55
ARTICLE XIV............................................................ 56
ADP and ACP Tests................................................ 56
14.1 Contribution Limitation Definitions..................... 56
14.2 ADP and ACP Tests....................................... 57
14.3 Correction of ADP and ACP Tests......................... 58
14.4 Method of Calculation................................... 58
14.5 Multiple Use Test....................................... 59
14.6 Adjustment for Investment Gain or Loss.................. 59
14.7 Required Records........................................ 60
14.8 Incorporation by Reference.............................. 60
14.9 Collectively Bargained Employees........................ 60
14.10 QSLOB................................................... 60
ARTICLE XV............................................................. 62
Custodial Arrangements........................................... 62
15.1 Custodial Agreement..................................... 62
15.2 Selection of Custodian.................................. 62
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<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Page
15.3 Custodian's Duties...................................... 62
15.4 Separate Entity......................................... 62
15.5 Plan Asset Valuation.................................... 63
15.6 Right of Employers to Plan Assets....................... 63
ARTICLE XVI............................................................ 64
Administration and Investment Management......................... 64
16.1 Authority and Responsibility of the Board of
Directors............................................... 64
16.2 Committee Membership.................................... 64
16.3 Committee Structure..................................... 64
16.4 Committee Actions....................................... 64
16.5 Compensation............................................ 65
16.6 Responsibility and Authority of the Committee
Regarding Administration of the Plan.................... 65
16.7 Allocations and Delegations of Responsibility........... 66
16.8 Committee Bonding....................................... 66
16.9 Information to be Supplied by Employer.................. 67
16.10 Records................................................. 67
16.11 Plan Expenses........................................... 67
16.12 Fiduciary Capacity...................................... 67
16.13 Employer's Agent........................................ 67
16.14 Plan Administrator...................................... 67
16.15 Appointment of Record-Keeper............................ 67
16.16 Plan Administrator Duties and Authority................. 68
16.17 Committee Decisions Final............................... 70
ARTICLE XVII........................................................... 71
Claims Procedure................................................. 71
17.1 Initial Claim for Benefits.............................. 71
17.2 Review of Claim Denial.................................. 71
ARTICLE XVIII.......................................................... 73
Adoption and Withdrawal From Plan................................ 73
18.1 Procedure for Adoption.................................. 73
18.2 Procedure for Withdrawal................................ 73
ARTICLE XIX............................................................ 74
Amendment, Termination and Merger................................ 74
19.1 Amendments.............................................. 74
- vi -
<PAGE>
Table of Contents
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Page
19.2 Plan Termination........................................ 76
19.3 Plan Merger............................................. 76
ARTICLE XX............................................................. 77
Special Top-Heavy Rules.......................................... 77
20.1 Application............................................. 77
20.2 Special Terms........................................... 77
20.3 Minimum Contribution.................................... 81
20.4 Maximum Benefit Accrual................................. 81
ARTICLE XXI............................................................ 83
Miscellaneous Provisions......................................... 83
21.1 Assignment and Alienation............................... 83
21.2 Protected Benefits...................................... 83
21.3 Plan Does Not Affect Employment Rights.................. 83
21.4 Deduction of Taxes from Amounts Payable................. 83
21.5 Facility of Payment..................................... 83
21.6 Source of Benefits...................................... 84
21.7 Indemnification......................................... 84
21.8 Reduction for Overpayment............................... 84
21.9 Limitation on Liability................................. 84
21.10 Company Merger.......................................... 84
21.11 Employees' Trust........................................ 85
21.12 Gender and Number....................................... 85
21.13 Invalidity of Certain Provisions........................ 85
21.14 Headings................................................ 85
21.15 Uniform and Nondiscriminatory Treatment................. 85
21.16 Law Governing........................................... 85
21.17 Notice and Information Requirements..................... 85
21.18 Qualified Military Service.............................. 85
- vii -
<PAGE>
ARTICLE I
- --------------------------------------------------------------------------------
DEFINITIONS
The following sections of this Article I provide basic definitions of
terms used throughout the Plan, and whenever used herein in a capitalized form,
except as otherwise expressly provided, the terms shall be deemed to have the
following meanings:
1.1 "Accounting Period" means the periods designated by the Committee with
respect to each Investment Fund not to exceed one year in duration.
1.2 "Accounts" means the record of a Participant's interest in the Plan's
assets represented by his or her:
(a) "Matching Account" which means a Participant's interest in the
Plan's assets composed of Matching Contributions allocated on or after May
1, 1999 to the Participant under the Plan, the amount allocated under
former provisions of the Varlen Corporation Profit Sharing and Retirement
Savings Plan or former provisions of the National Metalwares Profit
Sharing Plan and Trust, the Precision Scientific 401(k) Tax Deferred
Savings Plan, the Precision Scientific Profit Sharing Plan, the Means
Stamping Industries, Inc. Retirement Plan, the Consolidated Metco Profit
Sharing and Retirement Savings Plan or the Brenco Supplemental Pension
Plan prior to May 1, 1999, if any (as identified by the Committee), which
continue to be accounted for under the Plan, plus all income and gains
credited to, and minus all losses, expenses, withdrawals and distributions
charged to, such Account.
(b) "Employer Account" which means a Participant's interest in the
Plan's assets composed of Profit Sharing Contributions allocated on or
after May 1, 1999 to the Participant under the Plan, the amount allocated
under the former provisions of the Varlen Corporation Profit Sharing and
Retirement Savings Plan or the former provisions of the National
Metalwares Profit Sharing Plan and Trust, the Precision Scientific 401(k)
Tax Deferred Savings Plan, the Precision Scientific Profit Sharing Plan,
the Means Stamping Industries, Inc. Retirement Plan, the Consolidated
Metco Profit Sharing and Retirement Savings Plan prior to May 1, 1999 or,
with respect to the Brenco Supplemental Pension Plan, profit sharing
contributions made for plan years beginning on or after January 1, 1999
but prior to May 1, 1999, if any (as identified by the Committee), which
continue to be accounted for under the Plan, plus all income and gains
credited to, and minus all losses, expenses, withdrawals and distributions
charged to, such Account.
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<PAGE>
(c) "Post-Tax Account" which means a Participant's interest in the
Plan's assets composed of post-tax contributions allocated under the
former provisions of the Varlen Corporation Profit Sharing and Retirement
Savings Plan or under the former provisions of the National Metalwares
Profit Sharing Plan and Trust, the Precision Scientific 401(k) Tax
Deferred Savings Plan, the Precision Scientific Profit Sharing Plan, the
Means Stamping Industries, Inc. Retirement Plan, the Consolidated Metco
Profit Sharing and Retirement Savings Plan or the Brenco Supplemental
Pension Plan prior to May 1, 1999, if any (as identified by the
Committee), which continue to be accounted for under the Plan, plus all
income and gains credited to, and minus all losses, expenses, withdrawals
and distributions charged to, such Account.
(d) "Pre-Tax Account" which means a Participant's interest in the
Plan's assets composed of Pre-Tax Contributions allocated on or after May
1, 1999 to the Participant under the Plan, the amount allocated under the
former provisions of the Varlen Corporation Profit Sharing and Retirement
Savings Plan or the former provisions of the National Metalwares Profit
Sharing Plan and Trust, the Precision Scientific 401(k) Tax Deferred
Savings Plan, the Precision Scientific Profit Sharing Plan, the Means
Stamping Industries, Inc. Retirement Plan, the Consolidated Metco Profit
Sharing and Retirement Savings Plan or the Brenco Supplemental Pension
Plan prior to May 1, 1999, if any (as identified by the Committee), which
continue to be accounted for under the Plan, plus all income and gains
credited to, and minus all losses, expenses, withdrawals and distributions
charged to, such Account.
(e) "Rollover Account" which means a Participant's interest in the
Plan's assets composed of Rollover Contributions allocated on or after May
1, 1999 to the Participant under the Plan, the amount allocated under the
former provisions of the Varlen Corporation Profit Sharing and Retirement
Savings Plan or the former provisions of the National Metalwares Profit
Sharing Plan and Trust, the Precision Scientific 401(k) Tax Deferred
Savings Plan, the Precision Scientific Profit Sharing Plan, the Means
Stamping Industries, Inc. Retirement Plan, the Consolidated Metco Profit
Sharing and Retirement Savings Plan or the Brenco Supplemental Pension
Plan prior to May 1, 1999, if any (as identified by the Committee), which
continue to be accounted for under the Plan, plus all income and gains
credited to, and minus all losses, expenses, withdrawals and distributions
charged to, such Account.
(f) "Special Account" which means a Participant's interest in the
Plan's assets composed of Special Contributions allocated on or after May
1, 1999 to the Participant under the Plan, the amount allocated under the
former provisions of the Varlen Corporation Profit Sharing and Retirement
Savings Plan or the former provisions of the National Metalwares Profit
Sharing Plan
- 2 -
<PAGE>
and Trust, the Precision Scientific 401(k) Tax Deferred Savings Plan, the
Precision Scientific Profit Sharing Plan, the Means Stamping Industries,
Inc. Retirement Plan, the Consolidated Metco Profit Sharing and Retirement
Savings Plan or the Brenco Supplemental Pension Plan prior to May 1, 1999,
if any (as identified by the Committee), which continue to be accounted
for under the Plan, plus all income and gains credited to, and minus all
losses, expenses, withdrawals and distributions charged to, such Account.
(g) "Brenco Money Purchase Pension Account" which means a
Participant's interest in the Plan's assets composed of an amount
previously contributed and allocated on a pay based formula under former
money purchase plan provisions which were accounted for under the Brenco
Supplemental Pension Plan, if any (as identified by the Committee), which
continue to be accounted for under the Plan, plus all income and gains
credited to, and minus all losses, expenses, withdrawals and distributions
charged to, such Account. Amounts in the Pension Account shall be
restricted such that no withdrawals shall be permitted prior to the
Participant's Termination of Employment.
(h) "Brenco Employer Account" which means a Participant's interest
in the Plan's assets composed of pay-based employer contributions made
under the Brenco Supplemental Pension Plan prior to January 1, 1999, if
any (as identified by the Committee), which continue to be accounted for
under the Plan, plus all income and gains credited to, and minus all
losses, expenses, withdrawals and distributions charged to, such Account.
(i) "Brenco Retirement Account" which means a Participant's interest
in the Plan's assets composed of amounts previously transferred from the
Brenco Retirement Plan No. 2 to the Brenco Supplemental Pension Plan, if
any (as identified by the Committee), which continue to be accounted for
under the Plan, plus all income and gains credited to, and minus all
losses, expenses, withdrawals and distributions charged to, such Account.
1.3 "Accrued Benefit" means the shares held in or posted to Accounts on
the Settlement Date.
1.4 "Appendix" means a written supplement attached to this Plan and made a
part hereof which has been added in accordance with the provisions of the Plan.
1.5 "Authorized Leave of Absence" means an absence, with or without
Compensation, authorized on a nondiscriminatory basis by a Commonly Controlled
- 3 -
<PAGE>
Entity under its standard personnel practices applicable to the Employee,
including any period of time during which such person is covered by a short-term
disability plan of his or her Employer. An Employee who leaves the service of a
Commonly Controlled Entity to enter the Armed Forces of the United States of
America and who reenters the service of the Commonly Controlled Entity with
reemployment rights under any statute granting reemployment rights to persons in
the Armed Forces shall be deemed to have been on an Authorized Leave of Absence.
The date that an Employee's Authorized Leave of Absence ends shall be determined
in accordance with the personnel policies of such Commonly Controlled Entity,
which ending date shall be no earlier than the date that the Authorized Leave of
Absence is scheduled to end, unless the Employee communicates to such Commonly
Controlled Entity that he or she is to have a Termination of Employment as of an
earlier date.
1.6 "Beneficiary" means any person designated by a Participant to receive
any benefits which shall be payable with respect to the death of a Participant
under the Plan or as a result of a QDRO.
1.7 "Board of Directors" or "Board" means the board of directors of the
Company.
1.8 "Break in Service" means:
(a) with respect to Continuous Service, the fifth anniversary (or sixth
anniversary if absence from employment was due to a Maternity/Paternity Absence)
of the date of the Participant's termination of employment; and
(b) with respect to Computation Periods, the end of 5 consecutive
Computation Periods (or 6 consecutive Computation Periods if absence from
employment was due to a Maternity/Paternity Absence) for which a Participant is
credited with less than 501 Hours of Service.
1.9 "Change Date" means the one or more dates during the Plan Year
designated by the Committee as the dates available for implementing or changing
a Participant's Contribution Election.
1.10 "Committee" means the committee appointed pursuant to the terms of
the Plan to manage and control the operation and administration of the Plan.
1.11 "Commonly Controlled Entity" means (1) an Employer and any
corporation, trade or business, but only for so long as it and the Employer are
members of a controlled group of corporations as defined in Section 414(b) of
the Code or under common control as defined in Section 414(c) of the Code;
provided, however, that solely for purposes of the limitations of Code Section
415, the
- 4 -
<PAGE>
standard of control under Sections 414(b) and 414(c) of the Code shall be deemed
to be "more than 50%" rather than "at least 80%," (2) an Employer and an
organization, but only for so long as it and the Employer are, on and after the
Effective Date, members of an affiliated service group as defined in Section
414(m) of the Code, (3) an Employer and an organization, but only for so long as
the employees of it and the Employer are required to be aggregated, on and after
the Effective Date, under Section 414(o) of the Code, or (4) any other
organization designated as such by the Committee.
1.12 "Company" means Varlen Corporation or any successor corporation by
merger, consolidation, purchase, or otherwise, which elects to adopt the Plan
and the Trust.
1.13 "Company Stock" means common stock issued by Varlen Corporation.
1.14 "Compensation" means an Eligible Employee's:
(a) wages, salaries and all other amounts required to be reported on
an Eligible Employee's Form W-2 under Sections 6041(d), 6051(a)(3) and
6052 of the Code and which are received by an Eligible Employee from the
Employer for services rendered in the course of employment with the
Employer (including but not limited to overtime, shift differential,
commissions and bonuses), but specifically excluding reimbursements or
other expense allowances, fringe benefits (cash and non-cash), moving
expenses, deferred compensation and welfare benefits; and
(b) elective amounts excludeable from gross income under Code
Sections 125 and 402(e)(3)).
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding
twelve (12) months, over which Compensation is determined (determination period)
beginning in such calendar year. If a determination period consists of fewer
than twelve (12) months, the OBRA '93 annual compensation limit will be
multiplied by a fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
- 5 -
<PAGE>
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
1.15 "Computation Period" means with respect to Vesting Service and any
Break in Service with respect to Vesting Service, the twelve (12) consecutive
month period commencing with the Employee's Employment Date and anniversaries of
his Employment Date (or if Vesting Service is disregarded due to the occurrence
of a Break in Service, the Employment Date thereafter).
1.16 "Continuous Service" means the sum of the years (and fractions of
years) measured from an Employee's Employment Date to his or her date of
Termination of Employment first to occur after his or her Employment Date;
provided, that if an Employee has a Period of Severance of less than twelve (12)
consecutive months after a Termination of Employment, such Termination of
Employment shall be disregarded and such Employee's Continuous Service shall
include such period when he or she is not employed by a Commonly Controlled
Entity.
1.17 "Contributions" means amounts contributed to the Plan by the Employer
on behalf of a Participant. Specific types of contributions include:
(a) "Matching". An amount contributed by the Employer based upon
the amount contributed by the eligible Participant.
(b) "Pre-Tax". An amount contributed on a pre-tax basis in
conjunction with a Participant's Code Section 401(k) salary
deferral agreement.
(c) "Profit Sharing". An amount contributed by the Employer as a
discretionary profit sharing contribution.
(d) "Special". An amount contributed by the Employer to avoid
prohibited discrimination under Section 401(a)(4) of the Code.
1.18 "Contribution Dollar Limit" means the annual limit imposed on each
Participant pursuant to Section 402(g) of the Code, which shall be seven
thousand
- 6 -
<PAGE>
dollars ($7,000) per calendar year (as indexed for cost of living adjustments
pursuant to Code Section 402(g)(5) and 415(d)).
1.19 "Contribution Election" or "Election" means the election made by a
Participant to reduce his or her Compensation by an amount equal to the product
of his or her Contribution Percentage and such Compensation subject to the
Contribution Election.
1.20 "Contribution Percentage" means the percentage of a Participant's
Compensation which is to be contributed to the Plan by his or her Employer as a
Contribution.
1.21 "Conversion Election" means an election by a Participant to change
the investment of all or some specified portion of such Participant's Accounts
by voice response to the telephone number provided by the Named Fiduciary to
whom it is spoken, or on such form that may be required by the Named Fiduciary
to whom it is delivered. No Conversion Election shall be deemed to have been
given to the Named Fiduciary unless it is complete and delivered in accordance
with the procedures established by such Named Fiduciary for this purpose.
1.22 "Custodial Agreement" means the Trust Agreement or an insurance
contract to provide for the holding of the assets of the Plan.
1.23 "Custodian" means the Trustee or an insurance company if the contract
issued by such company is not held by the Trustee.
1.24 "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
1.25 "Disability" or "Disabled" means permanent and total disability
within the meaning of Section 22(e)(3) of the Code.
1.26 "Distributee" includes an Employee or former Employee. In addition,
the Employee's or former Employee's surviving Spouse and the Employee's or
former Employee's Spouse or former Spouse who is the alternate payee under a
QDRO are Distributees with regard to the interest of the Spouse or former
Spouse.
1.27 "Effective Date" means May 1, 1999, the date upon which the
provisions of this document become effective. In general, the provisions of this
document only apply to Participants who are Employees on or after the Effective
Date. However, investment and distribution provisions apply to all Participants
with Account balances to be invested or distributed after the Effective Date.
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1.28 "Elective Deferral" means amounts subject to the Contribution Dollar
Limit.
1.29 "Eligible Employee" means any Employee (including an Employee on an
Authorized Leave of Absence) of an Employer on and after the Effective Date of
the adoption of this Plan by the Employer, excluding any Employee:
(a) who is a member of a group of Employees represented by a
collective bargaining representative, unless a currently effective
collective bargaining agreement between his or her Employer and the
collective bargaining representative of the group of Employees of which he
or she is a member provides for coverage by the Plan or is included in
Appendix B; and
(b) who is considered an Employee solely because of the application
of Section 414(n) of the Code.
1.30 "Eligible Retirement Plan" means an individual retirement account
described in section 408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity plan described in section
403(a) of the Code, or a qualified trust described in section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover Distribution. However, in
the case of an Eligible Rollover Distribution to the surviving Spouse, an
Eligible Retirement Plan is an individual retirement account or individual
retirement annuity.
1.31 "Eligible Rollover Distribution" means any distribution of all or any
portion of the balance to the credit of the Distributee, except that an eligible
rollover distribution does not include any distribution that is one of a series
of substantially equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the Distributee's designated
Beneficiary, or for a specified period of ten years or more; any distribution to
the extent such distribution is required under section 401(a)(9) of the Code;
the portion 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, on and after January 1, 1999, any distribution made
pursuant to Section 10.1.
1.32 "Employee" means any person who rendered services as a common law
employee to a Commonly Controlled Entity or is on an Authorized Leave of
Absence, including the period of time before which the trade or business became
a Commonly Controlled Entity, but excluding the period of time after which it
ceases to be a Commonly Controlled Entity. Any individual considered an Employee
of a Commonly Controlled Entity under Section 414(n) of the Code shall be deemed
employed by the Commonly Controlled Entity for which the individual performed
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services.
1.33 "Employer" means the Company and any Commonly Controlled Entity which
has adopted the Plan; provided, that an entity will cease to be an Employer when
it ceases to be a Commonly Controlled Entity.
1.34 "Employment Date" means the day an Employee first earns an Hour of
Service; provided, however, with respect to an Employee who incurs a Period of
Severance on or after December 1, 1992 of twelve (12) consecutive months or
more, the Employment Date for such Employee shall be adjusted forward in time by
a period of days equal to the number of days in the Period of Severance.
1.35 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Reference to any specific section shall include such section, any valid
regulation promulgated thereunder, and any comparable provision of any future
legislation amending, supplementing or superseding such section.
1.36 "Fair Market Value" means:
(a) with respect to a security for which there is a generally
recognized market, the price of the security prevailing on a national
securities exchange which is registered under Section 6 of the Securities
Act of 1934;
(b) unless determined otherwise by the Committee, with respect to
any guaranteed income contract, the value reported by the issuing company
or bank;
(c) with respect to a Participant loan, the unpaid principal and
accrued interest; and
(d) for any other asset, the fair market value of the asset, as
determined in good faith by the Trustee or the Committee in accordance
with regulations promulgated under Section 3(18) of ERISA.
1.37 "Forfeiture" means the portion of the Participant's Accrued Benefit
which is forfeited pursuant to the terms of the Plan.
1.38 "Forfeiture Account" means an account holding amounts forfeited by
Participants.
1.39 "Highly Compensated Eligible Employee" or "HCE" means, effective
January 1, 1997, a highly compensated active employee or highly compensated
former employee.
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A highly compensated employee means each Employee who received
Compensation from the Employer in excess of $80,000 (as adjusted annually by the
Commissioner of the Internal Revenue Service for increases in the cost-of-living
in accordance with Section 414(q) of the Code) during the look-back year and, if
the Employer so elects, was among the top-paid group of Employees during the
look-back year. The term highly compensated employee also includes Employees who
are five percent (5%) owners (as defined in Section 414(a)(2) of the Code) at
any time during the look-back year or determination year.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve-month period immediately preceding the
determination year.
An Employee is in the top-paid group of Employees for a year if such
Employee is in the group consisting of the top-paid twenty percent (20%) of the
Employees when ranked on the basis of Compensation paid during such year.
The determination of who is a Highly Compensated Employee, including the
determination of the number and identity of Employees in the top-paid group and
the Compensation considered, will be made in accordance with Section 414(q) of
the Code and the regulations thereunder.
1.40 "Hour of Service" means each hour for which an Employee is directly
or indirectly paid or entitled to payment by a Commonly Controlled Entity for
the performance of duties and each hour for which an Employee is entitled to:
(a) payment for the performance of duties for any Commonly
Controlled Entity;
(b) payment from any Commonly Controlled Entity for any period
during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
sickness, incapacity (including disability), layoff, leave of absence,
jury duty or military service;
(c) back pay, irrespective of mitigation of damages, by award or
agreement with any Commonly Controlled Company (and these hours shall be
credited to the period to which the agreement pertains); or
(d) no payment, but is on an Authorized Leave of Absence (and these
hours shall be based upon his or her normally scheduled hours per week or
a 40 hour week if there is no regular schedule).
The crediting of hours shall be made in accordance with Department of Labor
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regulation section 2530.200b-2 and 3. Actual hours shall be used whenever an
accurate record of hours are maintained for an Employee.
1.41 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code sections shall be deemed to refer to comparable
sections of any subsequent Internal Revenue Code.
1.42 "Investment Election" means an election by which a Participant
directs the investment of his or her Contributions by voice response to the
telephone number provided by the Named Fiduciary to whom it is spoken, or on
such form that may be required by the Named Fiduciary to whom it is delivered.
No Investment Election shall be deemed to have been given to the Named Fiduciary
unless it is complete and delivered in accordance with the procedures
established by such Named Fiduciary for this purpose.
1.43 "Investment Fund" or "Fund" means one or more collective investment
funds, a pool of assets, or deposits with the Custodian, a mutual fund,
insurance contract, or managed pool of assets. The Investment Funds authorized
by the Committee are listed in Appendix A.
1.44 "Limited Deferrals" means Elective Deferrals subject to the limits of
Code Section 401(a)(30).
1.45 "Maternity/Paternity Absence" means a paid or unpaid and unapproved
absence from employment with a Commonly Controlled Entity (1) by reason of the
pregnancy of the Employee; (2) by reason of the birth of a child of the
Employee; (3) by reason of the placement of a child under age eighteen (18) in
connection with the adoption of such child by the Employee (including a trial
period prior to adoption); and (4) for the purpose of caring for a child of the
Employee immediately following the birth or adoption of such child. The Employee
must prove to the satisfaction of the Committee or its agent that the absence
meets the above requirements and must supply information concerning the length
of the absence unless the Committee has access to relevant information without
the Employee submitting it.
1.46 "Named Fiduciary" means:
(a) with respect to the management and control of the Plan's
administration and operation over which each has discretionary authority,
the Committee;
(b) with respect to the implementation of a Participant's or
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Beneficiary's Investment Election or Conversion Election, the Committee or
other such person appointed under the terms of the Trust Agreement.
1.47 "Non-Highly Compensated Employee" or "NHCE" means an Employee who is
not an HCE.
1.48 "Normal Retirement Date" means the date a Participant attains
sixty-five (65) years of age; provided that, with respect to a Participant who
was a participant in the Brenco Supplemental Pension Plan prior to May 1, 1999,
Normal Retirement Date shall mean the date the Participant attains age sixty-two
(62) years of age.
1.49 "Notice Date" means the date established by the Committee as the
deadline for it to receive notification with respect to an administrative matter
in order to be processed as of a Change Date designated by the Committee.
1.50 "Participant" means an Eligible Employee who begins to participate in
the Plan after completing the eligibility requirements. A Participant's
participation continues until his or her Termination of Employment and his or
her Accrued Benefit is distributed or forfeited.
1.51 "Payment Date" means the date on or after the Settlement Date on
which a Participant's Accrued Benefit is distributed or commences to be
distributed, which date shall be at least the minimum number of days required by
law, if any, after the date the Participant has received any notice required by
law, if any.
If a distribution is one to which Sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less than 30
days after the notice required under Section 1.41(a)-11(c) of the Income Tax
Regulations is given, provided that:
(a) the plan administrator clearly informs the Participant that the
Participant has a right to a period of at least thirty (30) days after
receiving the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option), and
(b) the Participant, after receiving the notice, affirmatively
elects a distribution.
1.52 "Period of Severance" means the period of time measured from the
later of (a) an Employee's Termination of Employment, and (b) the conclusion of
a Maternity/Paternity Absence of no longer than twelve (12) consecutive months,
to the date thereafter he or she first earns an Hour of Service.
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1.53 "Plan" means the Varlen Corporation Profit Sharing and Retirement
Savings Plan, as set forth herein and as hereafter may be amended from time to
time.
1.54 "Plan Year" means the annual accounting period of the Plan and Trust
which ends on each December 31.
1.55 "QDRO" means a domestic relations order which the Committee has
determined to be a qualified domestic relations order within the meaning of
Section 414(p) of the Code.
1.56 "Qualified Matching Contribution" means a Matching Contribution that
is treated as a Pre-Tax Contribution and posted to the Pre-Tax Account.
1.57 "Related Plan" means:
(a) with respect to Section 401(k) and 401(m) of the Code, any plan
or plans maintained by a Commonly Controlled Entity which is treated with
this Plan as a single plan for purposes of Sections 401(a)(4) or 410(b) of
the Code; and
(b) with respect to Section 415 of the Code, any other defined
contribution plan or a defined benefit plan (as defined in Section 415(k)
of the Code) maintained by a Commonly Controlled Entity, respectively
called a "Related Defined Contribution Plan" and a "Related Defined
Benefit Plan".
1.58 "Rollover Contribution" means:
(a) a rollover contribution as described in Section 402(c) of the
Code (or its predecessor); or
(b) a Trustee Transfer (1) to the Custodian of an amount by the
custodian of a retirement plan qualified for tax-favored treatment under
Code Section 401(a), which plan provides for such transfer; (2) with
respect to which the benefits otherwise protected by Code Section 411 in
such transferor plan are no longer required by Code Section 411 to be
protected in this Plan; and (3) which does not include amounts subject to
Code Section 401(k).
1.59 "Settlement Date" means the date on which the transactions from the
most recent Trade Date are settled.
1.60 "Spousal Consent" means the irrevocable written consent given by a
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Spouse to a Participant's election (or waiver) of a specified form of benefit or
Beneficiary designation. The Spouse's consent must acknowledge the effect on the
Spouse of the Participant's election, waiver or designation and be duly
witnessed by a Plan representative or notary public. Spousal Consent shall be
valid only with respect to the spouse who signs the Spousal Consent and only for
the particular choice made by the Participant which requires Spousal Consent. A
Participant may revoke (without Spousal Consent) a prior election, waiver or
designation that required Spousal Consent at any time before the Sweep Date
associated with the Settlement Date upon which payments will begin. Spousal
Consent also means a determination by the Administrator that there is no Spouse,
the Spouse cannot be located or such other circumstances as may be established
by applicable law.
1.61 "Spouse" means a person who, as of the earlier of a Participant's
Payment Date and death, is alive and married to the Participant within the
meaning of the laws of the State of the Participant's residence as evidenced by
a valid marriage certificate or other proof acceptable to the Committee. A
spouse who was the Spouse on the Payment Date but who is divorced from the
Participant at the Participant's death shall still be the Spouse at the date of
the Participant's death, except as otherwise provided in a QDRO.
1.62 "Sweep Date" means the date established by the Committee as the
cutoff date and time for the responsible Named Fiduciary to receive notification
with respect to a financial transaction for an Accounting Period in order to be
processed with respect to a Trade Date designated by the Committee.
1.63 "Termination of Employment" occurs when a person ceases to be an
Employee or if earlier, the first anniversary of the date his or her Authorized
Leave of Absence commenced, as determined by the personnel policies of the
Commonly Controlled Entity to whom he or she rendered services; provided,
however, where a Commonly Controlled Entity ceases to be such with respect to an
Employee as a result of either an asset sale or stock sale an Employee of the
Commonly Controlled Entity shall be deemed not to have incurred a Termination of
Employment: (a) unless the Committee shall make a determination that the
transaction satisfies Section 401(k) of the Code, or if no such determination is
made, until such Employee ceases to be employed by the successor to the Commonly
Controlled Entity; or (b) if the Committee shall make a Trustee Transfer of his
or her Accrued Benefit. Transfer of employment from one Commonly Controlled
Entity to another Commonly Controlled Entity shall not constitute a Termination
of Employment for purposes of the Plan.
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1.64 "Trade Date" means the date as of which a financial transaction
occurs, however with respect to a transaction involving Investment Funds
maintained on a share accounting methodology, the transaction shall be executed
based upon the average of the proceeds or purchase price of sales and purchases,
respectively, of a share each day a transaction occurs with respect to an
Accounting Period.
1.65 "Trust" means the legal entity resulting from the agreement between
the Company and the Trustee and all amendments thereto, in which some or all of
the assets of this Plan will be received, held, invested and distributed to or
for the benefit of Participants and Beneficiaries.
1.66 "Trust Agreement" means the agreement between the Company and the
Trustee establishing the Trust, and any amendments thereto.
1.67 "Trust Fund" means any property, real or personal, received by and
held by the Trustee, plus all income and gains and minus all losses, expenses,
withdrawals and distributions chargeable thereto.
1.68 "Trustee" means any corporation, individual or individuals designated
in the Trust Agreement who shall accept the appointment as Trustee to execute
the duties of the Trustee as set forth in the Trust Agreement.
1.69 "Trustee Transfer" means a transfer from the Custodian of an amount,
elected by and for the benefit of a Participant, to the custodian of an eligible
retirement plan, within the meaning of Section 402(c)(8)(B) of the Code;
provided that with respect to any withdrawal or distribution from the Plan, a
Participant may elect a transfer to only one eligible retirement plan, except as
may otherwise be determined by the Committee, in a uniform and nondiscriminatory
manner.
1.70 "Valuation Date" means the close of business each Accounting Period,
and such other dates as may be determined by the Committee.
1.71 "Vesting Service" means the sum of an Employee's Years of Service;
provided however, Years of Service shall be disregarded if such Years of Service
were earned prior to the date the Employee's Employer became a Commonly
Controlled Entity, unless the Committee makes a determination not to apply this
exclusion with respect to each such Employee in a uniform and nondiscriminatory
manner.
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1.72 "Year of Service" means:
(a) for service from January 1, 1992, each twelve (12) month period
of Continuous Service;
(b) a period of Continuous Service from January 2, 1991 through
January 1, 1992; and
(c) for Computation Periods ending before January 2, 1991, a
Computation Period in which an Employee is credited with at least 1,000
Hours of Service.
Notwithstanding the foregoing, Years of Service will be calculated as follows if
(and only if) it would be of benefit to the Employee:
(d) for service from January 1, 1992, each twelve (12) month period
of Continuous Service;
(e) the Computation Period from January 2, 1991 through January 1,
1992, but only if an Employee is credited with at least 1,000 Hours of
Service in such period; and
(f) for Computation Periods ending before January 2, 1991 a
Computation Period in which an Employee is credited with at least 1,000
Hours of Service.
An Employee's service with a company, the assets of which are
acquired by a Commonly Controlled Entity, shall only be counted as employment
with such Commonly Controlled Entity in the determination of his or her Years of
Service if (1) the Committee directs that credit for such service be granted, or
(2) a qualified plan of the acquired company is subsequently maintained by any
Employer or Commonly Controlled Entity.
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ARTICLE II
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PARTICIPATION
2.1 Eligibility. On or after the Effective Date as to each Employer:
(a) Participant on May 1, 1999. Each person who has an Accrued
Benefit on May 1, 1999 shall become a Participant as of May 1, 1999.
(b) Other Eligible Employee. Each other Eligible Employee shall
become a Participant on the first day of each Plan Year quarter on or
after the date he or she completes six months of Continuous Service.
2.2 Reemployment.
(a) Eligible Employee Was Previously A Participant. An Eligible
Employee who previously was a Participant prior to his or her Termination
of Employment shall become a Participant on the first day of the next
payroll period.
(b) Eligible Employee Had A Termination Prior to Next Change Date.
An Eligible Employee who previously completed six months of Continuous
Service and who had a Termination of Employment before he or she became a
Participant shall be eligible to become a Participant on the later of (1)
the date he or she would have become a Participant but for his or her
Termination of Employment, or (2) the date he or she again performs an
Hour of Service.
2.3 Participation Upon Change of Job Status. An Employee who is not an
Eligible Employee shall become a Participant on the later of (1) the date he or
she would have become a Participant had he or she always been an Eligible
Employee, and (2) the date he becomes an Eligible Employee.
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ARTICLE III
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PARTICIPANT CONTRIBUTIONS
3.1 Pre-Tax Contribution Election.
(a) A Participant who is an Eligible Employee and who desires to
have Pre-Tax Contributions made on his or her behalf by his or her
Employer shall file a Contribution Election, pursuant to procedures
specified by the Committee, specifying his or her Contribution Percentage
of not less than one percent (1%) nor more than fourteen percent (14%)
(stated as a whole integer percentage) and authorizing the Compensation
otherwise payable to him or her to be reduced.
(b) Notwithstanding Subsection (a) hereof, for any Plan Year the
Committee may determine that the maximum Contribution Percentage shall be
greater or lesser than the percentages set forth in Subsection (a) hereof.
Otherwise, the maximum Contribution Percentage as provided in Subsection
(a) hereof shall apply.
(c) A Participant's Contribution Election shall be effective only
with respect to Compensation not yet paid as of the date the Contribution
Election is effective. A Contribution Election received on or before a
Notice Date shall become initially effective with respect to payroll
cycles ended after the applicable Change Date. However, the Committee, in
its sole discretion, may declare an additional window period to
Participants. Any Contribution Election which has not been properly and
fully executed will be deemed not to have been received and be void.
3.2 Election Procedures. A Participant's Contribution Election shall
continue in effect (with automatic adjustment for any change in his or her
Compensation) until the earliest of the date (1) his or her Contribution
Election is changed in accordance with paragraph (a) hereof; (2) he or she
ceases to be paid as an Eligible Employee; or (3) his or her Contribution
Election is canceled in accordance with paragraph (b) hereof.
(a) Changing the Election. A Participant may increase or decrease
his or her Contribution Percentage (subject to the percentage limits
stated above) only once each Change Date by making a new Contribution
Election, pursuant to procedures specified by the Committee, on which is
specified the amount of the Contribution Percentage.
(1) If such Contribution Election is received by the Notice
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Date, the change shall be effective with respect to the
first payroll cycle ended after the Change Date.
(2) However, if the Committee deems it necessary, the
Committee may specify an additional window period to
Participants.
(3) The amount of increase or decrease of such Contribution
Percentage shall be effective only with respect to
Compensation not yet paid.
(4) Any Contribution Election which has not been properly
and fully executed will be deemed not to have been
received and be void.
(b) Canceling the Election. A Participant desiring to cancel his or
her existing Contribution Election and reduce his or her Contribution
Percentage to zero must make a new Contribution Election, pursuant to
procedures specified by the Committee. The Committee will establish
procedures, to be administered in a uniform and nondiscriminatory manner,
for allowing a Participant to cancel his or her Contribution Election. Any
Contribution Election received on or before a Notice Date shall become
effective with respect to the payroll cycle ended after the next Change
Date. A Participant who is an Eligible Employee and who has canceled his
or her Election may again make a Contribution Election at any time. If
such Contribution Election is received by the Notice Date, it shall become
effective with respect to the first payroll cycle ended after the next
Change Date. Any Participant who has improperly or not fully executed a
Contribution Election will be deemed not to have made an Election.
(c) Continuation of Elections under Brenco Supplemental Pension
Plan. A Participant's Contribution election under the Brenco Supplemental
Pension Plan immediately prior to that plan's merger into the Plan shall
continue in effect notwithstanding such merger, until such time as is
otherwise provided under this Section 3.2.
3.3 Limitation of Elective Deferrals for all Participants. A Participant's
Limited Deferrals for any calendar year shall not exceed the Contribution Dollar
Limit. If a Participant advises the Committee that he or she has Elective
Deferrals (reduced by Elective Deferrals previously distributed or which are
characterized as a result of the application of Code Section 401(k)(3) to such
Participant) in excess of the Contribution Dollar Limit ("Excess Deferral"), the
Committee shall return such Excess Deferrals for the taxable year to the
Participant. To the extent the Participant's
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Limited Deferrals exceed the Contribution Dollar Limit, the Employer may notify
the Plan on behalf of the Participant (and "Excess Deferral" shall be calculated
by taking into account only Limited Deferrals). If such advice was received by
the Committee during the taxable year, the Plan shall distribute the Excess
Deferral as soon as administratively feasible. If such advice was received by
the Committee after the taxable year but no later than March 1 (or as late as
April 14, if allowed by the Committee) following the close of the taxable year,
the Committee shall cause the Plan to return such Excess Deferral no later than
April 15 immediately following the end of such taxable year, adjusted by income
allocable to that amount.
The net investment gain or loss associated with the Excess Deferral is
calculated as follows:
Ex[G/(AB-G)]x(1+(10%xM))
where:
E = the Excess Deferral amount,
G = the net gain or loss for the Plan Year in the Participant's
Pre-Tax Account,
AB = the total value of the Participant's Pre-Tax Account, determined
as of the end of the calendar year being corrected,
M = the number of full months from the calendar year end to the date
the excess amount is paid, plus one for the month during which
payment is to be made if payment will occur after the 15th of that
month.
If the application of the limitations in this Section results in a reduction of
previously contributed Pre-Tax Contributions on behalf of a Participant,
Matching Contributions allocable with respect thereto (prior to such reduction)
which are not distributed under the ACP Test shall be forfeited.
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ARTICLE IV
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EMPLOYER CONTRIBUTIONS AND ALLOCATIONS
4.1 Pre-Tax Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan and
to the Committee's authority to limit Contributions under the terms of
this Plan, for each period for which a Contribution Election is in effect,
the Employer shall contribute to the Plan on behalf of each Participant an
amount equal to the amount designated by the Participant as a Pre-Tax
Contribution on his or her Contribution Election.
(b) Allocation. The Pre-Tax Contribution shall be allocated to the
Pre-Tax Account of the Participant with respect to whom the amount is
paid.
(c) Timing, Medium and Posting. Pre-Tax Contributions shall be paid
to the Custodian in cash and posted to each Participant's Pre-Tax Account
by the Committee as soon as such amounts can reasonably be balanced
against the specific amount made on behalf of each Participant. Pre-Tax
Contributions shall be paid to the Custodian not more than ninety (90)
days after the date amounts are deducted from the Participant's
Compensation.
4.2 Matching Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan and
to the Committee's authority to limit Contributions under the Plan, for
each period for which Participants' Contributions are made, the Employer
shall make Matching Contributions as described in the following Allocation
Method paragraph on behalf of each Participant who contributed during the
period.
(b) Allocation Method. The Matching Contributions for each period
shall total twenty-five percent (25%) of the sum of each eligible
Participant's Pre-Tax Contributions for the period, provided that no
Matching Contributions shall be made based upon a Participant's
Contributions in excess of six percent (6%) of his or her Compensation.
The Employer may change the twenty-five percent (25%) matching rate or the
six percent (6%) of considered Compensation to any other percentages,
including zero (0%). Notwithstanding the foregoing, for any Participant
who is an Eligible Employee included in Appendix B, the Matching
Contributions, if any, made by the Employer on behalf of such Participant
shall be as is provided in Appendix B.
(c) Timing, Medium and Posting. The Employer shall make each
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period's Matching Contribution in cash as soon as is feasible, and not
later than the Employer's federal tax filing date, including extensions,
for deducting such Contribution. The Committee shall post such amount to
each Participant's Matching Account once the total Contribution received
by the Custodian has been balanced against the specific amount to be
credited to each Participant's Matching Account.
(d) Compensation. Compensation shall be measured by the period (not
to exceed the Plan Year) for which the Contribution is being made provided
the Eligible Employee is a Participant during such period.
4.3 Special Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan and
to the Committee's authority to limit Contributions under the Plan, for
each Plan Year, the Employer may make a Special Contribution in an amount
determined by the Board on behalf of each Non-Highly Compensated Employee
Participant.
(b) Allocation Method. The Special Contribution, together with any
available Forfeiture Account amount to be applied as a Special
Contribution, for each period shall be allocated among eligible
Participants as determined by the Board, subject to a maximum dollar
amount which may be contributed on behalf of any Participant as determined
by the Committee.
(c) Timing, Medium and Posting. The Employer shall make each
period's Special Contribution in cash as soon as is feasible, but no later
than twelve (12) months after the end of the Plan Year to which it is
allocated. The Committee shall post such amount to each Participant's
Special Account once the total Contribution received by the Custodian has
been balanced against the specific amount to be credited to each
Participant's Special Account.
(d) Compensation. Compensation shall be measured by the period (not
to exceed the Plan Year) for which the Contribution is being made,
provided the Eligible Employee is a Participant during such period.
4.4 Profit Sharing Contributions.
(a) Frequency and Eligibility. Subject to the limits of the Plan and
to the Committee's authority to limit Contributions under the Plan, for
each Plan Year, the Employer may make a Profit Sharing Contribution in an
amount determined by the Board with respect to the Varlen Corporate Office
and by the Company's Chief Executive Officer with respect to each
Participant who was an Eligible Employee on the last day of the period,
subject to Appendix B,
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provided, however, that consistent with the foregoing, such Profit Sharing
Contribution may vary among the various subsidiaries, divisions or other
business units of the Company, pursuant to criteria established by the
Committee and applied on a uniform basis. In addition, and consistent with
the foregoing, such Contribution shall be made on behalf of each
Participant who ceased being an Employee during the period after having
attained his or her Normal Retirement Date, having attained fifty-five
(55) years of age and completing five (5) years of Continuous Service, or
by reason of his or her Disability or death; subject to Appendix B.
(b) Allocation Method. The Profit Sharing Contribution for each
period shall be allocated, pursuant to criteria established by the
Committee and applied on a uniform basis, within each subsidiary, division
or business unit of the Company, among eligible Participants in direct
proportion to their Compensation. Any available Forfeiture Account amount
to be applied as a Profit Sharing Contribution for each period shall be
allocated among eligible Participants pro rata, on a per Participant
basis.
(c) Timing, Medium and Posting. The Employer shall make each Plan
Year Profit Sharing Contribution in cash as soon as is feasible, and not
later than the Employer's federal tax filing date, including extensions,
for deducting such Contribution. The Committee shall post such amount to
each Participant's Employer Account once the total Profit Sharing
Contribution received has been balanced against the specific amount to be
credited to each Participant's Employer Account.
(d) Compensation. Compensation shall be measured by the period (not
to exceed the Plan Year) for which the Contribution is being made provided
the Eligible Employee is a Participant during such period.
4.5 Miscellaneous.
(a) Deduction Limits. In no event shall the Employer Contributions
for a Plan Year exceed the maximum the Company estimates will be
deductible (or which would be deductible if the Employers had taxable
income) by any Employer or Commonly Controlled Entity under Section 404 of
the Code ("Deductible Amount"). Any amount in excess of the Deductible
Amount shall not be contributed in the following order of Contribution
type, to the extent needed to eliminate the excess:
(1) Each Participant's allocable share of Pre-Tax
Contributions for the Plan Year will be reduced by an
amount equal to the excess of the Participant's Pre-Tax
Contributions over
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an amount which bears the same ratio to the amount of
Pre-Tax Contributions made to the Plan on behalf of such
Participant during the Plan Year as the Deductible
Amount available for the Plan Year (reduced by the total
amount of other types of Employer Contributions for the
Plan Year) bears to the aggregate Pre-Tax Contributions
made to the Plan on behalf of all Participants subject
to such Deductible Amount during the Plan Year (before
the application of this provision).
(2) If the application of Section (a)(1) would result in a
reduction of a Participant's Pre-Tax Contributions which
are matched by Matching Contributions, the rate at which
Pre-Tax Contributions are reduced shall be offset by a
reduction for each Matching Contribution not made as a
result.
(3) Profit Sharing Contributions.
(b) Profit Sharing Plan. Notwithstanding anything herein to the
contrary, the Plan shall constitute a profit sharing plan for all purposes
of the Code.
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ARTICLE V
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ROLLOVERS
5.1 Rollovers. The Committee may authorize the Custodian to accept a
Rollover Contribution in cash from an Eligible Employee, but only if he or she
is a Participant. The Employee shall furnish satisfactory evidence to the
Committee that the amount is eligible for rollover treatment. Such amount shall
be posted to the Employee's Rollover Account by the Committee as of the date
received by the Custodian.
If it is later determined that an amount transferred pursuant to the above
paragraph did not in fact qualify as a Rollover Contribution, the balance
credited to the Employee's Rollover Account shall immediately be (1) segregated
from all other Plan assets, (2) treated as a non-qualified trust established by
and for the benefit of the Employee, and (3) distributed to the Employee. Any
such nonqualifying rollover shall be deemed never to have been a part of the
Plan.
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ARTICLE VI
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ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
6.1 Individual Participant Accounting.
(a) Account Maintenance. The Committee shall cause the Accounts for
each Participant to reflect transactions involving assets of the Accounts
in accordance with this Article. Financial transactions during or with
respect to an Accounting Period shall be accounted for at the individual
Account level by "posting" each transaction to the appropriate Account of
each affected Participant. Participant Account values shall be maintained
in dollars or shares depending on the Investment Fund. At any point in
time, the Participant's Accrued Benefit shall be equal to the net Fair
Market Value of his or her Account determined by using the most recent
Trade Date values provided by the Custodian.
(b) Trade Date Accounting and Investment Cycle. For any transaction
to be processed as of a Trade Date, the Committee must receive
instructions by the Sweep Date and such instructions shall apply only to
amounts held in or posted to the Accounts as of the Trade Date. Financial
transactions in an Investment Fund shall be posted to a Participant's
Account as of the Trade Date and based upon the Trade Date values provided
by the Custodian. All transactions shall be effected on the Settlement
Date relating to the Trade Date (or as soon as is administratively
feasible).
(c) Suspension of Transactions. Whenever the Committee considers
such action to be in the best interest of the Participants, the Committee
in its discretion may suspend from time to time the Trade Date.
(d) Temporary Investment. To the extent practicable, the Committee
shall direct the Custodian to make temporary investments in a short term
interest fund of assets in an Account held pending a Trade Date.
(e) How Fees and Expenses are Charged to Participants. Account
maintenance fees to the extent not paid by the Employer shall be charged
pro rata to each Participant's Account on the basis of each Participant's
Accrued Benefit, provided that no fee shall reduce a Participant's Account
balance below zero. Transaction type fees (such as special asset fees,
investment election change fees, etc.) shall be charged to the Accounts
involved in the transaction. Fees and expenses incurred for the management
and maintenance of Investment Funds shall be charged at the Investment
Fund level and
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<PAGE>
reflected in the net gain or loss of each Fund to the extent not paid by
the Employer. Notwithstanding the foregoing, for any Accounting Period
beginning as soon as administratively possible after a favorable
determination on this issue is received from the Internal Revenue Service,
(and after a Participant's Termination of Employment), the Employer shall
not pay the fees and expenses chargeable to the Account of a Participant
or to an Investment Fund with respect to the Account of a Participant who
incurred such Termination of Employment. Such fees and expenses shall be
charged directly against the Participant's Account or used to reimburse
the Employer for its payment of such fee or expense.
(f) Error Correction. The Committee may correct any errors or
omissions in the administration of the Plan by restoring or charging any
Participant's Accrued Benefit with the amount that would be credited or
charged to the Account had no error or omission been made. Funds necessary
for any such restoration shall be provided through payment made by the
Employer.
(g) Accounting for Participant Loans. Participant loans shall be
held in a separate Fund for investment only by such Participant and
accounted for in dollars as an earmarked asset of the borrowing
Participant's Account.
6.2 Accounting for Investment Funds.
(a) Share Accounting. The investments in each Investment Fund
designated in Appendix A shall be maintained in full and fractional
shares. The Committee is responsible for determining the number of full
and fractional shares of each such Investment Fund. To the extent an
Investment Fund is comprised of a collective investment fund of the
Custodian, the net asset and unit values shall be determined in accordance
with the rules governing such collective investment funds, which are
incorporated herein by reference. Fees and expenses incurred for the
management and maintenance of Investment Funds shall be charged at the
Investment Fund level and reflected in the net gain or loss of each Fund
to the extent not paid by the Employer.
(b) Accounting for Company Stock. The following additional rules
shall apply to the Company Stock Fund:
(1) Shareholder Rights. Shareholder Rights with respect to
all Company Stock in an Account shall be exercised by
the Trustee in accordance with directions from the
Participant pursuant to the procedures of the Trust
Agreement.
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<PAGE>
(2) Tender Offer. If a tender offer is commenced for Company
Stock, the provisions of the Trust Agreement regarding
the response to such tender offer, the holding and
investment of proceeds derived from such tender offer
and the substitution of new securities for such proceeds
shall be followed.
(3) Dividends and Income. Dividends (whether in cash or in
property) and other income received by the Custodian in
respect of Company Stock shall be reinvested in Company
Stock and shall constitute income and be recognized on
an accrual basis for the Accounting Period in which
occurs the record date with respect to such dividend;
provided that, with respect to any dividend which is
reflected in the market price of the underlying stock,
the Committee shall direct the Custodian during such
trading period to trade such stock the regular way to
reflect the value of the dividend, and all Fund
transfers and cash distributions shall be transacted
accordingly with no accrual of such dividend, other than
as reflected in such market price.
(4) Transaction Costs. Any brokerage commissions, transfer
taxes, transaction charges, and other charges and
expenses in connection with the purchase or sale of
Company Stock shall be added to the cost thereof in the
case of a purchase or deducted from the proceeds thereof
in the case of a sale, to the extent not paid by an
Employer; provided, however, where the purchase or sale
of Company Stock is with a "disqualified person" as
defined in Section 4975(e)(2) of the Code or a "party in
interest" as defined in Section 3(14) of ERISA, no
commissions may be charged with respect thereto.
6.3 Accounts for QDRO Beneficiaries. A separate Account shall be
established for a Beneficiary entitled to any portion of a Participant's Account
under a QDRO as of the date and in accordance with the directions specified in
the QDRO. Such Account shall be valued and accounted for in the same manner as
any other Account.
(a) Investment Direction. A QDRO Beneficiary may direct the
investment of such Account in the same manner as any other Participant;
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<PAGE>
provided, however, a QDRO Beneficiary may not acquire Company Stock.
(b) Distributions. A QDRO Beneficiary shall be entitled to payment
as provided in the QDRO and permissible under the otherwise applicable
terms of this Plan, regardless of whether the Participant is an Employee,
and to name a Beneficiary as specified in the QDRO.
(c) Participant Loans. A QDRO Beneficiary shall not be entitled to
borrow from his or her Account. If a QDRO specifies that the QDRO
Beneficiary is entitled to any portion of the Account of a Participant who
has an outstanding loan balance, all outstanding loans shall continue to
be held in the Participant's Account and shall not be divided between the
Participant's and QDRO Beneficiary's Accounts.
6.4 Special Accounting During Conversion Period. The Committee and
Custodian may use any reasonable accounting methods in performing their
respective duties during the period of converting the prior accounting system of
the Plan and Trust to conform to the individual Participant accounting system
described in this Section. This includes, but is not limited to, the method for
allocating net investment gains or losses and the extent, if any, to which
contributions received by and distributions paid from the Trust during this
period share in such allocation. All or a portion of the Trust assets may be
held, if necessary, in a short term interest bearing vehicle, which may include
deposits of the Trustee, during the conversion period for establishing such
individual Participant Accounts.
6.5 Accounting for Merging Brenco Supplemental Pension Plan Account
Balances. As of the Effective Date, the Brenco Supplemental Pension Plan shall
be merged into the Plan pursuant to Section 414(l) of the Internal Revenue Code
and the Account balances of each affected Participant shall be redesignated by
the Committee consistent with Section 1.2, so that Plan Contributions and other
Plan transactions can thereafter be accounted for consistent with this Article
VI.
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ARTICLE VII
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INVESTMENT FUNDS AND ELECTIONS
7.1 Investment Funds. Except for a Participant's loan Account, the Trust
shall be maintained in various Investment Funds. The Committee may change the
number or composition of the Investment Funds, subject to the terms and
conditions agreed to with the Custodian.
