SUBJECT TO COMPLETION , DATED , 1995
As filed with the Securities and Exchange Commission on May 12, 1995
Registration No. 33-[ ]
Securities and Exchange Commission
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DynCorp
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
4581
(Primary Standard Industrial Classification Code Number)
36-2408747
(I.R.S. Employer Identification Number)
2000 Edmund Halley Drive, Reston, Virginia 22091-3436
(703) 264-0330
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
David L. Reichardt
Senior Vice President & General Counsel
DynCorp
2000 Edmund Halley Drive
Reston, Virginia 22091-3436
(703) 264-9106
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to rule 415
under the Securities Act of 1933, check the following box. (X)
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Maximum Maximum
Class of Amount Offering Aggregate Amount of
Securities to to be Price Per Offering Registration
be Registered(1) Registered Share(2) Price(2) Fee
Common Stock 11,969,313 $14.90 $178,342,764 $61,497.50
par value $0.10 shares
per share
(1) This Registration Statement also relates to
in indeterminate number of interests in the DynCorp Savings and
retirement Plan, the DynCorp Employee Stock Purchase Plan, the
DynCorp 1995 Non-Qualified Stock Option Plan, the DynCorp
Executive Incentive Plan, and the DynCorp Employee Stock
Ownership Plan pursuant to which certain of the shares of Common
stock offered pursuant to the Prospectus included as part of this
Registration Statement may be issued and delivered or sold.
(2) Estimated solely for purposes of determining the
Registration fee pursuant to Rule 457 under the Securities Act of
1933.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
DynCorp
Cross Reference Sheet
Pursuant to Rule 404(a) of Regulation C and Item 501(b) of Regulation S-K
Form S-1
Item Number and Caption Caption or Location
1. Forepart of Registration Statement Facing Page of Registration Statement;
and Outside Front Cover Page of Outside Front Cover Page of Prospectus
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover
Pages of Prospectus Pages of Prospectus
3. Summary Information, Risk Factors The Company; Risk Factors; Securities
and Ratio of Earnings to Fixed Offered by this Prospectus
Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page of Prospectus;
Market Price
6. Dilution Dilution
7. Selling Security Holders Securities Offered by this Prospectus
8. Plan of Distribution Outside Front Cover Page of
Prospectus; Employee Benefit Plans;
Market Information
9. Description of the Securities Securities Offered by this Prospectus;
to be Registered Description of Capital Stock
10.Interests of Named Experts Validity of Common Stock; Experts
and Counsel
11.Information with Respect The Company; Risk Factors; Use of
to the Registrant Proceeds; Dividend Policy; Selected
Financial Data; Business; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Employee Benefit Plans; Management;
Security Ownership of Certain
Beneficial Owners and Management;
Certain Relationships and Related
Transactions; Description of Capital
Stock; Financial Statements
12.Disclosure of Commission Commission Position on Indemnification
Position on Indemnification
for Securities Act Liabilities
PROSPECTUS
DynCorp
11,969,313 Shares of DynCorp Common Stock
(Par Value $0.10 per Share)
Of the 11,969,313 shares of common stock, par value $0.10
per share, of the Company (the "Common Stock") being offered
hereby (the "Offering"), 4,632,163 shares may be offered and sold
by the Company, 5,426,100 shares may be offered and sold by
certain officers, directors, and affiliates of the Company, and
1,911,050 shares may be offered and sold by other employees and other
stockholders. See "Securities Offered by this Prospectus." The
Company will not receive any portion of the net proceeds from the
sale of shares by officers, directors, affiliates or other
individual stockholders.
The 4,632,163 shares of Common Stock offered by the Company
are expected to be offered as follows: (i) 850,000 shares may be
issued and delivered by the Company to a trustee for the benefit
of employees under the DynCorp Savings and Retirement Plan; (ii)
100,000 shares may be issued and delivered by the Company to
employees under the DynCorp Employee Stock Purchase Plan; (iii)
1,200,000 shares may be issued upon the exercise of options
granted and available to be granted to employees under the
DynCorp 1995 Non-Qualified Stock Option Plan; (iv) 300,000
shares may be issued and delivered to employees under the DynCorp
Executive Incentive Plan; and (v) 2,182,163 shares may be
offered and sold by the Company (including shares sold by
stockholders through the internal market (the "Internal Market")
maintained by Buck Investment Services, Inc. ("Buck"), the sale
of which may be attributed to the Company) to present and future
employees and directors. See "Dilution." The foregoing
allocation of the total shares offered by the Company represents
the Company's current anticipated use of such shares and is
provided for illustrative purposes only. The actual number of
shares offered and sold by the Company under each category may
exceed or be less than the indicated number. All of the shares
of Common Stock offered hereby will be subject to certain
restrictions (including restrictions on their transferability)
set forth in the Company's By-Laws (the "By-Laws") and may be
subject to other contingencies. See "Securities Offered by this
Prospectus," "Employee Benefit Plans" and "Description of Capital
Stock -- Restrictions on Common Stock." All other stockholders
(other than the Company and its retirement plans) will pay a
commission to Buck equal to 2% of the proceeds from the sale of
any shares of Common Stock sold by them in the Internal Market.
Buck is a registered broker-dealer which has agreed to effect
purchases and sales of shares of the Common Stock in the Internal
Market. See "Market Information -- The Internal Market."
There is no public market for the Common Stock and it is not
currently anticipated that such a market will develop. See
"Market Information -- The Internal Market."
For information concerning certain factors that should be
considered by prospective investors, see "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION; NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The purchase price of the shares of Common Stock offered
hereby, other than those shares issuable upon exercise of options
or awarded under the DynCorp Executive Incentive Plan, will be
their fair market value determined pursuant to the formula and
valuation process described below (the "Formula Price"). See
"Market Information -- Determination of Offering Price." The
Formula Price is reviewed four times each year, generally in
conjunction with Board of Directors' meetings, which are
currently scheduled for February, May, August and November.
On May 10, 1995, the Formula Price as determined by the
Company's Board of Directors was $14.90 per share.
The date of this prospectus is May 12, 1995.
THE COMPANY
DynCorp (the "Company") provides diversified management,
technical, and professional services to government and commercial
customers throughout the United States and internationally. The
Company provides primarily information technology, operations and
maintenance, and research and development support services under
contracts with U.S. Government agencies, foreign government
agencies and commercial customers including domestic and
international airlines. The Company's U.S. Government customers
include the Department of Defense, the National Aeronautics and
Space Administration, the Department of State, the Department of
Energy, the Environmental Protection Agency, the Centers for
Disease Control, the National Institutes of Health, the U.S.
Postal Service, and other U.S. Government agencies. The Company
is also one of the largest independent providers of commercial
aviation support services in the United States.
The Company's principal executive offices are located at
2000 Edmund Halley Drive, Reston, Virginia 22091-3436. The
Company's telephone number is (703) 264-0330. As used in this
Prospectus, all references to the Company include, unless the
context indicates otherwise, DynCorp and its predecessor and
subsidiary corporations.
RISK FACTORS
Prior to purchasing the Common Stock offered hereby,
purchasers should carefully consider all of the information
contained in this Prospectus and in particular should carefully
consider the following factors:
Net Operating Losses
The Company reported net losses for the years ended December
31, 1994 and 1993 of $12.8 million and $13.4 million,
respectively, and for the years ended December 31, 1992, 1991 and
1990 losses of $24.3 million, $17.6 million, and $18.8 million,
respectively. There can be no guarantee that profitable
operations will be achieved, or, if achieved, sustained. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Leveraged Financial Position
As of December 31, 1994, the Company had total long-term
indebtedness of $230.6 million, stockholders' equity of $7.25
million, and a long-term debt-to-total capitalization ratio of
38.1 : 1. $100 million of such indebtedness is collateralized by
a substantial portion of the Company's accounts receivable. The
Company's earnings were insufficient to cover fixed charges by
$18.6 million in 1994, $12.6 million in 1993, $20.6 million in
1992, $18.6 million in 1991, and $18.9 million in 1990. The
Company had negative operating cashflow of $4.7 million in 1992;
however, it had positive operating cash flow of $3.0 million and
$10.6 million in 1994 and 1993, respectively. The Company's
continuing debt service payments may have materially adverse
effects on its cashflow. In addition, the Company's debt levels
may limit its future ability to borrow funds, including borrowing
for growth opportunities or to respond to competitive conditions,
or if additional borrowings can be made, they may not be on terms
favorable to the Company. If the Company is unable to repay its
debt as it becomes due, the purchasers of Common Stock could lose
some or all of their investment. The Company continues to be
highly leveraged, and its ability to meet its future debt service
and working capital requirements is dependent upon increased
future earnings and cash flow from operations, the expansion of
an accounts receivable facility financing, continuation of ESOP
stock purchases in lieu of cash retirement contributions and the
reduction of its debt expense. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Concentration of Revenue/Dependence on Government Contracts
The Company derived 71% of its revenues in 1994 from
contracts with the U.S. Government ("Government Contracts");
contracts with the Department of Defense ("DoD") represented 54%
of the Company's 1994 revenues. Typically, a Government Contract
has an initial term of one year combined with two, three, or four
one-year renewal periods, exercisable at the discretion of the
Government. The Government is not obligated to exercise its
option to renew a Government Contract. At the time of completion
of a Government Contract, the contract in its entirety is
"recompeted" against all interested third-party providers.
Federal law permits the Government to terminate a contract at any
time if such termination is deemed to be in the Government's best
interest. The Government's failure to renew or termination of
any significant portion of the Company's Government Contracts
could adversely affect the Company's business and prospects.
Although the Company has made some progress to diversify into
non-DoD business, it is still heavily dependent upon contracts
with DoD.
Continuation and renewal of the Company's existing
Government Contracts and the acquisition by the Company of
additional Government Contracts is contingent upon, among other
things, the availability of adequate funding for various U.S.
Government agencies. The current world political situation and
pressure to reduce the federal budget deficit have reduced, and
may continue to reduce, military and other spending by the U.S.
Government. The precise effect of these political developments
on the Company's business and prospects cannot be predicted.
Such budget reductions and/or changes in governmental policies
might increase somewhat the nature and amount of work contracted
out by Government agencies to businesses such as the Company, but
they might also limit future revenue opportunities for the
Company with respect to U.S. Government Contracts. See "Business
- -- Government Contracting."
Termination of Contracts
Upon termination of any of the Company's contracts,
including Government Contracts, the Company would no longer
accrue a stream of accounts receivable thereunder for sale to its
wholly owned financing subsidiary, Dyn Funding Corporation, which
may result in demands on the Company's available cash as the
Company endeavors to replace the terminated contracts underlying
the Contract Receivable Collateralized Notes. The ability of the
Company to maintain certain ratios in connection with the
Contract Receivable Collateralized Notes depends in part on its
ability to keep in force existing contracts and/or acquire new
contracts such that sufficient eligible receivables are available
for sale by the Company to Dyn Funding Corporation. See
"Business -- Factoring of Receivables."
Contract Profit Exposure
The Company's Government Contract services are provided
through three types of contracts -- fixed-price,
time-and-materials, and cost-reimbursement contracts.
Approximately 12% of the Company's total Government Contracts
revenue in 1994 was attributable to fixed-price contracts which
require the Company to perform services under a contract at a
stipulated price. The Company derived approximately 16% of its
total Government Contracts revenue during 1994 from
time-and-material contracts, under which the Company is paid for
labor hours at negotiated, fixed hourly rates and reimbursed for
other allowable direct costs plus allocable indirect costs
(including a profit margin). The balance of the Company's
Government Contracts revenue in 1994 (approximately 72%) was
derived from cost-reimbursement contracts under which the Company
is reimbursed for all actual costs incurred in performing the
contract, to the extent that such costs are within the contract
ceiling and allowable under the terms of the contract and
applicable regulations, plus a fixed fee or incentive fee. The
Company assumes greater financial risk on fixed-price contracts
and time-and-material contracts, because the Company assumes the
risk of performing those contracts at the stipulated prices or
negotiated hourly rates. The failure to accurately estimate
ultimate costs or to control costs during performance of the work
could result, and in some instances has resulted, in losses. See
"Business -- Government Contracting."
