<PAGE>
As filed with the Securities and Exchange Commission on June 15, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------
QUANTA SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2851603
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3555 TIMMONS LANE, SUITE 610
HOUSTON, TEXAS 77027
(713) 629-7600
(Address of registrant's principal executive offices)
STOCK OWNERSHIP PLAN OF
NORAM TELECOMMUNICATIONS, INC.
(Full Title of Plan)
-------------------
John R. Colson Copy to: Eric A. Blumrosen
Chief Executive Officer Gardere Wynne Sewell & Riggs, L.L.P.
3555 Timmons Lane, Suite 610 333 Clay Avenue, Suite 800
Houston, Texas 77027 Houston, Texas 77002-4086
(713) 629-7600 (713) 308-5533
(Name and address, including zip code, and telephone number,
including area code, of registrant's agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED (1) (2) SHARE (3) PRICE (1)(3) REGISTRATION FEE (3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.00001 par value 303,556 shares $13.719 $4,164,485 $1,229
=======================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
this Registration Statement also covers an indeterminate amount of
interests to be offered or sold pursuant to the employee benefit plan
described herein.
(2) The shares of Common Stock, $.00001 par value ("Common Stock"), of Quanta
Services, Inc., a Delaware corporation (the "Registrant"), being
registered hereby consist of shares held by the Trustee pursuant to Stock
Ownership Plan of NorAm Telecommunications, Inc. (the "Plan") for the
accounts of participants.
(3) Calculated pursuant to Rule 457(h), based on the average of the high and
low prices for Common Stock on June 8, 1998, as reported on The New York
Stock Exchange, Inc.
================================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10 PROSPECTUS
ITEM 1. PLAN INFORMATION.*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.*
*Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with
Rule 428 under the Securities Act of 1933, as amended, and the Note to Part
I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents filed by the Registrant with the Securities and
Exchange Commission (the "Commission") are incorporated by reference in this
Registration Statement:
(1) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (Commission File No. 001-13831), filed with the
Commission on March 31, 1998;
(2) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 (Commission File No. 001-13831), filed with the Commission
on May 6, 1998; and
(3) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A, as filed with the
Commission on January 28, 1998 (as amended by the Registrant's Amendment
No. 1 to Form 8-A filed with the Commission on February 5, 1998, and the
Registrant's Amendment No. 2 to Form 8-A filed with the Commission on
February 6, 1998).
In addition, all documents subsequently filed by the Registrant or the Plan
pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Securities Exchange Act
of 1934 prior to the filing of a post-effective amendment which indicates that
all securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing of such
documents. The consolidated financial statements and schedules incorporated by
reference in this registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated on their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Edward E. Rhyne, General Counsel for the Registrant, has rendered an
opinion as to the legality of the securities being registered hereby. Mr. Rhyne
holds options to purchase 60,000 shares of Common Stock, all of which are
exercisable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware General Corporation Law
- --------------------------------
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by
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<PAGE>
or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation, or is or was
serving at the request or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee, or agent of a corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL states that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee, or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative, or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit, or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.
Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity,
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<PAGE>
or arising out of his status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions of
Section 145.
Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee, or agent, and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
Section 102(b)(7) of the DGCL provides that a certificate of poration
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided such provision shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law, (iii) under Section 174 of DGCL, or (iv) for any transaction from which the
director derived an improper personal benefit.
Amended and Restated Certificate of Incorporation
- -------------------------------------------------
The Registrant's Amended and Restated Certificate of Incorporation provides
that a director of the Registrant shall not be personally liable to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability for unlawful payments of dividends or
unlawful stock repurchases or redemptions as provided for in Section 174 of the
DGCL. If the DGCL is amended to authorize the further elimination or limitation
of the liability of directors, then the liability of a director of the
Registrant, in addition to the limitation on personal liability described above,
shall be limited to the fullest extent permitted by the amended DGCL. Further,
any repeal or modification of such provision of the Amended and Restated
Certificate of Incorporation by the stockholders of the Registrant shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Registrant existing at the time of such repeal or
modification.
Bylaws
- ------
The Bylaws of the Registrant provide that the Registrant will indemnify and
hold harmless any director or officer of the Registrant to the fullest extent
permitted by applicable law, as in effect as of the date of the adoption of the
Bylaws or to such greater extent as applicable law may thereafter permit, from
and against all losses, liabilities, claims, damages, judgments, penalties,
fines, amounts paid in settlement, and expenses (including attorneys' fees)
whatsoever arising out of any event or occurrence related to the fact that such
person is or was a director or officer of the Registrant and further provide
that the Registrant may, but is not required to, indemnify and hold harmless any
employee or agent of the Registrant or a director, officer, employee or agent of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise who is or was serving in such capacity at the written
request of the Registrant; provided, however, that the Registrant is only
required to indemnify persons serving as directors, officers, employees, or
agents of the Registrant for the expenses incurred in a proceeding if such
person has met the standards of conduct that make it permissible under the laws
of the State of Delaware for the Registrant to indemnify the claimant for the
amount claimed, but the burden of proving such defense will be on the
Registrant. The Bylaws further provide that, in the event of any threatened or
pending action, suit, or proceeding in which any of the persons referred to
above is a party or is involved and that may give rise to a right of
indemnification under the Bylaws, following written request by such person, the
Registrant will promptly pay to such person amounts to cover expenses reasonably
incurred by such person in such proceeding in advance of its final disposition
upon the receipt by the Registrant of (i) a written undertaking executed by or
on behalf of such person providing that such person will repay the advance if it
is ultimately determined that such person is not entitled to be indemnified by
the Registrant as provided in the Bylaws and (ii) satisfactory evidence as to
the amount of such expenses.
Insurance
- ---------
The Registrant intends to maintain liability insurance for the benefit of
its directors and officers.
II-4
<PAGE>
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4.1 Stock Ownership Plan of NorAm Telecommunications, Inc., dated as of
December 17, 1996.
4.2 Stock Ownership Plan of NorAm Telecommunications, Inc., Amendment No.
1, executed August 15, 1997.
5.1 Opinion of Edward E. Rhyne, General Counsel of the Registrant.
5.2 Internal Revenue Service Determination Letter dated July 16, 1997.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Edward E. Rhyne (included as part of Exhibit 5.1).
24.1 Power of Attorney (set forth on the signature pages of this
Registration Statement).
ITEM 9. UNDERTAKINGS.
Registrant hereby undertakes that it will submit all amendments to the Plan
to the Internal Revenue Service ("IRS") in a timely manner, and that it will
make all changes required by the IRS in order to qualify the Plan under Section
401 of the Internal Revenue Code.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to
this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and
-------- -------
(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE>
The undersigned Registrant hereby further undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and each filing of the annual report of the
Plan pursuant to Section 15(d) of the Securities and Exchange Act of 1934) that
is incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of
--------------
1933, the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas, on the 15th day of
June, 1998.
QUANTA SERVICES, INC.
By: /s/ JOHN R. COLSON
--------------------------------------------
John R. Colson, Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints
John R. Colson and Edward E. Rhyne and each of them (with full power in each
of them to act alone), his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign and to file with the Commission
and the securities regulatory authorities of the several states registration
statements, any amendment or post-effective amendments or any and all other
documents in connection therewith, in connection with the registration under the
Securities Act of 1933, as amended, or the registration or qualification under
any applicable state securities laws or regulations, of interests in the Plan
and shares of Common Stock issuable pursuant to such Plan, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
either of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below in the City of Houston, State of Texas on the 15th
day of June, 1998.
Name Title
- ---- -----
/s/ JOHN R. COLSON Chief Executive Officer and director
- ------------------------------- (principal executive officer)
John R. Colson
/s/ JAMES H. HADDOX Chief Financial Officer
- ------------------------------- (principal financial and accounting
James H. Haddox officer)
/s/ VINCENT D. FOSTER Director
- -------------------------------
Vincent D. Foster
/s/ JOHN R. WILSON Director
- -------------------------------
John R. Wilson
/s/ TIMOTHY A. SOULE Director
- -------------------------------
Timothy A. Soule
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<PAGE>
Name Title
- ---- -----
/s/ JOHN A. MARTELL Director
- -------------------------------
John A. Martell
/s/ GARY A. TUCCI Director
- -------------------------------
Gary A. Tucci
/s/ JAMES R. BALL Director
- -------------------------------
James R. Ball
/s/ RODNEY D. PROTO Director
- -------------------------------
Rodney D. Proto
/s/ MICHAEL T. WILLIS Director
- ------------------------------
Michael T. Willis
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<PAGE>
The Plan. Pursuant to the requirements of the Securities Act of 1933, the
--------
Trustee of the Plan has duly caused this Registration Statement to be signed on
the Plan's behalf by the undersigned, thereunto duly authorized, in the City of
Santa Rosa, State of California, on the 15th day of June, 1998.
STOCK OWNERSHIP PLAN OF NORAM
TELECOMMUNICATIONS, INC.
By: /s/ DAVID RYAN
-----------------------------------
David Ryan, Trustee
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<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------ ------- ------------
4.1 Stock Ownership Plan of NorAm Telecommunications, Inc.,
dated as of December 17, 1996.
4.2 Stock Ownership Plan of NorAm Telecommunications, Inc.,
Amendment No. 1, executed August 15, 1997.
5.1 Opinion of Edward E. Rhyne, General Counsel of the Registrant.
5.2 Internal Revenue Service Determination Letter dated July 16, 1997.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Edward E. Rhyne (included as part of Exhibit 5.1).
24.1 Power of Attorney (set forth on the signature pages of this
Registration Statement).
II-10
<PAGE>
EXHIBIT 4.1
STOCK OWNERSHIP PLAN
of
NorAm TELECOMMUNICATIONS, INC.
Plan Document
TRUSTEES:
Edward R. McAyeal
Patrick A. McCloskey
TONKON, TORP, GALEN, MARMADUKE & BOOTH
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
Telephone: (503) 221-1440
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS................................................... 2
ARTICLE 2 PARTICIPATION................................................. 7
2.1 Eligibility Requirements...................................... 7
2.2 Commencement of Participation................................. 7
2.3 Change of Employment Status................................... 7
ARTICLE 3 CONTRIBUTIONS................................................. 8
3.1 Employer Contributions........................................ 8
3.2 Form and Timing of Contributions.............................. 8
3.3 Participant Contributions..................................... 8
3.4 No Rollover Contributions..................................... 8
3.5 Acquisition Loan.............................................. 9
ARTICLE 4 ACCOUNTS...................................................... 10
4.1 Participants' Accounts........................................ 10
4.2 Adjustments to Accounts....................................... 10
4.3 Allocation of Employer Contributions,
Forfeitures and Financed Shares............................... 11
4.4 Maximum Annual Additions to Accounts.......................... 12
ARTICLE 5 DISTRIBUTIONS FROM THE ESOP................................... 16
5.1 Distribution of Benefits Generally............................ 16
5.2 Distribution Upon Retirement.................................. 18
5.3 Distribution Upon Death....................................... 18
5.4 Distribution Upon Physical or Mental Disability............... 19
5.5 Distribution Upon Termination of Employment Other Than by
Retirement, Death or Disability............................... 20
5.6 Pre-Retirement Distributions for Diversification of
Stock Balances................................................ 22
5.7 Missing Participants or Beneficiaries......................... 22
5.8 Benefits Not Assignable....................................... 22
5.9 Direct Rollover Option........................................ 24
ARTICLE 6 EMPLOYER STOCK PROVISIONS..................................... 26
6.1 Voting Employer Stock......................................... 26
6.2 Dividends Paid on Employer Stock.............................. 26
6.3 Restrictions on Employer Stock Distributed from ESOP.......... 27
6.4 Rights and Options on Distributed Employer Stock.............. 28
i
<PAGE>
ARTICLE 7 ADMINISTRATION................................................ 30
7.1 Fiduciary Responsibility...................................... 30
7.2 Nondiscriminatory Administration.............................. 30
7.3 Responsibilities of Employer.................................. 30
7.4 Claim Procedure............................................... 30
7.5 Expenses of Administration.................................... 31
ARTICLE 8 ADMINISTRATOR................................................. 32
8.1 Duties of the Administrator................................... 32
8.2 Delegation of Responsibilities................................ 32
8.3 Compensation.................................................. 32
ARTICLE 9 TRUSTEES...................................................... 34
9.1 Limitation of Duties and responsibilities..................... 34
9.2 General Administrative Powers................................. 34
9.3 Records, Valuation, Accounting and Settlement................. 36
9.4 Parties to Settlement......................................... 37
9.5 Inspection of Records......................................... 37
9.6 Conflicting Claims............................................ 37
9.7 Resignation................................................... 37
9.8 Removal; Successor Trustee.................................... 38
9.9 Continuation of Trust Fund.................................... 38
9.10 Performance Bond.............................................. 38
ARTICLE 10 INVESTMENT OF TRUST FUND...................................... 39
10.1 Investment Management of Trust Fund........................... 39
10.2 Permitted Investments......................................... 39
10.3 Exempt Loan Permitted......................................... 39
ARTICLE 11 TERMINATION, AMENDMENT OR MERGER.............................. 40
11.1 No Contractual Obligation..................................... 40
11.2 Amendments.................................................... 40
11.3 Merger, Consolidation or Transfer of Trust Fund............... 41
11.4 Termination................................................... 41
11.5 Vesting Upon Termination...................................... 41
ARTICLE 12 TOP-HEAVY PROVISIONS.......................................... 42
12.1 Definitions................................................... 42
12.2 Top-Heavy Plan Requirements................................... 46
12.3 Aggregation of Plans.......................................... 48
12.4 Special Limitations........................................... 49
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<PAGE>
ARTICLE 13 MISCELLANEOUS................................................. 50
13.1 Nonliability of Employer...................................... 50
13.2 Indemnification............................................... 50
13.3 Exclusive Benefit of Participants............................. 50
13.4 Return of Employer Contributions.............................. 50
13.5 Construction.................................................. 51
13.6 Severability.................................................. 51
13.7 Applicable Law................................................ 51
iii
<PAGE>
STOCK OWNERSHIP PLAN
OF
NORAM TELECOMMUNICATIONS, INC.