7.2 Investment of Contributions.
(a) Investment Election. Each Participant may direct the Trustee,
pursuant to procedures specified for that purpose by the responsible Named
Fiduciary, to invest Contributions posted to his or her Accounts in one or
more Investment Funds. If the Committee directs, for any Accounting
Period, Contributions with respect to which the Participant has investment
control may be invested separately in the Investment Funds. If the
Participant elects to have any such Contributions made on his or her
behalf invested in more than one Investment Fund, he or she must designate
in whole multiples of five percent (5%) what percentage of the
Contribution is to be invested in each such Investment Fund. If the
Committee directs, for any Accounting Period, Contributions with respect
to which the Participant has investment control may be invested separately
in Funds.
(b) Effective Date of Investment Election; Change of Investment
Election. A Participant's initial Investment Election will be effective
with respect to a Fund on the Trade Date which relates to the Sweep Date
on which or prior to which the Investment Election is received pursuant to
procedures specified by the Committee. A Participant's Investment Election
shall continue in effect, notwithstanding any change in his Compensation
or his Contribution Percentage, until the earliest of (1) the effective
date of a new Investment Election, and (2) the date he ceases to be paid
as an Eligible Employee. A change in Investment Election shall be
effective with respect to a Fund on the Trade Date which relates to the
Sweep Date on which or prior to which the Participant's new Investment
Election is received pursuant to procedures specified by the Committee.
Any Investment Election which has not been properly or fully executed will
be deemed not to have been received.
(c) Switching Fees. A reasonable processing fee may be charged
directly to a Participant's Account for Investment Election changes in
excess of a specified number per Plan Year as determined by the Committee.
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<PAGE>
7.3 Investment of Accounts.
(a) Conversion Election. Notwithstanding a Participant's Investment
Election, a Participant or Beneficiary may direct the Trustee, pursuant to
procedures specified for that purpose by the responsible Named Fiduciary,
to change the interest his or her Accrued Benefit has in one or more
Investment Funds. If the Participant or Beneficiary elects to invest his
or her Accrued Benefit in more than one (1) Investment Fund, he or she
must designate in whole multiples of five percent (5%) or in whole dollar
amounts that portion of his Accounts which is to be invested in such
Investment Fund. If the Committee directs, for any Accounting Period,
Accounts may be invested separately in Funds.
(b) Effective Date of Conversion Election. A Conversion Election to
change a Participant's or Beneficiary's investment of his or her Accrued
Benefit in one Investment Fund to another Fund shall be effective with
respect to such Funds on the Trade Date(s) which relates to the Sweep Date
on which or prior to which the Election is received pursuant to procedures
specified by the Committee. Notwithstanding the foregoing, to the extent
required by any provisions of an Investment Fund, the effective date of
any Conversion Election may be delayed or the amount of any permissible
Conversion Election may be reduced. Any Conversion Election which has not
been properly or fully executed will be deemed not to have been received.
(c) Switching Fees. A reasonable processing fee may be charged
directly to a Participant's Account for Conversion Election changes in
excess of a specified number per Plan Year as determined by the Committee.
7.4 Establishment of Investment Funds. The Committee shall cause to be
established one or more Investment Funds set forth in Appendix A. In addition,
the Committee may, from time to time, in its discretion:
(a) limit investments in or transfers from an Investment Fund;
(b) add funding vehicles thereunder;
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<PAGE>
(c) liquidate, consolidate or otherwise reorganize an existing
Investment Fund; or
(d) add a new Investment Fund to Appendix A.
7.5 Transition Rules. Effective as of the date any Investment Fund is
added or deleted, each Participant and Beneficiary shall have the opportunity to
submit new Investment Elections and Conversion Elections to the responsible
Named Fiduciary no later than the applicable Sweep Date. The Committee and
Custodian may use any reasonable accounting methods in performing their
respective duties during the period of transition from one Investment Fund to
another, including, but not limited to:
(a) designating into which Investment Fund a Participant's Accrued
Benefit will be invested if the Participant fails to submit a proper
Conversion Election form;
(b) the method for allocating net investment gains or losses and the
extent, if any, to which amounts received by and distributions paid from
the Trust during this period share in such allocation; and
(c) investing all or a portion of the Trust's assets in a
short-term, interest-bearing Fund during such transition period.
7.6 Investment of Brenco Supplemental Pension Plan Account Balances. In
connection with the merger of the Brenco Supplemental Pension Plan with and into
the Plan, effective as of the Effective Date, the Committee and Custodian shall
designate into which Investment Fund a Participant's Brenco Supplemental Pension
Plan Accounts shall be mapped, on a uniform basis; provided that each affected
Participant shall be provided the opportunity to submit a Conversion Election
(pursuant to Section 7.3 but subject to such additional procedures as the
Committee shall adopt to facilitate the merger) to direct a change in the
interest his or her Accrued Benefit has in one or more Investment Funds. Each
affected Participant will also be required to submit a new Investment Election
(pursuant to Section 7.2 but subject to such additional procedures as the
Committee shall adopt to facilitate the merger).
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ARTICLE VIII
- --------------------------------------------------------------------------------
VESTING AND FORFEITURES
8.1 Fully Vested Contribution Accounts.
A Participant shall be fully vested and have a nonforfeitable right
to his or her Accrued Benefit in these Accounts at all times:
Brenco Employer Account
Brenco Money Purchase Pension Account
Pre-Tax Account
Post-Tax Account
Brenco Retirement Account
Rollover Account
Matching Account
Special Account.
8.2 Vesting; Payment of Accrued Benefit On or After Retirement or
Disability. A Participant's Accrued Benefit shall be fully vested and
nonforfeitable upon the occurrence of any one or more of the following events:
(a) completion of at least the minimum number of years of Vesting
Service in the Vesting Schedule for a 100% nonforfeitable percentage;
(b) attainment of Normal Retirement Date;
(c) his or her Termination of Employment for reason of a Disability;
or
(d) he or she dies while an Employee.
8.3 Vesting Schedule and Forfeitures.
(a) Vesting. If a Participant has a Termination of Employment, the
Participant shall be vested and have a nonforfeitable right to his or her
Accrued Benefit in his Employer Account, determined in accordance with the
following vesting schedules:
Years of Vesting Service Nonforfeitable Percentage
------------------------ -------------------------
Less than 1 year 0%
1 year but less than 2 years 0%
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2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or more 100%
Notwithstanding the preceding sentence, with respect to that portion
of a Participant's Accounts that is attributable to amounts
transferred from the National Metalwares Profit Sharing Plan and
Trust, the Precision Scientific 401(k) Tax Deferred Savings Plan,
the Precision Scientific Profit Sharing Plan, the Means Stamping
Industries, Inc. Retirement Plan, the Consolidated Metco Profit
Sharing and Retirement Savings Plan or the Brenco Supplemental
Pension Plan, the vested percentage of such amounts shall be no less
than their vested percentage under such plan as of the transfer's
effective date.
8.4 Forfeitures.
(a) Forfeiture Where Payment Commences Prior to a Break in Service.
As of the Payment Date of a Participant's nonforfeitable percentage of his
or her Accrued Benefit, that portion of his or her Accrued Benefit which
is forfeitable shall be forfeited as of the Payment Date. Thereafter, if
such person is rehired as an Employee prior to incurring a Break in
Service, he or she shall be entitled to make repayment to the Plan of the
full amount distributed to him or her on or after the Payment Date no
later than the earlier of (1) the date he or she incurs a Break in
Service, and (2) the last day of the 5-year period commencing on or after
his or her date of reemployment. Upon making repayment in a single payment
of the amount distributed to him or her, the amount repaid shall be
credited to the Participant's Account from which paid and the Forfeiture
shall be reinstated to his or her Accounts and invested in the same manner
as the Account to which it is posted. The amount required to restore such
Participant's Accounts shall be charged against the Plan's Forfeitures,
and if insufficient, be made up from additional Employer Contributions.
If the Employee makes the above-described repayment, such repayment
shall be considered to be the "investment in the contract" for purposes of
Sections 72(c)(1)(A), 72(f) and 402(e)(4)(D)(i) of the Code in relation to
the amount reinstated in his or her Account on account of the repayment.
(b) Forfeiture Where Payment Commences After a Break in Service. If
no Payment Date of a Participant's nonforfeitable Accrued Benefit occurs
before having incurred a Break in Service, that portion of the
Participant's Accrued Benefit (which is Employer-derived) which is
forfeitable as of his or her
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<PAGE>
Termination of Employment shall be forfeited as of the completion of a
Break in Service. If the Participant is reemployed as an Employee prior to
having incurred a Break in Service, the Forfeiture shall not occur. If the
Participant is reemployed as an Employee after incurring a Break in
Service, the Participant shall be fully vested and have a nonforfeitable
interest in that portion of his or her Accounts accrued prior to the Break
in Service and not forfeited as a result of such Break in Service. A
Participant who incurs a Termination of Employment with a zero vested
interest in his or her Accrued Benefit (which is Employer-derived) shall
be deemed to have a Payment Date and a Forfeiture of his or her Accrued
Benefit as of such Termination of Employment.
8.5 Forfeiture Account.
A Forfeiture will be posted, no later than as of the last day of the Plan
Year in which the Forfeiture arises, to the Forfeiture Account on the Settlement
Date for the Trade Date on which the Custodian, at the direction of the
Committee, has converted the Forfeiture to cash. No later than the end of such
Plan Year, the Forfeiture Account shall be used (in the following order) to
reinstate Accrued Benefits and supplement Contributions, to the extent provided
in Article IV.
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ARTICLE IX
- --------------------------------------------------------------------------------
PARTICIPANT LOANS
9.1 Participant Loans Permitted. The Committee is authorized to establish
and administer a loan program for a Participant who is an Eligible Employee or a
former Eligible Employee who is a "party in interest" under ERISA pursuant to
the terms and conditions set forth in this Article. All loan limits are
determined as of the Trade Date the Trustee reserves funds for the loan. The
funds will be disbursed to the Participant as soon as is administratively
feasible after the next following Settlement Date.
9.2 Loan Funding Limits.
The loan amount must meet the following limits:
(a) Plan Minimum Limit. The minimum amount for any loan is
$1,000.00.
(b) Plan Maximum Limit. Subject to the legal limit described in (c)
below, the maximum a Participant may borrow, including the outstanding
balance of existing Plan loans, is fifty percent (50%) of the following
Accounts which are fully vested:
Post-Tax Account
Brenco Money Purchase Pension Account
Employer Account attributable to amounts received from a
merged plan
Pre-Tax Account attributable to amounts received from a
merged plan
Brenco Retirement Account
Rollover Account
Matching Account
Pre-Tax Account attributable to unmatched Pre-Tax
Contributions
Pre-Tax Account attributable to matched Pre-Tax
Contributions
Special Account
Brenco Employer Account
Employer Account.
(c) Legal Maximum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing loans, is based upon the
value of
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his or her vested interest in this Plan and all other qualified plans
maintained by a Commonly Controlled Entity (the "Vested Interest"). The
maximum amount is equal to 50% of his or her Vested Interest, not to
exceed $50,000. However, the $50,000 amount is reduced by the
Participant's highest outstanding balance of all loans from any Commonly
Controlled Entity's qualified plans during the twelve (12) month period
ending on the day before the Trade Date on which the loan is made.
9.3 Maximum Number of Loans. A Participant may have only one loan
outstanding at any given time.
9.4 Source of Loan Funding. A loan to a Participant shall be made solely
from the assets of his or her own Accounts. The available assets shall be
determined first by Contribution Account and then by investment type within each
type of Contribution Account. The hierarchy for loan funding by type of
Contribution Account shall be the order listed in the preceding Plan Maximum
Limit paragraph. Within each Account used for funding, amounts shall first be
taken from the available cash in the Account and then taken by type of
investment in direct proportion to the market value of the Participant's
interest in each Investment Fund as of the Sweep Date on which the loan is made.
9.5 Interest Rate. The interest rate charged on Participant loans shall be
fixed and equal to the prime rate, plus 1%, of a bank designated by the
Committee.
9.6 Repayment. Substantially level amortization shall be required of each
loan with payments made at least monthly, through payroll deduction, provided
that payment can be made by check for prepayments in full, or when a Participant
is on an Authorized Leave of Absence, Disabled or transferred to the employ of a
Commonly Controlled Entity which is not participating in the Plan. Loans may be
prepaid in full at any time. The loan repayment period shall be as mutually
agreed upon by the Participant and Committee, not to exceed five (5) years.
However, the term may be for any period not to exceed ten (10) years if the
purpose of the loan is to acquire the Participant's principal residence.
9.7 Repayment Hierarchy. Loan principal repayments shall be credited to
the Participant's Contribution Accounts in the inverse of the order used to fund
the loan. Loan interest shall be credited to the Contribution Account in direct
proportion to the principal repayment. Loan payments are credited by investment
type based upon the Participant's current Conversion Election for that Account.
9.8 Loan Application, Note and Security. A Participant shall apply for any
loan in accordance with a procedure established by the Committee. The Committee
shall administer Participant loans and shall specify the time frame for
approving loan
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<PAGE>
applications. All loans shall be evidenced by a promissory note and security
agreement, and secured only by a Participant's vested Account balance. The Plan
shall have lien on a Participant's Account to the extent of any outstanding loan
balance.
9.9 Default, Suspension and Acceleration.
(a) Default. A loan is treated as a default on the earlier of (i)
the date any scheduled loan payment is more than ninety (90) days late,
provided that the Committee may agree to a suspension of loan payments for
up to twelve (12) months for a Participant who is on an Authorized Leave
of Absence or Disabled, or (ii) 30 days from the time the Participant
receives written notice of the note being due and payable and a demand for
past due amounts.
(b) Actions upon Default. In the event of default, the Committee may
direct the Trustee to execute upon its security interest in the
Participant's Account by segregating the unpaid loan balance from the
Account, including interest to the date of default and report the default
as a taxable distribution. As soon as a Plan withdrawal or distribution to
such Participant would otherwise be permitted, the Committee shall
instruct the Trustee to distribute the note to the Participant.
(c) Acceleration. A loan shall become due and payable in full once
the Participant incurs a Termination of Employment unless he or she is
Disabled in which case the note will not be due and payable until the
Participant ceases to be Disabled, dies or the note is otherwise due.
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ARTICLE X
- --------------------------------------------------------------------------------
IN-SERVICE WITHDRAWALS
10.1 Withdrawals for 401(k) Hardship.
(a) Requirements. A Participant may request the withdrawal of any
amount from the vested portion of his or her Accounts needed to satisfy a
financial need by making a withdrawal request in accordance with a
procedure established by the Committee. The Committee shall only approve
those requests for withdrawals (1) on account of a Participant's "Deemed
Financial Need", and (2) which are "Deemed Necessary" to satisfy the
financial need.
(b) "Deemed Financial Need". Financial commitments relating to:
(1) costs directly related to the purchase or construction
(excluding mortgage payments or balloon payments) of a
Participant's principal residence;
(2) the payment of expenses for medical care described in
Section 213(d) of the Code previously incurred by the
Participant, the Participant's Spouse, or any dependents
of the Participant (as defined in Section 152 of the
Code) or necessary for those persons to obtain medical
care described in Section 213(d) of the Code;
(3) payment of tuition and related educational fees for the
next twelve (12) months of post-secondary education for
the Participant, his or her Spouse, children or
dependents (as defined in Section 152 of the Code); or
(4) necessary payments to prevent the eviction of the
Participant from his or her principal residence or the
foreclosure on the mortgage of the Participant's
principal residence.
(c) "Deemed Necessary". A withdrawal is "deemed necessary" to
satisfy the financial need only if all of these conditions are met:
(1) the withdrawal may not exceed the dollar amount needed
to satisfy the Participant's documented Financial
Hardship, plus an amount necessary to pay federal,
state, or local income taxes or penalties reasonably
anticipated
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to result from such withdrawal;
(2) the Participant must have obtained all distributions,
other than Financial Hardship distributions, and all
nontaxable loans under all plans maintained by the
Company or any Commonly Controlled Entity;
(3) the Participant will be suspended from making Pre-Tax
Contributions, after-tax contributions, or elective
contributions subject to a cash or deferred arrangement
under the Plan (or under any other qualified or
nonqualified plan of deferred compensation maintained by
a Commonly Controlled Entity) for at least twelve (12)
months from the date the withdrawal is received; and
(4) the Dollar Limit for the taxable year immediately
following the taxable year in which the Financial
Hardship withdrawal is received shall be reduced by the
Elective Deferrals for the taxable year in which the
Financial Hardship withdrawal is received.
(d) Contribution Account Sources for Withdrawal. All available
amounts must first be withdrawn from a Participant's Post-Tax Account. The
remaining withdrawal amount shall come only from his or her Accounts in
the following priority order:
Pre-Tax Account attributable to amounts received from a
merged plan
Rollover Account
Brenco Retirement Account
Pre-Tax Account attributable to unmatched Pre-Tax
Contributions
Pre-Tax Account attributable to matched Pre-Tax
Contributions.
The amount that may be withdrawn from a Participant's Account shall not
include any of the following amounts posted to his Account after the end
of the Plan Year which ends before July 1, 1989:
Special Contributions
Qualified Matching Contributions
Earnings on the Pre-Tax Account
Earnings on a Special Account.
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10.2 Rollover Account Withdrawals.
(a) Amount Permitted. A Participant may withdraw up to the entire
balance from his or her Rollover Account for any reason. There is no
hardship requirement.
(b) Permitted Frequency. There is no restriction on the number of
times a Participant may withdraw from this Account.
10.3 Withdrawals for Participants over Age 59 1/2.
(a) Requirements. A Participant who is over age 59 1/2 may withdraw
from the vested portion of his or her Contribution Accounts listed in
paragraph (b) below.
(b) Contribution Account Sources for Withdrawal. When requesting a
withdrawal, a Participant shall first choose whether or not to have
amounts taken from his or her Post-Tax Account. Any remaining withdrawal
amount shall come only from his or her Accounts, in the following priority
order of Contribution Accounts:
Employer Account attributable to amounts received from a
merged plan
Pre-Tax Account attributable to amounts received from a
merged plan
Brenco Money Purchase Pension Account (but only on or
after age 62)
Brenco Retirement Account
Rollover Account
Matching Account
Pre-Tax Account attributable to unmatched Pre-Tax
Contributions
Pre-Tax Account attributable to matched Pre-Tax
Contributions
Special Account
Brenco Employer Account
Employer Account.
(c) Permitted Frequency. The maximum number of withdrawals permitted
from these Accounts after age 59 1/2 is one (1).
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10.4 Withdrawal Processing.
(a) Minimum Amount. The minimum amount for any type of withdrawal is
$100.
(b) Application by Participant. A Participant must apply for a
withdrawal pursuant to procedures specified by the Committee for any type
of withdrawal. Only a Participant who is an Employee may make a withdrawal
request.
(c) Approval by Committee. The Committee is responsible for
determining that a withdrawal request conforms to the requirements
described in this Section and notifying the Custodian of any payments to
be made in a timely manner.
(d) Time of Processing. The Custodian shall process all withdrawal
requests which it receives by a Sweep Date, based on the value as of the
Trade Date to which it relates, and fund them on the next Settlement Date.
The Custodian shall then make payment to the Participant as soon
thereafter as is administratively feasible.
(e) Medium and Form of Payment. The medium of payment for
withdrawals is cash or Direct Rollover. The form of payment for
withdrawals shall be a single installment (except to the extent of an
Account which includes a transfer from the National Metalwares Profit
Sharing Plan and Trust, the Precision Scientific 401(k) Tax Deferred
Savings Plan, the Precision Scientific Profit Sharing Plan, the
Consolidated Metco Profit Sharing and Retirement Savings Plan or the
Brenco Supplemental Pension Plan, in which case Section 11.7 shall apply).
(f) Investment Fund Sources. Within each Account used for funding a
withdrawal, amounts shall be taken by type of investment in direct
proportion to the market value of the Participant's interest in each
Investment Fund at the time the withdrawal is made.
(g) Direct Rollover. With respect to any payment hereunder which
constitutes an Eligible Rollover Distribution, a Distributee may direct
the Committee to have all or some portion of such payment (other than from
a Post-Tax Account) paid in the form of a Trustee Transfer, in accordance
with procedures established by the Committee, provided the Committee
receives written notice of such direction with specific instructions as to
the Eligible Retirement Plan on or prior to the applicable Sweep Date for
payment.
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ARTICLE XI
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DISTRIBUTIONS ON AND AFTER
TERMINATION OF EMPLOYMENT
11.1 Request for Distribution of Benefits.
(a) Request for Distribution. Subject to the other requirements of
this Article, a Participant may elect to have his or her vested Accrued
Benefit paid to him or her beginning upon any Settlement Date following
his or her Termination of Employment pursuant to procedures specified by
the Committee. Such election form shall include or be accompanied by a
notice which provides the Participant with information regarding all
optional times and forms of payment available. The election must be
submitted to the Committee by the Sweep Date that relates to the Payment
Date.
(b) Failure to Request Distribution. If a Participant has a
Termination of Employment and fails to make a request for distribution by
the last Payment Date permitted under this Article, his or her vested
Accrued Benefit shall be valued as of the Valuation Date which immediately
precedes such latest date of distribution (called the "Default Valuation
Date") and a notice of such deemed distribution shall be issued to his or
her last known address as soon as administratively possible. If the
Participant does not respond to the notice or cannot be located, his or
her vested Accrued Benefit determined on the Default Valuation Date shall
be treated as a Forfeiture. If the Participant subsequently files a claim,
the amount forfeited (unadjusted for gains and losses) shall be reinstated
to his or her Accounts and distributed as soon as administratively
feasible, and such payment shall be accounted for by charging it against
the Forfeiture Account or by a contribution from the Employer of the
affected Participant.
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11.2 Deadline for Distribution. In addition to any other Plan requirements
and unless the Participant elects otherwise, or cannot be located, the Payment
Date of a Participant's vested Accrued Benefit shall be not later than sixty
(60) days after the latest of the close of the Plan Year in which (i) the
Participant attains the earlier of age sixty-five (65) or his or her Normal
Retirement Date, (ii) occurs the tenth (10th) anniversary of the Plan Year in
which the Participant commenced participation, or (iii) the Participant had a
Termination of Employment. However, if the amount of the payment or the location
of the Participant (after a reasonable search) cannot be ascertained by that
deadline, payment shall be made no later than 60 days after the earliest date on
which such amount or location is ascertained. In any case, the Payment Date of
the vested Accrued Benefit for a Participant who has had a Termination of
Employment shall begin no later than the later of: (i) the Participant's
attainment of age sixty-five (65) and (ii) the Participant's Termination of
Employment. A Participant that has not had a Termination of Employment may elect
to have his or her Payment Date begin as early as the April 1 following the
calendar year in which the Participant attains age 70 1/2. Any payment made
pursuant to the preceding sentence shall be made in single annual payments in
such amounts as may be chosen by the Participant. Notwithstanding anything in
the Plan to the contrary, the initial Payment Date of any Participant who is a
five percent (5%) owner (within the meaning of Section 416 of the Code) during
the Plan Year in which the Participant turns age 70 1/2, shall not be later than
the April 1 following the close of said Plan Year, regardless of whether the
Participant has had a Termination of Employment. Payments made pursuant to the
preceding sentence while the Participant is still an Employee may be limited to
the minimum amount required under Section 401(a)(9) or such greater amount as
shall be elected by the Participant. All distributions under this Section 11.2
shall comply with the requirements of Section 401(a)(9) of the Code and the
Treasury Regulations promulgated thereunder.
11.3 Payment Form and Medium. A Participant's vested Accrued Benefit shall
be paid in the form of a lump sum or periodic installments as selected by the
Participant. As to Participants whose Accounts include a transfer from the
National Metalwares Profit Sharing Plan and Trust, the Precision Scientific
Profit Sharing Plan or the Freightliner portion of the Consolidated Metco Profit
Sharing and Retirement Savings Plan, available forms of payment with respect to
such amounts shall also include a single or joint life annuity, as selected by
the Participant. For Participants who were participants in the Brenco
Supplemental Pension Plan prior to August 1, 1994, such amounts shall also
include a single or joint life annuity. All payments will be made in cash
(generally by check) and shall be subject to Section 11.7.
11.4 Small Amounts Paid Immediately. If a Participant has a Termination of
Employment and the Participant's vested Accrued Benefit is $5,000 or less, the
Participant's Accrued Benefit shall be paid as a single lump sum as soon as
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administratively feasible after his Termination of Employment.
11.5 Payment Within Life Expectancy. The Participant's payment election
must be consistent with the requirement of Code Section 401(a)(9) that all
payments are to be completed within a period not to exceed the lives or the
joint and last survivor life expectancy of the Participant and his or her
Beneficiary. The life expectancies of a Participant and his or her spouse may
not be recomputed annually.
11.6 Incidental Benefit Rule. The Participant's payment election must be
consistent with the requirement that, if the Participant's Spouse is not his or
her sole primary Beneficiary, the minimum annual distribution for each calendar
year, beginning with the year in which he or she attains age seventy and
one-half (70 1/2), shall not be less than the quotient obtained by dividing (a)
the Participant's vested Accrued Benefit as of the last Trade Date of the
preceding year by (b) the applicable divisor as determined under the incidental
benefit requirements of Code Section 401(a)(9).
11.7 QJSA and QPSA Information and Elections. The following information
and election rules shall apply to a Participant's Brenco Money Purchase Pension
Account and to any Participant who elects an annuity option, but only to the
extent such Participant's Accounts include a transfer from the National
Metalwares Profit Sharing Plan and Trust, the Precision Scientific Profit
Sharing Plan or the Freightliner portion of the Consolidated Metco Profit
Sharing and Retirement Savings Plan or to the extent the Participant was a
participant in the Brenco Supplemental Pension Plan prior to August 1, 1994:
(a) "QJSA". A qualified joint and fifty percent (50%) survivor
annuity, meaning a form of benefit payment which is the actuarial
equivalent of the applicable portion of the Participant's vested Accrued
Benefit at the Payment Date, payable to the Participant in monthly
payments for life and providing that, if the Participant's Spouse survives
him or her, monthly payments equal to fifty percent (50%) of the amount
payable to the Participant during his lifetime will be paid to the Spouse
for the remainder of such person's lifetime.
(b) "QPSA". A qualified pre-retirement survivor annuity, meaning
that upon the death of a Participant before the Payment Date of the
applicable portion of his vested Accrued Benefit, such benefit will become
payable to the surviving Spouse as a life annuity, unless Spousal Consent
has been given to a different Beneficiary or the surviving Spouse chooses
a different form of payment.
(c) QJSA Information to a Participant. No more than ninety (90)
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nor less than thirty (30) days before the Payment Date, each Participant
who has a Spouse and requests an annuity form of payment shall be given a
written explanation of (1) the terms and conditions of the QJSA which
apply to his annuity; (2) the right to make an election to waive this form
of payment and choose an optional form of payment and the effect of this
election; (3) the right to revoke this election and the effect of this
revocation; and (4) the need for Spousal Consent.
(d) QJSA Election. A Participant may elect (and such election shall
include Spousal Consent if married), at any time within the ninety (90)
day period ending on the Payment Date, and for at least thirty (30) days
after the Participant receives the information described in Section
11.7(c) above, (or at such other times determined under uniform and
nondiscriminatory rules as the Committee shall permit and in accordance
with applicable regulations and rulings of the Secretary of the Treasury),
to (1) waive the right to receive the QJSA and elect an optional form of
payment; or (2) revoke or change any such election; however, the
Participant (and Participant's Spouse, if applicable) may waive the thirty
(30) day waiting period described in this Section 11.7(d) provided that,
if such waiting period is waived, distributions under the Plan shall
commence more than seven (7) days after the information is provided to the
Participant.
(e) QJSA Spousal Consent to Participant Loans. Spousal Consent must
be obtained for any Participant loan which is funded from any amount to
which the election in paragraph (d) above applies within the ninety (90)
day period ending on the date such loan is secured.
(f) QJSA Spousal Consent to Participant In-Service Withdrawals.
Spousal Consent must be obtained for any Participant in-service withdrawal
which is funded from any amount to which the election in paragraph (d)
above applies within the ninety (90) day period ending on the date of such
in-service withdrawal.
(g) QPSA Beneficiary Information to Participant. Each married
Participant who has requested a life annuity form of payment shall be
given written information stating that (1) his death benefit is payable to
his surviving Spouse; (2) his ability to choose that the benefit be paid
to a different Beneficiary; (3) the right to revoke or change a prior
designation and the effects of such revocation or change; and (4) the need
for Spousal Consent. Such information shall be provided during whichever
of the following periods ends later:
(1) the period that begins one year before the date on which
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the Participant requests a life annuity form of payment
and that ends one year after such date; and
(2) the period that begins with the first day of the Plan
Year in which the Participant attains age thirty-two
(32) and that ends with the close of the Plan Year in
which the Participant attains age thirty-five (35).
Notwithstanding the foregoing, if the Participant incurs a Termination of
Employment after requesting a life annuity form of payment, but before
attaining age thirty-five (35), the information described in the first
sentence of this Subsection shall be provided during the period that
begins one year before the date of the Participant's Termination of
Employment and that ends one year after such date.
(h) QPSA Beneficiary Designation by Participant. A married
Participant may designate (with Spousal Consent) a non-spouse Beneficiary
at any time after the Participant has been given the information in the
QPSA Beneficiary Information to Participant paragraph above and upon the
earlier of (1) the date the Participant incurs a Termination of
Employment, or (2) the beginning of the Plan Year in which that
Participant attains age 35.
11.8 Continued Payment of Amounts in Payment Status on January 1, 1992.
Any person who became a Participant prior to January 1, 1992 only because he had
an Accrued Benefit and who had commenced to receive payments prior to January 1,
1992 shall continue to receive such payments in the same form and payment
schedule under this Plan.
11.9 TEFRA Transitional Rule. Notwithstanding any other provisions of this
Plan, distribution on behalf of any Participant may be made in accordance with
the following requirements (regardless of when such distribution commences):
(a) The distribution must have been one provided for in the National
Metalwares Profit Sharing Plan and Trust, the Precision Scientific 401(k)
Tax Deferred Savings Plan, the Precision Scientific Profit Sharing Plan,
the Means Stamping Industries, Inc. Retirement Plan or the Consolidated
Metco Profit Sharing and Retirement Savings Plan.
(b) The distribution by the National Metalwares Profit Sharing Plan
and Trust, the Precision Scientific 401(k) Tax Deferred Savings Plan, the
Precision Scientific Profit Sharing Plan, the Means Stamping Industries,
Inc. Retirement Plan or the Consolidated Metco Profit Sharing and
Retirement Savings Plan is one which would not have disqualified the
National Metalwares
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Profit Sharing Plan and Trust, the Precision Scientific 401(k) Tax
Deferred Savings Plan, the Precision Scientific Profit Sharing Plan, the
Means Stamping Industries, Inc. Retirement Plan or the Consolidated Metco
Profit Sharing and Retirement Savings Plan under Code Section 401(a)(9) as
in effect prior to amendment by TEFRA.
(c) The distribution is in accordance with a method of distribution
designated by the Participant whose interest is being distributed or, if
the Participant is deceased, by a Beneficiary of such Participant.
(d) Such designation was in writing, was signed by the Participant
or the Beneficiary, and was made before January 1, 1984.
(e) The Participant had accrued a benefit under the National
Metalwares Profit Sharing Plan and Trust, the Precision Scientific 401(k)
Tax Deferred Savings Plan, the Precision Scientific Profit Sharing Plan,
the Means Stamping Industries, Inc. Retirement Plan or the Consolidated
Metco Profit Sharing and Retirement Savings Plan as of December 31, 1983.
(f) The method of distribution designated by the Participant or the
Beneficiary specifies the time at which distribution will commence, the
period over which distribution will be made, and in the case of any
distribution upon the Participant's death, the Beneficiaries of the
Participant listed in order of priority.
11.10 Direct Rollover. With respect to any payment hereunder which
constitutes an Eligible Rollover Distribution, a Participant may direct the
Committee to have such payment (other than from a Post-Tax Account) paid in the
form of a Trustee Transfer, in accordance with procedures established by the
Committee, provided the Committee receives written notice of such direction with
specific instructions as to the Eligible Retirement Plan on or prior to the
applicable Sweep Date for payment.
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ARTICLE XII
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DISTRIBUTION OF ACCRUED BENEFITS ON DEATH
12.1 Payment to Beneficiary. On the death of a Participant prior to his or
Payment Date, his or her vested Accrued Benefit shall be paid to the Beneficiary
or Beneficiaries designated by the Participant in a beneficiary designation form
provided by the Committee. Death of a Participant on or after his or her Payment
Date shall result in payment to his or her Beneficiary of whatever death benefit
is provided by the form of payment in effect on his or her Payment Date.
12.2 Beneficiary Designation. Each Participant shall complete a
beneficiary designation form indicating the Beneficiary who is to receive the
Participant's remaining Plan interest at the time of his or her death. The
Participant may change such designation of Beneficiary from time to time by
filing a new beneficiary designation form with the Committee. No designation of
Beneficiary or change of Beneficiary shall be effective until properly filed
with the Committee. Notwithstanding any designation to the contrary, the
Participant's Beneficiary shall be the Participant's Spouse to whom the
Participant is legally married under the laws of the State of the Participant's
residence on the date of the Participant's death and surviving him or her on
such date, unless such designation includes Spousal Consent. If the Participant
dies leaving no Spouse and either (1) the Participant shall have failed to file
a valid beneficiary designation form, or (2) all persons designated on the
beneficiary designation form shall have predeceased the Participant, the
Committee shall have the Custodian distribute such Participant's Accrued Benefit
in a single sum to his or her estate.
12.3 Benefit Election.
(a) Request for Distribution.
In the event of a Participant's death prior to his or her Payment
Date, a Beneficiary may elect to have the vested Accrued Benefit of a
deceased Participant paid to him or her beginning upon any Settlement Date
following the Participant's date of death by submitting a completed
distribution election form to the Committee. The election must be
submitted to the Committee by the Sweep Date that relates to the
Settlement Date upon which payments are to begin.
(b) Failure to Request Distribution. In the event a Beneficiary
fails to submit a timely distribution request form, his or her vested
Accrued Benefit shall be valued as of the Valuation Date which immediately
precedes such latest date of distribution (called the "Default Valuation
Date") and a notice of
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such deemed distribution shall be issued to his or her last known address
as soon as administratively possible. If the Beneficiary does not respond
to the notice or cannot be located, his or her vested Accrued Benefit
determined on the Default Valuation Date shall be treated as a Forfeiture.
If the Beneficiary subsequently files a claim, the amount forfeited
(unadjusted for gains and losses) shall be reinstated to his or her
Accounts and distributed as soon as administratively feasible, and such
payment shall be accounted for by charging it against the Forfeiture or by
a Contribution from the Employer of the affected Beneficiary.
12.4 Payment Form. In the event of a Participant's death prior to his or
her Payment Date, a Beneficiary shall be limited to the same form of payment to
which the Participant was limited, unless the Participant has elected an annuity
form of payment which provides for a QPSA with respect to that portion of his
Account which is payable in an annuity form of payment. Payments will be made in
cash (generally by check).
12.5 Time Limit for Payment to Beneficiary. Payment to a Beneficiary must
either:
(a) be completed within five (5) years of the Participant's death;
or
(b) begin within one year of his or her death and be completed
within the period of the Beneficiary's lifetime, except that:
(1) If the Participant dies after the April 1 immediately
following the end of the calendar year in which he or
she attains age seventy and one-half (70 1/2), payment
to his or her Beneficiary must be made at least as
rapidly as provided in the Participant's distribution
election;
(2) If the surviving Spouse is the Beneficiary, payments
need not begin until the date on which the Participant
would have attained age seventy and one-half (70 1/2)
and must be completed within the Spouse's lifetime; and
(3) If the Participant and the surviving Spouse who is the
Beneficiary die (A) before the April 1 immediately
following the end of the calendar year in which the
Participant would have attained age seventy and one-half
(70 1/2); and (B) before payments have begun to the
Spouse, the Spouse will be treated as the Participant in
applying these rules.
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12.6 Direct Rollover. With respect to any payment hereunder which
constitutes an Eligible Rollover Distribution , a Distributee may direct the
Committee to have such payment (other than from a Post-Tax Account) paid in the
form of a Trustee Transfer, in accordance with the procedure established by the
Committee, provided the Committee receives written notice of such direction with
specific instructions as to the Eligible Retirement Plan on or prior to the
applicable Sweep Date for payment.
12.7 QPSA Information and Election. The following information and election
rules shall apply to any Beneficiary of a Participant who dies prior to his or
her Payment Date after having elected an annuity option which provides for a
QPSA, but only to the extent his or her Account includes a transfer from the
National Metalwares Profit Sharing Plan and Trust, the Precision Scientific
Profit Sharing Plan or the Freightliner portion of the Consolidated Metco Profit
Sharing and Retirement Savings Plan:
(a) Form of Payment. The applicable portion of the Participant's
vested Accrued Benefit will be paid in the form of a QPSA.
(b) QPSA Information to a Surviving Spouse. Each surviving Spouse
who requests a life annuity form of payment shall be given a written
explanation of (1) the terms and conditions of being paid the applicable
portion of his or her vested Accrued Benefit in the form of a single life
annuity, (2) the right to make an election to waive this form of payment
and choose an optional form of payment and the effect of making this
election, and (3) the right to revoke this election and the effect of this
revocation.
(c) QPSA Election by Surviving Spouse. A surviving Spouse may elect,
at any time up to the Sweep Date associated with the Settlement Date upon
which payments will begin, to (1) waive the single life annuity and elect
an optional form of payment, or (2) revoke or change any such election.
12.8 Small Amounts Paid Immediately. If a Beneficiary's vested Accrued
Benefit is $5,000 or less, the Beneficiary's vested Accrued Benefit shall be
paid as a single lump sum as soon as administratively feasible.
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ARTICLE XIII
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MAXIMUM CONTRIBUTIONS
13.1 Definitions.
(a) "Annual Additions" means with respect to a Participant for any
Plan Year the sum of:
(1) Contributions and Forfeitures (and any earnings thereon)
allocated as of a date within the Plan Year;
(2) All contributions, forfeitures and suspended amounts
(and income thereon) for such Plan Year, allocated to
such Participant's account(s) under any Related Defined
Contribution Plan as of a date within such Plan Year;
(3) The sum of all after-tax contributions of the
Participant to Related Plans for the Plan Year and
allocated to such Participant's accounts under such
Related Plan as of a date within such Plan Year
("Aggregate Employee Contributions");
(4) Solely for purposes of this Section, all contributions
to any "separate account" (as defined in Section 419A(d)
of the Code) allocated to such Participant as of a date
within the Plan Year if such Participant is a "Key
Employee" within the meaning of Code Section 416(i); and
(5) Solely for purposes of this Section, all contributions
to any "individual medical benefit account" (as defined
in Section 415(l) of the Code) allocated to such
Participant as of a date within the Plan Year.
(b) "Maximum Annual Additions" of a Participant for a Plan Year
means the lesser of:
(1) twenty-five percent (25%) of the Participant's
Compensation, or
(2) the greater of thirty thousand dollars ($30,000) or
one-quarter of the dollar limitation in Code Section
415(b)(1)(A) as adjusted for cost of living increases
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(determined in accordance with regulations prescribed by
the Secretary of the Treasury or his or her delegate
pursuant to the provisions of Section 415(d) of the
Code).
(c) "Annual Excess" means, for each Participant affected, the amount
by which the allocable Annual Additions for such Participant exceeds or
would exceed the Maximum Annual Addition for such Participant.
13.2 Avoiding an Annual Excess. Notwithstanding any other provision of
this Plan, a Participant's "Annual Additions" for any Plan Year, which is hereby
designated as the "limitation year" for the Plan, as that term is used in
Section 415 of the Code, shall not exceed his or her "Maximum Annual Additions."
If, at any time during a Plan Year, the allocation of additional Contributions
for a Plan Year would produce an Annual Excess, the affected Participant shall
receive the Maximum Annual Addition from Contributions, and, at the direction of
the Committee, for the remainder of the Plan Year Contributions will be reduced,
if possible, to the amount needed for each affected Participant to receive the
Maximum Annual Addition.
13.3 Correcting an Annual Excess. If for any Plan Year as a result of a
reasonable error in estimating a person's Compensation, Elective Deferrals, or
such other facts and circumstances which the Internal Revenue Service will
permit, a Participant's Annual Excess shall be treated in the following manner:
(a) Aggregate Employee Contributions allocable under a Related Plan
shall be distributed to the Participant, if permitted, by the amount of
the Annual Excess.
(b) If any Annual Excess remains, Pre-Tax Contributions shall be
distributed to such Participant.
(c) If any Annual Excess (adjusted for investment gains and losses)
remains, Contributions shall be a Forfeiture for such Participant in the
following order:
(1) Matching Contributions; and
(2) Profit Sharing Contributions.
(d) Any Forfeiture of a Participant's allocations of Contributions
under subparagraph (c) above shall be held in the Forfeiture Account and
shall be used for the Plan Year to reduce or applied as Contributions. If
any such amount remains in the Forfeiture Account, it shall again be held
in suspense in
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the Forfeiture Account and be utilized to reduce future Contributions
for succeeding Plan Years.
(e) Any amounts held in suspense in the Forfeiture Account pursuant
to Paragraph (d) above remaining upon Plan termination shall be returned
to the Employers in such proportions as shall be determined by the
Committee.
13.4 Correcting a Multiple Plan Excess. If a Participant's Accounts have
or would have an Annual Excess, the Annual Excess shall be corrected by reducing
the Annual Addition to this Plan before reductions have been made to other
Related Defined Contribution Plans.
13.5 Two-Plan Limit. Prior to January 1, 2000, if a Participant
participates in any Related Defined Benefit Plan, the sum of the "Defined
Benefit Plan Fraction" (as defined below) and the "Defined Contribution Plan
Fraction" (as defined below) for such Participant shall not exceed one (called
the "Combined Fraction").
(a) "Defined Benefit Plan Fraction" means, for any Plan Year, a
fraction, the numerator of which is the projected benefit payable pursuant
to Code Section 415(e)(2)(A) under all Related Defined Benefit Plans and
the denominator of which is the lesser of: (i) the product of 1.25 and the
dollar limit in effect for the Plan Year under Code Section 415(b)(1)(A),
and (ii) the product of 1.4 and one hundred percent (100%) of the
Participant's average Compensation for his or her high three (3) years.
(b) "Defined Contribution Plan Fraction" means, for any Plan Year, a
fraction, the numerator of which is the sum of the Annual Additions (as
determined pursuant to Section 415(c) of the Code in effect for such Plan
Year) to a Participant's Accounts as of the end of the Plan Year under the
Plan or any Related Defined Contribution Plan, and the denominator of
which is the lesser of:
(1) The sum of the products of 1.25 and the dollar limit
under Code Section 415(c)(1)(A) for such Plan Year and
for each prior year of service with a Commonly
Controlled Entity and its predecessor, and
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(2) the sum of the products of 1.4 and twenty-five percent
(25%) of the Participant's Compensation for such Plan
Year and for each prior year of service with a Commonly
Controlled Entity and its predecessor.
If the Combined Fraction of such Participant exceeds one and if the
Related Defined Benefit Plan permits it, the Participant's Defined Benefit
Plan Fraction shall be reduced by limiting the Participant's annual
benefits payable from the Related Defined Benefit Plan in which he or she
participates to the extent necessary to reduce the Combined Fraction of
such Participant to one.
13.6 Short Plan Year. With respect to any change of the Plan Year (and
co-existent limitation year), the dollar limitation of the Maximum Annual
Addition for such Plan Year shall be determined by multiplying such dollar
amount by a fraction, the numerator of which is the number of months (including
fractional parts of a month) in the short Plan Year, and the denominator of
which is twelve (12).
13.7 Grandfathering of Applicable Limitations. The Plan shall recognize
and apply any grandfathering of applicable benefits and contributions
limitations which are permitted under ERISA, the Tax Equity and Fiscal
Responsibility Act of 1982 and the Tax Reform Act of 1986.
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ARTICLE XIV
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ADP AND ACP TESTS
14.1 Contribution Limitation Definitions. For purposes of this Article,
the following terms are defined as follows:
(a) "Average Contribution Percentage" or "ACP" means, separately,
the average of the Calculated Percentage for Participants within the HCE
Group and the NHCE Group, respectively, for a Plan Year.
(b) "Average Deferral Percentage" or "ADP" means, separately, the
average of the Calculated Percentage calculated for Participants within
the HCE Group and the NHCE Group, respectively, for a Plan Year.
(c) "Calculated Percentage" means the calculated percentage for a
Participant. The calculated percentage refers to either the
K-Contributions (including amounts distributed because they exceeded the
Contribution Dollar Limit) with respect to Compensation which would have
been received by the Participant in the Plan Year but for his or her
Contribution Election, or M-Contributions allocated to the Participant's
Account as of a date within the Plan Year, divided by his or her
Compensation for such Plan Year.
(d) "M-Contributions" shall include Matching Contributions
(excluding Qualified Matching Contributions). In addition, M-Contributions
may include Pre-Tax Contributions and Special Contributions treated as
Matching Contributions, but only to the extent that (1) the Committee
elects to use them; and (2) they meet the requirements of Code Section
401(m) to be regarded as Matching Contributions. M-Contributions shall not
include Matching Contributions which become a Forfeiture because the
Contribution to which it relates is in excess of the ADP Test, ACP Test or
the Contribution Dollar Limit.
(e) "K-Contributions" shall include Pre-Tax Contributions (excluding
Pre-Tax Contributions treated as Matching Contributions), but shall
exclude Limited Deferrals to this Plan made on behalf of any NHCE in
excess of the Contribution Dollar Limit. In addition, Deferrals may
include Qualified Matching Contributions and Special Contributions, but
only to the extent that (1) the Committee elects to use them and (2) they
meet the requirements of Code Section 401(k) to be regarded as elective
contributions.
(f) "HCE Group" and "NHCE Group" means, with respect to each
Employer and its Commonly Controlled Entities, the respective group of
HCEs
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and NHCEs who are eligible to have amounts contributed on their behalf for
the Plan Year, including Employees who would be eligible but for their
election not to participate or to contribute, or because their pay is
greater than zero but does not exceed a stated minimum, but subject to the
following:
(1) If the Related Plans are subject to the ADP or ACP Test,
and are considered as one plan for purposes of Code
Sections 401(a)(4) or 410(b) (other than 410(b)(2)), all
such plans shall be aggregated and treated as one plan
for purposes of meeting the ADP and ACP Tests provided
that, for Plan Years beginning after December 31, 1989,
plans may only be aggregated if they have the same Plan
Year.
(2) If an HCE is covered by more than one cash or deferred
arrangement maintained by the Related Plans, all such
arrangements (other than arrangements in plans that are
not required to be aggregated for this purpose under
Treas. Reg. ss.1.401(k)-1(g)(l)(ii)(B)) with respect to
the Plan Years ending with or within the same calendar
year shall be aggregated and treated as one arrangement
for purposes of calculating the separate percentage for
the HCE which is used in the determination of the
Average Percentage.
14.2 ADP and ACP Tests. For each Plan Year, the ADP and ACP for the HCE
Group must meet either the Basic or Alternative Limitation when compared to the
respective ADP and ACP for the NHCE Group:
(a) Basic Limitation. The ADP or ACP for the HCE Group may not
exceed 1.25 times the ADP or ACP, respectively, for the NHCE Group.
(b) Alternative Limitation. The ADP or ACP for the HCE Group is
limited by reference to the ADP or ACP, respectively, for the NHCE Group
as follows:
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If the NHCE Group Then the Maximum HCE
Percentage is: Group Percentage is:
-------------- --------------------
Less than 2% 2 times ADP or ACP for the
NHCE Group
2% to 8% ADP or ACP for the NHCE Group
plus 2%
More than 8% Basic Limitation applies
14.3 Correction of ADP and ACP Tests.
(a) Reduction of K-Contributions or M-Contributions. If the ADP or
ACP are not met or will not be met, the Committee shall determine a
maximum dollar amount (in accordance with Sections 401(k)(8) and 401(m)(6)
of the Code) for each HCE that would reduce the ADP or ACP of the HCE
Group by a sufficient amount to meet the ADP and ACP Tests.
(b) ADP Correction. Pre-Tax Contributions (including amounts
previously refunded because they exceeded the Contribution Dollar Limit)
shall be recharacterized by allocating such Pre-Tax Contributions to the
Participant's Post-Tax Account within two and one-half months after the
close of the Plan Year but not to exceed Ten Percent (10%) of his or her
Compensation in an amount equal to the actual K-Contribution minus the
maximum Pre-Tax Contribution (as determined under Section 14.4 herein) for
each individual HCE. Matching Contributions with respect to such
distributed Pre-Tax Contributions shall be forfeited (unless paid to the
Participant due to an ACP Correction).
(c) ACP Correction. Matching Contribution amounts in excess of the
maximum percentage of an HCE's Compensation shall, by the end of the next
Plan Year, be refunded to the Participant to the extent vested, and
forfeited to the extent such amounts were not vested as of the end of the
Plan Year being tested.
(d) Investment Fund Sources. Once the amount of Pre-Tax and Matching
Contributions to be refunded is determined, amounts shall then be taken by
type of investment in direct proportion to the market value of the
Participant's interest in each Investment Fund (which excludes Participant
loans) as of the Trade Date as of which the correction is processed.
14.4 Method of Calculation. Effective January 1, 1997, the Committee shall
determine the maximum permissible Pre-Tax Contribution (and corresponding
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Matching Contribution) for HCEs by reducing the appropriate HCE's Pre-Tax
Contribution in the following manner until the ADP or ACP Test is satisfied:
(a) The Pre-Tax Contribution of the HCE(s) with the greatest Pre-Tax
Contribution shall be reduced by one dollar ($1.00) until it is equal to
the dollar amount of the next greatest HCE Pre-Tax Contribution.
(b) If more reduction is needed, the procedure in Paragraph (a)
shall be repeated as needed.
14.5 Multiple Use Test. If the Average Contribution Percentage and the
Average Deferral Percentage for the HCE Group exceeds the Basic Limitation in
both the ADP or the ACP Tests (after correction of the ADP and ACP Test), the
ADP and ACP (as corrected) for the HCE Group must also comply with the
requirements of Code Section 401(m)(9), which as of the Effective Date require
that the sum of these two percentages (as determined after any corrections
needed to meet the ADP or ACP Tests have been made) must not exceed the greater
of:
(a) the sum of
(1) the larger of the ADP or ACP for the NHCE Group times
1.25; and
(2) the smaller of the ADP or ACP for the NHCE Group, times
two (2) if the NHCE Average Percentage is less than two
percent (2%), or plus two percent (2%) if it is two
percent (2%) or more; or
(b) the sum of
(1) the lesser of the ADP or ACP for the NHCE Group times
1.25; and
(2) the greater of the ADP or ACP for the NHCE Group, times
two (2) if the NHCE Average Percentage is less than two
percent (2%), or plus two percent (2%) if it is two
percent (2%) or more.
If the multiple use limit is exceeded, the Committee shall determine a
maximum ADP or ACP for the HCE Group and shall reduce the ADP or ACP for
each HCE in the same manner as would be used to correct to ADP or ACP.
14.6 Adjustment for Investment Gain or Loss. The net investment gain or
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loss associated with the K-Contributions and/or M-Contributions to be
distributed shall be distributed or charged against a distribution within two
and one-half (2 1/2) months but no later than twelve (12) months following the
close of the applicable Plan Year. Such gain or loss is calculated as follows:
Ex[G/(AB-G)]x(1+(10%xM))
where:
E = the total excess Deferrals or Contributions,
G = the net gain or loss for the Plan Year from all of an HCE's
affected Accounts,
AB = the total value of an HCE's affected Accounts, determined as of
the end of the Plan Year being corrected,
M = the number of full months from the Plan Year end to the date
excess amounts are paid, plus one for the month during which payment
is to be made if payment will occur after the fifteenth (15th) of
the month.
14.7 Required Records. The Committee shall maintain records which are
sufficient to demonstrate that the ADP, ACP and Multiple Use Test has been met
for each Plan Year for at least as long as the Employer's corresponding tax year
is open to audit.
14.8 Incorporation by Reference. The provisions of this Section are
intended to satisfy the requirements of Code Sections 401(k)(3), (m)(2), (m)(9)
and Treas. Reg. ss. 1.401(k)-1(b), ss.1.401(m)-1(b) and ss.1.401(m)-2 and, to
the extent not otherwise stated in this Section, those Code Sections and
Treasury Regulations are incorporated herein by reference.
14.9 Collectively Bargained Employees. The provisions of this Article
shall apply separately to Participants who are collectively bargained employees
within the meaning of Treas. Reg. ss. 1.410(b)-6(d)(2) and for Participants who
are not collectively bargained employees.
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14.10 QSLOB. The Committee in its sole discretion may apply the provisions
of this Article separately with respect to each qualified separate line of
business, as defined in Section 414(r) of the Code.
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ARTICLE XV
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CUSTODIAL ARRANGEMENTS
15.1 Custodial Agreement. The Committee may enter into one or more
Custodial Agreements to provide for the holding, investment and payment of Plan
assets, or direct by execution of an insurance contract that all or a specified
portion of the Plan's assets be held, invested and paid under such a contract.
