<PAGE>
=============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission File Number: 333-22025
DAKOTA TELECOMMUNICATIONS GROUP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 91-1845100
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
29705 453RD AVENUE (605) 263-3301
IRENE, SOUTH DAKOTA 57037-0066 (Issuer's Telephone Number,
(Address of Principal Executive Offices) Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes __X__ No _____
There were 985,216 shares of Dakota Telecommunications Group, Inc. Common
Stock, without par value, outstanding as of October 31, 1997.
Transitional Small Business Disclosure Format (check one): Yes _____ No __X__
=============================================================================
<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Introductory Explanation. . . . . . . . . . . . . . . . . . . . . . 3
Item 1. FINANCIAL STATEMENTS
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheet -
September 30, 1997 (Unaudited) and December 31, 1996. . 4
Consolidated Statements of Operations -
Three Months Ended September 30, 1997 (Unaudited)
and 1996 (Unaudited). . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Operations -
Nine Months Ended September 30, 1997 (Unaudited) and
1996 (Unaudited). . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 (Unaudited) and
1996 (Unaudited). . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements (Unaudited) . 8-12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 13
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 19
Item 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . 19
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . 21
Item 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . 22
SIGNATURES . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 25
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<PAGE>
PART I. FINANCIAL INFORMATION
INTRODUCTORY EXPLANATION
On February 19, 1997, Dakota Telecommunications Group (Delaware),
Inc. (the "Company") and Dakota Cooperative Telecommunications, Inc. (the
"Cooperative") filed a Registration Statement on Form S-4 (Registration
Statement No. 333-22025) (the "Registration Statement") with respect to the
proposed conversion of the Cooperative into a South Dakota business
corporation (the "Conversion") and the proposed merger of the resulting
South Dakota business corporation with and into the Company (the "Merger").
The description of the Conversion set forth under the heading "The
Conversion" in the Registration Statement is here incorporated by
reference. The description of the Merger set forth under the heading "The
Merger" in the Registration Statement is here incorporated by reference.
At a special meeting of the members of the Cooperative held on
July 21, 1997, the members of the Cooperative voted to approve and adopt
the amendment to the articles of incorporation of the Cooperative to effect
the Conversion. The Conversion became effective on July 22, 1997. In the
Conversion, (i) each share of common stock, $5 par value, of the
Cooperative issued and outstanding immediately prior to the effective time
of the Conversion became and was converted into the right to receive a
validly issued, fully paid and nonassessable share of common stock of the
South Dakota business corporation, (ii) each share of preferred stock, $100
par value, of the Cooperative ("Preferred Stock") issued and outstanding
immediately prior to the effective time of the Conversion became and was
converted into the right to receive 80.8216445 validly issued, fully paid
and nonassessable shares of common stock of the South Dakota business
corporation and (iii) each dollar credited on the books of the Cooperative
to the capital account of each current and former member (a "Capital
Credit") immediately prior to the effective time of the Conversion was
retired in full and automatically became and was converted into the right
to receive 0.2 of a validly issued, fully paid and nonassessable share of
common stock of the South Dakota business corporation, all subject to
payment in cash for fractional shares.
Immediately following the special meeting of members of the
Cooperative, a special meeting of the shareholders of the resulting South
Dakota business corporation was convened on July 21, 1997, and was
subsequently adjourned and concluded on July 25, 1997. At that meeting,
the shareholders of the South Dakota business corporation voted to approve
an Agreement and Plan of Merger pursuant to which the South Dakota business
corporation would be merged with and into the Company. In the Merger, each
right to receive a whole share of common stock of the South Dakota business
corporation issuable in the Conversion automatically became and was
converted into the right to receive one validly issued, fully paid and
nonassessable share of the Company's common stock, without par value. The
outstanding shares of common stock of the Company held by the South Dakota
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<PAGE>
business corporation were canceled in the Merger. The Merger became
effective on July 25, 1997. Pursuant to the Agreement and Plan of Merger,
the Company's name was changed to "Dakota Telecommunications Group, Inc."
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
=============================================================================
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,801,176 $ 2,121,444
Temporary Cash Investments 900,000 1,249,000
Accounts Receivable, Less Allowance for
Uncollectibles of $343,000 and $92,000 1,471,754 1,784,895
Deposits -- 274,889
Income Taxes Receivable 109,802 248,500
Materials and Supplies 1,383,644 694,097
Prepaid Expenses 245,178 168,078
------------ -------------
Total Current Assets 6,911,554 6,540,903
------------ -------------
INVESTMENTS AND OTHER ASSETS:
Excess of Cost Over Net Assets Acquired 1,738,901 1,830,959
Other Intangible Assets 560,725 509,559
Deposit 61,905 61,905
Other Investments 1,314,454 63,817
Deferred Charges 57,511 56,628
Deferred Income Taxes 238,000 --
------------ -------------
Total Investments and Other Assets 3,971,496 2,522,868
------------ -------------
PROPERTY, PLANT AND EQUIPMENT, NET 23,315,087 14,441,104
------------ -------------
TOTAL ASSETS $ 34,198,137 $ 23,504,875
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 2,081,000 $ 697,700
Accounts Payable 922,018 399,694
Other Current Liabilities 595,421 497,388
------------ -------------
Total Current Liabilities 3,598,439 1,594,782
------------ -------------
LONG-TERM DEBT 25,715,348 15,338,395
------------ -------------
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<PAGE>
DEFERRED CREDITS 120,432 159,482
------------ -------------
STOCKHOLDERS' EQUITY:
Common Stock 5,637,855 26,185
Preferred Stock -- 1,172,000
Other Capital 179,666 --
Capital Credits -- 4,732,723
Retained Earnings (Accumulated Deficit) (1,053,603) 481,308
------------ -------------
Total Stockholders' Equity 4,763,918 6,412,216
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 34,198,137 $ 23,504,875
============ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
=============================================================================
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
REVENUES:
Local Network $ 309,401 $ 286,370
Network Access 888,876 730,334
Long Distance Network 869,378 472,861
Cable Television Service 376,113 400,674
Other 382,218 31,309
------------ -------------
Total Operating Revenues 2,825,986 1,921,548
------------ -------------
COSTS AND EXPENSES:
Plant Operations 1,018,806 549,681
Depreciation and Amortization 820,124 625,007
Customer 378,798 146,304
General and Administrative 1,045,974 558,348
Other Operating Expenses 180,687 175,763
------------ -------------
Total Operating Expenses 3,444,389 2,055,103
------------ -------------
OPERATING LOSS (618,403) (133,555)
------------ -------------
OTHER INCOME (EXPENSES):
Interest and Dividend Income 88,524 72,461
Interest Expense (383,231) (240,674)
------------ -------------
Net Other Income (Expenses) (294,707) (168,213)
------------ -------------
LOSS BEFORE INCOME TAXES (913,110) (301,768)
INCOME TAX BENEFIT (232,784) (56,212)
------------ -------------
NET LOSS $ (680,326) $ (245,556)
============ =============
LOSS PER SHARE $ (0.69)
============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-7-
<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
=============================================================================
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
REVENUES:
Local Network $ 924,903 $ 746,995
Network Access 2,796,044 2,098,510
Long Distance Network 2,438,754 1,422,051
Cable Television Service 1,156,633 877,833
Other 1,124,333 138,725
------------- -------------
Total Operating Revenues 8,440,667 5,284,114
------------- -------------
COSTS AND EXPENSES:
Plant Operations 2,672,679 1,278,642
Depreciation and Amortization 2,379,769 1,777,843
Customer 828,096 339,045
General and Administrative 3,006,705 1,325,224
Other Operating Expenses 829,798 595,291
------------- -------------
Total Operating Expenses 9,717,047 5,316,045
------------- -------------
OPERATING LOSS (1,276,380) (31,931)
------------- -------------
OTHER INCOME (EXPENSES):
Interest and Dividend Income 240,509 222,745
Interest Expense (791,920) (522,971)
------------- -------------
Net Other Income and Expenses (551,411) (300,226)
------------- -------------
LOSS BEFORE INCOME TAXES (1,827,791) (332,157)
INCOME TAX BENEFIT (292,880) (47,087)
------------- -------------
NET LOSS $ (1,534,911) $ (285,070)
============= =============
LOSS PER SHARE $ (1.56)
=============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-8-
<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
=============================================================================
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,534,911) $ (285,070)
Adjustments to Reconcile Net Loss to Net
Cash Provided By Operating Activities:
Depreciation and Amortization 2,379,769 1,777,843
Receivables 313,141 252,360
Income Taxes Receivable 138,698 (61,000)
Other Current Assets (77,100) (48,723)
Accounts Payable 522,324 (114,397)
Accrued Income Taxes -- (260,655)
Other Current Liabilities 98,033 108,078
Deferred Credits (39,050) 43,120
------------- ------------
Net Cash Provided By Operating Activities 1,800,904 1,411,556
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property, Plant and Equipment, Net (11,131,102) (4,665,000)
Materials and Supplies (689,547) (389,196)
Purchase of Other Investments (1,250,637) (500,000)
Decrease (Increase) in Temporary Cash Investments 349,000 (749,000)
Decrease in Deposits 274,889 --
Purchase of Other Intangible Assets (81,759) (541,299)
Increase in Deferred Charges (883) (52,555)
Increase in Deferred Income Taxes (238,000) --
------------- ------------
Net Cash Used In Investing Activities (12,768,039) (6,897,050)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt 11,686,551 3,791,270
Principal Payments of Long-Term Debt (386,059) (977,188)
Increase (Decrease) in Construction Contracts Payable 459,761 (282,787)
Retirement of Patronage Capital (28,235) (11,210)
Other (85,151) 196
------------- ------------
Net Cash Provided by Financing Activities 11,646,867 2,520,281
------------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 679,732 (2,965,213)
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<PAGE>
CASH AND CASH EQUIVALENTS at Beginning of Period 2,121,444 6,322,884
------------- ------------
CASH AND CASH EQUIVALENTS at End of Period $ 2,801,176 $ 3,357,671
============= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest Expense $ 791,920 $ 609,548
Income Taxes 18,883 282,790
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
=============================================================================
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The balance sheets as of September 30, 1997 and December 31, 1996,
statements of operations for the three and nine months ended September 30,
1997 and 1996 and cash flows for the nine months ended September 30, 1997
and 1996 have been prepared by the Company without audit. In the opinion
of management, all adjustments (consisting solely of normal recurring
accruals) necessary to present fairly the financial position, results of
operations and changes in cash flows have been made.
The Consolidated Financial Statements have been prepared in accordance with
the requirements of Item 310(b) of Regulation S-B and with the instructions
to Form 10-QSB. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
These condensed financial statements should be read in conjunction with the
financial statements and accompanying notes for the years ended December
31, 1996 and 1995. The results of operations for the three and nine month
periods ended September 30, 1997 are not necessarily indicative of the
operating results to be expected for the year ending December 31, 1997.
NOTE 2 - ACQUISITIONS
In the first quarter of 1996, Dakota Telecom, Inc. purchased the assets of
ten cable service areas in two separate purchase transactions and one asset
exchange transaction. In the second quarter of 1996, Dakota Telecom, Inc.
purchased the assets of an additional nine cable service areas. Operations
of the nineteen cable service areas are included in the consolidated
statements of operations for the three and nine months ended September 30,
1996 subsequent to their purchase. Operations of the nineteen cable service
areas are included in the consolidated statement of operations for the
three and nine months ended September 30, 1997.
In December 1996, the Company acquired I-Way Partners, Inc. and TCIC
Communications, Inc. in exchange for 1,172 shares of preferred stock valued
at $1,172,000. Operations of the companies acquired are included in the
consolidated statement of operations for the three and nine months ended
September 30, 1997.
NOTE 3 - LONG-TERM DEBT
Long-term debt is as follows:
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
=============================================================================
<TABLE>
<CAPTION>
9/30/97 12/31/96
------------ ------------
<S> <C> <C> <C>
Rural Utilities Service (RUS) mortgage notes:
2% payable in quarterly installments $ -- $ 2,595,175
5% payable in monthly installments -- 10,756,343
------------ ------------
-- 13,351,518
Rural Telephone Finance Cooperative (RTFC):
Mortgage Note, matures 2006, variable
interest rate (6.65% at September 30, 1997) 1,439,377 1,537,537
Mortgage Note, matures 2012, variable
interest rate (6.65% at September 30, 1997) 13,684,210 --
Mortgage Note, matures 2012, variable
interest rate (6.65% at September 30, 1997) 9,570,621 --
Norwest Bank South Dakota, N.A. matures
May 1998, variable interest rate (prime plus
one percent, 9.5% at September 30, 1997)
payable upon maturity 330,000 330,000
Norwest Bank South Dakota, N.A. matures
May 1998, variable interest rate (prime plus
one percent, 9.5% at September 30, 1997)
payable upon maturity 650,469 650,469
Unsecured Notes to a Shareholder,
matures May 1998, variable interest rate
(prime plus one percent, 9.5% at
December 31, 1996), payable upon maturity 45,000 45,000
RTFC variable rate (7.25% at September 30, 1997)
Lines of Credit: $1,500,000 Limit Maturing
May 2002 1,500,000 --
Other -- 4,661
Construction Contracts Payable 576,671 116,910
------------ ------------
27,796,348 16,036,095
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<PAGE>
Amount Due Within One Year 2,081,000 (697,700)
------------ ------------
Total Long-Term Debt $ 25,715,348 $ 15,338,395
============ ============
</TABLE>
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
=============================================================================
NOTE 3 - LONG-TERM DEBT (CONTINUED)
The RTFC loans, maturing in 2012, are collateralized by all assets and
revenues and stock of the Company's subsidiaries.
The RTFC loan, maturing in 2006, is collateralized by the cable plant
located in ten cities in southeastern South Dakota and is payable in
quarterly installments. The $330,000 Norwest Bank loan is secured by the
assets of Iway, Inc. and is guaranteed by the former shareholders of
I-Way Partners, Inc.; the $650,469 Norwest Bank loan is secured by the assets
of two of the former shareholders of TCIC Communications, Inc. and their
personal guarantees. The former shareholders of I-Way Partners, Inc. and
TCIC Communications, Inc. are shareholders of the Company.
Approximate annual principal payments on the existing debt for the next
five years are: 1998 - $2,081,000; 1999 - 1,140,000; 2000 - $1,219,000;
2001 - $1,302,000; and 2002 - $2,890,000.
Unadvanced loan funds of $5,166,221 are available to the Company on loan
commitments from the RTFC. Loan proceeds will be used to refinance current
construction and to finance future construction.
The Company has a line of credit arrangement for $1.5 million with RTFC
which expires in 2002. Interest is payable quarterly at prime rate plus
1.5%. Any advances must be paid in full within 360 days of the advance and
remain at a zero balance for at least five consecutive business days.
Advances from the line of credit were used to finance construction approved
in the RTFC long-term agreements. At September 30, 1997, the outstanding
line of credit balance was classified as a long-term obligation in
anticipation of the receipt of previously approved RTFC funds.
The Company received loans of $14,737,000 and $13,684,000 from the RTFC for
the purposes of refinancing its RUS debt and RTFC lines of credit and to
finance plant construction. The loans are payable quarterly, with full
payment due in fifteen years. On July 15, 1997, the Company retired its
entire RUS debt with loan proceeds from the RTFC. In order to obtain
financing from RTFC, the loans include borrowings of $1,188,000 to purchase
Subordinated Capital Certificates (SCC) of RTFC. The SCCs bear no interest
and will be repaid to the Company. SCCs are included in other investments
on the balance sheet. The Company is required to maintain a debt service
coverage of not less than 1.25 and a times interest earned ratio of not
less than 1.50, each ratio is determined by averaging the two highest annual
calculations during the three most recent fiscal years. The Company
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DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
=============================================================================
is restricted from incurring any additional unsecured debt in excess of five
percent of total assets from any other lender and from declaring or paying
any dividend or purchasing or redeeming any capital stock in excess of 25
percent of the prior fiscal year-end cash margins without written approval
of the lender.
NOTE 4 - INCOME TAXES
As of July 22, 1997, Dakota Telecommunications Group, Inc. became taxable at
the federal level. Prior to that date, the Parent Company operated as a
cooperative and had been granted tax exempt status under Section 501(c)12 of
the Internal Revenue Code and therefore the Parent Company's income was not
taxable prior to July 22, 1997.
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Current $ 5,216 $ (56,212) $ (54,880) $ (47,087)
Deferred (238,000) -- (238,000) --
------------ ------------ ----------- ------------
Total $ (232,784) $ (56,212) $ (292,880) $ (47,087)
============ ============ =========== ============
</TABLE>
The difference between the statutory federal rate and effective tax rate
were as follows:
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
=============================================================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Consolidated Taxable Income
(Loss) Before Taxes $ (913,110) $ (301,768) $ (1,827,791) $ (332,157)
Less Tax Exempt Loss (Income 212,218 139,382 626,412 (27,426)
------------ ------------ ------------ -----------
Taxable Income (Loss) $ (700,892) $ (162,386) $ (1,201,379) $ (359,583)
============ ============ ============ ===========
Statutory Tax Rate 35.0% 35.0% 35.0% 35.0%
Effect of Graduated Tax Rates
and Other (1.8) (.4) (1.2) (3.2)
Losses with No Future Tax Benefits -- -- (9.4) (18.7)
------------ ------------ ------------ -----------
Effective Tax Rate 33.2% 34.6% 24.4% 13.1%
============ ============ ============ ===========
</TABLE>
The state of South Dakota does not have a tax on income. Deferred tax
assets of $238,000 as of September 30, 1997 and deferred tax liabilities of
$88,932 as of September 30, 1997 and December 31, 1996 are included on the
balance sheet.
NOTE 5 - REORGANIZATION COSTS
Included in general and administrative expenses for the nine months ended
September 30, 1997 is $585,438 of costs related to the reorganizing of the
Company as explained in Note 6.
NOTE 6 - REORGANIZATION
At a special meeting of the stockholders on July 21, 1997, the stockholders
approved an amendment to the Company's articles of incorporation which
resulted in the conversion of the Company from a cooperative to a South
Dakota business corporation. Also at a meeting convened on July 21, 1997,
and subsequently adjourned and completed on July 25, 1997, the shareholders
of the South Dakota business corporation approved an Agreement and Plan of
Merger that provided for the subsequent merger of the South Dakota business
corporation with and into the Company. The conversion of equity in the
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
=============================================================================
Cooperative to equity in the South Dakota business corporation and then
into equity in the Company was at the rate of one share of common stock for
each share of the Cooperative's common stock, 80.8216445 shares of common
stock for each share of preferred stock and 0.2 of a share of common stock
for each dollar of capital credits.
NOTE 7 - STOCKHOLDERS' EQUITY
The Company has 5,000,000 shares of no par common stock authorized and
985,216 shares are issued and outstanding as of September 30, 1997. The
Company also has 250,000 shares of no par preferred stock of which 15,000
shares are designated as Series A Junior Participating preferred stock. No
preferred stock has been issued or is outstanding as of September 30,
1997.
Other capital consists of capital credits in the Company that had been
allocated to members and patrons that the Company was unable to locate at
the time of the reorganization.
On July 22, 1997, the Board of Directors adopted a leveraged employee stock
ownership plan ("ESOP") and the 1997 Stock Incentive Plan. The ESOP and
Stock Incentive Plan are effective upon the registration of the plans with
SEC.
On July 22, 1997, the Board of Directors declared a dividend of one right
for each outstanding share of common stock that was distributed to common
stockholders of record on August 5, 1997. Each right represents the right
to purchase one one-hundredth of a share of Series A Junior Participating
Preferred Stock. The exercise price of the rights are $100 per right and
the redemption price is $.01. The rights expire August 4, 2007.
NOTE 8 - EARNINGS PER SHARE
Earnings per share was computed by dividing the net loss by the number of
common shares outstanding, as though the common stock were outstanding for
the entire period.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is provided by management as its
analysis of the Company's financial condition and results of operations
through September 30, 1997. This analysis should be read in conjunction
with the separate consolidated financial statements of the Company and the
notes thereto included in Part I, Item 1 of this Quarterly Report on
Form 10-QSB.
Certain information discussed below may constitute or include
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, such as information relating to the
Company's ongoing 1997 development plans, the effects of its July 1997
refinancing of its long-term debt and statements regarding the Company's
anticipated net losses for 1997, 1998 and 1999. Such forward-looking
information involves important known and unknown risks and uncertainties
and other factors that may cause the actual results, performance or
achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These risks and uncertainties include, but are
not limited to, uncertainties related to economic conditions; acquisitions
and divestitures; government and regulatory policies; the pricing and
availability of equipment, materials, inventories and software;
technological developments; change in the competitive environment in which
the Company operates; and other risks, uncertainties and factors discussed
in the Company's other filings with the Securities and Exchange Commission
including the Form S-4 Registration Statement that became effective on
June 13, 1997. Readers are cautioned not to place undue reliance on the
forward-looking statements made below, which speak only as of the date
hereof.
OVERVIEW
The Company is a diversified telecommunications services company.
The Company, either directly or through wholly owned subsidiaries, provides
local telephone and network access services, long distance telephone
services, operator assisted calling services, telecommunications equipment
sales and leasing services, cable television services and Internet access
and related services in South Dakota and the surrounding states.
In 1996 the Company began a major reorganization and expansion
program. This program includes the redesign and rebuilding of the
Company's switching center and telecommunications network, a project which
was concluded in October 1997, as well as the expansion of the Company's
operations through selected acquisitions. During 1996, the Company
purchased the assets of 19 cable television systems from three companies
that provided cable service to various communities. In December 1996, the
Company, through a wholly owned subsidiary, merged with TCIC
Communications, Inc. ("TCIC"), a South Dakota based provider of long
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distance and operator services. Also in December 1996, in a similar
transaction, the Company merged with I-Way Partners, Inc. ("Iway"), one of
South Dakota's largest Internet service providers. Both TCIC and Iway
continue to operate as wholly owned subsidiaries of the Company. The
Company currently anticipates that additional acquisitions will form a part
of its continuing expansion plans.
As part of its reorganization plans, the Company has also changed
its form of conducting business from a South Dakota cooperative into a
public Delaware business corporation. On February 19, 1997, the Company
filed a Registration Statement on Form S-4 (Registration Statement No.
333-22025) with respect to the proposed conversion of the Company from a
cooperative into a South Dakota business corporation (the "Conversion") and
the proposed merger of the resulting South Dakota business corporation into
the Company, then a wholly owned Delaware subsidiary of the cooperative
(the "Merger"). At a special meeting of the members of the cooperative on
July 21, 1997, the Conversion was approved. The Conversion was formalized
on July 22, 1997 with the filing of the amended Articles of Incorporation
approved by the members at the July 21, 1997 meeting. Immediately
following the special meeting of the cooperative members, a special meeting
of the shareholders of the resulting South Dakota business corporation was
convened on July 21, 1997, and subsequently adjourned and concluded on
July 25, 1997. At that meeting, the shareholders voted to approve
an Agreement and Plan of Merger pursuant to which the South Dakota business
corporation would be merged with and into the Company. The Merger became
effective on July 25, 1997. As a result, the Company now operates as a
public Delaware corporation.
The Company's reorganization and expansion plans have had, and
will continue to have, significant impacts on the Company's financial
condition and results of operations. As part of its network rebuilding
project, in 1995 the Company reassessed the remaining useful life of its
old facilities. In 1996, the Company incurred approximately $5.8 million
in new capital expenditures and in 1997 anticipates spending an additional
$15 million for its network construction program. These changes will
combine to result in substantially higher depreciation expense with a
corresponding reduction in the Company's net income in future years. In
addition, to implement its growth plans, in 1996 the Company completed the
acquisitions described above and increased its employee base from 34
employees at December 31, 1995, to 76 employees at December 31, 1996 and to
102 employees at September 30, 1997, resulting in increases in amortization
expense and employee-related operating expenses. While the Company
anticipates that its revenue base will continue to grow in the period from
1997 through 1999 as it completes its new facilities and markets new
services, the higher expense levels resulting from a combination of higher
depreciation, amortization and interest expense, as well as additional
employee expenses, will likely cause the Company to recognize and report
net after-tax losses in those years.
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
DECEMBER 31, 1996 COMPARED TO SEPTEMBER 30, 1997
Accounts Receivable decreased from $1,784,895 at December 31,
1996 to $1,471,754 at September 30, 1997 due to stricter collection
policies implemented by the Company in 1997. Materials and Supplies
increased from $694,097 at December 31, 1996 to $1,383,644 at September 30,
1997, primarily due to materials on hand to be used to complete the
Company's 1997 construction projects. The offsetting changes in these two
asset items accounted for most of the increase in current assets from
$6,540,903 at December 31, 1996 to $6,911,554 at September 30, 1997.
Investments and Other Assets increased from $2,522,868 at
December 31, 1996 to $3,971,496 at September 30, 1997. This increase was
primarily due to the purchase by the Company of approximately $1.2 million
in RTFC Subordinated Capital Certificates in connection with the
$28,421,000 long-term loan agreement entered into between the Company and
RTFC in July 1997. See the discussion of the RTFC financing, below, and
Note 3 to the Consolidated Financial Statements. An additional $238,000 of
this increase is attributable to the recognition of a deferred income tax
asset during 1997. See Note 4 to the Consolidated Financial Statements.
Net Fixed Assets increased from $14,441,104 at December 31, 1996
to $23,315,087 at September 30, 1997, representing primarily additional
plant assets constructed by the Company during 1997 as part of its network
upgrade program.
The Company's total capital structure, consisting of
Stockholders' Equity and Long-Term Debt, was $32,560,266 at September 30,
1997 compared to $22,448,311 at December 31, 1996. The increase in total
capital structure at September 30, 1997 of $10,111,935 was composed
primarily of additional outstanding long-term debt of $11,760,253 used to
finance the Company's network rebuilding program less accumulated net
losses from the Company's operations from January 1, 1997 through September
30, 1997 (see discussion of Results of Operations, below).
The presentation of the Stockholders' Equity account structure
changed substantially during the third quarter of 1997 due to the
conversion of the Company from a South Dakota stock cooperative into a
Delaware public corporation in July, 1997. The primary change was the
reclassification of the capital accounts from preferred stock and
cooperative capital credits into common stock. The Conversion did not
change overall total equity. The conversion process is discussed in more
detail above and in Notes 6 and 7 to the Consolidated Financial Statements.
The Company believes that it has adequate internal financial
resources to finance its ongoing day-to-day operating requirements.
Operating cash flow for the nine-month period ended September 30, 1997,
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totaled $844,858, consisting of the Company's net loss of $1,534,911 plus
its noncash depreciation and amortization expenses of $2,379,769. Adjusted
for the one time, nonrecurring reorganization expenses of $585,438
associated with the Conversion and Merger (See Note 5 to the Consolidated
Financial Statements), operating cash flow for the period totaled
$1,430,296, approximately equal to the $1,492,773 in operating cash flow
for the comparative period of 1996 (consisting of the 1996 net loss of
$285,070 plus depreciation and amortization expense of $1,777,843). See
Results of Operations, below, for additional information.
While the Company has adequate financial resources to fund its
day-to-day operations, it must rely on the availability of additional long-
term debt to finance its capital expenditures program. At September 30,
1997, the Company's long-term debt consisted of approximately $26.2 million
under a series of loans from the Rural Telephone Finance Cooperative
("RTFC"), approximately $577,000 owed to various contractors in connection
with the Company's construction projects, and $1 million in long-term
financing associated with the acquisitions of TCIC and Iway (See Note 2 to
the Company's Consolidated Financial Statements). On June 24, 1997, the
Company entered into a long-term loan arrangement with RTFC in the
aggregate amount of $28,421,000. Of this amount, $13,092,089.25 was used to
refinance the then outstanding long-term debt from the Rural Utilities
Service on July 15, 1997. The remaining amounts are allocated to
refinance the $1 million in debt assumed by the Company in the TCIC and
Iway acquisitions and to cover the Company's 1997 capital expenditures
program. Approximately $10.5 million of the Company's $11.1 million of
capital expenditures through September 30, 1997, were financed by the RTFC.
The balance represents amounts owed to contractors for the project. As of
September 30, 1997, the Company's construction projects were on schedule
and within budget. Accordingly, the Company currently believes that the
balance of the RTFC loan facility will be adequate to cover all of its
remaining 1997 capital expenditures. The Company further expects that the
RTFC and other long-term financing sources will continue to be available to
fund future capital expenditures and developments.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
Revenues increased from $5,284,114 during the first nine months
of 1996 to $8,440,667 in the first nine months of 1997, an increase of
$3,156,553, or approximately 60%. Approximately $875,442 of this increase
reflects the impact of rate increases in the Company's telephone operations
put into effect during 1996. The remaining increase reflects additional
revenues from the 19 new cable systems purchased by the Company during
1996, and additional revenues of $1,053,143 and $767,512 from the TCIC and
Iway operations, respectively. Revenues from the Iway operations are
included in Other Revenue in 1997 and account for a majority of the increase
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in Other Revenue during the first nine months of 1997 compared to the same
period in 1996.
Plant Operations expense increased from $1,278,642 during the
first nine months of 1996 to $2,672,679 in the first nine months of 1997,
an increase of $1,394,037, or approximately 109%. Approximately $657,035
and $363,839 of this increase was due to the additional costs and expenses
from the operations of TCIC and Iway, respectively. The remaining increase
is primarily due to increased operating costs associated with the 19
additional cable systems purchased by the Company during 1996.
Depreciation and Amortization expense increased from $1,777,843
in the first nine months of 1996 to $2,379,769 during the first nine months
of 1997, an increase of $601,926 or approximately 34%. Approximately
$168,188 of this increase was due to the amortization of the excess of cost
over net assets acquired in the acquisitions of TCIC and Iway and the
depreciation of assets used in those operations. The balance of this
increase is due primarily to the depreciation of additional assets used to
operate the 19 cable systems acquired in 1996 and assets installed by the
Company during the first nine months of 1997 as part of its network
construction program.
Other costs and expenses, including Customer, General and
Administrative and Other Operating Expenses, increased from $2,259,560
during the first nine months of 1996 to $4,664,599 in the first nine months
of 1997, an increase of $2,405,039 or approximately 106%. Of this increase,
$585,438 is due to the inclusion of one-time, nonrecurring charges
associated with the Conversion and Merger of the Company described above.
These reorganization expenses do not arise from and are not representative
of the Company's ongoing business. See Note 5 to the Company's
Consolidated Financial Statements. Approximately $771,449 and $406,778 of
this increase is due to the additional costs and expenses from the
operations of TCIC and Iway, respectively. The remaining increase is
primarily due to increased employee costs in the Company's telephone and
cable television operations.
Interest Expense increased from $522,971 for the first nine
months of 1996 to $791,920 during the first nine months of 1997, an
increase of $268,949, or approximately 51%. Approximately $65,000 of this
increase was attributable to the long-term debt assumed by the Company in
its acquisitions of TCIC and Iway in December 1996. The balance of this
increase is primarily due to the increase in long-term debt incurred by the
Company to acquire the assets of 19 cable television systems in 1996, to
refinance its RUS loans in July 1997, and to fund its 1996 and 1997 capital
expenditures.