Adopted December 17, 1996
NorAm Telecommunications, Inc. Employer
Edward R McAyeal Trustees
Patrick A. McCloskey
This Stock Ownership Plan (the "Plan") establishes a tax-qualified
retirement plan. This Plan is a stock bonus plan, designed as a leveraged
employee stock ownership plan. This Plan is effective for the Plan Year ending
December 31, 1996.
The Plan, including the Trust Fund created by it, is intended to
comply with sections 401 and 501 of the Code of 1986 and related Treasury
Regulations, and is for the exclusive benefit of the eligible Employees. The
Trustees agree to the terms and conditions of the trust contained in the Plan.
The Administrator of the Plan has determined that this Plan is not
presently "top-heavy" within the meaning of section 416(g) of the Code,
however, the applicable provisions are included herein.
The benefits under this Plan, to be vested and distributed in the
manner described in the Plan, are accumulated in order to provide Employees with
both a source of supplemental income at retirement and a measure of security
should the conditions of their employment change.
<PAGE>
ARTICLE 1
DEFINITIONS
-----------
The following words and phrases, as used in the Plan, have the
following meanings, unless a different meaning is clearly required by the
context:
(a) "Account" means the records maintained by the Administrator to
record a Participant's interest in the Trust Fund. As provided at Section
4.1, each Account shall consist of a Stock Balance and a Cash Balance.
(b) "Administrator" means the Employer, which shall have the power to
delegate duties to such other persons as may be necessary.
(c) "Affiliated Group" means the group of entities deemed to be under
common control with the Employer pursuant to sections 414(b), 414(c),
414(m) or 414(o) of the Code, or, for purposes of the annual addition limit
of Section 4.4, section 415(h) of the Code. An entity shall be considered a
member of the Affiliated Group only with respect to periods during which
the relationship governed by sections 414(b), 414(c), 414(m), 414(o) or
415(h) of the Code exists.
(d) "Beneficiary" means any person entitled to receive amounts from
the Plan as a result of the death of a Participant.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Compensation" means an Employee's W-2 compensation subject to the
following adjustments:
(1) amounts excluded from income pursuant to sections 125 or
402(e)(3) of the Code shall be included;
(2) all overtime pay shall be excluded;
(3) 50% of commission income in excess of $30,000 in any Plan Year
shall be excluded; and
(4) 50% of piece-work income in excess of $30,000 in any Plan Year
shall be excluded.
Notwithstanding the foregoing, for purposes of the annual addition limit
under section 4.4 and the "Top Heavy" rules in Article 12, Compensation
shall mean nondeferred
2
<PAGE>
compensation reportable on Form W-2, but determined without regard to any
rules that limit the remuneration included in wages based on the nature or
location of the employment or the services performed plus, for purposes
other than the annual addition limit under Section 4.4, any amounts
excluded from income pursuant to sections 125 or 402(e)(3) of the Code.
Compensation shall only include that Compensation which is actually paid to
the Participant during the Plan Year.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the
Compensation of each Employee taken into account under the Plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B) of
the Code. The cost-of-living adjustment in effect for a calendar year
applies to any period, not exceeding 12 months, over which Compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which
is the number of months in the determination period, and the denominator of
which is 12. Any reference in this Plan to the limitation under section 401
(a)(17) of the Code shall mean the OBRA '93 annual compensation limit set
forth in this section.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to
the OBRA '93 annual compensation limit in effect for that prior
determination period.
(g) "Directors" means the board of directors of the Employer.
(h) "Employee" means any person in the employ of the Employer
maintaining the Plan or of any other Employer required to be aggregated
with the Employer under sections 414(b), (c), (m) or (o) of the Code,
including Leased Employees within the meaning of sections 414(n) or (o) of
the Code.
(i) "Employer" means NorAm Telecommunications, Inc. and such of its
successors as may expressly adopt the Plan and agree in writing to continue
it. Any action required or permitted to be taken by the Employer may be
authorized by any officer of the Employer. Any member of the Affiliated
Group may, with the consent of the Board of Directors of NorAm
Telecommunications, Inc., adopt the Plan and "Employer" shall mean all such
participating employers collectively. As of the effective date of this
Plan, the only. participating affiliated employer is Advanced Communication
Technologies, Inc.
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(j) "Employer Stock" means the shares of Class A Common Stock (voting)
of the Employer, with no par value.
(k) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(1) "Hour of Service" means:
(1) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer during a Plan
Year.
(2) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which
no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or
leave of absence. Notwithstanding the preceding sentence:
(i) An hour for which an Employee is directly or indirectly
paid, or entitled to payment, on account of a period during which
no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained
solely for the purpose of complying with workers' compensation, or
unemployment compensation or disability insurance laws.
(ii) Hours of Service are not required to be credited for a
payment which solely reimburses an Employee for medical or
medically related expenses incurred by the Employee.
For purposes of this subsection (2), a payment shall be deemed to be
made by or due from the Employer regardless of whether such payment
is made by or due from the Employer directly, or indirectly through,
among others, a trust fund, or insurer, to which the Employer
contributes or pays premiums and regardless of whether contributions
made or due to the trust fund, insurer or other entity are for the
benefit of particular Employees or are on behalf of a group of
Employees in the aggregate;
(3) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
Hours of Service shall not be credited both under subsection (1) or
subsection (2), as the case may be, and under this subsection (3);
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(4) The determination of Hours of Service for reasons other than
the performance of duties and the crediting of Hours of Service to
computation periods shall be in accordance with Department of Labor
Regulations (S)2530.200b-2(b) and (c), which are hereby incorporated
by reference, and the veterans' reemployment rights laws;
(5) In the case of Employees for whom the Employer does not
maintain records of the hours worked, 190 Hours of Service shall be
credited for each month in which the Employee has at least one Hour of
Service;
(6) In the case of any Participant who is absent from work:
(i) by reason of the pregnancy of the Participant;
(ii) by reason of birth of the child of the Participant;
(iii) by reason of the placement of a child with the
Participant in connection with the adoption of such child by such
Participant; or
(iv) for purposes of caring for such child for a period
beginning immediately following such birth or placement;
such Participant shall receive credit for the Hours of Service which
otherwise would have been credited to the Participant but for such
absence or, if the Administrator is unable to determine with
reasonable accuracy the Participant's imputed Hours of Service, such
Participant shall receive credit for eight Hours of Service per day of
absence. Notwithstanding the foregoing, the maximum number of Hours of
Service credited under this subsection (6) shall not exceed 501. The
Hours of Service credited under this subsection (6) shall be applied
to the Plan Year in which the absence begins if the Participant's
Hours of. Service in such Plan Year would be less than 501 without the
application of this subsection. If the Participant has more than 500
Hours of Service in the Plan Year in which the absence begins (without
the application of this subsection), the Hours of Service credited
under this subsection shall be applied to the Plan Year that
immediately follows the Plan Year in which the absence begins.
(7) For purposes of eligibility to participate in the Plan and the
vesting of benefits under the Plan, Hours of Service with a member of
the Affiliated Group shall constitute Hours of Service with the
Employer.
(m) "Highly Compensated Employee", for years beginning after December
31, 1996, means any Employee who was a 5-percent owner at any time during
the
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Plan Year or the preceding Plan Year or, for the preceding Plan Year, had
compensation from the Employer in excess of $80,000.
(n) "Leased Employee" means any person (other than an employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient
(or for the recipient and related persons determined in accordance with
section 414(n)(6) of the Code) on a substantially full time basis for a
period of at least one year, and such services are of a type historically
performed by employees in the business field of the recipient employer.
Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the recipient
employer shall be treated as provided by the recipient employer. A Leased
Employee shall not be considered an employee of the recipient if:
(i) such employee is covered by a money purchase pension plan
providing: (1) a nonintegrated employer contribution rate of at least
10 percent of compensation, as defined above, but including amounts
contributed pursuant to a salary reduction agreement which are
excludable from the employee's gross income under section 125,
402(e)(3), 402(h) or 403(b) of the Code, (2) immediate participation,
and (3) full and immediate vesting; and
(ii) Leased Employees do not constitute more than 20 percent of
the recipient's nonhighly compensated workforce.
(o) "Normal Retirement Age" means the date an Employee attains age 62.
(p) "Participant" means an Employee qualified to participate in the
Plan under Article 2 and a former Employee who continues to have an Account
in the Plan.
(q) "Plan" means this Stock Ownership Plan, including the trust
agreement contained herein.
(r) "Plan Year" means the 12-month period from and including the first
day of January to and including the last day of December.
(s) "Trustees" means the Trustees named herein and any duly appointed
successor.
(t) "Trust Fund" means all property held by the Trustees under the
Plan.
(u) "Valuation Date" means the last day of each Plan Year and any
other date on which the Administrator advises the Trustees to value the
Trust Fund.
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ARTICLE 2
PARTICIPATION
-------------
2.1 Eligibility Requirements.
2.1-1 Except as otherwise provided in this Section 2.1. all Employees
are eligible to participate in the Plan.
2.1-2 No person who is covered by a collective bargaining agreement
between a union and the Employer or any employers' association under which
retirement benefits were the subject of good faith bargaining shall participate
in the Plan, unless such participation is required by the collective bargaining
agreement.
2.1-3 No Leased Employee shall participate in the Plan.
2.1-4 No Employee who is on permanent part-time status shall
participate in the Plan.
2.2 Commencement of Participation.
An eligible Employee shall participate in the Plan on the January 1 or
July 1 next following the later of (i) the Employee's 18th birthday or (ii) the
first anniversary of the Employee's first Hour of Service with the Employer.
Notwithstanding the foregoing, all Eligible Employees who are employed by the
Employer on December 1, 1996 shall participate in the Plan on that date. A
Participant who terminates and is reemployed as an Eligible Employee shall
participate in the Plan on the date reemployed.
2.3 Change of Employment Status.
If an Employee becomes eligible to participate as a result of a change
in employment status, the Employee shall participate in the Plan on the later of
the date the status changes or the date on which the Employee satisfies the
conditions of Section 2.2. If a Participant becomes ineligible to participate
because of a change in employment status, the Participant shall cease
participating in the Plan as of the date the status changes; provided, however,
that for as long as the Participant remains employed by the Employer, the
Participant will continue to accrue Hours of Service for purposes of determining
the vested benefit from the Plan.
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ARTICLE 3
CONTRIBUTIONS
-------------
3.1 Employer Contributions.
For each Plan Year, the Employer may contribute to the Plan an amount,
if any, determined by the Directors; provided, however, that the Employer shall
contribute to the Trustees an amount in cash not less than the amount required
to enable the Trustees to discharge any indebtedness incurred with respect to an
Acquisition Loan (as described in Section 3.5). If any part of the Employer's
contribution for any Plan Year is in cash in an amount exceeding the amount
needed to pay the amount due during or prior to the Plan Year with respect to an
Acquisition Loan, such cash shall be applied by the Trustees in their sole
discretion either to purchase Employer Stock or to repay an Acquisition Loan.
No person, including the Trustees, shall compel the Employer to make any
contribution to the Plan. Neither the Trustees nor the Administrator shall be
under any duty or obligation to inquire into the correctness of the amount of
the contribution which shall be made by the Employer to the Trustees, nor shall
any person, the Trustees or Administrator be obligated to institute any legal
action to compel the Employer to make any contribution to this Plan.
Notwithstanding any provision of this Plan to the contrary, contributions,
benefits and service credit with respect to qualified military service will be
provided in accordance with section 414(u) of the Code.
3.2 Form and Timing of Contributions.
Contributions to the Plan shall be in cash or shares of Employer
Stock. The Employer's contributions for any Plan Year shall be paid to the
Trustees in one or more installments, the last of which shall not be later than
the date for filing the Employer's federal income tax return for such Plan Year,
including any extensions of time granted for such filing. For the purposes of
this Plan, contributions prior to the last day of a Plan Year shall be accounted
for separately until the last day of the Plan Year, at which time they shall be
allocated among the Participants' Accounts.
3.3 Participant Contributions.
No Participant shall be required or permitted to contribute to the
Plan.
3.4 No Rollover Contributions.
The Trustees of this Plan may not accept rollover contributions from
any other qualified plan or individual retirement account.
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3.5 Acquisition Loan.
An installment obligation incurred by the Trustees in connection with
the purchase of Employer Stock shall constitute an Acquisition Loan. The
Trustees may incur an Acquisition Loan from time to time to finance the
acquisition of Employer Stock for the Trust or to repay a prior Acquisition
Loan. Shares of Employer Stock acquired by the Trustees with the proceeds of an
Acquisition Loan are described herein as "Financed Shares." An Acquisition Loan
shall be for a specific term, shall bear a reasonable rate of interest, and
shall not be payable on demand except in the event of default. An Acquisition
Loan may be secured by a collateral pledge of the Financed Shares so acquired
and any other Plan assets which are permissible security within the provisions
of Treasury Regulation (S) 54.4975-7(b). No other assets of the Plan or Trust
may be pledged as collateral for an Acquisition Loan, and no lender shall have
recourse against any other Trust assets. Any pledge of Financed Shares shall
provide for the release of shares so pledged on a basis equal to the principal
and interest (or, if the requirements of Treasury Regulation (S) 54.4975-
7(b)(8)(ii) are met, principal payments only), paid by the Trustees on the
Acquisition Loan. The released Financed Shares shall be allocated to
Participants' Stock Balances in accordance in accordance with Section 4.3.