All Custodial Agreements, as from time to time amended, shall continue in force
and shall be deemed to form a part of the Plan. Subject to the requirements of
the Code and ERISA, the Committee may cause assets of the Plan which are
securities to be held in the name of a nominee or in street name provided such
securities are held on behalf of the Plan by:
(a) a bank or trust company that is subject to supervision by the
United States or a State, or a nominee of such bank or trust company;
(b) a broker or dealer registered under the Securities Exchange Act
of 1934, or a nominee of such broker or dealer; or
(c) a "clearing agency" as defined in Section 3(a)(23) of the
Securities Exchange Act of 1934, or its nominee.
15.2 Selection of Custodian. The Committee shall select, remove or replace
the Custodian in accordance with the Custodial Agreement. The subsequent
resignation or removal of a Custodian and the approval of its accounts shall all
be accomplished in the manner provided in the Custodial Agreement.
15.3 Custodian's Duties. Except as provided in ERISA, the powers, duties
and responsibilities of the Custodian shall be as stated in the Custodial
Agreement, and unless expressly stated or delegated to the Custodian (with the
Custodian's acceptance), nothing contained in this Plan shall be deemed by
implication to impose any additional powers, duties or responsibilities upon the
Custodian. All Employer Contributions and Rollover Contributions shall be paid
into the Trust, and all benefits payable under the Plan shall be paid from the
Trust, except to the extent such amounts are paid to a Custodian other than the
Trustee. An Employer shall have no rights or claims of any nature in or to the
assets of the Plan except the right to require the Custodian to hold, use, apply
and pay such assets in its hands, in accordance with the directions of the
Committee, for the exclusive benefit of the Participants and their
Beneficiaries, except as hereinafter provided.
15.4 Separate Entity. The Custodial Agreement under this Plan from its
inception shall be a separate entity aside and apart from Employers or their
assets,
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and the corpus and income thereof shall in no event and in no manner whatsoever
be subject to the rights or claims of any creditor of any Employer.
15.5 Plan Asset Valuation. As of each Valuation Date, the Fair Market
Value of the Plan's assets held or posted to an Investment Fund shall be
determined by the Committee or the Custodian, as appropriate.
15.6 Right of Employers to Plan Assets. The Employers shall have no right
or claim of any nature in or to the assets of the Plan except the right to
require the Custodian to hold, use, apply, and pay such assets in its possession
in accordance with the Plan for the exclusive benefit of the Participants or
their Beneficiaries and for defraying the reasonable expenses of administering
the Plan; provided, that:
(a) if the Plan receives an adverse determination with respect to
its initial qualification under Sections 401(a), 401(k) and 401(m) of the
Code, Contributions conditioned upon the qualification of the Plan shall
be returned to the appropriate Employer within one (1) year of such denial
of qualification; provided, that the application for determination of
initial qualification is made by the time prescribed by law for filing the
respective Employer's return for the taxable year in which the Plan is
adopted, or by such later date as is prescribed by the Secretary of the
Treasury under Section 403(c)(2)(B) of ERISA;
(b) if, and to the extent that, deduction for a Contribution under
Section 404 of the Code is disallowed, Contributions conditioned upon
deductibility shall be returned to the appropriate Employer within one (1)
year after the disallowance of the deduction;
(c) if, and to the extent that, a Contribution is made through
mistake of fact, such Contribution shall be returned to the appropriate
Employer within one year of the payment of the Contribution; and
(d) any amounts held suspended pursuant to the limitations of Code
Section 415 shall be returned to the Employers upon termination of the
Plan.
All Contributions made hereunder are conditioned upon the Plan being
qualified under Sections 401(a) or 401(k) and 401(m) of the Code and a
deduction being allowed for such contributions under Section 404 of the
Code. Pre-Tax Contributions returned to an Employer pursuant to this
Section shall be paid to the Participant for whom contributed as soon as
administratively convenient. If these provisions result in the return of
Contributions after such amounts have been allocated to Accounts, such
Accounts shall be reduced by the amount of the allocation attributable to
such amount, adjusted for any losses or expenses.
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ARTICLE XVI
- --------------------------------------------------------------------------------
ADMINISTRATION AND INVESTMENT MANAGEMENT
16.1 Authority and Responsibility of the Board of Directors. The Board of
Directors shall have overall responsibility for the establishment, amendment,
termination, administration and operation of the Plan, for the establishment of
a funding policy for the Plan, and for the investment of the Plan's assets.
There is hereby delegated to the Committee, as set forth in this Plan and to the
Investment Committee, as set forth in the Custodial Agreement, such
responsibilities as are designated in each document.
16.2 Committee Membership. The Committee shall consist of not less than 3
persons, who shall be appointed by the Board of Directors of the Company. In the
absence of such appointment of the Committee, the Company will be the Committee.
Committee members shall remain in office at the will of the Board of Directors
and the Board of Directors may from time to time remove any of said members with
or without cause and shall appoint their successors.
16.3 Committee Structure. Any individual may be a member of the Committee.
Any member of the Committee may resign by delivering his or her written
resignation to the Board of Directors, and such resignation shall become
effective upon the date specified therein. A member who is an Employee shall
automatically cease to be a member upon his or her Termination of Employment. In
the event of a vacancy in membership, the remaining members shall constitute the
Committee in question with full power to act until said vacancy is filled.
16.4 Committee Actions. The Committee may act as follows:
(a) The members of the Committee may act at a meeting (including a
meeting at different locations by telephone conference) or in writing
without a meeting (through the use of a single document or concurrent
document).
(b) Any Committee member by writing may delegate any or all of his
or her rights, powers, duties and discretions to any other member with the
consent of such other member.
(c) The Committee shall act by majority decision, which action shall
be effective as if such action had been taken by all members of the
Committee; provided that by majority action one or more Committee members
or other persons may be authorized to act with respect to particular
matters on behalf of all Committee members.
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(d) Subject to applicable law, no member of the Committee shall be
liable for an act or omission of the other Committee members in which the
former had not concurred.
(e) Any action by the Committee under this Plan shall be treated as
an action of a Named Fiduciary under this Plan; provided that, where
reference is made in this Plan (or where the Committee designates in
writing) that the action is on behalf of the Employer, the Committee shall
be acting as an agent of the Employer, pursuant to authority granted by
the Employer.
16.5 Compensation. The members of the Committee shall serve without
compensation for their services as such.
16.6 Responsibility and Authority of the Committee Regarding
Administration of the Plan. The Committee on behalf of the Participants will
enforce the Plan in accordance with its respective terms and maintain the Plan
in the form of a written document as required by law and to maintain its
tax-exempt status under the Code. Unless otherwise specifically provided in the
Plan, the Committee shall have full and complete authority, responsibility and
control over the management, administration, and operation of the Plan,
including, but not limited to, the authority and discretion to:
(a) formulate, adopt, issue and apply procedures and rules and
change, alter or amend such procedures and rules in accordance with law
and as may be consistent with the terms of the Plan;
(b) exercise such discretion as may be required to construe and
apply the provisions of the Plan, subject only to the terms and conditions
of the Plan;
(c) appoint and compensate such agents and other specialists
(including attorneys, actuaries and accountants) to aid it in the
administration of the Plan, and arrange for such clerical, accounting,
legal or other services, as the Committee considers necessary or
appropriate in carrying out the provisions of the Plan;
(d) appoint and compensate an independent outside accountant to
conduct such audits of the financial statements of the Plan as the
Committee considers necessary or appropriate;
(e) delegate to the Custodian any tax withholding or tax reporting
obligations it may have under law;
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(f) be the agent for service of legal process;
(g) determine the Accounting Periods, Change Date, Notice Date and
Sweep Date for various transactions;
(h) exercise authority regarding the creation, cancellation or
change of an Investment Fund; and
(i) take all necessary and proper acts as are required for the
Committee to fulfill its duties and obligations under the Plan.
16.7 Allocations and Delegations of Responsibility.
(a) Delegations. Each Named Fiduciary, respectively, shall have the
authority to delegate, from time to time, all or any part of its
responsibilities under the Plan to such person or persons as it may deem
advisable and to revoke any such delegation of responsibility. Any action
of the delegate in the exercise of such delegated responsibilities shall
have the same force and effect for all purposes hereunder as if such
action had been taken by the Named Fiduciary. Any Named Fiduciary shall
not be liable for any acts or omissions of any such delegate. The delegate
shall report periodically to the Named Fiduciary, as applicable,
concerning the discharge of the delegated responsibilities.
(b) Allocations. Each Named Fiduciary, respectively, shall have the
authority to allocate, from time to time, all or any part of its
responsibilities under the Plan to one or more of its members as it may
deem advisable, and to revoke such allocation of responsibilities. Any
action of the member to whom responsibilities are allocated in the
exercise of such allocated responsibilities shall have the same force and
effect for all purposes hereunder as if such action had been taken by the
Named Fiduciary. Any Named Fiduciary shall not be liable for any acts or
omissions of such member. The member to whom responsibilities have been
allocated shall report periodically to the Named Fiduciary, as applicable,
concerning the discharge of the allocated responsibilities.
(c) Limit on Liability. Fiduciary duties and responsibilities which
have been allocated or delegated pursuant to the terms of the Plan or the
Trust, are intended to limit the liability of each Named Fiduciary, as
appropriate, in accordance with the provisions of Section 405(c)(2) of
ERISA.
16.8 Committee Bonding. The members of the Committee shall serve without
bond (except as otherwise required by federal law).
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16.9 Information to be Supplied by Employer. Each Employer shall supply to
the Committee, within a reasonable time of its request, the names of all
Employees, their age, their date of hire, and the amount of Compensation paid to
each Employee, the names and dates of all Employees who incurred a Termination
of Employment during the Plan Year, and the Hours of Service earned by each
Employee during the Plan Year. Each Employer shall provide to the Committee or
its delegate such other information as it shall from time to time need in the
discharge of its duties. The Committee may rely conclusively on the information
certified to it by an Employer.
16.10 Records. The regularly kept records of the Committee (or, where
applicable, the Custodian) and any Employer shall be conclusive evidence of the
Accrued Benefit of a Participant, his or her Compensation, his or her age, his
or her status as an Eligible Employee, and all other matters contained therein
applicable to this Plan; provided that a Participant may request a correction in
the record of his or her age at any time prior to retirement, and such
correction shall be made if within ninety (90) days after such request he or she
furnishes in support thereof a birth certificate, baptismal certificate, or
other documentary proof of age satisfactory to the Committee.
16.11 Plan Expenses. All expenses of the Plan shall be paid by the Trust
except to the extent paid by the Employers, and if paid by the Employers such
Employers may seek reimbursement of such expenses from the Trust and the Trust
shall reimburse the Employers if not prohibited by ERISA. If borne by the
Employers, expenses of administering the Plan shall be borne by the Employers in
such proportions as the Committee shall determine.
16.12 Fiduciary Capacity. Any person or group of persons may serve in more
than one fiduciary capacity with respect to the Plan.
16.13 Employer's Agent. The Committee shall act as agent for each Employer
in the administration of the Plan and the investment of the Plan's assets and
the Company shall act as agent for each Employer in amending or terminating the
Plan.
16.14 Plan Administrator. The Committee may appoint a plan administrator
who may (but need not) be a member of the Committee; and in the absence of such
appointment, the Committee shall be the plan administrator.
16.15 Appointment of Record-Keeper. The plan administrator has
responsibility for the maintenance of the records of the Participants' Accounts
in accordance with the terms of the Plan. Such records shall include
year-to-date and life-to-date Contributions under the Plan (adjusted for gains,
losses and distributions)
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allocated to each Participant's Accounts and such other information, including
such information as the Committee or plan administrator require to satisfy their
reporting and disclosure obligations under ERISA and the Code. The plan
administrator also has responsibility for preparation and issuance of any and
all reports required by the Code with respect to distributions under the Plan
and the responsibility with respect to the withholding of any amounts required
by the Code to be withheld at the source and to transmit funds withheld and any
and all necessary reports with respect to such withholding to the Internal
Revenue Service.
16.16 Plan Administrator Duties and Authority. Except to the extent that
certain responsibilities may be reserved by the Committee to itself or delegated
to other fiduciaries, the plan administrator shall perform all such duties as
are necessary to operate, administer and manage the Plan in accordance with the
terms thereof, including but not limited to the following:
(a) to determine all questions relating to a Participant's
eligibility for participation and benefits under the Plan and to finally
resolve, in the exercise of its full and complete discretionary authority,
any issues presented through the Plan claims procedure (and any final
determination of the Committee shall not be subject to de novo review if
challenged in court and shall not be overturned unless proven to be
arbitrary and capricious upon the evidence considered by the Committee at
the time of its decision);
(b) to provide each Participant with a summary plan description no
later than 90 days after he or she has become a Participant (or such other
period permitted under ERISA Section 104(b)(1)), as well as informing each
Participant of any material modification to the Plan in a timely manner;
(c) to make appropriate determinations as to allocations of
Contributions and the application of Forfeitures; and to make appropriate
determination as to whether Rollover Contributions constitute such;
(d) to interpret and construe the provisions of the Plan, to make
regulations and settle disputes within limits which are not inconsistent
with the terms thereof;
(e) where applicable, to provide each Participant or his Spouse with
QJSA and QPSA information;
(f) to adopt and prescribe the use of necessary forms and procedures
for giving instructions to the Committee, a Named Fiduciary or the
Trustee;
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(g) to prepare and file reports, notices, and any other documents
relating to the Plan which may be required by the Secretary of Labor, the
Secretary of the Treasury or any other governmental department or agency,
including, without limitation, those relating to a Participant's service,
accrued benefits, the percentage of such benefits which are
nonforfeitable, the date after which benefits are nonforfeitable even if
the Participant dies and annual registrations;
(h) to prepare and distribute to Participants all communication
materials required by ERISA;
(i) to compute and certify to the Custodian the amount and kind of
benefits payable to or withdrawn from Participants and Beneficiaries and
the date of payment, including withdrawals; and to prescribe procedures to
be followed by Participants and Beneficiaries in claiming benefits;
(j) to keep records relating to Participants and other matters
applicable to this Plan, provided that the Committee and the Custodian
may, by a separate written agreement, require that the Custodian keep such
records;
(k) to respond to a QDRO;
(l) to instruct the Custodian as to Participants' and Beneficiaries'
Investment Elections and Conversion Elections;
(m) to make available for inspection and to provide upon request at
such charge as may be permitted and determined by the Committee, documents
and instruments required to be disclosed by ERISA;
(n) to make a determination of whether a Participant is suffering a
deemed or demonstrated financial need and whether a withdrawal from this
Plan is deemed or demonstrated necessary to satisfy such financial need,
provided, however, in making such determination, the plan administrator
may rely, if reasonable to do so, upon representations made by such
Participant in connection with his or her request for a withdrawal;
(o) to take such actions as are necessary to establish and maintain
in full and timely compliance with any law or regulation having pertinence
to this Plan; and
(p) to have reasonable powers necessary or appropriate to accomplish
its duties as plan administrator, including delegation to,
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employment of, or contracting for the services of others to assist in
performing its duties.
16.17 Committee Decisions Final. The decision of the Committee in matters
within its jurisdiction shall be final, binding, and conclusive upon the
Employers and the Custodian and upon each Employee, Participant, Spouse,
Beneficiary, and every other person or party interested or concerned.
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ARTICLE XVII
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CLAIMS PROCEDURE
17.1 Initial Claim for Benefits. Each person entitled to benefits under
this Plan (a "Claimant") must sign and submit his or her claim for benefits to
the Committee or its agent in writing in such form as is provided or approved by
such Committee. A Claimant shall have no right to seek review of a denial of
benefits, or to bring any action in any court to enforce a claim for benefits
prior to his or her filing a claim for benefits and exhausting his or her rights
under this Section. When a claim for benefits has been filed properly, such
claim for benefits shall be evaluated and the Claimant shall be notified by the
Committee or agent of its approval or denial within ninety (90) days after the
receipt of such claim unless special circumstances require an extension of time
for processing the claim. If such an extension of time for processing is
required, written notice of the extension shall be furnished to the Claimant by
the Committee or agent prior to the termination of the initial ninety (90) day
period which shall specify the special circumstances requiring an extension and
the date by which a final decision will be reached (which date shall not be
later than one hundred eighty (180) days after the date on which the claim was
filed). A Claimant shall be given a written notice in which the Claimant shall
be advised as to whether the claim is granted or denied, in whole or in part. If
a claim is denied, in whole or in part, the Claimant shall be given written
notice which shall contain (1) the specific reasons for the denial, (2)
references to pertinent Plan provisions upon which the denial is based, (3) a
description of any additional material or information necessary to perfect the
claim and an explanation of why such material or information is necessary, and
(4) the Claimant's rights to seek review of the denial.
17.2 Review of Claim Denial. If a claim is denied, in whole or in part (or
if within the time periods prescribed for in the initial claim, the Committee or
agent has not furnished the Claimant with a denial and the claim is therefore
deemed denied), the Claimant shall have the right to request that the Committee
review the denial, provided that the Claimant files a written request for review
with the Committee within sixty (60) days after the date on which the Claimant
received written notification of the denial. A Claimant (or his or her duly
authorized representative) may review pertinent documents and submit issues and
comments in writing to the Committee. Within sixty (60) days after a request for
review is received, the review shall be made and the Claimant shall be advised
in writing by the Committee of the decision on review, unless special
circumstances require an extension of time for processing the review, in which
case the Claimant shall be given a written notification by the Committee within
such initial sixty (60) day period specifying the reasons for the extension and
when such review shall be completed (provided that such review shall be
completed within one hundred and twenty (120) days after the date on which the
request for review was filed). The decision on review shall be
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forwarded to the Claimant by the Committee in writing and shall include specific
reasons for the decision and references to Plan provisions upon which the
decision is based. A decision on review shall be final and binding on all
persons for all purposes. If a Claimant shall fail to file a request for review
in accordance with the procedures described in this Section, such Claimant shall
have no right to review and shall have no right to bring action in any court and
the denial of the claim shall become final and binding on all persons for all
purposes.
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ARTICLE XVIII
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ADOPTION AND WITHDRAWAL FROM PLAN
18.1 Procedure for Adoption. Any Commonly Controlled Entity may by
resolution of such Commonly Controlled Entity's board of directors adopt the
Plan for the benefit of its employees as of the date specified in the board
resolution. No such adoption shall be effective until such adoption has been
approved by the Committee.
18.2 Procedure for Withdrawal. An Employer (other than the Company) will
be deemed to have withdrawn from the Plan upon resolution to that effect by the
Committee. Notwithstanding the foregoing, an Employer will be deemed to have
withdrawn from the Plan when it ceases to be a Commonly Controlled Entity. With
respect to any Participant whose Employer is deemed to have withdrawn from the
Plan because it ceases to be a Commonly Controlled Entity, such Participant's
Account shall be fully vested as of the date of such withdrawal, provided there
is no successor plan or trust to which the balance of such Participant's
Accounts may be transferred.
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ARTICLE XIX
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AMENDMENT, TERMINATION AND MERGER
19.1 Amendments.
(a) Power to Amend. The Company, by resolution of the Board of
Directors on behalf of all Employers, or the Committee as provided in
Subsection (c) below, may amend, modify, change, revise or discontinue
this Plan by amendment at any time; provided, however, that no amendment
shall:
(1) increase the duties or liabilities of the Custodian or
the Committee without its written consent;
(2) have the effect of vesting in any Employer any interest
in any funds, securities or other property, subject to
the terms of this Plan and the Custodial Agreement;
(3) authorize or permit at any time any part of the corpus
or income of the Plan's assets to be used or diverted to
purposes other than for the exclusive benefit of
Participants and Beneficiaries;
(4) except to the extent permissible under ERISA and the
Code, make it possible for any portion of the Trust
assets to revert to an Employer to be used for, or
diverted to, any purpose other than for the exclusive
benefit of Participants and Beneficiaries entitled to
Plan benefits and to defray reasonable expenses of
administering the Plan;
(5) amend the provisions of this Plan which either (1) state
the amount and price of Company Stock to be awarded to
designated officers or categories of officers and,
specifically, the timing of such awards, or (2) set
forth a formula that determines the amount, price and
timing of such awards, shall not be amended more than
once every six (6) months, other than to comport with
changes in the Code, ERISA or the rules thereunder;
(6) permit an Employee to be paid the balance of his or her
Pre-Tax Account unless the payment would otherwise be
permitted under Code Section 401(k); and
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(7) have any retroactive effect as to deprive any such
person of any benefit already accrued, except that no
amendment made in order to conform the Plan as a plan
described in Section 401(a) of the Code of which
amendments are permitted by the Code or are required or
permitted by any other statute relating to employees'
trusts, or any official regulations or ruling issued
pursuant thereto, shall be considered prejudicial to the
rights of any such person.
(b) Restriction on Amendment. No amendment to the Plan shall deprive
a Participant of his or her nonforfeitable rights to benefits accrued to
the date of the amendment. Further, if the vesting schedule of the Plan is
amended, each Participant with at least three (3) years of Vesting Service
with the Employer may elect, within a reasonable period after the adoption
of the amendment, to have his nonforfeitable percentage computed under the
Plan without regard to such amendment. The period during which the
election may be made shall commence with the date the amendment is adopted
and shall end on the latest of:
(1) sixty (60) days after the amendment is adopted;
(2) sixty (60) days after the amendment becomes effective;
or
(3) sixty (60) days after the Participant is issued written
notice of the amendment by the Employer or the
Committee.
The preceding language concerning an amendment to the Plan's vesting
schedule shall also apply when a Plan with a different vesting schedule is
merged into this Plan. In addition to the foregoing, the Plan shall not be
amended so as to eliminate an optional form of payment of an Accrued
Benefit attributable to employment prior to the date of the amendment. The
foregoing limitations do not apply to benefit accrual occurring after the
date of the amendment.
(c) The Committee. The Committee may amend, modify, change or revise
the Plan by amendment if such amendment could have been adopted under this
Section and it does not cause a change in the level or type of
contributions to be made to the Plan or otherwise materially increase the
duties and obligations of any or all Employers with respect to the Plans.
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19.2 Plan Termination. It is the expectation of the Company that it will
continue the Plan and the payment of Contributions hereunder indefinitely, but
the continuation of the Plan and the payment of Contributions hereunder is not
assumed as a contractual obligation of the Company or any other Employer. The
right is reserved by the Company to terminate the Plan at any time, and the
right is reserved by the Company and any other Employer at any time to reduce,
suspend or discontinue its Contributions hereunder, provided, however, that the
Contributions for any Plan Year accrued or determined prior to the end of said
year shall not after the end of said year be retroactively reduced, suspended or
discontinued except as may be permitted by law. Upon termination of the Plan or
complete discontinuance of Contributions hereunder (other than for the reason
that the Employer has had no net profits or accumulated net profits), each
Participant's Accrued Benefit shall be fully vested. Upon termination of the
Plan or a complete discontinuance of Contributions, unclaimed amounts shall be
applied as Forfeitures and any unallocated amounts shall be allocated to
Participants who are Eligible Employees as of the date of such termination or
discontinuance on the basis of Compensation for the Plan Year (or short Plan
Year). Upon a partial termination of the Plan, the Accrued Benefit of each
affected Participant shall be fully vested. In the event of termination of the
Plan, the Committee shall direct the Custodian to distribute to each Participant
the entire amount of his or her Accrued Benefit as soon as administratively
possible, but not earlier than would be permitted in order to retain the Plan's
qualified status under Sections 401(a), (k) and (m) of the Code, as if all
Participants who are Employees had incurred a Termination of Employment on the
Plan's termination date. Should a Participant or a Beneficiary not elect
immediate payment of a nonforfeitable Accrued Benefit in excess of five thousand
dollars ($5,000), the Committee shall direct the Custodian to continue the Plan
and Custodial Agreement for the sole purpose of paying to such Participant his
or her Accrued Benefit or death benefit, respectively, unless in the opinion of
the Committee, to make immediate single sum payments to such Participant or
Beneficiary would not adversely affect the tax qualified status of the Plan upon
termination and would not impose additional liability upon any Employer or the
Custodian.
19.3 Plan Merger. The Plan shall not merge or consolidate with, or
transfer any assets or liabilities to any other plan, unless each person
entitled to benefits would receive a benefit immediately after the merger,
consolidation or transfer (if the Plan were then terminated) which is equal to
or greater than the benefit he or she would have been entitled to immediately
before the merger, consolidation or transfer (if the Plan were then terminated).
The Committee shall amend or take such other action as is necessary to amend the
Plan in order to satisfy the requirements applicable to any merger,
consolidation or transfer of assets and liabilities.
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ARTICLE XX
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SPECIAL TOP-HEAVY RULES
20.1 Application. Notwithstanding any provisions of this Plan to the
contrary, the provisions of this Article shall apply and be effective for any
Plan Year for which the Plan shall be determined to be a "Top-Heavy Plan" as
provided and defined herein.
20.2 Special Terms. For purposes of this Article, the following terms
shall have the following meanings:
(a) "Aggregate Benefit" means the sum of:
(1) the present value of the accrued benefit under each and
all defined benefit plans in the Aggregation Group
determined on each plan's individual Determination Date
as if there were a termination of employment on the most
recent date the plan is valued by an actuary for
purposes of computing plan costs under Section 412 of
the Code within the twelve (12) month period ending on
the Determination Date of each such plan, but with
respect to the first plan year of any such plan
determined by taking into account the estimated accrued
benefit as of the Determination Date; provided (A) the
method of accrual used for the purpose of this Paragraph
(1) shall be the same as that used under all plans
maintained by all Employers and Commonly Controlled
Entities if a single method is used by all stock plans
or, otherwise, the slowest accrual method permitted
under Section 411(b)(1)(C) of the Code, and (B) the
actuarial assumptions to be applied for purposes of this
Paragraph (1) shall be the same assumptions as those
applied for purposes of determining the actuarial
equivalents of optional benefits under the particular
plan, except that the interest rate assumption shall be
five percent (5%);
(2) the present value of the accrued benefit (i.e., account
balances) under each and all defined contribution plans
in the Aggregation Group, valued as of the valuation
date coinciding with or immediately preceding the
Determination Date of each such plan, including (A)
contributions made after the valuation date but on or
prior
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to the Determination Date, (B) with respect to the first
plan year of any plan, any contribution made subsequent
to the Determination Date but allocable as of any date
in the first plan year, or (C) with respect to any
defined contribution plan subject to Section 412 of the
Code, any contribution made after the Determination Date
that is allocable as of a date on or prior to the
Determination Date; and
(3) the sum of each and all amounts distributed (other than
a rollover or plan-to-plan transfer) from any
Aggregation Group Plan, plus a rollover or plan-to-plan
transfer initiated by the Employee and made to a plan
which is not an Aggregation Group Plan within the
Current Plan Year or within the preceding four (4) plan
years of any such plan, provided such amounts are not
already included in the present value of the accrued
benefits as of the valuation date coincident with or
immediately preceding the Determination Date.
The Aggregate Benefit shall not include the value of any rollover or
plan-to-plan transfer to an Aggregation Group Plan, which rollover or
transfer was initiated by a Participant, was from a plan which was not
maintained by an Employer or a Commonly Controlled Entity, and was made
after December 31, 1983, nor shall the Aggregate Benefit include the value
of employee contributions which are deductible pursuant to Section 219 of
the Code.
(b) "Aggregation Group" means the Plan and one or more plans
(including plans that terminated) which is described in Section 401(a) of
the Code, is an annuity contract described in Section 403(a) of the Code
or is a simplified employee pension described in Section 408(k) of the
Code maintained or adopted by an Employer or a Commonly Controlled Entity
in the Current Plan Year or one of the four preceding Plan Years which is
either a "Required Aggregation Group" or a "Permissive Aggregation Group".
(1) A "Required Aggregation Group" means all Aggregation
Group Plans in which either (1) a Key Employee
participates or (2) which enables any Aggregation Group
Plan in which a Key Employee participates to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
(2) A "Permissive Aggregation Group" means Aggregation Group
Plans included in the Required Aggregation Group,
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plus one or more other Aggregation Group Plans, as
designated by the Committee in its sole discretion,
which satisfy the requirements of Sections 401(a)(4) and
410 of the Code, when considered with the other
component plans of the Required Aggregation Group.
(c) "Aggregation Group Plan" means the Plan and each other plan in
the Aggregation Group.
(d) "Current Plan Year" means (1) with respect to the Plan, the Plan
Year in which the Determination Date occurs, and (2) with respect to each
other Aggregation Group Plan, the plan year of such other plan in which
occurs the Determination Date of such other plan.
(e) "Determination Date" means (1) with respect to the Plan and its
Plan Year, the last day of the preceding Plan Year; or (2) with respect to
any other Aggregation Group Plan in any calendar year during which the
Plan is not the only component plan of an Aggregation Group, the
determination date of each plan in such Aggregation Group to occur during
the calendar year as determined under the provisions of each such plan.
(f) "Former Key Employee" means an Employee (including a terminated
Employee) who is not a Key Employee but who was a Key Employee.
(g) "Key Employee" means an Employee (or a terminated Employee) who
at any time during the Current Plan Year or at any time during the four
preceding Plan Years is:
(1) an officer of a Commonly Controlled Entity whose
compensation from a Commonly Controlled Entity during
the Plan Year is greater than fifty percent (50%) of the
amount specified in Section 415(b)(1)(A) of the Code (as
adjusted for cost-of-living increases by the Secretary
of the Treasury) for the calendar year in which the Plan
Year ends; provided, however, that no more than the
lesser of (A) fifty (50) Employees, or (B) the greater
of (i) three (3) Employees or (ii) ten percent (10%)
(rounded to the next whole integer) of the greatest
number of Employees during the Current Plan Year or any
of the preceding four Plan Years shall be considered as
officers for this purpose. Such officers considered will
be those with the greatest annual compensation as an
officer during the five
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(5) year period ending on the Determination Date;
(2) One of the ten employees who owns (or is considered to
own within the meaning of Section 318 of the Code) more
than a one half percent (?%) interest in value and the
largest percentage ownership interest in value in a
Commonly Controlled Entity and whose total annual
compensation from a Commonly Controlled Entity is not
less than the amount specified in Section 415(b)(1)(A)
of the Code (as adjusted for cost-of-living increases by
the Secretary of the Treasury) for the calendar year in
which the Plan Year ends;
(3) A person who owns more than five percent (5%) of the
value of the outstanding stock of any Commonly
Controlled Entity or more than five percent (5%) of the
total combined voting power of all stock of any Commonly
Controlled Entity (considered separately) or;
(4) A person who owns more than one percent (1%) of the
value of the outstanding stock of a Commonly Controlled
Entity or more than one percent (1%) of the total
combined voting power of all stock of a Commonly
Controlled Entity (considered separately) and whose
total annual compensation (as defined in section
1.415-2(d) of the Treasury Regulations) from the
Employer or a Commonly Controlled Entity is in excess of
one hundred and fifty thousand dollars ($150,000).
The rules of Section 416 (i)(1)(B) and (C) of the Code shall be applied
for purposes of determining an Employee's ownership interest in a Commonly
Controlled Entity for purposes of Paragraphs (3) and (4) herein. A
Beneficiary (who would not otherwise be considered a Key Employee) of a
deceased Key Employee shall be deemed to be a Key Employee in substitution
for such deceased Key Employee. Any person who is a Key Employee under
more than one of the four Paragraphs of this Section shall have his or her
Aggregate Benefit under the Aggregation Group Plans counted only once with
respect to computing the Aggregate Benefit of Key Employees as of any
Determination Date. Any Employee who is not a Key Employee shall be a
Non-Key Employee.
(h) "Top-Heavy Plan" means the Plan with respect to any Plan Year if
the Aggregate Benefit of all Key Employees or the Beneficiaries of Key
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Employees determined on the Determination Date is an amount in excess of
sixty percent (60%) of the Aggregate Benefit of all persons who are
Employees within the Current Plan Year; provided, that if an individual
has not performed services for an Employer or a Commonly Controlled Entity
at any time during the five (5) year period ending on the Determination
Date, the individuals' Accrued Benefit shall not be taken into account.
With respect to any calendar year during which the Plan is not the only
Aggregation Group Plan, the ratio determined under the preceding sentence
shall be computed based on the sum of the Aggregate Benefits of each
Aggregation Group Plan totaled as of the last Determination Date of any
Aggregation Group Plan to occur during the calendar year.
20.3 Minimum Contribution. For any Plan Year that the Plan shall be a
Top-Heavy Plan, each Participant who is an Eligible Employee but who is neither
a Key Employee nor a Former Key Employee on the last day of the Plan Year shall
have allocated to his or her Matching and Employer Accounts on the last day of
the Plan Year a Profit Sharing Contribution in an amount equal to three percent
(3%) of such Participant's Compensation not in excess of two hundred thousand
dollars ($200,000); provided, however, in no event shall such contribution on
behalf of such Participant be less than five percent (5%) of such Compensation
if any Aggregation Group Plan is a defined benefit plan which does not satisfy
the minimum benefit requirements with respect to such Participant. The amount of
Profit Sharing Contributions required to be allocated under this Section for any
Plan Year shall be reduced by the amount of Employer Contributions and
Forfeitures allocated under this Plan on behalf of the Participant and employer
contributions and forfeitures allocated on behalf of the Participant under any
other defined contribution plan in the Aggregation Group for the Plan Year.
Elective Deferrals to any Aggregation Group Plan made on behalf of a Participant
in Plan Years beginning after December 31, 1984 but before January 1, 1989 shall
be deemed to be Employer Contributions for the purpose of this Section. Elective
Deferrals and Matching Contributions to Aggregation Group Plans in Plan Years
beginning on or after January 1, 1989 shall not be used to meet the minimum
contribution requirements of this Section. Where Employer Contributions and
Forfeitures allocated on behalf of a Participant are insufficient to satisfy the
minimum contribution otherwise required by this Section, an additional employer
contribution shall be made and allocated to the Matching or Employer Accounts of
such Participant.
20.4 Maximum Benefit Accrual. For any Plan Year that the Plan is a
Top-Heavy Plan, the denominator of the "defined benefit plan fraction" and the
denominator of the "defined contribution plan fraction" shall be determined by
substituting "1.0" for "1.25"; provided, however, this limit shall not apply
with respect to an Employee for any Plan Year during which he accrues no benefit
under any plan of the Aggregation Group. The preceding sentence shall not apply
if, within
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this Article, there is substituted "four percent (4%)" for "three percent (3%)"
and "seven and one-half percent (7.5%)" for "five percent (5%)" and "ninety
percent (90%)" for "sixty percent (60%)."
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ARTICLE XXI
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MISCELLANEOUS PROVISIONS
21.1 Assignment and Alienation. As provided by Code Section 401(a)(13) and
to the extent not otherwise required by law, no benefit provided by the Plan may
be anticipated, assigned or alienated, except:
(a) to create, assign or recognize a right to any benefit with
respect to a Participant pursuant to a QDRO, or
(b) to use a Participant's vested Account balance as security for a
loan from the Plan which is permitted pursuant to Code Section 4975.
21.2 Protected Benefits. All benefits which are protected by the terms of
Code Section 411(d)(6) and ERISA Section 204(g), which cannot be eliminated
without adversely affecting the qualified status of the Plan on and after May 1,
1999, shall be provided under this Plan to Participants for whom such benefits
are protected. The Committee shall cause such benefits to be determined and the
terms and provisions of the Plan (or, to the extent relevant, the Brenco
Supplement Pension Plan) immediately prior to May 1, 1999 are incorporated
herein by reference and made a part hereof, but only to the extent such terms
and provisions are so protected. Otherwise, they shall operate within the terms
and provisions of this Plan, as determined by the Committee.
21.3 Plan Does Not Affect Employment Rights. The Plan does not provide any
employment rights to any Employee. The Employer expressly reserves the right to
discharge an Employee at any time, with or without Cause, without regard to the
effect such discharge would have upon the Employee's interest in the Plan.
21.4 Deduction of Taxes from Amounts Payable. The Custodian shall deduct
from the amount to be distributed such amount as the Custodian, in its sole
discretion, deems proper to protect the Custodian and the Plan's assets held
under the Custodial Agreement against liability for the payment of death,
succession, inheritance, income, or other taxes, and out of money so deducted,
the Custodian may discharge any such liability and pay the amount remaining to
the Participant, the Beneficiary or the deceased Participant's estate, as the
case may be.
21.5 Facility of Payment. If a Participant or Beneficiary is declared an
incompetent or is a minor and a conservator, guardian, or other person legally
charged with his or her care has been appointed, any benefits to which such
Participant or Beneficiary is entitled shall be payable to such conservator,
guardian, or other person legally charged with his or her care. The decision of
the Committee in
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such matters shall be final, binding, and conclusive upon the Employer and the
Custodian and upon each Employee, Participant, Beneficiary, and every other
person or party interested or concerned. An Employer, the Custodian and the
Committee shall not be under any duty to see to the proper application of such
payments.
21.6 Source of Benefits. All benefits payable under the Plan shall be paid
or provided for solely from the Plan's assets held under the Custodial Agreement
and the Employers assume no liability or responsibility therefor.
21.7 Indemnification. To the extent permitted by law each Employer shall
indemnify and hold harmless each member (and former member) of the Board of
Directors, each member (and former member) of the Committee, and each officer
and employee (and each former officer and employee) of an Employer to whom are
(or were) delegated duties, responsibilities, and authority with respect to the
Plan against all claims, liabilities, fines and penalties, and all expenses
reasonably incurred by or imposed upon him or her (including but not limited to
reasonable attorney fees and amounts paid in any settlement relating to the
Plan) by reason of his or her service under the Plan if he or she did not act
dishonestly, with gross negligence, or otherwise in knowing violation of the law
under which such liability, loss, cost or expense arises. This indemnity shall
not preclude such other indemnities as may be available under insurance
purchased or provided by an Employer under any by-law, agreement, or otherwise,
to the extent permitted by law. Payments of any indemnity, expenses or fees
under this Section shall be made solely from assets of the Employer and shall
not be made directly or indirectly from the assets of the Plan.
21.8 Reduction for Overpayment. The Committee shall, whenever it
determines that a person has received benefit payments under this Plan in excess
of the amount to which the person is entitled under the terms of the Plan, make
two reasonable attempts to collect such overpayment from the person.
21.9 Limitation on Liability. No Employer nor any agent or representative
of any Employer who is an employee, officer, or director of an Employer in any
manner guarantees the assets of the Plan against loss or depreciation, and to
the extent not prohibited by federal law, none of them shall be liable (except
for his or her own gross negligence or willful misconduct), for any act or
failure to act, done or omitted in good faith, with respect to the Plan. No
Employer shall be responsible for any act or failure to act of any Custodian
appointed to administer the assets of the Plan.
21.10 Company Merger. In the event any successor corporation to the
Company, by merger, consolidation, purchase or otherwise, shall elect to adopt
the Plan, such successor corporation shall be substituted hereunder for the
Company upon filing in writing with the Custodian its election so to do.
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21.11 Employees' Trust. The Plan and Custodial Agreement are created for
the exclusive purpose of providing benefits to the Participants in the Plan and
their Beneficiaries and defraying reasonable expenses of administering the Plan,
and the Plan and Custodial Agreement shall be interpreted in a manner consistent
with their being, respectively, a Plan described in Sections 401(a), 401(k) and
401(m) of the Code and Custodial Agreements exempt under Section 501(a) of the
Code. At no time shall the assets of the Plan be diverted from the above
purpose.
21.12 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
21.13 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and the Plan shall be construed and
enforced as if such provisions, to the extent invalid or unenforceable, had not
been included.
21.14 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.
21.15 Uniform and Nondiscriminatory Treatment. Any discretion exercisable
hereunder by an Employer or the Committee shall be exercised in a uniform and
nondiscriminatory manner.
21.16 Law Governing. The Plan shall be construed and enforced according to
the laws of the state in which the Trust is located, to the extent not preempted
by ERISA.
21.17 Notice and Information Requirements. Except as otherwise provided in
this Plan or in the Custodial Agreement or as otherwise required by law, the
Employer shall have no duty or obligation to affirmatively disclose to any
Participant or Beneficiary, nor shall any Participant or Beneficiary have any
right to be advised of, any material information regarding the Employer, at any
time prior to, upon or in connection with the Employer's purchase, or any other
distribution or transfer (or decision to defer any such distribution) of any
Company Stock or any other stock held under the Plan.
21.18 Qualified Military Service. Notwithstanding any provision in the
Plan to the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Section 414(u) of
the Code.
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Executed in 2 counterpart originals this 1st day of May, 1999, but
effective as of the Effective Date.
Varlen Corporation
By: /s/ Richard A. Nunemaker
------------------------------
Title: Vice President, Finance and
Chief Financial Officer
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APPENDIX A
Investment Funds
The Investment Funds offered to Participants and Beneficiaries as of March 1,
1999, are:
The following core funds:
1. Fidelity Money Market Trust: Retirement Money Market
Portfolio
2. Fidelity Managed Income Portfolio (blended with existing
GICs, if any)
3. Fidelity Asset Manager
4. Fidelity Growth & Income Portfolio
5. Fidelity Magellan Fund
6. Fidelity Overseas Fund
7. Fidelity Small Cap Stock Fund
8. Varlen Corporation Common Stock
9. Spartan U.S. Equity Index Fund
10. Fidelity Retirement Growth Fund
The following Freedom Funds:
1. Fidelity Freedom Income Fund
2. Fidelity Freedom 2000 Fund
3. Fidelity Freedom 2010 Fund
4. Fidelity Freedom 2020 Fund
5. Fidelity Freedom 2030 Fund
The following additional funds:
1. Fidelity Capital & Income Fund
2. Fidelity Ginnie Mae Fund
3. Fidelity Government Income Fund
4. Fidelity High Income Fund
5. Fidelity Institutional Short-Intermediate Governmental
Fund
6. Fidelity Intermediate Bond Fund
7. Fidelity Investment Grade Bond Fund
8. Fidelity Mortgage Securities Fund
9. Fidelity Short-Term Bond Fund
10. Fidelity Target Timeline 2001 Fund
11. Fidelity Target Timeline 2003 Fund
12. Fidelity U.S. Bond Index Fund
<PAGE>
13. Fidelity Balanced Fund
14. Fidelity Puritan Fund
15. Fidelity Convertible Securities Fund
16. Fidelity Equity-Income Fund
17. Fidelity Equity-Income II Fund
18. Fidelity Growth & Income II Portfolio
19. Fidelity Real Estate Investment Portfolio
20. Spartan Market Index Fund
21. Spartan Total Market Index Fund
22. Spartan Extended Market Index Fund
23. Fidelity Utilities Fund
24. Fidelity Asset Manager: Income
25. Fidelity Asset Manager: Growth
26. Fidelity Blue Chip Growth Fund
27. Fidelity Capital Appreciation Fund
28. Fidelity Contrafund II
29. Fidelity Disciplined Equity Fund
30. Fidelity Dividend Growth Fund
31. Fidelity Emerging Growth Fund
32. Fidelity Export and Multinational Fund
33. Fidelity Fifty Fund
34. Fidelity Growth Company Fund
35. Fidelity Large-Cap Stock Fund
36. Fidelity Mid-Cap Stock Fund
37. Fidelity OTC Portfolio
38. Fidelity Stock Selector Fund
39. Fidelity TechnoQuant Growth Fund
40. Fidelity Trend Fund
41. Fidelity Value Fund
42. Fidelity Canada Fund
43. Fidelity Diversified International Fund
44. Fidelity Emerging Markets Fund
45. Fidelity Europe Fund
46. Fidelity Europe Capital Appreciation Fund
47. Fidelity France Fund
48. Fidelity Germany Fund
49. Fidelity Global Balanced Fund
50. Fidelity Hong Kong & China Fund
51. Fidelity International Bond Fund
52. Fidelity International Growth & Income Fund
53. Fidelity International Value Fund
54. Fidelity Japan Fund
55. Fidelity Japan Small Companies Fund
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56. Fidelity Latin America Fund
57. Fidelity New Markets Income Fund
58. Fidelity Nordic Fund
59. Fidelity Pacific Basin Fund
60. Fidelity Southeast Asia Fund
61. Spartan International Index Fund
62. Fidelity United Kingdom Fund
63. Fidelity Worldwide Fund
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APPENDIX B
Additional Groups of Employees
Who are Eligible to Participate in the Plan
Employees who are members of the following groups (in connection with their
employment with an Employer) are eligible to participate in the Plan:
1. UAW, Local #455 ("Local #455").
2. Prime Manufacturing Corp./District #10, International Association of
Machinists and Aerospace Workers.
3. Chrome Crankshaft Company of Illinois/Industrial Technical and
Professional Employees Union, AFL-CIO.
Participation of UAW, Local #455
For any Employees who are members of Local #455 (but only to the extent such
Employee was hired before March 1, 1994), the Matching Contributions for each
period shall be as follows:
(a) effective for pay periods beginning prior to March 1,
1994, one hundred percent (100%) of each eligible Participant's
first one hundred dollars ($100.00) of Pre-Tax Contributions for the
Plan Year and fifty percent (50%) of each such Participant's next
one hundred dollars ($100.00) of Pre-Tax Contributions for the Plan
Year; and
(b) effective for pay periods beginning on and after March 1,
1994, one hundred percent (100%) of each eligible Participant's
first one hundred fifty dollars ($150.00) of Pre-Tax Contributions
for the Plan Year and fifty percent (50%) of each such Participant's
next two hundred dollars ($200.00) of Pre-Tax Contributions for the
Plan Year.
In addition, no Profit Sharing Contributions shall be made on behalf of any
Employees who are members of Local #455 (but only to the extent such Employee
was hired before March 1, 1994).
Any Employees who are members of Local #455 and who are hired on or after March
1, 1994 shall not be subject to these special rules regarding Matching and
Profit Sharing Contributions.
Participation of Prime Manufacturing Corp. Employees
Effective for pay periods beginning on or after May 1, 1995, with respect to
each
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Participant who is an Employee of Prime Manufacturing Corp. and who is a member
of District #10, International Association of Machinists and Aerospace Workers:
1. his or her Matching Contributions for each period shall be equal to
twenty-five percent (25%) of the Participant's Pre-Tax Contributions
for the period, provided that no Matching Contributions shall be
made based upon a Participant's Contributions in excess of three
percent (3%) of his or her Compensation for such period; and
2. no Profit Sharing Contributions shall be made on behalf of such
Participant.
Participation of Chrome Crankshaft Company of Illinois Employees
Effective for pay periods beginning on or after January 4, 1999, with respect to
each Participant who is an Employee of Chrome Crankshaft Company of Illinois and
who is a member of the Industrial, Technical and Professional Employees Union,
AFL-CIO, the following special rules shall apply:
1. For the Plan Year ending on December 31, 1999, no Profit Sharing
Contributions shall be made on behalf of such Participant; and
2. For the Plan Years beginning on and after January 1, 2000, the
Profit Sharing Contribution with respect to each Participant who was
an Eligible Employee on the last day of the Plan Year shall be two
percent (2%) of such Participant's Compensation for the prior Plan
Year (for the period the Employee was a Participant). In addition,
such Contribution shall be made on behalf of each Participant who
ceased being an Employee during the period after having attained his
or her Normal Retirement Date, having attained fifty-five (55) years
of age and completing five (5) years of Continuous Service, or by
reason of his or her Disability or death.
<PAGE>
VARLEN CORPORATION
1989 INCENTIVE STOCK OPTION PLAN
(as amended on May 14, 1999)
ARTICLE I
PURPOSE
SECTION 1: Statement of Policy. The Board of Directors of VARLEN
CORPORATION believes that the maximum advantage to the Corporation can be
secured by establishing as close an identity as is feasible between the
interests of the Corporation and its Subsidiaries, and those of its or their
respective employees. The Board believes that it would be in the best interests
of the Corporation to adopt a 1989 Incentive Stock Option Plan which will
provide for the granting of both Incentive Stock Options (as defined in Section
2 of this Plan) and Non-Qualified Stock Options (as defined in Section 2 of this
Plan) and which will serve the function of providing a closer identification of
certain employees with the Corporation. Furthermore it will serve to retain
these employees in the service of the Corporation or its Subsidiaries and to
induce new executives and other key employees to become associated with the
Corporation or its Subsidiaries. It is the intent of the Board that the grant of
such Incentive Stock Options and Non-Qualified Stock Options shall be in
addition to any other compensation granted. It is for the accomplishment of
these several objectives that this Plan is formulated and adopted.
SECTION 2: Definitions. When used in this Plan, unless the context
otherwise requires:
(a) Affiliate. "Affiliate" shall mean any individual, corporation,
partnership, association, joint-stock company trust, unincorporated
association or other entity (other than the Corporation) that directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with the Corporation.
(b) Change of Control. "Change of Control" shall mean the occurrence
of one of the following events:
(i) if any "person" or "group" as those terms are used in
Sections 13(d) or 14(d) of the Exchange Act, other than a Exempt
Person, is or becomes the "beneficial owner" (as defined in rule
13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board and any new
directors whose election by the Board or nomination for election by
the Company's stockholders was approved by at least two-thirds of
the directors then still in office who either were directors at the
beginning of the period or whose election was previously so
approved, cease for any reason to constitute a majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation (A) which would result in all or a portion
of the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into
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voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation or (B) following which the Company's chief executive
officer and directors retain their positions with the surviving
entity (and constitute at least a majority of the surviving entity's
board of directors); or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
other disposition by the Company of all or substantially all the
Company's assets, other than a sale to an Exempt Person;
provided, however, that if the approval specified in clause (iii) or
clause (iv) above is obtained but such transaction is terminated or
abandoned by the parties thereto prior to its effectuation, then, from and
after the date of such termination or abandonment, no Change of Control
shall be deemed to have occurred by reason of such approval; and provided
further, that no Change of Control shall be deemed to have occurred by
reason of any event involving or arising out of a proceeding under Title
11 of the United States Code (or the provisions of any future United
States bankruptcy law), an assignment for the benefit of creditors or an
insolvency proceeding under state or local law.
(c) Code. "Code" shall mean the United States Internal Revenue Code
of 1986, as amended from time to time, or any statutes succeeding thereto.
(d) Committee. "Committee" shall mean the Compensation Committee
hereinafter described in Section 3 of this Plan.
(e) Common Stock. "Common Stock" and "Stock" shall each mean the
Common Stock of the Corporation of the par value of $.10 per share.
(f) Corporation. "Corporation" shall mean VARLEN CORPORATION, a
Delaware corporation.
(g) Directors. "Directors" and "Board of Directors" shall each mean
the Board of Directors if the Corporation as constituted from time to
time.
(h) Disinterested Person. "Disinterested Person" shall mean an
individual who is not at the time he exercises discretion in administering
this Plan eligible and has not at any time within one (1) year prior
thereto been eligible for selection as a person to whom stock options may
be granted pursuant to this Plan or to whom stock may be allocated or to
whom stock options or stock appreciation rights may be granted pursuant to
any other plan of the Corporation or any of its Affiliates entitling the
participants therein to acquire stock, stock options or stock appreciation
rights of the Corporation or any of its Affiliates.
(i) Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated
pursuant thereto.
(j) Incentive Stock Options. "Incentive Stock Options" shall mean
options which meet the requirements for Incentive Stock Options in Section
422A of the Code.
(k) New Option. "New Option" shall mean an option granted on or
after May 14, 1999.
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(l) Non-Qualified Stock Options. "Non-Qualified Stock Options" shall
mean stock options which do not meet the requirements for Incentive Stock
Options, as defined in Paragraph (i) of this Section 2, and stock options
which do meet such requirements but which the Committee designates as
Non-Qualified Stock Options.
(m) Old Option. "Old Option" shall mean an option granted prior to
May 14, 1999.
(n) Option Agreement. "Option Agreement" shall mean each Agreement
referred to in Section 12 of this Plan between the Corporation and any
person to whom an option is granted.
(o) Optionees. "Optionees" shall mean those persons who receive
Options under this Plan.
(p) Options. "Options" shall mean options granted under this Plan.
(q) Plan. "Plan" shall mean this 1989 Incentive Stock Option Plan
adopted by the Board of Directors, as such Plan from time to time may be
amended as herein provided.
(r) Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended, and the rules and regulations promulgated pursuant
thereto.
(s) Subsidiary. "Subsidiary" shall mean any corporation (other than
the Corporation) in an unbroken chain of corporations beginning with the
Corporation if each of the corporations other than the last corporation in
the unbroken chain owns stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the
other corporations in such chain.
ARTICLE II
ADMINISTRATION
SECTION 3: Committee.
(a) This Plan shall be administered by a Compensation Committee, or
any other successor committee appointed by the Board of Directors, which shall
consist of such number (not less than three) of directors as the Board of
Directors shall determine, all of whom shall be Disinterested Persons. The
Committee shall have plenary authority in its discretion, but subject to the
express provisions of this Plan, (i) to determine the key employees to whom and
the time or times at which Options shall be granted, the number of shares to be
covered by each Option, and whether an Option shall be an Incentive Stock Option
or a Non-Qualified Stock Option; (ii) to interpret this Plan and to prescribe,
amend and rescind the rules and regulations relating to it; (iii) to determine
the terms and provisions of the respective Option Agreements (which need not be
identical), including without limitation such terms and provisions as may be
requisite in the judgment of the Committee (A) to cause the grant of the
Options, and the issuance of Common Stock upon exercise of the Options, pursuant
to this Plan to comply with the Securities Act and the applicable rules and
regulations thereunder, including, without limitation, to cause this Plan and
the Options and Common Stock to be registered on Form S-8 promulgated
thereunder, or any other appropriate form, (B) to provide for the reimbursement
of the Corporation for taxes paid or advanced in respect of the grant to
employees of Options or the issuance of Common Stock upon exercise of Options
under this Plan and (C) to set forth the form of restrictive legends, if any, to
be placed on certificates representing shares of Common Stock to be issued
pursuant to Options relating to obligations of the holders under, or to provide
notice of the applicability to such Common Stock of, the Federal and State
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<PAGE>
securities laws and the Code; and (iv) to make all other determinations deemed
necessary or advisable for the administration of this Plan.