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
Revenues increased from $1,921,548 during the third quarter of
1996 to $2,825,986 in the same period of 1997, an increase of $904,438, or
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approximately 47%. Approximately $181,573 of this increase reflects the
impact of rate increases in the Company's telephone operations put into
effect during 1996. The remaining increase primarily reflects additional
revenues of $422,328 and $292,368 from the TCIC and Iway operations,
respectively. Revenues from the Iway operations are included in Other
Revenue in 1997 and account for a majority of the increase in Other Revenue
during the third quarter of 1997 compared to the same period in 1996.
Plant Operations expense increased from $549,681 during the third
quarter of 1996 to $1,018,806 in 1997, an increase of $469,125, or
approximately 85%. Approximately $237,450 and $140,771 of this increase
was due to the additional costs and expenses from the operations of TCIC
and Iway, respectively. The remaining increase is primarily due to
increased employee costs in the Company's telephone and cable television
operations.
Depreciation and Amortization expense increased from $625,007 in
the third quarter of 1996 to $820,124 in 1997, an increase of $195,117 or
approximately 31%. Approximately $60,360 of this increase was due to the
amortization of the excess of cost over net assets acquired in the
acquisitions of TCIC and Iway and the depreciation of assets used in those
operations. The balance of this increase is due primarily to the
depreciation of additional assets placed in service by the Company during
the first nine months of 1997 as part of its network construction program.
Other costs and expenses, including Customer, General and
Administrative and Other Operating Expenses increased from $880,415 during
the third quarter of 1996 to $1,605,459 in 1997, an increase of $725,044 or
approximately 82%. Of this increase, $90,951 is due to the inclusion of
one-time, nonrecurring charges associated with the Conversion and Merger of
the Company described above. These reorganization expenses do not arise
from and are not representative of the Company's ongoing business. See
Note 5 to the Company's Consolidated Financial Statements. Approximately
$335,668 and $176,536 of this increase is due to the additional costs and
expenses from the operations of TCIC and Iway, respectively. The remaining
increase is primarily due to increased employee costs in the Company's
telephone and cable television operations.
Interest Expense increased from $240,674 for the third quarter of
1996 to $383,231 during 1997, an increase of $142,557, or approximately
59%. Approximately $18,508 of this increase was attributable to the long
term debt assumed by the Company in its acquisitions of TCIC and Iway in
December 1996. The balance of this increase is due to the increase in long
term debt incurred by the Company to refinance its RUS debt and to fund its
1996 and 1997 capital expenditures.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On July 24, 1997, an action captioned as "Complaint/Shareholder
Derivative Action" was filed in the Circuit Court for the County of Clay,
South Dakota, First Judicial Circuit, by Ronald "Skip" Graff, on behalf of
Dakota Cooperative Telecommunications, Inc. (the "Cooperative") the
predecessor entity to the Registrant, Dakota Telecommunications Group, Inc.
(the "Company"), against the Cooperative and Ross Benson, Dale Bye, Edward
Christensen, Jr., Jeff Goeman, James Jibben, Palmer Larson, John Roth, John
Schaefer, Thomas Hertz and Craig Anderson (the "individual defendants").
The Complaint was filed against the individual defendants both individually
and in their capacities as members of the Board of Directors of the
Cooperative. The description of the Complaint included in Item 1 of the
Current Report on Form 8-K filed by the Cooperative and the Company on
August 6, 1997 is here incorporated by reference.
On November 10, 1997, Hon. Arthur L. Rusch, Judge for the Circuit
Court of Clay County, South Dakota entered and filed an order dismissing
the Complaint with prejudice in its entirety for failure to state a claim,
provided, that Mr. Graff was given 10 days to amend his complaint to attempt
to state a cause of action concerning the merger of Dakota
Telecommunications Group, Inc., a South Dakota corporation, with and into
Dakota Telecommunications Group, Inc., a Delaware corporation. Except as
described above, to the best knowledge of the Company, as of the date of
this filing, there are no pending legal proceedings against the Company.
Item 2. CHANGES IN SECURITIES
PREFERRED STOCK PURCHASE RIGHTS
On July 22, 1997, the Board of Directors of the Company declared
a dividend of one Preferred Stock Purchase Right (the "Rights") on each
outstanding share of common stock, no par value (the "Common Stock"), of
the Company to stockholders of record on August 5, 1997. Each Right will
entitle the holder thereof until August 4, 2007 (or, if earlier, until the
redemption of the Rights), to buy one one-hundredth of a share (a "Unit")
of Series A Junior Participating Preferred Stock, no par value (the
"Preferred Stock"), at an exercise price of $100 per Unit, subject to
certain antidilution adjustments. The Rights will be represented by
certificates for Common Stock and will not be exercisable or transferable
apart from the Common Stock until the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated
persons acquired, or obtained the right to acquire, beneficial ownership of
15% or more of the outstanding shares of Common Stock (such person being
referred to as an "Acquiring Person" and the date upon which such person
becomes an Acquiring Person being referred to as the "Stock Acquisition
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<PAGE>
Date"), (ii) 10 business days following the commencement or announcement of
an intention to commence a tender or exchange offer, the consummation of
which would result in beneficial ownership by a person of 15% or more of
the outstanding shares of Common Stock, or (iii) 10 business days after the
Company's Board of Directors determines, pursuant to certain criteria set
forth in the Rights Agreement, that a person beneficially owning 10% or
more of the outstanding shares of Common Stock is an "Adverse Person" (the
earlier of such dates being called the "Distribution Date"). Separate
certificates representing the Rights will be mailed to record holders of
Common Stock as of the Distribution Date. The Rights will first become
exercisable on the Distribution Date, unless earlier redeemed, and could
then begin trading separately from the Common Stock. Until a right is
exercised, the holder thereof, as such, will have no rights as a
stockholder of the Company with respect to the shares for which the right
is exercisable, including the right to vote or to receive dividends. The
description and terms of the Rights are set forth in a Rights Agreement
(the "Rights Agreement") between the Company and Norwest Bank Minnesota,
N.A., as Rights Agent (the "Rights Agent").
Each share of Preferred Stock purchasable upon exercise of the
Rights will have a minimum preferential quarterly dividend rate of $10 per
share but will be entitled to an aggregate dividend of 100 times the
dividend declared on the shares of Common Stock. In the event of
liquidation, the holders of Preferred Stock will receive a minimum
preferred liquidation payment of $100 per share but will be entitled to
receive an aggregate liquidation payment equal to 100 times the payment
made per share of Common Stock. Each share of Preferred Stock will have
100 votes, voting together with the Common Stock. In the event of any
merger, consolidation or other transaction in which shares of Common Stock
are exchanged, each share of Preferred Stock will be entitled to receive
100 times the amount received per share of Common Stock. The rights of the
holders of Preferred Stock as to dividends, liquidation and voting, and in
the event of mergers and consolidations, are protected by customary
antidilution provisions. Because of the nature of the Preferred Stock's
dividend, liquidation and voting rights, the value of the interest in a
share of Preferred Stock purchasable upon the exercise of each Right should
approximate the value of one share of Common Stock.
In the event that, any time following the Stock Acquisition Date,
the Company were acquired in a merger or other business combination
transaction or in the event 50% or more of its assets or earning power is
sold, proper provision will be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock
of the acquiring company which at the time of such transaction would have a
market value of two times the exercise price of the Right. Alternatively,
in the event that, any time following the Distribution Date, the Company
were the surviving corporation in a merger with an Acquiring Person and its
Common Stock was not changed or exchanged, or an Acquiring Person were to
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engage in certain specified self-dealing transactions with the Company, or
an Acquiring Person becomes the beneficial owner of more than 15% of the
then outstanding shares of Common Stock, or a person had been or was
designated as an Adverse Person by the Company's Board of Directors in
accordance with the criteria set forth in the Rights Agreement, proper
provision shall be made so that each holder of a Right, other than the
Acquiring Person, Adverse Person and certain related parties (whose Rights
will thereafter be void), will thereafter have the right to receive upon
exercise of a Right that number of shares of Common Stock having a market
value of two times the exercise price of such Right.
The Rights are redeemable, in whole but not in part, at a price
of $.01 per Right at any time prior to the designation of a person as an
Adverse Person under the Rights Plan or the fifteenth day after the Stock
Acquisition Date. Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and
thereafter, the only right of holders of the Rights will be to receive the
redemption price. The Rights will expire on August 4, 2007 (unless earlier
redeemed).
The purchase price payable, and the number of one one-hundredths
of a share of Preferred Stock or other securities or property issuable,
upon exercise of the Rights is subject to adjustment from time to time to
prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock,
(ii) as a result of the grant to holders of the Preferred Stock of certain
rights or warrants to subscribe for Preferred Stock or convertible
securities at less than the current market price of the Preferred Stock, or
(iii) upon the distribution to holders of the Preferred Stock of evidences
of indebtedness or assets (excluding regular periodic cash dividends) or of
subscription rights or warrants (other than those referred to above). With
certain exceptions, no adjustment in the purchase price will be required
until cumulative adjustments require an adjustment of at least 1% in such
purchase price.
Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Company prior to the Distribution
Date. After the Distribution Date, the provisions of the Rights Agreement
may be amended by the Board in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of Rights, or to
shorten or lengthen any time period under the Rights Agreement, so long as
no amendment to adjust the time period governing redemption shall be made
at a time when the Rights are not redeemable.
As of August 5, 1997, there were 985,216 shares of Common Stock
outstanding. One Right was distributed to stockholders of the Company for
each share of Common Stock owned of record by them on August 5, 1997. As
long as the Rights are attached to the Common Stock, the Company will issue
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one Right with each new share of Common Stock issued so that all such
shares will have Rights attached. The Company's Board of Directors has
reserved for issuance upon exercise of the Rights 15,000 shares of
Preferred Stock.
The Rights have certain antitakeover effects. The Rights will
cause substantial dilution to a person or group that attempts to acquire
the Company on terms not approved by the Company's Board of Directors,
except pursuant to an offer conditioned on the Rights being redeemed. The
Rights should not interfere with any merger or other business combination
approved by the Board of Directors prior to the fifteenth day after the
Stock Acquisition Date since the Rights may be redeemed by the Company at
$.01 per Right prior to such time.
The Rights Agreement, dated as of July 22, 1997, between the
Company and Norwest Bank Minnesota, N.A., as Rights Agent, specifying the
terms of the Rights (which includes as Exhibit A the form of Rights
Certificate and as Exhibit B the Summary of Rights to Purchase Preferred
Stock) is attached as Exhibit 4.3 to this Form 10-QSB and is here
incorporated by reference. The foregoing description of the Rights is
qualified by reference to such Exhibit 4.3.
THE CONVERSION AND MERGER
In addition, as described in the Introduction to Part I of this
Form 10-QSB and more fully in the Registration Statement, the Conversion and
Merger were completed during the quarter covered by this report. The
descriptions of the Conversion and Merger under the headings "The Conversion"
and "The Merger" in the Registration Statement are here incorporated by
reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 21, 1997, a special meeting of the members of the
Cooperative was held to vote on the adoption of amendments to its articles
of incorporation to effect a conversion of the Cooperative into a South
Dakota business corporation. A complete description of the special meeting
is set forth in Item 1 of the current report on Form 8-K dated July 22,
1997, and filed by the Company on August 6, 1997, and such description is
here incorporated by reference. At the special meeting 2,744 members voted
in favor of the amendment, 290 members voted against the amendment and 66
members abstained from voting. There were no broker non-votes. As a
result of the vote conducted at this special meeting, the Cooperative was
converted into a South Dakota business corporation (the "South Dakota
Corporation").
Immediately following the special meeting of members of the
Cooperative, a special meeting of the stockholders of the South Dakota
Corporation was convened on July 21, 1997, and subsequently adjourned and
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completed on July 25, 1997, to vote on a reincorporation merger to merge
the South Dakota Corporation into a Delaware company formed to permit the
South Dakota Corporation to change its state of incorporation from South
Dakota to Delaware. A complete description of the special meeting is set
forth in Item 1 of the current report on Form 8-K dated July 22, 1997, and
filed by the Company on August 6, 1997, and such description is here
incorporated by reference. At the special meeting, 655,135 votes were cast
in favor of the merger, 38,941 votes were cast against the merger and 8,614
votes were abstained. There were no broker non-votes. As a result of the
vote conducted at this special meeting, the South Dakota Corporation was
merged into the Company effective on July 25, 1997, and the Company is the
sole surviving entity.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
EXHIBIT
NUMBER DOCUMENT
3.1 Certificate of Incorporation of Dakota Telecommunications
Group, Inc., a Delaware corporation. Filed as Exhibit 3.1
to the Company's Form 10-QSB for the period ended June 30,
1997.
3.2 Bylaws of Dakota Telecommunications Group, Inc., a Delaware
corporation. Filed as Appendix F to the Prospectus and
Ballot/Proxy Statement filed as part of the Form S-4
Registration Statement that became effective on June 13,
1997 (the "Registration Statement").
4.1 Certificate of Incorporation of Dakota Cooperative
Telecommunications Group, Inc., a Delaware corporation.
Filed as Exhibit 3.1 to the Company's Form 10-QSB for the
period ended June 30, 1997.
4.2 Bylaws of Dakota Telecommunications Group, Inc., a Delaware
corporation. Filed as Appendix F to the Prospectus and
Ballot/Proxy Statement filed as part of the Registration
Statement.
4.3 Rights Agreement, dated as of July 22, 1997, between the
Company, and Norwest Bank Minnesota, N.A., which includes
the form of Rights Certificate as Exhibit A and the Summary
of Rights to Purchase Preferred Stock as Exhibit B.
4.4 Standstill Agreement dated November 27, 1996, among Dakota
Cooperative Telecommunications, Inc., and the Selling
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Shareholders of TCIC Communications, Inc. Filed as Exhibit
4.7 to the Registration Statement.
4.5 Standstill Agreement dated November 27, 1996, among Dakota
Cooperative Telecommunications, Inc. and the Selling
Shareholders of I-Way Partners, Inc. Filed as Exhibit 4.8
to the Registration Statement.
4.6 Dakota Telecom, Inc. Loan Agreement with Rural Telephone
Finance Cooperative dated January 29, 1996. Filed as
Exhibit 4.34 to the Registration Statement.
4.7 Dakota Cooperative Telecommunications, Inc. and Dakota
Telecom, Inc. Loan Agreement with Rural Telephone Finance
Cooperative dated June 24, 1997. Filed as Exhibit 4.31 to
the Company's Form 10-QSB for the period ended June 30,
1997.
4.8 Dakota Cooperative Telecommunications, Inc. and Dakota
Telecom, Inc. Mortgage and Security Agreement with Rural
Telephone Finance Cooperative dated June 24, 1997. Filed as
Exhibit 4.32 to the Company's Form 10-QSB for the period
ended June 30, 1997.
4.9 Dakota Cooperative Telecommunications, Inc. and Dakota
Telecom, Inc. Pledge and Security Agreement with Rural
Telephone Finance Cooperative dated June 24, 1997. Filed as
Exhibit 4.33 to the Company's Form 10-QSB for the period
ended June 30, 1997.
4.10 The Company has several classes of long-term debt
instruments outstanding in addition to those described in
Exhibits 4.6 through 4.9. The amount of these classes of
debt outstanding on September 30, 1997, does not exceed 10
percent of the Company's total consolidated assets. The
Company agrees to furnish copies of any agreement defining
the rights of holders of any such long-term indebtedness to
the Securities and Exchange Commission upon request.
10.1 Dakota Telecommunications Group, Inc. 1997 Stock Incentive Plan.
Filed as Appendix J to the Registration Statement.
10.2 Dakota Telecommunications Group, Inc. Employee Stock Ownership
Plan, effective July 22, 1997.
27 Financial Data Schedule.
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(b) REPORTS ON FORM 8-K. The following current report on Form
8-K was filed during quarter:
<TABLE>
<CAPTION>
DATE OF EVENT ITEMS FINANCIAL
REPORTED REPORTED STATEMENTS FILED
------------- -------- ----------------
<S> <C> <C> <C>
July 22, 1997 1 and 7 Not Applicable
</TABLE>
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DAKOTA TELECOMMUNICATIONS
GROUP, INC.
Date: November 14, 1997 By /S/THOMAS W. HERTZ
Thomas W. Hertz
President and Chief Executive
Officer
Date: November 14, 1997 By /S/CRAIG A. ANDERSON
Craig A. Anderson
Executive Vice President -
Marketing and Chief Financial Officer
(Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
3.1 Certificate of Incorporation of Dakota Telecommunications
Group, Inc., a Delaware corporation. Filed as Exhibit 3.1
to the Company's Form 10-QSB for the period ended June 30,
1997.
3.2 Bylaws of Dakota Telecommunications Group, Inc., a Delaware
corporation. Filed as Appendix F to the Prospectus and
Ballot/Proxy Statement filed as part of the Form S-4
Registration Statement that became effective on June 13,
1997 (the "Registration Statement").
4.1 Certificate of Incorporation of Dakota Cooperative
Telecommunications Group, Inc., a Delaware corporation.
Filed as Exhibit 3.1 to the Company's Form 10-QSB for the
period ended June 30, 1997.
4.2 Bylaws of Dakota Telecommunications Group, Inc., a Delaware
corporation. Filed as Appendix F to the Prospectus and
Ballot/Proxy Statement filed as part of the Registration
Statement.
4.3 Rights Agreement, dated as of July 22, 1997, between the
Company, and Norwest Bank Minnesota, N.A., which includes
the form of Rights Certificate as Exhibit A and the Summary
of Rights to Purchase Preferred Stock as Exhibit B.
4.4 Standstill Agreement dated November 27, 1996, among Dakota
Cooperative Telecommunications, Inc., and the Selling
Shareholders of TCIC Communications, Inc. Filed as Exhibit
4.7 to the Registration Statement.
4.5 Standstill Agreement dated November 27, 1996, among Dakota
Cooperative Telecommunications, Inc. and the Selling
Shareholders of I-Way Partners, Inc. Filed as Exhibit 4.8
to the Registration Statement.
4.6 Dakota Telecom, Inc. Loan Agreement with Rural Telephone
Finance Cooperative dated January 29, 1996. Filed as
Exhibit 4.34 to the Registration Statement.
<PAGE>
4.7 Dakota Cooperative Telecommunications, Inc. and Dakota
Telecom, Inc. Loan Agreement with Rural Telephone Finance
Cooperative dated June 24, 1997. Filed as Exhibit 4.31 to
the Company's Form 10-QSB for the period ended June 30,
1997.
4.8 Dakota Cooperative Telecommunications, Inc. and Dakota
Telecom, Inc. Mortgage and Security Agreement with Rural
Telephone Finance Cooperative dated June 24, 1997. Filed as
Exhibit 4.32 to the Company's Form 10-QSB for the period
ended June 30, 1997.
4.9 Dakota Cooperative Telecommunications, Inc. and Dakota
Telecom, Inc. Pledge and Security Agreement with Rural
Telephone Finance Cooperative dated June 24, 1997. Filed as
Exhibit 4.33 to the Company's Form 10-QSB for the period
ended June 30, 1997.
4.10 The Company has several classes of long-term debt
instruments outstanding in addition to those described in
Exhibits 4.6 through 4.9. The amount of these classes of
debt outstanding on September 30, 1997, does not exceed 10
percent of the Company's total consolidated assets. The
Company agrees to furnish copies of any agreement defining
the rights of holders of any such long-term indebtedness to
the Securities and Exchange Commission upon request.
10.1 Dakota Telecommunications Group, Inc. 1997 Stock Incentive
Plan. Filed as Appendix J to the Registration Statement.
10.2 Dakota Telecommunications Group, Inc. Employee Stock
Ownership Plan, effective July 22, 1997.
27 Financial Data Schedule.
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<PAGE>
EXHIBIT 4.3
===========================================================================
DAKOTA TELECOMMUNICATIONS GROUP, INC.
AND
NORWEST BANK MINNESOTA, N.A.
Rights Agent
__________________
RIGHTS AGREEMENT
July 22, 1997
===========================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . .1
Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . .4
Section 3. Issue of Rights Certificates. . . . . . . . . . . . . . . . .4
Section 4. Form of Rights Certificates . . . . . . . . . . . . . . . . .6
Section 5. Countersignature and Registration . . . . . . . . . . . . . .8
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates . . . . . . . . . . . . . . . . . . . . .8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 8. Cancellation and Destruction of Rights Certificates . . . . 12
Section 9. Reservation and Availability of Capital Stock . . . . . . . 12
Section 10. Preferred Stock Record Date . . . . . . . . . . . . . . . . 14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights . . . . . . . . . . . . . . . . . . . . 14
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power. . . . . . . . . . . . . . . . . . . . . . 27
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . 30
Section 15. Rights of Action. . . . . . . . . . . . . . . . . . . . . . 32
Section 16. Agreement of Rights Holders . . . . . . . . . . . . . . . . 32
Section 17. Rights Certificate Holder Not Deemed a Stockholder. . . . . 33
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . 33
Section 19. Merger or Consolidation or Change of Name of Rights
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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PAGE
Section 20. Duties of Rights Agent. . . . . . . . . . . . . . . . . . . 35
Section 21. Change of Rights Agent. . . . . . . . . . . . . . . . . . . 37
Section 22. Issuance of New Rights Certificates . . . . . . . . . . . . 38
Section 23. Redemption and Termination. . . . . . . . . . . . . . . . . 38
Section 24. Notice of Certain Events. . . . . . . . . . . . . . . . . . 39
Section 25. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 26. Supplements and Amendments. . . . . . . . . . . . . . . . . 41
Section 27. Successors. . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 28. Determinations and Actions by the Board of Directors,
etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 29. Benefits of this Agreement. . . . . . . . . . . . . . . . . 42
Section 30. Severability. . . . . . . . . . . . . . . . . . . . . . . . 42
Section 31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 42
Section 32. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 43
Section 33. Descriptive Headings. . . . . . . . . . . . . . . . . . . . 43
Exhibit A Form of Rights Certificate
Exhibit B Summary of Rights to Purchase Preferred Stock
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<PAGE>
RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT (the "Agreement") is made as of July 22,
1997, between DAKOTA TELECOMMUNICATIONS GROUP, INC., a Delaware corporation
(the "Company") and NORWEST BANK MINNESOTA, N.A. a national banking
association doing business under the laws of the United States (the "Rights
Agent").
W I T N E S S E T H :
On July 22, 1997 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, no par value per
share, of the Company (the "Common Stock") outstanding at the close of
business on August 5, 1997 (the "Record Date"), and has authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant
to the provisions of Section 11(p) hereof) for each share of Common Stock
of the Company that shall become outstanding between the Record Date
(whether originally issued or delivered from the Company's treasury) and
the Distribution Date and, in certain circumstances provided in Section 22
hereof, after the Distribution Date, each Right initially representing the
right to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock of the Company having the rights, powers and
preferences set forth in the Company's Certificate of Incorporation, upon
the terms and subject to the conditions hereinafter set forth (the
"Rights").
ACCORDINGLY, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such person, shall
be the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding, but shall not include the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan.
(b) "Adverse Person" shall mean any Person declared to be
an Adverse Person by the Board of Directors upon a determination
that the criteria set forth in Section 11(a)(ii)(D) apply to such
person.
<PAGE>
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule l2b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended and in effect on the date of this Agreement (the
"Exchange Act").
(d) A person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights,
exchange rights, other rights, warrants or options, or
otherwise; PROVIDED, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange
offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted
for purchase or exchange, or (B) securities issuable upon
exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering
Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22
hereof (the "Original Rights") or pursuant to Section 11(i)
hereof in connection with an adjustment made with respect to
any Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of or has "beneficial ownership" of
(as determined pursuant to Rule l3d-3 of the General Rules
and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or
not in writing; PROVIDED, however, that a Person shall not
be deemed the "Beneficial Owner" of, or to "beneficially
own," any security under this subparagraph (ii) as a result
of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding:
(A) arises solely from a revocable proxy given in response
to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule
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<PAGE>
13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (c)) or disposing of any
voting securities of the Company;
PROVIDED, HOWEVER, that nothing in this paragraph (d) shall cause
a person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through such person's participation in good
faith in a firm commitment underwriting until the expiration of
forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the
state of the principal place of business of the Rights Agent are
authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean
5:00 p.m. local time in the city of the principal office of the
Rights Agent, on such date; PROVIDED, however, that if such date
is not a Business Day it shall mean 5:00 p.m. on the next
succeeding Business Day.
(g) "Common Stock" shall mean the common stock, no par
value per share, of the Company, except that "Common Stock" when
used with reference to any Person other than the Company shall
mean the capital stock of such Person with the greatest voting
power, or the equity securities or other equity interest having
power to control or direct the management, of such Person.
(h) "Current Market Price" shall have the meaning ascribed
to such term in Section 11(d) hereof.
(i) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(j) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, no par value per share, of the
Company, and, to the extent that there are not sufficient shares
of Series A Junior Participating Preferred Stock authorized to
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<PAGE>
permit full exercise of the Rights, any other series of Preferred
Stock, no par value per share, of the Company designated for such
purpose containing terms substantially similar to the terms of
the Series A Junior Participating Preferred Stock.
(k) "Section 11 Event" shall mean any event described in
Section 11(a)(ii)(A), (B), (C) or (D) hereof.
(l) "Section 13 Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a) hereof.
(m) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to
Section 13(d) under the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such.
(n) "Subsidiary" shall mean, with reference to any Person,
any corporation of which an amount of voting securities
sufficient to elect at least a majority of the directors of such
corporation is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.
(o) "Triggering Event" shall mean any Section 11 Event or
any Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts
such appointment. The Company may from time to time appoint such Co-Rights
Agents as it may deem necessary or desirable.
Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the close of business on the
tenth day after the Stock Acquisition Date (or, if the tenth day
after the Stock Acquisition Date occurs before the Record Date,
the close of business on the Record Date), (ii) the close of
business on the tenth Business Day (or such later date as the
Board of Directors shall determine) after the date that a tender
or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General
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<PAGE>
Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding or
(iii) the close of business on the tenth Business Day after the
Board of Directors determines, pursuant to the criteria set forth
in Section 11(a)(ii)(D) hereof, that a Person is an Adverse
Person (the earliest of (i), (ii) and (iii) being herein referred
to as the "Distribution Date") (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by
the certificates for the Common Stock registered in the names of
the holders of the Common Stock (which certificates for Common
Stock shall be deemed also to be certificates for Rights) and not
by separate certificates, and (y) the Rights will be transferable
only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will
send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the close of business on
the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in
substantially the form of Exhibit A hereto (the "Rights
Certificates"), evidencing one Right for each share of Common
Stock so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at
the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates
representing only whole numbers of Rights are distributed and
cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates.
(b) As promptly as practicable following the Record Date,
the Company will send a copy of a Summary of Rights which may,
but need not be, in substantially the form attached hereto as
Exhibit B (the "Summary of Rights"), by first-class, postage
prepaid mail, to each record holder of the Common Stock as of the
close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to
certificates for the Common Stock outstanding as of the Record
Date, until the Distribution Date, the Rights will be evidenced
by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders
of the associated Rights. Until the earlier of the Distribution
Date or the Expiration Date (as such term is defined in Section 7
hereof), the transfer of any certificates representing shares of
Common Stock in respect of which Rights have been issued shall
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<PAGE>
also constitute the transfer of the Rights associated with such
shares of Common Stock.
(c) Rights shall be issued in respect of all shares of
Common Stock which are issued (whether originally issued or
delivered from the Company's treasury) after the Record Date but
prior to the earlier of the Distribution Date or the Expiration
Date, or, in certain circumstances provided in Section 22 hereof,
after the Distribution Date. Certificates representing such
shares of Common Stock shall also be deemed to be certificates
for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights
Agreement between Dakota Telecommunications Group, Inc. (the
"Company") and Norwest Bank Minnesota, N.A. (the "Rights
Agent"), dated as of July 22, 1997, as from time to time
amended (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which
is on file at the principal offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy
of the Rights Agreement, as in effect on the date of
mailing, without charge promptly after receipt of a written
request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any
Person who is, was or becomes an Acquiring Person or an
Adverse Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the
foregoing legend, until the earlier of (i) the Distribution Date
or (ii) the Expiration Date, the Rights associated with the
Common Stock represented by such certificates shall be evidenced
by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights,
and the transfer of any of such certificates shall also
constitute the transfer of the Rights associated with the Common
Stock represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof)
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<PAGE>
shall each be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation
and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply
with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or
to conform to usage. Subject to the provisions of Section 11 and
Section 22 hereof, the Rights Certificates, whenever distributed,
shall be dated as of the Record Date and on their face shall
entitle the holders thereof to purchase such number of one one-
hundredths of a share of Preferred Stock as shall be set forth
therein at the price set forth therein (such exercise price per
one one-hundredth of a share, the "Purchase Price"), but the
amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a)
or Section 22 hereof that represents Rights beneficially owned
by: (i) an Acquiring Person, an Adverse Person or any Associate
or Affiliate of an Acquiring Person or Adverse Person, (ii) a
transferee of an Acquiring person or Adverse Person (or of any
such Associate or Affiliate) who becomes a transferee after the
Acquiring Person or Adverse Person becomes such, or (iii) a
transferee of an Acquiring Person or Adverse Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person or Adverse Person becoming
such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person or
Adverse Person to holders of equity interests in such Acquiring
Person or Adverse Person or to any Person with whom such
Acquiring Person or Adverse Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or
(B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect avoidance of Section 7(e)
hereof, and any Rights Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following
legend:
The Rights represented by this Rights Certificate are
or were beneficially owned by a Person who was or became an
Acquiring Person, Adverse Person or an Affiliate or
Associate of an Acquiring Person or Adverse Person (as such
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<PAGE>
terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby
may become null and void in the circumstances specified in
Section 7(e) of such Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of
the Company by its Chairman of the Board, its President or any
Vice President, either manually or by facsimile signature, and
shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the
Company with the same force and effect as though the person who
signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of
the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although
at the date of the execution of this Rights Agreement any such
person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices
designated as the appropriate place for surrender of Rights
Certificates upon exercise or transfer, books for registration
and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the
date of each of the Rights Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e)
and Section 14 hereof, at any time after the close of business on
the Distribution Date, and at or prior to the close of business
on the Expiration Date, any Rights Certificate or Certificates
may be transferred, split up, combined or exchanged for another
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<PAGE>
Rights Certificate or Certificates, entitling the registered
holder to purchase a like number of one one-hundredths of a share
of Preferred Stock (or, following a Triggering Event, Common
Stock, other securities, cash or other assets, as the case may
be) as the Rights Certificate or Certificates surrendered then
entitled such holder (or former holder in the case of a transfer)
to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Rights Certificate or Certificates
shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal
office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the
registered holder shall have completed and signed the certificate
contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request. Thereupon the Rights Agent
shall, subject to Section 4(b), Section 7(e) and Section 14
hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as
so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate, and, in case
of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation
of the Rights Certificate if mutilated, the Company will execute
and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner
in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder
of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein including, without
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<PAGE>
limitation, the restrictions on exercisability set forth in
Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in
whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the principal office or offices
of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total
number of one one-hundredths of a share of Preferred Stock (or
other securities, cash or other assets, as the case may be) as to
which such surrendered Rights are then exercisable, at or prior
to the earlier of (i) the close of business on August 4, 2007
(the "Final Expiration Date"), or (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the earlier
of (i) and (ii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-hundredth of a
share of Preferred Stock pursuant to the exercise of a Right
shall initially be $100, and shall be subject to adjustment from
time to time as provided in Sections 11 and 13(a) hereof and
shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the
certificate duly executed, accompanied by payment, with respect
to each Right so exercised, of the Purchase Price per one one-
hundredth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any
applicable transfer tax, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from
any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of one one-hundredths
of a share of Preferred Stock to be purchased, and the Company
hereby irrevocably authorizes its transfer agent to comply with
all such requests, or (B) if the Company shall have elected to
deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a share of
Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by
such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary
agent to comply with such request, (ii) requisition from the
Company the amount of cash, if any, to be paid in lieu of
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fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified bank
check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue other securities
(including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the
Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate. The
Company reserves the right to require prior to the occurrence of
a Triggering Event that, upon any exercise of Rights, a number of
Rights be exercised so that only whole shares of Preferred Stock
would be issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11
Event, any Rights beneficially owned by (i) an Acquiring Person,
an Adverse Person or an Associate or Affiliate of an Acquiring
Person or Adverse Person, (ii) a transferee of an Acquiring
Person or Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person or Adverse
Person becomes such, or (iii) a transferee of an Acquiring Person
or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring
Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to
holders of equity interests in such Acquiring Person or Adverse
Person or to any Person with whom the Acquiring Person or Adverse
Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the
Board of Directors of the Company has determined is part of a
plan, arrangement or understanding which has as a primary purpose
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or effect the avoidance of this section 7(e), shall become null
and void without any further action and no holder of such Rights
shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of
Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or
Adverse Person or any of their respective Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth
in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as
the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or
any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any other Rights
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all canceled Rights
Certificates to the Company, or shall, at the written request of the
Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to
be reserved and kept available out of its authorized and unissued
shares of Preferred Stock (and, following the occurrence of a
Triggering Event, out of its authorized and unissued shares of
Common Stock and/or other securities) or out of its authorized
and issued shares of Preferred Stock (and, following the
occurrence of a Triggering Event, out of its authorized and
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issued shares of Common Stock and/or other securities) held in
its treasury, the number of shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock
and/or other securities) that, as provided in this Agreement
(including Section 11(a)(iii) hereof), will be sufficient to
permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock
and/or other securities) issuable and deliverable upon the
exercise of the Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause, from
and after such time as the Rights become exercisable (but only to
the extent that it is reasonably likely that the Rights will be
exercised), all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such
exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first
occurrence of a Section 11 Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been
determined pursuant to this Agreement (including in accordance
with Section 11(a)(iii) hereof), a registration statement under
the Securities Act of 1933 (the "Act"), with respect to the
securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with
a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities, and (B) the Expiration
Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities
or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety (90) days
after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to
prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall
issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution
Date, the Company may temporarily suspend the exercisability of
the Rights until such time as a registration statement has been
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declared effective. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in
any jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained or the exercise thereof
shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one one-
hundredths of a share of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized
and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer
taxes and charges which may be payable in respect of the issuance
or delivery of the Rights Certificates and of any certificates
for a number of one one-hundredths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect
of any transfer or delivery of Rights Certificates to a Person
other than, or the issuance or delivery of a number of one one-
hundredths of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) in respect of a name other
than that of the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities, as the
case may be) in a name other than that of the registered holder
upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is
due.