Payment of principal and interest on any Acquisition Loan shall be made by the
Trustees only from Employer contributions paid in cash to enable the Trustees to
repay such loan, from earnings attributable to such contributions, and any cash
dividends received by the Trustees on Financed Shares acquired with the proceeds
of the Acquisition Loan (including such contributions, earnings and dividends
received during or prior to the year of repayment less such payments in prior
years), whether or not allocated. Financed Shares shall initially be credited
to a "Loan Suspense Account" and shall be transferred for allocation to the
Accounts of Participants only as payments of principal and interest (or, if the
requirements of Treasury Regulation (S) 54.4975-7(b)(8)(ii) are met, principal
payments only) on the Acquisition Loan for that Plan Year bears to the total
remaining payments of principal and interest projected (or, if the requirements
of Treasury Regulation (S) 54.4975-7(b)(8)(ii) are met, principal payments only)
on the Acquisition Loan over the duration of the Acquisition Loan repayment
period.
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ARTICLE 4
ACCOUNTS
--------
4.1 Participants' Accounts.
The Administrator shall maintain an Account for each Participant,
recording that person's interest in contributions, each of which shall be
regularly adjusted in accordance with section 4.2 and 4.3. Each Account shall be
subdivided into a Stock Balance and a Cash Balance:
(a) Stock Balances. The Stock Balance will reflect the Participant's
share of Employer contributions made in Employer Stock, his or her
allocable share of released Financed Shares, his or her allocable share of
Employer Stock forfeitures and any Employer Stock attributable to earnings
on such stock.
(b) Cash Balances. The Cash Balance will reflect the Participant's
share of Employer contributions made in cash, any cash dividends on
Employer Stock allocated and credited to his or her Stock Balance (other
than currently distributable dividends) and his or her share of
corresponding cash forfeitures and any income, gains losses, appreciation
or depreciation attributable thereto.
Reference to a Participant's Account means both his or her Stock Balance and
Cash Balance. Except as otherwise provided in the Plan, the Trustees shall hold
all assets of the Plan in a single, commingled fund, and no Participant shall
have any interest in an individual asset of the Trust Fund.
4.2 Adjustments to Accounts.
4.2-1 As of each Valuation Date, the Trustees shall:
(a) First, charge to the Stock Balance of each Participant all
distributions and payments made to the Participant since the last preceding
Valuation Date that have not been charged previously;
(b) Next, credit to each Participant's Stock Balance the shares of
Employer Stock, if any, that have been purchased with amounts from the
Participant's Cash Balance since the last preceding Valuation Date, and
adjust such Balances in accordance with Subsection 4.2-2 and Section 4.3;
and
(c) Next, allocate and credit to each Participant's Cash Balance
the Employer contributions made in cash and cash Forfeitures that are
allocated and credited as of that date in accordance with Subsection 4.2-2
and allocate and credit to
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<PAGE>
each Participant's Stock Balance the shares of Employer Stock and Employer
Stock forfeitures that are to be allocated and credited as of that date in
accordance with the provisions of Section 4.3.
(d) Finally, make any remaining allocations and adjustments
described in Subsection 4.2-2 and Section 4.3.
4.2-2 For each Plan Year, Employer contributions (other than
contributions used to repay an Acquisition Loan) that are made in cash for that
year, and cash forfeitures arising under the Plan during that year shall be
allocated, as of the Valuation Date, to the Cash Balance of each Participant in
the same manner as Employer Stock contributed would be allocated under the
provisions of Section 4.3. Upon the purchase of Employer Stock or the repayment
of an Acquisition Loan with such cash, an appropriate number of shares of
Employer Stock shall be credited to the Stock Balance of such Participant and
the Participant's Cash Balance shall be charged by the amount of the cash used
to buy such Employer Stock or to repay the Acquisition Loan, as applicable. The
Trustees shall also credit to the Cash Balance of each Participant any cash
dividends paid to the Trustees on shares of Employer Stock held in that
Participant's Stock Balance as of the record date. The Trustees shall apply such
cash dividends credited to a Participant's Cash Balance to purchase shares of
Employer Stock or to the repayment of an Acquisition Loan. Thereafter, an
appropriate number of shares of Employer Stock shall then be credited to the
Stock Balance of such Participant and the Participant's Cash Balance shall then
be charged by the amount of cash used to purchase such Employer Stock or to
repay the Acquisition Loan, as applicable. As of the Valuation Date, before the
allocation of any Employer contributions made in cash, any appreciation,
depreciation, income, gains or losses in the fair market value of the Trust Fund
(excluding Employer Stock) shall be allocated among and credited to the Cash
Balances of the Participants, according to the balance of each Cash Balance as
of the immediately preceding Valuation Date, reduced in each case by the amount
of any charge to said Cash Balance since the next preceding Valuation Date. Any
gain or loss realized by the Trustees on the sale of Employer Stock will be
allocated to the Cash Balances of Participants, according to the balance of
Participants' Stock Balances, as of the next preceding Valuation Date.
4.3 Allocation of Employer Contributions. Forfeitures and Financed
Shares.
4.3-1 The Account of each Participant who has at least 1,000 Hours of
Service in the Plan Year and who is employed on the last day of the Plan Year
shall share in the allocation of the Employer contribution on and forfeitures
for that Plan Year and in the allocation of Financed Shares released from the
Loan Suspense Account during that year.
4.3-2 Notwithstanding Section 4.4-1 the Account of any Participant
who terminates employment after reaching Normal Retirement Age or whose
employment terminates for reasons of death or total disability (as described in
Section 5.4) shall share in
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the allocation of the Employer contribution, forfeitures and released Financed
Shares for the Plan Year in which his or her employment terminates.
4.3-3 The Employer contribution, forfeitures and release Financed
Shares shall be allocated among the Participant's Accounts according to the
ratio that the Compensation of each eligible Participant for the Plan Year bears
to the total Compensation of all such Participants for the Plan Year.
4.3-4 Notwithstanding any provision in the Plan to the contrary, if
shares of Employer Stock are sold to the Plan by a shareholder in a transaction
for which special tax treatment is elected by such shareholder pursuant to
section 1042 of the Code, no assets attributable to such Employer Stock may be
allocated to the Stock Balance of:
(a) any person who owns (after application of section 318(a) of the
Code) more than 25 percent in value of the outstanding securities of the
Employer; and
(b) the shareholder, and any person who is related to such
shareholder (within the meaning of section 267(b) of the Code, but
excluding lineal descendants of such shareholder as long as no more than
five percent of the aggregate amount of all Employer Stock sold by such
shareholder in a transaction to which section 1042 of the Code applies is
allocated to lineal descendants of such shareholder) during the
Nonallocation Period (as defined below).
Further, no allocation of Employer contributions may be made to the
Accounts of such persons unless additional allocations are made to other
Participants, in accordance with the provisions of sections 401(a) and 410 of
the Code. The phrase "Nonallocation Period" means the period beginning on the
date of sale and ending on the later of ten years after the date of sale or the
date of the allocation attributable to the final payment on the Acquisition Loan
incurred with respect to the sale.
4.4 Maximum Annual Additions to Accounts.
4.4-1 The amount of Annual Additions which the Administrator may
allocate under this Plan to a Participant's Account for a Plan Year shall not
exceed the Maximum Permissible Amount. If the amount the Employer otherwise
would contribute to the Participant's Account would cause the Annual Additions
for the Plan Year to exceed the Maximum Permissible Amount, the Employer shall
reduce its contribution to this Plan so that the Annual Additions for the Plan
Year equal the Maximum Permissible Amount.
4.4-2 Prior to determining a Participant's actual Compensation for a
Plan Year, the Administrator may determine the Maximum Permissible Amount on the
basis of the Participant's estimated annual Compensation for such Plan Year. The
Administrator shall make this determination on a reasonable and uniform basis
for all Participants similarly
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<PAGE>
situated. The Administrator shall reduce any Employer contributions (including
any allocation of forfeitures, if any) based on estimated annual Compensation by
any Excess Additions carried over from prior years.
4.4-3 As soon as is administratively feasible after the end of the
Plan Year, the Administrator shall determine the Maximum Permissible Amount for
such Plan Year on the basis of the Participant's actual Compensation for such
Plan Year. If, pursuant to the preceding sentence or because of the allocation
of forfeitures, there is an Excess Addition with respect to a Participant for a
Plan Year, the Administrator shall dispose of such Excess Addition as follows:
(a) The Administrator shall return any nondeductible contributions
to the Participant to the extent the return would reduce the Excess
Addition.
(b) If, after the application of (a), an Excess Addition still
exists and the Plan covers the Participant at the end of the Plan Year, the
Administrator shall use the Excess Addition to reduce future Employer
contributions (including any allocation of forfeitures) under the Plan for
the next Plan Year and for each succeeding Plan Year, as is necessary, for
the Participant.
(c) If, after the application of (a), an Excess Addition still
exists and the Plan does not cover the Participant at the end of the Plan
Year, the Administrator shall hold the Excess Addition unallocated in a
suspense account. The Administrator shall apply the suspense account to
reduce Employer contributions (including allocation of forfeitures) for all
remaining Participants in the next Plan Year, and in each succeeding Plan
Year, if necessary.
(d) The Administrator shall not distribute any Excess Addition to
Participants or to former Participants.
4.4-4 If a Participant participates, or has ever participated, in a
Defined Benefit Plan maintained by the Affiliated Group, the sum of the Defined
Benefit Plan Fraction and the Defined Contribution Plan Fraction for the
Participant for any Plan Year shall not exceed 1.0, except to the extent
expressly permitted pursuant to transition rules established under section 415
of the Code. If in any Plan Year the sum of the Defined Benefit Plan Fraction
and the Defined Contribution Plan Fraction on behalf of a Participant exceeds
1.0, the Employer shall reduce the Participant's benefits from the Defined
Benefit Plan to the extent necessary to prevent the sum of the Defined
Contribution Plan Fraction and the Defined Benefit Plan Fraction from exceeding
1.0.
4.4-5 All Defined Benefit Plans and Defined Contribution Plans
(whether or not terminated) maintained by the Affiliated Group shall be treated
as a single plan.
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4.4-6 The limitation year is the Plan Year. All qualified plans of
the Affiliated Group shall have the same limitation year.
4.4-7 For purposes of this Section:
(a) "Annual Addition" means the sum of the following amounts
allocated on behalf of a Participant for a Plan Year: (1) all employer
contributions; (2) all forfeitures; (3) amounts described in sections
415(l)(2) and 4l9(A)(d)(l) of the Code. Amounts reapplied to reduce
Employer contributions under Section 4.4-3 shall also be included as Annual
Additions.
(b) "Excess Addition" means the excess of the Participant's Annual
Additions for the Plan Year over the Maximum Permissible Amount.
(c) "Maximum Permissible Amount" means the lesser of (1) $30,000
(or, if greater, 1/4 of the dollar limitation in effect under section
415(b)(l)(A) of the Code), or (2) 25 percent of the Participant's
Compensation for the Plan Year. For purposes of the preceding sentence, the
Compensation limitation shall not apply to any contribution for medical
benefits (within the meaning of section 410(h) of the Code) which is
otherwise treated as an annual addition under section 415(l)(l) or
419A(d)(2) of the Code. If there is a short Plan Year because of a change
in year, the Administrator will multiply the $30,000 limitation (or larger
limitation) by a fraction, the numerator of which is the number of complete
months in the Plan Year and the denominator of which is 12.
(d) A "Defined Benefit Plan" means a retirement plan that does not
provide for individual accounts for employer contributions.
(e) "Defined Benefit Plan Fraction" means the Projected Annual
Benefit of the Participant under a Defined Benefit Plan divided by the
lesser of (1) 125 percent of the dollar limitation in effect under sections
415(b) and (d) of the Code for the Plan Year, or (2) 140 percent of the
Participant's highest average Compensation for three consecutive years of
service, including any adjustments under section 415(b) of the Code. For
purposes of the Defined Benefit Plan Fraction, a year of service is a Plan
Year in which the Employee completed at least 1,000 Hours of Service.
(f) "Defined Contribution Plan Fraction" means the sum of the
Annual Additions to the Participant's Account as of close of the Plan Year
divided by the sum of the lesser of the following amounts determined for
the Plan Year and for each prior year of service with the Affiliated Group:
(1) 125 percent of the dollar limitation in effect under section
415(c)(l)(A) of the Code for the Plan Year (determined without regard to
the special dollar limitations for Employee stock ownership plans), or (2)
25 percent of the Participant's Compensation for the Plan Year.
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(g) "Projected Annual Benefit" means the Participant's annual
retirement benefit (adjusted to an actuarial equivalent straight life
annuity if the plan expresses such benefit in a form other than a straight
life annuity or qualified joint and survivor annuity) under the terms of a
Defined Benefit Plan on the assumptions the Participant continues
employment until his or her Normal Retirement Age (or current age, if
later), Compensation continues at the same rate as in effect in the Plan
Year under consideration until his or her Normal Retirement Age and all
other relevant factors used to determine benefits under the Defined Benefit
Plan remain constant as of the current Plan Year for all future Plan Years.
4.4-8 The limitations of section 415 of the Code and Treasury
Regulations thereunder are incorporated in their entirety into this Plan by
reference and shall take precedence and priority over all other provisions of
the Plan.
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ARTICLE 5
DISTRIBUTIONS FROM THE ESOP
---------------------------
5.1 Distribution of Benefits Generally.
5.1-1 Benefits shall not be paid to any Participant except in
accordance with this Article. All distributions from the Plan shall be based on
the most recent valuation of the Trust Fund preceding the date of distribution.