(b) Paragraph (a) of this Section 3 notwithstanding, the authority
vested in the Committee to administer this Plan may be exercised by the Board of
Directors as a whole acting in accordance with the By-laws of the Corporation
if, and only if, at the time such authority is exercised: (i) all members of the
Board of Directors are Disinterested Persons, (ii) a majority of the members of
the Board of Directors and a majority of directors acting on Plan matters are
Disinterested Persons or (iii) the Corporation is not the issuer of any "equity
security" (as such term is defined in the Exchange Act) subject to the
registration requirements of Section 12 of the Exchange Act.
SECTION 4: Vacancies. If a member of the Committee for any reason
shall cease to serve, the vacancy may be filled by the Board of Directors.
SECTION 5: Removal. Any member of the Committee may be removed at
any time, with or without cause, by the Board of Directors.
SECTION 6: Chairman. The Board of Directors or the Committee may
select one of the members of the Committee as its Chairman.
SECTION 7: Meetings. The Committee shall hold its meetings at such
times and places as it shall deem advisable. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by all the members of the Committee shall be fully as effective as if it
had been made by the affirmative vote of a majority of its members at a meeting
duly called and held. The Committee may appoint a Secretary, shall keep minutes
of its meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
ARTICLE III
OPTIONS
SECTION 8: Shares Available. The Committee may, but shall not be
required to, allocate in accordance with this Plan both Incentive Stock Options
and Non-Qualified Stock Options to purchase not more than, in the aggregate,
200,000 shares of the Common Stock. Such shares may be authorized and unissued
shares or issued shares held in the Corporation's treasury. Such 200,000 shares
shall be computed prior to any adjustment resulting from stock dividends,
split-ups, reorganization, or other substitutions of securities for the present
Common Stock of the Corporation and upon the occurrence of any of the foregoing,
the aggregate number of shares available for allocation in accordance with this
Plan shall be appropriately and equitably adjusted in a manner similar to that
set forth in Section 25 hereof to make available for issuance under this Plan
the number of shares of Common Stock which would have been available had
allocation of an aggregate of 200,000 shares been made immediately prior to such
event.
SECTION 9: Time for Granting of Options. Options may be granted by
the Committee pursuant to this Plan from time to time for a period beginning May
1, 1989 and ending April 30, 1999. Nothing herein shall be construed to prohibit
the granting of Options at different times to the same persons.
SECTION 10: Persons Eligible. Persons eligible to receive Options
shall be such key employees (which term as used herein includes, without
limitation, officers) of the Corporation and its Subsidiaries as the
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<PAGE>
Committee in its sole discretion may select. However, a director of the
Corporation or of a Subsidiary who is not also an employee of the Corporation or
one of its Subsidiaries shall not be eligible to receive Options.
SECTION 11: Number of Shares to be Optioned and Nature of Option.
Subject to Section 10 of this Plan, the total number of shares to be optioned to
any eligible person and whether an Option shall be an Incentive Stock Option or
a Non-Qualified Stock Option shall be determined by the Committee in its sole
discretion.
SECTION 12: Form of Option Agreements. An Option Agreement signed by
the President, the Senior Vice President or a Vice President of the Corporation,
and attested by the Treasurer or Assistant Treasurer or Secretary or Assistant
Secretary of the Corporation, shall be issued to each person to whom an Option
is granted. The form and provisions of each Option Agreement shall be determined
by the Committee in accordance with the terms of this Plan. If any employee does
not execute an Option Agreement in the form prescribed by the Committee within
the later of (a) thirty (30) days from the grant thereof or (b) ten (10) days
after the receipt from the Corporation of an Option Agreement for execution, the
action of the Committee with respect to the Option granted to such employee
shall be of no further force or effect.
SECTION 13: Duration of Options. The duration of each Option shall
be for such time as the Committee, in its sole discretion, may fix upon the
occasion of granting an Option; provided, however, an Option, whether an
Incentive Stock Option or a Non-Qualified Stock Option, by its terms will not
under any circumstances be exercisable more than ten (10) years (or such shorter
period, if any, as may be necessary to comply with the requirements of state
securities laws) from the date such Option is granted, except that, to the
extent provided in Section 18 of this Plan, a Non-Qualified Stock Option shall
be exercisable for a maximum of one (1) year following the death of an Optionee,
or the date on which he is determined to have a permanent physical or mental
disability, regardless of its original term.
SECTION 14: Assignability of Options. Options and all rights
thereunder shall by their terms be non-assignable and non-transferable by the
holder of the option otherwise than by will or the laws of descent and
distribution, and shall be exercisable during the lifetime of the holder only by
the holder or his guardian or legal representative. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of any Option contrary to
the provisions of this Plan and any levy or any other attachment or similar
process upon an Option shall be null and void and without effect, and the Board
of Directors may, in its discretion, upon the happening of any such event,
terminate the Option forthwith. Nothing contained herein shall be deemed
inconsistent with the provisions hereinafter set forth pertaining to the
exercise of an Option by the estate of a deceased holder.
SECTION 15: Option Price. The option price of the Stock subject to
an Incentive Stock Option shall not be less than the fair market value of the
Stock at the time the Incentive Stock Option is granted. The option price of the
Stock subject to a Non-Qualified Stock Option shall not be less than fifty
percent (50%) of the fair market value of the Stock at the time such
Non-Qualified Stock Option is granted; provided, however, that if such option
price is less than the fair market value of the Stock at the time such
Non-Qualified Stock Option is granted, the option price shall not be less than
the book value of the Stock at the time such Non-Qualified Stock Option is
granted as determined by the Committee. For the purposes of this Section 15, the
"fair market value" of the Stock shall be its fair market value determined as of
the business day prior to the date of grant of the Option by the Committee in
its good faith discretion.
ARTICLE IV
EXERCISE OF OPTIONS
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SECTION 16: Terms of Exercise.
(a) Each Option shall be exercisable in whole or in part as set
forth in the Option Agreement; provided, however, that no Option shall be
exercised as to less than twenty-five (25) shares of Common Stock at any one
time, unless the balance subject thereto at the time is less than twenty-five
(25) shares of Common Stock.
(b) Although each Option Agreement may contain provisions providing for
the exercisability of various portions of the Option granted thereunder at
different time periods, each Old Option shall be exercisable prior to its
expiration in accordance with the provisions of this Plan to the full
extent thereof simultaneously with or at any time after a Change of
Control.
(c) Although each Option Agreement may contain provisions providing
for the exercisability of various portions of the Option granted thereunder at
different time periods, each New Option shall be exercisable prior to its
expiration in accordance with the provisions of this Plan to the full extent
thereof if there is a Change of Control and the Optionee is terminated from
being an employee of the Company or any of its Subsidiaries within one year
following such Change of Control. Subject to the remaining provisions of the
Plan, such New Options may be exercised simultaneous with or at any time after
such termination of employment.
(d) Notwithstanding the provisions of Section 16(b) of this Plan, in
the event of a merger or consolidation in which the Corporation is a party but
not the surviving corporation, at the discretion of the Committee, each Option
shall either become fully exercisable with respect to all shares of Common Stock
subject to such Option immediately prior to (but subject to) the consummation of
the merger or consolidation, and shall remain so until the expiration of the
Option or as otherwise provided in Section 18 of this Plan, or the agreement
with respect to such merger or consolidation shall include a provision that
would automatically amend such Option to enable the Optionee, had such Option
been exercised in full immediately prior to the effectiveness of such merger or
consolidation, to acquire the same merger consideration in respect of the shares
of Common Stock issued upon exercise of the Option as a holder of Common Stock
of the Corporation immediately prior to such merger or consolidation would have
been entitled to receive.
SECTION 17: Termination of Employment. In the event of the
termination for any reason of the employment of an Optionee (other than as
provided in Section 18 of this Plan), all Options granted to such Optionee which
have not been exercised by him prior to the time of such termination shall be
then terminated and thereafter may not be exercised. Options granted under this
Plan, however, shall not be affected by any change of employment so long as the
holder of the Option continues to be an employee of the Corporation or a
Subsidiary of the Corporation.
SECTION 18: Death, Disability, Retirement or Termination of
Employment with Consent. As used herein, an Optionee's employment with the
Corporation shall be deemed to have been terminated "with consent" if the
Corporation or a Subsidiary has provided its express written consent to the
exercise of the Optionee's options following such termination. Notwithstanding
the provisions of Section 17 of this Plan, Options granted to an Optionee may be
exercised as follows:
(a) In the event of the termination of the optionee's employment
with consent, then such Optionee's Option may be exercised, regardless of tax
consequences, to the extent then exercisable as provided in the Option Agreement
applicable to such Option (or, if so determined by the Committee in its sole
discretion,
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up to the full extent thereof) at any time (i) within 90 days following such
termination if exercise by such Optionee during such period would not violate
Section 16(b) of the Exchange Act, or (ii) within 190 days following such
termination if exercise by such Optionee within 90 days following such
termination would violate Section 16(b) of the Exchange Act, but in any event
not thereafter.
(b) In the event of the termination of the Optionee's employment
resulting from the Optionee's retirement under one or more of the Corporation's
retirement plans including, without limitation, any early retirement permitted
under such plans, then such Optionee's Options may be exercised, regardless of
tax consequences, to the full extent thereof at any time (i) within 90 days
following such termination if exercise by such Optionee during such period would
not violate Section 16(b) of the Exchange Act, or (ii) within 190 days following
such termination if exercise by such Optionee within 90 days following such
termination would violate Section 16(b) of the Exchange Act, but in any event
not thereafter, or (iii) at such later date as determined in the discretion of
the Committee.
(c) In the event of the death or the permanent physical or mental
disability (as such disability shall be determined by a physician selected by
the Corporation) of the Optionee either (i) while employed by the Corporation or
a Subsidiary, or (ii) (with respect to a Non-Qualified Stock Option only) while
eligible to exercise his Option pursuant to Section 18(a) or (b) of this Plan
following the termination of his employment, then such Optionee's Option may be
exercised, to the full extent thereof, at any time within one (1) year following
the Optionee's death or such determination of physical or mental disability, by
the Optionee, the executors or administrators of the Optionee or by any person
who shall have acquired the Option from the Optionee by bequest or inheritance.
(d) Notwithstanding the foregoing provisions, in no event may an
Option be exercised subsequent to the expiration of its term, except that a
Non-Qualified Stock Option shall be exercisable, to the extent provided in
Section 18(c) of this Plan, for a maximum of one (1) year following the death of
an Optionee, or the date on which he is determined to have a permanent physical
or mental disability, regardless of its original term.
SECTION 19: How Exercisable.
(a) An Option shall be exercisable by delivery of a duly signed
notice in writing to such effect and the full purchase price of the Stock
purchased pursuant to the exercise of the Option to the Treasurer of the
Corporation or to any other officer of the Corporation appointed by the
Committee for the purpose of receiving the same; provided, however, that no
Option issued pursuant to this Plan may be exercised at any time when the Option
or the granting or the exercise thereof violates any law or governmental order
or regulation. Delivery of the full purchase price shall be satisfied either:
(i) by payment in cash of the full purchase price, (ii) by tender of such number
of shares of Common Stock owned either (x) by the Optionee prior to exercise of
the Option or (y) with the consent of the Committee, by the Optionee as a result
of the exercise of the Option, as is equal in value (such value to be the fair
market value of such Stock, determined as of the business day prior to the date
of exercise of the Option by the Committee in its good faith discretion) to the
full purchase price or (iii) by delivery of any combination of cash and such
shares of Common Stock (valued as set forth above) which, in the aggregate, is
equal in value to the full purchase price, subject to compliance with applicable
securities laws.
(b) An Option shall also be exercisable by Optionees (to the extent
such exercise would not violate Section 16(b) of the Exchange Act) by delivery
of a duly signed notice in writing to such effect (the "Exercise Notice") which
shall include irrevocable instructions to the Corporation to deliver the stock
certificates issuable in respect of such option exercise directly to a broker
named therein which has agreed to
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participate in a "cashless" exercise on behalf of the Optionee. In connection
therewith, the Corporation shall acknowledge and, notwithstanding the provisions
of Section 20 hereof, forward a copy of the Exercise Notice to such broker and
the Corporation shall be authorized and entitled to deliver such stock
certificates directly to such broker against receipt of the exercise price and
any withholding taxes due in respect of such option exercise. The Committee
shall have the right to adopt such rules and regulations with respect to the
provisions of this paragraph as it deems appropriate.
(c) In addition, the Committee shall have the right to require a
cash payment upon the exercise of any option in connection with any obligation
of the Corporation or a Subsidiary of the Corporation to withhold Federal, state
or local taxes (a "Withholding Obligation"). An Optionee may irrevocably elect
(the "Election"), subject to approval or disapproval by the Committee or the
Board of Directors and subject to the right of the Committee or the Board of
Directors to revoke its advance approval, to satisfy any Withholding Obligation
in connection with the exercise of the option granted to him by tender of such
number of shares of the Corporation's Common Stock (valued as set forth above)
owned either (x) by such Optionee prior to exercise of the Option or (y) with
the consent of the Committee, by the Optionee as a result of the exercise of the
Option, or a combination of such Common Stock (valued as set forth above) and
cash, which has a value equal to the full amount of the Withholding Obligation,
subject to compliance with applicable securities law; provided, however, if
required to permit compliance with Section 16(b) of the Exchange Act, that (i)
the Election is made either (A) no later than six (6) months prior to the date
on which exercise of such Option becomes taxable to the Optionee (the "Tax
Recognition Date"), (B) during the ten-day period beginning on the third
business day following, and ending on the twelfth business day following, the
date of release for publication of the Corporation's quarterly or annual summary
statements of sales and earnings, or (C) during such other period as may be
instead provided in Rule l6b-3(e)(3)(iii) promulgated pursuant to the Exchange
Act (or any successor rule) and (ii) the Election shall not be available with
respect to such Option to any extent during the first six (6) months of the term
thereof, except in the event death or disability of the Optionee occurs prior to
the expiration of such six-month period. If the Tax Recognition Date with
respect to the exercise of a Non-Qualified Stock Option will be a date other
than the date on which the Option is exercised, then (A) the Committee with the
cooperation of the Optionee shall estimate in good faith the amount of the
Withholding Obligation (the "Estimated Amount"), (B) the optionee shall deliver
(in conformity with any applicable Election) to the Corporation, on the date the
Optionee exercises the Option, cash, such number of shares of Common Stock
(valued as set forth above) or such combination of cash and Common Stock (valued
as set forth above) as is equal in value to the Estimated Amount, (C) the
Committee shall notify the Optionee in writing, within fifteen (15) days after
the Tax Recognition Date with respect to the exercise of the Option of the
amount of income recognized by the optionee and of the date which is the Tax
Recognition Date, (D) promptly after providing such notice, the Corporation
shall deliver to the Optionee (using the same method of payment as was used with
respect to payment of the Estimated Amount and in conformity with any applicable
Election) either (1) cash, shares of the Corporation's Common Stock or a
combination of cash and shares of the Corporation's Common Stock as is equal in
value to the amount, if any, by which the Estimated Amount exceeds the actual
Withholding Obligation, or (2) written notice of the amount, if any, by which
such actual Withholding Obligation exceeds the Estimated Amount, or (3) written
notice that the Estimated Amount and the amount of such actual Withholding
Obligation are equal, (E) the Optionee shall deliver (in conformity with any
applicable Election) to the Corporation within fifteen (15) days after the date
of the notice, if any, described in the preceding clause (D) (2) above, cash,
shares of the Corporation's Common Stock or a combination of cash and shares of
such Common Stock as is equal in value to the excess amount specified in such
notice, and (F) the value of any shares of the Corporation's Common Stock
delivered by the Corporation or the Optionee pursuant to the preceding clauses
(D) or (E) shall be the fair market value of such shares, determined, as of the
business day immediately prior to the Tax Recognition Date, by the Committee in
its good faith discretion.
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(d) Whenever all or any portion of (i) the purchase price payable
upon exercise of an Option or (ii) the Withholding Obligation of the Corporation
or a Subsidiary of the Corporation is paid by the delivery of shares of the
Corporation's Common Stock, tender of such shares shall be accompanied by a duly
executed stock power and by payment of the requisite stock transfer tax, if any.
The Committee may also require the Optionee to make such representations as to
his title, authority to transfer such title and any other facts as it may deem
appropriate.
SECTION 20: Issuance of Shares. Within a reasonable time after the
exercise of an Option in accordance with its terms, the Corporation shall cause
to be delivered to the purchaser a certificate for the shares of Stock purchased
pursuant to the exercise of the Option.
SECTION 21: Stockholder Rights of Optionee. No person entitled to
exercise any Option granted under this Plan shall have any rights or privileges
of a stockholder of the Corporation in respect of any shares issuable upon
exercise of such Option until certificates representing such shares shall have
been issued and delivered.
SECTION 22: Termination of Options. Any Option not exercised within
the period fixed for its exercise in Section 13 of this Plan and this Article IV
shall terminate and become null and void.
SECTION 23: Unexercised Options. Stock covered by Options which have
terminated in accordance with the provision of this Plan, to the extent to which
such Options have not been exercised, may be treated by the Committee as Stock
which is eligible for other and further granting of Options in accordance with
the terms of this Plan.
ARTICLE V
NOT AN EMPLOYMENT CONTRACT
SECTION 24: Not an Employment Contract. Nothing in this Plan or in
any Option granted pursuant to this Plan shall confer on an individual any right
to continue in the employ of the Corporation or any Subsidiary or interfere in
any way with the right of the Corporation or such Subsidiary at any time to
terminate or modify the terms or conditions of the employment of the holder of
the Option.
ARTICLE VI
RECAPITALIZATION, MERGER,
CONSOLIDATION AND REORGANIZATION
SECTION 25: Change in Common Stock.
(a) Appropriate and equitable adjustment shall be made in the
number of shares of Common Stock subject to each outstanding Option, or the
option prices or both, in the event of any changes in the outstanding Common
Stock by reason of Stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, sales or exchanges of assets,
combinations or exchanges of shares or offerings of subscription rights, it
being the purpose of this provision to insure that an Option shall be adjusted
to give the Optionee, upon exercise of his Option, rights equivalent to the
rights of a person who had held shares of Common Stock in the amount subject to
the Option at the time the Option is granted. In applying this provision, an
adjustment shall be made for any changes occurring after May 1, 1989, the
effective date of this Plan.
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(b) In the event of a change in the Common Stock of the Corporation
as presently constituted, which is limited to a change of the par value status
of any or all of its authorized shares, the shares resulting from any such
change shall be deemed to be Common Stock or Stock within the meaning of this
Plan.
(c) To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive.
SECTION 26: Dissolution or Liquidation. A dissolution or liquidation
of the Corporation shall cause each outstanding Option to terminate except as
provided in any Option Agreement.
SECTION 27: Rights of Optionees and the Corporation.
(a) Except as hereinbefore expressly provided in this Article VI, an
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger, or consolidation or spinoff of assets
or stock of another corporation, and any issue by the Corporation of shares of
stock of any class or securities convertible into shares of stock of any class
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to any Option.
(b) The grant of an Option pursuant to this Plan shall not affect in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell or
transfer all or any part of its business or assets.
SECTION 28: Compliance With Securities Act. The Corporation may
postpone the issuance and delivery of shares upon any exercise of any Option
until (a) the admission of such shares to listing on any stock exchange on which
shares of the Corporation of the same class are then listed and the completion
of such registration or other qualification of such shares under any state or
Federal law, rule or regulation as the Corporation shall determine to be
necessary or advisable, (b) insofar as any local Blue Sky law might affect the
issuance of such shares, either the local Blue Sky Commission shall have ruled
or counsel to the Corporation shall have advised that the issue is not subject
to such local law or that such shares shall have been qualified under such law,
(c) counsel to the Corporation shall have advised either that the issuance of
such shares does not require registration under any Federal securities act or
that any such registration as may be required shall be effective as of the time
of issuance of such shares, (d) the employee to whom the Option is granted shall
have represented and agreed in writing that any shares purchased pursuant to the
Option are being purchased for investment and not with a view to the
distribution or resale thereof; provided, however, that an Optionee making such
representation and agreement may be released by the Corporation at its
discretion from such representation and agreement upon the shares being
registered or qualified in such manner as may be legally required at any time,
and (e) the Committee shall have been advised by counsel that all applicable
legal requirements pertaining to the issuance of such shares, including any
requirements of the Securities Act, have been complied with. Any person
exercising an option shall make such representations and furnish such
information as may be appropriate to permit the Corporation, in the light of the
then existence or nonexistence of an effective Registration Statement under the
Securities Act, with respect to such shares, to issue the shares in compliance
with the provisions of that or any comparable law. The Corporation shall not
have any liability with respect to any Option the exercise of which is prevented
by the provisions of this Section 28.
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ARTICLE VII
AMENDMENT, TERMINATION AND INTERPRETATION
SECTION 29: Amendment and Termination. This Plan shall terminate on
April 30, 1999. The Board of Directors or the Committee may at any time prior to
that date terminate or from time to time amend this Plan and the terms and
conditions thereof as to Stock which is not then the subject matter of Options
granted pursuant to the terms of this Plan; and the Board of Directors or the
Committee, with the written consent of the affected holders of any Options
granted pursuant to this Plan, may at any time terminate or from time to time
amend this Plan and the terms and conditions of this Plan as it regards any such
Options held by any such consenting Optionees; provided, however, that if
required by law or by the applicable provisions of the securities exchange upon
which the Common Stock is listed, such amendments shall be conditioned upon
obtaining the approval of the stockholders of the Corporation.
SECTION 30: Interpretation: A determination of the Committee as to
any question which may arise with respect to the interpretation of the
provisions of this Plan and of any Option or Option Agreement shall be final.
SECTION 31: Rules and Regulations. The Committee may authorize and
establish such rules, regulations and revisions thereof not inconsistent with
the provisions of this Plan as it may determine advisable to make this Plan and
the Options effective and provide for their administration, and may take such
other actions with regard to this Plan and the Options as it shall deem
desirable to effect their purposes.
SECTION 32: Evidence of Each Option. The Committee may include in
each agreement or document it may issue to the holder of any Option, evidencing
the existence of such Option given or granted pursuant to the terms of this
Plan, the text of this Plan by reference thereto in such certificate or
document; and in such event, all the terms of this Plan as it may exist and as
it may be amended from time to time shall be deemed included in such certificate
or document with the same force and effect as though this Plan were set forth in
its entirety in such agreement or document.
ARTICLE VIII
EFFECTIVENESS
SECTION 33: Effectiveness of Plan. This Plan shall become effective
on May 1, 1989, subject, however, to approval by the stockholders of the
Corporation.
ARTICLE IX
MISCELLANEOUS
SECTION 34: Substituted Options. Subject to the limitation in
Section 8 of this Plan on total shares available for Options, Options to
purchase shares of the Corporation's Common Stock may be granted under this Plan
on terms and conditions which differ from or conflict with the terms and
conditions set forth herein, provided that such Options are granted in
substitution for outstanding options held by persons who have become employees
of the Corporation or any of its Subsidiaries by reason of a corporate merger,
consolidation, acquisition of property or capital stock, separation,
reorganization or liquidation occurring after the date of adoption of this Plan.
Nothing contained in this Plan shall be construed to limit the
authority of the Corporation to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Corporation to
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grant or assume options for proper corporate purposes other than under this Plan
with respect to any employee or other person, firm, corporation or association.
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VARLEN CORPORATION
EXCESS BENEFITS PLAN
(As amended and restated May 14, 1999)
ARTICLE I
Establishment
The Varlen Corporation Excess Benefits Plan, originally effective as of
January 1, 1988, is hereby amended and restated generally effective as of May
14, 1999. The purpose of the Plan is to provide selected persons with deferred
compensation which would have otherwise accrued under the Varlen Corporation
Profit Sharing and Retirement Savings Plan or any successor thereto (or, to the
extent provided herein, under a Subsidiary Plan) except for the application of
certain limits with respect to such plan as required by the Internal Revenue
Code of 1986. The Plan is intended as an unfunded deferred compensation plan
maintained primarily for a select group of management or highly compensated
employees, and shall be construed and administered in accordance with such
intention.
ARTICLE II
Definitions
The following Sections of this Article II provide basic definitions of
terms used throughout this plan, and whenever used herein in a capitalized form,
except as may be expressly provided, the terms shall be deemed to have the
following meanings:
2.1 "Account" means the bookkeeping record established and maintained on
behalf of each Participant equal to the amount accrued pursuant to Section 4.1,
increased by any Account Earnings, and decreased by any distributions or
forfeitures pursuant to the terms of the Plan. The value of a Participant's
Account at any time during the Accounting Period, other than on a Valuation
Date, shall be the Account accrued as of the immediately preceding Valuation
Date, increased by the value of any additional amount accrued pursuant to
Section 4.1 and credited to the Account during the Accounting Period, and
reduced by the value of forfeitures or distributions to the Participant or his
Beneficiary during the Accounting Period. On the Valuation Date, the value shall
be that as determined under the preceding sentence increased by the value of any
Account Earnings for that Accounting Period. The Plan Committee may establish
one or more separate Accounts for any person for any reason the Plan Committee
may determine, and the Plan shall apply separately with respect to each Account.
The Account represents an unfunded commitment of the Employers to pay in the
future the amounts credited thereunder, subject to all the terms and conditions
of the Plan.
2.2 "Accounting Period" means each and any calendar year ending on or
after December 31, 1988, or such other period(s) as may be designated by the
Plan Committee.
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2.3 "Account Earnings" means the amount representing the growth or
decrease in a Participant's Account for any Accounting Period, relating to the
performance of the investment elections submitted by the Participant.
2.4 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
2.5 "Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
the Company.
2.6 "Appendix" means a written supplement attached to this Plan and made a
part hereof which has been added in accordance with the provisions of the Plan.
2.7 "Beneficiary" means any person (including any trust, estate or other
entity) designated by a Participant in accordance with Section 5.2 to receive
any death benefits which shall be payable under the Plan.
2.8 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.9 "Change of Control" means the occurrence of one of the following
events:
(a) if any "person" or "group" as those terms are used in
Sections 13(d) or 14(d) of the Exchange Act, other than a Exempt Person, is or
becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding securities;
or
(b) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board and any new directors
whose election by the Board or nomination for election by the Company's
stockholders was approved by at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election was previously so approved, cease for any reason to constitute a
majority thereof; or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or
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such surviving entity outstanding immediately after such merger or consolidation
or (B) following which the Company's chief executive officer and directors
retain their positions with the surviving entity (and constitute at least a
majority of the surviving entity's board of directors); or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all the Company's assets, other than a sale
to an Exempt Person;
provided, however, that if the approval specified in clause (c) or
clause (d) above is obtained but such transaction is terminated or
abandoned by the parties thereto prior to its effectuation, then, from and
after the date of such termination or abandonment, no Change of Control
shall be deemed to have occurred by reason of such approval; and provided
further, that no Change of Control shall be deemed to have occurred by
reason of any event involving or arising out of a proceeding under Title
11 of the United States Code (or the provisions of any future United
States bankruptcy law), an assignment for the benefit of creditors or an
insolvency proceeding under state or local law.
2.10 "Company" means Varlen Corporation or, except in determining whether
there is or has been a Change of Control, any successor entity by merger,
consolidation, purchase or otherwise.
2.11 "Compensation Committee" means the Compensation Committee of the
Board of Directors.
2.12 "Disability" means a mental or physical condition which entitles the
Participant to benefits under the long-term disability plan (including any
insurance policy) of the Employer, provided that if there is no such plan or the
Participant is an Employee but not covered by such plan, then "Disability" shall
mean a mental or physical condition which renders the Participant permanently
and continuously unable or incompetent to engage in any substantial gainful
activity of the same type or at the same level as that in which the Participant
has been employed at the time he incurred the Disability. Such determination
shall be made by one or more physicians appointed by the Plan Committee, on the
basis of such medical and other competent evidence as the Plan Committee shall
deem relevant.
2.13 "Earnings Factor" shall mean, with respect to any Plan Year, the
product of (a) the aggregate percent rate of growth (or decline) during the
calendar year in which the relevant Valuation Date occurs, in the funds elected
by a Participant pursuant to Section 4.3 herein, such percent to be calculated
at the sole discretion of the Plan Committee, and (b) a fraction, the numerator
of which is the number of full calendar months in the Accounting Period and the
denominator of which is 12. If the Accounting
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Period is other than one or more full calendar months, the Plan Committee shall
appropriately modify the fraction calculated under the preceding sentence.
2.14 "Effective Date" means January 1, 1988, for the Company and any
entity which is an Employer on January 1, 1988. For all other Affiliates, it
shall mean the date the Affiliate becomes an Employer.
2.15 "Employee" means any person who is a common-law employee of an
Employer and who renders services to an Employer on or after the Effective Date.
2.16 "Employer" means the Company and any wholly-owned, directly or
indirectly, subsidiary of the Company.
2.17 "Good Reason" means the occurrence of any of the following events
after a Change of Control, unless (i) such event occurs with the Participant's
express written consent; or (ii) the event occurs in connection with termination
of the Participant's employment for Cause, disability or death:
(a) any reduction in the nature or scope of the authorities, powers,
functions, responsibilities or duties of the Participant that
materially diminishes the Participant's position, authority, duties
or responsibilities;
(b) the assignment by the Company to the participant of duties or
responsibilities (other than isolated and incidental duties or
responsibilities that do not affect the participant's position or
authority) inconsistent with an executive-level position;
(c) the requirement by the Company that the Participant be based at any
office or location more than 35 miles from the offices of the
Company where the Participant was employed immediately prior to the
Change of Control;
(d) any reduction by the Company in the Executive's rate of annual base
salary, or any material and adverse change in the Executive's
eligibility for performance bonuses;
(e) any material reduction in the Participant's benefits under the
employee benefit plans in which he participates immediately prior to
the Change of Control; provided, however, that reasonable increases
in insurance co-payment requirements or deductibles, if imposed upon
all plan participants generally, shall not constitute a material
reduction for this purpose; and further provided, that an amendment
to or termination of an employee benefit plan or practice shall not
constitute a material reduction in the Participant's benefits for
this purpose if substitute or additional payments or benefits to the
Participant substantially offset the financial impact to the
Participant of such amendment or termination;
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(f) any failure by the Company to pay compensation and benefits when and
as due to the participant (exclusive of any amounts then the subject
of a bona fide dispute between the Company and the Participant); or
(g) failure of any successor to the Company to assume the obligations of
the Company under this Plan:
provided, however, that in each case the foregoing event shall not constitute
"Good Reason" until the participant has given written notice to the Board that
such event has occurred and may constitute "Good Reason," and such event is not
cured within thirty (30) days after the date of such notice.
2.18 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, and any subsequent Internal Revenue Code. If there is a
subsequent Internal Revenue Code, any references herein to Internal Revenue Code
sections shall be deemed to refer to comparable sections of any subsequent
Internal Revenue Code.
2.19 "New Participant" means a person who: (a) became a Participant on or
after May 14, 1999; or (b) became a Participant prior to such date but has
agreed in writing to be considered a New Participant.
2.20 "Old Participant" means a person who: (a) was a Participant prior to
May 14, 1999; and (b) who has not agreed in writing to be considered a New
Participant.
2.21 "Participant" means an Employee participating in the Plan as provided
in Article III.
2.22 "Plan" means the Varlen Corporation Excess Benefits Plan as stated
herein, and as hereafter may be amended from time to time.
2.23 "Plan Committee" means the committee appointed pursuant to Article VI
to administer the Plan.
2.24 "Plan Year" means the 12 consecutive month period beginning January
1, 1988 and each successive calendar year thereafter.
2.25 "Savings Plan" means the Varlen Corporation Profit Sharing and
Retirement Savings Plan, as may be amended from time to time, or any successor
thereto as designated by the Plan Committee.
2.26 "Subsidiary Plan" means a plan sponsored by an Employer other than
the Company, where (i) a Participant in the Plan is an Employee of such
Employer, (ii) such plan includes a qualified cash or deferred arrangement
pursuant to Code ss. 401(k), (iii) the Participant makes elective deferrals and
has an account under that plan that is credited
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with such other contributions as are provided for under that plan, and (iv) the
plan is listed by the Committee on the attached Appendix I. The Committee shall
have discretion to amend Appendix I from time to time.
2.27 "Termination of Employment" means the earliest of (a) a resignation
by the Employee for any reason, including Good Reason (b) a dismissal of the
Employee for any reason, (c) the disability of the Employee, (d) death of the
Employee or (e) the retirement of the Employee from an Employer or an Affiliate.
The transfer of an Employee from employment by one Employer or Affiliate to
employment by another Employer or an Affiliate shall not be regarded as a
Termination of Employment.
2.28 "Termination of Employment for Cause" or "Cause" means:
(a) Conviction of, or express admission of the commission of, a
felony or any crime or offence lesser than a felony involving the property
of the Company or a Subsidiary; or
(b) Conduct that has caused demonstrable and serious injury to the
Company or a Subsidiary, monetary or otherwise; or
(c) Willful refusal to perform, or substantial disregard of, duties
properly assigned, as determined by the Company; or
(d) Breach of duty of loyalty to the Company or a Subsidiary or
other act of fraud or dishonesty with respect to the Company or a
Subsidiary.
2.29 "Valuation Date" means the last day of each Accounting Period, and
such additional more frequent dates as the Plan Committee may from time to time
permit.
Except as otherwise indicated by the context, any masculine terminology herein
shall also include the feminine and neuter, and the definition of any term
herein in the singular may also include the plural.
ARTICLE III
Participation
3.1 Eligibility. The Board or the Compensation Committee, in its sole
discretion, shall designate the Employee or Employees who shall participate
under this Plan as Participants and shall designate the effective date of such
participation.
3.2 Duration of Participation. Subject to Article IX, a person shall cease
to be a Participant on the date the balance of his Account is reduced to zero;
provided that with respect to a Participant who incurs a Termination of
Employment or who is employed by an Affiliate that is not an Employer during the
Plan Year, the Plan Committee may
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determine for that Plan Year whether the Participant shall be a Participant for
the Plan Year (or portion thereof) and whether the Participant shall accrue any
amount pursuant to Section 4.1 for that Plan Year (or portion thereof). A
Participant shall not be entitled to an accrual under Section 4.1 with respect
to any Plan Year in which the Participant does not contribute to the Savings
Plan (or a Subsidiary Plan) the lesser of 6% of the Participant's compensation
(as defined in the Savings Plan or Subsidiary Plan) and the maximum permitted to
be contributed by the Participant as a salary reduction contribution as provided
in the Savings Plan or Subsidiary Plan.
3.3 Reemployment. If a Participant incurs a Termination of Employment and
is reemployed, such Participant shall not have credited to his Account an
accrual under Section 4. 1 unless and until the individual again becomes a
Participant in accordance with Section 3.1.
3.4 Transfer of Employment. A Participant who transfers from employment
with an Employer to employment with another Employer or Affiliate shall remain a
Participant, subject to Section 3.2.
ARTICLE IV
Establishment and Crediting of Account
4.1 Accrual.
(a) Amount. Subject to Section 3.2 and Article IX, the Account of
each Participant who is an Employee of an Employer shall be credited each
Plan Year with an amount equal to the sum of (1), (2) and (3), as follows:
(1) the amount of the matching contribution (as determined in the
Savings Plan) which would have been allocated to the
Participant during the plan year of the Savings Plan ending
with or within the Plan Year, absent the limitation on
deferrals described in Sections 401(a)(17), 401(k), 401(m),
402(g) or Section 415 of the Code, (or comparable limitations
as determined by the Plan Committee) (and in the case of a
Participant who benefited during such time period under a
Subsidiary Plan, the amount which would have been so allocated
under the terms of that Subsidiary Plan) reduced by the amount
of matching contribution actually allocated to the Participant
for the same period under the Savings Plan (and the Subsidiary
Plan);
(2) the amount of discretionary contribution (as determined in the
Savings Plan) which would have been allocated to the
Participant during the Plan Year of the Savings Plan ending
with or within the Plan Year, absent the limitation of
Sections 401(a)(17) and 415 of
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the Code, (or comparable limitations as determined by the Plan
Committee) (and in the case of a Participant who benefited
during such time period under a Subsidiary Plan, the amount
which would have been so allocated under the terms of that
Subsidiary Plan) reduced by the amount of such contributions
actually allocated to the Participant for the same period
under the Savings Plan (and the Subsidiary Plan); and
(3) the amount of "Forfeitures" (as defined in the Savings Plan,
including any comparable or successor definition and any
forfeitures under or with respect to any plan merged into or
with the Savings Plan) which would have been allocated to the
Participant during the plan year of the Savings Plan ending
with or within the Plan Year, absent the limitation of
Sections 401(a)(17) and 415 of the Code (or comparable
limitations as determined by the Plan Committee) (and in the
case of a Participant who benefited during such time period
under a Subsidiary Plan, the amount which would have been so
allocated under the terms of that Subsidiary Plan), reduced by
the amount of Forfeitures actually allocated to the
Participant for the same period under the Savings Plan (and
the Subsidiary Plan.)
(b) Account. The Plan Committee shall create and maintain an Account
for each Participant, to which shall be credited all amounts accrued
pursuant to Section 4.1(a) and any Account Earnings thereon, and shall be
charged with any distributions and forfeitures, pursuant to the terms of
the Plan.
4.2 Crediting and Charging Account. Subject to Section 3.2 and Article IX,
any amount accrued pursuant to Section 4.1 shall be credited to the
Participant's Account on the date such amount would have been credited to the
Participant pursuant to the Savings Plan or the Subsidiary Plan, as applicable,
if such amount would have been permitted as a contribution under the Savings
Plan or the Subsidiary Plan, as applicable, for the Plan Year. Any amounts
distributed or forfeited with respect to the Account shall be charged as of the
date of such distribution or forfeiture.
4.3 Earnings on Account Balances. Participants shall be given the
discretion to make quarterly elections with respect to the accrual rates to be
applied to earnings on their Account balances. The alternatives with respect to
such elections shall be communicated periodically by the Plan Committee. Each
such election must be delivered to the appropriate officer of the Company at
least fifteen (15) days prior to the beginning of the calendar quarter in which
such election is to be effective.
Neither the Plan Committee nor any administrator of any funding vehicle
which may be established under the Plan shall be required to actually invest the
funds in Participants' accounts in the manner(s) elected by the Participants.
Rather, such Account
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balance accruals shall be tracked by the Plan Committee by means of bookkeeping
accounts, according to such methods and procedures as the Plan Committee, in its
sole discretion, deems appropriate. Account Earnings shall be distributed to a
Participant or his or her Beneficiary as part of the value of the Participant's
Account and shall be subject to all the terms and conditions of this Plan.
ARTICLE V
Distribution
5.1 Payment of Accrued Benefits Upon Termination Other Than Death. If a
Participant has a Termination of Employment other than due to death, due to
Cause or due to Good Reason, there shall be distributed to the Participant
within 90 days of such Termination of Employment an amount equal to the
nonforfeitable portion of the value of his Account in a single sum. The
nonforfeitable portion of the Participant's Account shall be the sum of (1) all
amounts attributable to Section 4.1(a)(1) and (3), including Account Earnings
attributable thereto, and (2) the nonforfeitable portion of the Account
attributable to Section 4.1(a)(2) which portion shall be determined by
multiplying the Account attributable to Section 4.1(a)(2) by a percentage, which
percentage shall be the same percentage as the percentage of the Participant's
account under the Savings Plan (or Subsidiary Plan, to the extent of
contributions made based on the Subsidiary Plan) attributable to discretionary
contributions which the Participant is entitled to receive under the Savings
Plan (or a Subsidiary Plan as applicable) as of the date of the Termination of
Employment. Notwithstanding anything herein to the contrary, the Participant's
Account shall be fully vested and nonforfeitable: (a) in the event the
Termination of Employment is due to Disability; or (b) with respect to Old
Participants, as of the date of any Change of Control. In the event a
Participant's Termination of Employment is for Cause, the Account shall be
forfeited and the Participant and any Beneficiary of the Participant shall have
no right to any amount hereunder. In the event a Participant has incurred a
Termination of Employment and it is thereafter discovered the Participant
committed an act described in Section 2.24(a), any amount previously distributed
to the Participant pursuant to the Plan shall be returned to the Company within
90 days of the date the Company demands such payment.
5.2 Payment Upon Death. In the event the Participant incurs a Termination
of Employment due to death and has not previously received a distribution of his
Account, an amount equal to the total value of the Participant's Account shall
be distributed as soon as administratively possible to the Participant's
Beneficiary determined hereunder. The Beneficiary or Beneficiaries entitled to
any payments under this Section 5.2 shall be designated by the Participant on a
form provided or approved by the Plan Committee. The Participant may change such
designation from time to time by filing a new beneficiary designation form with
the Plan Committee. No designation of Beneficiary or change of Beneficiary shall
be effective until filed with the Plan Committee. If more than one Beneficiary
shall be designated, the Beneficiaries shall share any distribution on a pro
rata basis unless provided otherwise by the Beneficiaries (and approved by the
Plan
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Committee) or in the beneficiary designation form. If a Participant shall fail
to file a valid beneficiary designation form, or if all persons designated shall
have predeceased the Participant, the Employer shall distribute such
Participant's Account to the Participant's estate or such other person or entity
which the Plan Committee determines is entitled to such Account. Unless and
until a Participant shall file a beneficiary designation form with the Plan
Committee, the beneficiary designated under the Savings Plan shall be the
Beneficiary under this Plan.
5.3 Deduction of Taxes from Amount Payable. The Employer may deduct from
the amount to be distributed such amount as the Employer, in its sole
discretion, deems proper to protect against liability for the payment of death,
succession, inheritance, income, employment or other taxes, and out of the money
so deducted the Employer may discharge any such liability and pay the amount
remaining to the Participant or the Participant's Beneficiary, as the case may
be.
5.4 Board Discretion. Notwithstanding anything to the contrary in Section
5.1, the Board or the Compensation Committee may, at any time and in its sole
discretion, increase the nonforfeitable percentage of a New Participant's
Account.
ARTICLE VI
Administration
6.1 Authority and Responsibility of the Board of Directors and the
Compensation Committee. The Board of Directors shall have overall responsibility
for the establishment, amendment, termination, administration and operation of
the Plan; provided as of the effective date, such authority shall be delegated
to the Compensation Committee, and further provided that the responsibility for
administration and operation of the Plan shall be delegated to the Plan
Committee.
6.2 Plan Committee Membership. The Plan Committee shall consist of three
members, one of whom shall be the chief executive officer of the Company, one of
whom shall be the chief financial officer of the Company and a third member who
shall be chosen by the two previously named members. The members of the Plan
Committee shall remain as such until they resign their respective offices with
the Company, and in the case of the member of the Plan Committee named to serve
on the Plan Committee by the chief executive and chief financial officers, until
removed by such two members of the Plan Committee. The Plan Committee shall have
the general responsibility for the administration of the Plan and for carrying
out its provisions. In the event the previously named three persons shall not be
the Plan Committee, the Board of Directors or the Compensation Committee will
constitute the Plan Committee.
6.3 Plan Committee Structure. If requested to do so, each member of the
Plan Committee, upon becoming a member of the Plan Committee, shall file an
acceptance thereof in writing with the secretary of the Company and the
secretary of the Plan
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Committee. Any member of the Plan Committee may resign by delivering his written
resignation to the secretary of the Company and the secretary of the Plan
Committee, and such resignation shall become effective upon the date specified
therein. In the event of a vacancy in membership, the remaining members shall
constitute the Plan Committee with full power to act until said vacancy is
filled.
6.4 Plan Committee Actions. The action of the Plan Committee shall be
determined by the vote or other affirmative expression of a majority of its
members. The Plan Committee shall choose a chairman who shall be a member of the
Plan Committee and a secretary who may (but need not) be a member of the Plan
Committee. The secretary shall keep a record of all meetings and acts of the
Plan Committee and shall have custody of all records and documents pertaining to
its operations. Either the chairman or the secretary may execute any certificate
or other written direction on behalf of the Plan Committee. A Plan Committee
member shall not exercise any discretion under this Plan with respect to
himself.
6.5 Plan Committee Duties. The Plan Committee shall administer and enforce
the Plan in accordance with the terms of the Plan and shall have all powers
necessary to accomplish that purpose, including but not by way of limitation,
the following:
(a) To issue rules and regulations necessary for the proper conduct
and administration of the Plan and to change, alter, or amend such rules
and regulations;
(b) To construe the Plan;
(c) To determine all questions arising in its administration,
including those relating to the rights of Participants, former
Participants and Beneficiaries, to the entitlement to payment of the
Account value and its decision thereon shall be final and binding upon all
persons hereunder;
(d) To compute the amount and kind of benefits payable to
Participants or Beneficiaries under the Plan;
(e) To authorize all disbursements in accordance with the provisions
of the Plan;
(f) To employ and suitably compensate such accountants, attorneys
(who may but need not be the accountants or attorneys of the Company),
clerical employees and other persons to render advice as may be deemed
necessary to the performance of its duties;
(g) To communicate the Plan and its eligibility requirements to
certain Employees and to notify Employees when they become eligible to
participate;
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(h) To make available to Participants upon request, for examination
during business hours, such records as pertain exclusively to the
examining Participant;
(i) To keep records relating to Participants and other matters
applicable to this Plan;
(j) To appoint an agent for service of legal process;
(k) To prescribe procedures to be followed by Participants and
Beneficiaries in claiming benefits;
(1) To develop and make available forms for use by Participants and
Beneficiaries for making elections provided by the Plan;
(m) To make available for inspection and to provide upon request at
such charge as may be permitted and determined by the Plan Committee,
documents and instruments required to be disclosed by law;
(n) To withhold any and all taxes as may be required by law to be
withheld from any payment; and
(o) To file all reports as required by law with governmental
agencies.
6.6 Plan Liability. The Board of Directors, the Compensation Committee,
the Plan Committee and the respective members of each shall be free from all
liability, joint or several, for their acts or failure to act hereunder.
6.7 Plan Bonding. The Board of Directors, the Compensation Committee and
the Plan Committee shall serve without bond (except as otherwise required by
law) and without compensation for their service as such; but all expenses of the
Plan Committee shall be paid by the Employers.
6.8 Plan Committee Allocations and Delegations of Responsibility.
(a) Delegation. The Board of Directors, the Compensation Committee
and the Plan Committee shall have the authority to delegate from time to
time, by instrument in writing, all or any part of their responsibilities
under the Plan to such person or persons as it may deem advisable (and may
authorize such person to delegate such responsibilities to such other
person or persons as the Board of Directors, Compensation Committee or
Plan Committee shall authorize); and in the same manner the Board of
Directors, Compensation Committee and Plan Committee shall have the
authority to revoke any such delegation of its responsibility. Any action
of the delegate in the exercise of such delegated responsibilities shall
have the same force and effect for all purposes hereunder as
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if such action had been taken by the Board of Directors, the Compensation
Committee or the Plan Committee whichever is appropriate. Neither any
Employer, nor the Board of Directors, the Compenstion Committee or the
Plan Committee or the respective members of each, shall be liable for any
acts or omissions of any such delegate. The delegate shall report
periodically to the Board of Directors, the Compensation Committee or the
Plan Committee, whichever is appropriate, concerning the discharge of the
delegated responsibilities.
(b) Allocation. The Board of Directors, the Compensation Committee
and the Plan Committee shall have the authority to allocate from time to
time, by instrument in writing, all or any part of their responsibilities
under the Plan to one or more of their members as they may deem advisable,
and in the same manner to revoke such allocation of responsibilities. Any
action of the member to whom responsibilities are allocated in the
exercise of such allocated responsibilities shall have the same force and
effect for all purposes hereunder as if such action had been taken by the
Board of Directors, the Compensation Committee or the Plan Committee,
whichever is appropriate. Neither any Employer nor the Board of Directors,
the Compensation Committee or the Plan Committee or the respective members
of each, shall be liable for any acts or omissions of such member. The
member to whom responsibilities have been allocated shall report
periodically to the Board of Directors, the Compensation Committee or the
Plan Committee concerning the discharge of the allocated responsibilities.
(c) Limitation on Liability. Fiduciary duties and responsibilities
which have been allocated or delegated pursuant to the terms of (a) or (b)
of this Section are intended to limit the liability of the Employer, the
Board of Directors, the Compensation Committee or the Plan Committee, as
appropriate.
6.9 Information to be Supplied by Employers. Employers shall provide the
Plan Committee or its delegate with such information as it shall from time to
time need in the discharge of its duties.
6.10 Records. The regularly kept records of the Plan Committee and any
Employer shall be conclusive evidence of the Account the Participant's accrual
under Section 4.1, the Participant's vested interest under the Savings Plan, his
status as an Employee, and all other matters applicable to this Plan.
6.11 Capacity. Any person or group of persons may serve in more than one
capacity with respect to the Plan.
6.12 Employer's Agent. The Company and/or the Plan Committee shall act as
agent for each Employer in the administration of the Plan.
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6.13 Plan Committee Decisions Final. The decision of the Plan Committee in
matters within its jurisdiction shall be final, binding, and conclusive upon the
Employers and upon each Employee, Participant, Beneficiary, and every other
person or party interested or concerned.
ARTICLE VII
Claims Procedure
7.1 Initial Claim for Payment. Each Participant or Beneficiary shall
submit a claim for payment to the Plan Committee (or to such other person as may
be designated by the Plan Committee) in such manner as is prescribed by the Plan
Committee. When a claim for benefits is filed, the Plan Committee shall
undertake to dispose of such claim in a reasonable time and inform the
Participant or Beneficiary of such disposition and the reason for it. A
Participant shall have no right to seek review of a denial of payment or to
bring any action in any court to enforce a claim for payment prior to filing a
claim for payment and exhausting the rights to review delineated under Section
7.2.
7.2 Review of Claim Denial. If a claim is denied, in whole or in part, the
claimant shall have the right to request that the Plan Committee review the
denial, provided that the claimant files a written request for review with the
Plan Committee within sixty (60) days after the date on which the claimant
received written notification of the denial. A claimant (or a claimant's duly
authorized representative) may review pertinent documents and submit issues and
comments in writing to the Plan Committee. Within sixty (60) days after a
request for review is received, the review shall be made and the claimant shall
be advised in writing of the decision on review, unless special circumstances
require an extension of time for processing the review, in which case the
claimant shall be given a written notification within such initial sixty (60)
day period specifying the reasons for the extension and when such review shall
be completed (provided that such review shall be completed within one hundred
and twenty (120) days after the date on which the request for review was filed).
The decision on review shall be forwarded to the claimant in writing and shall
include specific reasons for the decision and references to Plan provisions upon
which the decision is based. A decision on review shall be final and binding on
all persons for all purposes. If a claimant shall fail to file a request for
review in accordance with the procedures herein outlined, such claimant shall
have no rights to review and shall have no right to bring action in any court
and the denial of the claim shall become final and binding on all persons for
all purposes.
ARTICLE VIII
Maintenance of Plan by Employer
8. 1 Maintenance of Plan. An Affiliate which is a wholly-owned, directly
or indirectly, subsidiary of the Company shall become an Employer for purposes
of this Plan. Each Employer shall execute such documents and take such other
actions as may
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be required or directed by the Board, the Compensation Committee or the Plan
Committee to implement or effect the Plan. If the Board or the Compensation
Committee desires to amend this Plan as to its application to the employees of
any Employer, it may do so by use of an Appendix. Notwithstanding any term or
provision of this Plan, the terms and provisions as may be imposed by the Board
or the Compensation Committee and attached hereto in an Appendix shall govern.
8.2 Procedure for Withdrawal. Any Employer (other than the Company) may,
by resolution of the Board or the Compensation Committee, subject to such
conditions as may be imposed by the Board or the Compensation Committee, cease
to be an Employer for purposes of this Plan.
ARTICLE IX
Amendment and Termination
9.1 Amendments. The Board or the Compensation Committee may amend, modify,
change, revise or discontinue this Plan at any time, provided, however, that no
action shall, without the written consent of the affected person, entity,
Participant or Beneficiary (a) materially increase the duties or liabilities of
any person or entity; (b) materially reduce the Participant's Account value; (c)
change the portion of the Account which is vested or the right to such Account
as provided in Article V; or (d) affect in any way the provisions of Section 9.2
or 10.1
9.2 Termination of the Plan. This Plan may be terminated and shall
terminate (a) at such time as the Board or the Compensation Committee, in their
discretion, may determine; (b) if a petition under any section or chapter of the
Bankruptcy Reform Act of 1978 or any similar law or regulation shall be filed by
the Company or if the Company shall make an assignment for the benefit of its
creditors or if any case or proceeding is filed by the Company for its
dissolution or liquidation; (c) if the Company is enjoined, restrained or in any
way prevented by court order from conducting all or any material part of its
business affairs or if a petition under any section or chapter of the Bankruptcy
Reform Act of 1978 or any similar law or regulation is filed against the Company
or if any case or proceeding is filed against the Company for its dissolution or
liquidation and such injunction, restraint or petition is not dismissed or
stayed within 45 days after the entry or filing thereof ; (d) if an application
is made by the Company for the appointment of a receiver, trustee or custodian
of the Company's assets; (e) if an application is made by any person other than
the Company for the appointment of a receiver, trustee, or custodian for the
Company's assets and the same is not dismissed within 45 days after the
application therefor; or (f) the Company is dissolved and its business
operations are not continued by or under the control of substantially the same
person or persons as control the Company or no successor entity assumes the
liability of the Plan. Such termination shall become effective, in the case of
the occurrence of the event in (a) of the preceding sentence, by the delivery of
notice by the Board or the Compensation Committee to the Participant, or if such
termination is the occurrence of an event described in (b), (c), (d),
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(e) or (f), upon the occurrence of the event. In the event of a termination of
the Plan for the reasons listed in (a) or (f), the termination of the Plan shall
not reduce the value of the Participant's Account and the Participant's Account
shall be fully vested and nonforfeitable as of the date the Plan is terminated,
and the Employer shall pay, subject to Section 10.10, and to the extent
permitted by law, as soon as administratively possible in a single sum to each
Participant or Beneficiary an amount equal to the value of his Account on the
date of the termination of the Plan. In the event of a termination of the Plan
for any reason listed in (b), (c), (d), or (e), the value of the Account shall
be fully vested and nonforfeitable, and paid in a single sum as soon as
administratively possible but consistent with the disposition of the event
listed in (b), (c), (d) or (e).