Audits by U.S. Government Agencies
Government Contract payments received by the Company in
excess of allowable direct and indirect costs are subject to
adjustment and repayment after audit by Government auditors.
Audits have been completed on the Company's incurred contract
costs through 1986 and are continuing for subsequent periods.
The Company has included an allowance in its financial statements
for excess billings and contract losses which it believes is
adequate based on its interpretation of contracting regulations
and past experience. There can be no assurance, however, that
this allowance will be adequate. See "Business -- Government
Contracting."
Suspension and Debarment
As a U.S. Government contractor, the Company is subject to
federal regulations under which its right to receive future
awards of new Government Contracts, or extensions of existing
Government Contracts, may be unilaterally suspended or barred for
periods of up to three years, should the Company be convicted of
a crime or be indicted based on allegations of a violation of
certain specific federal statutes or other activities.
Suspensions, even if temporary, can result in the loss of
valuable contract awards for which the Company would otherwise be
eligible. While suspension proceedings may be initiated by the
Government without a hearing, debarment for up to three years
cannot be imposed without a due process hearing. Suspension and
debarment actions are usually limited to that division or
subsidiary of a company which is involved in the alleged improper
activity which gives rise to the suspension or debarment actions;
however, Government agencies have authority to impose debarment
and suspension on affiliated entities which in no way were
involved in the alleged improper activity. The initiation of
suspension or debarment hearings upon the Company or any of its
affiliated entities could have a material adverse impact upon the
Company's business and prospects. See "Business -- Government
Contracting."
Environmental Matters
The Company's business activities occasionally result in the
generation of non-nuclear hazardous wastes, the hauling and
disposal of which are governed by federal, state, and local
environmental compliance statutes and regulations. In addition,
certain of the Company's businesses operate petroleum storage and
other facilities that are subject to similar regulations.
Violations of these laws can result in significant fines and
penalties for which insurance is not reasonably available.
Although the Company has installed and currently maintains a
comprehensive, company-wide environmental compliance program,
many of its operations involve the management of storage and
other facilities owned by others, including governmental
entities. Consequently, the Company is not always in a position
to control the compliance of the facilities it operates with
environmental and other laws. See "Business -- Environmental
Matters."
International Operations
The Company currently conducts some operations outside of
the United States. Such international operations entail
additional business risks and complexities such as foreign
currency exchange fluctuations, different taxation methods,
restrictions on financial and business practices and political
instability. There can be no assurance that the Company can
achieve or maintain success in these markets. None of these
international operations are material to the Company's financial
position or results of operations. See "Business -- International
Operations."
Competition
The markets which the Company services are highly
competitive. Some of the Company's competitors are large,
diversified firms with substantially greater financial resources
and larger technical staffs than the Company has available to it.
Government agencies' internal resources are also competitors and
potential competitors of the Company because they can perform
certain types of services that might otherwise be performed by
the Company. See "Business -- Competition."
Employee Stock Ownership Plan
In September 1988, the Company established its Employee
Stock Ownership Plan (the "ESOP") as a principal retirement
vehicle for the Company's employees. The Company borrowed $100
million and loaned the proceeds, on the same terms as the
Company's borrowings, to the ESOP to purchase 4,123,711 shares of
Common Stock (the "ESOP Loan"). The ESOP used an $8.2 million
cash contribution and an $8.9 million loan by the Company to
purchase an additional 1,312,459 shares of Common Stock during
1994, and the ESOP used a $4.25 million cash contribution and a
$13.75 million loan by the Company to purchase an additional
1,208,059 shares of Common Stock during 1995. Consequently, as
of the date of this Prospectus, the ESOP owns approximately 72%
of the outstanding Common Stock, and approximately 46% of the
Common Stock on a fully diluted basis assuming conversion of all
Class C Preferred and exercise of all outstanding warrants. As a
substantial shareholder, the ESOP has the potential to influence
Company policy. See "Employee Benefit Plans -- Employee Stock
Ownership Plan"
Absence of a Public Market
There is no public market for the Common Stock. While the
Company is initiating the Internal Market in an effort to provide
liquidity to stockholders, there can be no assurance that there
will be sufficient liquidity to permit stockholders to resell
their shares in the Internal Market, or that a regular trading
market will develop or be sustained in the future. The Internal
Market will be dependent on the presence of sufficient buyers to
support sell orders that will be placed through the Internal
Market. Depending on the Company's performance, potential buyers
(which would include employees and trustees under the Company's
benefit plans) may elect not to buy in the Internal Market.
Moreover, although the Company may enter the Internal Market as a
buyer of Common Stock under certain circumstances, including an
excess of sell orders over buy orders, the Company has no
obligation to engage in Internal Market transactions.
Consequently, there is a risk that sell orders could be prorated
as a result of insufficient buyer demand, or that the Internal
Market may not be permitted to open because of the lack of
buyers. To the extent that the Internal Market does not provide
sufficient liquidity for a shareholder, and the shareholder is
unable to locate a buyer for his or her shares, the shareholder
could effectively be subject to a total loss of investment.
Accordingly, the purchase of Common Stock is suitable only for
persons who have no need for liquidity in this investment. In
addition, all shares offered hereby will be subject to certain
restrictions, including the Company's right of first refusal to
purchase such shares before they may be offered to third parties.
See "Market Information -- The Internal Market" and "Description
of Capital Stock -- Restrictions on Common Stock."
Offering Price
The offering price is, and subsequent prices will be,
determined by means of a formula as described below. In
addition, the formula for determining the Formula Price is
subject to adjustment by the Company. See "Market Information --
Determination of Offering Price."
Trading Rules for Internal Market
To encourage the orderly establishment of the Internal
Market, the Company has adopted certain interim rules that will
apply to trading in the Internal Market. These rules will have
the effect of giving priority rights to sell shares of Common
Stock in the Internal Market to certain shareholders and not to
other shareholders. These rules are subject to change by the
Company in its discretion. See "Market Information -- The
Internal Market."
Class C Preferred Stock Rights and Preferences
The Company has outstanding 123,711 shares of Class C
Preferred Stock, par value $0.10 per share (the "Class C
Preferred"), all of which is owned by Capricorn Investors, LP
("Capricorn"), a limited partnership in which a company
controlled by H. S. Winokur, Jr., the Company's Chairman, serves
as general partner. The Class C Preferred shares are convertible
into a like number of shares of Common Stock and warrants to
purchase 825,981 shares of Common Stock. In addition, the Class
C Preferred shares bear an annual dividend of $4.365 per share,
and unpaid dividends compound quarterly at the rate of 18% per
year; dividends are only payable in the event of a liquidation of
the Company or upon declaration of a dividend on the Company's
Common Stock. The holders of Class C Preferred shares have the
right to vote as a separate class on certain major corporate
actions, such as corporate borrowings, issuance of stock, payment
of dividends and the repurchase of more than $250,000 per annum
fair market value of Management Investor shares, Restricted Stock
shares or other securities. These
voting rights give Capricorn the ability to effectively control
the Company with respect to certain major corporate decisions.
Consequently, actions that might otherwise be approved by a
majority of the holders of Common Stock could be vetoed by
Capricorn. See "Description of Capital Stock -- Class C
Preferred Stock."
Stockholders Agreement
Certain of the management group of the Company and other
outside investors who hold shares of Common Stock are parties to
a Stockholders Agreement originally dated March 11, 1988 and
restated March 11, 1994 (the "Stockholders Agreement"). Under
the terms of the Stockholders Agreement, stockholders who own
approximately 54% of the fully diluted outstanding shares of
Common Stock have agreed, among other things, to vote for the
election of a Board of Directors consisting of four management
group nominees, four Capricorn nominees and a joint nominee who
would be elected if needed to break a tie vote. Since the
management group stockholders, directly and through ESOP
shareholdings, and Capricorn represent a majority of the shares
of Common Stock necessary to elect the Company's Board of
Directors on a fully diluted basis, it is unlikely that other
stockholders acting in concert or otherwise will be able to
change the composition of the Board of Directors before March 10,
1999, the expiration date of the Stockholders Agreement. See
"Description of Capital Stock -- Stockholders Agreement."
Dependence Upon Key Management and Personnel
The Company's success depends to a certain extent on certain
key management personnel, and the loss of their services could
adversely affect the Company's business and prospects. If any of
these individuals were to leave the Company, no assurance can be
given that the Company would be able to find suitable
replacements. See "Management -- Directors and Executive
Officers."
Obligations to Repurchase Shares
The Company is obligated to repurchase shares of Common
Stock distributed to participants in the ESOP, until such time as
the Common Stock is Readily Tradable Stock, as defined in the
ESOP plan documents, and, through 1996, to pay at least $27.00
per share for such shares. The Company estimates that amounts
paid to such participants will be $4.7 million in 1995, $3.4
million in 1996, and $3.0 million in 1997. No assurances can be
given that the Company would, in view of such payment
obligations, have sufficient cash to participate as a buyer in
the Internal Market. See "Employee Benefit Plans -- Employee
Stock Ownership Plan."
Anti-Takeover Effects
The combined effects of management's and Capricorn's
collective ownership of a majority of the outstanding shares of
Common Stock, the voting rights of the Class C Preferred, the
voting provisions of the Stockholders Agreement, and the
Company's right of first refusal may discourage, delay, or
prevent attempts to acquire control of the Company that are not
negotiated with the Company's Board of Directors. These may,
individually or collectively, have the effect of discouraging
takeover attempts that some stockholders might deem to be in
their best interests, including tender offers in which
stockholders might receive a premium for their shares over the
Formula Price available in the Internal Market, as well as making
it more difficult for individual stockholders or a group of
stockholders to elect directors. However, the Board of Directors
believes that these facts are in the best interests of the
Company, because such matters may encourage potential acquirors
to negotiate directly with the Board of Directors, which is in
the best position to act on behalf of all stockholders. See
"Description of Capital Stock."
SECURITIES OFFERED BY THIS PROSPECTUS
Common Stock Offered by the Company
The shares of Common Stock offered by the Company may be
offered through the Internal Market and directly or contingently
to present and future employees and directors of the Company and
to trustees or agents for the benefit of employees under the
Company's employee benefit plans described below.
Direct and Contingent Sales to Employees and Directors
The Company believes that its success is principally
dependent upon the abilities of its key employees and directors.
Therefore, since 1988, the Company has pursued a policy of
offering such persons an opportunity to make an equity investment
in the Company as an inducement to such persons to become or
remain employed by or affiliated with the Company. At the
discretion of the Board of Directors or the Compensation
Committee of the Board of Directors (the "Compensation
Committee"), employees and directors may be offered an
opportunity to purchase a specified number of shares of Common
Stock offered hereby. All such direct and contingent sales to
employees and directors will be effected through the Internal
Market or the 1995 Option Plan, described below, and may be
attributable to the Company. Pursuant to the By-Laws, all shares
of Common Stock offered by the Company in the future, directly or
contingently, to its employees or directors are subject to a
right of first refusal. See "Description of Capital Stock --
Restrictions on Common Stock."
Equity Target Ownership Policy
The Company has adopted an Equity Target Ownership Policy
(the "ETOP") under which certain highly paid employees of the
Company are expected over a period of seven years to invest up to
specified multiples of their salaries in shares of the Common
Stock. Under the ETOP, corporate officers, presidents and vice
presidents of strategic business units, and other participants in
the Executive Incentive Plan with salaries greater than $99,999
but less than $200,000 are expected to invest at least 1.5 times
their salary in shares of Common Stock; those with salaries
greater than $199,999 but less than $300,000 are expected to
invest at least two times their salary in shares of Common Stock;
and those with salaries greater than $299,999 are expected to
invest at least three times their salary in shares of Common
Stock. Investments under any of the employee benefit plans
described below, as well as any other holdings, including
securities held prior to adoption of the ETOP, will qualify for
compliance with the ETOP.
Savings and Retirement Plan
The Company maintains a Savings and Retirement Plan (the
"SARP"), which is intended to be qualified under Sections 401(a)
and (k) of the Internal Revenue Code of 1986, as amended (the
"Code"). Generally, all employees are eligible to participate,
except for employees of divisions or other units designated as
ineligible. The SARP permits a participant to elect to defer,
for federal income tax purposes, a portion of his or her annual
compensation and to have such amount contributed directly by the
Company to the deferred fund of the SARP for his or her benefit.