If a Participant does not have a nonforfeitable right to any of his or her
Account on the date the Participant severs employment with the Employer, the
Participant shall be deemed to be cashed out of his or her Account as of such
date. Distribution of a Participant's vested Stock Balance will be made in whole
shares of Employer Stock or cash or a combination of both, as determined by the
Administrator; provided, that the Administrator shall notify the Participant or
Beneficiary of his or her right to demand distribution of his or her vested
Stock Balance entirely in whole shares of Employer Stock (with the value of any
fractional share paid in cash). However, if the Articles of Incorporation or
Bylaws of the Employer restrict ownership of substantially all of the
outstanding Employer Stock to employees and the Trust, then the distribution of
a Participant's Stock Balance shall be made entirely in the form of cash or
other property, and the Participant in not entitled to a distribution in the
form of Employer Stock. Distribution of a Participant's vested Cash Balance will
be made in cash. Also to the extent a Participant has elected to diversify his
or her Account under Section 5.6, the Participant shall not have the right to
demand that such diversified portion of the Account be paid in the form of
shares of Employer Stock.
5.1-2 Unless an earlier date is require by Subsections 5.1-3 or
5.1-4, distribution of a Participant's Account shall be made not later than one
year after the end of the fifth Plan Year following the Plan Year during which
the Participant severed employment with the Employer, unless the Participant is
reemployed by the Employer before the end of such year.
5.1-3 Notwithstanding any other provision of the Plan, unless the
Participant elects otherwise, distribution of a Participant's benefits from this
Plan must commence not later than the 60th day after the end of the Plan Year in
which the latest of the following occurs:
(a) The date the Participant reaches age 62;
(b) The date ten years after the Participant first becomes eligible
to participate in the Plan; or
(c) The date the Participant's employment with the Employer
terminates.
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5.1-4 Notwithstanding any provision in the Plan to the contrary, the
distributions under the Plan must be made in accordance with section 401(a)(9)
of the Code and the regulations thereunder. For Plan Years prior to January 1,
1997, distributions must satisfy the following minimum distribution
requirements:
(a) The entire vested interest of each Participant in the Plan
shall be distributed not later than April 1 of the calendar year following
the calendar year in which the Participant attains age 70 1/2.
(b) If a Participant dies before the Participant's entire vested
interest has been distributed, the remaining balance of the Participant's
vested interest shall be distributed to the Participant's beneficiary or
beneficiaries at least as rapidly as under the method of distribution in
effect as of the date of the Participant's death.
(c) If distribution to a Participant has not commenced and a
Participant dies, the Participant's entire interest shall be distributed
within five years after the death of the Participant. If the designated
beneficiary is the surviving spouse of the Participant, commencement of
payments may be deferred until the date on which the Participant would have
attained age 70 1/2. If a designated beneficiary who is the surviving
spouse of a Participant dies before payments commence, the Participant's
entire interest shall be distributed within five years of the date of the
spouse's death.
(d) To satisfy the minimum distribution incidental benefit rule of
section 401 (a)(9)(G) of the Code, the period over which payments are made
shall not exceed the applicable period determined under Proposed Treasury
Regulation (S) l.401(a)(9)-2, Q&A-4 and 5.
For Plan Years beginning after December 31, 1996, distribution of a
Participant's Account shall occur not later than the April 1 of the year
following the later of (i) the year in which the Employee attains age 70-1/2 or
(ii) the year in which the Employee retires; provided, however, that Subsection
(ii) shall not apply in the case of an Employee who is a five percent owner (as
defined in section 416 of the Code) for the Plan Year in which the Employee
attains age 70-1/2.
5.1-5 If a distribution is one to which sections 401(a)(11) and 417
of the Code do not apply, such distribution may commence less than 30 days after
the notice required under Treasury Regulation (S) 1.411(a)-11(c) is given,
provided that:
(a) 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
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(b) the Participant, after receiving the notice, affirmatively
elects a distribution.
5.1-6 The Administrator may direct the Trustees to make any
distribution which a Participant is entitled to receive:
(a) Directly to the Participant;
(b) To any person having custody of the Participant;
(c) To the legal guardian of the Participant; or
(d) To any person or corporation furnishing maintenance, support or
hospitalization to the Participant.
The receipt of the person to whom disbursements are made shall be a sufficient
voucher for the Trustees.
5.1-7 Prior to final payment or distribution to any Participant, his
or her legal representative or Beneficiary, the Administrator may demand from
the recipient a written receipt or acquittance, in full satisfaction of all
claims against the Plan, the Trustees, the Administrator, the Directors and the
Employer.
5.2 Distribution Upon Retirement.
Notwithstanding Section 5.5, a Participant's Account shall be fully
vested and nonforfeitable once the Participant attains Normal Retirement Age.
The Account of a Participant retiring on or after Normal Retirement Age shall be
distributed in a single distribution of the entire amount credited to the
Account.
5.3 Distribution Upon Death.
5.3-1 Notwithstanding Section 5.5, in the event a Participant's
employment terminates because of death, the Participant's Account shall be fully
vested and nonforfeitable. The provisions herein relating to distributions to a
Beneficiary also apply in the event of the death of a Participant whose
employment previously terminated but who has not yet received the total amount
to which the Participant is entitled under the Plan. The Beneficiary of a
Participant who has terminated employment for reasons other than retirement,
death or disability (as described in Section 5.4) shall not receive any amount
greater than the Participant's vested interest as described in Section 5.5.
5.3-2 The Administrator shall direct the Trustees to distribute the
amount credited to a deceased Participant's Account to the Participant's
Beneficiary. The method of
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payment of the Account shall be in the form of a single sum. The benefit
commencement date shall be no later than the 180th day after the end of the Plan
Year in which the Participant dies, but if the Beneficiary is the Participant's
surviving spouse, the benefit commencement date shall be either the first day of
the month in which the Participant would have attained the Normal Retirement Age
or an earlier date if the Participant's surviving spouse consents.
5.3-3 Each Participant may file with the Administrator a designation
of Beneficiary or Beneficiaries to receive amounts payable from the Plan upon
the Participant's death. The designation may be changed from time to time by
the Participant. No designation of Beneficiary or change of designation is
effective until delivered to the Administrator. A married Participant's
designation of a Beneficiary or change in designation which names a Beneficiary
other than the Participant's spouse shall only be effective if the designation
names a specific beneficiary and the spouse consents to the designation in
writing. The spousal consent shall be irrevocable and shall be witnessed by a
representative of the Administrator or notary public. Spousal consent shall not
be required if (i) the spouse cannot be located after a reasonable effort or
(ii) the Participant has a court order to the effect that the Participant has
been abandoned or is legally separated. Also, if the spouse is legally
incompetent to give consent, the spouse's legal guardian may give such consent
(even if the guardian is the Participant). If the Participant has not named a
Beneficiary, or if no named Beneficiary is living at the death of the
Participant, the Account shall be distributed to the following persons in the
following order of priority:
(a) The Participant's spouse;
(b) The Participant's lineal descendants, by right of
representation; or
(c) The Participant's estate.
If a Beneficiary dies after the Participant but before receiving the full
distribution to which the Beneficiary is entitled, the remaining amount shall be
paid to the Beneficiary's estate.
5.4 Distribution Upon Physical or Mental Disability.
If the employment of a Participant terminates because of total
physical or mental disability which in the opinion of the Administrator
permanently prevents Participant from resuming employment with the Employer, the
Participant's Account shall be fully vested and nonforfeitable, notwithstanding
Section 5.5. In determining whether or not a Participant is permanently
physically or mentally disabled, the administrator may rely upon a certification
of a medical examiner satisfactory to the Administrator. In administering this
Section, the administrator shall, to the fullest practical extent, treat alike
all participants similarly situated.
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5.5 Distribution Upon Termination of Employment Other Than by
Retirement. Death or Disability.
5.5-1 In the event a Participant's employment terminates for any
reason other than retirement, death or total disability (as described in Section
5.4), the percentage of the Participant's Account which shall be vested and
nonforfeitable shall be determined according to the following schedule:
Years of Vested
Service Percentage
------- ----------
less than 5 0%
5 or more 100%
A "Year of Service" means a Plan Year in which an Employee has at least 1,000
Hours of Service. A "One-Year Break in Service" means a Plan Year in which an
Employee has 500 Hours of Service or less. All Years of Service, whether or not
consecutive, shall be counted, except the following Years of Service shall not
be considered:
(a) Years of Service before age 18 if the Employee was not yet a
Participant in the Plan;
(b) Years of Service with the Employer during any period for which
the Employer did not maintain the Plan or a predecessor plan;
(c) If an Employee incurs a One-Year Break in Service, pre-break
Years of Service shall not be taken into account for vesting purposes
under the Plan until the Employee has completed a Year of Service
after his or her return; and
(d) After five consecutive One-Year Breaks in Service, a reemployed
Participant's Years of Service after the break shall not be taken into
account for purposes of determining the non-forfeitable percentage in
the Account which was credited prior to such break.
5.5-2 The Administrator shall direct the Trustees to distribute the
vested portion of a terminated Participant's Account to the Participant in a
lump sum payment. If the value of the Account at the time it is to be
distributed is $10,000 or more, the Account shall be held in the Trust until the
Participant reaches Normal Retirement Age or dies. However, if the value of the
Account at the time it is to be distributed is less than $10,000, distribution
shall commence within 180 days following the close of the Plan Year the
Participant's employment terminates, but only if the Participant consents or has
attained Normal Retirement Age. If the Participant does not consent and the
Participant has not yet attained Normal Retirement Age, distribution shall
commence at such other time as the
20
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Participant may designate. No distribution shall commence later than the time
specified at Section 5.1. Notwithstanding the foregoing, if the value of the
vested portion of a terminated Participant's Account does not exceed $3,500 on
the first day of the Plan Year following the Plan Year in which the
Participant's employment terminated, the Administrator shall direct the Trustees
to distribute the benefit in a single sum payment to Participant within 180 days
following the Plan Year of termination. If the present value of the Account at
the time of any distribution exceeds $3,500, the present value of the Account at
any subsequent time will be deemed to exceed $3,500.
5.5-3 That portion of a terminated Participant's Account which is not
vested shall continue to be credited to the Participant until the last day of
the first Plan Year in which the Participant has 500 Hours of Service or less,
at which time that portion shall be forfeited. Forfeitures shall be allocated
among the Accounts of the Participants as of the date the forfeiture occurs, as
provided in Section 4.3. Notwithstanding the foregoing, if a Participant who
has forfeited any portion of his or her Account returns to employment with the
Employer prior to five consecutive Plan Years in which the Participant had 500
Hours of Service or less, the amount previously forfeited (without any
adjustment for income, gains or losses) shall be recredited to the Participant's
Account. Restoration of the Account will be first, out of forfeitures occurring
in the year of restoration, second, out of Trust earnings and, third, out of an
additional Employer contribution to the Plan
5.5-4 If a terminated Participant, whose Account is less than 100
percent vested, receives a distribution of any part of the vested portion of his
or her Account and is thereafter reemployed before five consecutive Plan Years
with 500 Hours of Service or less, that Participant's vested interest in the
Account shall thereafter equal P(AB + [RxD])-(RxD).
(a) P is the vested percentage determined in accordance with
Section 5.5-1 as of the date the determination is made.
(b) AB is the value of the Account as of the last day of the Plan
Year preceding the date the determination is made.
(c) D is the amount previously distributed to the Participant.
(d) R is the ratio of AB to the value of the Account immediately
after the distribution occurred.
Accounts subject to this Section shall be separately maintained. They shall be
adjusted annually in accordance with Section 4.2. No further Employer
contributions, forfeitures or Financed Shares shall be credited to the Account
after the Participant's reemployment, and another Account shall be maintained
for the Participant's interest in future allocations of Employer contributions,
forfeitures and Financed Shares.
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5.6 Pre-Retirement Distributions for Diversification of Stock
Balances.
If a Participant attains age 55 and has 10 years of participation in
the Plan (so that he is a "Qualified Participant"), the Administrator shall
offer such Participant a distribution of the value (determined as of the last
day of the preceding Plan Year) of at least 25% of the number of shares of
Employer Stock credited to his Stock Balance in the first five years of his
Qualified Election Period (as defined below), and 50% of the number of shares of
Employer Stock credited to his Stock Balance in the last year of the Qualified
Election Period in accordance with the provisions of this Section 5.6. The
Participant must elect to receive such a distribution within 90 days after the
end of each of the six Plan Years during the Qualified Election Period (the
"Diversification Election Period"), and the distribution will be made within 90
days after each election made by Participant during the Diversification Election
Period. The "Qualified Election Period" means the six Plan Years beginning with
the Plan Year during which a Participant becomes a Qualified Participant. The
amount which may be distributed to a Participant during the Qualified Election
Period shall be determined by multiplying the number of shares of Employer Stock
credited to the Participant's Stock Balance (including shares of Employer Stock
the value of which has been previously distributed pursuant to this Subsection)
by 25% or, with respect to a Participant's final election, 50%, reduced by the
amount of any prior distributions received by such Participant pursuant to this
Section 5.6. Notwithstanding the foregoing, if the fair market value of the
Employer stock allocated to the Stock Balance of a Qualified Participant is $500
or less as of the last day of the Plan Year immediately preceding the first day
of any Diversification Election Period, then such Qualified Participant shall
not be entitled to an election under this Section 5.6 for that Diversification
Election Period.