ARTICLE X
Miscellaneous Provisions
10.1 Successor Entity. Any successor entity to the Company, by merger,
consolidation, purchase or otherwise, shall be substituted hereunder for the
Company, and the Plan shall be binding upon all successors to and assigns of the
Company, and the Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
satisfactory to the Compensation Committee, expressly, absolutely and
unconditionally to assume and agree to perform the obligations under this Plan
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
10.2 Indemnification. Each Employer shall indemnify and hold harmless each
member of the Board of Directors, the Compensation Committee, the Plan Committee
and each officer and employee of an Employer to whom are delegated duties,
responsibilities, and authority with respect to the Plan against all claims,
liabilities, fines and penalties, and all expenses reasonably incurred by or
imposed upon such delegate or agent (including but not limited to reasonable
attorney fees) which arise as a result of actions or failure to act in
connection with the operation and administration of the Plan to the extent
lawfully allowable and to the extent that such claim, liability, fine, penalty,
or expense is not otherwise paid for by liability insurance. Notwithstanding the
foregoing, an Employer shall not indemnify any person for any such amount
incurred through any settlement or compromise of any action unless the Employer
consents in writing to such settlement or compromise.
10.3 Nonalienation of Payment. This Plan shall be binding upon and inure
to the benefit of the Employer, its successors and assigns and the Employee and
the Employee's heirs, executors, administrators and legal representatives.
Except as permitted by the preceding sentence, benefits payable under the Plan
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, including any such liability which is for
alimony or other payments for the support of a
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spouse, former spouse or children of the Participant, or for any other relative
of a participant prior to actually being received by the person entitled to the
benefit under the terms of the Plan; and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge, garnish, execute or levy upon,
or otherwise dispose of any right to benefits payable hereunder, shall be void.
No Employer shall in any manner be liable for, or subject to the debts,
contracts, liabilities, engagements or torts of any person entitled to benefits
hereunder.
10.4 Allocation to Employer. The Plan Committee shall, if necessary,
determine each Employer's allocation of the obligation with respect to a
Participant's Account, with respect to such criteria and factors as the Plan
Committee may determine. In the event of allocation, the Employer will pay such
portion of the benefits payable hereunder as may be allocated to it. Such
determination shall be binding on all Participants, Beneficiaries and the
Employer. Under no circumstances shall any Participant or Beneficiary have any
right to examine the books and records of any Employer other than those records
of the Plan Committee relating only to the Account of the Participant.
10.5 Taxation Prior to Receipt. If the Participant or Beneficiary is
subject to taxation with respect to all or any portion of the value of the
Account prior to the calendar year in which the Participant or Beneficiary
otherwise receives such portion, the Company shall, at the written request of
the Participant or Beneficiary accompanied by evidence satisfactory to the
Company of the correct determination of such tax liability, distribute the
amount of the value of the Account determined to be taxable to the Participant
or a Beneficiary as soon as practicable.
10.6 Appointment of Guardian. If a Participant or Beneficiary is declared
an incompetent or is a minor and if a conservator, guardian or other person
legally charged with the Participant's care has been appointed, any benefits to
which such Participant or Beneficiary is entitled shall be payable to such
conservator, guardian or other person legally charged with the Participant's
care. The decision of the Plan Committee in such matters shall be final, binding
and conclusive upon each Participant, Beneficiary and every other interested or
concerned person or party. None of the Company, an Employer nor the Plan
Committee shall be under any duty to see to the proper application of such
payments.
10.7 Facility of Payment. All benefits under the Plan shall be paid to the
Participant or Beneficiary entitled thereto ("Payee") either by a check which
shall be endorsed personally by the Payee or, if the Payee makes a written
request on a form approved by the Plan Committee, by a deposit in the personal
savings or checking account of the Payee; provided that if any such deposit
shall be made in error or in excess of the amount due, the Payee shall be liable
to return any such payment or excessive portion of any payment.
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10.8 Effect of Return of Benefit Checks. Each person entitled to benefits
under this Plan shall furnish the Plan Committee with the address to which his
benefit check shall be mailed. If any benefit check mailed by regular United
States mail to the last address appearing on the Plan Committee's records is
returned because the addressee is not found at that address, the mailing of
benefit checks shall stop. Thereafter, if the Plan Committee receives written
notice of the proper address of the person entitled to receive such benefit
checks and is furnished with evidence satisfactory to the Plan Committee that
such person is living, all amounts then due shall be forwarded to such person.
10.9 Contract of Employment. Nothing contained herein shall be construed
to constitute a contract of employment between an Employer and any Employee or
Participant.
10.10 Source of Payment. All amounts deferred under the Plan, all property
and rights purchased with such amounts, all income attributable to such amounts,
property or rights, and all payments under this Plan shall remain (until paid)
solely the property and rights of the Employer and shall be paid from the
general assets or funds of the Employers, and no special or separate fund shall
be established and no other segregation of assets shall be made to assure
payment. All amounts accrued under the Plan shall remain, until distributed
pursuant to the terms hereof solely the property and rights of the Employers. No
Participant shall have any right, title, or interest whatever in or to any
investments which the Employer may make to aid the Employer in meeting its
obligations hereunder. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship, between an Employer and any Participant.
To the extent that any person acquires a right to receive payments from the
Employer hereunder, such right shall be no greater than the right of an
unsecured creditor of the Employer.
10.11 Mitigation of Excise Tax. If any amount payable under this Plan
(without the application of this Section 10.11), either alone or together with
other payments to the Participant from the Company or an Affiliate, would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment shall be reduced to the largest amount
that will result in no portion of the amount payable under this Plan being
subject to excise tax under Section 4999 of the Code or being disallowed as a
deduction under Section 280G of the Code. The determination of whether any
reduction in the amount payable is to apply shall be made by the Company in good
faith after consultation with the Participant, and such determination shall be
conclusive and binding on the Participant. The Participant shall cooperate in
good faith with the Company in making such determination and in providing the
necessary information for this purpose. The foregoing provisions of this Section
10.11 shall apply with respect to any person only the payment to such person
under this Plan without regard to this Section 10.11 ("Required Payment"), minus
the reduction described in this Section 10.11 ("Required Reduction"), and minus
the federal income tax on the difference between the Required Payment and the
Required Reduction, equals an amount greater than the
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Required Payment, minus the excise tax under Section 4999 of the Code on such
Required Payment, and minus the federal income tax on such Required Payment.
10.12 Limitation on Liability. No Employer, or its shareholders nor any
agent or representative of any Employer who is an employee, officer, or director
of an Employer in any manner guarantees the payments to be made under this Plan
against loss or depreciation, and to the extent not prohibited by federal law,
none of them shall be liable (except for his own gross negligence or willful and
material misconduct), for any act or failure to act, done or omitted in good
faith, with respect to the Plan. No Employer shall be responsible for any act or
failure to act of any agent appointed to administer the Plan.
10.13 Enforcement of Plan. It is the intent of the Company that the
Participant not be required to incur the expenses associated with the
enforcement of his rights under this Plan by litigation or other legal action,
or be bound to negotiate any settlement of his rights hereunder, because the
cost and expense of such legal action or settlement would substantially detract
from the benefits intended to be extended to the Participant hereunder.
Accordingly, if it is finally determined by a court or other entity of competent
jurisdiction that the Company has failed to comply with any of its obligations
under this Plan or in the event that the Company or any other person takes any
action to declare this Plan void or unenforceable, or institutes any litigation,
arbitration or other legal account designed to deny, diminish or to recover from
the Participant the benefits entitled to be provided to the Participant
hereunder, and that Participant has complied with all of his obligations under
this Plan, the Company irrevocably authorizes the Participant from time to time
to retain counsel of his choice, at the expense of the Company but only to the
extent such expense is reasonable and it is determined by the court or arbiter
before whom the matter is pending that the Participant is as likely as not to
prevail in the merits, to represent the Participant in connection with the
initiation or defense of any litigation, arbitration, or other legal action,
whether such action is by or against the Company or any director, officer,
shareholder or other person affiliated with the Company, in any jurisdiction.
The reasonable fees and expenses of counsel selected from time to time by the
Participant, as hereinabove provided, shall be paid or reimbursed to the
Participant by the Company on a regular, periodic basis upon presentation by
such counsel in accordance with its customary practices. Any legal expenses
incurred by the Company by reason of any dispute between the parties as to the
enforceability of or the terms contained in this Plan, notwithstanding the
outcome of any such dispute, shall be the sole responsibility of the Company,
and the Company shall not take any action to seek reimbursement from the
Participant for such expenses. The rights extended hereunder which would apply
to a Participant shall be equally applicable to a Beneficiary.
10.14 No Obligations To Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Participant shall not be required to mitigate damages or the
amount of any payment provided for under this Plan by seeking other
employment or otherwise, nor shall the amount of any payment provided for
under this Plan be
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reduced by any compensation earned by the Participant as the result of
employment by another employer after the termination of the Participant's
employment, or otherwise.
(b) The provisions of this Plan, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Participant's existing rights, or rights which would accrue
solely as a result of the passage of time, under any benefit plan,
incentive plan or securities plan, employment agreement or other contract,
plan or arrangement of the Company or an Affiliate.
10.15 Headings. The headings of Articles and Sections are included solely
for convenience of reference, and if there is any conflict between such headings
and the text of this Plan, the text shall control.
10.16 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and the Plan shall be construed and
enforced as if such provisions, to the extent invalid or unenforceable, had not
been included.
10.17 Law Governing. The Plan shall be construed and enforced according to
the laws of the State of Illinois (other than its laws respecting choice of law)
to the extent not preempted by the Employee Retirement Income Security Act of
1974, as amended.
Executed this _____ day of _______,1999.
VARLEN CORPORATION
By:_____________________________
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Appendix I
1. Brenco Supplemental Pension Plan
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VARLEN CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As amended and restated May 14, 1999)
ARTICLE I
Establishment
The Varlen Corporation Supplemental Executive Retirement Plan originally
effective January 1, 1989, is hereby amended and restated effective generally as
of May 14, 1999, for the purpose of providing supplemental retirement benefits
for one or more selected Employees. The Plan is intended as an unfunded deferred
compensation plan maintained primarily for a select group of management or
highly compensated employees and shall be construed and administered in
accordance with such intention.
ARTICLE II
Definitions
The following Sections of this Article II provide definitions of terms
used throughout this Plan, and whenever used herein in a capitalized form,
except as may be expressly provided, the terms shall be deemed to have the
following meanings:
2.1 "Accrued Benefit" means the benefit to which a Participant may be
entitled hereunder. The Accrued Benefit shall be an amount payable according to
the terms and provisions of Article VI herein. A person's Accrued Benefit, as of
any determination date prior to his Normal Retirement Date, is computed as if
the person were to incur a Termination of Employment on the determination date,
considering Years of Service, Employer Plan Benefits and Average Monthly
Compensation as of the determination date. The Accrued Benefit of a Participant
is equal to:
(a) fifty percent (50%) of the Participant's Average Monthly
Compensation multiplied by a fraction, not to exceed one, the numerator of
which is the Participant's Years of Service (not to exceed 15) and the
denominator of which is fifteen (15); reduced by
(b) the monthly benefit payable to the Participant in the form of a
Single Life Annuity for a Ten-Year Term Certain commencing at Normal
Retirement Date, the value of which is the Actuarial Equivalent of the
Participant's Employer Plan Benefits (as defined in Section 2.20).
The amount determined under this Section 2.1 shall be determined at any point in
time for a Participant who is an Employee. For a Participant who is not an
Employee, the final calculation of the Accrued Benefit shall occur as of the
date he was last an Employee.
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Each and any calculation shall be subject to the rules of the Plan Committee
respecting such calculation. The Accrued Benefit represents an unfunded
obligation of the Employers, the payment of which is subject to all the terms
and conditions of this Plan.
2.2 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
2.3 "Actuarial Equivalent" means, for purposes of computing the value of
Employer Plan Benefits and optional forms of benefit payments and any
adjustments called for under the terms of the Plan for benefits commencing other
than at Normal Retirement Date, when such interest rate assumptions and
mortality assumptions are not otherwise provided for in this Plan, the benefit
having the same value as the benefit which it replaces, based upon such interest
rates and mortality assumptions as the Plan Committee may determine, provided
that in the event of a Change of Control or the termination of the Plan the Plan
Committee shall establish the interest rates and mortality assumptions which
shall be set forth in an Appendix and shall be and become a part of the Accrued
Benefit.
2.4 "Affiliate" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
the Company.
2.5 "Appendix" means a written supplement attached to this Plan and made a
part hereof which has been added in accordance with the provisions of the Plan.
2.6 "Authorized Leave of Absence" means an absence, with or without
compensation, authorized by the Employer or the Affiliate under its standard
personnel practices, provided the Employee returns to employment with the
Employer or the Affiliate within the period specified for the absence.
2.7 "Average Monthly Compensation" means the average obtained by dividing
the sum of the person's Compensation for the 60 consecutive month period of
employment within the 120 consecutive month period of employment preceding the
earlier of the date of the Participant's obtaining age 62 or the Participant's
Termination of Employment (but taking into account any period for which
Compensation is determined under Section 2.12) (excluding any first and last
partial month of employment), which produces the largest sum, by sixty (60). If
a person has less than a 120 consecutive month period of Compensation, Average
Monthly Compensation shall mean the sum of the person's Compensation earned for
all complete months which produces the largest sum, but not to exceed sixty
(60), divided by the number of months, but not to exceed sixty (60), during this
period for which he received Compensation. For purposes of this Section 2.7, the
calendar month which ends coincident with or immediately preceding the calendar
month in which occurs a Termination of Employment or the date the Participant
attains age 62 and the calendar month commencing coincident with or immediately
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following a Participant's return to employment shall be considered consecutive.
If a Participant is employed on less than a full time basis at any time during
the 120 consecutive month period preceding the Termination of Employment or the
date the Participant attains age 62, whichever is earlier, compensation for any
period during which he is not employed on a full time basis shall be adjusted by
the Plan Committee in its discretion to be the Compensation which would have
been paid had the Participant been employed on a full time basis.
2.8 "Beneficiary" means any person (including any trust, estate or other
entity) entitled to receive a Participant's death benefits hereunder in
accordance with a form of payment under Article VI.
2.9 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.10 "Change of Control" means the occurrence of one of the following
events:
(a) if any "person" or "group" as those terms are used in Sections
13(d) or 14(d) of the Exchange Act, other than a Exempt Person, is or becomes
the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; or
(b) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) following which the
Company's chief executive officer and directors retain their positions with the
surviving entity (and constitute at least a majority of the surviving entity's
board of directors); or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all the Company's assets, other than a sale
to an Exempt Person;
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provided, however, that if the approval specified in clause (c) or
clause (d) above is obtained but such transaction is terminated or
abandoned by the parties thereto prior to its effectuation, then, from and
after the date of such termination or abandonment, no Change of Control
shall be deemed to have occurred by reason of such approval; and provided
further, that no Change of Control shall be deemed to have occurred by
reason of any event involving or arising out of a proceeding under Title
11 of the United States Code (or the provisions of any future United
States bankruptcy law), an assignment for the benefit of creditors or an
insolvency proceeding under state or local law.
2.11 "Company" means Varlen Corporation or, except in the event of
determining whether there is or has been a Change of Control, any successor
company by merger, consolidation, purchase or otherwise.
2.12 "Compensation" means the total compensation paid by all Employers to
a Participant for personal services rendered as an Employee, including regular
salary, wages, bonuses, commissions, vacation pay, short-term disability pay,
amounts deferred pursuant to any cash or deferred arrangement or amounts
deferred pursuant to Section 125 of the Code, but specifically excluding any
amount paid or accrued under this Plan or an Employer's excess benefit plan or
contingent stock award plan, living allowances, expense allowances, overtime
pay, amounts paid for an extended work week, reimbursement for relocation,
education or business expenses, imputed income under any employee benefit plan,
non-cash awards and any employer contributions made to or benefits paid under
any tax-qualified plan (other than amounts deferred under a cash or deferred
arrangement), payments made pursuant to any accident or health insurance plan,
stock options, any value received pursuant to a stock option or stock
appreciation rights plan, any other distributions which receive special tax
benefits and all other extraordinary cash payments or compensation. For purposes
of this Section 2.12, compensation paid in arrears, including without
limitation, bonuses, commissions and accrued but unused vacation pay shall be
attributed to the last day of the period for which it was earned regardless of
when paid, except that to the extent any portion of the Participant's
Compensation will not be determinable as of the Participant's Payment Date, the
Plan Committee may, in its discretion, elect to estimate the remaining portion
of the Participant's Compensation (based on information known to the Plan
Committee at that time), in which case the estimated amount will be treated as
compensation in lieu of all amounts that may subsequently be paid or accrued
after the determination date. For the avoidance of doubt, Compensation shall be
measured from the date the Participant became an Employee of an Employer, and
compensation accrued with an entity, other than an Employer, including
compensation paid prior to the date the entity became an Affiliate, shall be
credited for purposes of Average Monthly Compensation only to the extent
provided in an Appendix adopted by the Company or the Plan Committee.
2.13 "Compensation Committee" means the Compensation Committee of the
Board of Directors.
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2.14 "Death Benefits" means the benefits provided under Article V of the
Plan.
2.15 "Disability" means a mental or physical condition which entitles the
Participant to benefits under the long-term disability plan (including any
insurance policy) of the Employer, provided that if there is no such plan or the
Participant is an Employee but not covered by such plan, then "Disability" shall
mean a mental or physical condition which renders the Participant permanently
and continuously unable or incompetent to engage in any substantial gainful
activity of the same type or at the same level as that in which the Participant
has been employed at the time he incurred the Disability. Such determination
shall be made by one or more physicians appointed by the Plan Committee, on the
basis of such medical and other competent evidence as the Plan Committee shall
deem relevant.
2.16 "Early Retirement Date" means the date on which the Participant
attains an age of not less than 55 and accrues not less than 15 Years of
Service.
2.17 "Effective Date" means January 1, 1989 for the Company and any entity
which is an Employer on January 1, 1989. For all other Affiliates, it shall mean
the date the Affiliate becomes an Employer.
2.18 "Employee" means any person who is a common-law employee of an
Employer and renders services to an Employer on or after the Effective Date.
2.19 "Employer" means the Company and any wholly owned, directly or
indirectly, subsidiary of the Company.
2.20 "Employer Plan Benefits" means the sum of the benefits payable to the
Participant or with respect to the Participant determined as a monthly benefit
payable in the form of a Single Life Annuity for a Ten-Year Term Certain and
further determined as follows:
(a) any and all benefits attributable to Employer contributions,
including any benefits previously distributed or for which an annuity
contract has been purchased, which the Participant has accrued under any
and all defined benefit pension plans (as defined in section 414 (j) of
the Code) maintained, sponsored or contributed to by an Employer or an
Affiliate (including any such plan maintained, sponsored or contributed to
by an entity prior to its becoming an Affiliate except to the extent
provided in an Appendix), which for purposes of this Plan shall be
calculated as an amount payable in the Actuarial Equivalent form of Single
Life Annuity with a Ten-Year Term Certain; provided that any amount of
employee contribution described in Section 401(m) of the Code or which is
a rollover contribution shall be excluded from the benefit hereunder;
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(b) any and all benefits attributable to Employer contributions,
including any benefits previously distributed or for which an annuity
contract has been purchased, which the Participant has accrued under any
and all defined contribution plans (as defined in Section 414(i) of the
Code) of an Employer or an Affiliate (including any such plan maintained,
sponsored or contributed to by an entity prior to, its becoming an
Affiliate, except to the extent provided in an Appendix), which for
purposes of this Plan shall be calculated as an amount payable in the
Actuarial Equivalent form of a Single Life Annuity with a Ten-Year Term
Certain; provided that any amount deferred and contributed to any defined
contribution plan the taxation of which is deferred pursuant to Section
401(k) of the Code or is an amount of employee contribution described in
Section 401(m) of the Code or which is a rollover contribution, shall be
excluded from the benefit hereunder;
(c) any and all benefits attributable to Employer contributions,
including any benefits previously distributed or for which an annuity
contract has been purchased, which the Participant has accrued under any
and all plans of deferred compensation of an Employer or an Affiliate
(including any such plan maintained, sponsored or contributed to by an
entity prior to its becoming an Affiliate, except to the extent provided
in an Appendix, and further including, without limitation, the Varlen
Corporation Excess Benefit Plan), which for purposes of this Plan shall be
calculated as an amount payable in the Actuarial Equivalent form of a
Single Life Annuity with a Ten-Year Term Certain; provided that any amount
of employee contribution described in Section 401(m) of the Code, and any
amount which is a rollover contribution;shall be excluded from the benefit
hereunder;
(d) fifty percent (50%) of the Participant's primary social security
benefit which for purposes of the Plan shall be calculated as an amount
payable in the Actuarial Equivalent form of a Single Life Annuity with a
Ten-Year Term Certain and shall be determined as the estimated monthly
amount available to the Participant under the provisions of Title II of
the Social Security Act;
(e) The amount of the Employer Plan Benefit and each component
portion shall be determined in the sole discretion of the Plan Committee,
which discretion shall be applied reasonably and consistently with respect
to Participants and Beneficiaries who are similarly situated. The Plan
Committee shall adopt rules governing the computation of such amount,
including, without limitation, rules regarding calculation of the benefit
under any defined benefit pension plan and the primary social security
benefit, and the fact that an Employee does not actually receive such
amount because of failure to apply or continuance of work, or for any
other reason, shall be disregarded.
For purposes of this Section 2.20, and for the avoidance of doubt, employee Plan
Benefits shall not include benefits attributable to Employer contributions under
the Varlen
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Corporation 1998 Contingent Stock Award Plan. Furthermore, for an Employer that
became an Affiliate in connection with a merger, acquisition, corporate
combination or other corporate transaction, all benefits attributable to
contributions made by the Employer (or a predecessor entity to the Employer)
prior to the date the Employer became an Affiliate shall be treated as "benefits
attributable to Employer contributions" to the extent otherwise provided in this
Section 2.20.
2.21 "Good Reason" means the occurrence of any of the following events
after a Change of Control, unless (i) such event occurs with the Participant's
express written consent; or (ii) the event occurs in connection with termination
of the Participant's employment for Cause, disability or death:
(a) any reduction in the nature or scope of the authorities, powers,
functions, responsibilities or duties of the Participant that materially
diminishes the Participant's position, authority, duties or
responsibilities;
(b) the assignment by the Company to the Participant of duties or
responsibilities (other than isolated and incidental duties or
responsibilities that do not affect the Participant's position or
authority) inconsistent with an executive-level position;
(c) the requirement by the Company that the Participant be based at
any office or location more than 35 miles from the offices of the Company
where the Participant was employed immediately prior to the Change of
Control;
(d) any reduction by the Company in the Executive's rate of annual
base salary, or any material and adverse change in the Executive's
eligibility for performance bonuses;
(e) any material reduction in the Participant's benefits under the
employee benefit plans in which he participates immediately prior to the
Change of Control; provided, however, that reasonable increases in
insurance co-payment requirements or deductibles, if imposed upon all plan
participants generally, shall not constitute a material reduction for this
purpose; and further provided, that an amendment to or termination of an
employee benefit plan or practice shall not constitute a material
reduction in the Participant's benefits for this purpose if substitute or
additional payments or benefits to the Participant substantially offset
the financial impact to the Participant of such amendment or termination;
(f) any failure by the Company to pay compensation and benefits when
and as due to the Participant (exclusive of any amounts then the subject
of a bona fide dispute between the Company and the Participant); or
(g) failure of any successor to the Company to assume the
obligations of the Company under this Plan:
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provided, however, that in each case the foregoing event shall not constitute
"Good Reason" until the Participant has given written notice to the Board that
such event has occurred and may constitute "Good Reason," and such event is not
cured within thirty (30) days after the date of such notice.
2.22 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, and any subsequent Internal Revenue Code. If there is a
subsequent Internal Revenue Code, any references herein to Internal Revenue Code
sections shall be deemed to refer to comparable sections of any subsequent
Internal Revenue Code.
2.23 "Joint and 50% Survivor Annuity" means a monthly benefit payable
during the lifetime of the Participant with the provision that 50% of such
monthly benefit shall be payable to such Participant's Spouse in monthly
installments commencing on the first day of the month in which the Participant
dies and continuing thereafter during the remaining lifetime of the Spouse
through the last monthly payment on or prior to such Spouse's death. In
determining the Actuarial Equivalent value of the Joint and 50% Survivor
Annuity, the age of the Spouse shall be increased by the lesser of 10 or the
number of years by which the Participant's age exceeds the Spouse's age.
2.24 "Lump Sum" means a single sum payment of cash which is Actuarially
Equivalent to the replaced Retirement Benefit or Death Benefit.
2.25 "New Participant" means a person who: (a) became a Participant on or
after May 14, 1999; or (b) became a Participant prior to such date but has
agreed in writing to be considered a New Participant.
2.26 "Normal Retirement Date" means the date the Participant attains age
62.
2.27 "Old Participant" means a person who: (a) was a Participant prior to
May 14, 1999; and (b) who has not agreed in writing to be considered a New
Participant.
2.28 "Participant" means an Employee participating in the Plan as provided
in Article III.
2.29 "Payment Date" means the following:
(a) In the case of a Retirement Benefit payable under Section 4.1,
the first day of the month coinciding with or next following a
Participant's Termination of Employment.
(b) In the case of a Retirement Benefit payable under Section 4.2,
the first day of the month coinciding with or next following the
Participant's Normal Retirement Date, or if earlier, the date established
under Section 4.2 by the Plan
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Committee as the Participant's Payment Date in response to the
Participant's request for early payment.
(c) In the case of a Death Benefit payable under Section 5.1, the
later of (1) the first day of the month coincident with or next following
the Participant's date of death, or (2) the date established by the Plan
Committee in response to a Beneficiary's request.
If a Participant is reemployed by the Company or an Affiliate prior
to his Normal Retirement Date, any Payment Date determined under Paragraph
(b) shall be disregarded.
2.30 "Plan" means the Varlen Corporation Supplemental Executive Retirement
Plan, as stated herein, and as hereafter may be amended from time to time.
2.31 "Plan Committee" means the Plan Committee appointed pursuant to
Article VII to administer the Plan.
2.32 "Plan Year" means the 12 consecutive month period beginning January
1, 1989, and each successive calendar year thereafter.
2.33 "Retirement Benefit" means the benefit payable to a Participant under
the provisions of Section 4.1 or 4.2.
2.34 "Single Life Annuity" means a benefit payable monthly during the
lifetime of the Participant through the last monthly payment on or prior to such
Participant's death.
2.35 "Single Life Annuity for a Ten-Year Term Certain" means a benefit
payable during the lifetime of the Participant through the last month on or
prior to such Participant's death, provided that if the Participant shall die
prior to receiving 120 monthly payments (or the Actuarial Equivalent thereof)
the Participant's Beneficiary shall receive the same monthly payment until the
Participant and the Beneficiary have received in total 120 monthly payments.
2.36 "Spouse" means the person who is living and has been married at least
one year as of date of the Participant's death to the Participant within the
meaning of the laws of the State of the Participant's residence or evidenced by
a valid marriage certificate or other proof acceptable to the Plan Committee.
2.37 "Termination of Employment for Cause" or "Cause" means the occurrence
of one of the following events::
(a) Conviction of, or express admission of the commission of, a
felony or any crime or offense lesser than a felony involving the property
of the Company or a Subsidiary; or
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(b) Conduct that has caused demonstrable and serious injury to the
Company or a Subsidiary, monetary or otherwise; or
(c) Willful refusal to perform, or substantial disregard of, duties
properly assigned, as determined by the Company; or
(d) Breach of duty of loyalty to the Company or a Subsidiary or
other act of fraud or dishonesty with respect to the Company or a
Subsidiary.
2.38 "Termination of Employment" means the earliest of (a) resignation by
the Employee for any reason, including Good Reason, (b) a dismissal of the
Employee for any reason, (c) the disability of the Employee, (d) death of the
Employee or (e) the retirement of the Employee from an Employer or an Affiliate.
The transfer of an Employee from employment by one Employer or Affiliate to
employment by another Employer or an Affiliate shall not be regarded as a
Termination of Employment.
2.39 "Years of Service" means the sum of:
(a) the years of credited service accrued under and as defined in
the Executive Benefit Plan of Varlen Corporation and its Participating
Subsidiaries as of January 1, 1989 (which amount is set forth in an
Appendix hereto); and
(b) the Participant's whole, completed twelve month periods,
including the fractional parts thereof measured in whole, completed
months, of continuous, uninterrupted employment by an Employer on and
after January 1, 1989 including Authorized Leaves of Absence, measured
from the date the Participant becomes an Employee of an Employer to the
earlier of the date of his Termination of Employment or the date he
attains age 62. Years of Service accrued with an entity other than an
Employer, including service prior to the date the entity becomes an
Affiliate, shall be credited on and after January 1, 1989 for purposes of
this Section only to the extent provided in an Appendix adopted by the
Board, the Compensation Committee or the Plan Committee.
Except as otherwise indicated by the context, any masculine terminology
herein shall also include the feminine and neuter, the definition of any term
herein in the singular may also include the plural, and the terms "herein",
"hereunder", "hereof" or similar terminology shall refer to this Plan.
ARTICLE III
Participation
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3.1 Eligibility. The Board or the Compensation Committee, in its sole
discretion, shall designate the Employee or Employees who shall participate in
this Plan as Participants and shall designate the effective date of such
participation.
3.2 Termination of Participation. A person will cease to be a Participant
on the earliest of the date he receives the total distribution of his Accrued
Benefit, the date of his death and the date he forfeits his Accrued Benefit in
accordance with this Plan.
3.3 Reemployment. If a Participant incurs a Termination of Employment and
is reemployed, such Participant shall not accrue Years of Service subsequent to
such reemployment nor shall such Participant's Compensation be taken into
account under the Plan unless and until the individual again becomes a
Participant in accordance with Section 3.1. Any Years of Service accrued or
Compensation earned prior to the Termination of Employment shall be considered
upon reemployment only upon terms established by the Board, the Compensation
Committee or the Plan Committee.
3.4 Transfer of Employment. A Participant who transfers from employment
with an Employer to employment with another Employer or Affiliate shall remain a
Participant, subject to Section 3.2.
ARTICLE IV
Benefits
4.1 Normal or Late Retirement. A Participant who has a Termination of
Employment on or after attaining his Normal Retirement Date and who does not
receive a benefit under Section 4.2 shall be entitled to his Accrued Benefit
commencing on the Payment Date. The payment of the Retirement Benefit determined
hereunder shall be governed by the provisions of Article VI as in effect on his
Termination of Employment.
4.2 Early Retirement. A Participant who incurs a Termination of Employment
on or after attaining his Early Retirement Date but who has not attained his
Normal Retirement Date, and who does not receive a Retirement Benefit under
Section 4.1 shall be entitled to his Accrued Benefit determined as of his
Termination of Employment. Retirement Benefit payment timing and form shall be
governed by the terms and provisions of Article VI herein; provided that the
amount of the Retirement Benefit shall be reduced by .25% for each of the first
24 months by which the Payment Date precedes the Normal Retirement Date, and
further reduced .5% for each of the next 60 months by which the Payment Date
precedes the Normal Retirement Date, except that such reduction shall not apply
to an Old Participant if the Termination of Employment occurs subsequent to a
Change of Control or in the case of the Termination of Employment of Richard L.
Wellek. The payment of the Retirement Benefit determined hereunder shall be
governed by the provisions of Article VI as in effect on his Termination of
Employment.
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4.3 Forfeiture. A Participant who incurs a Termination of Employment prior
to the satisfaction of the requirements of Section 4.1 or 4.2, or who incurs a
Termination of Employment for Cause or who violates the provisions of Article XI
shall forfeit forever the Accrued Benefit and neither the Participant nor any
Beneficiary of such Participant shall have any right to receive any payment
under this Plan. A Participant who commits an act described in Section 2.37 or
who violates the provisions of Article XI shall return any amount previously
paid within 90 days after the Company notifies the Participant of such
violation.
4.4 Plan Committee Discretion. The payment elections of Participants shall
be subject to the approval of the Plan Committee, which may be exercised without
regard to similarly situated Participants.
4.5 Board Discretion. Notwithstanding anything to the contrary in the
Plan, the Board or the Compensation Committee may, at any time and in its sole
discretion, and with respect to one or more New Participants: (a) deem the
Participant to have attained age 62; (b) increase the Participant's Years of
Service for purposes of Section 2.1; (c) decrease or eliminate the early
retirement reduction set forth in Section 4.2; (d) modify the forfeiture
provision set forth in Section 4.3; or (e) permit a lump sum payment pursuant to
Section 6.2, or any or all of these; provided that no modification to the
provisions of Section 4.3 may impair a Participant's rights with respect to his
Accrued Benefit as of the date of the modification, unless he has consented in
writing to such modification.
ARTICLE V
Death Benefits
5.1 Entitlement to Death Benefits
(a) Amount and Conditions of Spouse's Death Benefit. If a
Participant who has attained his Normal or Early Retirement Date is
deceased prior to his Payment Date the Spouse of such Participant shall be
entitled to a Death Benefit. The Death Benefit provided shall commence on
the Payment Date provided in Section 2.29(c) and shall be an amount equal
to 50% of the Retirement Benefit the Participant would have received under
the following circumstances:
(i) In the case of a Participant who is an Employee on or
after his Normal Retirement Date, the Retirement Benefit the
Participant would have received under Section 4.1 had the
Participant incurred a Termination of Employment and commenced to
receive Retirement Benefits in the form of a Joint and 50% Survivor
Annuity on the first day of the month following the date of death.
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(ii) In the case of a Participant who is an Employee on or
after his Early Retirement Date, but not his Normal Retirement Date
at the time of his death, the Retirement Benefit the Participant
would have received under Section 4.2, had the Participant incurred
a Termination of Employment and commenced to receive Retirement
Benefits in the form of a Joint and 50% Survivor Annuity on the date
of death based upon the Participant's Average Monthly Compensation,
Years of Service, and Employer Plan Benefits, determined as of the
date of death.
(b) Single Sum Payment. Notwithstanding anything herein to the
contrary, a Spouse entitled to a Death Benefit under Section 5.1, may
elect in writing, subject to the Plan Committee's approval, after the
death of the Participant to receive payment of the Death Benefit in a Lump
Sum.
(c) No Death Benefit. If a Death Benefit is not paid in accordance
with Section 5.1(a) or (b), or if the Spouse dies before the Payment Date
of such Death Benefit, no Death Benefit shall be paid from the Plan.
5.2 Request for Distribution. Payment of any Death Benefits to which a
Spouse may be entitled under this Article V shall not begin until the Spouse has
submitted to the Plan Committee a distribution request form provided for that
purpose and the Plan Committee has approved in its sole discretion the
commencement of the payment at the time and in the form requested, which
discretion may be exercised without regard to similarly situated Spouses.
Thereafter, the Plan Committee shall instruct the Employer to make payment. In
the event payment of a Death Benefit does not commence or is not made until
after a Spouse's Payment Date, the Plan will pay to such Spouse all amounts due
and unpaid since the Payment Date in accordance with the form of payment
automatically in effect on the Payment Date. Notwithstanding the request or
election of a Spouse to the contrary, the Plan Committee shall direct an
immediate distribution of a single sum payment if the value of the Beneficiary's
Death Benefit payable as of the Payment Date does not exceed $10,000.
ARTICLE VI
Form and Payment of Retirement Benefits
6.1 Normal Form of Payment. Subject to Section 6.2, a Participant's
Accrued Benefit payable in accordance with Article IV shall be paid commencing
on the Payment Date in the form of a Single Life Annuity for a Ten-Year Term
Certain.
6.2 Optional Forms of Payout. Subject to the limitations expressed herein,
a Participant who is entitled to receive a Retirement Benefit may elect by
written application to the Plan Committee to receive such benefit in one of the
optional forms of payment set forth in Subsections 6.2(a) through 6.2(e) herein.
All elections must be made no later than December 28, 1994, for those who were
Participants as of November 28,
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1994. The Plan Committee, shall at its sole discretion, approve or disapprove of
each election submitted by each Participant; provided, however, that any
election to receive a lump sum payout pursuant to Subsection 6.2(a) herein,
where such payout occurs between a Participant's Early Retirement Date and
Normal Retirement Date, shall be automatically approved by the Plan Committee.
All optional forms of payment shall be Actuarially Equivalent as determined
under Section 2.2 of the Plan. The Plan Committee's exercise of discretion under
this Section 6.2 may be without regard to other Participants who are similarly
situated.
(a) Lump Sum Payment, which is a single sum payment equal in value
to the Actuarial Equivalent of the Participant's Accrued Benefit, provided
such Lump Sum is not payable earlier than the Participant's Early
Retirement Date or in the case of an Old Participant, unless there has
been a Change of Control; and
(b) Joint and Survivor Annuity, which is a reduced Retirement
Benefit payable monthly during the lifetime of the Participant with the
provision that a percentage, which percentage shall be chosen by the
Participant but shall not exceed one hundred percent, with the consent of
the Plan Committee not later than December 28, 1994, for those who were
Participants as of November 28, 1994, of such monthly benefit shall be
payable to the Participant's Beneficiary in monthly installments
commencing on the first day of the month following the month in which the
Participant dies and continuing thereafter on the first day of the month
during the remaining lifetime of the Beneficiary; and
(c) Single Life Annuity for a Term Certain, which is a reduced
Retirement Benefit payable during the lifetime of the Participant with
payments certain for a number of years, not to exceed 20, as shall be
selected by the Participant, subject to the approval of the Plan
Committee; provided that should the Participant predecease his or her
Beneficiary prior to receiving payments for the full Term Certain, the
Beneficiary shall receive the monthly payments remaining in the
Participant's Term Certain; and further provided, that in the event the
Participant and his or her Beneficiary shall both die before the Term
Certain shall expire, the Actuarial Equivalent of the remaining payments
for the Term Certain shall be paid to the estate of the last to die of the
Participant and the Beneficiary; and
(d) Insurance Annuity Held in the Company's Name, which shall be
equivalent to a reduced Retirement Benefit payable during the lifetime of
the Participant, upon such terms and provisions as are available to the
Company through one or more insurance carriers selected at the sole
discretion of the Plan Committee. Any such insurance annuity shall be
purchased by the Company, and the Company shall be the sole owner of the
insurance annuity. In the event that the Participant and any Beneficiary
named under such insurance annuity shall decease before the full payment
of the reduced Retirement Benefit, the Actuarial
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Equivalent of the remaining payments for the Term Certain shall be paid to
the estate of the last to die of the Participant and the Beneficiary; and
(e) Alternate Payment Schedule. A Participant may submit an
alternate payment schedule to the Plan Committee for approval; provided,
however, that no such alternate payment schedule shall be permitted unless
approved by the Plan Committee, at its sole discretion.
6.3 Designation of Beneficiary. A Participant to whom the provisions
regarding an optional form of payment applies shall designate a Beneficiary on a
beneficiary designation form provided by the Plan Committee. The person may
change such designation of Beneficiary at any time by filing a new beneficiary
designation form with the Plan Committee. No designation of Beneficiary or
change of Beneficiary shall be effective until filed with the Plan Committee.
Subject to the Participant's appointing a contingent Beneficiary, if a
Beneficiary commences to receive payments under an optional form of payment
before distribution of all Term Certain payments to that Beneficiary has been
completed, any payment to which the Beneficiary would have been entitled had he
survived shall be paid to the Beneficiary's estate in such amount and at such
times as it would have been paid had the Beneficiary survived to receive the
payments.
6.4 Effect of Participant Resuming Employment or Receiving a Lump Sum. If
a Participant has ceased to be an Employee, has commenced to receive Retirement
Benefits in a form other than a Lump Sum, and again becomes an Employee,
Retirement Benefit payments, if any, shall not be made during the period of such
reemployment. Upon a subsequent Termination of Employment by such Participant,
the Participant shall be entitled to receive a Retirement Benefit equal to the
greater of (a) the monthly benefit to which he was entitled from the Plan upon
such date of reemployment, if any, or (b) an amount determined under the Plan,
payable in the same form as (a), if applicable, as of such Termination of
Employment, reduced however, by the Actuarial Equivalent of Retirement Benefits
paid to the Participant prior to his reemployment. If a Participant has received
a Lump Sum distribution with respect to all or any portion of his Accrued
Benefit, the Accrued Benefit shall be determined as provided in Section 2.1
except that it shall be reduced by the Actuarial Equivalent value of such prior
Lump Sum.
ARTICLE VII
Administration
7.1 Authority and Responsibility of the Board of Directors and
Compensation Committee. The Board of Directors shall have overall responsibility
for the establishment, amendment, termination, administration and operation of
the Plan; provided as of May 14,1999, such authority shall be delegated to the
Compensation Committee; and further provided that the responsibility for
administration and operation of the Plan shall be delegated to the Plan
Committee.
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7.2 Plan Committee Membership. The Plan Committee shall consist of three
members, one of whom shall be the chief executive officer of the Company, one of
whom shall be the chief financial officer of the Company and a third member who
shall be chosen by the two previously named members. The members of the Plan
Committee shall remain as such until they resign their respective offices with
the Company, and in the case of the member of the Plan Committee, named to serve
on the Plan Committee by the chief executive officer and chief financial
officer, until removed by such two members of the Plan Committee. The Plan
Committee shall have the general responsibility for the administration of the
Plan and for carrying out its provisions. In the event the previously named
three persons shall not be the Plan Committee, the Board of Directors or the
Compensation Committee will constitute the Plan Committee.
7.3 Plan Committee Structure. If requested to do so, each member of the
Plan Committee, upon becoming a member of the Plan Committee, shall file an
acceptance thereof in writing with the secretary of the Company and the
secretary of the Plan Committee. Any member of the Plan Committee may resign by
delivering his written resignation to the secretary of the Company and the
secretary of the Plan Committee, and such resignation shall become effective
upon the date specified therein. In the event of a vacancy in membership, the
remaining members shall constitute the Plan Committee with full power to act
until said vacancy is filled.
7.4 Plan Committee Actions. The action of the Plan Committee shall be
determined by the vote or other affirmative expression of a majority of its
members. The Plan Committee shall choose a chairman who shall be a member of the
Plan Committee and a secretary who may (but need not) be a member of the Plan
Committee. The secretary shall keep a record of all meetings and acts of the
Plan Committee and shall have custody of all records and documents pertaining to
its operations. Either the chairman or the secretary may execute any certificate
or other written direction on behalf of the Plan Committee. A Plan Committee
member shall not exercise any discretion under this Plan with respect to
himself.
7.5 Plan Committee Duties. The Plan Committee shall administer and enforce
the Plan in accordance with the terms of the Plan and shall have all powers
necessary to accomplish that purpose, including but not by way of limitation,
the following:
(a) To issue rules and regulations necessary for the proper conduct
and administration of the Plan and to change, alter, or amend such rules
and regulations;
(b) To construe the Plan;
(c) To determine all questions arising in its administration,
including those relating to the rights of Participants, former
Participants, Spouses and Beneficiaries to the entitlement to payment of
Retirement Benefits and Death
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Benefits; and its decision thereon shall be final and binding upon all
persons hereunder;
(d) To compute the amount and kind of benefits payable to
Participants, Spouses or Beneficiaries under the Plan;
(e) To authorize all disbursements in accordance with the provisions
of the Plan;
(f) To employ and suitably compensate such accountants, attorneys
(who may but need not be the accountants or attorneys of the Company),
clerical employees and other persons to render advice as may be deemed
necessary to the performance of its duties;
(g) To communicate the Plan and its eligibility requirements to
certain Employees and to notify Employees when they become eligible to
participate;
(h) To make available to Participants upon request, for examination
during business hours, such records as pertain exclusively to the
examining Participant;
(i) To keep records relating to Participants and other matters
applicable to this Plan;
(j) To appoint an agent for service of legal process;
(k) To prescribe procedures to be followed by Participants, Spouses
and Beneficiaries in claiming benefits;
(1) To develop and make available forms for use by Participants and
Spouses for making elections provided by the Plan;
(m) To make available for inspection and to provide upon request at
such charge as may be permitted and determined by the Plan Committee,
documents and instruments required to be disclosed by law;
(n) To withhold any and all taxes as may be required by law to be
withheld from any payment; and
(o) To file all reports as required by law with governmental
agencies.
7.6 Plan Liability. The Board of Directors, the Compensation Committee,
the Plan Committee and the respective members hereunder shall be free from all
liability, joint or several, for their acts or failure to act hereunder.
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7.7 Plan Bonding. The Board of Directors, the Compensation Committee and
the Plan Committee shall serve without bond (except as otherwise required by
law) and without compensation for their service as such; but all expenses of the
Plan Committee shall be paid by the Employers.
7.8 Plan Committee Allocations and Delegations of Responsibility.
(a) Delegation. The Board of Directors, the Compensation Committee
and Plan Committee shall have the authority to delegate from time to time,
by instrument in writing, all or any part of their responsibilities under
the Plan to such person or persons as they may deem advisable (and may
authorize such person to delegate such responsibilities to such other
person or persons as the Board of Directors, the Compensation Committee or
the Plan Committee shall authorize); and in the same manner the Board of
Directors, the Compensation Committee and the Plan Committee shall have
the authority to revoke any such delegation of their responsibility. Any
action of the delegate in the exercise of such delegated responsibilities
shall have the same force and effect for all purposes hereunder as if such
action had been taken by the Board of Directors, the Compensation
Committee or the Plan Committee whichever is appropriate. Neither any
Employer, nor the Board of Directors, the Compensation Committee , the
Plan Committee or the respective members of each shall be liable for any
acts or omissions of any such delegate. The delegate shall report
periodically to the Board of Directors, the Compensation Committee or the
Plan Committee, whichever is appropriate, concerning the discharge of the
delegated responsibilities.
(b) Allocation. The Board of Directors, the Compensation Committee
and the Plan Committee shall have the authority to allocate from time to
time, by instrument in writing, all or any part of their responsibilities
under the Plan to one or more of their members as they may deem advisable,
and in the same manner to revoke such allocation of responsibilities. Any
action of the member to whom responsibilities are allocated in the
exercise of such allocated responsibilities shall have the same force and
effect for all purposes hereunder as if such action had been taken by the
Board of Directors, the Compensation Committee or the Plan Committee,
whichever is appropriate. Neither any Employer nor the Board of Directors,
the Compensation Committee, the Plan Committee or the respective members
of each shall be liable for any acts or omissions of such member. The
member to whom responsibilities have been allocated shall report
periodically to the Board of Directors, the Compensation Committee or the
Plan Committee concerning the, discharge of the allocated
responsibilities.
(c) Limitation on Liability. Fiduciary duties and responsibilities
which have been allocated or delegated pursuant to the terms of (a) or (b)
of this section are intended to limit the liability of the Employer, the
Board of Directors, the Compensation Committee or the Plan Committee, as
appropriate.
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7.9 Information to be Supplied by Employers. Employers shall provide the
Plan Committee or its delegate with such information as it shall from time to
time need in the discharge of its duties.
7.10 Records. The regularly kept records of the Plan Committee and any
Employer shall be conclusive evidence of the Accrued Benefit, the Retirement
Benefit, the Years of Service of a person, his Compensation and Average Monthly
Compensation, his age and the age of any Spouse or Beneficiary, his status as an
Employee, and all other matters applicable to this Plan; provided that a person
may request a correction in the record of his age at any time prior to his
Payment Date, and such correction shall be made if within 90 days after such
request he furnishes in support thereof a birth certificate, baptismal
certificate, or other documentary proof of age satisfactory to the Plan
Committee.
7.11 Capacity. Any person or group of persons may serve in more than one
capacity with respect to the Plan.
7.12 Employer's Agent. The Company and/or the Plan Committee shall act as
agent for each Employer in the administration of the Plan.
7.13 Plan Committee Decisions Final. The decision of the Plan Committee in
matters within its jurisdiction shall be final, binding, and conclusive upon the
Employers and upon each Employee, Participant, Spouse, Beneficiary, and every
other person or party interested or concerned.
ARTICLE VIII
Claims Procedure
8.1 Initial Claim for Payment. Each Participant or Beneficiary shall
submit a claim for payment to the Plan Committee (or to such other person as may
be designated by the Plan Committee) in such manner as is prescribed by the Plan
Committee. When a claim for benefits is filed, the Plan Committee shall
undertake to dispose of such claim in a reasonable time, and inform the
Participant or Beneficiary of such disposition and the reason for it. A
Participant shall have no right to seek review of a denial of payment or to
bring any action in any court to enforce a claim for payment prior to filing a
claim for payment and exhausting the rights to review as delineated under
Section 8.2.
8.2 Review of Claim Denial. If a claim is denied, in whole or in part, the
claimant shall have the right to request that the Plan Committee review the
denial, provided that the claimant files a written request for review with the
Plan Committee within sixty (60) days after the date on which the claimant
received written notification of the denial. A claimant (or a claimant's duly
authorized representative) may review pertinent documents and submit issues and
comments in writing to the Plan Committee.
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Within sixty (60) days after a request for review is received, the review shall
be made and the claimant shall be advised in writing of the decision on review,
unless special circumstances require an extension of time for processing the
review, in which case the claimant shall be given a written notification within
such initial sixty (60) day period specifying the reasons for the extension and
when such review shall be completed (provided that such review shall be
completed within one hundred and twenty (120) days after the date on which the
request for review was filed). The decision on review shall be forwarded to the
claimant in writing and shall include specific reasons for the decision and
references to Plan provisions upon which the decision is based. A decision on
review shall be final and binding on all persons for all purposes. If a claimant
shall fail to file a request for review in accordance with the procedures herein
outlined, such claimant shall have no rights to review and shall have no right
to bring action in any court and the denial of the claim shall become final and
binding on all persons for all purposes.
ARTICLE IX
Maintenance of Plan by Employers
9.1 Maintenance of Plan. An Affiliate which is a wholly-owned, directly or
indirectly, subsidiary of the Company shall be an Employer for purposes of this
Plan. Each Employer shall execute such documents and take such other actions as
may be required or directed by the Board, the Compensation Committee or the Plan
Committee to implement or effect the Plan. If the Board, or the Compensation
Committee desires to amend this Plan as to its application to the employees of
any Employer, it may do so by use of an Appendix. Notwithstanding any term or
provision of this Plan, the terms and provisions as may be imposed by the Board
or the Compensation Committee and attached hereto in an Appendix shall govern.
9.2 Procedure for Withdrawal. Any Employer (other than the Company) may by
resolution of the Board or the Compensation Committee, subject to such
conditions as may be imposed by the Board or the Compensation Committee, cease
to be an Employer for purposes of this Plan.
ARTICLE X
Amendment and Termination
10.1 Amendments. The Board or the Compensation Committee may amend,
modify, change, revise or discontinue this Plan by amendment at any, time;
provided, however, no action shall, without the written consent of the affected
person, entity, Participant, Spouse or Beneficiary (a) increase the duties or
liabilities of any person or entity, (b) reduce the Participant's Accrued
Benefit as of the date of the amendment; or (c) change the method of determining
the Participant's Accrued Benefit or the right thereto, including the right to
such Accrued Benefit as provided in Section 10.2; or (d) amend, in any way, the
provisions of Article X or Section 12.1
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10.2 Termination of the Plan. This Plan shall terminate: (a) at such time
as the Board or the Compensation Committee, in their discretion, may determine;
(b) if a petition under any section or chapter of the Bankruptcy Reform Act of
1978 or any similar law or regulation shall be filed by the Company or if the
Company shall make an assignment for the benefit of its creditors or if any case
or proceeding is filed by the Company for its dissolution or liquidation; (c) if
the Company is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs or if a petition
under any section or chapter of the Bankruptcy Reform Act of 1978 or any similar
law or regulation is filed against the Company or if any case or proceeding in
filed against the Company for its dissolution or liquidation and such
injunction, restraint or petition is not dismissed or stayed within 45 days
after the entry or filing thereof; (d) if an application is made by the Company
for the appointment of a receiver, trustee or custodian of the Company's assets;
(e) if an application is made by any person other than the Company for the
appointment of a receiver, trustee, or custodian for the Company's assets and
the same is not dismissed within 45 days after the application therefor; or (f)
if the Company is dissolved and its business operations are not continued by or
under the control of substantially the same person or persons as control the
Company or no successor entity assumes the liability of the Plan. Such
termination shall become effective, in the case of the occurrence of the event
described in (a) of the preceding sentence, by the delivery of notice by the
Board or the Compensation Committee to the Participant, or in the case of the
occurrence of an event described in (b), (c), (d), (e) or (f) upon the
occurrence of the event. In the event of a termination of the Plan for the
reasons listed in (a) or (f), the termination of the Plan shall not reduce the
Participant's Accrued Benefit, which shall be fully vested and nonforfeitable as
of the date the Plan is terminated, and the Employer shall pay as soon as
administratively possible in a Lump Sum to each Participant or Beneficiary an
amount equal to the value of his unpaid Accrued Benefit (based upon Average
Monthly Compensation and Years of Service to the date of Plan termination) on
the date of the Plan's termination. In the event of a termination of the Plan
for any reason listed in (b), (c), (d), or (e), the Accrued Benefit shall be
fully vested and nonforfeitable, and paid consistently with the disposition of
the event listed in (b), (c), (d) or (e).