Section 10. PREFERRED STOCK RECORD DATE. Each person in whose name
any certificate for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such fractional shares of Preferred Stock
(or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the
Rights Certificate evidencing such Rights was duly surrendered and payment
of the Purchase Price (and all applicable transfer taxes) was made;
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PROVIDED, however, that if the date of such surrender and payment is a date
upon which the Preferred stock (or Common Stock and/or other securities, as
the case may be) transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares (fractional
or otherwise) on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of
the Company with respect to shares for which the rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B)
subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of shares,
or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section
11(a) and Section 7(e) hereof, the Purchase Price in effect
at the time of the record date for such dividend or of the
effective date of such subdivision, combination or
reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so
that the holder or any Right exercised after such time shall
be entitled to receive, upon payment of the Purchase Price
then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books
of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If
an event occurs which would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in
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addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after
the date of this Agreement, directly or indirectly,
(1) shall merge into the Company or otherwise combine
with the Company or any Subsidiary of the Company and
the Company or such Subsidiary shall be the continuing
or surviving corporation of such merger or combination
and the Common Stock of the Company shall remain
outstanding and unchanged, (2) shall, in one
transaction or a series of transactions, transfer any
assets to the Company or to any of its Subsidiaries in
exchange (in whole or in part) for shares of Common
Stock, for shares of other equity securities of the
Company, or for securities exercisable for or
convertible into shares of equity securities of the
Company (Common Stock or otherwise) or otherwise obtain
from the Company, with or without consideration, any
additional shares of such equity securities or
securities exercisable for or convertible into shares
of such equity securities (other than pursuant to a pro
rata distribution to all holders of Common Stock),
(3) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise acquire or dispose of, in
one transaction or a series of transactions, to, from
or with (as the case may be) the Company or any of its
Subsidiaries, assets on terms and conditions less
favorable to the Company than the Company would be able
to obtain in arm's-length negotiation with an
unaffiliated third party, other than pursuant to a
transaction set forth in Section 13(a) hereof,
(4) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise acquire or dispose of in
one transaction or a series of transactions, to, from
or with (as the case may be) the Company or any of the
Company's Subsidiaries (other than incidental to the
lines of business, if any, engaged in as of the date
hereof between the Company and such Acquiring Person or
Associate or Affiliate) assets having an aggregate fair
market value of more than $5,000,000, other than
pursuant to a transaction set forth in Section 13(a)
hereof, (5) shall receive any compensation from the
Company or any of the Company's Subsidiaries other than
compensation for full-time employment as a regular
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employee at rates in accordance with the Company's (or
its Subsidiaries') past Practices, or (6) shall receive
the benefit, directly or indirectly (except
proportionately as a stockholder and except if
resulting from a requirement of law or governmental
regulation), of any loans, advances, guarantees,
pledges or other financial assistance or any tax
credits or other tax advantage provided by the Company
or any of its Subsidiaries, or
(B) any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such
plan), alone or together with its Affiliates and
Associates, shall, at any time after the Rights
Dividend Declaration Date, become the Beneficial Owner
of 15% or more of the shares of Common Stock then
outstanding, unless the event causing the 15% threshold
to be crossed is a transaction set forth in
Section 13(a) hereof, or is an acquisition of shares of
Common Stock pursuant to a tender offer or exchange
offer for all outstanding shares of Common Stock at a
price and on terms determined by at least a majority of
the members of the Board of Directors who are not
officers of the Company and who are not
representatives, nominees, Affiliates or Associates of
an Acquiring Person, after receiving advice from one or
more investment banking firms, to be (a) at a price
which is fair to stockholders (taking into account all
factors which such members of the Board deem relevant
including, without limitation, prices which could
reasonably be achieved if the Company or its assets
were sold on an orderly basis designed to realize
maximum value) and (b) otherwise in the best interests
of the Company and its stockholders, or
(C) during such time as there is an Acquiring
Person, there shall be any reclassification of
securities (including any reverse stock split), or
recapitalization of the Company, or any merger or
consolidation of the Company with any of its
Subsidiaries or any other transaction or series of
transactions involving the Company or any of its
Subsidiaries (whether or not with or into or otherwise
involving an Acquiring Person), other than a
transaction or transactions to which the provisions of
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Section 13(a) apply, which has the effect, directly or
indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any
class of equity securities of the Company or any of its
Subsidiaries which is directly or indirectly
beneficially owned by any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, or
(D) the Board of Directors of the Company shall
declare any Person to be an Adverse Person, upon a
determination that such Person, alone or together with
its Affiliates and Associates, has, at any time after
this Agreement has been filed with the Securities and
Exchange Commission as an exhibit to a filing under the
Exchange Act, become the Beneficial Owner of a number
of shares of Common Stock which the Board of Directors
of the Company determines to be substantial (which
number of shares shall in no event represent less than
10% of the outstanding shares of Common Stock) and a
determination by the Board of Directors of the Company,
after reasonable inquiry and investigation, including
consultation with such persons as such directors shall
deem appropriate and consideration of such factors as
are permitted by applicable law, that (a) such
Beneficial Ownership by such Person is intended to
cause the Company to repurchase the shares of Common
Stock beneficially owned by such Person or to cause
pressure on the Company to take action or enter into a
transaction or series of transactions intended to
provide such Person with short-term financial gain
under circumstances where the Board of Directors
determines that the best long-term interests of the
Company would not be served by taking such action or
entering into such transaction or series of
transactions at that time or (b) such Beneficial
Ownership is causing or reasonably likely to cause
a material adverse impact (including, but not limited
to, impairment of relationships with customers or
impairment of the Company's ability to maintain its
competitive position) on the business or prospects of
the Company,
then, promptly following the occurrence of any event
described in Section 11(a)(ii)(A), (B), (C) or (D) hereof,
proper provision shall be made so that each holder of a
Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise
thereof at the then-current Purchase Price in accordance
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with the terms of this Agreement, in lieu of a number of one
one-hundredths of a share of Preferred Stock, such number of
shares of Common Stock of the Company as shall equal the
result obtained by (x) multiplying the then-current Purchase
Price by the then number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11
Event, and (y) dividing that product (which product,
following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for
all purposes of this Agreement) by 50% of the Current Market
Price per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares");
PROVIDED that the Purchase Price and the number of
Adjustment Shares shall be further adjusted as provided in
this Agreement to reflect any events occurring after the
date of such first occurrence.
(iii) In the event that the number of shares of Common
Stock which is authorized by the Company's certificate of
incorporation but not outstanding or reserved for issuance
for purposes other than upon exercise of the Rights is not
sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this
Section 11(a), the Company shall: (A) determine the excess
of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess, the "Spread"), and (B) with
respect to each Right, make adequate provision to substitute
for the Adjustment Shares, upon the exercise of such Rights,
(1) cash, (2) a reduction in the Purchase Price, (3) Common
Stock or other equity securities of the Company (including,
without limitation, shares or units of shares of preferred
stock which the Board of Directors of the Company has deemed
to have the same value as shares of Common Stock (such
shares or units of shares of Preferred Stock are herein
called "common stock equivalents")), (4) debt securities of
the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the
Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by
the Board of Directors of the Company; PROVIDED, however, if
the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within
thirty (30) days following the later of (x) the first
occurrence of a Section 11 Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a)
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expires (the later of (x) and (y) being referred to herein
as the "Section 11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the
Board of Directors of the Company shall determine in good
faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise
in full of the Rights, the thirty (30) day period set forth
above may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger
Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that
some action need be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company
(x) shall provide, subject to Section 7(e) hereof, that such
action shall apply uniformly to all outstanding Rights, and
(y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii) the value
of the Common Stock shall be the Current Market Price per
share of the Common Stock on the Section 11(a)(ii) Trigger
Date and the value of any "common stock equivalent" shall be
deemed to have the same value as the Common Stock on such
date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of
Preferred Stock entitling them to subscribe for or purchase (for
a period expiring within forty-five (45) calendar days after such
record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock
("equivalent preferred stock")) or securities convertible into
Preferred Stock or equivalent preferred stock at a price per
share of Preferred Stock or per share of equivalent preferred
stock (or having a conversion price per share, if a security
convertible into Preferred Stock or equivalent preferred stock)
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less than the Current Market Price per share of Preferred Stock
on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number
of shares of Preferred Stock which the aggregate offering price
of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the
denominator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred
stock to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid by
delivery of consideration part or all of which may be in a form
other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred Stock
owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date
is fixed, and in the event that such rights or warrants are not
so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date
had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any
such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of
evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred
Stock, but including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price to
be in effect after such record date shall be determined by
multiplying the Purchase price in effect immediately prior to
such record date by a fraction, the numerator of which shall be
the Current Market Price per share of Preferred Stock on such
record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the
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Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such
Current Market Price per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record
date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase
Price which would have been in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder,
other than computations made pursuant to Section 11(a)(iii)
hereof, the "Current Market Price" per share of Common Stock
on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the thirty
(30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the
"Current Market Price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing
prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date;
PROVIDED, however, that in the event that the Current Market
Price per share of the Common Stock is determined during a
period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination
or reclassification of such Common Stock, and prior to the
expiration of the requisite thirty (30) Trading Day or
ten (10) Trading Day period, as set forth above, after the
ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or
reclassification, then, and in each such case, the "Current
Market Price" shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day
shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of
Common Stock are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to
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securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are
not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-
the-counter market, as reported on The Nasdaq Stock Market
("Nasdaq") or such other system then in use, or, if on any
such date the shares of Common Stock are not quoted by any
such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board of
Directors of the Company. If on any such date no market
maker is making a market in the Common Stock, the fair value
of such shares on such date as determined in good faith by
the Board of Directors of the Company shall be used. The
term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common
Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock
are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, "Current
Market Price" per share shall mean the fair value per share
as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
"Current Market Price" per share of Preferred Stock shall be
determined in the same manner as set forth above for the
Common Stock in clause (i) of this Section 11(d) (other
than the last sentence thereof). If the Current Market
Price per share of Preferred Stock cannot be determined in
the manner provided above or if the Preferred Stock is not
publicly held or listed or traded in a manner described in
clause (i) of this Section 11(d), the "Current Market Price"
per share of Preferred Stock shall be conclusively deemed to
be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement)
multiplied by the Current Market Price per share of the
Common Stock. If neither the Common Stock nor the Preferred
Stock is publicly held or so listed or traded, "Current
Market Price" per share of the Preferred Stock shall mean
the fair value per share as determined in good faith by the
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Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. For all purposes of
this Agreement, the "Current Market Price" of one one-
hundredth of a share of Preferred Stock shall be equal to
the "Current Market Price" of one share of Preferred Stock
divided by 100.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least one
percent (l%) in the Purchase Price; PROVIDED, however, that any
adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the
nearest ten-thousandth of a share of Common Stock or other share
or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three (3) years from the date of the
transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any
Right thereafter exercised shall become entitled to receive any
shares of capital stock other than Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall
apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-hundredths of a share of Preferred Stock
purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and
(c), each Right outstanding immediately prior to the making of
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such adjustment shall thereafter evidence the right to purchase,
at the adjusted Purchase Price, that number of one one-hundredths
of a share of Preferred Stock (calculated to the nearest one-
millionth) obtained by (i) multiplying (x) the number of one one-
hundredths of a share covered by a Right immediately prior to
this adjustment, by (y) the Purchase Price in effect immediately
prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights,
in lieu of any adjustment in the number of one one-hundredths of
a share of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of one
one-hundredths of a share of Preferred Stock for which a Right
was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the nearest one
ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of
its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the
date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued,
shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at
the option of the Company, shall cause to be distributed to such
holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment.
Rights Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and
may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of
record of Rights Certificates on the record date specified in the
public announcement.
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(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-hundredths of a share of
Preferred Stock issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per one one-hundredths of
a share and the number of one one-hundredths of a share which
were expressed in the initial Rights Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then-stated value, if any,
of the number of one one-hundredths of a share of Preferred Stock
issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue
fully paid and nonassessable such number of one one-hundredths of
a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer
until the occurrence of such event the issuance to the holder of
any Right exercised after such record date the number of one one-
hundredths of a share of Preferred Stock and other capital stock
or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-hundredths of a share of
Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; PROVIDED,
however, that the Company shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) or
securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the
extent that in its good faith judgment the Board of Directors of
the Company shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Stock,
(ii) issuance wholly for cash of any shares of Preferred Stock at
less than the Current Market Price, (iii) issuance wholly for
cash of shares of Preferred Stock or securities which by their
terms are convertible into or exchangeable for shares of
Preferred Stock, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter
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made by the Company to holders of its Preferred Stock shall not
be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at
any time after the Distribution Date, (i) consolidate with any
other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), (ii) merge
with or into any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(o)
hereof), if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or
other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior
to, simultaneously with or immediately after such consolidation,
merger or sale, the stockholders of the Person who constitutes,
or would constitute, the "Principal Party" for purposes of
Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23
or Section 26 hereof, take (or permit any Subsidiary to take) any
action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time
on or after the Rights Dividend Declaration Date and prior to the
Distribution Date (i) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with
each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such
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event shall equal the result obtained by multiplying the number
of Rights associated with each share of Common Stock immediately
prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of
Common Stock outstanding immediately following the occurrence of
such event.
(q) The failure of the Board of Directors to declare a
person to be an Adverse Person following such Person becoming the
Beneficial Owner of Shares of Common Stock representing 10% or
more of the outstanding shares of Common Stock shall not imply
that such Person is not an Adverse Person or limit the Board of
Directors' right at any time in the future to declare such Person
to be an Adverse Person.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 and
Section 13 hereof, the Company shall (a) promptly prepare a certificate
setting forth such adjustment and a brief statement of the facts accounting
for such adjustment, (b) promptly file with the Rights Agent, and with each
transfer agent for the Preferred Stock and the Common Stock, a copy of such
certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder
of a certificate representing shares of Common Stock) in accordance with
Section 25 hereof. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, following the Stock Acquisition
Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), and the Company shall not be the
continuing or surviving corporation of such consolidation or
merger, (y) any Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of
Common Stock shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise
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<PAGE>
transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof),
then, and in each such case (except as may be contemplated by
Section 13(d) hereof), proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then-current Purchase Price in accordance
with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such
term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as
shall be equal to the result obtained by (1) multiplying the
then-current Purchase Price by the number of one one-hundredths
of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 13 Event
(or, if a Section 11 Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of such
one one-hundredths of a share for which a Right was exercisable
immediately prior to the first occurrence of a Section 11 Event
by the Purchase Price in effect immediately prior to such first
occurrence), and (2) dividing that product (which, following the
first occurrence of a Section 13 Event, shall be referred to as
the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price per share of the
Common Stock of such Principal Party on the date of consummation
of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such
Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall
take such steps (including, but not limited to, the reservation
of a sufficient number of shares of its Common Stock) in
connection with the consummation of any such transaction as may
be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in
relation to its shares of Common Stock thereafter deliverable
upon the exercise of the Rights; and (v) the provisions of
Section 11(a)(ii) hereof shall be of no effect following the
first occurrence of any Section 13 Event.
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(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a), the
Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted in such
merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the Person that
is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions;
PROVIDED, however, that in any such case, (1) if the Common Stock
of such Person is not at such time and has not been continuously
over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to
such other Person; and (2) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common
Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market
value.
(c) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued
or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior
thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of
this Section 13 and further providing that, as soon as
practicable after the date of any such Section 13 Event, the
Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate
form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with
a prospectus at all times meeting the requirements of the
Act) until the Expiration Date; and
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(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the
requirements for registration on Form 10 under the Exchange
Act.
The foregoing provisions set forth in this Section 13 shall
similarly apply to successive mergers or consolidations or sales
or other transfers. In the event that a Section 13 Event shall
occur at any time after the occurrence of a Section 11(a)(ii)
Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in
Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction
described in subparagraphs (x) and (y) of Section 13(a) if (i)
such transaction is consummated with a Person or Persons who
acquired shares of Common Stock pursuant to a tender offer or
exchange offer for all outstanding shares of Common Stock which
complies with the provisions of Section 11(a)(ii)(B) hereof (or a
wholly owned subsidiary of any such Person or Persons) (ii) the
price per share of Common Stock offered in such transaction is
not less than the price per share of Common Stock paid to all
holders of shares of Common Stock whose shares were purchased
pursuant to such cash tender offer and (iii) the form of
consideration being offered to the remaining holders of shares of
Common Stock pursuant to such transaction is the same as the form
of consideration paid pursuant to such tender offer or exchange
offer. Upon consummation of any such transaction contemplated by
this Section 13(d), all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in
Section 11(p) hereof, or to distribute Rights Certificates which
evidence fractional Rights. In lieu of such fractional Rights,
there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For
purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The
closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such
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day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the
Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights
are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter
market, as reported on Nasdaq or such other system then in use
or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be
used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred
Stock) upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-
hundredth of a share of Preferred Stock, the Company may pay to
the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one one-
hundredth of a share of Preferred Stock. For purposes of this
Section 14(b), the current market value of one one-hundredth of a
share of Preferred Stock shall be one one-hundredth of the
closing price of a share of Preferred Stock (as determined
pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock.
In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal
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to the same fraction of the current market value of one (1) share
of Common Stock. For purposes of this Section 14(c), the current
market value of one share of Common Stock shall be the closing
price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or
any fractional shares upon exercise of a Right, except as
permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company
to enforce, or otherwise act in respect of, his right to exercise the
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy
at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common
Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent
if surrendered at the principal office or offices of the Rights
Agent designated for such purposes, duly endorsed or accompanied
by a proper instrument of transfer and with the appropriate forms
and certificates fully executed, subject to any requirements
under Section 6 hereof;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person in
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whose name a Rights Certificate (or, prior to the Distribution
Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights
Agent, subject to the last sentence of Section 7(e) hereof, shall
be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or other Person as a result of
its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of
such obligation; PROVIDED, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the number of
one one-hundredths of a share of Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 24 hereof),
or to receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and disbursements and other
disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties
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hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the
premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or certificate
for Common Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it
to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto;
PROVIDED, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any
of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name
of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall
be changed and at such time any of the Rights Certificates shall
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have been countersigned but not delivered, the Rights Agent may
adopt the countersignature under its prior name and deliver
Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned,
the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases
such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable
that any fact or matter (including, without limitation, the
identity of any Acquiring Person or Adverse Person and the
determination of "Current Market Price") be proved or established
by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the Chairman of
the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this
Agreement or in the Rights Certificates or be required to verify
the same (except as to its countersignature on such Rights
Certificates), but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and
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delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it
be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11 or Section 13 hereof
or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual
notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any shares of Common Stock or
Preferred Stock will, when so issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer
or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty
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hereunder either itself or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; PROVIDED, however,
reasonable care was exercised in the selection and continued
employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of its rights if there shall be
reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to
purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause 1 and/or 2 thereof,
the Rights Agent shall not take any further action with respect
to such requested exercise of transfer without first consulting
with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under
this Agreement upon thirty (30) days' notice in writing mailed to the
Company, and to each transfer agent of the Common Stock and Preferred
Stock, by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon thirty (30) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be,
and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. If the Rights Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder
of a Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for
the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation
organized and doing business under the laws of the United States or of the
State of Delaware, Illinois, Minnesota or New York (or of any other state
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of the United States so long as such corporation is authorized to do
business as a banking institution in the State of Delaware, Illinois,
Minnesota or New York), in good standing, having a principal office in the
State of Delaware, Illinois, Minnesota or New York, which is authorized
under such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus
of at least $100,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or
deed; but the predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and
the Preferred Stock, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided
for in this Section 21, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the Rights Agent
or the appointment of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class
of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration
of the Rights, the Company (a) shall, with respect to shares of Common
Stock so issued or sold pursuant to the exercise of stock options or under
any employee plan or arrangement, granted or awarded as of the Distribution
Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if
deemed necessary or appropriate by the Board of Directors of the Company,
issue Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale; PROVIDED, however, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant
risk of material adverse tax consequences to the Company or the Person to
whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
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Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the close of
business on the fifteenth day following the Stock Acquisition
Date (or, if the Stock Acquisition Date shall have occurred prior
to the Record Date, the close of business on the fifteenth day
following the Record Date), or (ii) the Final Expiration Date,
redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption
Price"). The Board of Directors may not redeem any rights
following a determination pursuant to Section 11(a)(ii)(D) that
any Person is an Adverse Person. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not
be exercisable after the first occurrence of a Section 11 Event
until such time as the Company's right of redemption set forth in
the first sentence of this Section 23(a) has expired. The
Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Current Market Price of the
Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any
further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of
Directors ordering the redemption of the Rights, the Company
shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to
all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer Agent
for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be
made.
Section 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after
the Distribution Date, (i) to pay any dividend payable in stock
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of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than
a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of
Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of
stock of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other than
a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies
with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with
Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of
Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i)
or (ii) above at least twenty (20) days prior to the record date
for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other
action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by
the holders of the shares of Preferred Stock whichever shall be
the earlier.
(b) In case any Section 11 Event shall occur, then, in any
such case, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, a
notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights
under Section 11(a) (ii) hereof, and (ii) all references in the
preceding paragraph to Preferred Stock shall be deemed thereafter
to refer to Common Stock and/or, if appropriate, other
securities.
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Section 25. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Rights Agent) as follows:
Dakota Telecommunications Group, Inc.
P.O. Box 66
East Highway 46
Irene, South Dakota 57037
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
Norwest Bank Minnesota, N.A.
161 North Concord Exchange
South St. Paul, Minnesota 55075
Attention: Shareowner Services
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Rights
Certificate (or, if prior to the Distribution Date, to the holder of
certificates representing shares of Common Stock) shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed to
such holder at the address of such holder as shown on the registry books of
the Company.
Section 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution
Date and subject to the penultimate sentence of this Section 26, the
Company may and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement without the approval of
any holders of certificates representing shares of Common Stock. From and
after the Distribution Date and subject to the penultimate sentence of this
Section 26, the Company may and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any
holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, (iii) to shorten or
lengthen any time period hereunder, or (iv) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders
of Rights Certificates (other than an Acquiring Person or Adverse Person or
an Affiliate or Associate of an Acquiring Person or Adverse Person);
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PROVIDED, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to
when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than any Acquiring Person or
Adverse Person and its Affiliates and Associates). Upon the delivery of a
certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the terms of
this Section 26, the Rights Agent shall execute such supplement or
amendment. Notwithstanding anything contained in this Agreement to the
contrary, no supplement or amendment shall be made which changes the
Redemption Price, the Final Expiration Date, the Purchase Price or the
number of one one-hundredths of a share of Preferred Stock for which a
Right is exercisable. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock.
Section 27. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial Owner, shall
be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act. The Board of
Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary
or advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable
for the administration of this Agreement (including a determination to
redeem or not redeem the Rights or to amend the Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board to any
liability to the holders of the Rights.
Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to
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the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to
the Distribution Date, registered holders of the Common Stock).
Section 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired
or invalidated; PROVIDED, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant or
restriction is held by such court or authority to be invalid, void or
unenforceable and the Board of Directors of the Company determines in its
good faith judgment that severing the invalid language from this Agreement
would adversely affect the purpose or effect of this Agreement, the right
of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth day following the date
of such determination by the Board of Directors.
Section 31. GOVERNING LAW. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such
State.
Section 32. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
Attest: DAKOTA TELECOMMUNICATIONS GROUP,
INC.
By /s/Kristie Lyngstad By /s/Thomas W. Hertz
Name: Kristie Lyngstad Name: Thomas W. Hertz
Title: Administrative Assistant Title: Chief Executive Officer and
President
Attest: NORWEST BANK MINNESOTA, N.A.
By /s/Lisa Dornburg By /s/Tammy Brusehauer
Name: Lisa Dornburg Name: Tammy Brusehauer
Title: Corporate Officer Title: Corporate Officer
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EXHIBIT A
[Form of Rights Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER AUGUST 4, 2007, OR EARLIER IF REDEEMED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
OF THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON, AN ADVERSE PERSON OR
AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON OR ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]<F*>
__________________
<F*> The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
<PAGE>
Rights Certificate
DAKOTA TELECOMMUNICATIONS GROUP, INC.
This certifies that ____________________________, or registered
assigns, is the registered owner of the number of Rights set forth above,
each of which entitles the owner thereof, subject to the terms, provisions
and conditions of the Rights Agreement, dated as of July 22, 1997 (the
"Rights Agreement"), between DAKOTA TELECOMMUNICATIONS GROUP, INC., a
Delaware corporation (the "Company"), and Norwest Bank Minnesota, N.A., a
national banking association doing business under the laws of the United
States (the "Rights Agent"), to purchase from the Company at any time prior
to 5:00 P.M. ( Minnesota time) on August 4, 2007, at the office or offices
of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, non-assessable share of
Series A Junior Participating Preferred Stock (the "Preferred Stock") of
the Company, at a purchase price of $100 per one one-hundredth of a share
(the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase set forth on the reverse
hereof and the Certificate contained therein duly executed. The Purchase
Price shall be paid in cash. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above,
are the number and Purchase Price as of August 5, 1997, based on the
Preferred Stock as constituted at such date. The Company reserves the
right to require prior to the occurrence of a Triggering Event (as such
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term is defined in the Rights Agreement) that a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11 Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or Adverse
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement), (ii) a transferee of any such Acquiring
Person, Adverse Person Associate or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a person
who, concurrently with or after such transfer, became an Acquiring Person,
Adverse Person or an Affiliate or Associate of an Acquiring Person or
Adverse Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the
occurrence of such Section 11 Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening
of certain events, including Triggering events.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions
and conditions are hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby made for a full
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description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of
the Rights Certificates, which limitations of rights include the temporary
suspension of the exercisability of such Rights under the specific
circumstances set forth in the Rights Agreement. Copies of the Rights
Agreement are on file at the above-mentioned office of the Company and are
also available upon written request to the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-
hundredths of a share of Preferred Stock as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled
such holder to purchase. If this Rights Certificate shall be exercised in
part, the holder shall be entitled to receive upon surrender hereof another
Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option
at a redemption price of $.01 per Right payable at the election of the
Company, in cash, Common Stock, or such other consideration as the Board of
Directors may determine, at any time prior to the earlier of the close of
business on (i) the fifteenth day following the Stock Acquisition Date (as
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such time period may be extended or shortened pursuant to the Rights
Agreement) and (ii) the Final Expiration Date. No fractional shares of
Preferred Stock will be issued upon the exercise of any Right or Rights
evidenced hereby (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock, which may, at the election of
the Company, be evidenced by depositary receipts), but in lieu thereof a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any
time be issuable on the exercise hereof, nor shall anything contained in
the Rights Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in the Rights Agreement), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
-5-
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of _________ __, 19__
ATTEST: DAKOTA TELECOMMUNICATIONS
GROUP, INC.
________________________________ By ________________________________
Name: Name:
Title: Title:
Countersigned:
NORWEST BANK MINNESOTA, N.A.
By______________________________
Authorized Signature
-6-
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _______________________________________ hereby sells,
assigns and transfers unto ________________________________________________
(Please print name and address of transferee)
___________________________________________________________________________
this Rights Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
__________________ Attorney, to transfer the within Rights Certificate on
the books of the within-named Company, with full power of substitution.
Dated: __________________ , 19__
___________________________________
Signature
Signature Guaranteed:
-7-
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person, an Adverse Person or an Affiliate or Associate of any
such Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by
this Rights Certificate from any Person who is, was or subsequently became
an Acquiring Person, an Adverse Person or an Affiliate or Associate of any
such Person.
Dated: _________, 19__ ___________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change
whatsoever.
-8-
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: DAKOTA TELECOMMUNICATIONS GROUP, INC.