The Company may, but is not obligated to, make a matching
contribution to the SARP's deferred fund for the benefit of those
participants who have elected to defer a portion of their
compensation for investment in shares of Common Stock. The
amount of the matching contribution will be determined
periodically by the Company's Board of Directors based on the
aggregate amounts deferred by participants. The SARP provides
for a Company matching contribution, in cash or Common Stock, of
100% of the first one percent of compensation invested in a
Company Common Stock fund by a participant and 25% of the next
four percent of compensation so invested. The Company currently
intends to make such matching contributions in the form of shares
of Common Stock. The Company may also make additional
contributions to the SARP deferred fund in order to comply with
Section 401(k) of the Code. Each participant will be vested at
all times in 100% of his or her contributions to the deferred
fund accounts. Company contributions will vest 50% after two
years of service and 100% after three years of service. Benefits
are payable to a participant within certain specified time
periods following such participant's retirement, permanent
disability, death or other termination of employment. Shares of
Common Stock distributed to a participant will be subject to the
Company's right of first refusal. See "Employee Benefit Plans --
Savings and Retirement Plan" and "Description of Capital Stock --
Restrictions on Common Stock."
Employee Stock Purchase Plan
The Company has, subject to stockholder approval,
established the Employee Stock Purchase Plan (the "ESPP") for the
benefit of substantially all its employees. The ESPP provides
for the purchase of Common Stock through payroll deductions by
participating employees. The ESPP is intended to qualify under
Section 423(b) of the Code. Participants contribute 95% of the
purchase price of the Common Stock, and the Company contributes
the balance in the form of cash or shares of Common Stock. Such
purchases will be made through the Internal Market. All shares
purchased pursuant to the ESPP will be credited to the
participant's account promptly following the Internal Market
trade day on which they were purchased and, pursuant to the
By-Laws, will be subject to the Company's right of first refusal.
See "Employee Benefit Plans -- Employee Stock Purchase Plan" and
"Description of Capital Stock -- Restrictions on Common Stock."
1995 Stock Option Plan
Pursuant to the Company's 1995 Non-Qualified Stock Option
Plan ("1995 Option Plan"), the Company may grant stock options to
certain of its employees and directors. Stock options under the
1995 Option Plan may be granted contingent upon an employee
obtaining a certain level of contract awards for the Company
within a specified period or upon other performance criteria and,
in many cases, a requirement that such individual also purchase a
specified number of shares of Common Stock in the Internal Market
at the Formula Price. Pursuant to the By-Laws, all shares of
Common Stock issued upon the exercise of such stock options will
be subject to the Company's right of first refusal. See
"Employee Benefit Plans -- 1995 Stock Option Plan" and
"Description of Capital Stock -- Restrictions on Common Stock."
Executive Incentive Plan
The Company maintains an Executive Incentive Plan (the
"EIP"), which provides for the payment of annual
bonuses to certain officers and management/executive employees.
The Company intends to amend the Incentive Plan, effective
January 1, 1996, to provide for payment of up to 20% of the
bonuses in the form of shares of Common Stock, valued at the
Formula Price. Awards of shares of Common Stock will be
distributed during each fiscal year. Pursuant to the By-Laws,
all shares of Common Stock awarded pursuant to the Incentive Plan
will be subject to the Company's right of first refusal. See
"Employee Benefit Plans -- Executive Incentive Plan" and
"Description of Capital Stock -- Restrictions on Common Stock."
Employee Stock Ownership Plan
The Company maintains an ESOP, which is a stock bonus plan
intended to be qualified under Section 401(a) of the Code.
Generally, all employees are eligible to participate, except
employees of groups or units designated as ineligible. Interests
of participants in the ESOP vest in accordance with the vesting
schedule and other vesting rules set forth in the ESOP plan
document. Benefits are allocated to a participant in shares of
Common Stock and are distributable within certain specified time
periods following such participant's retirement, permanent
disability, death or other termination of employment. Upon
distribution, the participant is entitled to a statutory "put"
right, whereby the Company is obligated to purchase the shares at
fair market value as determined by the ESOP's financial advisor.
In the event the participant declines to exercise the put right,
such shares of Common Stock may be sold in the Internal Market.
The amount of the Company's annual contribution to the ESOP is
determined by, and within the discretion of, the Board of
Directors and may be in the form of cash, Common Stock or other
qualifying securities. Pursuant to the ESOP and the By-Laws, any
shares of Common Stock distributed out of the ESOP will be
subject to a right of first refusal on behalf of the Company.
See "Employee Benefit Plans -- Employee Stock Ownership Plan" and
"Description of Capital Stock -- Restrictions on Common Stock."
Common Stock Offered by Officers, Directors, and Affiliates
Certain officers, directors, and affiliates of the Company
may, from time to time, sell up to an aggregate of 5,426,100
shares of the Common Stock being offered hereby in the Internal
Market or otherwise. The Company does not know whether some,
none, or all of such shares will be so offered or sold. However,
the Company believes that the ETOP and the initial priority of
access to the Internal Market will act as a disincentive to the
officers, in the case of the ETOP, and to the officers,
directors, and affiliates, in the case of market access, to sell
their Common Stock during 1995 and maybe into later years. The
officers, directors, and affiliates will not be treated more
favorably than other stockholders participating in the Internal
Market and, like all other stockholders selling shares in the
Internal Market (other than the Company and its retirement
plans), will pay Buck, the Company's designated broker-dealer, a
commission equal to two percent of the proceeds from their sales.
See "Market Information -- The Internal Market."
The following table sets forth information as of April 19,
1995, with respect to the number of shares of Common Stock owned
directly or indirectly by each of the officers, directors, and
affiliates (including shares issuable upon the exercise of
outstanding Warrants, shares issuable upon conversion of
outstanding Class C Preferred and exercise of related Warrants,
shares issuable as a result of vesting and expiration of
deferrals under the former Restricted Stock Plan, and shares
allocated to such person's accounts under the Company's employee
benefit plans), and their respective percentages of ownership of
fully diluted equity. The table does not give effect to the sale
of any shares of Common Stock being offered by the Company. Each
of the persons (other than Capricorn Investors LP, which is an
affiliate by reason of its ownership of more than 10% of the
Company's equity) is now and has, during some portion of the past
three years, been a director and/or officer of the Company.
Except as indicated below, all the shares are owned of record or
beneficially. The table also reflects the relative ownership of
such persons in the event of their individual sales of all the
shares owned by them.
<TABLE>
Percent of
Number of Ownership of Percent
Shares Fully Diluted Number of Ownership
Name and Title of Beneficial Owner Benefically Equity Before Shares After Sale of
Owned Offering * Offered All Shares
<S> <C> <C> <C> <C>
D. R. Bannister, President & Director 361,547 2.66% 361,547 *
T. E. Blanchard, Senior Vice President
& Director 207,778 1.53% 207,778 *
R. E. Dougherty, Director 1,870 * 1,870 *
J. H. Duggan, Executive Vice President
& Director 192,053 1.42% 192,053 *
P. V. Lombardi, Executive Vice President
& Director 18,106 * 18,106 *
M. T. Masin, Director 2,000 * 2,000 *
D. C. Mecum II, Director 1,870 * 1,870 *
D. L. Reichardt,Senior Vice President
& Director 92,781 * 92,781 *
Capricorn Investors LP/H.S. Winokur,Jr.,
Chairman of the Board and Director 4,117,127 30.34% 4,117,127 *
P. G. Deasy, Vice President 84,237 * 84,237 *
G. A. Dunn, Vice President & Controller 95,886 * 95,886 *
M. C. Filteau, Vice President 8,000 * 8,000 *
H. M. Hougen, Vice President & Secretary 26,157 * 26,157 *
R. A. Hutchinson, Treasurer 22,454 * 22,454 *
M. J. Hyman, Vice President 25,156 * 25,156 *
M. J. Mandell, Vice President 3,916 * 3,916 *
C. H. McNair, Jr., Vice President 14,971 * 14,971 *
R. Morrel, Vice President 18,402 * 18,402 *
J. H. Saunders, Vice President 16,024 * 16,024 *
H. B. Shipman, Vice President 815 * 815 *
R. J. Stephenson, Vice President 5,911 * 5,911 *
J. L. Sullivan, Vice President 2,000 * 2,000 *
R. L. Webb, Vice President 72,865 * 72,865 *
H. J. M. Williams, Vice President 5,072 * 5,072 *
R. G. Wilson, Vice President
& General Auditor 29,102 * 29,102 *
Total 5,426,100 40.00% 5,426,100 *
* indicates less than one percent
(1) Fully diluted shares include shares issuable upon
the exercise of outstanding Warrants, shares issuable upon
conversion of outstanding Class C Preferred and exercise of
related Warrants, shares issuable as a result of vesting and
expiration of deferrals under the former Restricted Stock Plan,
and shares allocated to such person's accounts under the
Company's employee benefit plans
</TABLE>
MARKET INFORMATION
The Internal Market
In 1988, following a decision by the Company's Board of
Directors to consider offers for the purchase of the Company, the
Company became privately owned through a leveraged buy-out (the
"LBO") involving its management group. Public trading of the
Common Stock ceased, and the new management installed the ESOP as
the Company's principal retirement benefit. Approximately 33,000
former and present employees are now beneficial owners of the
Company through the ESOP, representing approximately 72% of the
shares of Common Stock outstanding on the date of this Prospectus
and approximately 46% of the Company's Common Stock on a fully
diluted basis.
Approximately 280 managers and other employees have also
made investments in the Company since the LBO. As a consequence
of these investments and the subsequent issuance of shares
pursuant to the Company's former Restricted Stock Plan, 1,996,521
shares of Common Stock, and 195,370 warrants ("Warrants") to
purchase Common Stock, at an exercise price of $0.25 per share,
are held by members of management. In addition, the Company
accepted a subscription for 350,313 shares of Common Stock and
2,338,934 Warrants from certain other private and institutional
investors and Capricorn, a limited partnership which is
controlled by the Company's Chairman, Herbert S. Winokur, Jr.
Capricorn also purchased 123,711 Class C Preferred shares, which
are convertible share for share into Common Stock and into
825,981 Warrants, and purchased 82,475 shares of Class B
Preferred Stock, which the Company retired through redemption in
1990. See "Description of Capital Stock -- Class C Preferred
Stock."
Since the LBO, the management stockholders, Capricorn and
certain other investors have relied on the Stockholders Agreement
as a means of restricting the distribution of the Company's
shares of capital stock. The Stockholders Agreement contains
various provisions for the annual offering of shares of Common
Stock owned by retiring and terminated management stockholders,
first to other management stockholders, Capricorn, and certain
other investors and then to the Company as purchaser of last
resort. However, under the rights and preferences of the Class C
Preferred, the Company is currently limited to repurchasing no
more than $250,000 of Management Investor shares, Restricted Stock shares
or other securities each calendar year.
On May 10, 1995, the Board of Directors, with the consent of
the Class C Preferred holder, approved the establishment of the
Internal Market as a replacement for the resale procedures set
forth in the Stockholders Agreement.
The Internal Market generally permits eligible stockholders
to sell shares of Common Stock on four predetermined days each
year (each a "Trade Date"). All Warrants to be sold must first
be converted into shares of Common Stock which can then be sold
in the Internal Market. All sales of Common Stock in the
Internal Market are made at the prevailing Formula Price to
employees and directors of the Company who have been approved by
the Compensation Committee as being entitled to purchase up to a
specified number of shares of Common Stock. In addition, the
trustee of the SARP and the administrator of the ESPP may also
purchase shares of Common Stock for their respective trust and
plan in the Internal Market at the prevailing Formula Price.
The Internal Market will be managed by the Company's wholly
owned subsidiary, DynEx, Inc. Trades will be managed by the
Company's broker-dealer, Buck Investment Services, Inc. ("Buck"),
and shares will be appropriately credited following a Trade Date
to the accounts of participants by Buck's affiliate, Buck
Consultants, Inc.