ARTICLE XI
Exclusivity of Services and Confidential Information
11.1 Non-Competition. As a condition of participation in the Plan or the
payment or accrual of any benefit hereunder on or after the Effective Date, each
Participant agrees to execute when presented, but generally on or about the
Payment Date a written agreement whereby the Participant shall obligate himself
and be obligated:
(a) not to compete on or after the Payment Date, whether as
employer, employee, agent, proprietor, owner, partner, contractor,
stockholder (other than as the holder of less than five percent (5%) of
the stock of a corporation the
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securities of which are traded in the United States of America or in
another country on a national securities exchange or in the
over-the-counter or another comparable market), director or otherwise,
with an Employer or an entity controlled by the Employer on or after the
Payment Date or in which an Employer or an entity controlled by the
Employer is substantially engaged at any time on or after the Payment
Date; provided that this covenant shall not require the Participant to
divest himself of any interest or involvement in an enterprise held by the
Participant or existing prior to such time as the Employer or an entity
controlled by an Employer shall have begun, or begun active consideration
of, engaging in the same or similar businesses as those conducted by such
enterprise; and
(b) not to induce or attempt to persuade any employee of an Employer
or an entity controlled by an Employer to terminate such person's
employment relationship in order to enter into employment competitive with
an Employer or an entity controlled by an Employer.
11.2 Nondisclosure. As a condition of participation in the Plan and
accrual of any benefit hereunder, each Participant acknowledges and agrees that
any and all information ("Information") that may be obtained by him at any time
during his employment with an Employer or an entity controlled by an Employer
with respect to the conduct and details of the business of an Employer or an
entity controlled by an Employer shall be deemed to be confidential information
("Confidential Information"). For purposes of this Agreement, "Information"
shall mean all materials and information about customers or clients of an
Employer or an entity controlled by an Employer, all materials and information
about sources or supply of property (real or otherwise), materials, equipment or
financing, price, and cost related to the business of an Employer or an entity
controlled by an Employer, and trade secrets, ideas, and all other tangible and
intangible items related to the business of an Employer or an entity controlled
by an Employer, which may be disclosed to the Participant by an Employer or an
entity controlled by an Employer or developed or acquired by the Participant;
provided that such information is maintained by an Employer or an entity
controlled by an Employer in a reasonably confidential manner and that such
information is not generally available to the public other than as a result of a
disclosure or other action by the Participant. The Participant also agrees that
Confidential Information shall not be used by the Participant, directly or
indirectly disclosed by the Participant, or used by the Participant for the
benefit of any third party during the Participant's employment with an Employer
or an entity controlled by an Employer and thereafter without the prior written
consent of the Board of Directors of the Company. The Participant further agrees
that upon Termination of Employment he will surrender to the Company any books,
lists, records, documents, and other similar property obtained by him or
entrusted to him during his employment with an Employer or an entity controlled
by an Employer or which were paid for by an Employer or an entity controlled by
an Employer, it being explicitly understood and agreed that all such books,
records, lists, documents, and other similar property are and shall remain the
property of an Employer or an entity controlled by an Employer.
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11.3 Remedies. The following provisions shall apply to the provisions set
forth in Section 11.1 or 11.2:
(a) In the event of a violation by the Participant of any covenant
contained in this Article XI or entered into pursuant to this Plan, the
Participant shall forfeit his right to the Accrued Benefit, and the amount
of any previous payments of the Accrued Benefit shall be paid to the
Company within 90 days of the Company's issuing a notice of the violation.
(b) Without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Participant of
the covenants contained in this Article XI or an agreement entered into
pursuant hereto it is expressly agreed that such other remedies cannot
fully compensate the Employers for such a violation and that the Employers
shall be entitled to injunctive relief (including temporary restraining
orders after reasonable notice prior to application therefor) to prevent
any such violation or continuing violation thereof, and the Participant
hereby consents to the granting of such relief (including temporary
restraining orders after reasonable notice prior to application therefor)
by any court of competent jurisdiction.
(c) It is the intent and understanding of the Company and the
Participant that if in any action before any court or agency legally
empowered to enforce the covenants contained in this Article XI or an
agreement entered into pursuant hereto any term, restriction, covenant, or
promise contained therein is found to be unreasonable and accordingly
unenforceable, then such term, restriction, covenant, or promise shall be
deemed modified to the extent necessary to make it enforceable by such
court or agency.
(d) The covenants contained in this Article XI or an agreement
entered into pursuant hereto shall continue in effect pursuant to, and to
the extent consistent with, their terms notwithstanding the termination of
the Participant's employment with the Employer or other termination of
this Plan.
11.4 Limitation of Application. This Article shall not apply and shall be
null and void upon a Change of Control or in the event of a Termination of
Employment for Good Reason. For purposes of this Article XI, the Employer or the
entity controlled by the Employer shall be limited to those entities for which
the Participant was a common law Employee.
ARTICLE XII
Miscellaneous Provisions
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12.1 Successor Entity. Any successor entity to the Company by merger,
consolidation, purchase or otherwise, shall be substituted hereunder for the
Company and the Plan shall be binding upon all successors to and assigns of the
Company, and the Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
satisfactory to the Compensation Committee, expressly, absolutely and
unconditionally to assume and agree to perform the obligations under this Plan
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
12.2 Indemnification. Each Employer shall indemnify and hold harmless each
member of the Board of Directors, the Compensation Committee and the Plan
Committee and each officer and employee of an Employer to whom are delegated
duties, responsibilities, and authority with respect to the Plan against all
claims, liabilities, fines and penalties, and all expenses reasonably incurred
by or imposed upon such delegate or agent (including but not limited to
reasonable attorney fees) which arise as a result of actions or failure to act
in connection with the operation and administration of the Plan to the extent
lawfully allowable and to the extent that such claim, liability, fine, penalty,
or expense is not otherwise paid for by liability insurance. Notwithstanding the
foregoing, an Employer shall not indemnify any person for any such amount
incurred through any settlement or compromise of any action unless the Employer
consents in writing to such settlement or compromise.
12.3 Nonalienation of Payment. This Plan shall be binding upon and inure
to the benefit of the Employer, its successors and assigns and the Participant
and the Participant's Spouse's, Beneficiaries, heirs, executors, administrators
and legal representatives. Except as permitted by the preceding sentence,
benefits payable under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution or levy of any kind, either voluntary or
involuntary, including any such liability which is for alimony or other payments
for the support of a spouse, former spouse or children of the Participant, or
for any other relative of a Participant prior to actually being received by the
person entitled to the benefit under the terms of the Plan; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish,
execute or levy upon, or otherwise dispose of any right to benefits payable
hereunder, shall be void. No Employer shall in any manner be liable for, or
subject to the debts, contracts, liabilities, engagements or torts of any person
entitled to benefits hereunder.
12.4 Taxation Prior to Receipt. If the Participant or Beneficiary is
subject to taxation with respect to all or any portion of the Accrued Benefit
prior to the calendar year in which the Participant or Beneficiary otherwise
receives such portion, the Employer shall, at the written request of the
Participant or Beneficiary accompanied by evidence satisfactory to the Employer
of the correct determination of such tax liability, distribute the amount of the
Accrued Benefit determined to be taxable to the Participant or a Beneficiary as
soon as practicable.
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12.5 Allocation to Employer. The Plan Committee shall, if necessary,
determine each Employer's allocation of the Retirement or Death Benefit to which
the Participant is entitled pursuant to this Plan. If allocation is necessary,
the Employer shall pay such portion of the benefit payable hereunder as may be
allocated to it. Such determination shall be binding on all Participants,
Spouses, Beneficiaries and the Employers. Under no circumstances shall any
Participant or Beneficiary have any right to examine the books and records of
any Employer other than those records of the Plan Committee relating only to the
benefit of the Participant.
12.6 Prior Benefits. This Plan amends and restates the Executive Benefit
Plan of Varlen Corporation and its Participating Subsidiaries ("Former Plan"),
with respect to any person who is a Participant, and any person who is a
Participant herein or the Beneficiary of a Participant shall have no rights
under or with respect to such Former Plan.
12.7 Deduction of Taxes from Amounts Payable. The Employer may deduct from
the benefit such amount as the Employer, in its sole discretion, deems proper to
protect against liability for the payment of death, succession, inheritance,
income, employment or other taxes, and out of the money so deducted the Employer
may discharge any such liability and pay the amount remaining to the Participant
or the Beneficiary, as the case may be.
12.8 Facility of Payment. If a Participant or Beneficiary is declared an
incompetent or is a minor and if a conservator, guardian or other person legally
charged with the Participant's care has been appointed, any benefits to which
such Participant or Beneficiary is entitled shall be payable to such
conservator, guardian or other person legally charged with the Participant's
care. The decision of the Plan Committee in such matters shall be final, binding
and conclusive upon the Employer and upon each Employee, Participant, Spouse,
Beneficiary, and every other interested or concerned person or party. Neither an
Employer nor the Plan Committee shall be under any duty to see to the proper
application of such payments. All benefits under the Plan shall be paid to the
person entitled thereto ("Payee") either by a check which shall be endorsed
personally by the Payee or, if the Payee makes a written request on a form
approved by the Plan Committee, by a deposit in the personal savings or checking
account of the Payee; provided that if any such deposit shall be made in error
or in excess of the amount due, the Payee shall be liable to return any such
payment or excessive portion of any payment.
12.9 Mitigation of Excise Tax. If any amount payable under this Plan
(without the application of this Section 12.9), either alone or together with
other payments to the Participant from the Company or an Affiliate, would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment shall be reduced to the largest amount
that will result in no portion of the amount payable under this Plan being
subject to excise tax under Section 4999 of the Code or being disallowed
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<PAGE>
as a deduction under Section 280G of the Code. The determination of whether any
reduction in the amount payable is to apply shall be made by the Company in good
faith after consultation with the Participant, and such determination shall be
conclusive and binding on the Participant. The Participant shall cooperate in
good faith with the Company in making such determination and in providing the
necessary information for this purpose. The foregoing provisions of this Section
12.9 shall apply with respect to any person only if the payment to such person
under this Plan without regard to this Section 12.9 ("Required Payment"), minus
the reduction described in this Section 12.9 ("Required Reduction"), and minus
thefederal income tax on the difference between the Required Payment and the
Required Reduction, equals an amount greater than the Required Payment minus the
excise tax under Section 4999 of the Code on such Required Payment and, minus
the federal income tax on such Required Payment.
12.10 Effect of Return of Benefit Checks. Each person entitled to benefits
under this Plan shall furnish the Plan Committee with the address to which his
benefit checks shall be mailed. If any benefit check mailed by regular United
States mail to the last address appearing on the Plan Committee's records is
returned because the addressee is not found at that address, the mailing of
benefit checks shall stop. Thereafter, if the Plan Committee receives written
notice of the proper address of the person entitled to receive such benefit
checks and is furnished with evidence satisfactory to the Plan Committee that
such person is living, all amounts then due shall be forwarded to such person.
12.11 Small Pensions. Notwithstanding any other provision of this Plan, if
the Lump Sum value of a Retirement Benefit or Death Benefit does not exceed
$10,000, the Plan Committee, in its discretion, may immediately make full
payment of such amount in a Lump Sum.
12.12 Contract of Employment. Nothing contained herein shall be construed
to constitute a contract of employment between an Employer and any Employee or
Participant.
12.13 Source of Payment. All payments under this Plan shall be from the
general funds of the Employers, and no special or separate, fund shall be
established and no other segregation of assets shall be made to assure payment.
No Participant shall have any right, title, or interest whatever in or to any
investments which the Employer may make to aid the Employer in meeting its
obligations hereunder. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship, between an Employer and any Participant.
To the extent that any person acquires a right to receive payments from the
Employer hereunder, such right shall be no greater than the right of an
unsecured creditor of the Employer.
12.14 Limitation on Liability. No Employer nor any agent or representative
of any Employer who is an employee, officer, or director of an Employer in any
manner guarantees the payments to be made under this Plan against loss or
depreciation, and to
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the extent not prohibited by federal law, none of them shall be liable (except
for his own gross negligence or willful and material misconduct), for any act or
failure to act, done or omitted in good faith, with respect to the Plan. No
Employer shall be responsible for any act or failure to act of any agent
appointed to administer the Plan.
12.15 Enforcement of Plan. It is the intent of the Company that the
Participant not be required to incur the expenses associated with the
enforcement of his rights under this Plan by litigation or other legal action,
or be bound to negotiate any settlement of his rights hereunder, because the
cost and expense of such legal action or settlement would substantially detract
from the benefits intended to be extended to the Participant hereunder.
Accordingly, if it is finally determined by a court or other entity of competent
jurisdiction that the Company has failed to comply with any of its obligations
under this Plan or in the event that the Company or any other person takes any
action to declare this Plan void or unenforceable, or institutes any litigation,
arbitration or other legal account designed to deny, diminish or to recover from
the Participant the benefits entitled to be provided to the Participant
hereunder, and that Participant has complied with all of his obligations under
this Plan, the Company irrevocably authorizes the Participant from time to time
to retain counsel of his choice, at the expense of the Company, but only to the
extent such expense is reasonable and it is determined by the court or arbiter
before whom the matter is pending that the Participant is as likely as not to
prevail on the merits, to represent the Participant in connection with the
initiation or defense of any litigation, arbitration, or other legal action,
whether such action is by or against the Company or any director, officer,
shareholder or other person affiliated with the Company, in any jurisdiction.
The reasonable fees and expenses of counsel selected from time to time by the
Participant, as hereinabove provided, shall be paid or reimbursed to the
Participant by the Company on a regular, periodic basis upon presentation by
such counsel in accordance with its customary practices. Any legal expenses
incurred by the Company by reason of any dispute between the parties as to the
enforceability of or the terms contained in this Plan, notwithstanding the
outcome of any such dispute, shall be the sole responsibility of the Company,
and the Company shall not take any action to seek reimbursement from the
Participant for such expenses. The rights extended hereunder which would apply
to a Participant shall be equally applicable to a Beneficiary.
12.16 No Obligations To Mitigate Damages; No Effect on Other Contractual
Rights.
(a) The Participant shall not be required to mitigate damages or the
amount of any payment provided for under this Plan by seeking other
employment or otherwise, nor shall the amount of any payment provided for
under this Plan be reduced by any compensation earned by the Participant
as the result of employment by another employer after the termination of
the Participant's employment, or otherwise.
(b) The provisions of this Plan, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
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<PAGE>
diminish the Participant's existing rights, or rights which would accrue
solely as a result of the passage of time, under any benefit plan,
incentive plan or securities plan, employment agreement or other contract,
plan or arrangement of the Company or an Affiliate.
12.17 Headings. The headings of Articles and Sections are included solely
for convenience of reference, and if there is any conflict between such headings
and the text of this Plan, the text shall control.
12.18 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and the Plan shall be construed and
enforced as if such provisions, to the extent invalid or unenforceable, had not
been included.
12.19 Law Governing. The Plan shall be construed and enforced according to
the laws of the State of Illinois (other than its laws respecting choice of law)
to the extent not preempted by the Act.
Executed this ______ day of ______, 1999.
VARLEN CORPORATION
By: ___________________________
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VARLEN CORPORATION
1993 INCENTIVE STOCK OPTION PLAN
(as amended May 14, 1999)
1. Purpose. The purpose of this Plan is to advance the interests of Varlen
Corporation by providing an opportunity to selected key employees of the Company
and its Subsidiaries to purchase shares of Common Stock through the exercise of
options granted pursuant to this Plan, which may be either Incentive Options or
Nonqualified Options. By encouraging such stock ownership, the Company seeks to
establish as close an identity as feasible between the interests of the Company
and its Subsidiaries and those of such key employees and also seeks to attract,
retain, motivate and reward employees of superior ability, training and
experience.
2. Definitions.
(1) Board means the Board of Directors of the Company.
(2) Change of Control means the occurrence of one of the following
events:
(i) if any "person" or "group" as those terms are used in
Sections 13(d) or 14(d) of the Exchange Act, other than a Exempt
Person, is or becomes the "beneficial owner" (as defined in rule
13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board and any new
directors whose election by the Board or nomination for election by
the Company's stockholders was approved by at least two-thirds of
the directors then still in office who either were directors at the
beginning of the period or whose election was previously so
approved, cease for any reason to constitute a majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation (A) which would result in all or a portion
of the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B)
following which the Company's chief executive officer and directors
retain their positions with the surviving entity (and constitute at
least a majority of the surviving entity's board of directors); or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
other disposition by the Company of all or substantially all the
Company's assets, other than a sale to an Exempt Person;
provided, however, that if the approval specified in clause (iii) or
clause (iv) above is obtained but such transaction is terminated or
abandoned by the parties thereto prior to its effectuation, then,
from and after the date of such termination or abandonment, no
Change of Control shall be deemed to have occurred by reason of such
approval; and provided further, that no Change of
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Control shall be deemed to have occurred by reason of any event
involving or arising out of a proceeding under Title 11 of the
United States Code (or the provisions of any future United States
bankruptcy law), an assignment for the benefit of creditors or an
insolvency proceeding under state or local law.
(3) Code means the Internal Revenue Code of 1986 and regulations
thereunder, as amended from time to time.
(4) Committee means the committee appointed by the Board responsible
for administering the Plan in accordance with Section 5.
(5) Common Stock means the common stock of the Company, par value
$.10 per share.
(6) Company means Varlen Corporation, a Delaware corporation.
(7) Director means each individual who is serving as a member of the
Board as of the time of reference.
(8) Disinterested Person means a person who qualifies as such under
Rule 16b-3(c)(2)(i) under Section 16 of the Exchange Act, or any successor
definition adopted by the Securities and Exchange Commission, which
generally is defined as a Director who is not, during the one year prior
to service as a member of the Committee, or during such service, granted
or awarded equity securities pursuant to the Plan or any other plan of the
Company or its affiliates, except that participation in a formula plan,
participation in an ongoing securities acquisition plan, or an election to
receive an annual retainer fee in either cash or an equivalent amount of
securities, or partly in each, shall not disqualify a Director from being
a Disinterested Person.
(9) Employee means an employee of the Company or any Subsidiary
within the meaning of Code Section 3401(c); "key employee" means an
executive, administrative or managerial Employee who is determined by the
Committee to be eligible to be granted Options under the Plan.
(10) Exchange Act means the Securities Exchange Act of 1934 and the
rules and regulations promulgated pursuant thereto, as amended from time
to time.
(11) Incentive Option means a stock option intended to qualify as an
"incentive stock option" within the meaning of Code Section 422 and
designated as such.
(12) New Option means an option granted on or after May 14, 1999.
(13) Nonqualified Option means a stock option not intended to be an
Incentive Option and designated as a nonqualified stock option, the
federal income tax treatment of which is determined generally under
Code Section 83.
(14) Old Option means an option granted prior to May 14, 1999.
(15) Option means either an Incentive Option or a Nonqualified
Option granted pursuant to this Plan.
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<PAGE>
(16) Plan means this Varlen Corporation 1993 Incentive Stock Option
Plan as set forth herein, and as amended from time to time.
(17) Securities Act means the Securities Act of 1933 and rules and
regulations promulgated pursuant thereto, as amended from time to time.
(18) Subsidiary means a "subsidiary" of the Company within the
meaning of Code Section 424(f), which generally is defined as any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the relevant time, each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
3. Effective Date. This Plan was approved and adopted by the Board on
March 29, 1993. The effective date of the Plan shall be May 25, 1993, the date
of the annual meeting of stockholders of the Company, so long as the Plan is
approved by the stockholders of the Company on said date.
4. Stock Subject to Plan. The maximum aggregate number of shares of Common
Stock that may be made subject to Options granted hereunder is 150,000 shares,
which number shall be adjusted in accordance with Section 8 in the event of any
change in the Company's capital structure. Shares of Common Stock issued
pursuant to the Plan may consist, in whole or in part, of either authorized and
unissued shares or issued shares held in the Company's treasury. Any shares
subject to an Option that for any reason expires or is terminated unexercised as
to such shares may again be the subject of an Option under the Plan.
5. Administration. The Plan shall be administered by a Committee appointed
by the Board consisting of not fewer than two individuals who are Directors, who
are not Employees, and who are Disinterested Persons. The Board shall have the
discretion to remove and appoint members of the Committee from time to time. The
Committee shall have full power and discretion, subject to the express
provisions of the Plan, (i) to determine the key Employees to whom Options are
to be granted, the time or times at which Options are to be granted, the number
of shares of Common Stock to be made subject to each Option, whether each Option
is to be an Incentive Option or a Nonqualified Option, the exercise price per
share under each Option, and the maximum term of each Option; (ii) to interpret
and construe the Plan and to prescribe, amend and rescind rules and regulations
for its administration; (iii) to determine the terms and provisions of each
option agreement evidencing an Option; and (iv) to make all other determinations
the Committee deems necessary or advisable for administering the Plan. All
decisions of the Committee shall be made by a majority of its members, which
shall constitute a quorum, and shall be reflected in minutes of its meetings.
6. Eligibility. Options may be granted to such Employees who are key
employees as the Committee selects a Director who is not an Employee is not
eligible to receive Options pursuant to this Plan.
7. Terms and Conditions of Options. Options granted pursuant to the Plan
shall be evidenced by stock option agreements in such form and containing such
terms and conditions as the Committee shall determine. If an Employee to whom an
Option is granted does not execute an option agreement evidencing that Option in
the form prescribed by the Committee within the later of (i) thirty days from
the date of grant of the Option or (ii) ten days after the Employee's receipt of
an option agreement from the Company, the Option shall be void and of no further
force or effect. Each option agreement evidencing an Option shall contain among
its terms and conditions the following:
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<PAGE>
(1) Price. Subject to the conditions on Incentive Options contained
in Section 8(2), if applicable, the purchase price per share of Common
Stock payable upon the exercise of each Option granted hereunder shall be
as determined by the Committee in its discretion but shall not be less
than the fair market value of the Common Stock on the day the Option is
granted if an Incentive Option, and, if a Nonqualified Option, not less
than 85% of the fair market value of the Common Stock on the day the
Option is granted or, if greater, the book value of the Common Stock on
that date. The fair market value of Common Stock shall be as determined by
the Committee in its discretion in accordance with any applicable laws or
rules.
(2) Number of Shares and Kind of Option. Each option agreement shall
specify the number of shares to which it pertains and shall specify
whether the Option is a Nonqualified Option or an Incentive Option.
(3) Terms of Exercise. Subject to the conditions on Incentive
Options contained in Section 8(2), if applicable, and to Section 10, each
Option shall be exercisable for the full amount or for any part thereof
and at such intervals or in such installments as the Committee may
determine at the time it grants such Option; provided, however, that (i)
no Option shall be exercised as to fewer than 25 shares of Common Stock
or, if less, the total number of shares of Common Stock remaining
unexercised under the Option, and (ii) no Option shall be exercisable with
respect to any shares earlier than six months from the date the Option is
granted or later than ten years after the date the Option is granted,
except to the extent permitted in the event of the death or disability of
the holder of a Nonqualified Option under Section 7(7).
(4) Notice of Exercise and Payment. An Option shall be exercisable
only by delivery of a written notice to the Company's Treasurer, or any
other officer of the Company the Committee designates to receive such
notices, specifying the number of shares of Common Stock for which the
Option is being exercised. If the shares of Common Stock acquired upon
exercise of an Option are not at the time of exercise effectively
registered under the Securities Act, the optionee shall provide to the
Company, as a condition to the optionee's exercise of the Option, a
letter, in form and substance satisfactory to the Company, to the effect
that the shares are being purchased for the optionee's own account for
investment and not with a view to distribution or resale, and to such
other effects as the Company deems necessary or appropriate to comply with
federal and applicable state securities laws. Payment shall be made in
full at the time the Option is exercised. Payment shall be made by:
(i) cash;
(ii) delivery and assignment to the Company of shares of Common
Stock owned by the optionee;
(iii) a combination of (i) and (ii); or
(iv) delivery of a written exercise notice, including irrevocable
instructions to the Company to deliver the stock certificates
issuable upon exercise of the Option directly to a broker named in
the notice that has agreed to participate in a "cashless" exercise
on behalf of the optionee.
Upon the optionee's satisfaction of all conditions required for the
exercise of the Option and payment in full of the purchase price for the
shares being acquired, the Company shall, within a reasonable period of
4
<PAGE>
time following such exercise, deliver a certificate representing the
shares of Common Stock so acquired; provided, that the Company may
postpone issuance and delivery of shares upon any exercise of an Option to
the extent necessary or advisable to comply with applicable exchange
listing requirements, National Association of Securities Dealers, Inc.
("NASD") requirements, or federal or state securities laws.
(5) Withholding Taxes. The Company's obligation to deliver shares of
Common Stock upon exercise of an Option, in whole or in part, shall be
subject to the optionee's satisfaction of all applicable federal, state
and local tax withholding obligations.
(6) Nontransferability of Option. No Option shall be transferable by
the optionee otherwise than by will or the laws of descent and
distribution and shall be exercisable during the optionee's lifetime only
by the optionee (or the optionee's guardian or legal representative).
(7) Termination of Options. Each option agreement evidencing an
Option shall contain provisions for the termination of the Option if the
optionee ceases for any reason to be an Employee, which provisions shall
be no more favorable to the optionee than the following:
(i) Termination With Consent. If the optionee ceases to be an
Employee and the Company or Subsidiary that is the Employee's
primary employer at the time of termination consents in writing to
the optionee's exercise of an Option following such termination,
then the optionee may, at any time within a period of 90 days
following the date of such termination, exercise such Option to the
extent that the Option was exercisable on the date the optionee
ceased to be an Employee;
(ii) Retirement. If the optionee ceases to be an Employee by
reason of retirement under one or more of the Company's (or
Subsidiary's) retirement plans including, without limitation, early
retirement, then the optionee may, at any time within a period of 90
days following the date of such termination or at such later date as
determined in the discretion of the Committee, exercise each Option
held by the optionee on such date to the full extent of the Option;
(iii) Death or Disability. In the event of the Optionee's
death or disability (within the meaning of Code Section 22(e)(3))
either (x) while an Employee or (y) with respect only to
Nonqualified Options, while eligible to exercise a Nonqualified
Option under Subsections 7(7)(i) or (ii) above, then the optionee
(or the optionee's legal representative, executor, administrator, or
person acquiring an Option by bequest or inheritance) may, at any
time within a period of one year following the date of the
optionee's death or commencement of disability, exercise each Option
held by the optionee on such date to the full extent of the Option;
and
(iv) Other Termination. If the optionee ceases to be an
Employee for any reason other than those enumerated in Subsections
7(7)(i) through (iii) above, each Option granted to the optionee to
the extent outstanding on the date of such termination of
employment, shall terminate immediately on such termination of
employment and may not be exercised thereafter:
provided, however, that no Option may be exercised to any extent by
anyone after the date of expiration of the Option's term, except
that a Nonqualified Option shall remain exercisable as provided in
Subsection 7(7)(iii) regardless of the Option's term.
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<PAGE>
(8) Legends. Any restriction on transfer of shares of Common Stock
provided in this Plan or in the option agreement evidencing any Option
shall be noted or referred to conspicuously on each certificate evidencing
such shares.
8. Restrictions on Incentive Options. Incentive Options (but not
Nonqualified Options) granted under this Plan shall be subject to the following
restrictions:
(1) Limitation on Number of Shares. The aggregate fair market value,
determined as of the date an Incentive Option is granted, of the shares
with respect to which Incentive Options are exercisable for the first time
by an Employee during any calendar year shall not exceed $100,000. If an
Incentive Option is granted pursuant to which the aggregate fair market
value of shares with respect to which it first becomes exercisable in any
calendar year by an Employee exceeds the aforementioned $100,000
limitation, the portion of such Option which is in excess of the $100,000
limitation shall be treated as a Nonqualified Option pursuant to Code
Section 422(d)(1). In the event that an Employee is eligible to
participate in any other stock option plan of the Company or a Subsidiary
which is also intended to comply with the provisions of Code Section 422,
the $100,000 limitation shall apply to the aggregate number of shares for
which Incentive Options may be granted under all such plans.
(2) 10% Stockholder. If an Employee to whom an Incentive Option is
granted pursuant to the provisions of the Plan is on the date of grant the
owner of stock (as determined under Code Section 424(d)) possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or a Subsidiary, then the following special provisions shall be
applicable to the Incentive Option granted to such individual:
(i) The Option price per share subject to such Incentive
Option shall not be less than 110% of the fair market value of one
share on the date of grant; and
(ii) The Incentive Option shall not have a term in excess of
five (5) years from its date of grant.
9. Adjustment for Changes in Capitalization. Appropriate and equitable
adjustment shall be made in the maximum number of shares of Common Stock subject
to the Plan under Section 4 and, subject to Section 10, in the number, kind and
option price of shares of Common Stock subject to then outstanding Options to
give effect to any changes in the outstanding Common Stock by reason of any
stock dividend, stock split, stock combination, merger, consolidation,
reorganization, recapitalization or any other change in the capital structure of
the Company affecting the Common Stock after the effective date of the Plan.
10. Change in Control; Merger, Etc.
(1) Change in Control. Upon the occurrence of a Change of Control:
(i) all outstanding Old Options held pursuant to this Plan
shall become immediately exercisable in full; and
(ii) all outstanding New Options held pursuant to this Plan
shall become immediately exercisable in full if the optionee is
terminated from being an employee of the Company or any of its
Subsidiaries within one year following such Change of Control.
Subject to the remaining
6
<PAGE>
provisions of the Plan, such New Options may be exercised
simultaneous with or at any time after such termination of
employment.
(2) Where Company Does Not Survive. In the event of a merger or
consolidation to which the Company is a party but is not the surviving
company, the Committee in its discretion may vote to negate and give no
effect to the acceleration of Options pursuant to Section 10(l), but only
if and to the extent that an executed agreement of merger or consolidation
provides that the optionee holding such an Option shall receive the same
merger consideration as the optionee would have received as a stockholder
of the Company had the exercisability of the Option been accelerated in
accordance with Section 10(l) and had the optionee, immediately prior to
the merger or consolidation, exercised the Option for the full number of
shares subject thereto, paid the exercise price in full, and satisfied all
other conditions for the exercise of the Option.
(3) Liquidation or Dissolution. The provisions of Section 9 and
Subsections 10(l) and (2) shall not cause any Option to terminate other
than in accordance with other applicable provisions of the Plan. However,
in the event of the liquidation or dissolution of the Company, each
outstanding Option shall terminate, except to the extent otherwise
specifically provided in the option agreement evidencing the Option.
11. Rights of Optionees. No Employee shall have a right to be granted an
Option or, having received an Option, a right again to be granted an Option. An
optionee shall have no rights as a stockholder with respect to any shares of
Common Stock covered by his or her Option until the date the Option has been
exercised and the full purchase price for such shares has been received by the
Company. Nothing in this Plan or in any Option granted pursuant to the Plan
shall confer on any individual any right to continue in the employ of the
Company or any Subsidiary or interfere in any way with the right of the Company
or any Subsidiary to terminate or modify the terms or conditions of the
employment of the Option holder.
12. Amendment and Termination of the Plan. Unless sooner terminated by the
Board, the Plan shall terminate, so that no Options may be granted pursuant to
it thereafter, on March 28, 2003. The Board may at any time amend, suspend or
terminate the Plan in its discretion without further action on the part of the
stockholders of the Company, except that:
(1) no such amendment, suspension or termination of the Plan
shall adversely affect or impair any then outstanding Option without
the consent of the optionee holding the Option; and
(2) any such amendment, suspension or termination that
requires approval by the stockholders of the Company to comply with
applicable provisions of the Code, rules promulgated pursuant to
Section 16 of the Exchange Act, applicable state law or NASD or
exchange listing requirements shall be subject to approval by the
stockholders of the Company within the applicable time period
prescribed thereunder, and shall be null and void if such approval
is not obtained.
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VARLEN CORPORATION
1998 CONTINGENT STOCK AWARD PLAN
(Effective February 2, 1998,
as amended May 14, 1999)
The 1998 Contingent Stock Award Plan (the "Plan"), effective as of February 2,
1998, is established to promote the long-term growth and profitability of Varlen
Corporation and its subsidiaries (the "Company") by enabling the Company to
attract, retain, motivate and reward employees of superior ability, training and
experience in positions of substantial responsibilities.
1. Administration
The Plan shall be administered by the Compensation Committee of the Board
(the "Committee"), or any successor as shall be determined by the Board of
Directors. The Committee is authorized, subject to the provisions of the
Plan, to establish such rules as it deems necessary for the proper
administration of the Plan, and to make such determinations and to take
such action in connection therewith as it deems necessary or advisable,
consistent with the Plan.
2. Eligibility
Subject to the provisions of the Plan, the Committee shall have exclusive
power (i) to select the employees of the Company (each a "Participant")
entitled to participate in the Plan and to receive one or more awards, as
deferred and conditional incentive compensation under the Plan, of
contingent shares payable in cash and tracking the performance of the
Common Stock, $.10 par value per share (the "Common Stock"), of the
Company (each a share of "Contingent Stock"); (ii) to determine the size
of the grant to be made to each Participant; and (iii) to determine the
time or times when grants shall be made.
3. Shares Available for Awards
(a) The number of shares of Contingent Stock that may be awarded
under the Plan shall not exceed an aggregate of 500,000 shares. If
any shares of Contingent Stock granted under the Plan shall expire,
terminate or be canceled, such shares may again be awarded pursuant
to the Plan. Nothing in this Plan shall be construed to require the
Committee to grant all shares of Contingent Stock reserved hereunder
or any other number of shares of Contingent Stock.
(b) In the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, rights
offering or any other change in the corporate structure or capital
stock of the
<PAGE>
Company, the Committee shall make such adjustment, if any, as it may
deem appropriate in the number of shares of Contingent Stock
authorized by the Plan or granted to Participants or in the Initial
Value (as defined below) of such shares on the award date.
4. Terms and Conditions for Contingent Stock Awards
Each share of Contingent Stock awarded under this Plan shall be subject to
the following terms and conditions and such other terms and conditions as
the Committee may prescribe:
(a) Subject to Section 8 below, the period of each award of
Contingent Stock shall be five years from the date of such
award, except as otherwise provided by the Committee.
(b) Each award shall be evidenced by a written instrument
specifying to the Participant the number of shares of
Contingent Stock awarded and the terms and conditions of such
award.
(c) No award of Contingent Stock may be transferred. During a
Participant's lifetime, an award shall be redeemable for cash
only by such Participant, except as otherwise provided herein,
or by such Participant's guardian or legal representative.
5. Contingent Stock Initial Value
The "Initial Value" per share with respect to each share of Contingent
Stock awarded shall be 100% of the fair market value of the Common Stock
as of the date on which the Contingent Stock award is granted (determined
as the average of the last reported sale prices on each of the five
trading days prior to and including such date of the Common Stock on the
NASDAQ National Market System or, if then inapplicable, by such other
means as the Committee shall reasonably determine).
6. Contingent Stock Redemption Value
The "Redemption Value" per share with respect to each share of Contingent
Stock awarded shall be 100% of the fair market value of the Common Stock
as of the Redemption Date (determined as the average of the last reported
sale prices on each of the five trading days prior to and including such
Redemption Date of the Common Stock on the NASDAQ National Market System
or, if then inapplicable, by such other means as the Committee shall
reasonably determine).
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7. Contingent Stock Award Payments
The difference between the Initial Value of any Contingent Stock award and
the Redemption Value of such award shall be the redemption amount paid for
such award. The Participant will receive the full payment of Contingent
Stock awards in one lump sum in cash within 30 days of the Redemption
Date. All payments under the Plan shall be net of an amount sufficient to
satisfy withholding tax requirements of any government or governmental
unit having tax jurisdiction over the payment.
8. Mandatory Redemption of Contingent Stock Awards
(a) Upon the termination of a Participant's employment with
the Company for Cause, prior to the scheduled Redemption Date
of any Contingent Stock award previously granted to such
Participant, such Participant shall forfeit all rights to
Contingent Stock awards granted to such Participant and all
rights under the Plan shall be void.
(b) Upon the termination of a Participant's employment with the
Company, for a reason other than Cause, prior to the scheduled
Redemption Date of any Contingent Stock Award previously
granted to such Participant, the Participant shall be entitled
automatically to redeem any Contingent Stock awards previously
granted at a Redemption Value determined by the Committee and
calculated as of the date of such termination of employment
based on the fair market value of the Common Stock as of such
date prorated in accordance with (i) the number of days
elapsed from the date of grant to such date over (ii) the
number of days from the date of grant to the scheduled
Redemption Date.
(c) For purposes of this Section 8, the term "Cause shall mean:
(i) with respect to Raymond A. Jean, "Cause" as defined in
Section 1(a) of the Change of Control Agreement between the
Company and Mr. Jean dated April 8, 1999; (ii) with respect to
Richard A. Nunemaker, "Cause" as defined in Section 1(a) of
the Change in Control Agreement between the Company and Mr.
Nunemaker dated May 14, 1999; and (iii) with respect to any
other Participant, "Cause," as defined in the Varlen
Corporation 1998 Long-Term Equity Incentive Plan.
(d) So long as the Participant shall continue to be an employee of
the Company, the Contingent Stock held by such Participant
shall not be affected by any change of duties or position or
change in control
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of the Company. Nothing in the Plan shall confer upon any
employee any right to continue in the employ of the Company or
interfere with the right of the Company to terminate his/her
employment at any time for any reason whatsoever.
9. Amendment, Suspension or Termination of the Plan
The Committee may at any time terminate, suspend or amend this Plan;
provided, however, that no amendment, suspension or termination of this
Plan shall affect shares of Contingent Stock already awarded to a
Participant unless mutually agreed by such Participant and the Committee,
which agreement must be in writing and signed by such Participant and the
Company.
10. Effective Date and Duration of the Plan
The Plan shall become effective as of February 2, 1998. Unless previously
terminated upon the adoption of a resolution of the Committee terminating
the Plan, the Plan shall terminate at the close of business on February 2,
2008.
11. Governing Law
The Plan shall be governed by the corporate laws of the State of Delaware,
without giving effect to any choice of law provisions.
This Plan was adopted by the Compensation Committee and the Board of Directors
of Varlen Corporation on February 2, 1998.
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VARLEN CORPORATION
1998 LONG-TERM EQUITY INCENTIVE PLAN
(as amended May 14, 1999)
1. Purpose.
This plan shall be known as the Varlen Corporation 1998 Long-Term
Equity Incentive Plan (the "Plan"). The purpose of the Plan shall be to promote
the long-term growth and profitability of Varlen Corporation (the "Company") and
its Subsidiaries by (i) providing certain directors, officers and other
employees of, and certain other individuals who perform significant services
for, the Company and its Subsidiaries with incentives to maximize stockholder
value and otherwise contribute to the success of the Company and (ii) enabling
the Company to attract, retain and reward the best available persons for
positions of substantial responsibility. Grants of incentive or nonqualified
stock options, stock appreciation rights ("SARs"), either alone or in tandem
with options, restricted stock, performance awards, or any combination of the
foregoing may be made under the Plan.
2. Definitions.
(a) "Board of Directors" and "Board" mean the board of directors of
Varlen Corporation.
(b) "Cause" means the occurrence of one of the following events:
(i) Conviction of, or express admission of the commission of,
a felony or any crime or offense lesser than a felony involving the property of
the Company or a Subsidiary; or
(ii) Conduct that has caused demonstrable and serious injury
to the Company or a Subsidiary, monetary or otherwise; or
(iii) Willful refusal to perform, or substantial disregard of,
duties properly assigned, as determined by the Company; or
(iv) Breach of duty of loyalty to the Company or a Subsidiary
or other act of fraud or dishonesty with respect to the Company or a Subsidiary.
(c) "Change in Control" means the occurrence of one of the following
events:
(i) if any "person" or "group" as those terms are used in
Sections 13(d) and 14(d) of the Exchange Act, other than an Exempt Person, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act),
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directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board and any new directors
whose election by the Board or nomination for election by the Company's
stockholders was approved by at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election was previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) following which the
Company's chief executive officer and directors retain their positions with the
surviving entity (and constitute at least a majority of the surviving entity's
board of directors); or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets, other than a
sale to an Exempt Person.
provided, however, that if the approval specified in clause (iii) or clause (iv)
above is obtained but such transaction is terminated or abandoned by the parties
thereto prior to its effectuation, then, from and after the date of such
termination or abandonment, no Change of Control shall be deemed to have
occurred by reason of such approval; and provided further, that no Change of
Control shall be deemed to have occurred by reason of any event involving or
arising out of a proceeding under Title 11 of the United States Code (or the
provisions of any future United States bankruptcy law), an assignment for the
benefit of creditors or an insolvency proceeding under state or local law.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee of the Board, which
shall consist solely of two or more members of the Board, or a subcommittee
thereof consisting solely of two or more members of the full Committee, as
appointed by the Board.
(f) "Common Stock" means the common stock, par value $.10 per share,
of the Company, and any other shares into which such stock may be changed by
reason of a recapitalization, reorganization, merger, consolidation or any other
change in the corporate structure or capital stock of the Company.
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(g) "Competition" is deemed to occur if a person whose employment
with the Company or its Subsidiaries has terminated obtains a position as a
full-time or part-time employee of, as a member of the board of directors of, or
as a consultant or advisor with or to, or acquires an ownership interest in
excess of 5% of, a corporation, partnership, firm or other entity that engages
in any of the businesses of the Company or any Subsidiary with which the person
was involved in a management role at any time during his or her last five years
of employment with or other service for the Company or any Subsidiaries.
(h) "Disability" means a disability that would entitle an eligible
participant to payment of monthly disability payments under any Company
disability plan or as otherwise determined by the Committee.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Exempt Person" means any employee benefit plan of the Company
or a trustee or other administrator or fiduciary holding securities under an
employee benefit plan of the Company.
(k) "Fair Market Value" of a share of Common Stock of the Company
means, as of the date in question, the officially-quoted closing selling price
of the stock (or if no selling price is quoted, the bid price) on the principal
securities exchange on which the Common Stock is then listed for trading
(including for this purpose the Nasdaq National Market) (the "Market") for the
immediately preceding trading day or, if the Common Stock is not then listed or
quoted in the Market, the Fair Market Value shall be the fair value of the
Common Stock determined in good faith by the Committee; provided, however, that
when shares received upon exercise of an option are immediately sold in the open
market, the net sale price received may be used to determine the Fair Market
Value of any shares used to pay the exercise price or withholding taxes and to
compute the withholding taxes.
(l) "Incentive Stock Option" means an option conforming to the
requirements of Section 422 of the Code and any successor thereto.
(m) "Non-Employee Director" has the meaning given to such term in
Rule 16b-3 under the Exchange Act.
(n) "Nonqualified Stock Option" means any stock option other than an
Incentive Stock Option.
(o) "Other Company Securities" mean securities of the Company other
than Common Stock, which may include, without limitation, unbundled stock units
or components thereof, debentures, preferred stock, warrants and securities
convertible into or exchangeable for Common Stock or other property.
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(p) "Retirement" means retirement as defined under any Company
pension plan or retirement program or termination of one's employment on
retirement with the approval of the Committee.
(q) "Subsidiary" means a corporation or other entity of which
outstanding shares or ownership interests representing 50% or more of the
combined voting power of such corporation or other entity entitled to elect the
management thereof, or such lesser percentage as may be approved by the
Committee, are owned directly or indirectly by the Company.
3. Administration.
The Plan shall be administered by the Committee; provided that the
Board may, in its discretion, at any time and from time to time, resolve to
administer the Plan, in which case the term "Committee" shall be deemed to mean
the Board for all purposes herein. The Committee shall consist of at least two
directors. Subject to the provisions of the Plan, the Committee shall be
authorized to (i) select persons to participate in the Plan, (ii) determine the
form and substance of grants made under the Plan to each participant, and the
conditions and restrictions, if any, subject to which such grants will be made,
(iii) modify the terms of grants made under the Plan, (iv) interpret the Plan
and grants made thereunder, (v) make any adjustments necessary or desirable in
connection with grants made under the Plan to eligible participants located
outside the United States and (vi) adopt, amend, or rescind such rules and
regulations, and make such other determinations, for carrying out the Plan as it
may deem appropriate. Decisions of the Committee on all matters relating to the
Plan shall be in the Committee's sole discretion and shall be conclusive and
binding on all parties. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with applicable federal and state laws and rules and regulations promulgated
pursuant thereto. No member of the Committee and no officer of the Company shall
be liable for any action taken or omitted to be taken by such member, by any
other member of the Committee or by any officer of the Company in connection
with the performance of duties under the Plan, except for such person's own
willful misconduct or as expressly provided by statute.
The expenses of the Plan shall be borne by the Company. The Plan
shall not be required to establish any special or separate fund or make any
other segregation of assets to assume the payment of any award under the Plan,
and rights to the payment of such awards shall be no greater than the rights of
the Company's general creditors.
4. Shares Available for the Plan.
Subject to adjustments as provided in Section 15, an aggregate of
500,000 shares of Common Stock (the "Shares") may be issued pursuant to the
Plan. Such Shares may be in whole or in part authorized and unissued, or shares
which are held by the Company as treasury shares. If any grant under the Plan
expires or terminates
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<PAGE>
unexercised, becomes unexercisable or is forfeited as to any Shares, such
unpurchased or forfeited Shares shall thereafter be available for further grants
under the Plan unless, in the case of options granted under the Plan, related
SARs are exercised.
Without limiting the generality of the foregoing provisions of this
Section 4 or the generality of the provisions of Sections 3, 6 or 17 or any
other section of this Plan, the Committee may, at any time or from time to time,
and on such terms and conditions (that are consistent with and not in
contravention of the other provisions of this Plan) as the Committee may, in its
sole discretion, determine, enter into agreements (or take other actions with
respect to the options) for new options containing terms (including exercise
prices) more (or less) favorable than the outstanding options.
5. Participation.
Participation in the Plan shall be limited to those directors
(including Non-Employee Directors) and officers (including non-employee
officers) of, and employees and other individuals performing significant
services for (including non-employees to whom offers of employment have been
extended by), the Company and its Subsidiaries, in each case as selected by the
Committee (including participants located outside the United States). Nothing in
the Plan or in any grant thereunder shall confer any right on a participant to
continue in the employ of, or the performance of services for the Company or
shall interfere in any way with the right of the Company to terminate the
employment or performance of services of a participant at any time. By accepting
any award under the Plan, each participant and each person claiming under or
through him or her shall be conclusively deemed to have indicated his or her
acceptance and ratification of, and consent to, any action taken under the Plan
by the Company, the Board or the Committee.
Incentive Stock Options or Nonqualified Stock Options, SARs , alone
or in tandem with options, restricted stock awards, performance awards, or any
combination thereof, may be granted to such persons and for such number of
Shares as the Committee shall determine (such individuals to whom grants are
made being sometimes herein called "optionees" or "grantees," as the case may
be). Determinations made by the Committee under the Plan need not be uniform and
may be made selectively among eligible individuals under the Plan, whether or
not such individuals are similarly situated. A grant of any type made hereunder
in any one year to an eligible participant shall neither guarantee nor preclude
a further grant of that or any other type to such participant in that year or
subsequent years.
6. Incentive and Nonqualified Options.
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The Committee may from time to time grant to eligible participants
Incentive Stock Options, Nonqualified Stock Options, or any combination thereof;
provided that the Committee may grant Incentive Stock Options only to eligible
employees of the Company or its subsidiaries (as defined for this purpose in
Section 424(f) of the Code). In any one calendar year, the Committee shall not
grant to any one participant options or SARs to purchase a number of shares of
Common Stock in excess of 10% of the total number of shares authorized under the
Plan. The options granted shall take such form as the Committee shall determine,
subject to the following terms and conditions.
It is the Company's intent that Nonqualified Stock Options granted
under the Plan not be classified as Incentive Stock Options, that Incentive
Stock Options be consistent with and contain or be deemed to contain all
provisions required under Section 422 of the Code and any successor thereto, and
that any ambiguities in construction be interpreted in order to effectuate such
intent. If an Incentive Stock Option granted under the Plan does not qualify as
such for any reason, then to the extent of such nonqualification, the stock
option represented thereby shall be regarded as a Nonqualified Stock Option duly
granted under the Plan, provided that such stock option otherwise meets the
Plan's requirements for Nonqualified Stock Options.
(a) Price. The price per Share deliverable upon the exercise of each
option ("exercise price") shall be established by the Committee, except that in
the case of the grant of any option, the exercise price may not be less than
100% of the Fair Market Value of a share of Common Stock as of the date of grant
of the option, and in the case of the grant of any Incentive Stock Option to an
employee who, at the time of the grant, owns more than 10% of the total combined
voting power of all classes of stock of the Company or any of its Subsidiaries,
the exercise price may not be less that 110% of the Fair Market Value of a share
of Common Stock as of the date of grant of the option, in each case unless
otherwise permitted by Section 422 of the Code.
(b) Payment. Options may be exercised, in whole or in part, upon
payment of the exercise price of the Shares to be acquired. Unless otherwise
determined by the Committee, payment shall be made (i) in cash (including check,
bank draft or money order), (ii) by delivery of outstanding shares of Common
Stock with a Fair Market Value on the date of exercise equal to the aggregate
exercise price payable with respect to the options' exercise, (iii) by
simultaneous sale through a broker reasonably acceptable to the Committee of
Shares acquired on exercise, as permitted under Regulation T of the Federal
Reserve Board, (iv) by authorizing the Company to withhold from issuance a
number of Shares issuable upon exercise of the options which, when multiplied by
the Fair Market Value of a share of Common Stock on the date of exercise is
equal to the aggregate exercise price payable with respect to the options so
exercised or (v) by any combination of the foregoing. Options may also be
exercised upon payment of the exercise price of the Shares to be acquired by
delivery of the optionee's promissory note, but only to the extent specifically
approved by and in accordance with the policies of the Committee.
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<PAGE>
In the event a grantee elects to pay the exercise price payable with
respect to an option pursuant to clause (ii) above, (A) only a whole number of
share(s) of Common Stock (and not fractional shares of Common Stock) may be
tendered in payment, (B) such grantee must present evidence acceptable to the
Company that he or she has owned any such shares of Common Stock tendered in
payment of the exercise price (and that such tendered shares of Common Stock
have not been subject to any substantial risk of forfeiture) for at least six
months prior to the date of exercise, and (C) Common Stock must be delivered to
the Company. Delivery for this purpose may, at the election of the grantee, be
made either by (A) physical delivery of the certificate(s) for all such shares
of Common Stock tendered in payment of the price, accompanied by duly executed
instruments of transfer in a form acceptable to the Company, or (B) direction to
the grantee's broker to transfer, by book entry, such shares of Common Stock
from a brokerage account of the grantee to a brokerage account specified by the
Company. When payment of the exercise price is made by delivery of Common Stock,
the difference, if any, between the aggregate exercise price payable with
respect to the option being exercised and the Fair Market Value of the share(s)
of Common Stock tendered in payment (plus any applicable taxes) shall be paid in
cash. No grantee may tender shares of Common Stock having a Fair Market Value
exceeding the aggregate exercise price payable with respect to the option being
exercised (plus any applicable taxes).
In the event a grantee elects to pay the exercise price payable with
respect to an option pursuant to clause (iv) above, (A) only a whole number of
Share(s) (and not fractional Shares) may be withheld in payment and (B) such
grantee must present evidence acceptable to the Company that he or she has owned
a number of shares of Common Stock at least equal to the number of Shares to be
withheld in payment of the exercise price (and that such owned shares of Common
Stock have not been subject to any substantial risk of forfeiture) for at least
six months prior to the date of exercise. When payment of the exercise price is
made by withholding of Shares, the difference, if any, between the aggregate
exercise price payable with respect to the option being exercised and the Fair
Market Value of the Share(s) withheld in payment (plus any applicable taxes)
shall be paid in cash. No grantee may authorize the withholding of Shares having
a Fair Market Value exceeding the aggregate exercise price payable with respect
to the option being exercised (plus any applicable taxes). Any withheld Shares
shall no longer be issuable under such option.
(c) Terms of Options. The term during which each option may be
exercised shall be determined by the Committee, but, except as otherwise
provided herein, in no event shall an option be exercisable in whole or in part,
in the case of a Nonqualified Stock Option or an Incentive Stock Option (other
than as described below), more than ten years from the date it is granted or, in
the case of an Incentive Stock Option granted to an employee who at the time of
the grant owns more than 10% of the total combined voting power of all classes
of stock of the Company or any of its Subsidiaries, if required by the Code,
more than five years from the date it is granted. All rights to purchase Shares
pursuant to an option shall, unless sooner terminated, expire at the date
designated by the Committee. The Committee shall determine the date on which
each option shall become exercisable and may provide that an option shall become
exercisable in installments. The
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Shares constituting each installment may be purchased in whole or in part at any
time after such installment becomes exercisable, subject to such minimum
exercise requirements as may be designated by the Committee. Unless otherwise
provided herein or in the terms of the related grant, an optionee may exercise
an option only if he or she is, and has continuously since the date the option
was granted, been a director, officer or employee of, or performed other
services for, the Company or a Subsidiary. Prior to the exercise of an option
and delivery of the Shares represented thereby, the optionee shall have no
rights as a stockholder with respect to any Shares covered by such outstanding
option (including any dividend or voting rights).