5.7 Missing Participants or Beneficiaries.
Each Participant and each Beneficiary must file with the Administrator
from time to time in writing his or her post office address and each change of
post office address. Any communication, statement or notice addressed to a
Participant or Beneficiary at his or her last post office address filed with the
Administrator, or if no address is filed with the Administrator then, in the
case of a Participant, at his or her last post office address as shown on the
Employer's records, will be binding on the Participant and Beneficiary for all
purposes of the Plan. The Employer, the Administrator and the Trustees are not
required to search for or locate a Participant or Beneficiary.
5.8 Benefits Not Assignable: ODROs.
5.8-1 The interest of a Participant and his or her Beneficiary in the
Trust Fund shall not in any way be subject to their debts or other obligations,
may not be voluntarily or involuntarily anticipated, assigned (either at law or
in equity) or alienated, and no such interest shall be subject to attachment,
garnishment, levy, execution or other legal or equitable process. This Section
shall not invalidate or prevent any arrangement for the
22
<PAGE>
withholding of any federal, state or local tax from Plan distributions or any
arrangement for the recovery by the Plan of overpayments previously made to a
Participant or Beneficiary.
5.8-2 In addition to payments made under this Plan on account of a
Participant's termination of employment, payments may be made to an Alternate
Payee (as defined below) prior to, coincident with, or after Participant's
termination of employment if made pursuant to a Qualified Domestic Relations
Order. A distribution to an Alternate Payee may be made out of a Participant's
Account on a date coincident with the Participant's "earliest retirement age,"
defined as the earlier of (i) the date on which the Participant is entitled to a
distribution under the Plan, or (ii) the later of (A) the date the Participant
attains age 50, or (B) the earliest date on which the Participant could begin
receiving benefits under the Plan if he or she had separated from service. In
addition, this Plan specifically authorizes distributions to an Alternate Payee
under a Qualified Domestic Relations Order prior to the Participant's attainment
of the earliest retirement age (as defined above and in section 414(p) of the
Code) but only if: (1) the order specified distribution at the earlier date or
permits an agreement between the Plan and the Alternate Payee authorizing an
earlier distribution; and (2) the Alternate Payee consents to a distribution
prior to the Participant's earliest retirement age if the present value of the
Alternate Payee benefits under the Plan exceeds $3,500. Nothing in this
Subsection 5.8-2 shall provide a Participant with a right to receive a
distribution at a time not otherwise permitted under the Plan, nor shall it
provide the Alternate Payee with a right to receive a form of payment not
permitted under the Plan. The term "Qualified Domestic Relations Order" means
any judgment, decree, or order (including approval of a property settlement
agreement) which:
(a) relates to the provision of child support, alimony payments, or
marital property rights to a spouse, child or other dependent of a
Participant.
(b) is made pursuant to a State domestic relations law (including a
community property law),
(c) creates or recognizes the existence of an Alternate Payee's right
to, or assigns to an Alternate Payee the right to, receive all or a portion
of the benefits payable with respect to the Participant,
(d) clearly specifies the name and last known mailing address, if any,
of the Participant and the name and mailing address of each Alternate Payee
covered by the order, the amount and percentage of the Participant's
benefits to be paid by the Plan to each Alternate Payee, or the manner in
which such amount or percentage is to be determined, the number of payments
or period to which such order applies and each plan to which such order
applies, and
(e) does not required the Plan to provide (i) any form or type of
benefit, or any option, not otherwise provided under the Plan, (ii)
increased benefits, or
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(iii) benefits to an Alternate Payee which are required to be paid to
another payee under another order previously determined by the
Administrator to be a Qualified Domestic Relations Order.
The Administrator shall establish reasonable procedures to determine the
qualified status of domestic relations orders and to administer distributions
under such qualified orders. Any expenses incurred by the Administrator in
determining the qualified status of domestic relations orders or administering a
qualified order shall be charged to the ESOP Accounts of the Participant to whom
such order relates. The Administrator may, in its sole discretion, establish and
maintain a segregated account for each Alternate Payee. The term "Alternate
Payee" means any spouse, former spouse, child or other dependent of a
Participant who is recognized by a Qualified Domestic Relations Order as having
a right to receive all, or a portion of, the benefits payable under the Plan
with respect to the Participant.
5.9 Direct Rollover Option.
5.9-1 Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Section, a distributee
may elect, at the time and in the manner prescribed by the Administrator, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
5.9-2 Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
5.9-3 Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
5.9-4 Distributee: A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving spouse and
the employee's or
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<PAGE>
former employee's spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in section 414(p) of the Code,
are distributees with regard to the interest of the spouse or former spouse.
5.9-5 Direct rollover: A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee.
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ARTICLE 6
EMPLOYER STOCK PROVISIONS
-------------------------
6.1 Voting Employer Stock.
6.1-1 The Trustees shall vote all Employer Stock held in the trust
fund; provided that Participants shall have the right to vote shares of Employer
Stock allocated to their Accounts in the following circumstances:
(a) If the Employer Stock is required to be registered under section
12 of the Securities Exchange Act of 1934; or
(b) If the Employer Stock would be required to be registered under
section 12 of the Securities Exchange Act of 1934 except for the exemption
provided in Section 12(g)(2)(H) of that act.
6.1-2 If the Employer Stock is to be voted with respect to any
corporate matter which involves the voting of such shares with respect to the
approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business or such similar transaction as
may be prescribed in Treasury Regulations, each Participant shall be permitted
one vote per share of Employer Stock. The Trustees shall vote all shares of
Employer Stock held by the Plan in the proportion to the vote of the
Participants.
6.2 Dividends Paid on Employer Stock.
6.2-1 Any cash dividends paid with respect to shares of Employer
Stock allocated to Participants' Stock Balances or held in the Loan Suspense
Account may, as determined by the Administrator, be allocated among and credited
to Cash Balances of the Participants; provided, however, that the dividends paid
with respect to Employer Stock held in the Loan Suspense Account shall be
allocated among and credited to Cash Balances according to the number of shares
of Employer Stock held in the respective Stock Balances on the date such
dividends were declared by the Employer (the "Dividend Declaration Date"). The
amounts credited to the Cash Balances may be reinvested in Employer Stock as
provided in Section 3.5.
6.2-2 Except as provided in subsection 6.2-3, any cash dividends paid
with respect to shares of Employer Stock allocated to Participants' Stock
Balances may, as determined by the Administrator, be either paid by the Employer
directly in cash to the Participants on a non-discriminatory basis, or paid to
the Trustees and distributed by the
26
<PAGE>
Trustees to the Participant no later than 90 days after the end of the Plan Year
in which paid to the Trustees.
6.2-3 To the extent permitted by applicable law, any cash dividends
paid with respect to shares of Employer Stock allocated to Participants' Stock
Balances or held in the Loan Suspense Account may (as required by applicable
Acquisition Loan documentation or, if not so required, as determined in the sole
discretion of the Administrator) be used to repay the principal balance of an
outstanding Acquisition Loan or interest thereon in whole or in part, or to
purchase additional shares of Employer Stock as provided in subsection 3.5.
Financed Shares released from the Loan Suspense Account by reason of dividends
paid with respect to such Employer Stock shall be allocated to Participants'
Stock Balances as follows:
(a) First, Financed Shares with a fair market value at least equal to
the dividends paid with respect to the Employer Stock allocated to the
Participants' Stock Balances shall be allocated among and credited to the
Stock Balances of such Participants, pro rata, according to the number of
shares of Employer Stock held in such Balances on the Dividend Declaration
Date;
(b) Then any remaining Financed Shares released from the Loan Suspense
Account by reason of dividends paid with respect to Employer Stock held in
the Loan Suspense Account shall be allocated among and credited to the
Stock Balances of all Participants, pro rata, according to each
Participant's Compensation.
6.3 Restrictions on Employer Stock Distributed from ESOP.
6.3-1 Each certificate for shares of Employer Stock distributed to a
Participant or Beneficiary shall bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 and may not be sold,
offered for sale or otherwise transferred except in compliance with
the terms and conditions contained in the Stock Ownership Plan of
NorAm Telecommunications, Inc."
6.3-2 Shares of Employer Stock may not be sold, transferred,
assigned, pledged, hypothecated or otherwise disposed of, and the Employer shall
not be required to register or recognize the transfer of any Employer Stock
unless (i) the Employer shall have received written notice of the contemplated
disposition, setting forth all of the circumstances and details thereof, and
(ii) one of the following has occurred:
(a) The Employer receives an opinion of counsel for the Employer to
the effect that the contemplated disposition is exempt from the
registration and prospectus requirements of the Securities Act of 1933, as
amended, and the rules and regulations
27
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of the Securities and Exchange Commission then in effect under the Act, and
of any other applicable federal or state act then in effect; or
(b) The Employer Stock is to be disposed of pursuant to and in
strict accordance with a registration statement and notification pursuant
to all applicable federal and state laws, including the Securities Act of
1933, as amended.
In the event the disposition of shares of Employer Stock is determined to be
exempt under section (a) above, the Employer may require that the certificate
issued to the transferee bear the legend described in Section 6.2-1 and be
subject to the terms and conditions of this section as if the Employer Stock
were still held by the transferor.
6.4 Rights and Options on Distributed Employer Stock.
6.4-1 Shares of Employer Stock which are distributed by the Trustees
shall be subject to a right of first refusal. If the owner of any shares of
Employer Stock distributed by the Trustees receive a bona fide offer to purchase
such shares from a financially qualified buyer and desire to accept such offer,
he or she must first offer, in writing delivered to the Trustees and the
Employer, to sell said shares to the Employer for the price and on the terms set
forth in said offer. If the offered price is less than the current fair market
value of the Employer Stock determined in accordance with Subsection 9.3-3, the
price shall be increased to fair market value and the terms adjusted
proportionately to compensate for the increased price. The Employer or its
nominee shall have 14 days to purchase the Employer Stock. If the Employer does
not exercise its right to purchase the shares, the owner of the shares may sell
the shares to the original offeror for the price and terms set forth in the
original offer, if, but only if, the sale is closed within 60 days following
expiration of the offer to the Employer. If it is not closed, the provisions of
this Section shall again apply as to any transfer of said shares. The right of
first refusal described in this Section shall be null and void if the Employer
Stock is publicly traded, as described in Treasury Regulation (S)54.4975-
7(b)(l)(iv). The certificates representing Employer Stock which are distributed
by the Trustees shall bear a legend noting the right of first refusal.
6.4-2 Each Participant, Beneficiary or donee of the Employer Stock
received by the Participant shall have an option to sell Employer Stock received
from the Plan, or any part of it, to the Employer. For a period of 60 days after
shares of Employer Stock are distributed to a Participant or Beneficiary, the
Participant, Beneficiary or Participant's donee shall have the right to require
the Employer to purchase the shares at fair market value determined in
accordance with Subsection 9.3-3. The option shall be exercised by the seller by
giving written notice to the Employer. Payment for the purchase of Employer
Stock may, at the election of the Employer, be either in a lump sum or in
substantially equal annual, quarterly or monthly installments over a period not
to exceed five years from the date the Employer purchases the shares. If an
installment payment is elected, the first installment shall be due within 30
days of the date the option was exercised. At the election of the seller the
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installment payments may be extended beyond five years, but not to exceed ten
years. As security for an installment payment, the seller shall be given a
promissory note which provides for the acceleration of the balance in the event
of a default. If the term of an installment payment for Employer Stock exceeds
five years, the seller shall receive adequate security for the outstanding
amount of the promissory note. The promissory note shall bear interest at a rate
equal to the prevailing bank prime interest rate then being charged in Portland,
Oregon, adjusted annually.
6.4-3 After the close of the Employer's taxable year in which the
option under Subsection 6.3-2 lapses, the Employer will notify each person who
failed to exercise an option of the fair market value of Employer Stock. Each
such person shall then have 60 days from the date the valuation information is
mailed to require the Employer to purchase all or any part of the Employer Stock
on the terms provided in Section 6.3-2. Thereafter, the Employer shall have no
obligation to purchase the shares.
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ARTICLE 7
ADMINISTRATION
--------------
7.1 Fiduciary Responsibility.
For purposes of ERISA, the "plan administrator" and "named fiduciary"
shall be the Administrator, except to the extent that certain rights and
responsibilities are herein reserved to the Employer and the Directors. The
Trustees shall administer the Trust Fund.
7.2 Nondiscriminatory Administration.
The Employer, the Directors, the Trustees and the Administrator shall
not discriminate in favor of or against any Employed in the determination of any
matter under the Plan.
7.3 Responsibilities of Employer.
The Employer shall provide the Administrator with all information
required to determine the eligibility of the Employees to participate, each
Participant's share of contributions to the Plan and each Participant's or
Beneficiary's right to receive distributions from the Plan. The Administrator
may rely on such information without independent investigation and shall not be
responsible for the accuracy of the information provided by the Employer.
7.4 Claim Procedure.
7.4-1 Although the Administrator may request information from any
Participant or Beneficiary to determine that person's eligibility for a
distribution from the Plan, benefits from this Plan shall normally be paid from
the Trust Fund without requiring a written application. Any person claiming a
benefit under this Plan may make a claim in writing to the Administrator. Within
60 days following its receipt, the Administrator will respond in writing to the
person initiating the claim. If no response to a claim is given within 60 days,
the claim will be deemed to have been denied.
7.4-2 If the Administrator denies a claim in writing, notice to the
person making the claim shall contain the following:
(a) the reasons for the denial, stating specifically the provisions of
the Plan upon which the Administrator bases the decision;
(b) a statement of documents or information, if any, which will be
required to perfect the claim, together with an explanation of why such
documentation or information is necessary; and
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(c) an explanation of the Plan's claim review procedure.