The Company may, but is not obligated to, purchase shares of
Common Stock in the Internal Market on any Trade Date, but only
if and to the extent that the number of shares offered for sale
by stockholders exceeds the number of shares sought to be
purchased by authorized buyers, and the Company, in its
discretion, determines to make such purchases. Such purchases
are also controlled by the holder of the Class C Preferred Stock
as noted above. See "Risk Factors -- Class C Preferred Stock
Rights and Preferences."
Except as provided below, in the event that the aggregate
number of shares offered for sale in the Internal Market is
greater than the aggregate number of shares sought to be
purchased by authorized buyers and the Company, offers to sell
500 shares or less of Common Stock or up to the first 500 shares
if more than 500 shares of Common Stock are offered by any seller
will be accepted first and offers to sell shares in excess of 500
shares of Common Stock will then be accepted on a pro-rata basis
determined by dividing the total number of shares remaining under
purchase orders by the total number of shares remaining under
sell orders. If, however, there are insufficient purchase orders
to support the primary allocation of 500 shares of Common Stock,
then the purchase orders will be allocated equally among all of
the proposed sellers up to the first 500 shares offered for sale
by each seller. To the extent that the aggregate number of
shares sought to be purchased exceeds the aggregate number of
shares offered for sale, the Company may, but is not obligated
to, sell authorized but unissued shares of Common Stock in the
Internal Market. All sellers in the Internal Market (other than
the Company and its retirement plans) will pay Buck a commission
equal to two percent of the proceeds from such sales. No
commission is paid by purchasers in the Internal Market.
To encourage the orderly establishment of the Internal
Market, the Company has adopted certain interim rules that will
apply to trading on the Internal Market during 1995, or until
such time as an orderly market has developed. The goal of these
rules is to avoid the placement of a disproportionate number of
sell orders pending establishment of an adequate market float.
During 1995, priority for the right to sell into the Internal
Market will be given first to those former employees who have
retired from the Company, or terminated due to death or
disability, or their personal representatives, notwithstanding
the 500-share pro-ration as described above. The Company's Board
of Directors will evaluate the performance of the Internal Market
from time to time to determine whether these interim rules should
be suspended or modified based on market performance. These
rules are subject to change by the Company in its discretion.
See "Risk Factors --Trading Rules for Internal Market."
There is no public market for the Common Stock. While the
Company is initiating the Internal Market in an effort to provide
liquidity to stockholders, there can be no assurance that there
will be sufficient liquidity to permit stockholders to resell
their shares in the Internal Market, or that a regular trading
market will develop or be sustained in the future. The Internal
Market will be dependent on the presence of sufficient buyers to
support sell orders that will be placed through the Internal
Market. Depending on the Company's performance, potential buyers
(which would include employees and trustees under the Company's
benefit plans) may elect not to buy in the Internal Market.
Moreover, although the Company may enter the Internal Market as a
buyer of Common Stock under certain circumstances, including an
excess of sell orders over buy orders, the Company has no
obligation to engage in Internal Market transactions.
Consequently, there is a risk that sell orders could be prorated
as a result of insufficient buyer demand, or that the Internal
Market may not be permitted to open because of the lack of
buyers. To the extent that the Internal Market does not provide
sufficient liquidity for a shareholder and the shareholder is
unable to locate a buyer for his or her shares, the shareholder
could effectively be subject to a total loss of investment.
Accordingly, the purchase of Common Stock is suitable only for
persons who have no need for liquidity in this investment. See
"Risk Factors -- Absence of a Public Market."
Determination of Offering Price
The purchase price of the shares of Common Stock offered
hereby, other than those shares issuable upon exercise of options
or awarded under the EIP, will be their fair market value
determined pursuant to the formula and valuation process
described below (the "Formula Price"). The Formula Price is
reviewed four times each year, generally in conjunction with
Board of Directors' meetings, which are currently scheduled for
February, May, August and November.
The Formula Price is determined according to the following
formula (the "Formula"): the price per share is equal to 5.00
(the "Multiplier") multiplied by the product of the market factor
("M" or the "Market Factor") the earnings of the Company ("P")
before interest, taxes, depreciation, and amortization for the
four fiscal quarters immediately preceding the price
determination, the product of which is divided by the weighted
average number of outstanding common shares and common share
equivalents ("W") for such four fiscal quarters, as used by the
Company in computing fully-diluted earnings per share. The Multiplier
is a constant. The Market Factor is a numerical factor
(currently 1.01) which is intended to reflect existing securities
market conditions relevant to the valuation of the Common Stock.
The Market Factor will be reviewed quarterly by the Board of
Directors in conjunction with an appraisal which is prepared by
the independent appraisal firm for the committee administering
the Company's ESOP and which is relied upon by the ESOP. Subject
to the limitation set forth above, the Formula Price of the
Common Stock, expressed as an equation, is as follows:
Formula Price = 5 (M x P)/W
The Formula was adopted in its present form by the Board of
Directors on May 10, 1995, and will become effective with price
determinations in the Internal Market. The Formula is subject to
change by the Board of Directors.
The most recent Formula Price determined by the Board of
Directors is $14.90 per share, determined May 10, 1995. The
first use of the Formula Price in the Internal Market will be in
connection with determination of the Formula Price prior to the
first Trade Date. Such determination, and all subsequent
determinations of the Formula Price will be based on financial
data reported for the year ending as of the last day of the
financial quarter immediately preceding the Trade Date. Trade
Dates are expected to occur on or about February 15, May 15,
August 15, and November 15 of each year.
Price Range of Common Stock
Because the Company's Common Stock has not been publicly
traded since 1988, there has not been any historical
market-determined price. However, the Board of Directors has
periodically determined the fair market value of the stock for
purposes of the Stockholders Agreement, and there have been
private share transactions based upon such determination. Prior
to September, 1988, the price was set by the terms of the LBO and
was based on a "package" consisting of one share of Common Stock
plus Warrants to purchase 6.6767 additional shares. The exercise
price of the Warrants reduced from $5.00 per share to $0.25 per
share during the period 1988 to 1993 as the initial ESOP loan was
paid down.
During the period September, 1988 through May, 1994, the
price was established by the Board based on the fair market value
of such a package. The Board's determination of the package
price was based on the most recent valuation of the Common Stock
by the ESOP's financial advisor adjusted for the lack of
liquidity and absence of a control premium, and once set,
typically provided for monthly revision of the price to reflect
anticipated change in the value, pending subsequent reviews by
the Board. Since January 1, 1994, when the exercise price for
the Warrants was reduced to $0.25 per share, substantially all of
the Management Stockholders have exercised their Warrants.
Effective July 1, 1994, the Board discontinued the practice of
using a package value, and adopted the practice of establishing
the market value on the basis of the price of Common Stock sold
by the Company to the ESOP, which is approved by the ESOP's
Financial Advisor. Set forth below is a table showing the
equivalent price of a share of Common Stock purchased by a
Management Stockholder at the Board-determined price on the date
indicated, and assuming that all the related Warrants in the
"package" were exercised at the minimum exercise price of $0.25.
Date Average price per share
July 1, 1988 $ 3.47
July 1, 1989 $ 3.79
July 1, 1990 $ 5.20
July 1, 1991 $ 5.72
July 1, 1992 $ 7.68
July 1, 1993 $ 7.97
July 1, 1994 $11.86
February 10, 1995 $14.60
May 10, 1995 $14.90
USE OF PROCEEDS
The shares of common Stock which may be offered by the Company are principally
being offered to permit the acquisition of shares by the Company's
employee benefit plans as described herein and to permit the
Company to offer shares of Common Stock to present and future
employees and directors. The Company does not intend or expect
this Offering to raise significant capital. Any net proceeds
received by the Company from the sale of the Common Stock
offered (after giving effect to the payment of expenses of the
offering) will be added to the general funds of the Company for
working capital and general corporate purposes. Currently, the
Company has no specific plans for the use of such proceeds.
However, it is anticipated that the greater portion of the
proceeds will go to the individual employees, present and former,
who will be selling into the Internal Market. The Company will
not receive any portion of the net proceeds from the sale of such
shares or from the sale of shares by officers, directors,
affiliates, or other employees.
DIVIDEND POLICY
The Company last paid a dividend in 1986, prior to the LBO.
The Company has not, since that time, paid a dividend and does
not have a policy for the payment of regular dividends. The
payment of dividends in the future will be subject to the
discretion of the Board of Directors of the Company and will
depend on the Company's results of operations, financial
position, and capital requirements, general business conditions,
restrictions imposed by financing arrangements, if any, legal and
regulatory restrictions on the payment of dividends, and other
factors the Board of Directors deems relevant. The holder of the
Class C Preferred also has the right to approve or disapprove
proposed dividend payments. See "Description of Capital Stock --
Class C Preferred Stock."
DILUTION
The tangible book value of the Company on December 31, 1994
was a negative figure of $76,311,000, or ($9.22) per share.
Tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the number of
shares of Common Stock outstanding. As the following table
demonstrates, after giving effect to the sale of 2,282,163 shares
of Common Stock by the Company in the Offering at an assumed
Formula Price of $14.90 per share, and after deducting
anticipated expenses, the pro forma book value of the Company on
December 31, 1994, would have been ($42,381,000), or ($4.01) per
share, representing an immediate $18.91 per share dilution to new
investors purchasing shares of Common Stock at the assumed
Formula Price.
Assumed initial Formula Price per share $14.90
Net tangible book value per share before the Offering ($9.22)
Increase per share attributable to new investors $5.21
Pro forma net tangible book value per share after the Offering ($4.01)
Dilution per share to new investors $18.91
Dilution is determined by subtracting pro forma book
value per share after giving effect to the Offering from the
initial public offering price paid by a new investor for a share
of Common Stock. The foregoing calculation assumes no additional
exercises of the outstanding warrants to purchase shares of
Common Stock. As of December 31, 1994, there were outstanding
warrants to purchase 4,246,529 million shares of Common Stock at
a warrant exercise price of $0.25 per share. If all the warrants
outstanding and warrants issuable upon conversion of the Class C
Preferred as of December 31, 1994, were to be immediately
converted to Common Stock, dilution per share to new investors
would be $17.76 per share.
SELECTED FINANCIAL DATA
The following table presents summary selected historical
financial data derived from the Consolidated Financial Statements
of the Company, which have been audited by Arthur Andersen LLP
for each of the five years. During the periods presented, the
Company paid no cash dividends on its Common Stock. The
following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements
and related notes thereto, included elsewhere in this Prospectus.
For the Years Ended December 31,
1990 1991 1992 1993 1994
(dollars in thousands, except per share amounts)
Statement of
Operations Data:
Revenues $717,391 $807,186 $911,422 $953,144 $1,022,072
Cost of services 703,242 783,300 883,276 913,587 978,204
Selling and corporate
administrative 15,055 17,935 20,476 18,267 17,199
Interest expense 15,346 18,910 24,876 25,538 25,618
Loss from continuing
operations and before
extraordinary item (14,417) (12,595) (20,816) (13,414) (12,831)
Net loss (13,691) (12,403) (23,342) (13,414) (12,831)
Net loss for common
stockholders (18,752) (17,583) (24,301) (13,414) (12,831)
Loss per share from continuing
operations and before extraordinary
item for common stockholders (4.28) (3.97) (4.49) (2.87) (2.12)
As of December 31,
Balance Sheet Data: 1990 1991 1992 1993 1994
Total assets $289,354 $316,361 $348,273 $382,456 $402,330
Long-term debt excluding current
maturities 103,584 121,251 199,762 216,425 230,608
Redeemable preferred stock 19,705 24,884 - - -
Redeemable common stock - - - 2,200 2,288
Stockholders' equity 27,416 26,598 3,884 6,166 7,250
BUSINESS
Overview
The Company provides diversified
management, technical, and professional services to government
and commercial customers throughout the United States and
internationally. The Company provides primarily information
technology, operations and maintenance, and research and
development support services under contracts with U.S. Government
agencies, foreign government agencies and commercial customers
including domestic and international airlines. The Company's
U.S. Government customers include the Department of Defense (the
"DoD"), the National Aeronautics and Space Administration
("NASA"), the Department of State, the Department of Energy (the
"DOE"), the Environmental Protection Agency (the "EPA"), the
Centers for Disease Control, the U.S. Postal Service and other
U.S. Government agencies. Sales generated from services provided
to the DoD and the U.S. Government in the aggregate, represented
54% and 71% of total sales, respectively, in 1994. The Company
is one of the largest independent providers of commercial
aviation support services in the United States. The Company
provides total ground support services including ramp service,
line maintenance, cargo handling, aircraft fueling, and passenger
check-in to domestic and international airline operators at
approximately 80 airports nationwide. Total sales and earnings
before interest, taxes, depreciation, and amortization for the
Company in 1994 were $1.02 billion and $32.2 million,
respectively.