The undersigned hereby irrevocably elects to exercise _________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares
be issued in the name of and delivered to:
Please insert social security
or other identifying number: ______________________________________________
___________________________________________________________________________
(Please print name and address)
___________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
-9-
<PAGE>
Please insert social security
or other identifying number:_______________________________________________
___________________________________________________________________________
(Please print name and address)
___________________________________________________________________________
Dated: ______________, 19__
___________________________________
Signature
Signature Guaranteed:
-10-
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an
Acquiring Person, an Adverse Person or an Affiliate or Associate of any
such Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person.
Dated: _________, 19__ ___________________________________
Signature
Signature Guaranteed:
-11-
<PAGE>
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this
Rights Certificate in every particular, without alteration or enlargement
or any change whatsoever.
-12-
<PAGE>
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On July 22, 1997, the Board of Directors of Dakota
Telecommunications Group, Inc. (the "Company") declared a dividend of one
(1) Right for each outstanding share of the Company's common stock (the
"Common Stock"), outstanding on August 5, 1997. Each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share
(a "Unit") of Series A Junior Participating Preferred Stock, no par value
per share (the "Preferred Stock"), at a price of $100 per Unit (the
"Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between
the Company and Norwest Bank, Minnesota, N.A., as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons
acquired, or obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding shares of Common Stock (such person being referred
to as an "Acquiring Person" and the date upon which such person becomes an
Acquiring Person being referred to as the "Stock Acquisition Date"),
(ii) 10 business days following the commencement or announcement of an
intention to commence a tender or exchange offer, the consummation of which
would result in beneficial ownership by a person of 15% or more of the
outstanding shares of Common Stock, or (iii) 10 business days after the
Company's Board of Directors determines, pursuant to certain criteria set
forth in the Rights Agreement, that a person beneficially owning 10% or
more of the outstanding shares of Common Stock is an "Adverse Person" (the
earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced with respect to any of the Common Stock certificates
outstanding as of August 5, 1997, by such Common Stock certificates. The
Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with such Common Stock certificates. New
Common Stock certificates issued after August 5, 1997, but prior to the
Distribution Date (or if earlier, the redemption or expiration of the
Rights), will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or, if earlier, the redemption or
expiration of the Rights), the surrender for transfer of any Common Stock
certificates will also constitute transfer of the Rights associated with
those Common Stock certificates. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights (the "Rights
Certificates") will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and such separate Rights
Certificates alone will evidence the Rights. Except as otherwise
determined by the Board of Directors, only shares of Common Stock issued
prior to the Distribution Date will be issued with Rights.
<PAGE>
The Rights are not exercisable until the Distribution Date. The
Rights will expire on August 4, 2007, unless earlier redeemed by the
Company as described below.
The Purchase Price payable, and the number of one one-hundredths
of a share of Preferred Stock or other securities or property issuable,
upon exercise of the Rights is subject to adjustment from time to time to
prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Stock, (ii) upon the
grant to holders of the Preferred Stock of certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the
current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional shares of Preferred Stock (other
than fractions which are integral multiples of one one-hundredth of a share
of Preferred Stock) will be issued and in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
In the event that, any time following the Stock Acquisition Date,
the Company were acquired in a merger or other business combination
transaction or in the event 50% or more of its assets or earning power were
sold, proper provision shall be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock
of the acquiring company which at the time of such transaction would have a
market value of two times the exercise price of the Right. Alternatively,
in the event that, any time following the Distribution Date, the Company
were the surviving corporation in a merger with an Acquiring Person and its
Common Stock was not changed or exchanged, or an Acquiring Person were to
engage in certain specified self-dealing transactions with the Company, or
an Acquiring Person becomes the beneficial owner of more than 15% of the
then outstanding shares of Common Stock, or a person had been or was
designated as an Adverse Person by the Company's Board of Directors in
accordance with the criteria set forth in the Rights Agreement, proper
provision shall be made so that each holder of a Right, other than the
Acquiring Person, Adverse Person and certain related parties (whose Rights
will thereafter be void), will thereafter have the right to receive upon
exercise of a Right that number of shares of Common Stock having a market
value of two times the exercise price of such Right.
At any time prior to the designation of a person as an Adverse
Person under the Rights Plan or the close of business on the fifteenth day
-2-
<PAGE>
after the Stock Acquisition Date, the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights, the Company shall make announcement
thereof, and upon such election, the right to exercise the Rights will
terminate and the only Right of the holders of Rights will be to receive
the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company with respect to the shares
for which the Right is exercisable, including, without limitation, the
right to vote or to receive dividends. While the distribution of the
Rights will not be taxable to stockholders or to the Company, stockholders
will recognize taxable income if the Rights are redeemed and may, depending
on the circumstances, recognize taxable income when the Rights become
exercisable or are exercised.
Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Company prior to the Distribution
Date. After the Distribution Date, the provisions of the Rights Agreement
may be amended by the Board in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of Rights (excluding
the interests of any Acquiring Person or Adverse Person), or to shorten or
lengthen any time period under the Rights Agreement, except that no
amendment to adjust the time period governing redemption may be made at a
time when the Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form
8-A. A copy of the Rights Agreement is available from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
-3-
<PAGE>
EXHIBIT 10.2
DAKOTA TELECOMMUNICATIONS GROUP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(Effective July 22, 1997)
Warner, Norcross & Judd
900 Old Kent Building
111 Lyon Street, N.W.
Grand Rapids, Michigan 49503-2489
<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
PAGE
ARTICLE 1 - Establishment of Plan and Trust. . . . . . . . . . . . . . . .1
1.1 Establishment of Plan. . . . . . . . . . . . . . . . . . . . . .1
(a) Employer. . . . . . . . . . . . . . . . . . . . . . . . . .1
(b) Plan History. . . . . . . . . . . . . . . . . . . . . . . .1
(c) Adoption by Another Employer. . . . . . . . . . . . . . . .1
1.2 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . .1
1.3 Compliance With Law. . . . . . . . . . . . . . . . . . . . . . .2
1.4 Effective Dates of Plan Provisions . . . . . . . . . . . . . . .2
1.5 Application to Inactive and Former Participants. . . . . . . . .2
ARTICLE 2 - Definitions. . . . . . . . . . . . . . . . . . . . . . . . . .2
2.1 Break in Service . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 Employer Contributions . . . . . . . . . . . . . . . . . . . . .3
2.3 5% Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
(a) Corporation . . . . . . . . . . . . . . . . . . . . . . . .3
(b) Partnership . . . . . . . . . . . . . . . . . . . . . . . .3
(c) Proprietorship. . . . . . . . . . . . . . . . . . . . . . .3
2.4 Highly Compensated Employee. . . . . . . . . . . . . . . . . . .3
(a) Definition. . . . . . . . . . . . . . . . . . . . . . . . .3
(b) Determination Rules . . . . . . . . . . . . . . . . . . . .4
2.5 Hour of Service. . . . . . . . . . . . . . . . . . . . . . . . .4
(a) Back Pay. . . . . . . . . . . . . . . . . . . . . . . . . .4
(b) No Duties Performed . . . . . . . . . . . . . . . . . . . .5
(c) Qualified Maternity or Paternity Absence. . . . . . . . . .5
(d) Military Service. . . . . . . . . . . . . . . . . . . . . .5
(e) No Duplication. . . . . . . . . . . . . . . . . . . . . . .5
(f) Non-Covered Employment. . . . . . . . . . . . . . . . . . .5
(g) Periods Credited. . . . . . . . . . . . . . . . . . . . . .6
(h) Additional Hours. . . . . . . . . . . . . . . . . . . . . .6
(i) Predecessor Plan. . . . . . . . . . . . . . . . . . . . . .6
(j) Equivalency . . . . . . . . . . . . . . . . . . . . . . . .6
2.6 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.7 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
(a) Short Plan Year . . . . . . . . . . . . . . . . . . . . . .6
(b) Future Plan Years . . . . . . . . . . . . . . . . . . . . .6
2.8 Related Employer . . . . . . . . . . . . . . . . . . . . . . . .6
2.9 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . .7
-i-
<PAGE>
PAGE
ARTICLE 3 - Eligibility to Participate . . . . . . . . . . . . . . . . . .7
3.1 Eligibility Requirements . . . . . . . . . . . . . . . . . . . .7
(a) Employee. . . . . . . . . . . . . . . . . . . . . . . . . .7
(b) Entry Date. . . . . . . . . . . . . . . . . . . . . . . . .7
(c) Year of Eligibility Service . . . . . . . . . . . . . . . .7
(d) Eligibility Period. . . . . . . . . . . . . . . . . . . . .7
(e) Breaks in Service . . . . . . . . . . . . . . . . . . . . .8
3.2 Requirement of Covered Employment. . . . . . . . . . . . . . . .8
3.3 Participation Rules. . . . . . . . . . . . . . . . . . . . . . .8
(a) Termination of Participation. . . . . . . . . . . . . . . .8
(b) Cancellation of Years of Eligibility Service. . . . . . . .8
(c) Resumption of Participation . . . . . . . . . . . . . . . .8
3.4 Leased Employee. . . . . . . . . . . . . . . . . . . . . . . . .9
(a) Definition. . . . . . . . . . . . . . . . . . . . . . . . .9
(b) Conditions. . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE 4 - Contributions. . . . . . . . . . . . . . . . . . . . . . . . .9
4.1 Contributions. . . . . . . . . . . . . . . . . . . . . . . . . .9
(a) ESOP Contributions. . . . . . . . . . . . . . . . . . . . .9
(b) Restoration of Forfeiture . . . . . . . . . . . . . . . . 10
4.2 ESOP Contribution. . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Limits on Employer Contributions . . . . . . . . . . . . . . . 10
(a) Deduction . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Annual Additions. . . . . . . . . . . . . . . . . . . . . 10
4.4 Return of Employer Contributions . . . . . . . . . . . . . . . 10
(a) Mistake of Fact or Nondeductibility . . . . . . . . . . . 10
(b) Initial Qualification . . . . . . . . . . . . . . . . . . 11
4.5 Reduction Of Employer Contribution for Leased Employees. . . . 11
4.6 Timing of Contributions. . . . . . . . . . . . . . . . . . . . 11
ARTICLE 5 - Allocations. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) ESOP Account. . . . . . . . . . . . . . . . . . . . . . . 12
(b) Accounting Only . . . . . . . . . . . . . . . . . . . . . 12
(c) Consolidation . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) ESOP Contribution . . . . . . . . . . . . . . . . . . . . 13
(b) Restoration of Forfeiture . . . . . . . . . . . . . . . . 15
5.3 Stock Dividends on Employer Stock, Stock Splits, Etc.. . . . . 15
5.4 Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Timing. . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Annual Addition Limitation. . . . . . . . . . . . . . . . 16
-ii-
<PAGE>
PAGE
(c) Investment Experience . . . . . . . . . . . . . . . . . . 16
(d) Limitation on Allocation. . . . . . . . . . . . . . . . . 16
5.5 Allocation of Earnings, Losses, and Expenses; Revaluation of
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Earnings, Losses, and Expenses. . . . . . . . . . . . . . 16
(b) Revaluation of Trust. . . . . . . . . . . . . . . . . . . 16
(c) No Earnings on Distributions. . . . . . . . . . . . . . . 17
5.6 Sale or Purchase of Employer Stock . . . . . . . . . . . . . . 17
(a) Sale of Employer Stock. . . . . . . . . . . . . . . . . . 17
(b) Purchase of Employer Stock. . . . . . . . . . . . . . . . 17
5.7 Limitation on Annual Additions . . . . . . . . . . . . . . . . 18
(a) Annual Additions. . . . . . . . . . . . . . . . . . . . . 18
(b) Defined Contribution Dollar Limit . . . . . . . . . . . . 18
(c) Percentage Limit. . . . . . . . . . . . . . . . . . . . . 19
(d) ESOP Exceptions . . . . . . . . . . . . . . . . . . . . . 19
(e) Section 415 Compensation. . . . . . . . . . . . . . . . . 19
(f) Limitation Year . . . . . . . . . . . . . . . . . . . . . 20
(g) Related Employer Aggregation. . . . . . . . . . . . . . . 20
5.8 Excess Additions . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Before Contribution . . . . . . . . . . . . . . . . . . . 20
(b) After Contribution. . . . . . . . . . . . . . . . . . . . 20
(c) No Distribution . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 6 - Determination of Vested Percentage . . . . . . . . . . . . . 21
6.1 Year of Vesting Service. . . . . . . . . . . . . . . . . . . . 21
6.2 Vested Percentage. . . . . . . . . . . . . . . . . . . . . . . 21
(a) Vesting Schedule. . . . . . . . . . . . . . . . . . . . . 21
(b) Normal Retirement Date, Death, or Disability. . . . . . . 22
6.3 Cashout. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Partial Vesting . . . . . . . . . . . . . . . . . . . . . 22
(b) Zero Vesting. . . . . . . . . . . . . . . . . . . . . . . 22
6.4 Five Breaks in Service . . . . . . . . . . . . . . . . . . . . 22
(a) Cancellation of Vesting Service . . . . . . . . . . . . . 22
(b) Forfeiture of Nonvested Amount. . . . . . . . . . . . . . 23
6.5 Death After Termination/Lost Recipient . . . . . . . . . . . . 23
(a) Death After Termination . . . . . . . . . . . . . . . . . 23
(b) Lost Recipient. . . . . . . . . . . . . . . . . . . . . . 23
6.6 Vested Account Balance and Nonvested Amount. . . . . . . . . . 23
(a) Vested Amount . . . . . . . . . . . . . . . . . . . . . . 23
(b) Nonvested Amount. . . . . . . . . . . . . . . . . . . . . 23
(c) Partial Distribution of Vested Account Balance. . . . . . 23
-iii-
<PAGE>
PAGE
ARTICLE 7 - Distributions. . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Distributive Events. . . . . . . . . . . . . . . . . . . . . . 24
(a) Normal Retirement Date. . . . . . . . . . . . . . . . . . 24
(b) Death . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Total Disability. . . . . . . . . . . . . . . . . . . . . 24
(d) Other Termination of Employment . . . . . . . . . . . . . 24
(e) Required Beginning Date . . . . . . . . . . . . . . . . . 24
(f) QDRO. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(g) Plan Termination; Partial Termination . . . . . . . . . . 25
7.2 Valuation for Distribution . . . . . . . . . . . . . . . . . . 25
7.3 Methods and Form of Distribution . . . . . . . . . . . . . . . 25
(a) Methods of Distribution . . . . . . . . . . . . . . . . . 25
(b) Form of Distribution. . . . . . . . . . . . . . . . . . . 26
7.4 Minimum Distribution . . . . . . . . . . . . . . . . . . . . . 27
7.5 Time of Distribution . . . . . . . . . . . . . . . . . . . . . 27
(a) Immediate Distribution. . . . . . . . . . . . . . . . . . 27
(b) Normal Distribution Date. . . . . . . . . . . . . . . . . 28
(c) Required Distribution . . . . . . . . . . . . . . . . . . 28
7.6 Death of Participant . . . . . . . . . . . . . . . . . . . . . 29
(a) Death Before Required Beginning Date. . . . . . . . . . . 29
(b) Death After Required Beginning Date . . . . . . . . . . . 30
7.7 Election of Method and Time of Distribution. . . . . . . . . . 30
(a) Permitted Elections . . . . . . . . . . . . . . . . . . . 30
(b) Required Consent. . . . . . . . . . . . . . . . . . . . . 30
(c) Election Requirements . . . . . . . . . . . . . . . . . . 31
(d) Failure to Elect. . . . . . . . . . . . . . . . . . . . . 31
(e) Additional Information. . . . . . . . . . . . . . . . . . 31
(f) No Reduction or Delay of Distribution . . . . . . . . . . 31
7.8 Designation of Beneficiary . . . . . . . . . . . . . . . . . . 31
(a) Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Spousal Consent . . . . . . . . . . . . . . . . . . . . . 31
(c) Failure to Designate. . . . . . . . . . . . . . . . . . . 32
(d) Death of Beneficiary. . . . . . . . . . . . . . . . . . . 32
(e) No Beneficiary. . . . . . . . . . . . . . . . . . . . . . 33
(f) Determination . . . . . . . . . . . . . . . . . . . . . . 33
7.9 Facility of Payment. . . . . . . . . . . . . . . . . . . . . . 33
(a) Incapacity. . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Legal Representative. . . . . . . . . . . . . . . . . . . 33
(c) Determination . . . . . . . . . . . . . . . . . . . . . . 33
7.10 Notice of Penalties. . . . . . . . . . . . . . . . . . . . . . 33
(a) Distribution Before Age 59 1/2. . . . . . . . . . . . . . 33
(b) Excess Distributions. . . . . . . . . . . . . . . . . . . 34
(c) Failure to Receive a Minimum Distribution . . . . . . . . 34
7.11 Special Rules--Distribution of Employer Stock. . . . . . . . . 34
(a) Distributee's Option to Sell Benefit Shares . . . . . . . 34
(b) Right of First Refusal. . . . . . . . . . . . . . . . . . 35
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(c) Terms of Purchase . . . . . . . . . . . . . . . . . . . . 35
(d) Securities Law. . . . . . . . . . . . . . . . . . . . . . 36
(e) Stock Certificate Legend. . . . . . . . . . . . . . . . . 37
7.12 Distribution of Cash Dividends . . . . . . . . . . . . . . . . 37
ARTICLE 8 - Administration of the Plan . . . . . . . . . . . . . . . . . 37
8.1 Duties, Powers, and Responsibilities of the Employer . . . . . 37
(a) Required. . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Discretionary . . . . . . . . . . . . . . . . . . . . . . 38
8.2 Employer Action. . . . . . . . . . . . . . . . . . . . . . . . 39
8.3 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . 39
8.4 Administrative Committee . . . . . . . . . . . . . . . . . . . 39
(a) Appointment . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Agent; Powers and Duties. . . . . . . . . . . . . . . . . 39
(c) Not Fiduciary . . . . . . . . . . . . . . . . . . . . . . 39
(d) Membership. . . . . . . . . . . . . . . . . . . . . . . . 39
(e) Records . . . . . . . . . . . . . . . . . . . . . . . . . 40
(f) Actions . . . . . . . . . . . . . . . . . . . . . . . . . 40
(g) Report to Administrator . . . . . . . . . . . . . . . . . 40
(h) Compensation. . . . . . . . . . . . . . . . . . . . . . . 40
(i) Conflict of Interest. . . . . . . . . . . . . . . . . . . 40
8.5 Duties, Powers, and Responsibilities of the Administrator. . . 40
(a) Plan Interpretation . . . . . . . . . . . . . . . . . . . 40
(b) Participant Rights. . . . . . . . . . . . . . . . . . . . 40
(c) Limits; Nondiscrimination Tests; Top-Heavy Tests. . . . . 40
(d) Allocations and Vesting . . . . . . . . . . . . . . . . . 40
(e) Errors in Participants' Accounts. . . . . . . . . . . . . 41
(f) Claims and Elections. . . . . . . . . . . . . . . . . . . 41
(g) Benefit Payments. . . . . . . . . . . . . . . . . . . . . 41
(h) QDRO Determination. . . . . . . . . . . . . . . . . . . . 41
(i) Administration Information. . . . . . . . . . . . . . . . 41
(j) Recordkeeping . . . . . . . . . . . . . . . . . . . . . . 41
(k) Reporting and Disclosure. . . . . . . . . . . . . . . . . 41
(l) Penalties; Excise Tax . . . . . . . . . . . . . . . . . . 41
(m) Advisers. . . . . . . . . . . . . . . . . . . . . . . . . 41
(n) Expenses, Fees, and Charges . . . . . . . . . . . . . . . 41
(o) Nondiscrimination . . . . . . . . . . . . . . . . . . . . 42
(p) Bonding . . . . . . . . . . . . . . . . . . . . . . . . . 42
(q) Other Powers and Duties . . . . . . . . . . . . . . . . . 42
8.6 Delegation of Administrative Duties. . . . . . . . . . . . . . 42
(a) In Writing. . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Acceptance of Responsibility. . . . . . . . . . . . . . . 42
(c) Conflict. . . . . . . . . . . . . . . . . . . . . . . . . 42
8.7 Interrelationship of Fiduciaries; Discretionary Authority. . . 42
(a) Performance of Duties . . . . . . . . . . . . . . . . . . 42
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(b) Reliance on Others. . . . . . . . . . . . . . . . . . . . 43
(c) Discretionary Authority of Fiduciaries. . . . . . . . . . 43
8.8 Compensation; Indemnification. . . . . . . . . . . . . . . . . 43
8.9 Fiduciary Standards. . . . . . . . . . . . . . . . . . . . . . 43
(a) Prudence. . . . . . . . . . . . . . . . . . . . . . . . . 43
(b) Exclusive Purpose . . . . . . . . . . . . . . . . . . . . 43
(c) Prohibited Transaction. . . . . . . . . . . . . . . . . . 43
8.10 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . 43
(a) Initial Determination . . . . . . . . . . . . . . . . . . 44
(b) Method. . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Further Review. . . . . . . . . . . . . . . . . . . . . . 44
(d) Redetermination . . . . . . . . . . . . . . . . . . . . . 44
8.11 Participant's Responsibilities . . . . . . . . . . . . . . . . 44
ARTICLE 9 - Investment of Funds. . . . . . . . . . . . . . . . . . . . . 44
9.1 Investment Responsibility. . . . . . . . . . . . . . . . . . . 44
9.2 Authorized Investments . . . . . . . . . . . . . . . . . . . . 45
(a) Specific Investments. . . . . . . . . . . . . . . . . . . 45
(b) Unallocated Funds . . . . . . . . . . . . . . . . . . . . 45
(c) Right of Trustee To Hold Cash . . . . . . . . . . . . . . 45
9.3 Commingled Investment. . . . . . . . . . . . . . . . . . . . . 45
9.4 Investments--Employer Stock. . . . . . . . . . . . . . . . . . 46
(a) Acquisition Limit . . . . . . . . . . . . . . . . . . . . 46
(b) Adequate Consideration. . . . . . . . . . . . . . . . . . 46
(c) No Commissions. . . . . . . . . . . . . . . . . . . . . . 46
(d) Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 46
(e) Securities Acquisition Loan . . . . . . . . . . . . . . . 46
(f) Unallocated and Pledged Employer Stock. . . . . . . . . . 46
(g) No Recourse . . . . . . . . . . . . . . . . . . . . . . . 46
(h) Repayment of Loan . . . . . . . . . . . . . . . . . . . . 46
(i) Release of Pledged Employer Stock . . . . . . . . . . . . 47
(j) Pending Investment. . . . . . . . . . . . . . . . . . . . 47
9.5 Purchase From Stockholder. . . . . . . . . . . . . . . . . . . 47
9.6 Stock Dividends, Stock Splits, Etc . . . . . . . . . . . . . . 48
9.7 Voting of Employer Stock . . . . . . . . . . . . . . . . . . . 48
(a) Participant Direction . . . . . . . . . . . . . . . . . . 48
(b) Notification. . . . . . . . . . . . . . . . . . . . . . . 48
(c) Proxy Solicitation. . . . . . . . . . . . . . . . . . . . 48
(d) Unallocated Shares. . . . . . . . . . . . . . . . . . . . 48
(e) Confidentiality . . . . . . . . . . . . . . . . . . . . . 48
9.8 Diversification of Investments . . . . . . . . . . . . . . . . 49
(a) Available Employer Stock. . . . . . . . . . . . . . . . . 49
(b) Timing of Direction . . . . . . . . . . . . . . . . . . . 49
(c) Determination of Number of Shares To Be Liquidated and
Reinvested. . . . . . . . . . . . . . . . . . . . . . . . 49
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(d) Qualified Election Period . . . . . . . . . . . . . . . . 49
(e) Value of Shares to Be Liquidated and Reinvested.. . . . . 49
(f) Investments.. . . . . . . . . . . . . . . . . . . . . . . 50
(g) Investments Election. . . . . . . . . . . . . . . . . . . 50
(h) No Reinvestment in Employer Stock . . . . . . . . . . . . 50
9.9 Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . . 50
(a) Participant Direction . . . . . . . . . . . . . . . . . . 50
(b) Trustee's Response - Valid Directions . . . . . . . . . . 50
(c) Invalid Directions or No Directions . . . . . . . . . . . 50
(d) Unallocated Shares. . . . . . . . . . . . . . . . . . . . 51
(e) Allocation of Proceeds. . . . . . . . . . . . . . . . . . 51
(f) Confidentiality . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 10 - Administration of the Trust . . . . . . . . . . . . . . . . 51
10.1 Duties and Powers of the Trustee . . . . . . . . . . . . . . . 51
(a) Duties of the Trustee . . . . . . . . . . . . . . . . . . 51
(b) Powers of the Trustee . . . . . . . . . . . . . . . . . . 51
(c) Limitation on Duties and Powers of the Trustee. . . . . . 53
10.2 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(a) Report. . . . . . . . . . . . . . . . . . . . . . . . . . 54
(b) Judicial Settlement . . . . . . . . . . . . . . . . . . . 54
10.3 Appointment, Resignation, and Removal of Trustee . . . . . . . 54
(a) Resignation . . . . . . . . . . . . . . . . . . . . . . . 55
(b) Removal . . . . . . . . . . . . . . . . . . . . . . . . . 55
(c) Successor Trustee . . . . . . . . . . . . . . . . . . . . 55
(d) Effective Date of Resignation or Removal. . . . . . . . . 55
(e) Procedure Upon Transfer . . . . . . . . . . . . . . . . . 55
(f) Earlier Transfer. . . . . . . . . . . . . . . . . . . . . 55
(g) Final Transfer. . . . . . . . . . . . . . . . . . . . . . 55
(h) In Kind Transfer. . . . . . . . . . . . . . . . . . . . . 55
(i) Limitation on Liability of Successor. . . . . . . . . . . 55
10.4 Trustee Action . . . . . . . . . . . . . . . . . . . . . . . . 56
10.5 Exculpation of Nonfiduciary. . . . . . . . . . . . . . . . . . 56
ARTICLE 11 - Amendment, Mergers, Successor Employer. . . . . . . . . . . 56
11.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(a) Exclude Participant . . . . . . . . . . . . . . . . . . . 56
(b) Reduce Participant's Account. . . . . . . . . . . . . . . 56
(c) Reduce Vested Percentage. . . . . . . . . . . . . . . . . 56
(d) Vesting Schedule. . . . . . . . . . . . . . . . . . . . . 56
(e) Elimination of Protected Benefits . . . . . . . . . . . . 57
(f) Alter Trustee's Duties. . . . . . . . . . . . . . . . . . 57
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11.2 Merger of Plans. . . . . . . . . . . . . . . . . . . . . . . . 57
(a) Preservation of Account Balance . . . . . . . . . . . . . 57
(b) Authorization . . . . . . . . . . . . . . . . . . . . . . 57
11.3 Successor Employer . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 12 - Termination . . . . . . . . . . . . . . . . . . . . . . . . 57
12.1 Right to Terminate or Discontinue Contributions. . . . . . . . 57
12.2 Automatic Termination. . . . . . . . . . . . . . . . . . . . . 58
12.3 Discontinuance of Contributions. . . . . . . . . . . . . . . . 58
12.4 Effect of Termination or Partial Termination . . . . . . . . . 58
(a) Nonforfeitability . . . . . . . . . . . . . . . . . . . . 58
(b) Distribution. . . . . . . . . . . . . . . . . . . . . . . 58
12.5 No Reversion of Assets . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 13 - General Provisions. . . . . . . . . . . . . . . . . . . . . 58
13.1 Spendthrift Provision. . . . . . . . . . . . . . . . . . . . . 58
(a) Not Security. . . . . . . . . . . . . . . . . . . . . . . 59
(b) Attempts Void . . . . . . . . . . . . . . . . . . . . . . 59
13.2 Effect Upon Employment Relationship. . . . . . . . . . . . . . 59
13.3 No Interest in Employer Assets . . . . . . . . . . . . . . . . 59
13.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 59
13.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 60
13.7 Nondiversion . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 14 - Top-Heavy Plan Provisions . . . . . . . . . . . . . . . . . 60
14.1 Top-Heavy Determination. . . . . . . . . . . . . . . . . . . . 60
(a) Top-Heavy Plan. . . . . . . . . . . . . . . . . . . . . . 60
(b) Calculation . . . . . . . . . . . . . . . . . . . . . . . 61
14.2 Top-Heavy Definitions. . . . . . . . . . . . . . . . . . . . . 61
(a) Top-Heavy Ratio . . . . . . . . . . . . . . . . . . . . . 61
(b) Present Value of Accrued Benefits . . . . . . . . . . . . 61
(c) Required Aggregation Group. . . . . . . . . . . . . . . . 62
(d) Permissive Aggregation Group. . . . . . . . . . . . . . . 62
(e) Determination Date. . . . . . . . . . . . . . . . . . . . 62
(f) Key Employee. . . . . . . . . . . . . . . . . . . . . . . 62
(g) Top-Heavy Valuation Date. . . . . . . . . . . . . . . . . 63
14.3 Minimum Allocation . . . . . . . . . . . . . . . . . . . . . . 63
SCHEDULE A
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<PAGE>
TABLE OF DEFINITIONS
DEFINED TERMS
TERM LOCATION
Administrator 8.3
Annual Additions 5.7(a)
Annual Compensation Limit 5.2(a)(iii)(B)(2)
Available Employer Stock 9.8(a)
Beneficiary 7.8(a)
Benefit Shares 7.11(a)
Benefit Starting Date 7.7(b)(ii)
Break in Service 2.1
Code 1.3
Compensation 5.2(a)(iii)(B)
Covered Employment 3.2
Current Obligations 4.2
Defined Contribution Dollar Limit 5.7(b)
Determination Date 14.2(e)
Earliest Distribution Date 7.5(a)(i)
Effective Date 1.4
Elective Deferrals 5.2(a)(iii)(B)(1)
Eligibility Period 3.1(d)
Employee 3.1(a)
Employer 1.1(a)
Employer Contributions 2.2
Employer Stock 5.1(a)(iii)
Employer Stock Account 5.1(a)(i)
Entry Date 3.1(b)
ERISA 1.3
ESOP Account 5.1(a)
ESOP Contribution 4.2
Exempt Loan 9.4(d)
Fair Market Value 7.11(c)(iv)
5% Owner 2.3
Highly Compensated Employee 2.4(a)
Hour of Service 2.5
Investment Manager 8.1(b)(i)(B)
Key Employee 14.2(f)
Leased Employee 3.4(a)
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<PAGE>
TERM LOCATION
Limitation Year 5.8(f)
Minimum Distribution 7.4
Normal Retirement Date 7.1(a)
Other Investments Account 5.1(a)(ii)
Participant 3.1
Participating Compensation 5.2(a)(iii)(A)
Percentage Limit 5.7(c)
Permissive Aggregation Group 14.2(d)
Person 2.6
Plan Year 2.7
Present Value of Accrued Benefits 14.2(b)(i)
Pro Rata Portion 9.4(i)(i)
QDRO 7.1(f)
Qualified Election Period 9.8(d)
Qualified Maternity or
Paternity Absence 2.5(c)(i)
Regulations 1.3
Related Employer 2.8
Required Aggregation Group 14.2(c)
Required Beginning Date 7.5(c)(i)
Section 415 Compensation 5.7(e)
Securities Acquisition Loan 9.4(e)
Spouse 7.8(b)(ii)
Tender Offer 9.9
Top-Heavy Plan 14.1(a)
Top-Heavy Ratio 14.2(a)
Top-Heavy Valuation Date 14.2(g)
Total Disability 7.1(c)
Trustee 1.2
Valuation Date 2.9
Vested Account Balance 6.6(a)
Vesting Period 6.1
Year of Eligibility Service 3.1(c)
Year of Vesting Service 6.1
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Dakota Telecommunications Group, Inc. adopts the Dakota
Telecommunications Group, Inc. Employee Stock Ownership Plan.