7.4-3 A person who is not satisfied with the Administrator's response
(or failure to respond) may request review by written notice to the president of
the Employer. The matter will be reviewed by the president who may, but is not
required to, have the person appear before him. On review, the person may be
represented by counsel, may examine pertinent documents and may submit issues
and arguments in writing.
7.4-4 The decision on review will be made no later than 60 days after
the receipt of the request for review, unless special circumstances of the
matter make this impractical, in which case the decision shall be made not later
than 120 days after receipt of the request for review.
7.5 Expenses of Administration.
The Employer may, but shall not be required to, pay all or any part of
the expenses properly and actually incurred in the administration of the Plan.
In the event the Employer elects not to pay such expenses, the Trust Fund shall
bear the expense.
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ARTICLE 8
ADMINISTRATOR
-------------
8.1 Duties of the Administrator.
Without limiting the authority of the Administrator to manage the
Plan, the Administrator, in its sole discretion, shall have the following powers
and duties:
(a) to require any person to furnish such information as the
Administrator may request for the proper administration of the Plan;
(b) to make and enforce such rules and regulations and prescribe the
use of such forms as the Administrator deems necessary, in its sole
discretion, for the efficient administration of the Plan;
(c) to interpret the Plan and resolve ambiguities, inconsistencies and
omissions in the Plan. The determination of the Administrator, in its sole
discretion, shall be conclusive and binding on all persons affected
thereby;
(d) to decide the eligibility of any Employee to participate in the
Plan and to give Employees notice of their eligibility to participate in
the Plan;
(e) to compute benefits to be paid to any person in accordance with
the provisions of the Plan and to direct the Trustees to pay such benefits;
and
(f) to maintain adequate and complete records with respect to
Participants and their rights under the Plan and to retain such records for
a period of not less than six years.
8.2 Delegation of Responsibilities.
The Administrator may appoint and delegate the administrative
functions to such accountants, counsel, specialists and other persons as the
Administrator deems necessary or desirable. The Administrator may rely upon any
tables, valuations, certificates, opinions or reports which may be furnished by
any such consultant.
8.3 Compensation.
No fee or compensation shall be paid to the Administrator for its
services as such. Except as may be required by ERISA, no bond, surety or other
security shall be required of the Administrator for the faithful performance of
its duties. Reasonable expenses properly and actually incurred by the
Administrator, including but not limited to the
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compensation of any accountant, counsel, specialist or other person employed by
the Administrator, shall be expenses of administration and shall be paid
pursuant to section 7.5.
33
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ARTICLE 9
TRUSTEES
--------
9.1 Limitation of Duties and Responsibilities.
The duties and responsibilities of the Trustees shall be those set
forth in the Plan and, except as provided by law, no other duties or
responsibilities, whether by amendment or supplement, shall be created without
the written consent of the Trustees. Except as otherwise provided in ERISA, a
Trustee shall not be liable for a breach by another fiduciary under this Plan
unless the Trustee:
(a) participates knowingly in, or knowingly undertakes to conceal, an
act or omission of such other fiduciary, knowing such act or omission to be
a breach;
(b) by the Trustee's failure to comply with section 404(a)(1) of
ERISA in the administration of its specific responsibilities which give
rise to its status as a fiduciary, the Trustee has enabled such other
fiduciary to commit a breach; or
(c) has knowledge of a breach by such other fiduciary and fails to
make reasonable efforts under the circumstances to remedy the breach.
9.2 General Administrative Powers.
The Trustees shall have the rights, powers and privileges of an
absolute owner when dealing with property of the Trust Fund, including, without
limitation, the powers listed below. While more than one person is acting as
Trustee, a majority of the Trustees may authorize an action for the Trustees.
Except as otherwise specified below, the Trustees' exercise of such powers shall
be subject to the direction of the Administrator.
(a) To hold, manage, improve, repair and control all property, real
or personal; convey, transfer, exchange, partition, lease and otherwise
dispose of the same from time to time in such manner, for such
consideration and upon such terms and conditions, including credit, as may
be deemed proper;
(b) To exercise any option, conversion privilege or subscription
right given the Trustees as the owner of any security held in the Trust
Fund; to vote any corporate stock either in person or by proxy, with or
without power of substitution; to consent to or oppose any reorganization,
consolidation, merger, readjustment of financial structure, sale, lease or
other disposition of the assets of any corporation or other organization,
the securities of which may be an asset of the Trust Fund, and to take any
action in connection therewith and receive and retain any securities
resulting therefrom;
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(c) To deposit any security with any protective or reorganization
committee, and to delegate to such committee such power and authority with
respect thereto as may be deemed proper, and to pay out of the Trust Fund
an appropriate portion of the expenses and compensation of such committee;
(d) Regardless of whether the Trustees or any other fiduciary has
responsibility to manage or control the assets of the Trust Fund, to cause
any property of the Trust Fund to be issued, held or registered in the name
of the Trustees as trustee, or in the name of a nominee, or in such form
that title will pass by delivery; provided, however, that the records of
the Trustees shall in all events indicate the true ownership of such
property;
(e) To renew or extend the time of payment of any obligation due or
to become due;
(f) To commence or defend suits or legal or administrative
proceedings, and to compromise, arbitrate, or settle claims, debts or
damages in favor of or against the Trust Fund; to deliver or accept, in
either total or partial satisfaction of any indebtedness or other
obligation, any property; to continue to hold for such period of time as
may be deemed appropriate any property so received, and to pay all costs
and reasonable attorney fees in connection therewith out of the assets of
the Trust Fund, to select counsel acceptable to the Administrator and the
Trustees; and to conduct the prosecution or defense of any litigation or
legal dispute subject to the control of the Administrator;
(g) To grant options to purchase or to purchase options to acquire
any real property;
(h) To foreclose any obligation by judicial proceeding or otherwise;
(i) To manage any real property in the Trust Fund in the same manner
as if the Trustees were the absolute owner thereof, including the power to
lease the same for such term or terms within or beyond the existence of the
Trust Fund and upon such conditions (including, but not by way of
limitation, agreements for the purchase or disposal of buildings thereon
and options to the tenant to renew such lease from time to time, or to
purchase such property) as may be deemed proper; to subdivide, develop and
improve all real property held in the Trust Fund; to make ordinary and
extraordinary repairs and alterations to any buildings to raze buildings
and to erect new buildings; and to purchase such insurance on behalf of the
Trust Fund at its expense including, but not by way of limitation, public
liability, fire and extended coverage, rent insurance and such other
insurance covering such other risks as may be deemed appropriate;
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(j) To borrow money in such amounts and upon such terms and for such
purposes as may be deemed appropriate, and, in connection therewith, to
execute promissory notes, mortgages or other obligations and to pledge or
mortgage any Trust Fund assets as security; and to lend money on a secured
basis;
(k) To appoint one or more persons or entities as ancillary trustee
or subtrustee for the purpose of investing in and holding title to real or
personal property or any interest therein located outside the state of
Oregon. Any such ancillary trustee or subtrustee shall act with such power,
authority, discretion, duties and functions of the Trustees under this
Section as shall be specified in the instrument establishing ancillary or
subtrust, including, without limitation, the power to receive, hold and
manage property, real or personal, or undivided interests therein, oil,
mineral or gas properties, royalty interests or rights, including equipment
pertaining thereto, leaseholds, mortgages, deeds of trust and other
interests in realty, situated in the state in which the ancillary trustee
or subtrustee is authorized to act as trustee of employee benefit trusts,
and the Trustees may pay the reasonable expenses and compensation of such
ancillary trustees or subtrustees out of the Trust Fund;
(l) Regardless of whether the Trustees or any other fiduciary has
responsibility to manage or control the assets of the Trust Fund, to
deposit any securities held in the Trust Fund with a securities depository;
and
(m) To hold such part of the assets of the Trust Fund uninvested for
such limited periods of time as may be necessary for purposes of orderly
account administration or pending required directions, without liability
for payment of interest provided, however, that regardless of whether the
Trustees or any other fiduciary has responsibility to manage assets of the
Trust Fund, the Trustees shall be authorized in their discretion to invest
funds of the Trust Fund, pending receipt of such direction, in savings
accounts in all cases where it is reasonable and feasible to do so.
9.3 Records, Valuation, Accounting and Settlement.
9.3-1 The Trustees shall keep full and complete records of the
administration of the Trust Fund and shall furnish the Administrator with a
complete accounting as soon as practicable after the end of each Plan Year,
showing all income and expense since the date of the last accounting and the
fair market value of the Trust Fund as of the last day of the Plan Year. The
Administrator may demand an audit of the accounting by a certified public
accountant, to be chosen by the Administrator. Alternatively, either the
Administrator or the Trustees may require that the accounting be settled by a
court of competent jurisdiction. If no objections to the accounting are filed
within six months of its submission, it shall be deemed settled.. Auditing
expenses shall be expenses of administration and shall be paid pursuant to
Section 7.5.
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9.3-2 In determining the value of assets, the Trustees shall use a
uniform and consistent method or basis of valuation which is consistent with
generally accepted accounting principles and based upon such sources of
information as will, in the Trustees' discretion, result in the fair and
equitable valuation of Plan assets. The Trustees may utilize published
quotations or pricing services that the Trustees consider reliable. If the
Trustees determine that any assets of the Plan consist of property not freely
traded on a recognized exchange, or that information necessary to ascertain the
fair market value thereof is not readily available to the Trustees, the Trustees
shall take such action as they deem necessary to determine fair market value at
the expense of the Trust Fund, including, but not limited to, estimates or
appraisals of value from sources familiar with the type of property involved.
The valuations by the Trustees shall be binding upon all interested persons.
9.3-3 For all purposes under this Plan, shares of Employer Stock
shall be valued at fair market value. Fair market value shall be based on an
appraisal independently arrived at by a person who customarily makes such
appraisals and who is independent of any party to the transaction. The
Administrator shall engage the appraiser who shall qualify as an independent
appraiser under the requirements of the Treasury Regulation (S) 54.4975-1l
(d)(5).
9.4 Parties to Settlement.
No Employee, Participant or Beneficiary (other than an employee
serving as Administrator) shall be party to any accounting referred to in
Section 9.3. The Administrator shall represent all Participants and their
Beneficiaries. All persons shall be bound by the settlement of the accounting
between the Trustees and the Administrator.
9.5 Inspection of Records.
The record of transactions in connection with the investment of the
Trust Fund shall be open to inspection by the Administrator or its agents at all
reasonable times.
9.6 Conflicting Claims.
If a dispute arises as to the person to whom the Trustees are to pay
any funds or to deliver property, the Trustees may withhold the payment or
delivery until the dispute has been determined by a court of competent
jurisdiction or has been settled by the parties concerned.
9.7 Resignation.
Any Trustee may resign at any time upon delivering to the Employer a
written notice of such resignation to take effect not less than 30 days after
such notice, unless the Directors agree to a shorter time.
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9.8 Removal; Successor Trustee.
The Directors may remove any Trustee and appoint a successor Trustee,
upon 30 days' notice, unless the Trustee agrees to a shorter time.
9.9 Continuation of Trust Fund.
No change of identity of the Trustees shall result in the dissolution
or liquidation of the Trust Fund.
9.10 Performance Bond.
Except as required by ERISA, the Trustees shall not be required to
give any bond or other security for the faithful performance of the duties
hereunder.
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ARTICLE 10
INVESTMENT OF TRUST FUND
------------------------
10.1 Investment Management of Trust Fund.
The Trustees shall have full responsibility and authority to manage
the investment of the Trust Fund, without distinction between principal and
income.
10.2 Permitted Investments.
The Trust Fund shall be primarily invested in shares of Employer
Stock. Except as herein provided, the Trust Fund may be invested and reinvested
in such investments as the Trustees deem to be sound and advisable, including
but not limited to real and personal property, common and preferred stock, bonds
or other corporate obligations, options to buy or sell corporate securities,
mortgages, trust deeds, conditional sales contracts and other instruments.
Acquisition and holding by the Trust Fund of "qualifying employer real property"
as defined in section 407(d)(4) of ERISA shall be permitted. Unless under the
circumstances it is clearly prudent not to do so, the Trustees shall diversify
the investments so as to minimize the risk of large losses. The Trust Fund may
be held in cash or its equivalent to the extent advisable, without liability for
interest. The Trustees shall not be restricted to permissible investments as
prescribed by any present or future state law relating to investment of trust
funds by corporate or other trustees.
10.3 Exempt Loan Permitted.
The Trustees may borrow funds for the purpose of purchasing Employer
Stock as provided in Section 3.5.
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ARTICLE 11
TERMINATION, AMENDMENT OR MERGER
--------------------------------
11.1 No Contractual Obligation.
The Employer has established the Plan with the bona fide intention and
expectation that it will be able to and will deem it advisable to make
contributions to the Plan each year. However, the continuance of the Plan and
contributions by the Employer to the Plan in any Plan Year are not assumed as a
contractual obligation of the Employer. Adopting the Plan is not a contract
between the Employer and any Employee, nor is it consideration or an inducement
for or condition of the employment of any person. Nothing contained in the Plan
shall give any Employee the right to be retained in the employ of the Employer
or interfere with the right of the Employer to discharge any Employee, with or
without cause, at any time.
11.2 Amendments.
The Employer may from time to time amend the Plan.. No amendment shall
be made at any time pursuant to which the Trust Fund or any part thereof may be
diverted to purposes other than the exclusive benefit of the Participants or
their Beneficiaries. In no event shall any amendment to the Plan reduce or
restrict, either directly or indirectly, the accrued benefit of any Participant,
except to the extent permitted by the Code and by Treasury Regulations. If the
vesting schedule of the Plan is amended, and the amendment could reduce the
vested percentage of a Participant who has completed at least three Years of
Service, then such Participant may elect to have his or her vested percentage
determined under the vesting schedule in effect prior to the amendment;
provided, however, that no election will be provided to any Participant whose
vested percentage under the amended vesting schedule cannot be less than such
percentage under the vesting schedule in effect prior to the amendment. The
period during which the election may be made shall commence with the date the
amendment is adopted or deemed to be made and shall end on the latest of:
(i) 60 days after the amendment is adopted,
(ii) 60 days after the amendment becomes effective;
(iii) 60 days after the Participant is issued written notice of
the amendment by the Employer or Administrator.