The Company's strategy has been to grow internally,
increasing business through strong marketing and business
development efforts, as well as through an aggressive strategic
acquisition program. The Company provides services through six
primary business areas. The composition and market niches,
including the total contract price of some significant contracts,
of the business areas are described below.
Aerospace Technology
This organization consists of one of the Company's oldest
businesses -- Aerospace Operations -- first started by the
Company in 1951. It includes military aviation maintenance and
aerospace engineering operations in Texas, various military bases
and locations where Government aircraft are maintained, and
certain locations overseas in support of NATO and the United
Nations.
$508 million Contract Field Teams - This is the Company's
second oldest contract, first awarded by the U.S. Air Force in
1951. Under this contract, which has been retained by the Company
through successive recompetitions (the last of which was in 1993
for a five-year renewal), the Company furnishes between 1,500 and
2,500 aviation technicians who are available on short notice to
travel anywhere in the world to service and modify U.S. military
aircraft.
$407 million Fort Rucker Helicopter Support - First awarded to
the Company in 1988, this contract involving 1,400 employees was
renewed in 1993 for an additional five-year period. The Company
maintains over 600 rotary-wing aircraft which are operated 24
hours a day to support Army and Air Force pilot training
activities.
$105 million Aerotherm - The Aerotherm subsidiary of Aerospace
Technology is one of the leading test and evaluation contractors
with expertise in space vehicle reentry technology. It also
builds test vehicles for the U.S. Air Force Ballistic Missile
Office and operates a state-of-the-art high energy laser testing
facility for the Army. Aerotherm performs most of its work under
five major long-term contracts and numerous subcontracts of
various durations.
$98 million International Narcotics Matters Support - Under
this contract first awarded in 1991, the Company operates and
supports a dedicated air wing of the Department of State's drug
interdiction program in Central and South America. The program
is based in Florida and employs over 120 pilots, engineers, and
technical support and advisory personnel.
$97 million Johnson Space Center Support - This NASA aircraft
maintenance support contract was won by the Company in January of
1994. A total of 200 Company technicians and support personnel
maintain NASA aircraft used in launch activities.
$76 million Patuxent River R & D Center - This is a Navy
contract first awarded to the Company in 1985 and rewon in 1991
for an additional five-year term. Approximately 225 employees
provide test and systems operations support in connection with
test launches.
$36 million Mission Field Teams - Under two contracts with the
Department of State and the United Nations, Aerospace Technology
furnished logistical and other support services in connection
with international peace keeping activities world-wide. Recent
operations have been in Haiti and the former Yugoslavia.
Other Business Aerospace Technologies has recently acquired
exclusive application rights in North and South America to
Australian-developed technology for the application of composite
patches to aircraft surfaces and structural members. The
utilization of this process where appropriate avoids the costly
alternative of replacing and rebuilding metal surfaces and
support members. Aerospace Technology recently completed repairs
of C-141 aircraft for the U.S. Air Force using the composite
repair technology. A prototype repair has also been made to a
C5A Starlifter aircraft. The Company believes that there is a
significant market for composite repair of military and
commercial aircraft surfaces and supporting structures.
Enterprise Management
This organization consists primarily of the former Support
Services Division of the Company which was started in 1987 and
the range operations and test evaluation activities and contracts
of the former Test & Evaluation Division of the Company. Its
basic markets include management of test ranges, military and
other governmental facilities, management of commercial
enterprises and facilities, and the operation and management of
multi-location service contracts, such as the U.S. Department of
Justice Asset Forfeiture Program involving over 300 offices
throughout the United States.
It includes the operation, maintenance, and management of
major governmental and private enterprises and installations,
ranging from the turn-key responsibility for operation of all
aspects of a single base (such as a military installation) to
assumption of responsibility for the staffing of particular
functions at various locations for a single customer. Disciplines
included within operational responsibility vary, but generally
include scientific support, operation of sophisticated electronic
and mechanical systems, grounds and buildings, environmental
systems, security systems, transportation systems, construction
and demolition, environmental remediation, and the handling of
and accountability for inventories of equipment and
materials/supplies and other property. Activities include testing
and evaluation of military hardware systems at government test
ranges, collection and processing of data, maintenance of
targets, ranges and laboratory facilities, developmental testing
of complex weapon systems, security systems work, and technology
transfer into commercial applications.
$585 million Rocky Flats - A subsidiary of the Company is a
subcontractor to Kaiser Hill, a joint venture. Through the
subsidiary, the Company will provide site support services to the
DOE complex at Rocky Flats, Colorado. These services include
facilities and equipment maintenance, logistics and property
management, information and records management, and environmental
safety and health services.
$235 million National Training Center - Over 1,100 Company
personnel operate the Army's National Training Center near
Barstow, California, where U.S. and foreign military
organizations engage in mock military exercises. The Company
maintains and issues over 3,000 items of military equipment and
provides personnel to operate the entire Fort Irwin facility,
which supports more than 12,000 personnel. This contract was
first won in 1987 and was renewed for an additional five-year
term in 1991.
$217 million Department of Justice Asset Forfeiture Support
Program - This five-year, 1,000-person contract, requiring
staffing of over 300 locations in the United States, involves the
support of Department of Justice's drug-related
asset seizure program. Company
personnel support the various U.S. Attorney offices that are
responsible for enforcing and administering the federal asset
forfeiture laws. The contract was secured for a period of five
years in 1993.
$98 million White Sands Missle Range - Under the Company's
oldest contract, originally awarded in 1946, the Company provides
data collection services to the U.S. Army at White Sands Missile
Range, New Mexico.
$87 million Fort Belvoir - This facility management and
support contract involves every aspect of operational
responsibility ranging from grounds maintenance to security and
air field operations at Fort Belvoir, Virginia. Over 225 Company
personnel are involved under this contract. The Company was
awarded this contract for an additional five-year period in March
of 1995.
$62 million Fallon Naval Air Station Support - Awarded in
1992, this contract covers the maintenance and support of the
Navy's facilities at Fallon, including all grounds and air field
maintenance. The contract requires 302 Company support
personnel.
$55 million Department of State Security - The Company
provides a variety of technical services to the Department of
State at various locations around the world under six contracts
that extend through 1999.
$41 million Memphis Naval Air Station - This five-year Navy
contract awarded in 1993 involves operational and maintenance
support for the infrastructure of the Naval Air Station in
Millington, Tennessee.
$38 million Marine Spill Response Corporation Operations
Contract - Under this commercial contract awarded in 1993, the
Company operates a fleet of 16 oil spill response ships that were
specifically commissioned and built for U.S. coastal protection
service under the Oil Pollution Act of 1992.
Other Business Enterprise Management operates internationally
where it performs security services and other support activities
related to facilities and enterprise management. In addition to
its military customers, this unit has contracts for similar
services with non-DoD agencies such as the U.S. Department of
Agriculture, Department of State, and Department of Justice.
Information and Engineering Technology
This business consists of segments of businesses acquired
during the period 1991 through 1994 -- Viar & Company, NMI
Systems, Inc., Technology Applications, Inc., and CBIS Federal,
Inc., plus existing segments (NORCO, ITSO).
The Company integrated these portions of the previously
acquired corporate entities into the Information and Engineering
Technology business effective January 1, 1995.
Its activities include software development and maintenance,
computer center operations, data processing and analysis,
database administration, telecommunications support and
operations, maintenance and operation of integrated electronic
systems, and networking of electronic systems in a local and wide
area environment.
$250 million DOE Information Technology Support Operations -
This recently awarded five-year information technology support
contract marks a significant milestone in the Company's efforts,
starting with the acquisitions of Viar and Meridian in 1992, to
expand its activities into the growing information technology
marketplace. Over 200 Company personnel provide basic computer,
software, and networking support to all of DOE's operations.
$156 million GSA Automated Data Processing - Under this
recently acquired 4-year contract, the Company will provide life
cycle applications software development and maintenance for
business and scientific systems to U.S. agencies in the General
Services Administration's Southeast Sunbelt and Great Lakes
regions. The contract will employ between 400 and 800 persons in
14 states.
$126 million NORCO Contract - Another of the Company's oldest
contracts, which was first awarded over 30 years ago, is an
engineering, technical and computer operations contract with the
U.S. Navy. The current five-year term is scheduled to run
through 1995, at which time it will be recompeted.
Other Business Information and Communications Technology -
Performs approximately $20 million per annum of systems
networking contracts inherited from its 1993 acquisition of
NMI Systems, Inc.. Commercial and governmental customers are
served.
Environmental, Energy and National Security Programs
This business consists of the former environmental
operations of Viar & Company and certain of the energy research
and study operations of Meridian Corporation. Other principal
contracts involve furnishing of research and other support
services to the EPA and DOE. It includes environmental
regulation development, quality assurance studies and research,
and management of information relating to the proper handling of
hazardous materials and substances, alternative energy research
and evaluation, and energy security studies and assessments. The
Company is also a leader in the nation in the provision of
services in support of nuclear safeguards and security research
and development. Specialized disciplines include the development
of physical security systems, vulnerability and risk assessments,
and human reliability.
$1.5 billion(1) DOE Strategic Petroleum Reserve - Through its 60%
controlled affiliate, DynMcDermott Petroleum Services Company,
Inc., the Company furnishes approximately 900 technicians and
operational personnel to operate DOE's seven-site emergency crude
oil storage facilities in Louisiana and Texas. The Reserve is
maintained for possible draw-down and domestic sales of crude in
the event of an international crisis or threat to the U.S. oil
supply. The operation of the Reserve involves all technical
responsibility for approximately 700 million barrels of crude in
storage, over 1,000 miles of pipeline, as well as all related
environmental, safety, and security matters. The current contract
runs through 1998.
(1) Represents value of costs incurred and fee. Only the fee
portion ($5.1 million in 1994) has been recorded as revenue in
the Company's financial statements.
$89 million EPA Programs - Under several contracts, the
Company performs program management, analytical, and technical
support for EPA Superfund policy, research and development, and
enforcement under Superfund and effluent guidelines. These
contracts extend into 1998.
$81 million Defense Policy Support - As one of the leading
providers of direct energy policy support to DoD, DOE and other
federal agencies, the Company, through its subsidiary, DynCorp
Environmental, Energy and National Security Programs, holds
contracts with terms continuing through 1999, under which it
furnishes analysis and documentation support on defense policy
related to energy matters.
$40 million EPA CLASS - Under this five-year contract awarded
in 1994, the Company provides program management support in the
testing of environmental samples by EPA's contracted laboratories
for the Office of Emergency and Remedial Responses. This is a
successor contract to a contract first awarded to Viar & Company
in 1980.
Advanced Technology Services
This business includes remote bar coding contracts and other
contracts with the U.S. Postal Service and health and health-care
related support services, including health surveillance, health
education, industrial hygiene, fitness programs and clinical
laboratory services. The mission of Advanced Technology Services
is to identify and develop new and innovative commercial
businesses for the Company through leveraging of the Company's
existing know-how and to pursue commercial opportunities that
arise external to the Company. It serves as an incubator for new
commercial applications for the established business lines or
possible future business in new market areas and focuses on
emerging technologies or novel process applications where the
application of known or evolving technologies may represent
significant value-added or new market opportunities.
$220 million U.S. Postal Service Remote Bar Coding - Under
contracts secured in 1992, the Company operates a
contractor-furnished remote bar coding facility in Pennsylvania
which provide remote bar coding of mail for four U.S. Postal
Service regions. The contracts, which currently run through
1996, including options, may not be renewed beyond April, 1996,
due to an announced policy change in the U.S. Postal Service that
would bring this contracted-out work back into the Service.