(d) Limitations on Grants. If required by the Code, the aggregate
Fair Market Value (determined as of the grant date) of Shares for which an
Incentive Stock Option is exercisable for the first time during any calendar
year under all equity incentive plans of the Company and its Subsidiaries (as
defined in Section 422 of the Code) may not exceed $100,000.
(e) Termination; Change in Control.
(i) If a participant ceases to be a director, officer or
employee of, or to perform other services for, the Company and any Subsidiary
due to death or Disability, all of the participant's options and SARs shall
become fully vested and exercisable and shall remain so for a period of one year
from the date of such death or Disability, but in no event after the expiration
date of the options or SARs. Notwithstanding the foregoing, if the Disability
giving rise to the termination of employment is not within the meaning of
Section 422(e)(3) of the Code, Incentive Stock Options not exercised by such
participant within 90 days after the date of termination of employment will
cease to qualify as Incentive Stock Options and will be treated as Nonqualified
Stock Options under the Plan if required to be so treated under the Code.
(ii) If a participant ceases to be a director, officer or
employee of, or to perform other services for, the Company and any Subsidiary
upon the occurrence of his or her Retirement, all of the participant's options
and SARs which are then vested shall remain exercisable for 90 days after the
date of Retirement or at such later date as determined in the discretion of the
Committee, but in no event after the expiration date of the options or SARs,
provided that the participant does not engage in Competition during such 90-day
period unless he or she receives written consent to do so from the Committee.
Upon the occurrence of such Retirement, all of the participant's options and
SARs which are not yet vested shall become fully vested and exercisable only at
the discretion of, and on the terms prescribed by, the Committee.
(iii) If a participant ceases to be a director, officer or
employee of, or to perform other services for, the Company or a Subsidiary due
to Cause, all of the participant's options and SARs shall be forfeited
immediately upon such cessation, whether or not then exercisable.
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(iv) Unless otherwise determined by the Committee, if a
participant ceases to be a director, officer or employee of, or to otherwise
perform services for, the Company or a Subsidiary for any reason other than
death, Disability, Retirement or Cause, (A) all of the participant's options and
SARs that were exercisable on the date of such cessation shall remain
exercisable for, and shall otherwise terminate at the end of, a period of 90
days after the date of such cessation, but in no event after the expiration date
of the options or SARs, provided that the participant does not engage in
Competition during such 90-day period unless he or she receives written consent
to do so from the Committee and (B) all of the participant's options and SARs
that were not exercisable on the date of such cessation shall be forfeited
immediately upon such cessation.
(v) Unless the Committee decides to otherwise provide for the
accelerated vesting of all options and SARs in the event of a Change in Control,
if there is a Change in Control of the Company and participant is terminated
from being a director, officer or employee of, or from performing other services
for, the Company or any Subsidiary within one year following such Change in
Control, all of the participant's options and SARs shall become fully vested and
exercisable immediately upon the date of such cessation and shall remain so for
a period of one year from the date of such cessation, but in no event after the
expiration date of the options or SARs. Notwithstanding the foregoing, Incentive
Stock Options not exercised by such participant within 90 days after the date of
termination of employment will cease to qualify as Incentive Stock Options and
will be treated as Nonqualified Stock Options under the Plan if required to be
so treated under the Code.
(f) Grant of Reload Options. The Committee may provide (either at
the time of grant or exercise of an option), in its discretion, for the grant to
a grantee who exercises all or any portion of an option ("Exercised Options")
and who pays all or part of such exercise price with shares of Common Stock, of
an additional option (a "Reload Option") for a number of shares of Common Stock
equal to the sum (the "Reload Number") of the number of shares of Common Stock
tendered or withheld in payment of such exercise price for the Exercised Options
plus, if so provided by the Committee, the number of shares of Common Stock, if
any, tendered or withheld by the grantee or withheld by the Company in
connection with the exercise of the Exercised Options to satisfy any federal,
state or local tax withholding requirements. The terms of each Reload Option,
including the date of its expiration and the terms and conditions of its
exercisability and transferability, shall be the same as the terms of the
Exercised Option to which it relates, except that (i) the grant date for each
Reload Option shall be the date of exercise of the Exercised Option to which it
relates and (ii) the exercise price for each Reload Option shall be the Fair
Market Value of the Common Stock on the grant date of the Reload Option.
7. Stock Appreciation Rights.
The Committee shall have the authority to grant SARs under this
Plan,
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either alone or to any optionee in tandem with options (either at the time of
grant of the related option or thereafter by amendment to an outstanding
option). SARs shall be subject to such terms and conditions as the Committee may
specify.
No SAR may be exercised unless the Fair Market Value of a share of
Common Stock of the Company on the date of exercise exceeds the exercise price
of the SAR or, in the case of SARs granted in tandem with options, any options
to which the SARs correspond. Prior to the exercise of the SAR and delivery of
the cash and/or Shares represented thereby, the participant shall have no rights
as a stockholder with respect to Shares covered by such outstanding SAR
(including any dividend or voting rights).
SARs granted in tandem with options shall be exercisable only when,
to the extent and on the conditions that any related option is exercisable. The
exercise of an option shall result in an immediate forfeiture of any related SAR
to the extent the option is exercised, and the exercise of an SAR shall cause an
immediate forfeiture of any related option to the extent the SAR is exercised.
Upon the exercise of an SAR, the participant shall be entitled to a
distribution in an amount equal to the difference between the Fair Market Value
of a share of Common Stock on the date of exercise and the exercise price of the
SAR or, in the case of SARs granted in tandem with options, any option to which
the SAR is related, multiplied by the number of Shares as to which the SAR is
exercised. The Committee shall decide whether such distribution shall be in
cash, in Shares having a Fair Market Value equal to such amount, in Other
Company Securities having a Fair Market Value equal to such amount or in a
combination thereof.
All SARs will be exercised automatically on the last day prior to
the expiration date of the SAR or, in the case of SARs granted in tandem with
options, any related option, so long as the Fair Market Value of a share of
Common Stock on that date exceeds the exercise price of the SAR or any related
option, as applicable. An SAR granted in tandem with options shall expire at the
same time as any related option expires and shall be transferable only when, and
under the same conditions as, any related option is transferable.
8. Restricted Stock.
The Committee may at any time and from time to time grant Shares of
restricted stock under the Plan to such participants and in such amounts as it
determines. Each grant of restricted stock shall specify the applicable
restrictions on such Shares, the duration of such restrictions (which shall be
at least six months except as otherwise provided in the third paragraph of this
Section 8), and the time or times at which such restrictions shall lapse with
respect to all or a specified number of Shares that are part of the grant.
The participant will be required to pay the Company the aggregate
par value of any Shares of restricted stock (or such larger amount as the Board
may determine
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<PAGE>
to constitute capital under Section 154 of the Delaware General Corporation Law,
as amended) within ten days of the date of grant, unless such Shares of
restricted stock are treasury shares. Unless otherwise determined by the
Committee, certificates representing Shares of restricted stock granted under
the Plan will be held in escrow by the Company on the participant's behalf
during any period of restriction thereon and will bear an appropriate legend
specifying the applicable restrictions thereon, and the participant will be
required to execute a blank stock power therefor. Except as otherwise provided
by the Committee, during such period of restriction the participant shall have
all of the rights of a holder of Common Stock, including but not limited to the
rights to receive dividends and to vote, and any stock or other securities
received as a distribution with respect to such participant's restricted stock
shall be subject to the same restrictions as then in effect for the restricted
stock.
Unless the Committee decides to otherwise provide for the lapse of
all restrictions in the event of a Change in Control, if there is a Change in
Control and participant is terminated from being a director, officer or employee
of, or from performing other services for, the Company and any Subsidiary within
one year following such Change in Control or at such time as a participant
ceases to be a director, officer or employee of, or to otherwise perform
services for, the Company and its Subsidiaries due to death or Disability during
any period of restriction, all restrictions on Shares granted to such
participant shall lapse. Except as otherwise provided by the Committee, at such
time as a participant ceases to be a director, officer or employee of, or to
otherwise perform services for, the Company or its Subsidiaries for any other
reason, all Shares of restricted stock granted to such participant on which the
restrictions have not lapsed or do not thereupon lapse shall be immediately
forfeited to the Company. Upon the occurrence of Retirement prior to the end of
any period of restriction, the Committee, at its discretion, may allow such
restrictions to lapse.
9. Performance Awards.
Performance awards may be granted to participants at any time and
from time to time as determined by the Committee. The Committee shall have
complete discretion in determining the size and composition of performance
awards so granted to a participant and the appropriate period over which
performance is to be measured (a "performance cycle"). Performance awards may
include (i) specific dollar-value target awards (ii) performance units, the
value of each such unit being determined by the Committee at the time of
issuance, and/or (iii) performance Shares, the value of each such Share being
equal to the Fair Market Value of a share of Common Stock.
The value of each performance award may be fixed or it may be
permitted to fluctuate based on a performance factor (e.g., return on equity)
selected by the Committee.
The Committee shall establish performance goals and objectives for
each performance cycle on the basis of such criteria and objectives as the
Committee may select from time to time, including, without limitation, the
performance of the participant, the
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<PAGE>
Company, one or more of its Subsidiaries or divisions or any combination of the
foregoing. During any performance cycle, the Committee shall have the authority
to adjust the performance goals, objectives and/or cycle duration for such cycle
for such reasons as it deems equitable.
The Committee shall determine the portion of each performance award
that is earned by a participant on the basis of the Company's performance over
the performance cycle in relation to the performance goals for such cycle. The
earned portion of a performance award may be paid out in Shares, cash, Other
Company Securities, or any combination thereof, as the Committee may determine.
A participant must be a director, officer or employee of, or
otherwise perform services for, the Company or its Subsidiaries at the end of
the performance cycle in order to be entitled to payment of a performance award
issued in respect of such cycle; provided, however, that, except as otherwise
determined by the Committee, if a participant ceases to be a director, officer
or employee of, or to otherwise perform services for, the Company and its
Subsidiaries upon his or her death, Retirement, or Disability prior to the end
of the performance cycle, the participant shall earn a proportionate portion of
the performance award based upon the elapsed portion of the performance cycle
and the Company's performance over that portion of such cycle.
If there is a Change in Control and participant is terminated from
being a director, officer or employee of, or from performing other services for,
the Company or any Subsidiary within one year following such Change in Control,
a participant shall earn no less than the proportionate portion of the
performance award that the participant would have earned if the performance
cycle(s) had terminated as of the date of such cessation following the Change in
Control.
10. Withholding Taxes.
(a) Participant Election. Unless otherwise determined by the Committee, a
participant may elect to deliver shares of Common Stock (or have the Company
withhold shares acquired upon exercise of an option or SAR or deliverable upon
grant or vesting of restricted stock, as the case may be) to satisfy, in whole
or in part, the amount the Company is required to withhold for taxes in
connection with the exercise of an option or SAR or the delivery of restricted
stock upon grant or vesting, as the case may be. Such election must be made on
or before the date the amount of tax to be withheld is determined. Once made,
the election shall be irrevocable. The fair market value of the shares to be
withheld or delivered will be the Fair Market Value as of the date the amount of
tax to be withheld is determined. In the event a participant elects to deliver
shares of Common Stock pursuant to this Section 10(a), such delivery must be
made subject to the conditions and pursuant to the procedures set forth in
Section 6(b) with respect to the delivery of Common Stock in payment of the
exercise price of options.
(b) Company Requirement. The Company may require, as a condition to any grant or
exercise under the Plan or to the delivery of certificates for Shares issued
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<PAGE>
hereunder, that the grantee make provision for the payment to the Company,
either pursuant to Section 10(a) or this Section 10(b), of any federal, state or
local taxes of any kind required by law to be withheld with respect to any grant
or any delivery of Shares. The Company, to the extent permitted or required by
law, shall have the right to deduct from any payment of any kind (including
salary or bonus) otherwise due to a grantee, an amount equal to any federal,
state or local taxes of any kind required by law to be withheld with respect to
any grant or to the delivery of Shares under the Plan, or to retain or sell
without notice a sufficient number of the Shares to be issued to such grantee to
cover any such taxes, the payment of which has not otherwise been provided for
in accordance with the terms of the Plan, provided that the Company shall not
sell any such Shares if such sale would be considered a sale by such grantee for
purposes of Section 16 of the Exchange Act that is not exempt from matching
thereunder.
11. Written Agreement; Vesting.
Each employee to whom a grant is made under the Plan shall enter
into a written agreement with the Company that shall contain such provisions,
including without limitation vesting requirements, consistent with the
provisions of the Plan, as may be approved by the Committee. Unless the
Committee determines otherwise and except as otherwise provided in Sections 6,
7, 8 and 9 in connection with a Change in Control or certain occurrences of
termination, no grant under this Plan may be exercised, and no restrictions
relating thereto may lapse, within six months of the date such grant is made.
12. Transferability.
Unless the Committee determines otherwise, no option, SAR,
performance award, or restricted stock granted under the Plan shall be
transferable by a participant otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code. Unless the Committee determines otherwise, an option, SAR, or
performance award may be exercised only by the optionee or grantee thereof or
his guardian or legal representative; provided that Incentive Stock Options may
be exercised by such guardian or legal representative only if permitted by the
Code and any regulations promulgated thereunder.
13. Listing, Registration and Qualification.
If the Committee determines that the listing, registration or
qualification upon any securities exchange or under any law of Shares subject to
any option, SAR, performance award or restricted stock grant is necessary or
desirable as a condition of, or in connection with, the granting of same or the
issue or purchase of Shares thereunder, no such option or SAR may be exercised
in whole or in part, no such performance award may be paid out and no Shares may
be issued unless such listing, registration or qualification is effected free of
any conditions not acceptable to the Committee.
It is the intent of the Company that the Plan comply in all respects
with Section 162(m) of the Code, that awards made hereunder comply in all
respects with Rule
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<PAGE>
16b-3 under the Exchange Act, that any ambiguities or inconsistencies in
construction of the Plan be interpreted to give effect to such intention and
that if any provision of the Plan is found not to be in compliance with Section
162(m), such provision shall be deemed null and void to the extent required to
permit the Plan to comply with Section 162(m), as the case may be.
14. Transfer of Employee.
The transfer of an employee from the Company to a Subsidiary, from a
Subsidiary to the Company, or from one Subsidiary to another shall not be
considered a termination of employment; nor shall it be considered a termination
of employment if an employee is placed on military or sick leave or such other
leave of absence which is considered by the Committee as continuing intact the
employment relationship.
15. Adjustments.
In the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, distribution of
assets, or any other change in the corporate structure or shares of the Company,
the Committee shall make such adjustment as it deems appropriate in the number
and kind of Shares or other property reserved for issuance under the Plan, in
the number and kind of Shares or other property covered by grants previously
made under the Plan, and in the exercise price of outstanding options and SARs.
Any such adjustment shall be final, conclusive and binding for all purposes of
the Plan. In the event of any merger, consolidation or other reorganization in
which the Company is not the surviving or continuing corporation or in which a
Change in Control is to occur, all of the Company's obligations regarding
options, SARs performance awards, and restricted stock that were granted
hereunder and that are outstanding on the date of such event shall, on such
terms as may be approved by the Committee prior to such event, be assumed by the
surviving or continuing corporation or canceled in exchange for property
(including cash).
Without limitation of the foregoing, in connection with any
transaction of the type specified by clause (iii) of the definition of a Change
in Control in Section 2(c), the Committee may, in its discretion, (i) cancel any
or all outstanding options under the Plan in consideration for payment to the
holders thereof of an amount equal to the portion of the consideration that
would have been payable to such holders pursuant to such transaction if their
options had been fully exercised immediately prior to such transaction, less the
aggregate exercise price that would have been payable therefor, or (ii) if the
amount that would have been payable to the option holders pursuant to such
transaction if the vested portion of their options had been fully exercised
immediately prior thereto would be less than the aggregate exercise price that
would have been payable therefor, cancel any or all such options for no
consideration or payment of any kind. Payment of any amount payable pursuant to
the preceding sentence may be made in cash or, in the event that the
consideration to be received in such transaction includes securities or other
property, in cash and/or securities or other property in the Committee's
discretion.
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<PAGE>
16. Termination and Modification of the Plan.
The Board of Directors or the Committee, without approval of the
stockholders, may modify or terminate the Plan, except that no modification
shall become effective without prior approval of the stockholders of the Company
if stockholder approval would be required for continued compliance with the
performance-based compensation exception of Section 162(m) of the Code or any
listing requirement of the principal stock exchange on which the Common Stock is
then listed.
17. Amendment or Substitution of Awards under the Plan.
The terms of any outstanding award under the Plan may be amended
from time to time by the Committee in its discretion in any manner that it deems
appropriate (including, but not limited to, acceleration of the date of exercise
of any award and/or payments thereunder or of the date of lapse of restrictions
on Shares); provided that, (i) notwithstanding anything to the contrary
contained herein, the Committee may not, at any time, lower the exercise price
of any option that is outstanding pursuant to the Plan as of such time without
first obtaining the affirmative vote of a majority of the shares of Common Stock
then issued and outstanding and (ii) except as otherwise provided in Section 15,
no such amendment shall adversely affect in a material manner any right of a
participant under the award without his or her written consent. The Committee
may, in its discretion, permit holders of awards under the Plan to surrender
outstanding awards in order to exercise or realize rights under other awards, or
in exchange for the grant of new awards, or require holders of awards to
surrender outstanding awards as a condition precedent to the grant of new awards
under the Plan.
18. Commencement Date; Termination Date.
The date of commencement of the Plan shall be June 1, 1998, subject
to approval by the shareholders of the Company. The Plan may terminate upon the
adoption of a resolution of the Board terminating the Plan, in which event
termination of the Plan shall not materially and adversely affect any of the
rights or obligations of any person, without his consent, under any grant of
options or other incentives theretofore granted under the Plan.
19. Governing Law. The Plan shall be governed by the corporate laws of the State
of Delaware, without giving effect to any choice of law provisions.
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this
11/9/98, by and between Varlen Corporation ("Employer"), and William J.
Rotenberry ("Employee").
1. Employer shall employ Employee and the Employee shall render services to
Employer. Employee's employment shall be full-time and Employee shall perform
such duties as Employer shall from time to time request. Employee shall devote
all of Employee's time, skill, attention, knowledge, experience and effort to
such duties and faithfully and diligently perform such duties to the best of
Employee's abilities and for the benefit of Employer. Employee shall attend and
work at such places as Employer shall from time to time reasonably specify, and
shall obey all directions, policies, guidelines rules and regulations as may
from time to time be implemented by Employer.
2. This Agreement shall automatically terminate in the event of (i) Employee's
death; or (ii) Employee's permanent disability and Employee is therefore
eligible to collect social security benefits; or (iii) retirement pursuant to
one of the Employer's benefit plans. In addition, Employer may terminate this
Agreement immediately upon giving notice to Employee for "Cause." For the
purposes of this Agreement, "Cause" shall mean (i) Employee's breach of any
material provision of this Agreement and such breach shall not have been
remedied within thirty (30) days of written notice thereof; (ii) the
misappropriation by Employee of any funds or property from Employer; (iii)
Employee's violation of any law, rule or regulation (other than minor traffic
violations or similar offenses) or final cease-and-desist order; or (iv) any
action by Employee that may have, in Employer's sole discretion, a detrimental
effect on the reputation of Employer. For the purposes of this Agreement,
"Unreasonable Change" shall mean (i) Employee is assigned to a position bearing
a title of lower rank than a vice president; (ii) Employee's salary or target
bonus taken as a whole are reduced (recognizing the payment of a bonus is tied
to achievement of financial and personal performance); or (iii) Employee's place
of principal employment (not to be construed as limiting business travel) is
moved more than fifty (50) miles from LaGrange, Illinois. If employment is
terminated by Employer for any reason other than due to death, permanent
disability, retirement, or Cause or if Employee promptly terminates his
employment in the event of an Unreasonable Change without his consent, the
Employer shall continue to pay the Employee the following: A) his base
compensation for a period of one year from the date of such termination; B) a
bonus at a rate of 30% of base compensation level in lieu of any other claims to
a bonus payment during or after his employment paid at the expiration of such
one year period; C) provided Employee shall promptly notify Employer of
subsequent health care coverage, payment of the COBRA premium for a period
terminating on the earliest of the following: (i) one year from the date of
employment termination; or (ii) the effective date of health care coverage for
Employee at a substantially similar level or better; and D) use of the
Employer-provided car for a period of two months from the date of employment
termination. Such payment of base compensation and bonus will not be offset or
reduced by any income of Employee after the date of termination of employment
absent a breach of a provision of this Agreement by Employee.
3. A) Employee acknowledges that the transportation and petroleum instruments
businesses are specialized and that he will have access to the Employer's and
its subsidiaries' and affiliates' Confidential Information. "Confidential
Information" means any information, or data, in whatever form or medium,
concerning the business or affairs of Employer or any of its subsidiaries or
affiliates including any information entrusted to any of the foregoing,
including, without limitation, strategic plans, planned and potential
acquisitions, inventions, research, product plans, products, services, lists of
customers, records, computer software (including data and related
documentation), methods of operation, pricing or cost information, price and bid
strategies, technical data, financial information, financing plans, business or
marketing and manufacturing techniques, strategies or developments, product or
system ideas or designs, developments, processes, formulas, technology, designs,
drawings, application opportunities, or any other trade secret or information of
whatever nature not generally in the public domain. Employee acknowledges that
the documents and information regarding the Confidential Information are highly
confidential and constitute trade secrets. Employee further acknowledges that
the services rendered by Employee will be of a special character which have a
unique value to the Employer and its subsidiaries and affiliates.
B) Employee shall hold all Confidential Information in the strictest
confidence and shall not, during or subsequent to Employee's employment: (i)
disclose or make use of the Confidential Information for any purpose whatsoever
other than the performance of services to Employer, or (ii) disclose to any
person or entity or use for Employee's account or for the account of others,
directly or indirectly, any Confidential Information. Employee further agrees to
take all reasonable precautions to prevent any unauthorized disclosure of such
Confidential Information. Upon the termination of this Agreement, or upon
Employer's earlier request, Employee shall cease use of and deliver to Employer
all of Employer's and its subsidiaries' and affiliates' property and
Confidential Information in tangible form that Employee may have in Employee's
possession or control.
C) Employee covenants and agrees that, except to the extent required to
perform services on behalf of Employer pursuant to this Agreement, during the
term of Employee's employment by Employer or its subsidiaries or affiliates and
until the date one (1) year after the termination of his employment, Employee
shall not, directly or indirectly, anywhere in the world: (i) engage in the
businesses of the Employer, its subsidiaries or its affiliates at the time of
his termination of employment for Employee's own account (in whole or in part);
or (ii) own, manage, operate, control, benefit from, be employed by, provide
services to, or participate in the management, ownership, operation or control
of, or be connected in any manner with, any entity engaged in the businesses of
the Employer, its subsidiaries or its affiliates at the time of his termination
of employment (in whole or in part) or any activity similar to or competitive
with such businesses (in whole or in part).
D) Employee covenants and agrees that during the term of Employee's
employment by Employer and until the date one (1) year after the termination of
his employment, Employee shall not, directly or indirectly: (i) solicit for
employment, employ or enter into any joint venture, independent contractor or
other business relationship with any employee of Employer or its affiliates;
(ii) persuade or attempt to persuade any such employee to terminate or modify
his or her relationship with Employer and/or its subsidiaries or affiliates or
otherwise interfere in any way with the employment relationship; (iii) solicit
for any entity other than Employer the business of any customer of Employer or
its subsidiaries or affiliates; or (iv) persuade or attempt to persuade any
customer, or any potential customer, of Employer or its subsidiaries or its
affiliates not to do business with Employer or its subsidiaries or affiliates.
E) Section 3 shall survive any termination of this Agreement.
4. If any provision of this Agreement is held by a court to be invalid, void, or
unenforceable and the court does not elect to reduce such provision, this
Agreement shall be deemed amended to delete such provision or portion
adjudicated to be invalid or unenforceable without in any way affecting the
remaining parts of this Agreement. If any court determines that this or any part
of this Agreement, is unenforceable because of the duration of such provision or
the area it covers, such court shall have the power to reduce the duration or
area of such provision and, in its reduced form, such provision shall then be
enforced.
5. Employer may assign this Agreement to any of its subsidiaries or affiliates
at any time. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns.
VARLEN CORPORATION
By: /s/ Vicki L. Casmere
--------------------------------
Title: Vice President, General Sign Name: /s/ William J. Rotenberry
Counsel and Secretary -------------------------
-----------------------------
<PAGE>
CHANGE IN CONTROL AGREEMENT
This Agreement (the "Agreement") made and entered into as of April
8, 1999, by and between VARLEN CORPORATION, a Delaware corporation (the
"Company"), and RAYMOND A. JEAN (the "Executive");
W I T N E S S E T H:
WHEREAS, the Executive currently serves as a key member of
management and his knowledge and continued service are valuable to the Company;
and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to obtain reasonable assurance of the Executive's continued service to the
Company and continued dedication and objectivity in the event of any actual,
threatened, or potential Change in Control (as defined herein) of the Company,
without distraction or concern about any adverse effects upon the employment
status of the Executive that may result from any such Change in Control;
NOW, THEREFORE, the Executive and the Company, in consideration of
the agreements, covenants and conditions contained herein and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, hereby agree as follows:
1. Definitions. The following terms shall have the meanings set forth below:
a. "Cause" means the occurrence of any of the following events:
i) the material and substantial breach by the Executive of his
obligations under this Agreement;
ii) the willful and continued failure by the Executive to
substantially perform his duties and obligations to the
Company in his capacity as Executive; or
iii) the conviction of the Executive of, or the express admission
by the Executive that he has committed, a fraud upon the
Company or a felony (whether or not in conjunction with the
performance by the Executive of his duties to the Company);
provided, however, that in each case the foregoing event shall not constitute
"Cause" unless and until (x) the Company has given written notice to the
Executive that such event has occurred and may constitute "Cause" and has
provided the Executive with an opportunity to meet with the Board to discuss
such notice and (y) in the case of a breach described in clause (i) or (ii)
above, the Executive fails to cure such breach within thirty (30) days after the
date upon which such meeting with the Board is held (or, if the Executive
declines to attend such meeting, within thirty (30) days after the date upon
which such meeting is proposed by the Board). For purposes of this definition,
no act, or failure to act, on the part
<PAGE>
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of the Executive shall be deemed "willful" unless done, or omitted to be done,
by the Executive without good faith and without reasonable belief that the
action or omission was in the best interests of the Company.
b. "Change in Control" means the occurrence of any of the following
events:
i) any person or group of persons (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"))(a "Person") acquires and holds either
(A) at least 25% of the then-outstanding shares of common
stock of the Company or (B) securities of the Company entitled
to cast at least 25% of the votes that may be cast in an
election of directors of the Company; provided, however, that
none of the following acquisitions of such securities shall
constitute a "Change in Control":
(A) any acquisition by an Exempt Person; or
(B) any acquisition pursuant to a reorganization, merger or
consolidation, provided that, pursuant to Section
1(b)(iii) hereof, such event does not itself constitute
a Change in Control;
ii) Incumbent Directors cease for any reason to constitute at
least a majority of the Board;
iii) a reorganization, merger or consolidation to which the Company
is a party, other than a reorganization, merger or
consolidation with an Exempt Person, is approved by the
requisite vote of the stockholders of the Company, unless,
after the occurrence of such reorganization, merger or
consolidation, (1) securities of the surviving company
entitled to cast a majority of the votes that may be cast in
an election of directors of the surviving company, are held by
the holders of the Company's outstanding common stock
immediately prior to the effectiveness of such transaction,
and (2) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation were Incumbent
Directors at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation; or
iv) a sale of all or substantially all of the Company's assets,
other than to an Exempt Person, is approved by the
stockholders of the Company;
provided, however, that if the approval specified in clause (iii) or clause (iv)
above is obtained but such sale is terminated or abandoned by the parties
thereto prior to its effectuation, then, from and after the date of such
termination or abandonment, no Change in Control shall be deemed to have
occurred by reason of such approval; and provided further, that no Change in
Control shall be deemed to have occurred by reason of any event
<PAGE>
-3-
involving or arising out of a proceeding under Title 11 of the United States
Code (or the provisions of any future United States bankruptcy law), an
assignment for the benefit of creditors or an insolvency proceeding under state
or local law.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Disability" means a medically determined physical or mental impairment
as a result of which the Executive has qualified to receive long-term disability
benefits under the principal disability policy or plan adopted or maintained by
the Company for the benefit of the Executive.
e. "Exempt Person" means any of the following:
i) any wholly-owned subsidiary of the Company;
ii) any employee benefit plan of the Company or a trustee or other
administrator or fiduciary holding securities under an
employee benefit plan of the Company; or
iii) the Executive or any group of persons or entities with which
the Executive acts in concert.
f. "Good Reason" means the occurrence of any of the following events after
a Change in Control, unless (i) such event occurs with the Executive's express
written consent; or (ii) the event occurs in connection with termination of the
Executive's employment for Cause, Disability or death:
i) any reduction in the nature or scope of the authorities,
powers, functions, responsibilities or duties of the Executive
that materially diminishes the Executive's, position,
authority, duties or responsibilities;
ii) the assignment by the Company to the Executive of duties or
responsibilities (other than isolated and incidental duties or
responsibilities that do not affect the Executive's position
or authority) inconsistent with an executive-level position;
iii) the requirement by the Company that the Executive be based at
any office or location more than 35 miles from the corporate
offices of the Company where the Executive was employed
immediately prior to the Change in Control;
iv) any reduction by the Company in the Executive's rate of annual
base salary;
iv) any material and adverse change in the Executive's eligibility
for performance bonuses;
<PAGE>
-4-
v) any material and adverse change in the Executive's eligibility
for long-term incentive compensation (including but not
limited to his rights under the Company's Supplemental
Executive Retirement Plan and the Company's Excess Benefits
Plan, each as amended) or the Company's failure to pay any
long-term incentive plan payment when due or the cancellation,
termination or postponement of any such benefits payable to
the Executive; provided, however, that a change in the
Executive's eligibility for long-term incentive compensation
shall not be deemed to be material and adverse if substitute
or additional payments or benefits to the Executive
substantially offset the financial impact to the Executive of
such change;
vi) any material reduction in the Executive's benefits under the
employee benefit plans in which he participates immediately
prior to the Change in Control; provided, however, that
reasonable increases in insurance co-payment requirements or
deductibles, if imposed upon all plan participants generally,
shall not constitute a material reduction for this purpose;
and further provided, that an amendment to or termination of
an employee benefit plan or practice shall not constitute a
material reduction in the Executive's benefits for this
purpose if substitute or additional payments or benefits to
the Executive substantially offset the financial impact to the
Executive of such amendment or termination;
vi) any breach by the Company of any of its obligations under this
Agreement or any failure by the Company to pay compensation
and benefits when and as due to the Executive (exclusive of
any amounts then the subject of a bona fide dispute between
the Company and the Executive); or
vii) the failure of a successor to the Company to assume the
Agreement;
provided, however, that in each case the foregoing event shall not constitute
"Good Reason" until the Executive has given written notice to the Board that
such event has occurred and may constitute "Good Reason," and such event is not
cured within thirty (30) days after the date of such notice. Any event or
condition described in this Section 1(f) that occurs prior to a Change in
Control but that was at the direct or indirect request of a person who
effectuates a Change in Control or has announced an intention to effectuate a
Change in Control shall, following a Change in Control, constitute Good Reason
notwithstanding that the event or condition occurred prior to a Change in
Control.
g. "Incumbent Directors" means individuals who, as of the date hereof,
constitute the Board, together with any individual who becomes a director
subsequent to the date hereof and whose election, or nomination for election by
the Company's stockholders, is approved by a vote of at least a majority of the
Incumbent Directors in office immediately prior to such person's election, but
excluding those individuals whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as contemplated by
<PAGE>
-5-
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board.
h. "Termination Event" means the cessation of the Executive's employment
with the Company (i) by action of the Company, other than for Cause, or (ii) by
the Executive for Good Reason, but in each case excluding termination by reason
of death or Disability of the Executive.
2. Payment upon Occurrence of a Termination Event.
a. In the event that a Termination Event occurs within two (2) years after
the occurrence of a Change in Control, the Company shall pay to the Executive,
within 45 days after such Termination Event, the amount equal to (i) three times
the Executive's "base amount" (as defined in Section 280G of the Code as
presently in effect) at the time of the Change in Control, minus (ii) $1.00,
minus (iii) any amounts paid pursuant to Section 2(b). However, if the Company
should determine, in consultation with tax advisors satisfactory to the
Executive, that any amount payable to the Executive pursuant to this Section
2(a), either alone or in conjunction with any payments or benefits to or on
behalf of the Executive pursuant to this Agreement or otherwise, would not be
deductible by the Company, in whole or in part, for Federal income tax purposes
by reason of Section 280G of the Code or its successor, then the aggregate
amount payable to the Executive pursuant to this Section 2(a) shall be reduced
to the largest amount that, in the opinion of such tax advisors, the Company
could pay the Executive under this Section 2(a) without any part of that amount
being nondeductible by the Company as a result of Section 280G of the Code or
its successor.
b. For a period of up to three years beginning on the occurrence of the
Termination Event the Executive shall have the right, exercisable by written
notice to the Company within 30 days after the occurrence of the Termination
Event, and subject to any limitations or restrictions imposed by any applicable
insurance plans or insurance carriers of the Company, to continue in effect at
the Company's expense any one or more insurance plans (including but not limited
to any health, prescription drug, vision, dental, accident, disability and life
insurance coverage) in effect, for the benefit of the Executive and his family,
at the time of the Termination Event. In such event, the present value at the
time of the Termination Event of the anticipated medical insurance premiums and
other costs to be paid by the Company in order to provide such coverage for such
period shall be subtracted from the amounts otherwise payable pursuant to
Section 2(a).
3. Obligations of Executive. The Executive agrees that in the event
that any person or group attempts to effect a Change in Control, he shall not
voluntarily leave the employ of the Company without Good Reason (a) until such
attempted Change in Control terminates or (b) if a Change in Control occurs,
until 180 days following such Change in Control. For purposes of this Section 3,
the existence of Good Reason shall be determined as if a Change in Control had
occurred when such attempted Change in Control became known to the Company.
<PAGE>
-6-
4. Non-Exclusivity of Rights. Nothing contained in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies,
excepts as expressly provided herein or in such other contract or agreement.
5. Withholding. The Executive acknowledges that salary and all other
compensation payable under this Agreement shall be subject to withholding for
income and other applicable taxes to the extent required by law, as determined
by the Company in its reasonable judgment.
6. Waiver and Amendment. No act, delay, omission or course of
dealing on the part of any party hereto in exercising any right, power or remedy
hereunder shall operate as, or be construed as, a waiver thereof or otherwise
prejudice such party's rights, powers and remedies under this Agreement;
provided, however, that a claim for Cause by the Company or Good Reason by the
Executive must be made within 90 days of such person's knowledge of the events
constituting Cause or Good Reason, or such claim is otherwise considered waived.
This Agreement may not be amended except in a writing executed by both the
Company and the Executive.
7. Notice. Any and all notices referred to herein shall be
sufficient if furnished in writing and delivered by hand, by facsimile
transmission or by overnight delivery service maintaining records of receipt, to
the respective parties at the following addresses:
If to the Company: Varlen Corporation
55 Shuman Boulevard
Naperville, IL 60566
Facsimile: 630-420-7123
Attn: Corporate Secretary
If to the Executive: Raymond A. Jean
1815 N. Pond Lane
Lake Forest, Illinois 60045
Facsimile: 847-295-7335
or to such other address or addresses as either party may from time to time
designate by notice given as aforesaid. Notices shall be effective when
delivered.
8. Arbitration. Except as provided otherwise in this Agreement, all
disputes arising under or in connection with this Agreement may at the option of
either party be submitted to arbitration in Chicago, Illinois, under the rules
of the American Arbitration Association, and the decision of the arbitrator
shall be final and binding upon the parties. Judgment upon the award rendered
may be entered and enforced in any court having jurisdiction.
<PAGE>
-7-
9. Interim Advances.
(a) In the event that, during the 90-day period following any
termination of the Executive's employment after a Change in Control there is a
bona fide dispute between the Company and the Executive with respect to the
Executive's entitlement to any payments under this Agreement as a result of such
termination and such dispute has not been resolved within 90 days after the date
of the Termination Event, then, subject to Section 9(c), the Company shall pay
to the Executive, as an advance against any amounts that are claimed to be due
to the Executive under this Agreement, on 91st day after the Termination Event
and on the same date of each succeeding month until such dispute is resolved, an
amount equal to the Executive's monthly base salary as in effect immediately
prior to the Change in Control.
(b) Following any termination of the Executive's employment after a
Change of Control and until determination of the Executive's eligibility for
payments under Section 2 hereof, the Company shall, at the request of the
Executive and subject to Section 9(c), make the payments specified in Section
2(b) hereof as advances against payments that may ultimately be payable under
Section 2.
(c) The Company shall not be required to pay any amount set forth in
this Section 9 except upon receipt of a written undertaking by the Executive to
repay all such amounts to which Executive is ultimately determined not to be
entitled.
10. Miscellaneous.
a. The rights and obligations contained herein shall be binding on and
inure to the benefit of the successors and assigns of the Company. The Executive
may not assign his rights or obligations hereunder without the express written
consent of the Company.
b. This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois.
c. This Agreement sets forth all, and is intended by each party to be an
integration of all, of the promises, agreements and understandings between the
parties hereto with respect to the subject matter hereof.
d. This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original, and all of which together shall constitute
one agreement binding on the parties hereto.
e. Each provision of this Agreement shall be considered severable and if
for any reason any provision that is not essential to the effectuation of the
basic purpose of the Agreement is determined to be invalid or contrary to any
applicable law, such invalidity shall not impair the operation of or affect
those provisions of this Agreement that are valid.
f. Headings contained in this Agreement are inserted for reference and
convenience only and in no way define, limit, extend or describe the scope of
this Agreement or the meaning or construction of any of the provisions hereof.
As used herein,
<PAGE>
-8-
unless the context otherwise requires, the single shall include the plural and
vice versa, words of any gender shall include words of any other gender, and
"or" is used in the inclusive sense.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
--------------------------
RAYMOND A. JEAN
/s/ R. A. Jean
-----------------------------
<PAGE>
VARLEN CORPORATION
55 Shuman Boulevard
Naperville, IL 60566
May 14, 1999
Mr. Ray Jean
1815 N. Pond Lane
Lake Forest, Ill. 60045
Dear Ray:
This letter constitutes an amendment to the Change of Control Agreement
dated April 8, 1999 between you and Varlen Corporation ("Agreement").
Pursuant to Section 6 of the Agreement, the Agreement is hereby amended
effective April 8, 1999 by adding the following Section 10(b), and relettering
Sections 10(b) through (f) as Sections 10(c) through (g):
b. This Agreement is in lieu of any other payments due to the
Executive exclusively as a result of a Change in Control and supersedes
any prior agreement between the Executive and the Company with respect to
the subject matter hereof.
Please signify your consent to this amendment to the Agreement by signing
this letter in the space provided below.
Very truly yours,
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
Agreed to:
/s/ R. A. Jean May 14, 1999
- -------------------
Raymond Jean
<PAGE>
CHANGE IN CONTROL AGREEMENT
This Agreement (the "Agreement") made and entered into as of May 14,
1999, by and between VARLEN CORPORATION, a Delaware corporation (the "Company"),
and RICHARD A. NUNEMAKER (the "Executive");
W I T N E S S E T H:
WHEREAS, the Executive currently serves as a key member of
management and his knowledge and continued service are valuable to the Company;
and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to obtain reasonable assurance of the Executive's continued service to the
Company and continued dedication and objectivity in the event of any actual,
threatened, or potential Change in Control (as defined herein) of the Company,
without distraction or concern about any adverse effects upon the employment
status of the Executive that may result from any such Change in Control;
NOW, THEREFORE, the Executive and the Company, in consideration of
the agreements, covenants and conditions contained herein and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, hereby agree as follows:
1. Definitions. The following terms shall have the meanings set forth below:
a. "Cause" means the occurrence of any of the following events:
i) the material and substantial breach by the Executive of his
obligations under this Agreement;
ii) the willful and continued failure by the Executive to
substantially perform his duties and obligations to the
Company in his capacity as executive; or
iii) the conviction of the Executive of, or the express admission
by the Executive that he has committed, a fraud upon the
Company or a felony (whether or not in conjunction with the
performance by the Executive of his duties to the Company);
provided, however, that in each case the foregoing event shall not constitute
"Cause" unless and until (x) the Company has given written notice to the
Executive that such event has occurred and may constitute "Cause" and has
provided the Executive with an opportunity to meet with the Board to discuss
such notice and (y) in the case of a breach described in clause (i) or (ii)
above, the Executive fails to cure such breach within thirty (30) days after the
date upon which such meeting with the Board is held (or, if the Executive
declines to attend such meeting, within thirty (30) days after the date upon
which such meeting is proposed by the Board). For purposes of this definition,
no act, or failure to act, on the part
<PAGE>
-2-
of the Executive shall be deemed "willful" unless done, or omitted to be done,
by the Executive without good faith and without reasonable belief that the
action or omission was in the best interests of the Company.
b. "Change in Control" means the occurrence of any of the following
events:
i) any person or group of persons (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"))(a "Person") acquires and holds either
(A) at least 25% of the then-outstanding shares of common
stock of the Company or (B) securities of the Company entitled
to cast at least 25% of the votes that may be cast in an
election of directors of the Company; provided, however, that
none of the following acquisitions of such securities shall
constitute a "Change in Control":
(A) any acquisition by an Exempt Person; or
(B) any acquisition pursuant to a reorganization, merger or
consolidation, provided that, pursuant to Section
1(b)(iii) hereof, such event does not itself constitute
a Change in Control;
ii) Incumbent Directors cease for any reason to constitute at
least a majority of the Board;
iii) a reorganization, merger or consolidation to which the Company
is a party, other than a reorganization, merger or
consolidation with an Exempt Person, is approved by the
requisite vote of the stockholders of the Company, unless,
after the occurrence of such reorganization, merger or
consolidation, (1) securities of the surviving company
entitled to cast a majority of the votes that may be cast in
an election of directors of the surviving company, are held by
the holders of the Company's outstanding common stock
immediately prior to the effectiveness of such transaction,
and (2) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation were Incumbent
Directors at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation; or
iv) a sale of all or substantially all of the Company's assets,
other than to an Exempt Person, is approved by the
stockholders of the Company;
provided, however, that if the approval specified in clause (iii) or clause (iv)
above is obtained but such sale is terminated or abandoned by the parties
thereto prior to its effectuation, then, from and after the date of such
termination or abandonment, no Change in Control shall be deemed to have
occurred by reason of such approval; and provided further, that no Change in
Control shall be deemed to have occurred by reason of any event
<PAGE>
-3-
involving or arising out of a proceeding under Title 11 of the United States
Code (or the provisions of any future United States bankruptcy law), an
assignment for the benefit of creditors or an insolvency proceeding under state
or local law.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Disability" means a medically determined physical or mental impairment
as a result of which the Executive has qualified to receive long-term disability
benefits under the principal disability policy or plan adopted or maintained by
the Company for the benefit of the Executive.
e. "Exempt Person" means any of the following:
i) any wholly-owned subsidiary of the Company;
ii) any employee benefit plan of the Company or a trustee or other
administrator or fiduciary holding securities under an
employee benefit plan of the Company; or
iii) the Executive or any group of persons or entities with which
the Executive acts in concert.
f. "Good Reason" means the occurrence of any of the following events after
a Change in Control, unless (i) such event occurs with the Executive's express
written consent; or (ii) the event occurs in connection with termination of the
Executive's employment for Cause, Disability or death:
i) any reduction in the nature or scope of the authorities,
powers, functions, responsibilities or duties of the Executive
that materially diminishes the Executive's position,
authority, duties or responsibilities;
ii) the assignment by the Company to the Executive of duties or
responsibilities (other than isolated and incidental duties or
responsibilities that do not affect the Executive's position
or authority) inconsistent with an executive-level position;
iii) the requirement by the Company that the Executive be based at
any office or location more than 35 miles from the corporate
offices of the Company where the Executive was employed
immediately prior to the Change in Control;
iv) any reduction by the Company in the Executive's rate of annual
base salary;
v) any material and adverse change in the Executive's eligibility
for performance bonuses;
<PAGE>
-4-
vi) any material and adverse change in the Executive's eligibility
for long-term incentive compensation (including but not
limited to his rights under the Company's Supplemental
Executive Retirement Plan and the Company's Excess Benefits
Plan, each as amended) or the Company's failure to pay any
long-term incentive plan payment when due or the cancellation,
termination or postponement of any such benefits payable to
the Executive; provided, however, that a change in the
Executive's eligibility for long-term incentive compensation
shall not be deemed to be material and adverse if substitute
or additional payments or benefits to the Executive
substantially offset the financial impact to the Executive of
such change;
vii) any material reduction in the Executive's benefits under the
employee benefit plans in which he participates immediately
prior to the Change in Control; provided, however, that
reasonable increases in insurance co-payment requirements or
deductibles, if imposed upon all plan participants generally,
shall not constitute a material reduction for this purpose;
and further provided, that an amendment to or termination of
an employee benefit plan or practice shall not constitute a
material reduction in the Executive's benefits for this
purpose if substitute or additional payments or benefits to
the Executive substantially offset the financial impact to the
Executive of such amendment or termination;
viii) any breach by the Company of any of its obligations under this
Agreement or any failure by the Company to pay compensation
and benefits when and as due to the Executive (exclusive of
any amounts then the subject of a bona fide dispute between
the Company and the Executive); or
ix) the failure of a successor to the Company to assume the
Agreement;
provided, however, that in each case the foregoing event shall not constitute
"Good Reason" until the Executive has given written notice to the Board that
such event has occurred and may constitute "Good Reason," and such event is not
cured within thirty (30) days after the date of such notice. Any event or
condition described in this Section 1(f) that occurs prior to a Change in
Control but that was at the direct or indirect request of a person who
effectuates a Change in Control or has announced an intention to effectuate a
Change in Control shall, following a Change in Control, constitute Good Reason
notwithstanding that the event or condition occurred prior to a Change in
Control.
g. "Incumbent Directors" means individuals who, as of the date hereof,
constitute the Board, together with any individual who becomes a director
subsequent to the date hereof and whose election, or nomination for election by
the Company's stockholders, is approved by a vote of at least a majority of the
Incumbent Directors in office immediately prior to such person's election, but
excluding those individuals whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as contemplated by
<PAGE>
-5-
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board.
h. "Termination Event" means the cessation of the Executive's employment
with the Company (i) by action of the Company, other than for Cause, or (ii) by
the Executive for Good Reason, but in each case excluding termination by reason
of death or Disability of the Executive.
2. Payment upon Occurrence of a Termination Event.
a. In the event that a Termination Event occurs within two (2) years after
the occurrence of a Change in Control, the Company shall pay to the Executive,
within 45 days after such Termination Event, the amount equal to the lesser of:
(A) two times the Executive's "base amount" (as defined in Section 280G of the
Code as presently in effect) at the time of the Change in Control; and (B)(i)
three times the Executive's "base amount" (as defined in Section 280G of the
Code as presently in effect) at the time of the Change in Control, minus (ii)
$1.00, minus (iii) any amounts paid pursuant to Section 2(b). However, if the
Company should determine, in consultation with tax advisors satisfactory to the
Executive, that any amount payable to the Executive pursuant to this Section
2(a), either alone or in conjunction with any payments or benefits to or on
behalf of the Executive pursuant to this Agreement or otherwise, would not be
deductible by the Company, in whole or in part, for Federal income tax purposes
by reason of Section 280G of the Code or its successor, then the aggregate
amount payable to the Executive pursuant to this Section 2(a) shall be reduced
to the largest amount that, in the opinion of such tax advisors, the Company
could pay the Executive under this Section 2(a) without any part of that amount
being nondeductible by the Company as a result of Section 280G of the Code or
its successor.
b. For a period of up to two years beginning on the occurrence of the
Termination Event the Executive shall have the right, exercisable by written
notice to the Company within 30 days after the occurrence of the Termination
Event, and subject to any limitations or restrictions imposed by any applicable
insurance plans or insurance carriers of the Company, to continue in effect at
the Company's expense any one or more insurance plans (including but not limited
to any health, prescription drug, vision, dental, accident, disability and life
insurance coverage) in effect, for the benefit of the Executive and his family,
at the time of the Termination Event. In such event, the present value at the
time of the Termination Event of the anticipated medical insurance premiums and
other costs to be paid by the Company in order to provide such coverage for such
period shall be subtracted from the amounts otherwise payable pursuant to
Section 2(a)(B).
3. Obligations of Executive. The Executive agrees that in the event
that any person or group attempts to effect a Change in Control, he shall not
voluntarily leave the employ of the Company without Good Reason (a) until such
attempted Change in Control terminates or (b) if a Change in Control occurs,
until 120 days following such Change in Control. For purposes of this Section 3,
the existence of Good Reason shall be determined
<PAGE>
-6-
as if a Change in Control had occurred when such attempted Change in Control
became known to the Company.
4. Non-Exclusivity of Rights. Nothing contained in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies,
excepts as expressly provided herein or in such other contract or agreement.
5. Withholding. The Executive acknowledges that salary and all other
compensation payable under this Agreement shall be subject to withholding for
income and other applicable taxes to the extent required by law, as determined
by the Company in its reasonable judgment.
6. Waiver and Amendment. No act, delay, omission or course of
dealing on the part of any party hereto in exercising any right, power or remedy
hereunder shall operate as, or be construed as, a waiver thereof or otherwise
prejudice such party's rights, powers and remedies under this Agreement;
provided, however, that a claim for Cause by the Company or Good Reason by the
Executive must be made within 90 days of such person's knowledge of the events
constituting Cause or Good Reason, or such claim is otherwise considered waived.
This Agreement may not be amended except in a writing executed by both the
Company and the Executive.
7. Notice. Any and all notices referred to herein shall be
sufficient if furnished in writing and delivered by hand, by facsimile
transmission or by overnight delivery service maintaining records of receipt, to
the respective parties at the following addresses:
If to the Company: Varlen Corporation
55 Shuman Boulevard
Naperville, IL 60566
Facsimile: 630-420-7123
Attn: Corporate Secretary
If to the Executive: Richard A. Nunemaker
141 Cottage Hill Avenue
Elmhurst, Illinois 60126
Facsimile: _____________
or to such other address or addresses as either party may from time to time
designate by notice given as aforesaid. Notices shall be effective when
delivered.
8. Arbitration. Except as provided otherwise in this Agreement, all
disputes arising under or in connection with this Agreement may at the option of
either party be submitted to arbitration in Chicago, Illinois, under the rules
of the American Arbitration
<PAGE>
-7-
Association, and the decision of the arbitrator shall be final and binding upon
the parties. Judgment upon the award rendered may be entered and enforced in any
court having jurisdiction.
9. Miscellaneous. Interim Advances.
a. In the event that, during the 90-day period following any termination
of the Executive's employment after a Change in Control there is a bona fide
dispute between the Company and the Executive with respect to the Executive's
entitlement to any payments under this Agreement as a result of such termination
and such dispute has not been resolved within 90 days after the date of the
Termination Event, then, subject to Section 9(c), the Company shall pay to the
Executive, as an advance against any amounts that are claimed to be due to the
Executive under this Agreement, on 91st day after the Termination Event and on
the same date of each succeeding month until such dispute is resolved, an amount
equal to the Executive's monthly base salary as in effect immediately prior to
the Change in Control.
b. Following any termination of the Executive's employment after a Change
of Control and until determination of the Executive's eligibility for payments
under Section 2 hereof, the Company shall, at the request of the Executive and
subject to Section 9(c), make the payments specified in Section 2(b) hereof as
advances against payments that may ultimately be payable under Section 2.
c. The Company shall not be required to pay any amount set forth in this
Section 9 except upon receipt of a written undertaking by the Executive to repay
all such amounts to which Executive is ultimately determined not to be entitled.
10. Miscellaneous.
a. The rights and obligations contained herein shall be binding on and
inure to the benefit of the successors and assigns of the Company. The Executive
may not assign his rights or obligations hereunder without the express written
consent of the Company.
b. This Agreement is in lieu of any other payments due to the Executive
exclusively as a result of a Change in Control and supersedes any prior
agreement between the Executive and the Company with respect to the subject
matter hereof.
c. This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois.
d. This Agreement sets forth all, and is intended by each party to be an
integration of all, of the promises, agreements and understandings between the
parties hereto with respect to the subject matter hereof.
e. This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original, and all of which together shall constitute
one agreement binding on the parties hereto.
<PAGE>
-8-
f. Each provision of this Agreement shall be considered severable and if
for any reason any provision that is not essential to the effectuation of the
basic purpose of the Agreement is determined to be invalid or contrary to any
applicable law, such invalidity shall not impair the operation of or affect
those provisions of this Agreement that are valid.
g. Headings contained in this Agreement are inserted for reference and
convenience only and in no way define, limit, extend or describe the scope of
this Agreement or the meaning or construction of any of the provisions hereof.