ARTICLE 1
ESTABLISHMENT OF PLAN AND TRUST
1.1 ESTABLISHMENT OF PLAN.
This defined contribution plan is established by the Employer for the
exclusive benefit of eligible Employees and their beneficiaries.
(a) EMPLOYER. "Employer" means Dakota Telecommunications Group,
Inc., and any other employer that has adopted or later adopts this plan.
(b) PLAN HISTORY. A schedule that states the effective date of this
plan and certain amendments may be attached.
(c) ADOPTION BY ANOTHER EMPLOYER. Adoption of this plan by another
employer shall be effective as of the date approved and specified in
writing by Dakota Telecommunications Group, Inc., and by the adopting
employer. Adoption of this plan by an employer other than Dakota
Telecommunications Group, Inc., shall not create a separate plan.
For purposes of administration of this plan, "Employer" means
only Dakota Telecommunications Group, Inc.
1.2 DECLARATION OF TRUST.
The "Trustee" (Home Federal Savings Bank or a successor Trustee)
declares that plan assets delivered to it will be held in trust and
administered under the terms of this plan and trust. The trust is
established and shall be operated for the exclusive benefit of Participants
and their beneficiaries. The trust shall not be diverted to other
purposes, except that trust assets may be used to pay reasonable expenses
of administration.
1.3 COMPLIANCE WITH LAW.
This benefit program is intended to create a qualified retirement plan
and trust under the Internal Revenue Code of 1986 ("Code") and the Employee
<PAGE>
Retirement Income Security Act of 1974 ("ERISA"), as amended, and all
Regulations issued under the Code and ERISA ("Regulations").
1.4 EFFECTIVE DATES OF PLAN PROVISIONS.
"Effective Date" of this plan means July 22, 1997, unless a provision
specifies a different effective date. Each plan provision applies from its
effective date until the effective date of an amendment.
1.5 APPLICATION TO INACTIVE AND FORMER PARTICIPANTS.
An amendment to this plan shall apply to former Participants and to
Participants not employed in Covered Employment on the effective date of
the amendment only if it amends a provision of the plan that continues to
apply to those Participants or only to the extent it expressly states that
it is applicable. Except as specified in the preceding sentence, if a
Participant is not employed in Covered Employment on the effective date of
an amendment, the amendment shall not become applicable to the Participant
unless the Participant has an Hour of Service in Covered Employment after
the effective date of the amendment.
ARTICLE 2
DEFINITIONS
Except for the following general definitions, defined terms are
located at or near the first major use of the term in this plan. A table
showing the location of all definitions appears immediately after the table
of contents. When used as defined, the first letter of each defined term
is capitalized.
2.1 BREAK IN SERVICE.
"Break in Service" means an Employee's failure to complete more than
500 Hours of Service during a 12-consecutive-month period.
2.2 EMPLOYER CONTRIBUTIONS.
"Employer Contributions" means ESOP Contributions.
2.3 5% OWNER.
"5% Owner" means:
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<PAGE>
(a) CORPORATION. An individual who owns (or is considered to own
under Code Section 318) either more than 5% of the outstanding stock of a
corporate Employer or Related Employer, or stock possessing more than 5% of
the total combined voting power of all stock of a corporate Employer or
Related Employer;
(b) PARTNERSHIP. A partner who owns more than 5% of the capital or
profits interest in an Employer or Related Employer that is a partnership;
or
(c) PROPRIETORSHIP. An Employer or Related Employer that is a sole
proprietor.
Notwithstanding aggregation of the Employer and all Related Employers
as required by Code Sections 414(b), (c) and (m), the percentage of
ownership for purposes of this definition shall be determined separately
for each entity that is an Employer or Related Employer.
2.4 HIGHLY COMPENSATED EMPLOYEE.
(a) DEFINITION. "Highly Compensated Employee" for a Plan Year means
any Employee who:
(i) 5% OWNER. Was a 5% Owner at any time during the current
Plan Year or the 12-month period immediately preceding the current Plan
Year; or
(ii) OTHER. Is described in (A) and (B) during the 12-month
period immediately preceding the current Plan Year.
(A) COMPENSATION. Received Section 415 Compensation in
excess of $80,000 (as adjusted under Code Section 415(d)); and
(B) TOP-PAID 20%. If the Employer elects application of
this subsection (B) in accordance with the Regulations, was among the top-paid
20% of Employees when ranked by Section 415 Compensation.
(b) DETERMINATION RULES. The determination of who is a Highly
Compensated Employee shall be made under Code Section 414(q) and
Regulations, including the following rules:
(i) TOP-PAID 20%. The following Employees are excluded before
determining the top-paid 20% of Employees:
(A) AGE AND SERVICE. Employees who have not attained age
21 or completed six months of service by the last day of the 12-month
period immediately preceding the current Plan Year;
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<PAGE>
(B) PART-TIME/SEASONAL. Employees who normally work less
than 17 1/2 hours per week or normally work six months or less in any Plan
Year;
(C) NONRESIDENT ALIENS. Employees who are nonresident
aliens receiving no earned income from sources within the United States;
and
(D) COLLECTIVE BARGAINING EMPLOYEES. Employees covered by
a collective bargaining agreement if more than 90% of all Employees are
covered by a collective bargaining agreement and this plan excludes them.
(ii) COMPENSATION. For Plan Years beginning before January 1,
1998, for purposes of determining compensation under (a) above,
compensation means Section 415 Compensation plus elective contributions
that are excluded from gross income by Code Sections 125, 402(e)(3),
402(h)(1)(B), or 403(b).
(iii) FORMER EMPLOYEES. A former Employee who was a Highly
Compensated Employee at termination of employment or at any time after
attaining age 55 shall be a Highly Compensated Employee at all times
thereafter.
2.5 HOUR OF SERVICE.
"Hour of Service" means each hour that an Employee is directly or
indirectly paid or entitled to be paid by the Employer for the performance
of duties during the applicable period. These hours will be credited for
the period in which the duties are performed.
(a) BACK PAY. Hours of Service include each hour for which back pay,
irrespective of mitigation of damages, is awarded or agreed to by the
Employer. Back pay hours shall be credited to the Employee for the period
or periods to which the award or agreement pertains.
(b) NO DUTIES PERFORMED. For all purposes under this plan, an
Employee shall be credited with the first 501 Hours of Service for which
the Employee is directly or indirectly paid or entitled to be paid by the
Employer (including back pay) for each single period of absence from work,
even if no duties are performed due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military service, or
leave of absence, even if employment terminates. However, an Employee is
not required to be credited with Hours of Service for periods in which no
duties are performed if the Employee is compensated solely as required by
worker's compensation, unemployment compensation, or disability insurance
laws. Hours described in this subsection (b) shall be credited to the
Employee for the period in which payment is made or amounts payable to the
Employee become due.
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<PAGE>
(c) QUALIFIED MATERNITY OR PATERNITY ABSENCE. Only for purposes of
determining whether the Employee has a Break in Service, an Employee shall
be credited with the first 501 Hours of Service during a Qualified
Maternity or Paternity Absence.
(i) DEFINITION. A "Qualified Maternity or Paternity Absence"
means an absence from work due to pregnancy of the Employee, birth of a
child of the Employee, placement of a child with the Employee in connection
with adoption of the child, or caring for a child immediately after the
birth or placement of the child with the Employee.
(ii) CREDIT. If necessary to avoid a Break in Service, Hours of
Service shall be credited for the period in which the absence begins. If
the hours are not necessary to prevent a Break in Service for that period,
the hours shall be credited for the next period. Hours of Service are
credited at the rate the Employee normally would have earned Hours of
Service. If these hours cannot be determined, the hours shall be credited
at the rate of eight hours per day of absence.
(d) MILITARY SERVICE. If employment terminates due to active service
in the armed forces of the United States, the Employee shall be credited
with Hours of Service for the hours the Employee would have been scheduled
to work during each month of the period of active service. The Employee
must apply for, and be able to resume, employment with the Employer within
the time limits established by federal law for protection of veterans'
reemployment rights.
(e) NO DUPLICATION. There shall be no duplication in the crediting
of Hours of Service. An Employee shall not be credited with more than one
Hour of Service for each hour paid at a premium rate.
(f) NON-COVERED EMPLOYMENT. Hours of Service earned in employment
with the Employer or a Related Employer that is not Covered Employment
count toward Years of Eligibility Service and Years of Vesting Service, but
not toward determining eligibility for a share of the Employer
Contribution.
(g) PERIODS CREDITED. Generally, Hours of Service shall be credited
as provided in Section 2530.200b of the ERISA Regulations. Hours of
Service under (b) above shall be credited under the rules of this section
and as provided in Section 2530.200b-2(b) of those Regulations. Hours of
Service shall be credited to appropriate periods determined under the rules
set forth in Section 2530.200b-2(c) of those Regulations.
(h) ADDITIONAL HOURS. The Administrator may adopt additional
written, uniform, and nondiscriminatory rules that credit more Hours of
Service than those required under the rules set forth in this section.
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(i) PREDECESSOR PLAN. If this plan is required to be treated as a
continuation of the plan of a predecessor employer under Code
Section 414(a), an Employee shall be credited with all Hours of Service
credited to the Employee under the predecessor's plan.
(j) EQUIVALENCY. If an Employee is not paid on an hourly basis and
records of hours worked are not maintained, Hours of Service shall be
credited at the rate of 10 hours per day for each day that the Employee
would be credited with at least one Hour of Service under this section.
2.6 PERSON.
"Person" means an individual, committee, proprietorship, partnership,
corporation, trust, estate, association, organization, or similar entity.
2.7 PLAN YEAR.
"Plan Year" means:
(a) SHORT PLAN YEAR. The period beginning on the Effective Date and
ending December 31, 1997; and
(b) FUTURE PLAN YEARS. For periods beginning after December 31,
1997, the 12-month period beginning each January 1.
2.8 RELATED EMPLOYER.
"Related Employer" means (i) each corporation, other than
the Employer, that is a member of a controlled group of corporations, as
defined in Code Section 414(b), of which the Employer is a member;
(ii) each trade or business, other than the Employer, whether or not
incorporated, under common control of or with the Employer under Code
Section 414(c); (iii) each member, other than the Employer, of an
affiliated service group, as defined in Code Section 414(m), of which the
Employer is a member; and (iv) any other entity required to be aggregated
with the Employer by Regulations under Code Section 414(o). An entity
shall not be considered a Related Employer for any purpose under this plan
during any period it does not satisfy (i), (ii), (iii), or (iv) in the
preceding sentence.
2.9 VALUATION DATE.
"Valuation Date" means the last day of the Plan Year and any other
date specified as a Valuation Date by the Administrator.
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ARTICLE 3
ELIGIBILITY TO PARTICIPATE
3.1 ELIGIBILITY REQUIREMENTS.
An Employee in Covered Employment who is regularly scheduled to
complete at least 1,000 Hours of Service during a Plan Year shall become a
Participant ("Participant") immediately. The eligibility requirement for
participation in this plan for all other Employees is completion of one
Year of Eligibility Service. An Employee in Covered Employment who does
not become a Participant immediately shall be eligible to become a
Participant on the first Entry Date immediately following the date the
Employee satisfies the eligibility requirements.
(a) EMPLOYEE. "Employee" means an individual who is employed by the
Employer or a Related Employer and who receives compensation for personal
services to the Employer or Related Employer that is subject to withholding
for federal income tax purposes.
(b) ENTRY DATE. For an Employee who does not become a Participant
immediately, "Entry Date" means each January 1 and July 1.
(c) YEAR OF ELIGIBILITY SERVICE. "Year of Eligibility Service" means
completion of at least 1,000 Hours of Service during an Eligibility Period.
A Year of Eligibility Service is credited only at the end of the
Eligibility Period.
(d) ELIGIBILITY PERIOD. "Eligibility Period" means each 12-month
period beginning on the date the Employee first has an Hour of Service or
on an anniversary of that date. For an Employee who has a Break in Service
due to termination of employment before completing one Year of Eligibility
Service, Eligibility Periods begin on the date the Employee has an Hour of
Service due to reemployment and anniversaries of that date.
(e) BREAKS IN SERVICE. Breaks in Service under this article shall be
determined on the basis of Eligibility Periods.
3.2 REQUIREMENT OF COVERED EMPLOYMENT.
If an eligible Employee is not employed in Covered Employment on the
applicable Entry Date and the Employee's Years of Eligibility Service are
not canceled under Section 3.3(b), the Employee shall become a Participant
on the first subsequent day on which the Employee has an Hour of Service in
Covered Employment.
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"Covered Employment" means all employment with the Employer except
employment with a Related Employer that has not adopted this plan,
employment as a Leased Employee, employment in a unit of employees covered
by a collective bargaining agreement under which the Employer has engaged
in good faith negotiations about retirement benefits, or employment as a
nonresident alien receiving no earned income from sources within the United
States.
3.3 PARTICIPATION RULES.
(a) TERMINATION OF PARTICIPATION. Participation shall terminate upon
the earlier of the date the Participant is not an Employee and has been
paid the full amount due under this plan, the date of the Participant's
death, or the date the Participant's Years of Eligibility Service are
canceled under (b) below.
(b) CANCELLATION OF YEARS OF ELIGIBILITY SERVICE. An Employee's
Years of Eligibility Service shall be canceled if the Employee's vested
percentage is zero and the Employee has at least five consecutive Breaks in
Service.
(c) RESUMPTION OF PARTICIPATION. If an Employee's Years of
Eligibility Service are canceled under (b) above, the Employee must satisfy
the eligibility requirements of Section 3.1 again to participate or to
resume participation in this plan. If the Years of Eligibility Service of
a former Participant are not canceled, the former Participant shall resume
participation immediately upon completion of an Hour of Service in Covered
Employment.
3.4 LEASED EMPLOYEE.
(a) DEFINITION. "Leased Employee" means an individual described in
and required to be treated as an Employee under Code Sections 414(n) and
414(o) and Regulations. For purposes of this definition, the Employer or
any Related Employer for whom a Leased Employee performs services is
referred to as the recipient.
(i) CODE SECTION 414(N). A Leased Employee under Code
Section 414(n) is an individual who is not an Employee (except by reason of
this definition) but who performs services for the recipient under the
primary direction or control of the recipient, pursuant to an agreement
between the recipient and a leasing organization, on a full-time basis for
at least a one-year period.
(ii) CODE SECTION 414(O). A Leased Employee includes a leased
owner or a leased manager determined to be a Leased Employee under Code
Section 414(o) and the Regulations.
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(b) CONDITIONS. A Leased Employee shall be treated as an Employee
unless:
(i) 20% OF NON-HIGHLY COMPENSATED WORK FORCE. Leased Employees
do not constitute more than 20% of the recipient's non-highly compensated
work force, and
(ii) COVERED BY PLAN DESCRIBED IN CODE SECTION 414(N). The
Leased Employee is covered by a money purchase pension plan described in
Code Section 414(n) with a nonintegrated employer contribution rate of at
least 10% of Section 415 Compensation, immediate participation, and full
and immediate vesting. Immediate participation shall not be required for a
Leased Employee who received less than $1,000 in compensation from the
leasing organization in each Plan Year during the four-year period ending
with the current Plan Year.
ARTICLE 4
CONTRIBUTIONS
4.1 CONTRIBUTIONS.
The following contributions are permitted or required for a Plan Year.
(a) ESOP CONTRIBUTIONS. The Employer may make an ESOP Contribution
for each Plan Year.
(b) RESTORATION OF FORFEITURE. When restoration of a forfeiture is
required under Article 6 and current forfeitures and trust earnings applied
for that purpose are insufficient, the Employer shall contribute the
necessary additional amount.
4.2 ESOP CONTRIBUTION.
The Employer may make an "ESOP Contribution" for a Plan Year on behalf
of all eligible Employees. Subject to the restrictions of this plan, the
ESOP Contribution shall be sufficient to meet the Current Obligations of
this plan to the extent the Current Obligations are not paid with cash
dividends. To the extent the ESOP Contribution is made in cash, the ESOP
Contribution may be used to repay an Exempt Loan used to purchase Employer
Stock for this plan.
"Current Obligations" means trust financial obligations arising from
an Exempt Loan to the trust, and payable in cash within one year from the
date an Employer Contribution is due.
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4.3 LIMITS ON EMPLOYER CONTRIBUTIONS.
Employer Contributions are subject to the following limits:
(a) DEDUCTION. Employer Contributions for a Plan Year shall not
exceed the amount allowable as a deduction under Code Section 404. A
nondeductible contribution may be subject to a 10% excise tax.
(b) ANNUAL ADDITIONS. Employer Contributions are subject to the
limit on Annual Additions stated in Article 5.
4.4 RETURN OF EMPLOYER CONTRIBUTIONS.
(a) MISTAKE OF FACT OR NONDEDUCTIBILITY. Part or all of any Employer
Contribution may be returned to the Employer under the following
circumstances:
(i) MISTAKE OF FACT. An Employer Contribution made by mistake
of fact shall be returned to the Employer, upon demand, within one year
after payment of the contribution.
(ii) NONDEDUCTIBILITY. Each Employer Contribution is conditioned
on its deductibility under Code Section 404. Unless necessary for the
trust to meet its Current Obligations, a nondeductible Employer
Contribution shall be returned to the Employer, upon demand, before the due
date for the Employer's federal income tax return for the taxable year for
which the contribution was made or if later, within one year after the date
of disallowance of the deduction. The portion of the contribution to be
returned shall not exceed the amount determined to be nondeductible.
(iii) AMOUNT. The amount that may be returned shall be
determined as of the Valuation Date coinciding with or most recently
preceding the date of repayment. The amount shall be the excess of the
amount contributed over the amount that is deductible or the amount that
would have been deductible if the mistake of fact had not occurred.
Earnings attributable to the excess amount shall not be returned. Losses
attributable to the excess amount shall reduce the amount returned. The
amount returned shall not reduce a Participant's account to less than the
account balance would have been on the applicable Valuation Date had the
excess amount not been contributed.
(b) INITIAL QUALIFICATION. All Employer Contributions are
conditioned on the initial qualification of this plan.
(i) TIMING. If this plan fails to qualify initially under the
Code, the contributions made after the Effective Date and before the date
of determination of nonqualified status shall be returned to the Employer
by the Trustee within one year after the date of determination of
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nonqualified status. This provision shall not be effective unless this
plan is submitted to the Internal Revenue Service not later than the due
date for the Employer's federal income tax return for the taxable year in
which this plan was adopted or a later date permitted in Regulations.
(ii) AMOUNT. The amount to be returned shall be the amount of
the trust assets attributable to Employer Contributions.
4.5 REDUCTION OF EMPLOYER CONTRIBUTION FOR LEASED EMPLOYEES.
If a Leased Employee becomes a Participant in this plan, any Employer
Contribution which would be made for and allocated to the Leased Employee
shall be reduced by any contribution made by the leasing organization for
the Participant to a qualified retirement plan for services performed by
the Leased Employee for the Employer.
4.6 TIMING OF CONTRIBUTIONS.
Any Employer Contribution shall be paid to the Trustee on or before
the date prescribed by law (including extensions) for filing the Employer's
federal income tax return for the taxable year. The Employer also shall
identify the type and amount of each contribution for a Plan Year by
written communication to the Trustee on or before the date final
allocations are performed under Article 5. If property other than cash is
contributed, the property shall be valued at fair market value at the time
of contribution.
ARTICLE 5
ALLOCATIONS
5.1 ACCOUNTS.
The Administrator shall maintain the necessary number of accounts for
each Participant. The Administrator shall maintain the accounts described
in (a) below:
(a) ESOP ACCOUNT. "ESOP Account" means a separate account for a
Participant consisting of subaccounts known as Employer Stock Accounts and,
if applicable, Other Investments Accounts.
(i) EMPLOYER STOCK ACCOUNT. "Employer Stock Account" means the
portion of a Participant's ESOP Account that is credited with shares of
Employer Stock. There shall be a separate Employer Stock Account for
Employer Stock purchased with each Exempt Loan, and a separate Employer
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Stock Account for Employer Stock acquired by the trust without an Exempt
Loan. An Employer Stock Account shall include stock dividends paid on
Employer Stock allocated to such account and Employer Stock purchased with
cash dividends to the extent those dividends were not used to repay an
Exempt Loan or distributed to Participants.
(ii) OTHER INVESTMENTS ACCOUNT. "Other Investments Account"
means the portion of a Participant's ESOP Account credited with cash or the
Participant's share of the net income (or loss) on investments of a
permanent nature. An Other Investments Account shall not be required to be
maintained unless, and until, investments of a permanent nature, other than
Employer Stock, are held in a Participant's ESOP Account.
(iii) EMPLOYER STOCK. "Employer Stock" means Employer
securities within the meaning of Code Section 409(l).
(b) ACCOUNTING ONLY. Separate accounts shall be maintained for
accounting purposes only and shall not require segregated investment of
amounts allocated to separate accounts except as specified in Article 9.
(c) CONSOLIDATION. Separate accounts shall not be required if (i)
the separation is not necessary for compliance with any requirement of the
Code, ERISA, and Regulations, (ii) the consolidation would not deprive a
Participant of any tax or transfer opportunity, and (iii) the accounts are
subject to the same vesting schedule or are fully vested.
5.2 ALLOCATIONS.
As of each applicable Valuation Date, the contributions to this plan
and/or Employer Stock released under Section 9.4(i) shall be allocated to
each Participant's accounts as follows:
(a) ESOP CONTRIBUTION.
(i) ELIGIBILITY. A Participant shall be eligible for a share of
the ESOP Contribution or Employer Stock allocated as a result of the ESOP
Contribution for each Plan Year in which (A) the Participant is employed in
Covered Employment on the last day of the Plan Year and completes at least
1,000 Hours of Service, or (B) the Participant's employment terminates on
or after the Participant's Normal Retirement Date or due to death or Total
Disability. Each Participant with an Employer Stock Account at the payment
date for cash dividends (payable with respect to Employer Stock held in the
Participant's accounts) shall be eligible for the allocation of cash
dividends on that Employer Stock.
For the short Plan Year, the number of Hours of Service a
Participant must complete shall be 416.
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(ii) ALLOCATION.
(A) CASH DIVIDEND AND CASH CONTRIBUTIONS. Subject to (D)
below, all cash dividends paid to the trust, plus earnings, with respect to
Employer Stock purchased with an Exempt Loan, may be used to pay Current
Obligations with respect to the Exempt Loan, or to prepay that Exempt Loan
to the extent prepayment would not violate the terms of the Exempt Loan.
If cash dividends are not used to pay or prepay an Exempt Loan, the cash
dividends shall be distributed pursuant to Section 7.12. Subject to (D)
below, cash contributions by the Employer, plus earnings, shall be used to
pay Current Obligations or to prepay an Exempt Loan to the extent
prepayment would not violate the terms of the Exempt Loan. If cash
contributions are not used to pay or prepay an Exempt Loan, they shall be
allocated under (D)(2) below. Employer Stock released for allocation under
Section 9.4(i) as a result of the payments made on an Exempt Loan shall be
allocated in accordance with (B) below.
(B) EMPLOYER STOCK. Employer Stock released under
Section 9.4(i) shall be allocated as of the end of the Plan Year to the
applicable account of each Participant as follows:
(1) CASH DIVIDENDS VALUE. First, released Employer
Stock with respect to an Exempt Loan which has a Fair Market Value equal to
the cash dividends paid to the trust (and used to pay or prepay an Exempt
Loan) during the Plan Year with respect to Employer Stock allocated to each
Participant's applicable Employer Stock Account shall be allocated to that
Participant's applicable account.
(2) PROPORTIONATE ALLOCATION. Second, if additional
Employer Stock remains to be allocated, released Employer Stock with
respect to an Exempt Loan shall be allocated to each Participant's
applicable Employer Stock Account in the proportion that the Participating
Compensation of each eligible Participant bears to the Participating
Compensation of all eligible Participants.
(C) SPECIAL EMPLOYER CONTRIBUTION OR EMPLOYER STOCK
RELEASE. Notwithstanding any provision of this plan to the contrary, to
the extent necessary to meet the required allocation of Employer Stock
under (ii)(B)(1) above, the Employer, in its sole discretion, may
contribute additional Employer Stock or cash to the trust for purposes of
completing such allocation. If sufficient Employer Contributions are not
made for such purpose, then additional shares of Employer Stock shall be
released under Section 9.4(i) for purposes of completing such allocation.
(D) NO EXEMPT LOAN. If this plan has no Exempt Loan with
respect to a Participant's Employer Stock Account,
(1) CASH DIVIDENDS. Cash dividends paid with respect
to the Participant's Employer Stock Account shall be distributed pursuant
to Section 7.12;
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(2) CASH CONTRIBUTIONS. Cash contributions shall be
allocated to eligible Participants' Other Investments Accounts in the
proportion described in (B)(2) above; and
(3) EMPLOYER STOCK CONTRIBUTIONS. Contributions in
Employer Stock shall be allocated to eligible Participants' Employer Stock
Accounts in the proportion described in (B)(2) above.
(E) EMPLOYER STOCK ALLOCATION IN NUMBERS OF SHARES.
Allocation of Employer Stock and accountings with respect to the Employer
Stock Account shall be in numbers of whole and fractional shares.
(iii) DEFINITIONS.
(A) PARTICIPATING COMPENSATION. "Participating
Compensation" means the Participant's Compensation for services while a
Participant in Covered Employment during the Plan Year.
(B) COMPENSATION. "Compensation" means an Employee's W-2
wages as provided in Regulations under Code Section 415 plus Elective
Deferrals and any amount that is excluded from gross income pursuant to
Code Section 125 minus any amounts paid or reimbursed by the Employer for
moving expenses incurred by the Employee.
(1) ELECTIVE DEFERRALS. "Elective Deferrals" means
the elective contributions made for the Participant and any other portion
of the Participant's income deferred and excluded from current taxation
under Code Sections 402(e)(3) (a cash or deferred 401(k) profit-sharing
plan); 402(h)(1)(B) (a simplified employee pension plan); or 403(b) (a
tax-sheltered annuity).
(2) ADJUSTED ANNUAL COMPENSATION LIMIT. Compensation
for any Plan Year may not exceed the Annual Compensation Limit. "Annual
Compensation Limit" means $150,000 (as adjusted under Code
Section 401(a)(17)(B)).
For the short Plan Year, the Annual Compensation
Limit shall be multiplied by a fraction. The numerator of the fraction is
the number of months in the short Plan Year and the denominator is 12.
(b) RESTORATION OF FORFEITURE. If a forfeited amount is required to
be restored under Article 6, that amount shall be allocated to the account
from which the amount was forfeited.
5.3 STOCK DIVIDENDS ON EMPLOYER STOCK, STOCK SPLITS, ETC.
Each Participant's Employer Stock Account will be credited with the
Participant's share of Employer Stock (including fractional shares)
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representing (i) stock dividends paid on Employer Stock, (ii) a stock
split, or (iii) stock received by the Trustee as a result of a
reorganization or other recapitalization of the Employer. However, stock
dividends or other Employer Stock received with respect to Employer Stock
that is encumbered, or held in a suspense account, pursuant to Section 9.4
shall be added to the encumbrance or suspense account, and shall be
released and allocated as provided in Section 9.4 and Section 5.2.
5.4 FORFEITURES.
Forfeitures shall be allocated first to restore any forfeited amounts
that are required to be restored under Article 6. Any remaining
forfeitures shall be allocated as an additional ESOP Contribution.
(a) TIMING. Forfeitures shall occur as of the dates specified in
Article 6. Forfeitures that occur during a Plan Year shall be allocated as
of the end of that Plan Year.
(b) ANNUAL ADDITION LIMITATION. Any forfeitures that cannot be
allocated under (a) due to the limitation on Annual Additions shall be held
and applied pursuant to Section 5.8.
(c) INVESTMENT EXPERIENCE. Any forfeiture that occurs during a Plan
Year shall not share in the investment experience of the trust for the
period from the preceding Valuation Date through the date as of which the
forfeiture is allocated.
(d) LIMITATION ON ALLOCATION. Forfeitures shall not be allocated to
the account of any forfeiting Participant.
5.5 ALLOCATION OF EARNINGS, LOSSES, AND EXPENSES; REVALUATION OF ASSETS.
(a) EARNINGS, LOSSES, AND EXPENSES. As soon as administratively
feasible after each Valuation Date, the Trustee shall credit each
Participant's accounts other than Employer Stock Accounts with the
proportion of the net earnings of such accounts and of the net gain from
the disposition of assets of such accounts since the last Valuation Date,
as the balance of each such account bears to the aggregate balances of all
such accounts before allocations of contributions and forfeitures; and
shall charge each such account with any net loss suffered by the trust
since the last Valuation Date, and any expenses paid from the trust since
the last Valuation Date, and any expenses paid from the trust, in the same
proportion and manner as earnings and gains are credited to those accounts.
Interest paid under an installment contract for the purchase of Employer
Stock or on an Exempt Loan used to purchase Employer Stock shall not be
deemed an expense under this provision.
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(b) REVALUATION OF TRUST.
(i) EMPLOYER STOCK. As soon as administratively feasible after
each Valuation Date, the Administrator shall determine Fair Market Value of
the Employer Stock and shall certify to the Trustee the Fair Market Value.
The Trustee shall thereupon adjust its records to reflect Fair Market
Value. Determination of Fair Market Value shall be made in good faith and
in accordance with this plan and with Regulations under ERISA
Section 3(18). For purposes of this provision, Fair Market Value of
Employer Stock that is readily tradeable on an established securities
market shall be the daily closing price for Employer Stock, as reported on
a national securities exchange, as of the last business day coinciding with
or immediately preceding the Valuation Date. Fair Market Value of Employer
Stock that is not readily tradeable on an established securities market
shall be determined annually by an independent appraiser selected by the
Employer, meeting requirements similar to those described in Code
Section 170(a)(1), in accordance with Code Section 401(a)(28) and
Regulations. The Employer shall cooperate with, and allow access to and
furnish relevant information to, the independent appraiser for purposes of
performing the valuation of Employer Stock.
(ii) OTHER ACCOUNTS. After the allocations described in
(a) above, the Trustee shall revalue, at fair market value, the assets of
the trust other than the Employer Stock held in the Employer Stock
Accounts. The amount in each account other than the Employer Stock Account
shall be adjusted as of the Valuation Date so that the ratio of the
adjusted amount in each such account to the total assets of all such
accounts equals the ratio of the amount in the account before adjustment to
the total assets of all such accounts before adjustment.
(c) NO EARNINGS ON DISTRIBUTIONS. A Participant's ESOP Account shall
not be credited with any interest or earnings for the period between the
last Valuation Date preceding the date of distribution and the date of
distribution.