$31 million Biotechnology and Health Services - The Company
provides biomedical technology services to various health
organizations. Under contracts extending into 1998, the Company
operates seven laboratories and five repositories for the
National Institutes of Health.
$5 million Grupo DynCorp de Mexico - Initiated in 1993, this
Mexican operation has secured contracts (denominated in U.S.
dollars) with an annual revenue value of approximately $2.6
million--primarily in the environmental remediation analysis and
industrial security markets. Advanced Technology Services opened
a dedicated office in Mexico City in 1993, and it is actively
engaged in marketing a variety of the Company's technical and
professional services that may have application to Mexican
governmental and commercial customer needs.
Commercial Aviation
The aviation ground handling business is conducted through
the Company's wholly owned subsidiaries, DynCorp Aviation
Services, Inc., DynAir Fueling, Inc., and DynAir Services, Inc.,
formerly Servair, Inc., which was acquired by the Company in
1971. They provide a wide range of ground handling services at
approximately 80 airports, ranging from line maintenance and
fueling to cleaning and baggage handling. DynAir is among the
largest independent ground handlers in the United States. Ground
handling includes line maintenance, cargo handling, baggage
handling and loading, aircraft cleaning, passenger handling
services, fueling, deicing, and all other services (except
catering) generally furnished or available at airports.
The Company's ground handling contracts with commercial
airline customers ("Commercial Contracts") usually run for
periods of up to three years. These contracts seldom contain
renewal provisions and must be renegotiated upon expiration. The
Company is usually paid for its ground services at a fixed
contract rate on a per-flight basis (every takeoff and landing).
Awards of Commercial Contracts are made on the basis of price,
quality of service and past performance. For routine line
maintenance, a carrier contacts the Company for a fixed rate
quotation based on the service and the frequency of visits.
Commercial Contracts are generally terminable at will on very
short notice (often 30 to 90 days) by the Company's customers.
Because of this, certain Commercial Contracts may expire prior to
the stated maturity of the Contract Receivable Collateralized
Notes previously issued by the Company to its wholly owned
financing subsidiary, Dyn Funding Corporation, which may result
in demands on the Company's available cash as the Company
endeavors to replace the terminated contracts underlying the
Contract Receivable Collateralized Notes. See "Risk Factors --
Termination of Contracts."
The aircraft maintenance and repair business is conducted
through the Company's DynAir Tech subsidiaries of Arizona
(acquired in 1987), Florida (acquired in in 1969), and Texas. In
facilities located in Phoenix, Miami, and Amarillo, the Company
performs maintenance checks, component overhaul, heavy structural
maintenance, airframe and systems maintenance, and modification
on a wide variety of passenger and cargo aircraft, including
wide-body aircraft. Contracts may cover one or more aircraft and
are usually completed within a year. The Company is usually paid
for its services on a combination of fixed prices for planned
services and for time and materials for unplanned services, such
as repairs of problems not known until the aircraft is undergoing
maintenance. Maintenance procedures range from brief checks
performed on a frequent basis to heavy maintenance and overhaul,
which can require many thousands of labor hours, on a less
frequent basis.
The Company continues to evaluate its alternatives in
respect to the unsatisfactory performance of the maintenance and
repair business, which has posted four consecutive years of
operating losses. See Note 21 to the Consolidated Financial
Statements which are included elsewhere in this Prospectus.
Government Contracting
The Company derived 71% of its revenues in 1994 from
Government Contracts, and 54% of its revenues from Government
Contracts in 1994 represented contracts with the DoD. Typically,
a Government Contract has an initial term of one year combined
with two, three, or four one-year renewal periods, exercisable at
the discretion of the Government. The Government is not
obligated to exercise its option to renew a Government Contract.
At the time of completion of a Government Contract, the contract
in its entirety is "recompeted" against all interested
third-party providers. Approximately 80% of the Company's
Government Contracts business is from contracts that have an
aggregate initial term and renewal periods of five years or more.
Federal law permits the Government to terminate a contract at any
time if such termination is deemed to be in the Government's best
interest. The Government's failure to renew, or the early
termination of, any significant portion of the Company's
Government Contracts could adversely affect the Company's
business and prospects. In addition, the fact that Government
Contracts may be terminated without renewal prior to the stated
maturity of the Contract Receivable Collateralized Notes
previously issued by the Company to its wholly owned financing
subsidiary, Dyn Funding Corporation, which may result in demands
on the Company's available cash as the Company endeavors to
replace the terminated contracts underlying the Contract
Receivable Collateralized Notes. See "Risk Factors --
Concentration of Revenues/Dependence on Government Contracts "
and "Risk Factors -- Termination of Contracts."
Contracts with the U.S. Government and its prime contractors
usually contain standard provisions for termination at the
convenience of the Government or such prime contractors, pursuant
to which the Company is generally entitled to recover costs
incurred, settlement expenses, and profit on work completed prior
to termination. There can be no assurance that terminations will
not occur, and such terminations could adversely affect the
Company's business and prospects. The Company's Government
Contracts do not provide for renegotiation of profits. See "Risk
Factors -- Termination of Contracts."
Continuation and renewal of the Company's existing
Government Contracts and the acquisition by the Company of
additional Government Contracts is contingent upon, among other
things, the availability of adequate funding for various U.S.
Government agencies. The current world political situation and
pressure to reduce the federal budget deficit have reduced, and
may continue to reduce, military and other spending by the U.S.
Government. The precise effect of these political developments
on the Company's business and prospects cannot be predicted.
Such budget reductions and/or changes in governmental policies
might increase somewhat the nature and amount of work contracted
out by Government agencies to businesses such as the Company, but
they might also limit future revenue opportunities for the
Company with respect to U.S. Government contracts. See "Risk
Factors -- Concentration of Revenue/Dependence on Government
Contracts."
The Company's Government Contract services are provided
through three types of contracts -- fixed-price,
time-and-materials, and cost-reimbursement contracts.
Approximately 12% of the Company's Government Contracts revenue
in 1994 was attributable to fixed-price contracts which require
the Company to perform services under a contract at a stipulated
price. The Company derived approximately 16% of its Government
contracts revenue during 1994 from time-and-material contracts,
under which the Company is paid for labor hours at negotiated,
fixed hourly rates and reimbursed for other allowable direct
costs plus allocable indirect costs (including a profit margin).
The balance of the Company's Government Contracts revenues in
1994 (approximately 72%) were derived from cost-reimbursement
contracts under which the Company is reimbursed for all actual
costs incurred in performing the contract, to the extent that
such costs are within the contract ceiling and allowable under
the terms of the contract and applicable regulations, plus a
fixed fee or incentive fee. The Company assumes greater
financial risk on fixed-price contracts and time-and-material
contracts, because the Company assumes the risk of performing
those contracts at the stipulated prices or negotiated hourly
wages. The failure to accurately estimate ultimate costs or to
control costs during performance of the work could result, and in
some instances has resulted, in losses. See "Risk Factors --
Contract Profit Exposure."
Government Contract payments received by the Company in
excess of allowable direct and indirect costs are subject to
adjustment and repayment after audit by Government auditors.
Audits have been completed on the Company's incurred contract
costs through 1986 and are continuing for subsequent periods.
The Company has included an allowance in its financial statements
for possible excess billings and contract losses which it
believes is adequate based on its interpretation of contracting
regulations and past experience. There can be no assurance,
however, that this allowance will be adequate. See "Risk Factors
- -- Audits by U.S. Government Agencies."
As a U.S. Government contractor, the Company is subject to
federal regulations under which its right to receive future
awards of new Government Contracts, or extensions of existing
Government Contracts, may be unilaterally suspended or barred for
periods of up to three years, should the Company be convicted of
a crime or be indicted based on allegations of a violation of
certain specific federal statutes or other activities.
Suspensions, even if temporary, can result in the loss of
valuable contract awards for which the Company would otherwise be
eligible. While suspension proceedings may be initiated by the
Government without a hearing, debarment for up to three years
cannot be imposed without a due process hearing. Suspension and
debarment actions are usually limited to that division or
subsidiary of a company which is involved in the alleged improper
activity which gives rise to the suspension or debarment actions;
however, Government agencies have authority to impose debarment
and suspension on affiliated entities which in no way were
involved in the alleged improper activity. The initiation of
suspension or debarment hearings upon the Company or any of its
affiliated entities could have a material adverse impact upon the
Company's business and prospects. See "Risk Factors --
Suspension and Debarment."
Factoring of Receivables
On January 23, 1992, the Company's wholly owned subsidiary,
Dyn Funding Corporation ("DFC"), completed a private placement of
$100,000,000 of 8.54% Contract Receivable Collateralized Notes,
Series 1992-1 (the "Notes"). Upon receiving the proceeds from the
sale of the Notes, DFC purchased from the Company an initial pool
of receivables for $70,601,000, paid $1,524,000 for expenses and
deposited $3,000,000 into a reserve fund account and $24,875,000
into a collection account with Bankers Trust Company as trustee
pending additional purchases of receivables from the Company. Of
the proceeds received from DFC, the Company used $38,112,000 to
pay the outstanding balances of the ESOP Loan and a revolving
loan facility and $33,280,000 was used for the redemption of all
outstanding Class A Preferred Stock plus accrued dividends (the
redemption price per share was $25.00 plus accrued dividends of
$0.66 per share).
The Notes are collateralized by the right to receive
proceeds from certain Government Contracts and certain eligible
accounts receivable of commercial customers of the Company.
Credit support for the Notes is provided by
over-collateralization in the form of additional receivables.
The Company retains an interest in the excess balance of
receivables through its ownership of the common stock of DFC.
Additional credit and liquidity support is provided to the Notes
through a cash reserve fund. Interest payments are made monthly
with monthly principal payments beginning February 28, 1997. The
Notes are projected to have a life of five years and two months
and to be fully repaid by July 30, 1997.
On an ongoing basis, the cash receipts from collection of
the receivables will be used to make interest payments on the
Notes, pay a servicing fee to the Company, and purchase
additional receivables from the Company. Beginning February 28,
1997, instead of purchasing additional receivables, the cash
receipts will be used by DFC to repay principal on the Notes.
During the non-amortization period (the period between January
23, 1992 and January 30, 1997), cash in excess of the amount
required to purchase additional receivables and meet payments on
the Notes is to be paid to the Company, subject to certain
collateral coverage tests. The receivables pledged as security
for the Notes are valued at a discount from their stated value
for purposes of determining adequate credit support. DFC is
required to maintain receivables, at their discounted values,
plus cash on deposit at least equal to the outstanding balance of
the Notes.
Commencing March 30, 1994, the Notes became redeemable in
whole, but not in part, at the option of DFC at a price equal to
the principal amount of the Notes plus accrued interest plus a
premium (as defined in the Notes).
Special redemption (payment of a portion of the Notes plus a
premium) is required in the event that the collateral value ratio
test is less than 1.00 as of two consecutive monthly
determination dates and the Company has not substituted
receivables or deposited cash into the collection account to
bring the collateral value ratio to 1.00.
Mandatory redemption (payment of the Notes in full plus a
premium) is required in the event that (i) the collateral value
ratio test is equal to or less than 0.95 as of three consecutive
monthly determination dates and the Company has not substituted
receivables or deposited cash into the collection account to
bring the collateral value ratio above 0.95; or (ii) three
special redemptions are required within any consecutive 12-month
period; or (iii) the aggregate stated value of all ineligible
receivables which have been ineligible receivables for more than
30 days exceeds 7% of the aggregate collateral balance and the
collateral value ratio is less than 1.00.
DFC may not purchase additional eligible receivables if the
Company has an interest coverage ratio (as defined) of less than
1.10, or if the Company has more than $40 million of scheduled
principal debt (as defined) due within 24 months prior to the
amortization date or $20 million of scheduled principal debt due
within 12 months prior to the amortization date. See "Risk
Factors -- Termination of Contracts."
Environmental Matters
The Company's business activities occasionally result in the
generation of non-nuclear hazardous wastes, the hauling and
disposal of which are governed by federal, state and local
environmental compliance statutes and regulations. In addition,
certain of the Company's businesses operate petroleum storage and
other facilities that are subject to similar regulations.