The Plan Administrator shall determine appropriate procedures for the
election of a prior vesting schedule in accordance with Treasury Regulation (S)
1.411(a)-8. If other optional retirement benefits are changed by an amendment,
the benefits with respect to the benefits accrued to the date of the amendment
shall not be reduced for any Employee who at
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any time on or after the amendment satisfied the pre-amendment condition for the
benefit. If any benefits protected under section 411 (d)(6) of the Code are
eliminated by an amendment, such protected benefits will be preserved with
respect to benefits accrued as of the later of the adoption or effective date of
the amendment.
11.3 Merger, Consolidation or Transfer of Trust Fund.
In the event that the Plan is merged or consolidated with, or the
Trust Fund is transferred or its liabilities assumed by, any other tax qualified
retirement benefit plan, no Participant shall suffer any loss of benefits. The
benefit payable to each Participant if the Plan were terminated immediately
before the merger, consolidation or transfer shall be compared with the benefit
payable if the Plan were terminated immediately after the merger, consolidation
or transfer. In no event shall any benefit after the merger, consolidation or
transfer be less than the benefit before the merger, consolidation or transfer.
11.4 Termination.
In the event the Employer decides that it is not advisable to continue
to contribute to the Plan, the Employer may permanently terminate Employer
contributions to the Plan. After the date specified in the resolution, the
Employer shall make no further contributions. All of the other provisions of the
Plan shall remain in force and the Trust Fund shall be held, administered and
distributed as provided in the Plan. At any time after completely discontinuing
all contributions to the Plan, the Employer may terminate the Trust Fund. The
Employer shall direct the Trustees to make payment of the Accounts to the
persons entitled thereto, after paying or providing for the payment of all
expenses and adjusting all Accounts to reflect such payments. Except as provided
in Section 13.4, the complete discontinuance of Employer contributions to the
Plan or the termination of the Trust Fund shall not have the effect of revesting
in the Employer any part of the Trust Fund.
11.5 Vesting Upon Termination.
Upon termination or partial termination of the Plan or upon the
complete discontinuance of contributions to the Plan, the Account of each
Participant affected thereby shall be fully vested and nonforfeitable,
notwithstanding any other provision in the Plan to the contrary.
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ARTICLE 12
TOP-HEAVY PROVISIONS
--------------------
This Article 12 contains provisions for determining whether the Plan
is a Top-Heavy Plan in accordance with section 416 of the Code and special
vesting, contribution and compensation requirements that will supersede any
conflicting provisions in the Plan if the Plan becomes a Top-Heavy Plan in any
Plan Year.
12.1 Definitions.
The following words and phrases, as used in this Article 11, shall
have the following meanings, unless a different meaning is clearly required by
the context:
(a) "Aggregate Account" means the value of all accounts, including
the vested and nonvested portions thereof, of all defined contribution
plans (including any simplified employee pension plan) maintained by the
Affiliated Group on behalf of an Employee. An Employee's Aggregate Account
as of any Determination Date shall consist of the Employee's account
balance as of the most recent valuation of the Plan occurring within a 12-
month period ending on the Determination Date, credited for any
contributions made after the Determination Date but allocated as of the
Determination Date, as adjusted by the following:
(i) Any distributions made to the Employee (or the
Employee's Beneficiary) within the Plan Year that includes the
Determination Date and within the four preceding Plan Years shall be
included in the Employee's Aggregate Account;
(ii) Amounts attributable to deductible employee
contributions, as defined in section 72(o)(5)(A) of the Code, shall
not be included in the Employee's Aggregate Account;
(iii) With respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and made from
a plan maintained by one employer to a plan maintained by another
employer), if this Plan provides the rollover or plan-to-plan
transfer, the rollover or transfer shall be counted as a distribution
for the purposes of Subsection 12.1(a)(i). In determining whether two
employers are involved in a rollover or plan-to-plan transfer, all
members of the Affiliated Group shall be deemed a single employer.
Rollovers or plan-to-plan transfers shall not be considered as part of
the Employee's Aggregate Account;
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(iv) With respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made to a plan
maintained by another member of the Affiliated Group), if this Plan
provides the rollover or plan-to-plan transfer, it shall not be
counted as a distribution for purposes of Subsection 12.l(a)(i). If
this Plan is the plan accepting such rollover or plan-to-plan
transfer, it shall consider such rollover or plan-to-plan transfer as
part of the Employee's Aggregate Account. This Section shall apply
irrespective of the date on which such rollover or plan-to-plan
transfer is accepted; and
(v) If an Employee has not performed any services for a
member of the Affiliated Group at any time during the five-year period
ending on the Determination Date, the value of all Accounts of the
Employee shall not be included in the Employee's Aggregate Account.
(b) "Aggregation Group" means either a Required Aggregation Group
or a Permissive Aggregation Group.
(c) "Determination Date" means, with respect to any Plan Year:
(i) The last day of the preceding Plan Year; or
(ii) In the case of the first Plan Year, the last day of such
Plan Year.
(d) "Key Employee" means any Employee or former Employee (and the
Beneficiaries of such Employee) who, at any time during the Plan Year
containing the Determination Date and the four preceding Plan Years was:
(i) an officer of a member of the Affiliated Group if such
individual's annual compensation exceeds 50 percent of the dollar
limitation under section 415(b)(1)(A) of the Code;
(ii) an owner (or a person considered an owner under section
318 of the Code) of one of the ten largest interests in a member of
the Affiliated Group if such individual's annual compensation exceeds
100 percent of the dollar limitation under section 415(c)(1)(A) of the
Code;
(iii) a 5-percent owner of a member of the Affiliated Group; or
(iv) a 1-percent owner of a member of the Affiliated Group
having an annual Compensation from the Affiliated Group for the Plan
Year of more than $150,000.
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For purposes of this definition, annual compensation means
compensation as defined in section 415(c)(3) of the Code, but including
amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludible from the employee's gross income under
section 125, 402(a)(8), 402(h), or 403(b) of the Code. Notwithstanding the
foregoing, the definition of Key Employee in section 416(i)(1) of the Code
and the Treasury Regulations thereunder is hereby incorporated by reference
and shall control if in conflict with the preceding definition of Key
Employee.
(e) "Non-Key Employee" means any Employee (and such Employee's
Beneficiary) who is not a Key Employee.
(f) "Permissive Aggregation Group" includes:
(i) Each Plan of the Affiliated Group in the Required
Aggregation Group; and
(ii) One or more Plans of the Affiliated Group that are not
part of the Required Aggregation Group, but so included at the
election of the Employer; provided, however, the resulting Permissive
Aggregation Group, taken as a whole, would satisfy the provisions of
sections 401(a)(4) and 410 of the Code.
(g) "Required Aggregation Group" includes:
(i) Each Plan of the Affiliated Group in which a Key Employee
participates in the Plan Year containing the Determination Date or any
of the four preceding Plan Years; and
(ii) Each other Plan of the Affiliated Group which enables any
Plan in which a Key Employee is a participant to meet the requirements
of sections 401(a)(4) or 410 of the Code during such period.
(h) "Top-Heavy Group" means an Aggregation Group in which, as of
the Determination Date, the sum of the Aggregate Accounts of Key Employees
in all plans included in the group exceeds 60 percent of the sum of the
Aggregate Accounts of all Employees in all such plans; provided, however,
that the Aggregate Accounts of any Non-Key Employee who was a Key Employee
for any prior Plan Year shall be disregarded in making the determination.
(i) "Top-Heavy Plan" means for any Plan Year beginning after
December 31, 1983, this Plan if any of the following conditions exist:
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(i) If the Top-Heavy Ratio for this Plan exceeds 60 percent,
and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group;
(ii) If this Plan is a 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 percent; or
(iii) If this Plan is a part of a Required Aggregation Group
and part of a Permissive Aggregation Group, and the Top-Heavy Ratio
for the Permissive Aggregation Group exceeds 60 percent.
(j) "Top-Heavy Plan Year" means any Plan Year in which the Plan is
a Top-Heavy Plan.
(k) "Top-Heavy Ratio" means:
(i) If the Affiliated Group maintains one or more defined
contribution plans (including any simplified employee pension plan),
and the Affiliated Group has not maintained any defined benefit plan
which during the five-year period ending on the Determination Date has
or has had accrued benefits, the Top-Heavy Ratio for this Plan alone
or for the Required or Permissive Aggregation Group as appropriate is
a fraction, the numerator of which is the sum of the Account balances
of all Key Employees as of the Determination Date (including any part
of any Account balance distributed in the five-year period ending on
the Determination Date), and the denominator of which is the sum of
all Account balances (including any part of any Account balance
distributed in the five-year period ending on the Determination Date),
both computed in accordance with section 416 of the Code and the
Treasury Regulations thereunder. Both the numerator and denominator of
the Top-Heavy Ratio are increased to reflect any contribution not
actually made as of the Determination Date, but which is required to
be taken into Account on that date under section 416 of the Code and
the Treasury Regulations thereunder.
(ii) If the Affiliated Group maintains one or more defined
contribution plans (including any simplified employee pension plan),
and the Affiliated Group maintains or has maintained one or more
defined benefit plans which during the five-year period ending on the
Determination Date has or has had any accrued benefits, the Top-Heavy
Ratio for any Required or Permissive Aggregation Group as appropriate
is a fraction, the numerator of which is the sum of account balances
under the aggregated defined contribution plan or plans for all Key
Employees, determined in accordance with (i) above, and the
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present value of accrued benefits under the aggregated defined benefit
plan or plans for all Key Employees as of the Determination Date, and
the denominator of which is the sum of the account balances under the
aggregated defined contribution plan or plans for all Participants,
determined in accordance with (i) above, and the present value of
accrued benefits under the defined benefit plan or plans for all
Participants as of the Determination Date, all determined in
accordance with section 416 of the Code and the Treasury Regulations
thereunder. The accrued benefits under a defined benefit plan in both
the numerator and denominator of the Top-Heavy Ratio are increased for
any distribution of an accrued benefit made in the five-year period
ending on the Determination Date.
(iii) For purposes of (i) and (ii) above, the value of account
balances and the present value of accrued benefits will be determined
as of the last day of the preceding Plan Year that falls within or
ends with the 12-month period ending on the Determination Date, except
as provided in section 416 of the Code and the Treasury Regulations
thereunder for the first and second Plan Years of a defined benefit
plan. The account balances and accrued benefits of a Participant who
is not a Key Employee, but who was a Key Employee in a prior year, or
who has not been credited with at least one Hour of Service with the
Affiliated Group at any time during the five-year period ending on the
Determination Date will be disregarded. The calculation of the Top-
Heavy Ratio, and the extent to which distributions, rollovers and
transfers are taken into account, will be made in accordance with
section 416 of the Code and the Treasury Regulations thereunder.
Deductible employee contributions will not be taken into account for
purposes of computing the Top-Heavy Ratio. When aggregating plans the
value of account balances and accrued benefits will be calculated with
reference to the Determination Dates that fall within the same
calendar year.
The accrued benefit of a Participant other than a Key Employee shall
be determined under (A) the method, if any, that uniformly applies for
accrual purposes under all defined benefit plans maintained by the
Affiliated Group, or (B) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under the
fractional rule of section 41l(b)(l)(C) of the Code.
12.2 Top-Heavy Plan Requirements.
12.2-1 For any Top-Heavy Plan Year and each Plan Year thereafter,
notwithstanding any other provisions of the Plan, each Participant's Accounts
shall be vested in accordance with the following schedule:
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Years of Vested
Service Percentage
------- ----------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
The foregoing minimum vesting shall apply to all benefits within the
meaning of section 41l(a)(7) of the Code except those attributable to Employee
contributions, including benefits accrued before the effective date of section
416 and benefits accrued before the Plan became top-heavy. Further, no decrease
in a Participant's nonforfeitable percentage may occur in the event the Plan's
status as top-heavy changes for any Plan Year. However, this Section does not
apply to the account balances of any Employee who does not have an Hour of
Service after the Plan has initially become top-heavy and such Employee's
account balance attributable to Employer contributions and forfeitures will be
determined without regard to this Section. If the vesting schedule under the
Plan shifts in or out of the above top-heavy schedule for any Plan Year because
of the Plan's top-heavy status, such shift is an amendment to the vesting
schedule and the election in Section 12.2 of the Plan applies.
12.2-2 For any Top-Heavy Plan Year, the following minimum contribution
requirements shall apply:
(a) Notwithstanding any of the provisions of the Plan, the
Employer's contribution rate for each Non-Key Employee shall be equal to
not less than 3 percent of each Non-Key Employee's Compensation provided,
however, if the Employer's contribution rate for each Key Employee for such
Top-Heavy Plan Year is less than 3 percent, the contribution rate for each
Non-Key Employee shall be equal to the highest contribution rate for any
Key Employee.
(b) The Employer's contribution rate for an Employee is: (1) the
sum of (A) the Employer's contributions made or required to be made
(without regard to any waiver of the minimum funding requirement), (B)
reallocated forfeitures on behalf of such Employee, and (C) contributions
attributable to a wage reduction or similar arrangement; (2) divided by the
Employee's Compensation. Contributions and benefits under Chapter 21, Title
II of the Social Security Act shall be disregarded in determining a
contribution rate. The contribution rate for an Employee shall be
determined by aggregating all defined contribution plans and all wage
reduction and similar arrangements, of the Affiliated Group.