5.6 SALE OR PURCHASE OF EMPLOYER STOCK.
Each Participant's Employer Stock Account and Other Investments
Account will be adjusted as of the applicable Valuation Date as follows:
(a) SALE OF EMPLOYER STOCK. Each Participant's Employer Stock
Account will be debited with the Participant's share of Employer Stock
(including fractional shares) sold by the trust from that account for any
reason. The proceeds received from the sale shall be credited directly to
the Participant's Other Investments Account. If unallocated Employer Stock
is sold, the proceeds, as necessary, shall be used to repay, or prepay, the
Exempt Loan by which such stock was purchased. After payment of the Exempt
Loan, if additional proceeds from the sale of such Employer Stock remain,
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the proceeds shall be considered earnings and gains of the trust on ESOP
Accounts, and shall be allocated in the proportion that the Employer Stock
in the Participant's Employer Stock Account with respect to that Exempt
Loan bears to the aggregate Employer Stock in all Participant's Employer
Stock Accounts with respect to that Exempt Loan.
(b) PURCHASE OF EMPLOYER STOCK. If the Trustee purchases Employer
Stock with cash rather than with the proceeds of an Exempt Loan, each
Participant's Other Investments Account will be debited with the
Participant's share of the purchase price for Employer Stock purchased by
the trust, and the shares purchased (including fractional shares) shall be
credited directly to the Participant's Employer Stock Account.
5.7 LIMITATION ON ANNUAL ADDITIONS.
The total Annual Additions for a Participant for any Limitation Year
shall not exceed the lesser of the Percentage Limit or the Defined
Contribution Dollar Limit.
(a) ANNUAL ADDITIONS. "Annual Additions" for a Participant for a
Limitation Year means the sum of:
(i) EMPLOYER CONTRIBUTIONS AND FORFEITURES. The Participant's
share of the Employer's contributions (including allocations under a
simplified employee pension) and forfeitures;
(ii) AFTER-TAX EMPLOYEE CONTRIBUTIONS. The Participant's after-tax
employee contributions;
(iii) POST-RETIREMENT MEDICAL BENEFITS ACCOUNT. For purposes
of the Defined Contribution Dollar Limit and for Limitation Years beginning
after December 31, 1985, amounts allocated to the separate post-retirement
medical benefits account of a Key Employee, as defined in Code
Section 419A(d)(3), under a welfare benefit fund, as defined in Code
Section 419(e);
(iv) INDIVIDUAL MEDICAL BENEFIT ACCOUNT. For purposes of the
Defined Contribution Dollar Limit, contributions allocated for Limitation
Years beginning after March 31, 1984, to an individual medical benefit
account in a pension or annuity plan, as defined in Code Section 415(l)(2);
(v) EXCESS DEFERRALS. For the Limitation Years during which
these amounts were contributed, excess deferrals that are not distributed
to a Participant by the first April 15th following the end of the
Participant's taxable year;
(vi) EXCESS CONTRIBUTIONS AND EXCESS AGGREGATE CONTRIBUTIONS.
For the Limitation Years during which these amounts were contributed,
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excess contributions and excess aggregate contributions whether or not
distributed to a Participant; and
(vii) EXCESS ANNUAL ADDITION APPLIED. An excess Annual
Addition from the preceding Limitation Year applied to reduce the Employer
Contributions for the current Plan Year.
(b) DEFINED CONTRIBUTION DOLLAR LIMIT. "Defined Contribution Dollar
Limit" means $30,000 (or 25% of the defined benefit dollar limit under Code
Section 415(b)(1)(A), if greater).
(c) PERCENTAGE LIMIT. "Percentage Limit" means 25% of the
Participant's Section 415 Compensation from the Employer for the Limitation
Year.
(d) ESOP EXCEPTIONS. If no more than one-third of the contributions
deductible under Code Section 404(a)(9) under this plan for a Plan Year are
allocated to the accounts of Highly Compensated Employees, the following
special rules shall apply:
(i) CERTAIN FORFEITURES NOT ANNUAL ADDITIONS. Forfeitures of
Employer Stock acquired by this plan with a loan described in Code
Section 404(a)(9)(A) and allocated to a Participant's account shall not be
deemed an Annual Addition.
(ii) EMPLOYER CONTRIBUTION TO PAY INTEREST NOT ANNUAL
ADDITION. The Employer Contribution for a Plan Year deductible under Code
Section 404(a)(9)(B) and not allocated to a Participant's account shall not
be deemed an Annual Addition.
(e) SECTION 415 COMPENSATION. "Section 415 Compensation" means a
Participant's earned income, wages, salaries, and fees for professional
services and other amounts received for personal services actually rendered
in the course of employment with the Employer (including, but not limited
to, commissions paid to salesmen, compensation for services based on a
percentage of profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, reimbursements, and expense allowances) actually paid (or
accrued for Limitation Years beginning before January 1, 1992) and
includable in gross income for the Limitation Year.
(i) EXCLUSIONS. Section 415 Compensation excludes:
(A) CONTRIBUTIONS. Contributions (including Elective
Deferrals for Plan Years beginning before January 1, 1998) to a plan of
deferred compensation that are not includable in the Employee's gross
income for the taxable year in which contributed, or contributions under a
simplified employee pension plan to the extent the contributions are
deductible by the Employee, or any distributions from a plan of deferred
compensation;
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(B) NONQUALIFIED STOCK OPTION. Amounts realized from the
exercise of a nonqualified stock option, or when restricted stock (or
property) held by the Employee either becomes freely transferable or is no
longer subject to substantial risk of forfeiture;
(C) QUALIFIED STOCK OPTION. Amounts realized from the
sale, exchange, or other disposition of stock acquired under a qualified
stock option;
(D) OTHER AMOUNTS. Other amounts that received special tax
benefits (including any amount that is excluded from gross income under
Code Section 125), or contributions made by the Employer (whether or not
under a salary reduction agreement) toward the purchase of an annuity
described in Code Section 403(b) (whether or not the amounts are actually
excludable from the gross income of the Employee); and
(E) ADJUSTED ANNUAL COMPENSATION LIMIT. Amounts in excess
of the Annual Compensation Limit.
(ii) ESTIMATION. Until Section 415 Compensation is actually
determinable, the Employer may use a reasonable estimate of Section 415
Compensation. As soon as administratively feasible, actual Section 415
Compensation shall be determined.
(f) LIMITATION YEAR. "Limitation Year" means the Plan Year.
(i) CHANGE. If the Limitation Year is amended to a different
12-month period, the new Limitation Year must begin on a date within the
Limitation Year in which the amendment is made.
(ii) SHORT LIMITATION YEAR. If a short Limitation Year is
created by an amendment, the maximum Annual Addition shall not exceed the
Defined Contribution Dollar Limit multiplied by a fraction. The numerator
of the fraction is the number of months in the short Limitation Year and
the denominator is 12.
(g) RELATED EMPLOYER AGGREGATION. All plans maintained by the
Employer and any Related Employer, all contributions under those plans, and
Section 415 Compensation from the Employer and any Related Employer shall
be aggregated for purposes of applying this section and the remainder of
this article.
5.8 EXCESS ADDITIONS.
(a) BEFORE CONTRIBUTION. If the Annual Additions limitation will be
exceeded for a Participant, the Employer Contribution for the Plan Year may
be reduced before payment to the Trustee to the maximum amount permitted
under Section 5.7.
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(b) AFTER CONTRIBUTION. If the Annual Additions limitation would be
exceeded for a Participant as a result of an allocation of forfeitures, a
reasonable error in estimating a Participant's annual Section 415
Compensation, a reasonable error in determining the amount of Elective
Deferrals permissible under the limits of Code Section 415, or other facts
and circumstances permitted by the Commissioner of Internal Revenue, the
excess amount shall be reallocated to the accounts of all other
Participants for whom the additional allocation would not exceed the Annual
Additions limitation.
(i) SUSPENSE ACCOUNT. If reallocation of the excess would cause
all Participants to exceed the Annual Additions limitation, the remaining
excess shall be held in a suspense account.
(ii) REDUCE EMPLOYER CONTRIBUTION. The amount in the suspense
account shall be used to reduce an Employer Contribution for the next Plan
Year and shall be allocated before other Annual Additions are allocated.
(iii) PLAN TERMINATION. If this plan is terminated or
contributions to this plan are discontinued while there is a suspense
account, the allocation shall be made as of the end of the next Plan Year
or, if earlier, as of the date of termination or discontinuance.
(iv) NO INVESTMENT EXPERIENCE. No investment experience shall be
allocated to a suspense account.
(c) NO DISTRIBUTION. Excess Annual Additions held in a suspense
account may not be distributed to Participants or former Participants.
ARTICLE 6
DETERMINATION OF VESTED PERCENTAGE
6.1 YEAR OF VESTING SERVICE.
An Employee shall be credited with a "Year of Vesting Service" for
each Vesting Period in which the Employee completes at least 1,000 Hours of
Service, including Vesting Periods before the Employee became a Participant
and Vesting Periods before the original effective date of this plan.
The "Vesting Period" for determining Years of Vesting Service and the
existence of Breaks in Service under this article shall be the Plan Year.
For a short Plan Year, the Vesting Period shall be the 12-month period
ending on the last day of the short Plan Year.
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6.2 VESTED PERCENTAGE.
(a) VESTING SCHEDULE. A Participant's vested percentage with respect
to the Participant's ESOP Account shall be determined as follows:
YEARS OF VESTING SERVICE VESTED PERCENTAGE
Less than 1 year -0-
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years or more 100%
(b) NORMAL RETIREMENT DATE, DEATH, OR DISABILITY. The vested
percentage with respect to the ESOP Account of a Participant who is
employed by the Employer or a Related Employer on the Participant's Normal
Retirement Date or whose employment terminates due to death or Total
Disability shall be 100%.
6.3 CASHOUT.
(a) PARTIAL VESTING. If a Participant's employment terminates and
the Participant's entire Vested Account Balance is distributed before the
last day of the second Plan Year after the Plan Year during which the
Participant's employment terminated, any nonvested amount shall be
forfeited as of the date of distribution.
If the Participant is reemployed by the Employer or a Related
Employer before the Participant has five consecutive Breaks in Service and
repays the entire amount distributed before the earlier of five years after
the date the Participant is reemployed or the date the Participant has five
consecutive Breaks in Service, the forfeited amount shall be restored to
the Participant's account as of the date of repayment.
(b) ZERO VESTING. If a Participant's employment terminates and the
Participant's vested percentage under Section 6.2(a) is zero, any nonvested
amount shall be forfeited as of the date that the Participant's employment
terminates. If the former Participant is reemployed by the Employer or a
Related Employer before the Participant has five consecutive Breaks in
Service, the forfeited amount shall be restored as of the date the
Participant is reemployed.
6.4 FIVE BREAKS IN SERVICE.
(a) CANCELLATION OF VESTING SERVICE. If an Employee whose vested
percentage under Section 6.2(a) is zero has five consecutive Breaks in
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Service, the Participant's Years of Vesting Service credited before the
Breaks in Service shall be permanently canceled.
(b) FORFEITURE OF NONVESTED AMOUNT. Unless previously forfeited, a
Participant's nonvested amount shall be permanently forfeited as of the end
of the Vesting Period that includes the Participant's fifth consecutive
Break in Service.
6.5 DEATH AFTER TERMINATION/LOST RECIPIENT.
(a) DEATH AFTER TERMINATION. If a Participant whose vested
percentage under Section 6.2(a) is not 100% dies after termination of
employment but before the Participant has five consecutive Breaks in
Service, the remaining Vested Account Balance shall be distributed pursuant
to Article 7. Any nonvested amount that was not forfeited previously shall
be forfeited as of the date of the Participant's death.
(b) LOST RECIPIENT. If a Person entitled to a payment cannot be
located, the Participant's account shall be forfeited as of the date the
Administrator certifies to the Trustee that the Person cannot be located.
The Participant's Vested Account Balance shall be restored to the
Participant's account if the Person entitled to the payment submits a
written election of method of payment.
6.6 VESTED ACCOUNT BALANCE AND NONVESTED AMOUNT.
(a) VESTED AMOUNT. "Vested Account Balance" as of the date of
determination means the balance in the Participant's account listed under
Section 6.2(a) multiplied by the Participant's vested percentage.
(b) NONVESTED AMOUNT. The remainder shall be the Participant's
nonvested amount.
(c) PARTIAL DISTRIBUTION OF VESTED ACCOUNT BALANCE. If part of the
Participant's Vested Account Balance is distributed or reduced for any
reason before the Participant's vested percentage is 100%, the remaining
amount in the affected account shall be maintained in a separate account.
The Participant's vested amount with respect to the separate account is
equal to P(AB + (R x D)) - (R x D), where P is the Participant's vested
percentage; AB is the separate account balance, after allocations and
revaluation, as of the end of the most recent Plan Year; D is the amount of
the distribution; and R is a fraction. The numerator of the fraction is
AB, and the denominator is the separate account balance remaining
immediately after the distribution. If a separate account is maintained,
it shall be merged into the Participant's regular account at the end of the
Plan Year in which the Participant's vested percentage under Section 6.2(a)
becomes 100%.
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ARTICLE 7
DISTRIBUTIONS
7.1 DISTRIBUTIVE EVENTS.
The following events shall permit distribution.
(a) NORMAL RETIREMENT DATE. A Participant's employment terminates at
or after the Participant's Normal Retirement Date. "Normal Retirement
Date" means the date the Participant attains age 65.
(b) DEATH. A Participant dies.
(c) TOTAL DISABILITY. A Participant suffers a Total Disability while
an Employee. "Total Disability" means the inability of the Participant due
to a physical or mental condition to perform the duties of the
Participant's employment. The Administrator may require that one or more
physicians (chosen or approved by the Administrator) certify whether or not
Total Disability exists. This certification shall be conclusive.
(d) OTHER TERMINATION OF EMPLOYMENT. A Participant's employment
terminates for any reason. A transfer between Covered Employment and any
other employment with the Employer, or a transfer between the Employer and
a Related Employer, is not a termination of employment.
(e) REQUIRED BEGINNING DATE. A Participant reaches the Participant's
Required Beginning Date.
(f) QDRO. This plan receives a QDRO and the Administrator directs
the Trustee to pay benefits to an alternate payee as set forth in the QDRO.
"QDRO" means a qualified domestic relations order, as defined in
Code Section 414(p), that is issued by a competent state court and that
meets the following conditions:
(i) ALTERNATE PAYEE. The alternate payee must be the Spouse or
former Spouse or a child or other dependent of the Participant.
(ii) REASON FOR DISTRIBUTION. The distribution must relate to
alimony, support of a child or other dependent, or a division of marital
property.
(iii) CONTENTS. The QDRO must contain the name and address
of the Participant and the alternate payee, the amount of the distribution
or percentage of the Participant's account to be distributed, the Valuation
Date as of which the amount or percentage is to be determined, and
instructions concerning the timing and method of distribution.
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(iv) RESTRICTIONS. A QDRO may not require (A) this plan to pay
more to the Participant and all alternate payees than the Participant's
Vested Account Balance; (B) a method, commencement date, or duration of
payment not otherwise permitted under this article; and (C) cancellation of
the prior rights of another alternate payee.
(g) PLAN TERMINATION; PARTIAL TERMINATION. Termination of this plan
with respect to all Participants or partial termination with respect to
Participants affected by the partial termination.
7.2 VALUATION FOR DISTRIBUTION.
The Participant's Vested Account Balance shall be determined as of the
Valuation Date coinciding with or most recently preceding the date of the
distribution. The amount distributed shall not include investment
experience for the period from the Valuation Date to the date of
distribution. Separate valuations shall be performed for segregated
accounts that are commingled for investment and any accounts that are
separately invested without commingling. The amount to be distributed
shall be reduced by the amount of any distribution or withdrawal during the
period from the Valuation Date to the date of distribution.
7.3 METHODS AND FORM OF DISTRIBUTION.
(a) METHODS OF DISTRIBUTION. Distribution shall be made in one of
the following methods:
(i) LUMP SUM. Except for a transfer under (ii) below,
distribution shall be made in a single payment or, if necessary, in one or
more payments within one taxable year of the recipient.
(ii) TRANSFERS TO ANOTHER PLAN. The Trustee shall transfer the
distributee's eligible rollover distribution to the trustee or custodian of
an eligible retirement plan for the benefit of the distributee.
(A) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover
distribution is a distribution of any portion of the balance to the credit
of a 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 that the distribution is required under Code
Section 401(a)(9); and the portion of any distribution that is not
includable in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
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(B) ELIGIBLE RETIREMENT PLAN. An eligible retirement plan
is an individual retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section 408(b), an annuity
plan described in Code Section 403(a), or a qualified trust described in
Code Section 401(a), that accepts the distributee's eligible rollover
distribution. An eligible rollover distribution to the surviving Spouse
may be transferred only to an individual retirement account or individual
retirement annuity.
(C) DISTRIBUTEE. A distributee includes a Participant or
former Participant, the Participant's surviving Spouse, and the
Participant's Spouse or former Spouse who is an alternate payee under a
QDRO.
(b) FORM OF DISTRIBUTION.
(i) RIGHT TO DEMAND DISTRIBUTION IN EMPLOYER STOCK. A
Participant or Beneficiary entitled to a distribution of benefits may
demand that the ESOP Account be paid in Employer Stock, except that the
value of a fractional share may be paid in cash.
(A) SOURCE OF SHARES. The Trustee may meet a current
distribution obligation by use of the Participant's Employer Stock Account
only, by use of the Participant's Other Investments Account to acquire
Employer Stock, or by partial use of each account.
(B) ACQUISITION OF ADDITIONAL SHARES. A balance in the
Participant's Other Investments Account will be applied to acquire the
maximum number of whole shares of Employer Stock, at the then Fair Market
Value, as necessary to meet the current distribution obligation to the
Participant. Employer Stock to be acquired by use of the Participant's
Other Investments Account may be acquired from any source, including the
Employer Stock Accounts of all other Participants.
(C) METHOD OF ACQUISITION FROM OTHER PARTICIPANT'S EMPLOYER
STOCK ACCOUNTS. If Employer Stock is acquired from the Employer Stock
Accounts of all other Participants, the acquisition shall be from all other
Participants' Employer Stock Accounts at the then Fair Market Value. The
Employer Stock Accounts shall be debited on a reasonable,
nondiscriminatory, pro rata basis. The amount applied from the
Participant's Other Investments Account to acquire the Employer Stock shall
be credited to all other Participants' Other Investments Accounts on the
same reasonable, nondiscriminatory, pro rata basis.
(ii) FAILURE TO DEMAND PAYMENT IN EMPLOYER STOCK. If a
Participant or Beneficiary does not demand payment of benefits in Employer
Stock, after notification by the Administrator of that right, benefits may
be paid in cash, in Employer Stock, or in a combination of both, as
directed by the Administrator. If benefits are to be paid in cash, the
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amount payable shall be the net proceeds received by the Trustee with
respect to the sale of Employer Stock from the Participant's Employer Stock
Account, plus the value of the Participant's Other Investments Account.
(iii) LIMITATION ON ELECTION TO RECEIVE DISTRIBUTIONS IN
EMPLOYER STOCK. A Participant may not elect to receive Employer Stock with
respect to amounts that were liquidated and reinvested under Section 9.8.
7.4 MINIMUM DISTRIBUTION.
The minimum amount that must be distributed for each calendar year
beginning with the calendar year in which the Participant attains age
70 1/2 ("Minimum Distribution") shall be equal to the greater of the
minimum required distribution under Regulations Section 1.401(a)(9)-1 or
the minimum distribution incidental benefit under Regulations
Section 1.401(a)(9)-2.
7.5 TIME OF DISTRIBUTION.
(a) IMMEDIATE DISTRIBUTION. Distribution shall begin on the Earliest
Distribution Date.
(i) EARLIEST DISTRIBUTION DATE. "Earliest Distribution Date"
means the first date on which distribution is administratively feasible
following the end of the Plan Year that includes the distributive event or,
if later, after election of distribution. If the Participant's employment
terminates before the Participant's Normal Retirement Date or the date the
Participant suffers a Total Disability or dies, the "Earliest Distribution
Date" with respect to Employer Stock in the Participant's ESOP Account
shall be the first day on which distribution is administratively feasible
following the last day of the fifth Plan Year after the Plan Year in which
the Participant's employment terminated.
(ii) EXCEPTIONS.
(A) CERTAIN FINANCED SECURITIES. If the Participant's
employment terminates before the Participant's Normal Retirement Date or
the date the Participant suffers a Total Disability or dies, the portion of
the Participant's Employer Stock Account consisting of Employer Stock
purchased with an Exempt Loan shall be distributed as soon as
administratively feasible after the last day of the Plan Year in which the
Exempt Loan is repaid in full, if later than the date described in (a)(i)
above.
(B) $3,500 OR LESS. The Vested Account Balance of a
Participant whose employment terminates for any reason other than death and
whose Vested Account Balance, including any earlier distribution, is $3,500
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or less, shall be distributed as soon as administratively feasible
following the end of the Plan Year in which the Participant's employment
terminates. The Participant may elect earlier payment.
(C) DEATH. The time of distribution following death of a
Participant is determined under Section 7.6.
(D) PLAN TERMINATION/PARTIAL TERMINATION. Distribution to
affected Participants shall be made as soon as administratively feasible
after termination or partial termination of this plan and receipt of
applicable approvals.
(b) NORMAL DISTRIBUTION DATE. Distribution due to termination of
employment for any reason other than death shall begin not later than 60
days after the end of the Plan Year that includes the Participant's Normal
Retirement Date or, if later, the end of the Plan Year in which employment
terminates. If the amount cannot be ascertained at that date, distribution
retroactive to that date shall be made within 60 days of the date that the
amount can be determined.
A Participant may not elect to defer distribution beyond the date
described in the preceding paragraph.
(c) REQUIRED DISTRIBUTION. Distribution to a Participant shall begin
not later than the Participant's Required Beginning Date.
(i) REQUIRED BEGINNING DATE. "Required Beginning Date" means:
(A) NON-5% OWNER. For a Participant who is not a 5% Owner,
the April 1 after the end of the calendar year in which the later of the
following occurs:
(1) TERMINATION. The Participant's termination of
employment with the Employer and all Related Employers; and
(2) AGE 70 1/2. The Participant attains age 70 1/2.
(B) 5% OWNER. For a Participant who is a 5% Owner, the
April 1 following the end of the calendar year in which the Participant
attains age 70 1/2. For a Participant who is still employed by the
Employer or a Related Employer upon attaining age 70 1/2 and who becomes a
5% Owner after attaining age 70 1/2, the April 1 following the end of the
calendar year in which the Participant becomes a 5% Owner.
(C) DETERMINATION OF 5% OWNER. For purposes of this
definition, a Participant is treated as a 5% Owner if the Participant is a
5% Owner during the Plan Year in which the Participant attains age 66 1/2
or any later Plan Year. Once distribution begins to a 5% Owner, it shall
continue even if the Participant ceases to be a 5% Owner.
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(ii) PAYMENT. Unless paid during the calendar year in which the
Participant attains age 70 1/2 (or the calendar year before the
Participant's Required Beginning Date, if later) the Minimum Distribution
for that calendar year shall be paid not later than the Required Beginning
Date. The Minimum Distribution for each subsequent calendar year shall be
paid by the last day of the calendar year for which it is required.
7.6 DEATH OF PARTICIPANT.
(a) DEATH BEFORE REQUIRED BEGINNING DATE. If the Participant dies
before the Required Beginning Date, distribution shall be made to the
Participant's Beneficiary as soon as administratively feasible following
the end of the Plan Year in which the Participant dies or, if later, after
election of distribution.
(i) SPOUSE AS BENEFICIARY. If the Spouse is the Beneficiary,
the Spouse may elect distribution at any time after the Participant's
death. Distribution must be made on or before the last day of the calendar
year in which the Participant would have attained age 70 1/2 or, if later,
the last day of the calendar year following the calendar year in which the
Participant died. If the Spouse dies before distribution is made,
distribution shall be made under (ii) as though the Spouse were the
Participant.
(ii) DEFAULT RULE. Distribution of the Participant's Vested
Account Balance shall be paid in a lump sum no later than the last day of
the calendar year that includes the fifth anniversary of the Participant's
death. If the Beneficiary dies before complete distribution of the
Participant's Vested Account Balance, the remainder to be distributed shall
be paid in a lump sum to the successor Beneficiary no later than the last
day of the calendar year that includes the fifth anniversary of the
Participant's death.
(b) DEATH AFTER REQUIRED BEGINNING DATE. If the Participant dies
after the Required Beginning Date, any unpaid amount must be paid to the
Beneficiary in a lump sum no later than the last day of the calendar year
after the calendar year in which the Participant died.
7.7 ELECTION OF METHOD AND TIME OF DISTRIBUTION.
(a) PERMITTED ELECTIONS. To the extent permitted under this article,
the Participant or other recipient may elect the method and time of
distribution.
(b) REQUIRED CONSENT. If the distributive event is termination of
employment prior to the Participant's Normal Retirement Date for any reason
other than death, distribution shall not be made without the Participant's
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consent. The consent shall be given by an election of distribution. An
election of distribution shall be made within the 90-day period ending on
the Benefit Starting Date.
(i) NOTICE. When consent is required, the Participant shall be
notified of the right to elect or defer distribution. The written notice
shall provide an explanation of the material features and relative values
of the available methods of distribution. The notice shall be provided at
least 30 days and not more than 90 days before the Benefit Starting Date.
(ii) BENEFIT STARTING DATE. "Benefit Starting Date" means the
first day of the first period for which an amount is distributable in any
form. Generally, the Benefit Starting Date is the date on which
distribution is due when all conditions and requirements for distribution
have been met.
(iii) EXCEPTION TO CONSENT REQUIREMENT. The Participant's
consent is not required with respect to a distribution when the
Participant's Vested Account Balance, including any earlier distribution,
is $3,500 or less.
(iv) WAIVER OF NOTICE PERIOD. A distribution may commence less
than 30 days after the notice required under (i) above is given, provided:
(A) RIGHT TO 30-DAY PERIOD. The Administrator clearly
informs the Participant that the Participant has a right to a period of at
least 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) ELECTION. The Participant, after receiving the notice,
affirmatively elects a distribution.
(c) ELECTION REQUIREMENTS.
(i) TIME. The election shall be made not later than the date
distribution begins or, if earlier, the date when distribution must begin.
An election may be revoked or changed before distribution begins.
(ii) FORM. An election shall be made in a form acceptable to the
Administrator.
(d) FAILURE TO ELECT. If a Person fails to elect (or multiple
recipients cannot agree):
(i) METHOD. The method of distribution shall be a lump sum.
(ii) TIME. Distribution shall begin under Section 7.5(b) if the
Participant is alive or under Section 7.6(a)(ii) if the Participant died.
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(e) ADDITIONAL INFORMATION. The Administrator may require additional
election, application or information forms required by law or deemed
necessary or appropriate by the Administrator in connection with any
distribution.
(f) NO REDUCTION OR DELAY OF DISTRIBUTION. An election shall not
cause a reduction in the minimum amount or delay the required time of
payment of any Minimum Distribution or any distribution required after the
death of a Participant.
7.8 DESIGNATION OF BENEFICIARY.
A Participant may designate or change a Beneficiary by filing a signed
designation with the Administrator in the form approved by the
Administrator. The Participant's Will is not effective for this purpose.
(a) BENEFICIARY. "Beneficiary" means the Person designated by the
Participant to receive the Participant's benefits under this plan after the
Participant's death.
(b) SPOUSAL CONSENT. If a married Participant designates or changes
a Beneficiary other than the Spouse without the Spouse's consent to and
acknowledgment of the effect of the designation, the designation shall be
void. A consent that permits further designations without consent is void
unless the Spouse expressly and voluntarily permits such designations
without any further spousal consent. The consent may be limited to a
specific Beneficiary and a specific method of distribution.
(i) CONSENT. Consent by the Spouse is irrevocable. The consent
and acknowledgment must be witnessed by an individual named by the
Administrator or by a notary public. If the Spouse cannot be located or if
other circumstances set forth in Regulations issued under Code Section 417
exist, the consent need not be obtained.
(ii) SPOUSE. "Spouse" means the Participant's husband or wife at
any specified time. A former Spouse shall not be a Spouse except to the
extent specified in a QDRO under Code Section 414(p).
(iii) SUCCESSOR BENEFICIARIES. A Participant may designate
one or more successor Beneficiaries to the Spouse without the Spouse's
consent.
(iv) CHANGE OF MARITAL STATUS. A Beneficiary designation by a
Participant will not be effective upon the Participant's subsequent
marriage unless the Spouse consents to the designation and acknowledges the
effect of the designation.
(c) FAILURE TO DESIGNATE. If a Participant fails to designate a
Beneficiary, the Beneficiary shall be the Spouse at the time of the
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Participant's death and the Spouse's estate with respect to any amount
remaining undistributed at the subsequent death of the Spouse. If the
Participant is not survived by a Spouse, the Beneficiary for each date of
distribution shall be the first of the following classes with a living
member on the date of distribution:
(i) CHILDREN. The Participant's children, including those by
adoption, dividing the distribution equally among the Participant's
children with the living issue of any deceased child taking their parent's
share by right of representation;
(ii) PARENTS. The Participant's parents, dividing the
distribution equally if both parents are living;
(iii) BROTHERS AND SISTERS. The Participant's brothers and
sisters, dividing the distribution equally among the Participant's living
brothers and sisters.
(d) DEATH OF BENEFICIARY. If distribution is being made to a
Beneficiary who dies before complete distribution, the remaining amount in
the account shall be paid to the successor Beneficiary. If distribution is
made to more than one Beneficiary, distribution shall continue to the
survivor or survivors of them, and any remaining amount in the account upon
the death of the last survivor shall be paid to the successor Beneficiary.
Survivors shall include the issue of any deceased child who shall take the
deceased child's share by right of representation.
(e) NO BENEFICIARY. If a deceased Participant has no surviving
Beneficiary under (c) above on the date a distribution is payable, the
remaining balance shall be paid to the Participant's estate.
(f) DETERMINATION. The Administrator shall apply the rules of this
section to determine the proper Persons to whom payment should be made.
The decision of the Administrator shall be final and binding on all
Persons.
7.9 FACILITY OF PAYMENT.
A payment under this section shall fully discharge the Employer and
Trustee from all future liability with respect to that payment.
(a) INCAPACITY. If a recipient entitled to a payment is legally,
physically, or mentally incapable of receiving or acknowledging payment,
the Administrator may direct the payment to the recipient; to the
recipient's legal representative or any other Person who is legally
entitled to receive payments on behalf of the recipient under the laws of
the state in which the recipient resides; or by expending the payment
directly for the benefit of the recipient. A payment made to any Person
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other than the recipient shall be used for the recipient's exclusive
benefit.
(b) LEGAL REPRESENTATIVE. The Employer shall not be required to
commence probate proceedings or to secure the appointment of a legal
representative.
(c) DETERMINATION. The Employer may act upon affidavits in making
any determinations. In relying upon the affidavits or having made a
reasonable effort to locate any Person entitled to payment, the Employer
shall be authorized to direct payment to a successor Beneficiary or another
Person. A Person omitted from payment shall have no rights on account of
payments so made.