Violations of these laws can result in significant fines and
penalties for which insurance is not reasonably available.
Although the Company has installed and currently maintains a
comprehensive, company-wide environmental compliance program,
many of its operations involve the management of storage and
other facilities owned by others, including governmental
entities. Consequently, the Company is not always in a position
to control the compliance of the facilities it operates with
environmental and other laws. See "Risk Factors -- Environmental
Matters."
International Operations
The Company currently conducts some operations outside of
the United States. Such international operations entail
additional business risks and complexities such as foreign
currency exchange fluctuations, different taxation methods,
restrictions on financial and business practices and political
instability. There can be no assurance that the Company can
achieve or maintain success in these markets. See "Risk Factors
- -- International Operations."
Competition
The markets which the Company services are highly
competitive. In each of its operating groups, the Company's
competition is quite fragmented, with no single competitor
holding a significant market position. The Company experiences
vigorous competition from industrial firms, university
laboratories, non-profit institutions, U.S. Government agencies,
and, in the case of Commercial Aviation, the in-house operations
of major airlines. A majority of the Company's revenues are
derived from contracts with the U.S. Government and its prime
contractors, and such contracts are awarded on the basis of
negotiations or competitive bids where price is a significant
factor. Management does not believe that any one or a small
number of competitors are dominant in any of its business areas.
However, some of the Company's competitors are large, diversified
firms with substantially greater financial resources and larger
technical staffs than the Company has available to it. See "Risk
Factors -- Competition."
Backlog
The Company's backlog of business (including estimated value
of option years on Government Contracts) was $2.206 billion at
December 31, 1994, compared to a year-end 1993 backlog of $2.772
billion. At March 31, 1995, backlog (including estimated value
of option years on Government Contracts) was $2.766 billion.
U.S. Government agencies operate under annual fiscal
appropriations by the Congress and fund various contracts on an
incremental basis. Therefore, a substantial portion of the
Company's backlog represents contracts which have not been funded
by the responsible Government agency.
Properties
The Company is primarily a service-oriented company, and, as
such, the ownership or leasing of real property is an activity
which is not material to an understanding of the Company's
operations. The Company owns two office buildings. The Company
leases numerous commercial office facilities, hangars, and
warehouses used in connection with the storage of inventories and
fabrication of materials associated with various services
rendered and servicing, including its corporate headquarters, a
149,000 square foot facility under a 12-year lease. None of the
properties is unique; however, several of the leases constitute a
partially exclusive right to operate at certain airports. All of
the Company's owned facilities are located within the United
States. In the opinion of management, the facilities employed by
the Company are adequate for the present needs of the business.
LEGAL MATTERS
The Company is involved in various claims and lawsuits,
including contract disputes and claims based on allegations of
negligence and other tortious conduct. The Company is also
potentially liable for certain environmental, personal injury,
tax, and contract dispute issues related to the prior operations
of divested businesses. In most cases, the Company has denied,
or believes it has a basis to deny, liability, and in some cases
has offsetting claims against the plaintiffs or third parties.
A former subsidiary of the Company, which discontinued its
business activities in 1986, has been named as one of many
defendants in civil lawsuits which have been filed in various
state courts against manufacturers, distributors and installers
of asbestos products. The Company has also been named as a
defendant in several of these actions. At the beginning of 1992,
403 claims had been filed, and during the year 1,785 additional
claims were filed, with 73 claims being settled. In 1993, 709
additional claims were filed and 1,273 were settled. In 1994,
1,135 new claims were filed with 353 being settled. Through
April 20, 1995, 274 new cases have been filed and 49 settled.
Defense has been tendered to and accepted by the Company's
insurance carriers; however, the Company has been unable to
identify solvent insurance carriers for all of the claim periods.
The Company believes that the subsidiary has substantial defenses
against alleged secondary and indirect liability. The Company
has provided a reserve for the estimated uninsured legal costs to
defend the suits and the estimated cost of reaching reasonable
no-fault liability settlements. The amount of the reserve has
been estimated based on the number of claims filed and settled to
date, number of claims outstanding, current estimates of future
filings, trends in costs and settlements, and the advice of the
insurance carriers and counsel.
The Company and its former subsidiary have also instituted
litigation against its various asbestos liability insurers for
the purpose of obtaining a declaratory judgment regarding the
aggregate amount of available insurance, the right of carriers to
unilaterally allocate losses and defense costs among themselves,
the obligation of certain excess insurance carriers to "drop
down" their coverage to cover liability at the primary level
resulting from lost policies or policies issued by currently
insolvent carriers, and certain insurance coverage issues that
could impact the Company's ultimate liability for uninsured
exposure.
The Internal Revenue Service has completed an examination of
the Company's tax returns for the period 1985 through 1988 and
proposed several adjustments, the most significant of which
related to deductions taken by the Company for expenses incurred
in the LBO. A settlement of these matters has been approved by
the Service. Taxes and accrued interest associated with these
adjustments were $6.0 million, of which $1.4 million has been
paid. Approximately $3.1 million will be eliminated by offset of
a claim for operating loss carryback, which has been approved by
the Service. The Company is in current negotiations with the
Service regarding the installment payment of the remaining $1.5
million.
The Company has retained certain liability in connection
with its 1989 divestiture of its major electrical contracting
business, Dynalectric Company ("Dynalectric"). The Company and
Dynalectric were sued in 1989 by a former Dynalectric company
subcontractor. The subcontractor has alleged that its
subcontract to furnish certain software and services in
connection with a major municipal traffic signalization project
was improperly terminated by Dynalectric and that Dynalectric is
liable to the former subcontractor for a variety of additional
claims, the aggregate dollar amount of which have not been
formally recited in subcontractor's complaint. Dynalectric has
filed certain counterclaims against the former subcontractor.
The Company and Dynalectric believe that they have valid
defenses, and/or that any liability would be more than off-set by
recoveries under the counterclaims. The Company has established
reserves for the contemplated defense costs and for the cost of
obtaining enforcement of arbitration provisions contained in the
contract, but there can be no assurance that the amount of such
reserves will be adequate to cover all the costs and expenses
involved with this claim.
The Company and its various subsidiaries are occasionally
the subjects of investigations by the Department of Justice and
other investigative organizations, resulting from employee and
other allegations regarding business practices. The Company does
not anticipate any action as a result of such inquiries and
investigations which would have a material adverse effect on its
consolidated financial position or results of operations or its
ability to conduct business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
In June, 1994, the Company announced its intent to
restructure its government operations to better serve its
customers and address the declining business base of certain of
the existing operating units. A detailed implementation plan was
developed during the second half of the year and the new
organizational structure was substantially in place by January
1995. The restructuring resulted primarily in the elimination
and/or consolidation of business units in order to achieve
improved efficiency and economy of scale. Additionally, the
Company acquired the following businesses during the year.
CBIS Federal, Inc., which provides full life cycle integrated
information solutions, primarily to civilian agencies of the
federal government.
A 25% interest in Composite Technology Inc., a Texas based
aerospace technology company that specializes in repair of
aircraft components through the use of composite materials.
A 25% interest in Gateway Passenger Services LP, a California
based airport ground handling operation expected to provide
expansion opportunities into the Pacific rim area and Hawaii.
In August, 1994, the Company initiated the Asset Management
Program, which delineates management's plan to replace its high
interest rate Junior Subordinated Debentures utilizing proceeds
from the refinancing of equipment, expansion of the receivable
backed financing, tighter control of cash disbursements, and the
sale of certain assets. See "Liquidity and Capital Resources."
The Company ended the year with revenues in excess of $1
billion, and continued to improve gross profit and margins.
However, as in 1993, several unusual items, primarily commercial
aviation maintenance operating losses and the recognition of
asset impairment related to this unit, the write-off of an
investment in a 50.1% owned subsidiary, expenses related to
divested businesses and the pay-in-kind ("PIK") interest differential
yielded a net loss for the year. The table below reflects the
pro forma effect of these mentioned items on the Company's
earnings had they not been incurred (dollars in
thousands):
Years ended December 31,
1994 1993
Loss before income taxes and minority interests $(16,907) $(11,133)
Commercial Sector - aircraft maintenance losses 5,351 6,629
Commercial Sector - aircraft maintenance
facilities asset impairment 9,492 -
Write-offs related to acquisitions/investments 5,499 3,602
Divested business expenses 2,318 293
PIK interest differential on debentures (a) 3,811 4,092
Pro forma earnings before income taxes and
minority interest $ 9,564 $ 3,483
(a) Estimated reduction in interest expense if refinanced at current
market rate (11.5% and 10.5% in 1994 and 1993 respectively) for
cash pay debt.
Revenues from the Department of Defense were $551 million in
1994 compared to $543 million in 1993 and $538 million in 1992.
These revenues represented 53.9% of total 1994 revenues compared
to 56.9% in 1993 and 59.0% in 1992. This represents the
Company's fourth year of its strategic long range plan to
continue to grow or maintain its defense business while focusing
primarily on the growth of non-defense business.
Following is a three-year summary of operations, cash flow
and long-term debt (in thousands):
Years Ended December 31,
1994 1993 1992
Operations
Revenues $ 1,022,072 $ 953,144 $ 911,422
Gross profit 43,868 39,557 28,146
Selling and corporate administrative (17,199) (18,267) (20,476)
Interest, net (23,150) (23,099) (22,458)
Aircraft maintenance impairment (9,492) - -
Other (10,934) (9,324) (5,860)
Loss before income taxes, minority
interest and extraordinary item $ (16,907) $ (11,133) $ (20,648)
Cash Flow
Net loss $ (12,831) $ (13,414) $ (23,342)
Depreciation and amortization 27,077 19,818 19,372
Pay-in-kind interest 15,329 13,142 6,590
Working capital items (26,818) (7,704) (7,559)
Other 215 (1,222) 283
Cash provided (used) by operations 2,972 10,620 (4,656)
Investing activities (22,214) (15,611) (18,130)
Financing activities 8,840 7,817 26,868
Increase (decrease) in cash
and short-term investments $ (10,402) $ 2,826 $ 4,082
December 31,
Long-term Debt(including current maturities) 1994 1993 1992
Junior Subordinated Debentures $ 102,659 $ 86,947 $ 73,489
Contract Receivable Collateralized Notes 100,000 100,000 100,000
Mortgages payable 22,285 23,416 19,436
Other notes payable and capitalized leases 9,008 9,899 9,507
$ 233,952 $ 220,262 $ 202,432
The following discussion of the Company's results of
operations is directed toward the two operating sectors,
Government and Commercial.
Results of Operations
Revenues - Revenues for 1994 were $1,022.1 million compared to 1993 revenues
of $953.1 million, an increase of $69.0 million (7.2%) with the
Government Sector contributing $41.5 million and the Commercial
Sector adding $27.5 million. The increase in the Government
Sector's revenue was primarily attributable to businesses
acquired in October 1994 and November and December 1993 ($52.5
million), new contract awards or contracts which were in the
start-up phase in 1993 but were fully operational in 1994 ($73.3
million) and a retroactive adjustment on one contract for wage
increases mandated by the Department of Labor under the Service
Contract Act ($7.0 million). These increases were offset by
declines from contracts lost in recompetition and reduced level
of effort on existing contracts. Revenue for the Commercial
Sector's aircraft maintenance operations and ground support
services operations were $73.1 million and $130.3 million,
respectively, up $15.8 million and $11.7 million over 1993
revenues.
Revenues for 1993 were $953.1 million compared to 1992
revenues of $911.4 million, an increase of $41.7 million (4.6%).
The Government Sector had an increase of $49.1 million (6.7%)
while the Commercial Sector had a decrease of $7.4 million
(4.0%). The increase in Government Sector's revenue includes
approximately $15.1 million from businesses acquired in December
1992 and November and December 1993, $16.0 million from the U.S.