As used herein, unless the context otherwise requires, the single shall include
the plural and vice versa, words of any gender shall include words of any other
gender, and "or" is used in the inclusive sense.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
-----------------------------
RICHARD A. NUNEMAKER
/s/ Richard A. Nunemaker
--------------------------------
<PAGE>
CHANGE IN CONTROL AGREEMENT
This Agreement (the "Agreement") made and entered into as of May 14,
1999, by and between VARLEN CORPORATION, a Delaware corporation (the "Company"),
and GEORGE W. HOFFMAN (the "Executive");
W I T N E S S E T H:
WHEREAS, the Executive currently serves as a key member of
management and his knowledge and continued service are valuable to the Company;
and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to obtain reasonable assurance of the Executive's continued service to the
Company and continued dedication and objectivity in the event of any actual,
threatened, or potential Change in Control (as defined herein) of the Company,
without distraction or concern about any adverse effects upon the employment
status of the Executive that may result from any such Change in Control;
NOW, THEREFORE, the Executive and the Company, in consideration of
the agreements, covenants and conditions contained herein and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, hereby agree as follows:
1. Definitions. The following terms shall have the meanings set forth below:
a. "Cause" means the occurrence of any of the following events:
i) the material and substantial breach by the Executive of his
obligations under this Agreement;
ii) the willful and continued failure by the Executive to
substantially perform his duties and obligations to the
Company in his capacity as executive; or
iii) the conviction of the Executive of, or the express admission
by the Executive that he has committed, a fraud upon the
Company or a felony (whether or not in conjunction with the
performance by the Executive of his duties to the Company);
provided, however, that in each case the foregoing event shall not constitute
"Cause" unless and until (x) the Company has given written notice to the
Executive that such event has occurred and may constitute "Cause" and has
provided the Executive with an opportunity to meet with the Board to discuss
such notice and (y) in the case of a breach described in clause (i) or (ii)
above, the Executive fails to cure such breach within thirty (30) days after the
date upon which such meeting with the Board is held (or, if the Executive
declines to attend such meeting, within thirty (30) days after the date upon
which such meeting is proposed by the Board). For purposes of this definition,
no act, or failure to act, on the part
<PAGE>
-2-
of the Executive shall be deemed "willful" unless done, or omitted to be done,
by the Executive without good faith and without reasonable belief that the
action or omission was in the best interests of the Company.
b. "Change in Control" means the occurrence of any of the following
events:
i) any person or group of persons (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"))(a "Person") acquires and holds either
(A) at least 25% of the then-outstanding shares of common
stock of the Company or (B) securities of the Company entitled
to cast at least 25% of the votes that may be cast in an
election of directors of the Company; provided, however, that
none of the following acquisitions of such securities shall
constitute a "Change in Control":
(A) any acquisition by an Exempt Person; or
(B) any acquisition pursuant to a reorganization, merger or
consolidation, provided that, pursuant to Section
1(b)(iii) hereof, such event does not itself constitute
a Change in Control;
ii) Incumbent Directors cease for any reason to constitute at
least a majority of the Board;
iii) a reorganization, merger or consolidation to which the Company
is a party, other than a reorganization, merger or
consolidation with an Exempt Person, is approved by the
requisite vote of the stockholders of the Company, unless,
after the occurrence of such reorganization, merger or
consolidation, (1) securities of the surviving company
entitled to cast a majority of the votes that may be cast in
an election of directors of the surviving company, are held by
the holders of the Company's outstanding common stock
immediately prior to the effectiveness of such transaction,
and (2) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation were Incumbent
Directors at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation; or
iv) a sale of all or substantially all of the Company's assets,
other than to an Exempt Person, is approved by the
stockholders of the Company;
provided, however, that if the approval specified in clause (iii) or clause (iv)
above is obtained but such sale is terminated or abandoned by the parties
thereto prior to its effectuation, then, from and after the date of such
termination or abandonment, no Change in Control shall be deemed to have
occurred by reason of such approval; and provided further, that no Change in
Control shall be deemed to have occurred by reason of any event
<PAGE>
-3-
involving or arising out of a proceeding under Title 11 of the United States
Code (or the provisions of any future United States bankruptcy law), an
assignment for the benefit of creditors or an insolvency proceeding under state
or local law.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Disability" means a medically determined physical or mental impairment
as a result of which the Executive has qualified to receive long-term disability
benefits under the principal disability policy or plan adopted or maintained by
the Company for the benefit of the Executive.
e. "Exempt Person" means any of the following:
i) any wholly-owned subsidiary of the Company;
ii) any employee benefit plan of the Company or a trustee or other
administrator or fiduciary holding securities under an
employee benefit plan of the Company; or
iii) the Executive or any group of persons or entities with which
the Executive acts in concert.
f. "Good Reason" means the occurrence of any of the following events after
a Change in Control, unless (i) such event occurs with the Executive's express
written consent; or (ii) the event occurs in connection with termination of the
Executive's employment for Cause, Disability or death:
i) any reduction in the nature or scope of the authorities,
powers, functions, responsibilities or duties of the Executive
that materially diminishes the Executive's position,
authority, duties or responsibilities;
ii) the assignment by the Company to the Executive of duties or
responsibilities (other than isolated and incidental duties or
responsibilities that do not affect the Executive's position
or authority) inconsistent with an executive-level position;
iii) the requirement by the Company that the Executive be based at
any office or location more than 35 miles from the offices of
the Company where the Executive was employed immediately prior
to the Change in Control;
iv) any reduction by the Company in the Executive's rate of annual
base salary;
v) any material and adverse change in the Executive's eligibility
for performance bonuses;
<PAGE>
-4-
vi) any material and adverse change in the Executive's eligibility
for long-term incentive compensation (including but not
limited to his rights under the Company's Supplemental
Executive Retirement Plan and the Company's Excess Benefits
Plan, each as amended) or the Company's failure to pay any
long-term incentive plan payment when due or the cancellation,
termination or postponement of any such benefits payable to
the Executive; provided, however, that a change in the
Executive's eligibility for long-term incentive compensation
shall not be deemed to be material and adverse if substitute
or additional payments or benefits to the Executive
substantially offset the financial impact to the Executive of
such change;
vii) any material reduction in the Executive's benefits under the
employee benefit plans in which he participates immediately
prior to the Change in Control; provided, however, that
reasonable increases in insurance co-payment requirements or
deductibles, if imposed upon all plan participants generally,
shall not constitute a material reduction for this purpose;
and further provided, that an amendment to or termination of
an employee benefit plan or practice shall not constitute a
material reduction in the Executive's benefits for this
purpose if substitute or additional payments or benefits to
the Executive substantially offset the financial impact to the
Executive of such amendment or termination;
viii) any breach by the Company of any of its obligations under this
Agreement or any failure by the Company to pay compensation
and benefits when and as due to the Executive (exclusive of
any amounts then the subject of a bona fide dispute between
the Company and the Executive); or
ix) the failure of a successor to the Company to assume the
Agreement;
provided, however, that in each case the foregoing event shall not constitute
"Good Reason" until the Executive has given written notice to the Board that
such event has occurred and may constitute "Good Reason," and such event is not
cured within thirty (30) days after the date of such notice. Any event or
condition described in this Section 1(f) that occurs prior to a Change in
Control but that was at the direct or indirect request of a person who
effectuates a Change in Control or has announced an intention to effectuate a
Change in Control shall, following a Change in Control, constitute Good Reason
notwithstanding that the event or condition occurred prior to a Change in
Control.
g. "Incumbent Directors" means individuals who, as of the date hereof,
constitute the Board, together with any individual who becomes a director
subsequent to the date hereof and whose election, or nomination for election by
the Company's stockholders, is approved by a vote of at least a majority of the
Incumbent Directors in office immediately prior to such person's election, but
excluding those individuals whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as contemplated by
<PAGE>
-5-
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board.
h. "Termination Event" means the cessation of the Executive's employment
with the Company (i) by action of the Company, other than for Cause, or (ii) by
the Executive for Good Reason, but in each case excluding termination by reason
of death or Disability of the Executive.
2. Payment upon Occurrence of a Termination Event.
a. In the event that a Termination Event occurs within two (2) years after
the occurrence of a Change in Control, the Company shall pay to the Executive,
within 45 days after such Termination Event, the amount equal to the lesser of
(A) (i) two times the sum of (x) the Executive's base salary at the time of the
Change in Control plus (y) the Executive's bonus payable for the last full
fiscal year prior to the Change in Control, minus (ii) any amounts paid pursuant
to Section 2(b); and (B)(i) three times the Executive's "base amount" (as
defined in Section 280G of the Code as presently in effect) at the time of the
Change in Control, minus (ii) $1.00, minus (iii) any amounts paid pursuant to
Section 2(b). However, if the Company should determine, in consultation with tax
advisors satisfactory to the Executive, that any amount payable to the Executive
pursuant to this Section 2(a), either alone or in conjunction with any payments
or benefits to or on behalf of the Executive pursuant to this Agreement or
otherwise, would not be deductible by the Company, in whole or in part, for
Federal income tax purposes by reason of Section 280G of the Code or its
successor, then the aggregate amount payable to the Executive pursuant to this
Section 2(a) shall be reduced to the largest amount that, in the opinion of such
tax advisors, the Company could pay the Executive under this Section 2(a)
without any part of that amount being nondeductible by the Company as a result
of Section 280G of the Code or its successor.
b. For a period of up to two years beginning on the occurrence of the
Termination Event the Executive shall have the right, exercisable by written
notice to the Company within 30 days after the occurrence of the Termination
Event, and subject to any limitations or restrictions imposed by any applicable
insurance plans or insurance carriers of the Company, to continue in effect at
the Company's expense any one or more insurance plans (including but not limited
to any health, prescription drug, vision, dental, accident, disability and life
insurance coverage) in effect, for the benefit of the Executive and his family,
at the time of the Termination Event. In such event, the present value at the
time of the Termination Event of the anticipated medical insurance premiums and
other costs to be paid by the Company in order to provide such coverage for such
period shall be subtracted from the amounts otherwise payable pursuant to
Section 2(a).
3. Obligations of Executive. The Executive agrees that in the event
that any person or group attempts to effect a Change in Control, he shall not
voluntarily leave the employ of the Company without Good Reason (a) until such
attempted Change in Control terminates or (b) if a Change in Control occurs,
until 120 days following such Change in Control. For purposes of this Section 3,
the existence of Good Reason shall be determined
<PAGE>
-6-
as if a Change in Control had occurred when such attempted Change in Control
became known to the Company.
4. Non-Exclusivity of Rights. Nothing contained in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies,
excepts as expressly provided herein or in such other contract or agreement.
5. Withholding. The Executive acknowledges that salary and all other
compensation payable under this Agreement shall be subject to withholding for
income and other applicable taxes to the extent required by law, as determined
by the Company in its reasonable judgment.
6. Waiver and Amendment. No act, delay, omission or course of
dealing on the part of any party hereto in exercising any right, power or remedy
hereunder shall operate as, or be construed as, a waiver thereof or otherwise
prejudice such party's rights, powers and remedies under this Agreement;
provided, however, that a claim for Cause by the Company or Good Reason by the
Executive must be made within 90 days of such person's knowledge of the events
constituting Cause or Good Reason, or such claim is otherwise considered waived.
This Agreement may not be amended except in a writing executed by both the
Company and the Executive.
7. Notice. Any and all notices referred to herein shall be
sufficient if furnished in writing and delivered by hand, by facsimile
transmission or by overnight delivery service maintaining records of receipt, to
the respective parties at the following addresses:
If to the Company: Varlen Corporation
55 Shuman Boulevard
Naperville, IL 60566
Facsimile: 630-420-7123
Attn: Corporate Secretary
If to the Executive: George W. Hoffman
1541 Thompson Lane
Mechanicsburg, PA 17055
Facsimile: _____________
or to such other address or addresses as either party may from time to time
designate by notice given as aforesaid. Notices shall be effective when
delivered.
8. Arbitration. Except as provided otherwise in this Agreement, all
disputes arising under or in connection with this Agreement may at the option of
either party be submitted to arbitration in Chicago, Illinois, under the rules
of the American Arbitration
<PAGE>
-7-
Association, and the decision of the arbitrator shall be final and binding upon
the parties. Judgment upon the award rendered may be entered and enforced in any
court having jurisdiction.
9. Interim Advances.
a. In the event that, during the 90-day period following any termination
of the Executive's employment after a Change in Control there is a bona fide
dispute between the Company and the Executive with respect to the Executive's
entitlement to any payments under this Agreement as a result of such termination
and such dispute has not been resolved within 90 days after the date of the
Termination Event, then, subject to Section 9(c), the Company shall pay to the
Executive, as an advance against any amounts that are claimed to be due to the
Executive under this Agreement, on 91st day after the Termination Event and on
the same date of each succeeding month until such dispute is resolved, an amount
equal to the Executive's monthly base salary as in effect immediately prior to
the Change in Control.
b. Following any termination of the Executive's employment after a Change
of Control and until determination of the Executive's eligibility for payments
under Section 2 hereof, the Company shall, at the request of the Executive and
subject to Section 9(c), make the payments specified in Section 2(b) hereof as
advances against payments that may ultimately be payable under Section 2.
c. The Company shall not be required to pay any amount set forth in this
Section 9 except upon receipt of a written undertaking by the Executive to repay
all such amounts to which Executive is ultimately determined not to be entitled.
10. Miscellaneous.
a. The rights and obligations contained herein shall be binding on and
inure to the benefit of the successors and assigns of the Company. The Executive
may not assign his rights or obligations hereunder without the express written
consent of the Company.
b. This Agreement is in lieu of any other payments due to the Executive
exclusively as a result of a Change in Control and supersedes any prior
agreement between the Executive and the Company with respect to the subject
matter hereof.
c. This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois.
d. This Agreement sets forth all, and is intended by each party to be an
integration of all, of the promises, agreements and understandings between the
parties hereto with respect to the subject matter hereof.
e. This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original, and all of which together shall constitute
one agreement binding on the parties hereto.
<PAGE>
-8-
f. Each provision of this Agreement shall be considered severable and if
for any reason any provision that is not essential to the effectuation of the
basic purpose of the Agreement is determined to be invalid or contrary to any
applicable law, such invalidity shall not impair the operation of or affect
those provisions of this Agreement that are valid.
g. Headings contained in this Agreement are inserted for reference and
convenience only and in no way define, limit, extend or describe the scope of
this Agreement or the meaning or construction of any of the provisions hereof.
As used herein, unless the context otherwise requires, the single shall include
the plural and vice versa, words of any gender shall include words of any other
gender, and "or" is used in the inclusive sense.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
---------------------------
GEORGE W. HOFFMAN
/s/ G. W. Hoffman
------------------------------
<PAGE>
CHANGE IN CONTROL AGREEMENT
This Agreement (the "Agreement") made and entered into as of May 14,
1999, by and between VARLEN CORPORATION, a Delaware corporation (the "Company"),
and VICKI L. CASMERE (the "Executive");
W I T N E S S E T H:
WHEREAS, the Executive currently serves as a key member of
management and his knowledge and continued service are valuable to the Company;
and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to obtain reasonable assurance of the Executive's continued service to the
Company and continued dedication and objectivity in the event of any actual,
threatened, or potential Change in Control (as defined herein) of the Company,
without distraction or concern about any adverse effects upon the employment
status of the Executive that may result from any such Change in Control;
NOW, THEREFORE, the Executive and the Company, in consideration of
the agreements, covenants and conditions contained herein and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, hereby agree as follows:
1. Definitions. The following terms shall have the meanings set forth below:
a. "Cause" means the occurrence of any of the following events:
i) the material and substantial breach by the Executive of his
obligations under this Agreement;
ii) the willful and continued failure by the Executive to
substantially perform his duties and obligations to the
Company in his capacity as executive; or
iii) the conviction of the Executive of, or the express admission
by the Executive that he has committed, a fraud upon the
Company or a felony (whether or not in conjunction with the
performance by the Executive of his duties to the Company);
provided, however, that in each case the foregoing event shall not constitute
"Cause" unless and until (x) the Company has given written notice to the
Executive that such event has occurred and may constitute "Cause" and has
provided the Executive with an opportunity to meet with the Board to discuss
such notice and (y) in the case of a breach described in clause (i) or (ii)
above, the Executive fails to cure such breach within thirty (30) days after the
date upon which such meeting with the Board is held (or, if the Executive
declines to attend such meeting, within thirty (30) days after the date upon
which such meeting is proposed by the Board). For purposes of this definition,
no act, or failure to act, on the part
<PAGE>
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of the Executive shall be deemed "willful" unless done, or omitted to be done,
by the Executive without good faith and without reasonable belief that the
action or omission was in the best interests of the Company.
b. "Change in Control" means the occurrence of any of the following
events:
i) any person or group of persons (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"))(a "Person") acquires and holds either
(A) at least 25% of the then-outstanding shares of common
stock of the Company or (B) securities of the Company entitled
to cast at least 25% of the votes that may be cast in an
election of directors of the Company; provided, however, that
none of the following acquisitions of such securities shall
constitute a "Change in Control":
(A) any acquisition by an Exempt Person; or
(B) any acquisition pursuant to a reorganization, merger or
consolidation, provided that, pursuant to Section
1(b)(iii) hereof, such event does not itself constitute
a Change in Control;
ii) Incumbent Directors cease for any reason to constitute at
least a majority of the Board;
iii) a reorganization, merger or consolidation to which the Company
is a party, other than a reorganization, merger or
consolidation with an Exempt Person, is approved by the
requisite vote of the stockholders of the Company, unless,
after the occurrence of such reorganization, merger or
consolidation, (1) securities of the surviving company
entitled to cast a majority of the votes that may be cast in
an election of directors of the surviving company, are held by
the holders of the Company's outstanding common stock
immediately prior to the effectiveness of such transaction,
and (2) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation were Incumbent
Directors at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation; or
iv) a sale of all or substantially all of the Company's assets,
other than to an Exempt Person, is approved by the
stockholders of the Company;
provided, however, that if the approval specified in clause (iii) or clause (iv)
above is obtained but such sale is terminated or abandoned by the parties
thereto prior to its effectuation, then, from and after the date of such
termination or abandonment, no Change in Control shall be deemed to have
occurred by reason of such approval; and provided further, that no Change in
Control shall be deemed to have occurred by reason of any event
<PAGE>
-3-
involving or arising out of a proceeding under Title 11 of the United States
Code (or the provisions of any future United States bankruptcy law), an
assignment for the benefit of creditors or an insolvency proceeding under state
or local law.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Disability" means a medically determined physical or mental impairment
as a result of which the Executive has qualified to receive long-term disability
benefits under the principal disability policy or plan adopted or maintained by
the Company for the benefit of the Executive.
e. "Exempt Person" means any of the following:
i) any wholly-owned subsidiary of the Company;
ii) any employee benefit plan of the Company or a trustee or other
administrator or fiduciary holding securities under an
employee benefit plan of the Company; or
iii) the Executive or any group of persons or entities with which
the Executive acts in concert.
f. "Good Reason" means the occurrence of any of the following events after
a Change in Control, unless (i) such event occurs with the Executive's express
written consent; or (ii) the event occurs in connection with termination of the
Executive's employment for Cause, Disability or death:
i) any reduction in the nature or scope of the authorities,
powers, functions, responsibilities or duties of the Executive
that materially diminishes the Executive's position,
authority, duties or responsibilities;
ii) the assignment by the Company to the Executive of duties or
responsibilities (other than isolated and incidental duties or
responsibilities that do not affect the Executive's position
or authority) inconsistent with an executive-level position;
iii) the requirement by the Company that the Executive be based at
any office or location more than 35 miles from the corporate
offices of the Company where the Executive was employed
immediately prior to the Change in Control;
iv) any reduction by the Company in the Executive's rate of annual
base salary;
v) any material and adverse change in the Executive's eligibility
for performance bonuses;
<PAGE>
-4-
vi) any material and adverse change in the Executive's eligibility
for long-term incentive compensation (including but not
limited to his rights under the Company's Supplemental
Executive Retirement Plan and the Company's Excess Benefits
Plan, each as amended) or the Company's failure to pay any
long-term incentive plan payment when due or the cancellation,
termination or postponement of any such benefits payable to
the Executive; provided, however, that a change in the
Executive's eligibility for long-term incentive compensation
shall not be deemed to be material and adverse if substitute
or additional payments or benefits to the Executive
substantially offset the financial impact to the Executive of
such change;
vii) any material reduction in the Executive's benefits under the
employee benefit plans in which he participates immediately
prior to the Change in Control; provided, however, that
reasonable increases in insurance co-payment requirements or
deductibles, if imposed upon all plan participants generally,
shall not constitute a material reduction for this purpose;
and further provided, that an amendment to or termination of
an employee benefit plan or practice shall not constitute a
material reduction in the Executive's benefits for this
purpose if substitute or additional payments or benefits to
the Executive substantially offset the financial impact to the
Executive of such amendment or termination;
viii) any breach by the Company of any of its obligations under this
Agreement or any failure by the Company to pay compensation
and benefits when and as due to the Executive (exclusive of
any amounts then the subject of a bona fide dispute between
the Company and the Executive); or
ix) the failure of a successor to the Company to assume the
Agreement;
provided, however, that in each case the foregoing event shall not constitute
"Good Reason" until the Executive has given written notice to the Board that
such event has occurred and may constitute "Good Reason," and such event is not
cured within thirty (30) days after the date of such notice. Any event or
condition described in this Section 1(f) that occurs prior to a Change in
Control but that was at the direct or indirect request of a person who
effectuates a Change in Control or has announced an intention to effectuate a
Change in Control shall, following a Change in Control, constitute Good Reason
notwithstanding that the event or condition occurred prior to a Change in
Control.
g. "Incumbent Directors" means individuals who, as of the date hereof,
constitute the Board, together with any individual who becomes a director
subsequent to the date hereof and whose election, or nomination for election by
the Company's stockholders, is approved by a vote of at least a majority of the
Incumbent Directors in office immediately prior to such person's election, but
excluding those individuals whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as contemplated by
<PAGE>
-5-
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board.
h. "Termination Event" means the cessation of the Executive's employment
with the Company (i) by action of the Company, other than for Cause, or (ii) by
the Executive for Good Reason, but in each case excluding termination by reason
of death or Disability of the Executive.
2. Payment upon Occurrence of a Termination Event.
a. In the event that a Termination Event occurs within two (2) years after
the occurrence of a Change in Control, the Company shall pay to the Executive,
within 45 days after such Termination Event, the amount equal to the lesser of:
(A) two times the Executive's "base amount" (as defined in Section 280G of the
Code as presently in effect) at the time of the Change in Control; and (B)(i)
three times the Executive's "base amount" (as defined in Section 280G of the
Code as presently in effect) at the time of the Change in Control, minus (ii)
$1.00, minus (iii) any amounts paid pursuant to Section 2(b). However, if the
Company should determine, in consultation with tax advisors satisfactory to the
Executive, that any amount payable to the Executive pursuant to this Section
2(a), either alone or in conjunction with any payments or benefits to or on
behalf of the Executive pursuant to this Agreement or otherwise, would not be
deductible by the Company, in whole or in part, for Federal income tax purposes
by reason of Section 280G of the Code or its successor, then the aggregate
amount payable to the Executive pursuant to this Section 2(a) shall be reduced
to the largest amount that, in the opinion of such tax advisors, the Company
could pay the Executive under this Section 2(a) without any part of that amount
being nondeductible by the Company as a result of Section 280G of the Code or
its successor.
b. For a period of up to two years beginning on the occurrence of the
Termination Event the Executive shall have the right, exercisable by written
notice to the Company within 30 days after the occurrence of the Termination
Event, and subject to any limitations or restrictions imposed by any applicable
insurance plans or insurance carriers of the Company, to continue in effect at
the Company's expense any one or more insurance plans (including but not limited
to any health, prescription drug, vision, dental, accident, disability and life
insurance coverage) in effect, for the benefit of the Executive and his family,
at the time of the Termination Event. In such event, the present value at the
time of the Termination Event of the anticipated medical insurance premiums and
other costs to be paid by the Company in order to provide such coverage for such
period shall be subtracted from the amounts otherwise payable pursuant to
Section 2(a).
3. Obligations of Executive. The Executive agrees that in the event
that any person or group attempts to effect a Change in Control, he shall not
voluntarily leave the employ of the Company without Good Reason (a) until such
attempted Change in Control terminates or (b) if a Change in Control occurs,
until 120 days following such Change in Control. For purposes of this Section 3,
the existence of Good Reason shall be
<PAGE>
-6-
determined as if a Change in Control had occurred when such attempted Change in
Control became known to the Company.
4. Non-Exclusivity of Rights. Nothing contained in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies,
excepts as expressly provided herein or in such other contract or agreement.
5. Withholding. The Executive acknowledges that salary and all other
compensation payable under this Agreement shall be subject to withholding for
income and other applicable taxes to the extent required by law, as determined
by the Company in its reasonable judgment.
6. Waiver and Amendment. No act, delay, omission or course of
dealing on the part of any party hereto in exercising any right, power or remedy
hereunder shall operate as, or be construed as, a waiver thereof or otherwise
prejudice such party's rights, powers and remedies under this Agreement;
provided, however, that a claim for Cause by the Company or Good Reason by the
Executive must be made within 90 days of such person's knowledge of the events
constituting Cause or Good Reason, or such claim is otherwise considered waived.
This Agreement may not be amended except in a writing executed by both the
Company and the Executive.
7. Notice. Any and all notices referred to herein shall be
sufficient if furnished in writing and delivered by hand, by facsimile
transmission or by overnight delivery service maintaining records of receipt, to
the respective parties at the following addresses:
If to the Company: Varlen Corporation
55 Shuman Boulevard
Naperville, IL 60566
Facsimile: 630-420-7123
Attn: Corporate Secretary
If to the Executive: Vicki L. Casmere
614 West Maple Street
Hinsdale, Illinois 60521
Facsimile: _____________
or to such other address or addresses as either party may from time to time
designate by notice given as aforesaid. Notices shall be effective when
delivered.
8. Arbitration. Except as provided otherwise in this Agreement, all
disputes arising under or in connection with this Agreement may at the option of
either party be submitted to arbitration in Chicago, Illinois, under the rules
of the American Arbitration
<PAGE>
-7-
Association, and the decision of the arbitrator shall be final and binding upon
the parties. Judgment upon the award rendered may be entered and enforced in any
court having jurisdiction.
9. Interim Advances.
a. In the event that, during the 90-day period following any termination
of the Executive's employment after a Change in Control there is a bona fide
dispute between the Company and the Executive with respect to the Executive's
entitlement to any payments under this Agreement as a result of such termination
and such dispute has not been resolved within 90 days after the date of the
Termination Event, then, subject to Section 9(c), the Company shall pay to the
Executive, as an advance against any amounts that are claimed to be due to the
Executive under this Agreement, on 91st day after the Termination Event and on
the same date of each succeeding month until such dispute is resolved, an amount
equal to the Executive's monthly base salary as in effect immediately prior to
the Change in Control.
b. Following any termination of the Executive's employment after a Change
of Control and until determination of the Executive's eligibility for payments
under Section 2 hereof, the Company shall, at the request of the Executive and
subject to Section 9(c), make the payments specified in Section 2(b) hereof as
advances against payments that may ultimately be payable under Section 2.
c. The Company shall not be required to pay any amount set forth in this
Section 9 except upon receipt of a written undertaking by the Executive to repay
all such amounts to which Executive is ultimately determined not to be entitled.
10. Miscellaneous.
a. The rights and obligations contained herein shall be binding on and
inure to the benefit of the successors and assigns of the Company. The Executive
may not assign his rights or obligations hereunder without the express written
consent of the Company.
b. This Agreement is in lieu of any other payments due to the Executive
exclusively as a result of a Change in Control and supersedes any prior
agreement between the Executive and the Company with respect to the subject
matter hereof.
c. This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois.
d. This Agreement sets forth all, and is intended by each party to be an
integration of all, of the promises, agreements and understandings between the
parties hereto with respect to the subject matter hereof.
e. This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original, and all of which together shall constitute
one agreement binding on the parties hereto.
<PAGE>
-8-
f. Each provision of this Agreement shall be considered severable and if
for any reason any provision that is not essential to the effectuation of the
basic purpose of the Agreement is determined to be invalid or contrary to any
applicable law, such invalidity shall not impair the operation of or affect
those provisions of this Agreement that are valid.
g. Headings contained in this Agreement are inserted for reference and
convenience only and in no way define, limit, extend or describe the scope of
this Agreement or the meaning or construction of any of the provisions hereof.
As used herein, unless the context otherwise requires, the single shall include
the plural and vice versa, words of any gender shall include words of any other
gender, and "or" is used in the inclusive sense.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
--------------------------
VICKI L. CASMERE
/s/ Vicki L. Casmere
-----------------------------
<PAGE>
VARLEN CORPORATION
55 Shuman Boulevard
Naperville, IL 60566
April 8, 1999
Mr. Ray Jean
1815 N. Pond Lane
Lake Forest, Ill. 60045
Dear Ray:
Varlen Corporation (the "Company") recognizes and values your
contributions to its present success and your expected contributions to its
future success. As a result, the Company wishes to provide you with the
following benefits:
Subject to the effectuation of any amendments to the Company's
Supplemental Executive Retirement Plan (the "SERP") necessary to implement
this letter agreement, the Company will regard you as having 15 "years of
service" for purposes of the SERP, and except as provided below will
regard you as entitled to all benefits to which you would be entitled if
you were age 62 on the date of this letter, with the result that upon your
"Termination of Employment," as defined in the SERP, you will be entitled
to the benefits specified in Section 4.1 of the SERP.
For purposes of determining your Average Monthly Compensation as defined
in Article II of the SERP, the phrase "the 120 consecutive month period of
employment preceding the earlier of the date of the Participant's
obtaining age 62 " shall mean the 120 consecutive month period of
employment preceding the earlier of the date the Participant actually
obtains age 62, without regard to the preceding paragraph of this letter.
This letter and the SERP represent our agreement and supersede any
prior discussions or agreement on this subject.
Very truly yours,
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
Agreed to:
/s/ R. A. Jean April 27, 1999
- ----------------
Raymond Jean
<PAGE>
VARLEN CORPORATION
55 Shuman Boulevard
Naperville, IL 60566
May 14, 1999
Mr. Ray Jean
1815 N. Pond Lane
Lake Forest, Ill. 60045
Dear Ray:
This letter is written in reference to your participation in the Varlen
Corporation Supplemental Executive Retirement Plan ("SERP"). Varlen Corporation
(the "Company") hereby agrees that, notwithstanding anything to the contrary in
Section 12.9 of the SERP: (a) if the Internal Revenue Service makes a final
determination that any amount paid to you under the SERP constituted a
"parachute payment" as defined in Section 280G of the Internal Revenue Code
("Code") and the regulations thereunder, you will not be required to repay such
amount to the Company or the SERP by reason of such determination; and (b) the
Company will reimburse you for any amounts you are required to pay pursuant to
Section 4999 of the Code as a result of any payments made to you pursuant to the
SERP.
Very truly yours,
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
---------------------------
Agreed to:
/s/ R. A. Jean May 14, 1999
- -------------------
Raymond Jean
<PAGE>
VARLEN CORPORATION
55 Shuman Boulevard
Naperville, IL 60566
May 14, 1999
Mr. Richard A. Nunemaker
141 Cottage Hill Avenue
Elmhurst, Ill. 60126
Dear Rick:
Varlen Corporation (the "Company") recognizes and values your
contributions to its present success and your expected contributions to its
future success. This letter confirms that, as approved by the Compensation
Committee of the Board of Directors on April 8, 1999, and communicated to you at
that time, the Company has determined to provide you with the following
benefits:
Subject to the effectuation of any amendments to the Company's
Supplemental Executive Retirement Plan (the "SERP") necessary to implement
this letter agreement, the Company will regard you as having 15 "years of
service" for purposes of the SERP, and except as provided below will
regard you as entitled to all benefits to which you would be entitled if
you were age 62 on the date of this letter, with the result that upon your
"Termination of Employment," as defined in the SERP, you will be entitled
to the benefits specified in Section 4.1 of the SERP.
For purposes of determining your Average Monthly Compensation as defined
in Article II of the SERP, the phrase "the 120 consecutive month period of
employment preceding the earlier of the date of the Participant's
obtaining age 62 " shall mean the 120 consecutive month period of
employment preceding the earlier of the date the Participant actually
obtains age 62, without regard to the preceding paragraph of this letter.
This letter and the SERP represent our agreement and supersede any
prior discussions or agreement on this subject.
Very truly yours,
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
-------------------------
Agreed to:
/s/ Richard A. Nunemaker May 14, 1999
- --------------------------
Richard A. Nunemaker
<PAGE>
VARLEN CORPORATION
55 Shuman Boulevard
Naperville, IL 60566
May 14, 1999
Mr. Richard A. Nunemaker
141 Cottage Hill Avenue
Elmhurst, Ill. 60126
Dear Rick:
This letter is written in reference to your participation in the Varlen
Corporation Supplemental Executive Retirement Plan ("SERP"). Varlen Corporation
(the "Company") hereby agrees that, notwithstanding anything to the contrary in
Section 12.9 of the SERP: (a) if the Internal Revenue Service makes a final
determination that any amount paid to you under the SERP constituted a
"parachute payment" as defined in Section 280G of the Internal Revenue Code
("Code") and the regulations thereunder, you will not be required to repay such
amount to the Company or the SERP by reason of such determination; and (b) the
Company will reimburse you for any amounts you are required to pay pursuant to
Section 4999 of the Code as a result of any payments made to you pursuant to the
SERP.
Very truly yours,
VARLEN CORPORATION
By: /s/ Greg A. Rosenbaum
-------------------------
Agreed to:
/s/ Richard A. Nunemaker May 14, 1999
- --------------------------
Richard A. Nunemaker
<PAGE>
FIRST AMENDMENT TO CONSULTING AGREEMENT
This First Amendment to the Consulting Agreement (the "Agreement") dated January
31, 1999, between Richard L. Wellek, (the "Consultant") and Varlen Corporation
("Company") shall be effective May 14, 1999.
Schedule 2 of the Agreement entitled "Fee Arrangements" shall be deleted and
replaced with the attached Revised Schedule 2.
All other provisions of the Agreement shall remain in full force and effect.
Richard L. Wellek Varlen Corporation
/s/ Richard L. Wellek By: /s/ R. A. Jean
- -------------------------- -----------------------------
Raymond A. Jean
Title: President and Chief Executive
Officer
<PAGE>
REVISED SCHEDULE 2
Fee Arrangements
In consideration for the Services provided under this Agreement, Consultant will
receive a fee paid biweekly at a rate of $250,000 per year.
In the event of a Change in Control, as defined below, the foregoing fee
remaining payable under this Agreement shall be accelerated and paid in a lump
sum on the date of such Change in Control.
"Change of Control" means the occurrence of one of the following events:
(i) if any "person" or "group" as those terms are used in Sections 13(d)
or 14(d) of the Exchange Act, other than a Exempt Person, is or becomes the
"beneficial owner" (as defined in rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities; or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation (A)
which would result in all or a portion of the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) following which the Company's chief
executive officer and directors retain their positions with the surviving entity
(and constitute at least a majority of the surviving entity's board of
directors); or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all the Company's assets, other than a sale
to an Exempt Person;
provided, however, that if the approval specified in clause (iii) or
clause (iv) above is obtained but such transaction is terminated or abandoned by
the parties thereto prior to its effectuation, then, from and after the date of
such termination or abandonment, no Change of Control shall be deemed to have
occurred by reason of such
<PAGE>
approval; and provided further, that no Change of Control shall be deemed to
have occurred by reason of any event involving or arising out of a proceeding
under Title 11 of the United States Code (or the provisions of any future United
States bankruptcy law), an assignment for the benefit of creditors or an
insolvency proceeding under state or local law.
<PAGE>
CONSENT
I, Ray Jean, being a Participant under the Varlen Corporation
Supplemental Executive Retirement Plan, as amended (the "SERP"), do hereby give
my consent, in accordance with Section 4.5 of the SERP, to the amendment of the
SERP as specified in the attachment hereto, agree to be considered a "New
Participant" within the meaning of Article II of the SERP, and consent to the
modification of the provisions relating to my benefits under the SERP as
follows:
The Company will regard me as having 15 "years of service" for purposes of
the SERP, and will regard me as entitled to all benefits under the SERP to
which I would be entitled if I were age 62 on April 8, 1999, and that upon
my "Termination of Employment," as defined in the SERP, I will be entitled
to the benefits specified in Section 4.1 of the SERP.
I do hereby give my further consent, in accordance with Section 9 of
the Varlen Corporation 1998 Contingent Stock Award Plan (the "CSAP") to the
amendment of the CSAP as specified in the attachment hereto, as it relates to
all shares of "Contingent Stock" (as defined in such plan) that have heretofore
or may hereafter be awarded to me.
IN WITNESS WHEREOF, I have set my hand as of the day and year first
above written.
/s/ R. A. Jean May 14, 1999
-------------------
Ray Jean
<PAGE>
ATTACHMENT A
UPDATED DEFINITIONS
"Cause" means the occurrence of one of the following events:
(i) Conviction of, or express admission of the commission of, a
felony or any crime or offense lesser than a felony involving
the property of the Company or a Subsidiary; or
(ii) Conduct that has caused demonstrable and serious injury to the
Company or a Subsidiary, monetary or otherwise; or
(iii) Willful refusal to perform, or substantial disregard of,
duties properly assigned, as determined by the Company; or
(iv) Breach of duty of loyalty to the Company or a Subsidiary or
other act of fraud or dishonesty with respect to the Company
or a Subsidiary.
<PAGE>
"Change of Control" means the occurrence of one of the following events:
(i) if any "person" or "group" as those terms are used in Sections
13(d) or 14(d) of the Exchange Act, other than a Exempt Person, is or becomes
the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) following which the
Company's chief executive officer and directors retain their positions with the
surviving entity (and constitute at least a majority of the surviving entity's
board of directors); or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all the Company's assets, other than a sale
to an Exempt Person;
provided, however, that if the approval specified in clause (iii) or clause (iv)
above is obtained but such transaction is terminated or abandoned by the parties
thereto prior to its effectuation, then, from and after the date of such
termination or abandonment, no Change of Control shall be deemed to have
occurred by reason of such approval; and provided further, that no Change of
Control shall be deemed to have occurred by reason of any event involving or
arising out of a proceeding under Title 11 of the United States Code (or the
provisions of any future United States bankruptcy law), an assignment for the
benefit of creditors or an insolvency proceeding under state or local law.
<PAGE>
"Good Reason" means the occurrence of any of the following events
after a Change of Control, unless (i) such event occurs with the Participant's
express written consent; or (ii) the event occurs in connection with termination
of the Participant's employment for Cause, disability or death:
(i) any reduction in the nature or scope of the authorities,
powers, functions, responsibilities or duties of the
Participant that materially diminishes the Participant's
position, authority, duties or responsibilities;
(ii) the assignment by the Company to the Participant of duties or
responsibilities (other than isolated and incidental duties or
responsibilities that do not affect the Participant's position
or authority) inconsistent with an executive-level position;
(iii) the requirement by the Company that the Participant be based
at any office or location more than 35 miles from the offices
of the Company where the Participant was employed immediately
prior to the Change of Control;
(iv) any reduction by the Company in the Executive's rate of annual
base salary, or any material and adverse change in the
Executive's eligibility for performance bonuses;
(v) any material reduction in the Participant's benefits under the
employee benefit plans in which he participates immediately
prior to the Change of Control; provided, however, that
reasonable increases in insurance co-payment requirements or
deductibles, if imposed upon all plan participants generally,
shall not constitute a material reduction for this purpose;
and further provided, that an amendment to or termination of
an employee benefit plan or practice shall not constitute a
material reduction in the Participant's benefits for this
purpose if substitute or additional payments or benefits to
the Participant substantially offset the financial impact to
the Participant of such amendment or termination;
(vi) any failure by the Company to pay compensation and benefits
when and as due to the Participant (exclusive of any amounts
then the subject of a bona fide dispute between the Company
and the Participant); or
(vii) failure of any successor to the Company to assume the
obligations of the Company under this Plan;
provided, however, that in each case the foregoing event shall not constitute
"Good Reason" until the Participant has given written notice to the Board that
such event has occurred and may constitute "Good Reason," and such event is not
cured within thirty (30) days after the date of such notice.
<PAGE>
ATTACHMENT B
SERP CIC AMENDMENTS
1. The following definitions are added to the Plan:
2.___ "New Participant" means a person who: (a) became a Participant
on or after May 14, 1999; or (b) became a participant prior to such date
but has agreed in writing to be considered a New Participant.
2.___ "Old Participant" means a person who: (a) was a Participant
prior to May 14, 1999; and (b) who has not agreed in writing to be
considered a New Participant.
2. The second sentence of Section 4.2 is amended to state:
Retirement Benefit payment timing and form shall be governed by the terms
and provisions of Article VI herein; provided that the amount of the
Retirement Benefit shall be reduced by .25% for each of the first 24
months by which the Payment Date precedes the Normal Retirement Date, and
further reduced .5% for each of the next 60 months by which the Payment
Date precedes the Normal Retirement Date, except that such reduction shall
not apply to an Old Participant is his Termination of Employment occurs
subsequent to a Change of Control.
3. The following Section 4.5 is added:
4.5 Board Discretion. Notwithstanding anything to the contrary in
the Plan, the Board or the Compensation Committee may, at any time and in
its sole discretion, and with respect to one or more New Participants: (a)
deem the Participant to have attained age 62; (b) increase the
Participant's Years of Service for purposes of Section 2.1; (c) decrease
or eliminate the early retirement reduction set forth in Section 4.2; (d)
modify the forfeiture provision set forth in Section 4.3; or (e) permit a
lump sum payment pursuant to Section 6.2, or any or all of these; provided
that no modification to the provisions of Section 4.3 may impair a
Participant's rights with respect to his Accrued Benefit as of the date of
the modification, unless he has consented in writing to such modification.
4. Section 6.2(a) is amended to state:
(a) Lump Sum Payment. A single sum payment equal in value to the Actuarial
Equivalent of the Participant's Accrued Benefit, provided such Lump Sum is
not payable earlier than the Participant's Early Retirement Date or, in
the case of an Old Participant, unless there has been a Change of Control;
and
5. The third sentence of Section 12.15 is deleted.
<PAGE>
ATTACHMENT C
SERP ss. 12.9 AMENDMENT
The second, third and fourth sentences of Section 12.9 are amended to state:
The determination of whether any reduction in the amount payable is to
apply shall be made by the Company in good faith after consultation with
the Participant, and such determination shall be conclusive and binding on
the Participant. The Participant shall cooperate in good faith with the
Company in making such determination and in providing the necessary
information for this purpose. The foregoing provisions of this Section
12.9 shall apply with respect to any person only if the payment to such
person under this Plan without regard to this Section 12.9 ("Required
Payment"), minus the reduction described in this Section 12.9 ("Required
Reduction"), and minus the federal income tax on the difference between
the Required Payment and the Required Reduction, equals an amount greater
than the Required Payment, minus the excise tax under Section 4999 for the
Code on such Required Payment, and minus the federal income tax on such
Required Payment.
<PAGE>
ATTACHMENT H
CSAP CIC AMENDMENTS
1. Section 4(a) is amended to state:
(a) Subject to Section 8 below, the period of each award of
Contingent Stock shall be five years from the date of such award, except
as otherwise provided by the Committee.
2. The opening paragraph of Section 8 and Sections 8(a) and (b) are amended
to state:
8. Mandatory Redemption of Contingent Stock Awards.
(a) Upon the termination of a Participant's employment with the
Company for Cause, prior to the scheduled Redemption Date of any
Contingent Stock award previously granted to such Participant, such
Participant shall forfeit all rights to Contingent Stock awards granted to
such Participant and all rights under the Plan shall be void.
(b) Upon the termination of a Participant's employment with the
Company, for a reason other than Cause, prior to the scheduled Redemption
Date of any Contingent Stock Award previously granted to such Participant,
the Participant shall be entitled automatically to redeem any Contingent
Stock awards previously granted at a Redemption Value determined by the
Committee and calculated as of the date of such termination of employment
based on the fair market value of the Common Stock as of such date
prorated in accordance with (i) the number of days elapsed from the date
of grant to such date over (ii) the number of days from the date of grant
to the scheduled Redemption Date.
3. The following Section 8(c) is added to the Plan and Section 8(c) is
relettered as Section 8(d):
(c) For purposes of this Section 8, the term "Cause" shall mean: (i)
with respect to Raymond A. Jean, "Cause" as defined in Section 1(a) of the
Change of Control Agreement between the Company and Mr. Jean dated April
8, 1999; (ii) with respect to Richard A. Nunemaker, "Cause" as defined in
Section 1(a) of the Change in Control Agreement between the Company and
Mr. Nunemaker dated May 14, 1999; and (iii) with respect to any other
Participant, "Cause," as defined in the Varlen Corporation 1998 Long-Term
Equity Incentive Plan.
<PAGE>
CONSENT
I, Richard A. Nunemaker, being a Participant under the Varlen
Corporation Supplemental Executive Retirement Plan, as amended (the "SERP"), do
hereby give my consent, in accordance with Section 4.5 of the SERP, to the
amendment of the SERP as specified in the attachment hereto, agree to be
considered a "New Participant" within the meaning of Article II of the SERP, and
consent to the modification of the provisions relating to my benefits under the
SERP as follows:
The Company will regard me as having 15 "years of service" for purposes of
the SERP, and will regard me as entitled to all benefits under the SERP to
which I would be entitled if I were age 62 on April 8, 1999, and that upon
my "Termination of Employment," as defined in the SERP, I will be entitled
to the benefits specified in Section 4.1 of the SERP.
I do hereby give my further consent, in accordance with Section 9 of
the Varlen Corporation 1998 Contingent Stock Award Plan (the "CSAP") to the
amendment of the CSAP as specified in the attachment hereto, as it relates to
all shares of "Contingent Stock" (as defined in such plan) that have heretofore
or may hereafter be awarded to me.
IN WITNESS WHEREOF, I have set my hand as of the day and year first
above written.
/s/ Richard A. Nunemaker May 14, 1999
-------------------------
Richard A. Nunemaker
<PAGE>
ATTACHMENT A
UPDATED DEFINITIONS
"Cause" means the occurrence of one of the following events:
(i) Conviction of, or express admission of the commission of, a
felony or any crime or offense lesser than a felony involving
the property of the Company or a Subsidiary; or
(ii) Conduct that has caused demonstrable and serious injury to the
Company or a Subsidiary, monetary or otherwise; or
(iii) Willful refusal to perform, or substantial disregard of,
duties properly assigned, as determined by the Company; or
(iv) Breach of duty of loyalty to the Company or a Subsidiary or
other act of fraud or dishonesty with respect to the Company
or a Subsidiary.
<PAGE>
"Change of Control" means the occurrence of one of the following events:
(i) if any "person" or "group" as those terms are used in Sections
13(d) or 14(d) of the Exchange Act, other than a Exempt Person, is or becomes
the "beneficial owner" (as defined in rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) following which the
Company's chief executive officer and directors retain their positions with the
surviving entity (and constitute at least a majority of the surviving entity's
board of directors); or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all the Company's assets, other than a sale
to an Exempt Person;
provided, however, that if the approval specified in clause (iii) or clause (iv)
above is obtained but such transaction is terminated or abandoned by the parties
thereto prior to its effectuation, then, from and after the date of such
termination or abandonment, no Change of Control shall be deemed to have
occurred by reason of such approval; and provided further, that no Change of
Control shall be deemed to have occurred by reason of any event involving or
arising out of a proceeding under Title 11 of the United States Code (or the
provisions of any future United States bankruptcy law), an assignment for the
benefit of creditors or an insolvency proceeding under state or local law.
<PAGE>
"Good Reason" means the occurrence of any of the following events
after a Change of Control, unless (i) such event occurs with the Participant's
express written consent; or (ii) the event occurs in connection with termination
of the Participant's employment for Cause, disability or death:
(i) any reduction in the nature or scope of the authorities,
powers, functions, responsibilities or duties of the
Participant that materially diminishes the Participant's
position, authority, duties or responsibilities;
(ii) the assignment by the Company to the Participant of duties or
responsibilities (other than isolated and incidental duties or
responsibilities that do not affect the Participant's position
or authority) inconsistent with an executive-level position;
(iii) the requirement by the Company that the Participant be based
at any office or location more than 35 miles from the offices
of the Company where the Participant was employed immediately
prior to the Change of Control;
(iv) any reduction by the Company in the Executive's rate of annual
base salary, or any material and adverse change in the
Executive's eligibility for performance bonuses;
(v) any material reduction in the Participant's benefits under the
employee benefit plans in which he participates immediately
prior to the Change of Control; provided, however, that
reasonable increases in insurance co-payment requirements or
deductibles, if imposed upon all plan participants generally,
shall not constitute a material reduction for this purpose;
and further provided, that an amendment to or termination of
an employee benefit plan or practice shall not constitute a
material reduction in the Participant's benefits for this
purpose if substitute or additional payments or benefits to
the Participant substantially offset the financial impact to
the Participant of such amendment or termination;
(vi) any failure by the Company to pay compensation and benefits
when and as due to the Participant (exclusive of any amounts
then the subject of a bona fide dispute between the Company
and the Participant); or
(vii) failure of any successor to the Company to assume the
obligations of the Company under this Plan;
provided, however, that in each case the foregoing event shall not constitute
"Good Reason" until the Participant has given written notice to the Board that
such event has occurred and may constitute "Good Reason," and such event is not
cured within thirty (30) days after the date of such notice.
<PAGE>
ATTACHMENT B
SERP CIC AMENDMENTS
1. The following definitions are added to the Plan:
2.___ "New Participant" means a person who: (a) became a Participant
on or after May 14, 1999; or (b) became a participant prior to such date
but has agreed in writing to be considered a New Participant.
2.___ "Old Participant" means a person who: (a) was a Participant
prior to May 14, 1999; and (b) who has not agreed in writing to be
considered a New Participant.
2. The second sentence of Section 4.2 is amended to state:
Retirement Benefit payment timing and form shall be governed by the
terms and provisions of Article VI herein; provided that the amount
of the Retirement Benefit shall be reduced by .25% for each of the
first 24 months by which the Payment Date precedes the Normal
Retirement Date, and further reduced .5% for each of the next 60
months by which the Payment Date precedes the Normal Retirement
Date, except that such reduction shall not apply to an Old
Participant is his Termination of Employment occurs subsequent to a
Change of Control.
3. The following Section 4.5 is added:
4.5 Board Discretion. Notwithstanding anything to the contrary in
the Plan, the Board or the Compensation Committee may, at any time and in
its sole discretion, and with respect to one or more New Participants: (a)
deem the Participant to have attained age 62; (b) increase the
Participant's Years of Service for purposes of Section 2.1; (c) decrease
or eliminate the early retirement reduction set forth in Section 4.2; (d)
modify the forfeiture provision set forth in Section 4.3; or (e) permit a
lump sum payment pursuant to Section 6.2, or any or all of these; provided
that no modification to the provisions of Section 4.3 may impair a
Participant's rights with respect to his Accrued Benefit as of the date of
the modification, unless he has consented in writing to such modification.
4. Section 6.2(a) is amended to state:
(a) Lump Sum Payment. A single sum payment equal in value to the
Actuarial Equivalent of the Participant's Accrued Benefit, provided such
Lump Sum is not payable earlier than the Participant's Early Retirement
Date or, in the case of an Old Participant, unless there has been a Change
of Control; and
5. The third sentence of Section 12.15 is deleted.
<PAGE>
ATTACHMENT C
SERP ss. 12.9 AMENDMENT
The second, third and fourth sentences of Section 12.9 are amended to state:
The determination of whether any reduction in the amount payable is to
apply shall be made by the Company in good faith after consultation with
the Participant, and such determination shall be conclusive and binding on
the Participant. The Participant shall cooperate in good faith with the
Company in making such determination and in providing the necessary
information for this purpose. The foregoing provisions of this Section
12.9 shall apply with respect to any person only if the payment to such
person under this Plan without regard to this Section 12.9 ("Required
Payment"), minus the reduction described in this Section 12.9 ("Required
Reduction"), and minus the federal income tax on the difference between
the Required Payment and the Required Reduction, equals an amount greater
than the Required Payment, minus the excise tax under Section 4999 for the
Code on such Required Payment, and minus the federal income tax on such
Required Payment.
<PAGE>
ATTACHMENT H
CSAP CIC AMENDMENTS
1. Section 4(a) is amended to state:
(a) Subject to Section 8 below, the period of each award of
Contingent Stock shall be five years from the date of such award, except
as otherwise provided by the Committee.
2. The opening paragraph of Section 8 and Sections 8(a) and (b) are amended
to state:
8. Mandatory Redemption of Contingent Stock Awards.
(a) Upon the termination of a Participant's employment with the
Company for Cause, prior to the scheduled Redemption Date of any
Contingent Stock award previously granted to such Participant, such
Participant shall forfeit all rights to Contingent Stock awards granted to
such Participant and all rights under the Plan shall be void.
(b) Upon the termination of a Participant's employment with the
Company, for a reason other than Cause, prior to the scheduled Redemption
Date of any Contingent Stock Award previously granted to such Participant,
the Participant shall be entitled automatically to redeem any Contingent
Stock awards previously granted at a Redemption Value determined by the
Committee and calculated as of the date of such termination of employment
based on the fair market value of the Common Stock as of such date
prorated in accordance with (i) the number of days elapsed from the date
of grant to such date over (ii) the number of days from the date of grant
to the scheduled Redemption Date.
3. The following Section 8(c) is added to the Plan and Section 8(c) is
relettered as Section 8(d):
(c) For purposes of this Section 8, the term "Cause" shall mean: (i)
with respect to Raymond A. Jean, "Cause" as defined in Section 1(a) of the
Change of Control Agreement between the Company and Mr. Jean dated April
8, 1999; (ii) with respect to Richard A. Nunemaker, "Cause" as defined in
Section 1(a) of the Change in Control Agreement between the Company and
Mr. Nunemaker dated May 14, 1999; and (iii) with respect to any other
Participant, "Cause," as defined in the Varlen Corporation 1998 Long-Term
Equity Incentive Plan.
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