7.10 NOTICE OF PENALTIES.
The following penalties apply to distribution of, or failure to
distribute, certain amounts under this plan.
(a) DISTRIBUTION BEFORE AGE 59 1/2. A Participant who receives a
distribution before attaining age 59 1/2 may be liable for an additional
10% federal income tax on any portion of the distribution included in gross
income.
(b) EXCESS DISTRIBUTIONS. If a Participant or Beneficiary receives
excess distributions, as defined in Code Section 4980A(c), the Participant
or Beneficiary shall be subject to a 15% penalty tax on the excess
distributions.
(c) FAILURE TO RECEIVE A MINIMUM DISTRIBUTION. For a calendar year
in which a Participant or Beneficiary fails to receive the Minimum
Distribution under Code Section 401(a)(9), the recipient shall be subject
to an additional tax equal to 50% of the difference between the Minimum
Distribution and the amount the recipient actually received.
7.11 SPECIAL RULES--DISTRIBUTION OF EMPLOYER STOCK.
Upon distribution of Employer Stock that is not readily tradeable on
an established securities market, the following provisions shall apply.
(a) DISTRIBUTEE'S OPTION TO SELL BENEFIT SHARES. Upon distribution
of Employer Stock to a Participant or Beneficiary (or a donee, trustee, or
other Person, including an estate to whom the Employer Stock passes as a
result of a death), the recipient may elect to sell all or part of the
Employer Stock (the "Benefit Shares").
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(i) OPTION PERIOD: LAPSE. The option to sell the Benefit
Shares shall begin on the date of distribution and extend for a period of
the next 60 days. At the end of the period, the option will temporarily
lapse. After the end of the Plan Year in which the temporary lapse occurs,
and after the Employer Stock is valued as of the last day of that Plan
Year, each recipient who has not exercised the option to sell shall be
notified of the new Fair Market Value of the Benefit Shares. Each
recipient will then have a period of 60 days from the date of notification
to exercise the option to sell. If the option to sell is not exercised, it
shall lapse at the termination of the new 60-day period and shall not be
renewed.
(ii) WRITTEN NOTICE. Upon a written notice to the Employer of an
election to sell, the seller shall sell and the Employer shall purchase in
accordance with the provisions of (c) below.
(iii) LIMITATION. The 60-day option periods shall not run
during a period of time during which the Employer is unable to purchase the
Benefit Shares due to a state or federal law.
(iv) NONTERMINABLE. This option to sell, and the terms of sale
as set forth in (c) below, shall be nonterminable for the period of the
option, and shall continue in existence under this plan whether or not this
plan continues as an employee stock ownership plan and whether or not this
plan is discontinued.
(v) ASSIGNMENT. The Employer may assign the obligation to
purchase to the Trustee, with the agreement of the Trustee.
(b) RIGHT OF FIRST REFUSAL.
(i) NOTICE OF SALE OR TRANSFER. If a Participant or Beneficiary
should at any time intend to sell or exchange or otherwise transfer any
Benefit Shares, and if the Participant obtains a bona fide offer for the
purchase or exchange of the Benefit Shares, or if any of the Benefit Shares
should be the subject of a proposed assignment or transfer by way of gift,
bankruptcy, execution, hypothecation, or seizure and sale by legal process,
or upon the death of the Participant or Beneficiary, the Participant or
Beneficiary (or a creditor causing the proposed transfer) or the personal
representative of the estate of the Participant or Beneficiary shall
deliver to the Employer a written notice stating: (A) the name or names of
the proposed transferees; (B) the certificate number and number of the
Benefit Shares proposed to be transferred; (C) the proposed price (if a
sale transaction is contemplated); and (D) all other terms of the proposed
transfer. The Trustee shall have the right and option for a period of 14
days after receipt of the notice to purchase all of the Benefit Shares the
transfer of which is proposed.
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(ii) FAILURE TO EXERCISE OPTION. If the Trustee does not
exercise the option to purchase and if the proposed transfer is made within
20 days after the termination of the option to the Person or Persons in the
manner and upon the terms and conditions set forth in the written notice,
then the Benefit Shares may be so transferred and shall in the hands of the
transferee be free of all options, obligations, and restrictions provided
in this trust.
(iii) ADDITIONAL NOTICES OF SALE. If the Trustee does not
elect to exercise the option and if the proposed transfer is not made
within 20 days after the termination of the option, then the Benefit Shares
so proposed to be transferred may not be transferred without again giving
the notice to the Trustee and the Trustee again shall have the option to
purchase the Benefit Shares.
(iv) ASSIGNMENT. The Trustee may assign the option to purchase
to the Employer, with the consent of the Employer.
(c) TERMS OF PURCHASE. If the Trustee or the Employer becomes
obligated to purchase Benefit Shares pursuant to the provisions of either
(a) or (b) above, the terms of the purchase shall be as follows:
(i) DISTRIBUTEE'S OPTION TO SELL. If Benefit Shares are
purchased pursuant to the option granted under (a) above, the purchase
price shall be the Fair Market Value of the Benefit Shares, and shall be
paid in either a single lump-sum payment or in not less frequent than
annual installments. If a lump-sum payment is to be made, the payment
shall be paid within 30 days after the date the option is exercised. If
installment payments are to be made, each installment shall be as equal as
possible, and the first installment shall be paid within 30 days after the
date that the option is exercised. If installment payments are to be made,
interest at a reasonable rate shall be payable and the purchaser shall
grant the seller a security interest in the Benefit Shares being purchased
or in other adequate security. The installment period may not extend for
more than five years.
(ii) RIGHT OF FIRST REFUSAL. If Benefit Shares are purchased
pursuant to (b) above, the purchase price shall be the price stated in the
written notice of the proposed transfer, or if greater, the Fair Market
Value of the Benefit Shares. The terms of purchase shall be no less
favorable to the Participant or Beneficiary than the terms of the offer the
Participant or Beneficiary has received. If the proposed transfer by the
Participant or Beneficiary is not a sale transaction, the purchase price
shall be the Fair Market Value of the Benefit Shares, and the terms of
purchase shall be governed by the rules of (a)(i) above.
(iii) PROCEDURE ON CLOSING. At the time provided for the
payment or initial installment, the seller of Benefit Shares shall deposit
with the purchaser the certificates for the Benefit Shares, properly
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endorsed or accompanied by an appropriate stock power. At that time, the
purchaser shall deposit with the seller any required cash payment and, if
applicable, its executed promissory note representing any balance remaining
to be paid. Also at that time the Benefit Shares shall be subject to a
security interest in favor of the seller, as collateral for the payment of
the promissory note, or other adequate security shall be given to the
seller. All or a portion of the unpaid balance of a purchase price may be
prepaid by the purchaser at any time without penalty.
(iv) FAIR MARKET VALUE. "Fair Market Value" generally means the
value determined as of the most recent Valuation Date, pursuant to
Section 5.5(b)(i). However, in the case of a transaction under this
section between this plan and a disqualified person, as that term is
defined in Code Section 4975, "Fair Market Value" means the value as of the
date of the transaction.
(d) SECURITIES LAW. All plan provisions with respect to transactions
involving Employer Stock, including, but not limited to, its distribution
as a benefit and its repurchase or sale, are subject to and conditioned
upon compliance with applicable provisions of federal and state securities
laws or regulations. Without limiting the preceding sentence, no
certificate for shares of Stock shall be transferred to a Participant or
Beneficiary unless the shares, at the time of any issuance or transfer:
(i) are exempt, are the subject matter of an exempt transaction, or are
registered within the meaning of applicable federal or state securities
laws and regulations; and (ii) comply with the rules of any stock exchange
on which the Employer's shares may be listed. Unless an exemption from
registration is available, prior to or as soon as practicable after the
time when shares of Employer Stock would otherwise be deliverable to a
Participant or Beneficiary, the Employer will register the shares or
interest, as required under federal and/or state law. If the shares are
delivered to Participant or Beneficiary pursuant to a registration
exemption, the Participant or Beneficiary shall deliver to the Employer a
representation in writing signed by the Participant or the Participant's
representative, or by the Beneficiary, as the case may be, that the
Employer Stock will be held indefinitely unless it is subsequently
registered under state and federal law, or unless an exemption from the
registration is available. A stock certificate issued by the Employer
pursuant to a registration exemption shall bear a legend and statement that
the Employer deems advisable to assure compliance with this plan and with
federal and state laws and regulations that shall be in substantially the
form set forth in (e) below.
(e) STOCK CERTIFICATE LEGEND. Benefit share certificates of Employer
Stock distributed to a Participant or Beneficiary shall have the following
legend endorsed on the certificates:
THIS CERTIFICATE, AND DISPOSITION OF IT, IS SUBJECT TO THE TERMS
OF THE DAKOTA TELECOMMUNICATIONS GROUP, INC. EMPLOYEE STOCK
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OWNERSHIP PLAN, INCLUDING A RIGHT OF FIRST REFUSAL TO PURCHASE
THE SHARES REPRESENTED BY THIS CERTIFICATE.
7.12 DISTRIBUTION OF CASH DIVIDENDS.
If an Exempt Loan used to purchase Employer Stock is not fully repaid,
cash dividends on Employer Stock purchased with the proceeds of that Exempt
Loan will be used to repay such Exempt Loan. If the Exempt Loan used to
purchase the Employer Stock has been repaid or the cash dividends are not
used to repay the Exempt Loan, the Trustee shall distribute cash dividends
paid on the Employer Stock allocated to a Participant's account directly to
the Participant. Cash dividends paid on Employer Stock which was not
purchased with an Exempt Loan may be distributed directly to the
Participant. Cash dividends to be distributed to Participants shall be so
paid not later than 90 days after the end of the Plan Year during which
they were paid to the trust.
ARTICLE 8
ADMINISTRATION OF THE PLAN
8.1 DUTIES, POWERS, AND RESPONSIBILITIES OF THE EMPLOYER.
(a) REQUIRED. The Employer shall be responsible for:
(i) EMPLOYER CONTRIBUTIONS.
(A) AMOUNT. Determining the amount of Employer
Contributions;
(B) PAYMENT. Paying, ceasing, or suspending Employer
Contributions (including additional contributions if necessary to correct
an error in allocation, vesting, or distribution of a Participant's
interest); and
(C) COMPLIANCE. Determining that the amount and time of
Employer Contributions comply with this plan;
(ii) AGENT FOR SERVICE OF PROCESS. Serving as the agent for
service of process;
(iii) TRUSTEE. Appointing the Trustee;
(iv) AMENDMENT. Amending this plan and trust;
(v) PLAN TERMINATION. Revoking this instrument and terminating
this plan and trust; and
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(vi) MERGERS; SPIN-OFFS. Merging this plan with another
qualified retirement plan maintained by the Employer or dividing this plan
into multiple plans.
(b) DISCRETIONARY. The Employer may exercise the following
responsibilities:
(i) INVESTMENT MANAGER. Appointing one or more Investment
Managers, who shall have the power to acquire, manage, or dispose of any or
all trust assets subject to:
(A) FUNCTIONS. The functions of the Investment Manager
shall be limited to those specified services and duties for which the
Investment Manager is engaged, and the Investment Manager shall have no
other duties, obligations, or responsibilities under this plan or trust;
(B) QUALIFICATION. "Investment Manager" means a Person
that is a registered investment adviser under the Investment Advisors Act
of 1940, a bank (as defined in the Investment Advisors Act of 1940), or an
insurance company licensed to manage, acquire, and dispose of assets of
qualified retirement plans under the laws of more than one state; and
(C) ACKNOWLEDGMENT. A prospective Investment Manager must
acknowledge in writing that it is a fiduciary with respect to this plan and
trust;
(ii) CUSTODIAN. Appointing one or more agents to act as
custodian of trust assets transferred to the custodian;
(iii) ALTERNATE ADMINISTRATOR. Designating a Person other
than the Employer as the Administrator; and
(iv) PAYMENT OF ADMINISTRATIVE EXPENSES. Paying administrative
expenses incurred in the operation, administration, management, and control
of this plan or the trust. These expenses shall be the obligation of the
trust unless paid by the Employer.
8.2 EMPLOYER ACTION.
An action required to be taken by the Employer shall be taken by its
board of directors or by an officer authorized to act on behalf of the
Employer.
8.3 PLAN ADMINISTRATOR.
"Administrator" means the Employer or a Person designated by the
Employer. The Administrator is a named fiduciary for operation and
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management of this plan and shall have the responsibilities conferred by
ERISA upon the "Administrator" as defined in ERISA Section 3(16).
8.4 ADMINISTRATIVE COMMITTEE.
(a) APPOINTMENT. The Employer may, but shall not be required to,
appoint an administrative committee to perform the duties involved in the
daily operation of this plan.
(b) AGENT; POWERS AND DUTIES. The administrative committee is an
agent of the Employer. The administrative committee shall have the powers
and duties delegated to it by the Administrator.
(c) NOT FIDUCIARY. Except to the extent the administrative committee
is expressly delegated a fiduciary responsibility with respect to this
plan, the administrative committee will be responsible to the Employer for
its actions and will not be a named fiduciary for operation and management
of this plan.
(d) MEMBERSHIP. The number of members of the administrative
committee shall be determined by the Employer. The Employer shall appoint
the members of the administrative committee and may remove or replace them
at any time.
(e) RECORDS. The administrative committee shall keep records of its
proceedings.
(f) ACTIONS. The administrative committee shall act by a majority of
its members then in office. Action may be taken either by a vote at a
meeting or in writing without a meeting. Actions of the administrative
committee may be evidenced by written instrument executed by the chairman
or the secretary of the administrative committee.
(g) REPORT TO ADMINISTRATOR. The administrative committee shall
report to the Administrator when requested with respect to the
administration, operation, and management of this plan.
(h) COMPENSATION. Any member of the administrative committee who is
an Employee shall serve without compensation.
(i) CONFLICT OF INTEREST. Any member of the administrative committee
who is a Participant shall not vote or act on a matter that relates solely
to that Participant. If that Participant is the only member of the
administrative committee, the necessary action shall be exercised by the
Administrator.
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8.5 DUTIES, POWERS, AND RESPONSIBILITIES OF THE ADMINISTRATOR.
Except to the extent properly delegated, the Administrator shall have
the following duties, powers, and responsibilities and shall:
(a) PLAN INTERPRETATION. Interpret all provisions of this instrument
(including resolving an inconsistency or ambiguity or correcting an error
or an omission);
(b) PARTICIPANT RIGHTS. Subject to Section 8.10, determine the
rights of Participants and Beneficiaries under the terms of this plan and
communicate that information to the Trustee;
(c) LIMITS; NONDISCRIMINATION TESTS; TOP-HEAVY TESTS. Be responsible
for determining (i) that this plan complies with all limitations and
nondiscrimination tests under the Code and Regulations; and (ii) whether or
not this plan is a Top-Heavy Plan for any Plan Year;
(d) ALLOCATIONS AND VESTING. Determine which Participants are
entitled to a share of the Employer Contribution and other available
amounts for a Plan Year, the amount of each eligible Participant's
Participating Compensation for the Plan Year, the amount of the Employer
Contribution to be allocated to each eligible Participant, the amount and
disposition of an excess Annual Addition, and a Participant's vested
percentage;
(e) ERRORS IN PARTICIPANTS' ACCOUNTS. Correct (to the extent
possible, by making adjustments to the accounts) an error, including (but
not limited to) errors in allocations of the Employer Contribution or
investment experience, or in determination of vesting or distribution of a
Participant's interest;
(f) CLAIMS AND ELECTIONS. Establish or approve the manner of making
an election, designation, application, claim for benefits, and review of
claims;
(g) BENEFIT PAYMENTS. Direct the Trustee as to the recipient, time
payments are to be made, and the elected form of distribution;
(h) QDRO DETERMINATION. Establish procedures to determine whether or
not a domestic relations order is a QDRO, to notify the Participant and any
alternate payee of this determination, and to administer distributions
pursuant to a QDRO;
(i) ADMINISTRATION INFORMATION. Obtain to the extent reasonably
possible all information necessary for the proper administration of this
plan;
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(j) RECORDKEEPING. Establish procedures for and supervise the
establishment and maintenance of all records necessary and appropriate for
the proper administration of this plan;
(k) REPORTING AND DISCLOSURE. Prepare and (i) file annual and
periodic reports required under ERISA and Regulations; and (ii) distribute
disclosure documents including (but not limited to) the summary plan
description, a form permitting the recipient to reject federal income tax
withholding from a distribution, a notice informing the recipient of the
requirements and effects of lump-sum, five-year averaging or of a
qualifying rollover under the Code, the summary annual report, Form 5500
series, requested and required benefit statements, and notices to Employees
of applications for determination;
(l) PENALTIES; EXCISE TAX. Report and pay any penalty tax or excise
taxes incurred by this plan or the Employer in connection with this plan on
the proper tax form designated by the Internal Revenue Service and within
the time limits specified for the tax form;
(m) ADVISERS. Employ attorneys, actuaries, accountants, clerical
employees, agents, or other Persons who are necessary for operation,
administration, and management of this plan;
(n) EXPENSES, FEES, AND CHARGES. Present to the Trustee for payment
(if not paid by the Employer) or reimbursement (if advanced by the
Employer) all reasonable and necessary expenses, fees and charges,
including fees for attorneys, actuaries, accountants, clerical employees,
agents, or other Persons, incurred in connection with the administration,
management, or operation of this plan;
(o) NONDISCRIMINATION. Apply all rules, policies, procedures, and
other acts without discrimination among Participants;
(p) BONDING. Review compliance with the bonding requirements of
ERISA; and
(q) OTHER POWERS AND DUTIES. Exercise all other powers and duties
necessary or appropriate under this plan, except those powers and duties
allocated to another named fiduciary.
8.6 DELEGATION OF ADMINISTRATIVE DUTIES.
The powers and duties of the Employer and the Administrator set forth
in Sections 8.1 and 8.5 may be delegated to another fiduciary.
(a) IN WRITING. The written delegation shall specify (i) the date of
the action and the effective date of the delegation; (ii) the
responsibility delegated; (iii) the name, office, or other reference of
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each fiduciary to whom the responsibility is delegated; and (iv) if a
responsibility is delegated to more than one fiduciary, the allocation of
the responsibility among the fiduciaries.
(b) ACCEPTANCE OF RESPONSIBILITY. The delegation shall be
communicated to the fiduciary to whom the responsibility is assigned, and
written acceptance of the responsibility shall be made by the fiduciary. A
fiduciary shall retain the responsibility until the fiduciary resigns or
rejects the responsibility in writing, or the Administrator takes a
superseding action.
(c) CONFLICT. If a fiduciary's powers or actions conflict with those
of the Administrator, the powers of and actions of the Administrator will
control.
8.7 INTERRELATIONSHIP OF FIDUCIARIES; DISCRETIONARY AUTHORITY.
A Person may serve in more than one fiduciary capacity with respect to
this plan and trust.
(a) PERFORMANCE OF DUTIES. Each fiduciary shall act in accordance
with this plan and trust. Each fiduciary shall be responsible for the
proper exercise of its responsibilities.
(b) RELIANCE ON OTHERS. Except as required by ERISA Section 405(b),
each fiduciary may rely upon the action of another fiduciary and is not
required to inquire into the propriety of any action.
(c) DISCRETIONARY AUTHORITY OF FIDUCIARIES. Each fiduciary shall
have full discretionary authority in the exercise of the powers, duties,
and responsibilities allocated or delegated to that fiduciary under this
instrument.
8.8 COMPENSATION; INDEMNIFICATION.
An Employee fiduciary who is compensated on a full-time basis by the
Employer shall not receive compensation from this plan, except for
reimbursement of expenses, unless permitted under a prohibited transaction
exemption issued by the Department of Labor. The Employer shall indemnify
and hold harmless each member of the Board of Directors, each of its
Employees, and each other Person (except a fiduciary independent of the
Employer), to whom responsibilities for the operation and administration of
this plan have been assigned or fiduciary duties have been delegated from
any and all claims, loss, damages, expense, and liability arising from any
action or failure to act. Indemnification shall not be required if a
Person's action or inaction is judicially determined to be due to gross
negligence or willful misconduct of the Person. The Employer may purchase
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and maintain liability insurance covering itself, any Related Employer, and
any Person against part or all of any claim, loss, damage, expense, and
liability arising from the performance or failure to perform any power,
duty, or responsibility with respect to this plan and trust.
8.9 FIDUCIARY STANDARDS.
Each fiduciary shall act solely in the interest of Participants and
Beneficiaries:
(a) PRUDENCE. With the care, skill, and diligence of a prudent
Person;
(b) EXCLUSIVE PURPOSE. For the exclusive purpose of providing
benefits and paying expenses of administration; and
(c) PROHIBITED TRANSACTION. To avoid engaging in a prohibited
transaction under the Code or ERISA unless an exemption for the transaction
is available or obtained.
8.10 CLAIMS PROCEDURE.
The Administrator shall determine all issues arising from the
administration of this plan.
(a) INITIAL DETERMINATION. Upon application by a Participant or
Beneficiary, the Administrator shall make an initial determination and
communicate the determination to the Participant or Beneficiary within 90
days after the application. If the initial determination requires a longer
period, the Administrator shall notify the Participant or Beneficiary that
the 90-day period is extended to 180 days.
(b) METHOD. The decision of the Administrator shall be in writing.
The decision shall set forth (i) the decision and the specific reason for
the decision; (ii) specific reference to the plan provisions on which the
decision is based; (iii) a description of additional material, information,
or acts that may change or modify the decision; and (iv) an explanation of
the procedure for further review of the decision.
(c) FURTHER REVIEW. Within 60 days of receipt of the initial written
decision, the Participant or Beneficiary filing the original application,
or the applicant's authorized representative, may make a request for
redetermination by the Administrator. The applicant (or the authorized
representative) may review all pertinent documents and submit issues,
comments, and arguments.
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(d) REDETERMINATION. Within 60 days of receipt of an application for
redetermination, unless special circumstances require a longer period of
time (but not longer than 120 days after receipt of the application), the
Administrator shall provide the applicant with its final decision, setting
forth specific reasons for the decision with specific reference to plan
provisions on which the decision is based.
8.11 PARTICIPANT'S RESPONSIBILITIES.
All requests for action of any kind by a Participant or Beneficiary
under this plan shall be in writing, executed by the Participant or
Beneficiary, and shall be subject to any other plan rules applicable to any
specific type of request.
ARTICLE 9
INVESTMENT OF FUNDS
9.1 INVESTMENT RESPONSIBILITY.
Except for investment in Employer Stock and to the extent investment
responsibility is expressly granted to an Investment Manager or a
Participant, the Trustee shall have sole and complete authority and
responsibility for the investment, management, and control of trust assets.
The administrative committee shall give the Trustee written direction with
respect to investment in Employer Stock.
9.2 AUTHORIZED INVESTMENTS.
To the extent the trust is not invested in Employer Stock under
Section 9.4, the trust may be invested and reinvested in common or
preferred stocks, bonds, mortgages, leases, notes, debentures, mutual
funds, guaranteed investment contracts and other contracts and funds of
insurance companies, other securities, and other real or personal property
including, without limitation, the investments described in (a) below.
(a) SPECIFIC INVESTMENTS.
(i) INTEREST-BEARING DEPOSITS. The trust may be invested in
deposits, certificates, or share accounts of a bank, savings and loan
association, credit union, or similar financial institution, including a
fiduciary, if the deposits bear a reasonable rate of interest, whether or
not the deposits or certificates are insured or guaranteed by an agency of
the United States Government.
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(ii) POOLED INVESTMENT FUNDS. The trust may be invested through
ownership of assets or shares in a common trust fund, pooled investment
fund, mutual fund, or other commingled investment, including any pooled or
common fund maintained by the Trustee or custodian, or affiliate of the
Trustee or custodian, that allows participation by a trust fund established
under a qualified retirement plan. For this purpose, the terms and
provisions of the declaration of trust or other governing documents through
which the common trust fund, pooled investment fund or mutual fund is
maintained are incorporated in, and made applicable to, this plan.
(b) UNALLOCATED FUNDS. An Employer Contribution or other amounts
held by the Trustee pending allocation may be held in cash or invested in
interest-bearing obligations maturing before the date the allocation is
required.
(c) RIGHT OF TRUSTEE TO HOLD CASH. The Trustee may hold a reasonable
portion of the trust in cash pending investment or payment of expenses and
distributions.
9.3 COMMINGLED INVESTMENT.
The trust may be commingled for investment without distinction between
principal and income.
9.4 INVESTMENTS--EMPLOYER STOCK.
This plan is designed to operate as an employee stock ownership plan
and to be invested primarily in Employer Stock. The Trustee shall use
available cash and other trust assets in ESOP Accounts to buy Employer
Stock from other stockholders or from the Employer, as directed by the
administrative committee. The Trustee may borrow funds or issue its
promissory note or notes to finance the purchase of Employer Stock.
(a) ACQUISITION LIMIT. The Trustee may acquire and hold Employer
Stock in an amount up to 100% of the market value of the ESOP Accounts.
(b) ADEQUATE CONSIDERATION. A purchase or sale of Employer Stock by
the Trustee shall be for not more than, or less than (as applicable),
adequate consideration and in accordance with this plan and with
Regulations under ERISA Section 3(18).
(c) NO COMMISSIONS. No commissions on the purchase or sale of
Employer Stock from or to a disqualified person, as defined in Code
Section 4975 or a party in interest, as defined in ERISA Section 3(14), may
be paid to any Person.
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(d) INDEBTEDNESS. A Securities Acquisition Loan or other extension
of credit ("Exempt Loan") to the trust shall bear a reasonable rate of
interest and shall be for a term certain. Collateral pledged to a creditor
by the trust shall consist solely of the Employer Stock purchased with the
borrowed funds (although the Employer may guarantee payment of the Exempt
Loan and may give security for such guaranty).
(e) SECURITIES ACQUISITION LOAN. "Securities Acquisition Loan" means
any loan that meets the requirements of Code Section 133.
(f) UNALLOCATED AND PLEDGED EMPLOYER STOCK. The Employer Stock shall
be maintained in a suspense account, if not pledged as collateral, and
shall be released from the suspense account or, if pledged as collateral,
shall be released from encumbrance as provided in (i) below.
(g) NO RECOURSE. Under the terms of an Exempt Loan, the creditor
shall be given no recourse against the trust, except with respect to the
collateral pledged.
(h) REPAYMENT OF LOAN. An Exempt Loan shall be repaid solely from
Employer Contributions (other than contributions in the form of Employer
Stock) and forfeitures, proceeds from the sale of unallocated shares of
Employer Stock purchased with the Exempt Loan, and from trust earnings on
such contributions or on the Employer Stock purchased with such Exempt
Loan, and the Employer Contributions shall be sufficient to enable the
trust to pay each and every installment of principal and interest when due,
even if no tax benefit results from the contributions.
(i) RELEASE OF PLEDGED EMPLOYER STOCK. An Exempt Loan must provide
that upon payment of a portion of the balance due, the creditor shall
release a Pro Rata Portion of the pledged collateral or, if not pledged as
collateral, a Pro Rata Portion of the Employer Stock shall be released from
the suspense account, as the Exempt Loan is paid. Employer Stock purchased
with each Exempt Loan shall be released separately.
(i) PRO RATA PORTION. "Pro Rata Portion" means the number of
pledged securities or number of shares in the suspense account held
immediately before release for the current Plan Year multiplied by a
fraction. The numerator of the fraction is the amount of principal and
interest paid during the Plan Year and the denominator is the sum of the
numerator and the remaining principal and interest to be paid under the
obligation in all future years. The number of future years shall be
determined without taking into account possible extensions or renewals of
the obligation. If the interest rate under the obligation is variable, the
interest to be paid in future years shall be computed by using the interest
rate applicable as of the end of the current Plan Year. If the collateral
or suspense account includes more than one class of Employer Stock, the
number of shares of each class to be released for a Plan Year must be
determined by applying the same fraction to each class.
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(ii) ALTERNATIVE DETERMINATION OF PRO RATA PORTION. At the
direction of the Administrator, Pro Rata Portion of securities may be
determined with reference solely to principal payments, but only if (A) the
obligation provides for annual payments of principal and interest at a
cumulative rate that is not less rapid at any time than level annual
payments of the amounts for 10 years, and (B) the interest included in any
payment is disregarded only to the extent that it would be determined to be
interest under standard loan amortization tables. This alternate
determination shall not be applicable from the time that, by reason of a
renewal, extension, or refinancing, the sum of the expired duration of the
obligation, plus any renewal period, extension period, or the duration of a
new obligation used to refinance the existing obligation, exceeds 10 years.
(iii) SPECIAL RELEASE RULE. Notwithstanding (i) and (ii)
above, to the extent provided in Section 5.2(a)(ii)(C), at the direction of
the Employer, the Trustee shall release additional shares of Employer Stock
for purposes of allocation to Participant accounts.
(j) PENDING INVESTMENT. Pending investment in Employer Stock, funds
may be invested and reinvested pursuant to Section 9.2.
9.5 PURCHASE FROM STOCKHOLDER.
As directed by the administrative committee, the Trustee shall enter
into a buy-sell agreement or agreements under the terms of which the
Trustee agrees to purchase the Employer Stock of a stockholder who is a
party to the agreement. A buy-sell agreement shall provide that the price
to be paid by the Trustee for the Employer Stock shall not exceed the fair
market value of the Employer Stock. The Trustee may not enter into a buy-sell
agreement to become effective upon the death of the stockholder, or at
some other future indefinite time.
9.6 STOCK DIVIDENDS, STOCK SPLITS, ETC.
Employer Stock received by the Trustee as a stock dividend or stock
split or as the result of a reorganization or other recapitalization of the
Employer shall be allocated under Section 5.3. If any rights, warrants, or
options are issued on Employer Stock held in the trust, the Trustee may
exercise them for the acquisition of additional shares of Employer Stock to
the extent cash is then available. Employer Stock acquired in this manner
shall be treated as Employer Stock bought by the Trustee for the net price
paid. If any rights warrants, or options on Employer Stock that are not
exercised shall be sold by the Trustee, the proceeds shall be treated as a
current cash dividend received on Employer Stock.
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9.7 VOTING OF EMPLOYER STOCK.
(a) PARTICIPANT DIRECTION. Each Participant shall have the right to
direct the Trustee as to the manner in which all Employer Stock held in the
Participant's ESOP Account shall be voted. The Trustee shall total the
fractional shares of all Participants who have directed the vote in the
same manner and shall cast the largest number of whole votes possible from
the total of the fraction. Any remaining fraction shall be disregarded.
(b) NOTIFICATION. The Employer shall notify the Trustee and
Participants when voting rights are to be exercised and, within periods as
required by law or Employer charter or bylaws for other shareholders, shall
furnish the Trustee and Participants with information similar to that
furnished to other shareholders of the Employer.
(c) PROXY SOLICITATION. Management and others may solicit and
exercise proxies from Participants to the same extent as authorized for
other shareholders. Any such proxy will be in the form of an instruction
to the Trustee that will be voted by the Trustee in the manner indicated in
the Participant's direction, and will not be returned or disclosed to the
solicitor.
(d) UNALLOCATED SHARES. Unallocated shares of Employer Stock shall
be voted by the Trustee, as directed by the administrative committee.