Notwithstanding the foregoing, the contribution rate for a Non-Key Employee
shall be determined without regard to elective contributions under this or
any other plan of the Affiliated Group.
47
<PAGE>
(c) The minimum contribution shall be allocated to the Accounts of
all Non-Key Employees who are Participants and who have not separated from
service at the end of the Plan Year, including Non-Key Employees who have:
(i) Failed to complete 500 Hours of Service in the Plan Year;
(ii) Declined to make mandatory or elective contributions (if
any) to the Plan; or
(iii) Failed to receive a contribution because the individual's
Compensation was less than a certain amount.
(d) Notwithstanding the foregoing, the minimum contribution
pursuant to this Subsection 12.2-2 shall not apply in any Plan Year in
which the Participant is eligible for benefits under this Plan or another
plan of the Affiliated Group and the Participant receives a contribution
not less than the contribution pursuant to this Section, or accrues a
benefit not less than the minimum benefit required pursuant to section
416(c)(l) of the Code. A Participant who is eligible for benefits from this
Plan and a Top Heavy defined benefit plan of the Affiliated Group shall
receive the minimum benefit from the defined benefit plan and Subsection
12.2-2 shall not apply.
12.2-3 The provisions of this Section shall not apply to any
individual who severed employment with the Affiliated Group before a Top-Heavy
Plan Year, until such individual returns to employment with the Affiliated
Group.
12.3 Aggregation of Plans.
12.3-1 In the case of a Required Aggregation Group, each plan in the
group will be considered a Top-Heavy Plan if the Required Aggregation Group is a
Top-Heavy Group. No plan in the Required Aggregation Group will be considered a
Top-Heavy Plan if the Aggregation Group is not a Top-Heavy Group.
12.3-2 In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a Top-Heavy Plan if
the Permissive Aggregation Group is a Top-Heavy Group. A plan that is not part
of the Required Aggregation Group, but that has nonetheless been aggregated as
part of the Permissive Aggregation Group, will not be considered a Top-Heavy
Plan even if the Permissive Aggregation Group is a Top-Heavy Group.
48
<PAGE>
12.4 Special Limitations.
"100 percent" shall be substituted for "125 percent" whenever 125
percent occurs in the multiple plan limitations of section 415 of the Code and
(i) for each year in which the Plan is a Top-Heavy Plan (as defined at
Subsection 12.1(j)) unless the requirements of (a) and (b) below are met with
respect to the Plan:
(a) the Plan would not be a Top-Heavy Plan if "90 percent" were
substituted for "60 percent" each place it appears in Subsection 12.1(j);
and
(b) the Plan and any other Plan in the Aggregation Group would not
meet the requirements of Subsection 12.2-2 if "4 percent" were substituted
for "3 percent" whenever it occurs.
If the requirements of (a) and (b) are met, then "4 percent" shall be
substituted for "3 percent" wherever it occurs in Subsection 12.2-2.
49
<PAGE>
ARTICLE 13
MISCELLANEOUS
-------------
13.1 Nonliability of Employer.
All amounts payable under the Plan shall be paid or provided for
solely from the Trust Fund, and the Employer assumes no liability or
responsibility therefor.
13.2 Indemnification.
To the extent that insurance coverage does not apply, the Employer
shall indemnify and defend the Directors, the Trustees and any Employee
performing the duties of the Administrator from any liability, including costs
and attorney fees at trial or on appeal, arising in any manner in connection
with any action taken or not taken in the operation or administration of the
Plan or Trust Fund unless accompanied by willful misconduct, bad faith or fraud
in the performance of their duties, in which event the indemnity provisions of
this sentence shall not apply in favor of those persons who participated in the
willful misconduct, bad faith or fraud. No assets of the Plan shall directly or
indirectly be used to indemnify such persons.
13.3 Exclusive Benefit of Participants.
Except as provided in Section 13.4, no part of the Trust Fund shall
revert to the Employer or be used for or diverted to purposes other than the
exclusive benefit of the Participants or their Beneficiaries.
13.4 Return of Employer Contributions.
13.4-1 Notwithstanding any provision of the Plan to the contrary, if a
contribution is made by the Employer by a mistake of fact, the Trustees shall
return such contribution to the Employer within one year after payment of the
contribution, and in such event no Participant shall have any interest in or to
such contribution whatsoever.
13.4-2 Notwithstanding any provision of the Plan to the contrary, all
contributions are conditioned upon deductibility under section 404 of the Code,
and to the extent any deduction is disallowed, the Trustees shall return the
disallowed portion of the contribution to the Employer within one year after the
disallowance of the deduction, and in such event no Participant shall have any
interest in or to such contribution whatsoever.
13.4-3 The amount which shall be returned to the Employer under
Sections 13.4-1 and 13.4-2 shall be the excess of the amount contributed over
the amount that would have been contributed had there not occurred a mistake of
fact or a mistake in determining the
50
<PAGE>
deductibility of the contribution. Earnings attributable to the excess
contribution may not be returned to the Employer, but losses attributable
thereto must reduce the amount returned. If the return of the excess
contribution would cause the balance credited to the Account of any Participant
to be reduced to less than the balance which would have been credited to the
Account had the excess amount not been contributed, then the amount to be
returned to the Employer shall be limited so as to avoid such reduction.
13.5 Construction.
Wherever appropriate, words used in the singular include the plural,
the plural includes the singular, and the masculine includes the feminine.
Article and Section captions are for convenience only, do not affect the meaning
of any provision of the Plan and are not to be considered in the interpretation
hereof.
13.6 Severability.
If any provision of the Plan shall, for any reason, be invalid or
unenforceable, the remaining provisions shall, nevertheless, be carried into
effect as if the invalid or unenforceable provision were omitted.
13.7 Applicable Law.
Insofar as not inconsistent with ERISA, the Plan shall be construed,
administered and enforced according to the laws of the state of Oregon.
IN WITNESS WHEREOF, the parties have caused this Plan and the Trust
Fund established thereby to be executed as of 17th day of December, 1996.
NORAM TELECOMMUNICATIONS, INC. TRUSTEES
By /s/ SHELDON V. ORTON /s/ E.R. McAYEAL
------------------------------------- ------------------------------------
Edward R. McAyeal
Title President
----------------------------------
/s/ PATRICK A. McCLOSKEY
------------------------------------
Patrick A. McCloskey
51
<PAGE>
EXHIBIT 4.2
STOCK OWNERSHIP PLAN OF
NORAM TELECOMMUNICATIONS, INC.
Amendment No. 1
---------------
Pursuant to Section 10.2 of the Stock Ownership Plan of Noram
Telecommunications, Inc. (the "Plan"), the sponsoring employer hereby amends the
plan as follows:
1. Key Employee. Section 12.1(d) is amended by replacing the
reference to Section "402(a)(8)" with "402(e)(3)."
2. Permanent Part Time. Section 2.1-4 shall be deleted in its
entirety and nothing substituted therefor.
3. Compensation. Section 1(f) shall be amended by inserting the
following paragraphs at the end thereof:
In determining the Compensation of a Participant, who is either a
5% owner or is both a Highly Compensated Employee and one of the ten most
highly compensated employees, the rules of Section 414(q) of the Code shall
apply, except in applying such rules, the term "family" shall include only
the spouse of the Participant and any lineal descendants of the Participant
who have not attained age 19 before the close of the year. If, as a result
of the application of such rules, the adjusted $150,000 limitation is
exceeded, then the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as
determined under this Section prior to the application of this limitation.
In determining Compensation of any Highly Compensated Employee,
all overtime compensation and 50% of all commission earnings shall be
excluded for purposes of allocating the contributions under this Plan.
4. Deemed Distributions. Section 5.5-3 shall be amended by adding
the following sentence at the end thereof:
Any Participant who severs employment and whose Account is not vested shall
be deemed to have received a distribution of the vested portion of such
Account.
<PAGE>
5. Voting Employer Stock. Section 6.1 shall be amended to read as
follows:
6.1 Voting Employer Stock.
6.1-1 The Trustees shall vote all Employer Stock held in the trust
fund; provided that Participants and Beneficiaries shall have the right to
vote shares of Employer Stock allocated to their Accounts in the following
circumstances:
(a) If the Employer Stock is required to be registered under section
12 of the Securities Exchange Act of 1934;
(b) If the Employer Stock would be required to be registered under
section 12 of the Securities Exchange Act of 1934 except for the exemption
provided in Section 12(g)(2)(H) of that act; or
(c) If the Employer Stock is to be voted with respect to any
corporate matter which involves the voting of such shares with respect to
the approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business or such similar transaction
as may be prescribed in Treasury Regulations.
In such cases, each Participant or Beneficiary shall be permitted one vote
per share of Employer Stock allocated to his or her Account and the
Trustees shall vote the shares of Employer Stock allocated to the Accounts
as directed by the Participants and Beneficiaries.
5. Effective Date. This amendment shall be effective for Plan Years
commencing after December 31, 1995. Except as amended, the plan shall continue
in full force and effect.
NORAM TELECOMMUNICATIONS, INC.
By: /s/ PATRICK A. McCLOSKEY
---------------------------------------
Date Signed: 8/15/97
------------------------------
2
<PAGE>
Exhibit 5.1
-----------
QUANTA SERVICES, INC.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77056
June 11, 1998
Quanta Services, Inc.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77056
Gentlemen:
You have requested the undersigned's opinion in his capacity as General
Counsel of Quanta Services, Inc., a Delaware corporation (the "Company") in
-------
connection with the Registration Statement on Form S-8 (the "Registration
------------
Statement"), filed with the Securities and Exchange Commission in connection
- ---------
with the registration under the Securities Act of 1933, as amended, of 303,556
shares of the Company's Common Stock, par value $.00001 per share (the "Common
------
Stock"), issued to the Stock Ownership Plan of NorAm Telecommunications, Inc.
- -----
(the "Plan").
----
With respect to the foregoing, the undersigned has examined such documents
and questions of law as he deemed necessary to render the opinions expressed
below. Based upon the foregoing, the undersigned is of the opinion that the
Common Stock issued to the Plan is duly and validly issued, fully paid and
nonassessable.
The undersigned consents to the use of this opinion as Exhibit 5.1 to the
Registration Statement.
This opinion letter is as of the date hereof, and the undersigned
undertakes no obligation, and expressly disclaims any obligation, to advise you
of any change in the matters set forth herein. Please note that the opinions
expressed herein relate only to the matters specifically set forth, and no
opinion is implied or should be inferred as to any other matters.
Sincerely,
/s/ Edward Rhyne
-----------------------------------------
Edward Rhyne
General Counsel
<PAGE>
EXHIBIT 5.2
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
P.O. BOX 2508
CINCINNATI, OH 45201
Employer Identification Number:
Date: JUL 16 1997 93-0883272
DLN:
917058006
NORAM TELECOMMUNICATIONS, INC. Person to Contact:
15701 SE 135TH NAN CHYO
CLACKAMAS, OR 97015 Contact Telephone Number:
(213) 725-2531
Plan Name:
STOCK OWNERSHIP PLAN OF NORAM
TELECOMMUNICATIONS, INC
Plan Number: 001
Dear Applicant:
We have made a favorable determination on your plan, identified above,
based on the information supplied. Please keep this letter in your permanent
records.
Continued qualification of the plan under its present form will depend on
its effect in operation. (See section 1.401-1(b)(3) of the Income Tax
Regulations.) We will review the status of the plan in operation periodically.
The enclosed document explains the significance of this favorable
determination letter, points out some events that may affect the qualified
status of your employee retirement plan, and provides information on the
reporting requirements for your plan. It also describes some events that
automatically nullify it. It is very important that you read the publication.
This letter relates only to the status of your plan under the Internal
Revenue Code. It is not a determination regarding the effect of other federal or
local statutes.
This determination is subject to your adoption of the proposed amendments
submitted in your letter dated 062397. The proposed amendments should be adopted
on or before the date prescribed by the regulations under Code section 401(b).
This determination letter is applicable for the plan adopted on 121796.
This plan satisfies the requirements of Code section 4975(e)(7).
This plan satisfies the nondiscrimination in amount requirement of section
1.401(a) (4)-1(b) (2) of the regulations on the basis of a design-based safe
harbor described in the regulations.
This letter is issued under Rev. Proc. 93-39 and considers the amendments
required by the Tax Reform Act of 1986 except as otherwise specified in this
letter.
This plan satisfies the nondiscriminatory current availability requirements
of section 1.401(a) (4)-4(b) of the regulations with respect to those
<PAGE>
-2-
NORAM TELECOMMUNICATIONS, INC.
benefits, rights and features that are currently available to all employees in
the plan's coverage group. For this purpose, the plan's coverage group consists
of those employees treated as currently benefitting for purposes of
demonstrating that the plan satisfies the minimum coverage requirements of
section 410(b) of the Code.
Except as otherwise specified this letter may not be relied upon with
respect to whether the plan satisfies the qualification requirements as amended
by the Uruguay Round Agreements Act, Pub. L. 103-465 and by the Small Business
Job Protection Act of 1996 (SBJPA), Pub. L. 104-108, other than the requirements
of Code section 401(a) (26).
If you have questions concerning this matter, please contact the person
whose name and telephone number are shown above.
Sincerely yours,
/s/ [ILLEGIBLE]
District Director
Enclosures:
Publication 794
Reporting & Disclosure Guide
for Employee Benefit Plans
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated March 18, 1998
included in Quanta Services, Inc.'s Form 10-K for the year ended December 31,
1997, and to all references to our firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
June 12, 1998