(e) CONFIDENTIALITY. The Trustee may not divulge information with
respect to any Participant's directions under (a) above to any Person,
including the Employer.
9.8 DIVERSIFICATION OF INVESTMENTS.
Upon the request of a Participant who has attained at least age 55 and
has at least ten years of participation in this plan, the Administrator may
direct the Trustee to liquidate up to 25% of the number of shares of
Available Employer Stock allocated to the Participant. If the Participant
is a participant in the 401(k) plan maintained by the Employer, the
Administrator shall direct the Trustee to transfer the proceeds to that
plan to be held, administered, and distributed in accordance with the terms
of that plan. If the Participant is not a participant in the 401(k) plan
maintained by the Employer, the proceeds shall be reinvested in investments
described in (f) below.
(a) AVAILABLE EMPLOYER STOCK. "Available Employer Stock" means
Employer Stock acquired by or contributed to this plan, and held in the
Participant's ESOP Account. Employer Stock acquired by or contributed to
this plan will not be Available Employer Stock if the Fair Market Value of
the Employer Stock allocated to the eligible Participant's ESOP Account as
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of the Valuation Date immediately preceding the first day the Participant
is eligible to make an election under this section is $500 or less.
(b) TIMING OF DIRECTION. The direction to liquidate and reinvest
Available Employer Stock under this provision may be given during the first
90 days after the last day of each Plan Year in the Qualified Election
Period. During the first 90 days after the last day of the last (sixth)
Plan Year in the Qualified Election Period, the Participant may request the
liquidation and reinvestment of up to 50% of the number of shares of
Available Employer Stock allocated to the Participant.
(c) DETERMINATION OF NUMBER OF SHARES TO BE LIQUIDATED AND
REINVESTED. The total amount liquidated and reinvested at any time shall
not exceed 25% (or 50%) of the number of shares of Available Employer Stock
held allocated to the Participant, including shares of Available Employer
Stock previously liquidated and reinvested. Any fractional number of
shares to be liquidated and reinvested shall be rounded up to the next
highest whole number of shares.
(d) QUALIFIED ELECTION PERIOD. "Qualified Election Period" means the
six-year period beginning on the first day of the first Plan Year in which
the Participant attains at least age 55 and has at least ten years of
participation.
(e) VALUE OF SHARES TO BE LIQUIDATED AND REINVESTED. A direction to
liquidate Available Employer Stock and reinvest the proceeds in accordance
with this provision shall apply to the Available Employer Stock held in the
Participant's ESOP Account as of the last day of the Plan Year immediately
preceding the date of liquidation. Dividends paid on Available Employer
Stock before the date of distribution of the proceeds from the liquidation
of Available Employer Stock shall be reinvested under this section. No
interest or earnings shall be credited to the Available Employer Stock
liquidated for the period beginning on the last day of the Plan Year
immediately preceding the date of liquidation and the date of liquidation.
(f) INVESTMENTS. The Administrator shall direct the Trustee to make
available at least three investment options as required under Code Section
401(a)(28) and Regulations. All amounts transferred to any one of the
available investment funds shall be commingled for investment.
(g) INVESTMENTS ELECTION. The election to diversity the investment
of a Participant's account under this section shall be made by the eligible
Participant and shall be in writing. By the written election, the eligible
Participant may request that the value of the Available Employer Stock
which is to be diversified be invested in one, two, or three of the
available investments. The portion of the amount to be diversified that is
directed to any one investment must be a whole percentage of at least 25%
of the available amount. The Participant may change the investment
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election not more than once a year and only during the first 90 days of any
Plan Year.
(h) NO REINVESTMENT IN EMPLOYER STOCK. After available Employer
Stock held in a Participant's Employer Stock Account has been liquidated
and reinvested under this section, the Participant may not direct that the
balance in the investment funds under (e) above be reinvested in Employer
Stock.
9.9 TENDER OFFER.
The following provisions apply if any Person makes an offer to
purchase or solicits an offer to sell to that Person 1% or more of the
outstanding shares of Employer Stock ("Tender Offer").
(a) PARTICIPANT DIRECTION. Each Participant may direct the Trustee
to sell, offer to sell, exchange, or otherwise dispose of Employer Stock
held in the Participant's accounts, in accordance with the terms of the
Tender Offer. Participant direction shall be filed with the Trustee in the
form and at the time specified by the Trustee.
(b) TRUSTEE'S RESPONSE - VALID DIRECTIONS. The Trustee shall follow
all Participant's valid directions with respect to the potential sale,
offer, exchange, or other disposal of the Employer Stock held in the
Participant's accounts. The proceeds from the disposition of Employer
Stock under this section shall be credited to each Participant's applicable
account and shall be subject to the investment provisions applicable to
such account.
(c) INVALID DIRECTIONS OR NO DIRECTIONS. The Trustee shall treat
invalid directions from a Participant, and failure to give the Trustee
directions, as a direction by the Participant not to dispose of the
Employer Stock held in the Participant's accounts. The Trustee, or its
agent, shall determine the validity of directions from Participants.
(d) UNALLOCATED SHARES. The Trustee shall dispose of unallocated
shares of Employer Stock after a Tender Offer. The disposition of
unallocated shares shall be determined by multiplying the total number of
unallocated shares by a fraction. The numerator of the fraction is the
number of shares for which Participants gave valid directions for
disposition under (a) above, and the denominator is the total number of
shares for which the Participants gave valid directions.
(e) ALLOCATION OF PROCEEDS. The proceeds from any disposition of
Employer Stock held in the Participant's accounts as a result of a Tender
Offer shall be allocated to Participants' applicable accounts. Proceeds
from unallocated Employer Stock shall be used to repay the Exempt Loan with
which such Employer Stock was purchased.
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(f) CONFIDENTIALITY. The Trustee may not divulge information with
respect to any Participant's directions under (a) above to any Person,
including the Employer.
ARTICLE 10
ADMINISTRATION OF THE TRUST
10.1 DUTIES AND POWERS OF THE TRUSTEE.
(a) DUTIES OF THE TRUSTEE. The Trustee shall be a named fiduciary
having the following duties:
(i) CONTROL, MANAGE, AND INVEST ASSETS. To control, manage, and
invest trust assets;
(ii) ADMINISTRATOR'S INSTRUCTIONS. To carry out the instructions
of the Administrator; and
(iii) RECORDS; REPORTS. To maintain records and to prepare
and file reports required by law or Regulations, other than those for which
the Administrator is responsible under the terms of this plan.
(b) POWERS OF THE TRUSTEE. The Trustee shall have the following
powers:
(i) CONTROL PROPERTY. To hold, manage, improve, repair, and
control all property, real or personal, forming part of the trust;
(ii) ASSET INVESTMENT. To invest trust assets subject to the
limitations in this plan;
(iii) DISPOSITION OF ASSET. To sell, convey, transfer,
exchange, partition, lease for any term (even extending beyond the duration
of the trust), or otherwise dispose of a trust asset from time to time, in
the manner, for the consideration, and upon the terms and conditions that
the Trustee, in its discretion, determines;
(iv) AGENTS, ADVISERS, AND COUNSEL. To employ and to compensate
from the trust agents, advisers, and legal counsel reasonably necessary in
managing the trust and advising the Trustee as to its powers, duties, and
liabilities;
(v) CLAIMS. To prosecute, defend, settle, arbitrate,
compromise, or abandon all claims and demands in favor of or against the
trust, with or without the assistance of legal counsel;
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(vi) VOTE SECURITIES. To vote a corporation's stock or other
securities, either in person or by proxy, for any purpose;
(vii) EXERCISE TRUST RIGHTS. To exercise, refrain from the
exercise of, or convey a conversion privilege or subscription right
applicable to a trust asset;
(viii) COLLECTION. To demand, collect, and receive the
principal, dividends, interest, income, and all other moneys or other
property due upon trust assets;
(ix) CHANGE OF STRUCTURE. To consent to, oppose, or take another
action in connection with a bankruptcy, composition, arrangement,
reorganization, consolidation, merger, liquidation, readjustment of the
financial structure, or sale of assets of a corporation or other
organization, the securities of which may constitute a portion of the
trust;
(x) ISSUE, HOLD, OR REGISTER SECURITIES. To cause securities or
other property forming part of the trust to be issued, held, or registered
in the individual name of the Trustee, in the name of its nominee or in
such form that title will pass by delivery, provided that the records of
the Trustee shall indicate the ownership of the property or security;
(xi) BORROWING. To borrow money for the benefit of the trust
without binding itself individually, and to secure the loan by pledge,
mortgage, or creation of another security interest in the property;
(xii) DISTRIBUTIONS. To make distributions from the trust as
directed by the Administrator;
(xiii) EXPENSES. Unless paid by the Employer, to pay from the
trust all reasonable fees, taxes, commissions, charges, premiums and other
expenses, including expenses described in Section 8.5(n) and reasonable
fees of the Trustee and any other custodian or Investment Manager, incurred
in connection with the administration of this plan or trust;
(xiv) INSURE ASSETS. To insure trust assets through a policy
or contract of insurance;
(xv) INCORPORATE. To incorporate (or participate in an
incorporation) under the laws of any state for the purpose of acquiring and
holding title to any property that is part of the trust;
(xvi) DEPOSITORY. To keep on deposit with a custodian in the
United States any part of the trust; and
(xvii) OTHER ACTS. To perform all other acts the Trustee
deems necessary, suitable, or desirable for the control and management of
the trust and discharge of its duties.
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(c) LIMITATION ON DUTIES AND POWERS OF THE TRUSTEE. Unless properly
delegated and assumed by agreement of the Trustee, the Trustee shall not be
required to exercise a duty or power of the Employer, Administrator, or any
other fiduciary under this instrument.
If an Investment Manager is appointed to manage and invest some
or all of the trust assets, the Investment Manager shall have, and the
Trustee shall not have, the specified duties and powers with respect to
investment of trust assets subject to the Investment Manager's control.
The Trustee shall have no obligation or power to exercise discretionary
authority or control with respect to investment of the assets subject to
management by the Investment Manager or to render advice regarding the
investment of such assets, unless required by ERISA Section 405. The
Trustee shall not be liable for the investment performance of the assets
subject to management by the Investment Manager. The powers and duties of
the Trustee with respect to such assets shall be limited to the following:
(i) CUSTODY AND PROTECTION. To act as custodian of the trust
assets not transferred to the custody of the Investment Manager or another
custodian, and to protect the assets in its custody from loss by theft,
fire, or other cause;
(ii) ACQUISITIONS. To acquire additional assets for the trust in
accordance with the direction of the Investment Manager;
(iii) DISPOSITIONS. To sell or otherwise dispose of trust
assets in accordance with the direction of the Investment Manager;
(iv) ACCOUNTINGS. To account for and render accountings with
respect to the trust (except for assets held by another custodian);
(v) AUTHORIZED ACTIONS. To take authorized actions for and on
behalf of the trust in accordance with the direction of the Investment
Manager; and
(vi) MINISTERIAL AND CUSTODIAL TASKS. To perform other
ministerial and custodial tasks in accordance with the direction of the
Investment Manager.
If trust assets are transferred to another custodian, that
custodian shall have, and the Trustee shall not have, the foregoing duties
and powers with respect to those assets.
10.2 ACCOUNTING.
The Trustee shall maintain accurate and detailed records of all
investments, receipts, disbursements, and other transactions for the trust.
The records shall be available for inspection at all reasonable times by
Persons designated by the Administrator.
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(a) REPORT. As soon as administratively feasible after each
Valuation Date and each other date agreed to by the Administrator and the
Trustee, the Trustee shall prepare and furnish to the Administrator a
statement of account containing the information required by ERISA
Section 103(b)(3).
(b) JUDICIAL SETTLEMENT. A dispute concerning the Trustee's records
or statement of account may be settled by a suit for an accounting brought
by a Person having an interest in the trust.
The accounting and reporting responsibilities shall not apply with
respect to assets held by another custodian except to the extent assumed by
the Trustee at the direction of the Administrator.
10.3 APPOINTMENT, RESIGNATION, AND REMOVAL OF TRUSTEE.
The Trustee shall be at least one individual or eligible corporation
with trust powers appointed in writing by the Administrator and authorized
to act as Trustee by ERISA and the Code.
(a) RESIGNATION. The Trustee may resign with at least 60 days'
written notice to the Administrator, effective as of the date specified in
the notice.
(b) REMOVAL. The Administrator may remove the Trustee with at least
60 days' written notice to the Trustee, effective as of the date specified
in the notice.
(c) SUCCESSOR TRUSTEE. At least 10 days before the effective date of
the resignation or removal, the Administrator shall appoint a successor
Trustee by written instrument delivered to the Trustee with the acceptance
of the successor Trustee endorsed on the instrument.
(d) EFFECTIVE DATE OF RESIGNATION OR REMOVAL. The resignation or
removal of the Trustee shall not be effective before the appointment is
made and accepted by the successor Trustee. The parties, by agreement, may
waive the time requirements.
(e) PROCEDURE UPON TRANSFER. Upon the resignation or removal of the
Trustee, the Trustee shall pay from the trust all accrued fees and expenses
of the trust, including its own fees, and, as of the effective date of its
resignation or removal, shall deliver a statement of account to the
Administrator and the successor Trustee.
(f) EARLIER TRANSFER. In order to facilitate the prompt transfer of
fiduciary responsibility and trust assets to the successor Trustee, the
Administrator and the Trustee may agree upon a procedure by which the
Trustee shall deliver all trust assets (less a reasonable reserve for fees
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and expenses) to the successor Trustee as soon as administratively feasible
after receipt of notice of appointment of the successor Trustee and
acceptance of trust by the successor Trustee. The Administrator and the
Trustee may agree to the transfer of trust assets to the successor Trustee
pending preparation and approval of the final trust accountings.
(g) FINAL TRANSFER. As soon as administratively feasible, the
Trustee shall deliver the remaining trust assets to the successor Trustee,
together with records maintained by the Trustee.
(h) IN KIND TRANSFER. The Trustee shall consult with the
Administrator concerning the liquidation of trust assets to be transferred
for the purpose of determining the feasibility of the transfer of certain
trust assets in kind before implementing the liquidation.
(i) LIMITATION ON LIABILITY OF SUCCESSOR. The successor Trustee
shall not be liable for the acts or omissions of any prior Trustee.
10.4 TRUSTEE ACTION.
Actions by a corporate Trustee shall be either by a resolution of its
board of directors or by a written instrument executed by one of its
authorized officers. Actions taken by any other Trustee shall be by a
written instrument executed by the Trustee.
10.5 EXCULPATION OF NONFIDUCIARY.
A transfer agent, brokerage, clearing house, insurance company, or any
other Person that is not a fiduciary with respect to this plan and who has
paid money or delivered property to the Trustee shall not be responsible
for its application or for determining the propriety of the actions of the
Trustee concerning the money or other property.
ARTICLE 11
AMENDMENT, MERGERS, SUCCESSOR EMPLOYER
11.1 AMENDMENT.
The Employer may amend this plan and trust. An amendment may be
retroactive or prospective, in the sole discretion of the Employer, except
where prohibited by ERISA or the Code. An amendment may be made without
the consent of any other Person, except that an amendment shall not:
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(a) EXCLUDE PARTICIPANT. Exclude an Employee who previously became a
Participant;
(b) REDUCE PARTICIPANT'S ACCOUNT. Decrease the amount credited to a
Participant's account;
(c) REDUCE VESTED PERCENTAGE. Reduce a Participant's vested
percentage, as of the later of the date of adoption of the amendment or the
effective date of the amendment;
(d) VESTING SCHEDULE. Modify the vesting schedule for a Participant
who was a Participant on the later of the effective date or the date of
adoption of the amendment, except to increase the Participant's vested
percentage;
(e) ELIMINATION OF PROTECTED BENEFITS. Eliminate any early
retirement benefits and retirement-type subsidy under
Code Section 411(d)(6)(B)(i) or any optional forms of distribution with
respect to benefits attributable to service earned before the amendment
except as may be permitted under Code Sections 401(a)(4) and 411; and
(f) ALTER TRUSTEE'S DUTIES. Alter the duties, responsibilities, or
liabilities of the Trustee without the consent of the Trustee.
11.2 MERGER OF PLANS.
This plan may be merged or consolidated, or its assets and liabilities
may be transferred, in whole or in part, to another qualified retirement
plan if:
(a) PRESERVATION OF ACCOUNT BALANCE. Each Participant's account
balance would be equal to or greater than the account balance the
Participant would have been entitled to receive if this plan had terminated
immediately before the merger, consolidation, or transfer.
(b) AUTHORIZATION. The Employer and any new or successor employer
authorize the merger, consolidation, or transfer.
11.3 SUCCESSOR EMPLOYER.
If an Employer is dissolved, merged, consolidated, restructured, or
reorganized, or if the assets of the Employer are transferred, this plan
and trust may be continued by the successor, and in that event, the
successor will be substituted for the Employer.
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ARTICLE 12
TERMINATION
12.1 RIGHT TO TERMINATE OR DISCONTINUE CONTRIBUTIONS.
The Employer reserves the right to revoke this instrument and
terminate this plan and trust, or to cease or suspend further
contributions.
12.2 AUTOMATIC TERMINATION.
This plan shall automatically terminate, or partially terminate when
applicable, and contributions to the trust shall cease upon the Employer's
legal dissolution, or upon its adjudication as bankrupt or insolvent, or
upon a general assignment by the Employer for the benefit of creditors, or
upon the appointment of a receiver for its assets, or when required by
ERISA or the Code.
12.3 DISCONTINUANCE OF CONTRIBUTIONS.
If the Employer determines that it is no longer possible or desirable
to make Employer Contributions to the trust, it may, without terminating
this plan, take appropriate action to permanently discontinue further
Employer Contributions. Upon discontinuance of Employer Contributions, the
accounts of all affected Participants shall be nonforfeitable. This plan
and trust will remain in force, and the Administrator and the Trustee will
continue to administer this plan and trust under its provisions except for
Employer Contributions.
12.4 EFFECT OF TERMINATION OR PARTIAL TERMINATION.
(a) NONFORFEITABILITY. Upon termination or partial termination of
this plan, accounts of affected Participants shall be nonforfeitable.
(b) DISTRIBUTION. The Administrator shall direct the Trustee to make
distributions to affected Participants under Article 7.
12.5 NO REVERSION OF ASSETS.
The Employer shall not receive an amount from the trust upon
termination, partial termination, or discontinuance of contributions.
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ARTICLE 13
GENERAL PROVISIONS
13.1 SPENDTHRIFT PROVISION.
An interest in the trust shall not be subject to assignment,
conveyance, transfer, anticipation, pledge, alienation, sale, encumbrance,
or charge, whether voluntary or involuntary, by a Participant or
Beneficiary except under a QDRO or as permitted in subsection (a).
(a) NOT SECURITY. An interest shall not provide collateral or
security for a debt of a Participant or Beneficiary or be subject to
garnishment, execution, assignment, levy, or to another form of judicial or
administrative process or to the claim of a creditor of a Participant or
Beneficiary, through legal process or otherwise, except under a voluntary
revocable assignment permitted by Regulation 1.401(a)-13.
(b) ATTEMPTS VOID. An attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge, or otherwise dispose of
benefits payable, before actual receipt of the benefits, or a right to
receive benefits, shall be void. The trust shall not be liable for, or
subject to, the debts, contracts, liabilities, engagements, or torts of a
Person entitled to benefits. The benefits and trust assets under this plan
shall not be considered an asset of a Participant or Beneficiary in the
event of insolvency or bankruptcy.
13.2 EFFECT UPON EMPLOYMENT RELATIONSHIP.
The adoption of this plan shall not create a contract of employment
between the Employer and an Employee, confer upon an Employee a legal right
to continuation of employment, limit or qualify the right of the Employer
to discharge or retire an Employee at will, or affect the right of the
Employee to remain in service after the Normal Retirement Date.
13.3 NO INTEREST IN EMPLOYER ASSETS.
Nothing in this plan and trust shall be construed to give an Employee,
Participant, or Beneficiary an interest in the assets or the business
affairs of the Employer, or the right to examine the books and records of
the Employer. A Participant's rights are solely those granted by this
instrument.
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13.4 CONSTRUCTION.
The singular includes the plural, and the plural includes the
singular, unless the context clearly indicates the contrary. Capitalized
terms have the meaning specified in this plan. If a term is not defined,
the term shall have the general, accepted meaning of the term.
Any period of time described in this plan shall consist of consecutive
days, months, or years, as appropriate.
13.5 SEVERABILITY.
If any provision of this plan is invalid, unenforceable, or
disqualified under the Code, ERISA, or Regulations, for any period of time,
the affected provisions shall be ineffective but the remaining provisions
shall be unaffected.
13.6 GOVERNING LAW.
This plan and trust shall be interpreted, administered, and managed in
compliance with the Code, ERISA, and Regulations. To the extent not
preempted by federal law, this plan and trust shall be interpreted,
administered, and managed in compliance with the laws of the State of South
Dakota.
13.7 NONDIVERSION.
The trust is established and shall be administered for the exclusive
benefit of Participants and their beneficiaries. The trust shall not be
diverted to other purposes unless this plan fails to qualify initially. If
this plan fails to qualify initially, (i) this plan shall terminate, and
(ii) Employer Contributions shall be returned to the Employer.
ARTICLE 14
TOP-HEAVY PLAN PROVISIONS
14.1 TOP-HEAVY DETERMINATION.
If this plan is or becomes a Top-Heavy Plan in a Plan Year, the
provisions of this article shall supersede all conflicting plan provisions.
(a) TOP-HEAVY PLAN. "Top-Heavy Plan" means this plan for a Plan Year
if:
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(i) NOT REQUIRED OR PERMISSIVE AGGREGATION GROUP. This plan is
not part of a Required Aggregation Group or a Permissive Aggregation Group,
and the Top-Heavy ratio exceeds 60%;
(ii) REQUIRED AGGREGATION GROUP. This plan is part of a Required
Aggregation Group (but not part of a Permissive Aggregation Group), and the
Top-Heavy Ratio for the Required Aggregation Group exceeds 60%; or
(iii) PERMISSIVE AGGREGATION GROUP. This plan is part of a
Permissive Aggregation Group, and the Top-Heavy Ratio for the Permissive
Aggregation Group exceeds 60%.
(b) CALCULATION. The calculation of the Top-Heavy Ratio and the
extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Code Section 416 and Regulations.
(i) DISREGARD CERTAIN EMPLOYEES. In calculating the Top-Heavy
Ratio, the account balance or accrued benefit of a Participant who was a
Key Employee in a prior year but is no longer a Key Employee or has not
performed services for an Employer maintaining this plan at any time during
the five-year period ending on the Determination Date(s) will be
disregarded.
(ii) OWNERSHIP. Ownership shall be determined under Code
Section 318 as modified by Code Section 416(i)(1)(B)(iii) without regard to
the aggregation rules under Code Section 414.
(iii) ROLLOVERS AND TRANSFERS. A distribution rolled over or
an amount transferred from this plan to another qualified retirement plan
of the Employer or a Related Employer shall not be included in the Present
Value of Accrued Benefits under this plan. A distribution rolled over or
an amount transferred from another qualified retirement plan of the
Employer or a Related Employer to this plan shall be included in the
Present Value of Accrued Benefits under this plan. If a rollover or
transfer to a qualified retirement plan of an unrelated employer was
initiated by the former Participant, it shall be deemed a distribution from
this plan. If a rollover or transfer from a qualified retirement plan of
an unrelated employer to this plan for a Participant was initiated by the
Participant, it shall not be included in the Present Value of Accrued
Benefits under this plan.
14.2 TOP-HEAVY DEFINITIONS.
For purposes of this article, the following terms have the stated
meanings:
(a) TOP-HEAVY RATIO. "Top-Heavy Ratio" means the ratio, as of this
plan's Determination Date, calculated by dividing the aggregate Present
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Value of Accrued Benefits of all Key Employees of each plan in the Required
Aggregation Group (and each other plan in the Permissive Aggregation Group,
if necessary or desirable) by the aggregate Present Value of Accrued
Benefits of all Participants under all plans in the Required (or
Permissive) Aggregation Group.
(b) PRESENT VALUE OF ACCRUED BENEFITS.
(i) THIS PLAN. "Present Value of Accrued Benefits" under this
plan means the account balances of all Participants and Beneficiaries
determined as of the Determination Date, including forfeitures reallocated
as of such Determination Date. The Present Value of Accrued Benefits
includes the amount of a distribution made from this plan during the Plan
Year that includes the Determination Date and any of the four preceding
Plan Years.
(ii) OTHER PLANS. The Present Value of Accrued Benefits shall be
determined with respect to, and pursuant to the provisions of, all
qualified retirement plans (including a simplified employee pension plan)
in the aggregation group.
(iii) UNPAID CONTRIBUTION. A contribution not paid as of a
Determination Date for any plan in the aggregation group shall be included
in the determination of the Present Value of Accrued Benefits as required
in Code Section 416 and Regulations.
(c) REQUIRED AGGREGATION GROUP. "Required Aggregation Group" means
all qualified retirement plans, including terminated plans, of the Employer
and each Related Employer in which at least one Key Employee participates,
or participated at any time during the five-year period ending on the
Determination Date, plus all other qualified retirement plans of the
Employer and each Related Employer, that enable one or more of the plans
covering at least one Key Employee to meet the requirements of Code
Sections 401(a)(4) or 410.
(d) PERMISSIVE AGGREGATION GROUP. "Permissive Aggregation Group"
means all qualified retirement plans, including terminated plans, if any,
of the Employer and each Related Employer that are part of a Required
Aggregation Group that includes this plan, plus any other qualified
retirement plan (designated by the Employer) of the Employer and each
Related Employer that is not part of the Required Aggregation Group but
that, when considered part of the Permissive Aggregation Group, does not
prevent the group from meeting the requirements of Code Sections 401(a)(4)
and 410.
(e) DETERMINATION DATE. For any Plan Year after the initial Plan
Year, "Determination Date" means the last day of the preceding Plan Year.
For the initial Plan Year, "Determination Date" means the last day of the
initial Plan Year.
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<PAGE>
(i) PRESENT VALUE OF ACCRUED BENEFITS. The Present Value of
Accrued Benefits are determined as of the most recent Top-Heavy Valuation
Date within the 12-month period ending on the Determination Date.
(ii) MULTIPLE PLANS. When aggregating plans, the Present Value
of Accrued Benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year.
(f) KEY EMPLOYEE. "Key Employee" means an Employee or former
Employee (including any deceased Employee or the Beneficiary of any
deceased Employee) who, under Code Section 416(i), is or was, during the
determination period (the Plan Year containing the Determination Date and
the four preceding Plan Years), one of the following:
(i) OFFICER. An officer of an Employer or Related Employer if
the officer's Section 415 Compensation exceeds 50% of the defined benefit
dollar limit under Code Section 415(b)(1)(A) (as adjusted under Code
Section 415(d)) for the Plan Year;
(ii) TOP 10 OWNERS. One of the 10 Employees owning the largest
interests, exceeding 1/2%, in an Employer or Related Employer if the
Employee's Section 415 Compensation exceeds $30,000 (or the Defined
Contribution Dollar Limit, if greater);
(iii) 5% OWNER. A 5% Owner; or
(iv) 1% OWNER; $150,000 COMPENSATION. A 1% owner, determined
under the definition of 5% Owner but replacing "5%" with "1%," whose
Section 415 Compensation exceeds $150,000.
Ownership under (ii) above, as well as under (iii) and (iv)
pursuant to the definition of 5% Owner, shall be determined separately for
each Employer and Related Employer. Compensation for (i), (ii), and (iv)
above for a Plan Year is determined without regard to the Annual
Compensation Limit. For Plan Years beginning before January 1, 1998, for
purposes of determining compensation under (i), (ii), and (iv) above,
compensation means Section 415 Compensation plus elective contributions
that are excluded from gross income by Code Sections 125, 402(e)(3),
402(h)(1)(B), or 403(b).
(g) TOP-HEAVY VALUATION DATE. "Top-Heavy Valuation Date" means, for
a defined contribution plan (including a simplified employee pension plan),
the date for revaluation of the assets to market value coinciding with, or
occurring most recently within the 12-month period ending on, the
Determination Date. For a defined benefit plan, the term means the most
recent date used for computing the plan costs for minimum funding purposes
(whether or not an actuarial valuation is performed during that Plan Year)
occurring within the 12-month period ending on the Determination Date.
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<PAGE>
14.3 MINIMUM ALLOCATION.
For each Plan Year in which this plan is or becomes a Top-Heavy Plan,
the Employer Contribution or Employer Stock allocation as a result of the
Employer Contribution and forfeitures allocated to the account of each
Participant who is not a Key Employee and who is employed on the last day
of the Plan Year shall be not less than the lesser of 3% of the
Participant's Section 415 Compensation, or the largest percentage of
Section 415 Compensation allocated to any Key Employee from all Employer
Contributions. A Participant who is not a Key Employee and whose
employment terminates during the Plan Year on or after the Participant's
Normal Retirement Date or due to death or Total Disability shall be
eligible for this minimum allocation.
The Employer has executed this instrument this 28th day of
July, 1997.
DAKOTA TELECOMMUNICATIONS
GROUP, INC.
By /s/Craig A. Anderson
Craig A. Anderson
Its Executive Vice President
EMPLOYER
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<PAGE>
Home Federal Savings Bank ("Trustee") accepts the duties, powers and
responsibilities of the Trustee as described in Articles 9 and 10 of the
Dakota Telecommunications Group, Inc. Employee Stock Ownership Plan.
Dated: July 28, 1997. HOME FEDERAL SAVINGS BANK
By /s/Mark S. Sivertson
Mark S. Sivertson
Its Senior Vice President and Trust
Officer
TRUSTEE
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<PAGE>
SCHEDULE A
ORIGINAL PLAN. Dakota Telecommunications Group, Inc., originally
established the Dakota Telecommunications Group, Inc. Employee Stock
Ownership Plan effective July 22, 1997.
218788-3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS
OF OPERATIONS OF DAKOTA TELECOMMUNICATIONS GROUP, INC. AND
SUBSIDIARIES FOR THE PERIOD ENDED SEPTEMBER 30, 1997, INCLUDED
IN ITS FORM 10-QSB, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,801,176
<SECURITIES> 0
<RECEIVABLES> 1,814,754
<ALLOWANCES> 343,000
<INVENTORY> 1,383,644
<CURRENT-ASSETS> 6,911,554
<PP&E> 37,257,050
<DEPRECIATION> 13,941,963
<TOTAL-ASSETS> 34,198,137
<CURRENT-LIABILITIES> 3,598,439
<BONDS> 25,715,348
<COMMON> 0
0
5,637,855
<OTHER-SE> 179,666
<TOTAL-LIABILITY-AND-EQUITY> 34,198,137
<SALES> 0
<TOTAL-REVENUES> 8,440,667
<CGS> 0
<TOTAL-COSTS> 9,717,047
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 791,920
<INCOME-PRETAX> (1,827,791)
<INCOME-TAX> (292,880)
<INCOME-CONTINUING> (1,534,911)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,534,911)
<EPS-PRIMARY> (1.56)
<EPS-DILUTED> (1.56)
</TABLE>