Postal Service contracts which were in the start-up phase in 1992
but were fully operational in 1993, and $17.9 million from new
contract awards offset partially by contracts completed and/or
not renewed. The overall decline in Commercial Sector's 1993
revenue resulted from low volume in the aircraft maintenance
activities and the impact of relocating the Miami, Florida
maintenance operation to a new hanger facility; offset partially
by increases in ground support services. Aircraft maintenance
1993 revenue decreased to $57.3 million from $74.3 million in 1992 while
ground support services' 1993 revenue increased to $118.6 million
from $109.0 million in 1992.
Cost of Services/Gross Margins - Cost of services was 95.7% of
revenues in 1994, 95.8% in 1993 and 96.9% in 1992 which resulted
in gross margins of $43.9 million (4.3%), $39.6 million (4.1%)
and $28.1 million (3.1%), respectively. Both the Government and
Commercial Sectors' margins increased from that of the prior
year. The increase in Government Sector's gross margin was
attributable to acquisitions consummated in November and
December, 1993 and October, 1994, and new contract awards which
were partially offset by decreases related to lost contracts,
reduced level of effort on existing contracts and increased costs
incurred in support of proposal efforts. Commercial Sector's
gross margin as a percent of revenue was up 1.4% over 1993. The
ground services and fueling operations increase of 1.4% was due
to several factors including improved operations and an
adjustment to the depreciable lives of certain assets (see Note 4
to the Consolidated Financial Statements included elsewhere in
this Prospectus). The aircraft maintenance operations reflected
an improvement of 2.8%, but still had a negative margin of 6.4%,
primarily because of inadequate workload to cover fixed costs.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital Resources".
Government Sector's 1993 gross margins were improved while
the Commercial Sector's 1993 margins declined from those of the
prior year. The improvement in Government Sector's gross margins
was principally due to improved profit performance on new
contracts started in 1992 and the early part of 1993 (in
particular the Postal Service and the Department of Energy
contracts). Commercial Sector's decline in gross margin was the
result of reduced volume in the aircraft maintenance activities,
offset partially by improved gross margins of the ground support
activities. Aircraft maintenance had gross margin losses of $6.6
million in 1993 compared to $0.4 million in 1992. Also
contributing to the decline in Commercial Sector's margins were
approximately $0.6 million of costs associated with the
relocation of the Miami, Florida aircraft maintenance operations
to larger hangar facilities at the Miami, Florida airport.
Selling and Corporate Administrative - Selling and corporate
administrative expenses as a percentage of revenues were 1.7%,
1.9% and 2.2% in 1994, 1993 and 1992, respectively. The decrease
of $1.1 million in 1994 from 1993 is attributable to cost
reductions associated with Commercial Sector's general and
administrative functions and also a decrease in Restricted Stock
Plan expense due to the award of fewer shares in 1994.
There were both increases and decreases in 1993 over 1992 of
the various elements and components of these expenses; however,
the two most significant factors contributing to the decrease of
$2.2 million from 1992 were cost reductions made in Commercial
Sector's general and administrative expenses and a decrease in
Government Sector's marketing and bid and proposal costs from the
unusually high amount incurred in 1992 on a contract proposal for
the Department of Energy's Strategic Petroleum Reserve in
Louisiana.
Interest - Interest expense was $25.6 million in 1994, virtually
unchanged from $25.5 million in 1993. Increases resulting from
the compounding of the pay-in-kind interest on the Junior
Subordinated Debentures and the inclusion of a full year of
interest on mortgages assumed in conjunction with an acquisition
in the fourth quarter of 1993 were offset by the reversal of
interest accruals resulting from a favorable settlement with the
Internal Revenue Service of the Company's tax liability for the
period 1985-1988.
Interest expense in 1993 of $25.5 million was $0.6 million
higher than 1992. This small increase was primarily the result
of the Contract Receivable Collateralized Notes being outstanding
for the full year of 1993 compared to approximately eleven months
in 1992, interest on the mortgage for the Corporate office
building was for the full year of 1993 compared to five months in
1992 and an increase in the amount of capitalized leases
outstanding, all of which were partially offset by a reduction in
the accrual of interest on possible payments of federal income
taxes.
The net increase in interest income in 1994 over that of
1993 is due to the compounding of interest on the 17% Cummings
Point Industries, Inc. note receivable, offset by decreases due
to the recording in 1993 of prior years' interest income (and
offsetting bank fee expense) on cash balances in various
operating accounts. Interest income in 1993 was approximately
the same as that in 1992 with increases from the interest on the
Cummings Point Industries note receivable and the above noted
prior year adjustments being offset by decreases resulting from
lower balances of excess funds available for investment.
Other - The increase in other expense in 1994 as compared to 1993
is attributable to the write-off of the Company's 50.1%
investment in an unconsolidated subsidiary, an increase in the
provision for nonrecovery of commercial receivables and accrual
of adjustments for legal fees and environmental costs related to
divested businesses. These increases were partially offset by an
adjustment to reserves for legal and other expenses associated
with events which predated the Company's acquisition of another
business.
The increase in 1993 over 1992 is caused primarily by the
accelerated amortization of cost in excess of net assets of an
acquired business and the initial accrual of legal and other
costs mentioned above.
Years Ended December 31,
(In thousands)
Other Expense consists of: 1994 1993 1992
Amortization of costs in excess
of net assets acquired $ 3,813 $ 4,830 $ 3,793
Provision for nonrecovery of receivables 2,526 1,141 965
ESOP Repurchase Premium 1,323 1,507 2,787
Write-off of investment in
unconsolidated subsidiary 3,250 - -
Legal and other expense accruals
associated with an acquired business (1,830) 2,070 -
Environmental costs of divested
businesses (347) 366 1,000
Gain on sale of warrants obtained in
divestitures - - (756)
Other divested business adjustments 2,665 (73) (1,600)
Miscellaneous (466) (517) (329)
Total Other $10,934 $ 9,324 $ 5,860
Income Taxes - During 1994, the
Company reached a favorable settlement with the IRS of disputes
over tax deductions related to the leveraged buyout in 1988.
This settlement was approved by the IRS in February 1995, and
applicable tax reserves were reversed in the fourth quarter of
1994.
In 1994, the federal tax benefit resulted from the
reversal of tax reserves for the IRS examination and the tax
benefit of operating losses, net of a valuation allowance, less
the federal tax provision of a majority owned subsidiary required
to file a separate Federal return. In 1993 and 1992, the Company
did not record any Federal income tax benefit because of the
uncertainty regarding the level of future income. The Federal
tax provision recognized in those years was that of a majority
owned subsidiary which is required to file a separate return.
Additionally, the Company recognized a foreign income tax
provision in 1994, 1993 and 1992 and a state tax credit in 1992.
Cash Flow
Cash and short-term investments were $12.4 million at
December 31, 1994, down from $22.8 million at the prior year-end.
Working capital at December 31, 1994, was $91.1 million compared
to $73.8 million at December 31, 1993. The increase in working
capital was primarily the result of growth in business volume, an
increase of accounts receivable and acquisitions. The 1994 ratio
of current assets to current liabilities was 1.63 compared to
1.53 in 1993. At December 31, 1994, $8.7 million of cash and
short-term investments and $124.2 million of accounts receivable
were restricted as collateral for the Contract Receivable
Collateralized Notes.
In 1994, operating activities produced cash flow of $3.0
million compared to $10.6 million in 1993 and a negative $4.7
million in 1992. The principal reason for this decline was the
increased requirement for working capital noted above.
In 1994, investing activities used $22.2 million of cash, of
which $15.3 million was used for the acquisition of businesses
(see Note 17 to the Consolidated Financial Statements included
elsewhere in this Prospectus) and another $7.4 million was used
for the purchase of property and equipment. In addition, $0.9
million of contract phase-in costs were incurred and deferred.
These costs will be amortized over the duration of the contracts.
In 1993, investing activities used $15.6 million of cash which
included $10.9 million for acquisitions and $5.4 million for the
purchase of property and equipment.
In 1994, financing activities provided cash of $8.8 million.
The sale of stock to the Employee Stock Ownership Plan
contributed $17.1 million. Cash of $5.1 million was used for
payments on indebtedness and $3.2 million was used to purchase
treasury stock. In 1993, financing activities provided cash of
$7.8 million. Payments of $16.1 million were received on the
loan to the ESOP, $6.4 million was used for payments on
indebtedness and $2.0 million was used to purchase treasury
stock. The treasury stock purchases are primarily to meet ERISA
requirements to repurchase ESOP shares when there is no
alternative public market.
Liquidity and Capital Resources
At December 31, 1994, the Company's debt totaled $234.0
million compared to $220.3 million the prior year-end and $202.4
million at December 31, 1992. The increase in debt resulted from
pay-in-kind interest of $15.3 million on the Junior Subordinated
Debentures. The Company had a net decrease in cash and
short-term investments of $10.4 million in 1994 and an increase
of $2.8 million and $4.1 million in 1993 and 1992, respectively.
The decrease for 1994 was caused to a large degree by net
investments in acquired businesses of $15.3 million and an
increase in accounts receivable and contracts in process of $16.5
million. The latter increase was largely attributable to a delay
in finalizing the terms on a new contract and an internal
disruption in a government finance office, both of which occurred
in the fourth quarter of 1994. The Company's cash flow was
favorably impacted in 1994, 1993 and 1992 through the utilization
of pay-in-kind interest on the Junior Subordinated
Debentures and the sale of stock to the Employee Stock Ownership
Plan totaling $32.4 million, $29.2 million and $22.7
million, respectively.
The mortgage of approximately $19 million on the Corporate
Office, which was retired in March 1995 through a sale-leaseback
of the facility; see Note 20 to the Consolidated Financial
Statements included elsewhere in this Prospectus. Annualized
interest expense at January 1, 1995 is approximately $28.4
million of which $8.6 million of interest on the Junior
Subordinated Debentures is payable in kind (interest becomes
payable in cash effective with the December 31, 1995 payment).
The Company believes that it can achieve the increased cash
flow required to meet its future cash debt and interest
obligations (including annualized interest exclusive of the PIK
interest) by continued profit improvement, curtailment of
aircraft maintenance losses, reduced debt service cost and
continuation of its contribution to the ESOP. The Company plans
to continue its Value Improvement Program which was initiated in
late 1992 to reduce and/or eliminate operating costs and loss
operations, curtail the losses in Commercial Sector's aircraft
maintenance operations and to improve the gross margins in the
Government Sector. To reduce its debt service costs, the Company
intends to reduce its high interest rate Junior Subordinated
Debentures utilizing proceeds from the refinancing of equipment
($23.5 million completed in February 1995; see Note 20 to the
Consolidated Financial Statements included elsewhere in this
Prospectus), expansion of the collateralized receivable financing
(estimated $20.0 - $25.0 million), tighter management control of
working capital (estimated $20.0 million), the sale of assets
(estimated $5.0 million) and the collection of notes receivable
(estimated $10.0 million). These sources are expected to provide
approximately $80.0 million cash which the Company plans to use to
repurchase the PIK securities. The Company and the ESOP have an
agreement in principle under which the ESOP will continue during
1995 to purchase Company common stock to fund the ESOP retirement
benefit. Other possible sources of cash flow to retire debt are
cash from future operations and the sale or divestiture of other
operating units. From time to time, the Company receives
inquiries to buy the Company and/or one or more of its
significant subsidiaries. With the exception of the commercial
aircraft maintenance business, the Company is not soliciting any
such offers, nor does it have any such offers in hand. On the
other hand, the Company treats such inquiries seriously and
attempts to determine if any such proposals are in the best
interests of the shareholders.
The Company continues to evaluate its alternatives in
respect to the unsatisfactory performance by the Commercial
Sector's aircraft maintenance unit which posted its fourth
consecutive year of operating losses. The Company has engaged an
investment advisor to market the maintenance unit. The status of
the unit presently remains unresolved pending the outcome of
discussions with potential investors and a major customer. These
discussions could result in one of a number of alternatives,
including the consummation of a joint venture, the procurement of
long-term contracts, sale of the entire unit or, worst case, the
failure to negotiate any transaction at all. Current management
projections indicate that the maintenance unit should be
profitable in 1995. The Company believes that if it is unable to
consummate a satisfactory resolution through any of these
alternatives, the most likely course of action would be to
consolidate its operations by closing one of the heavy
maintenance facilities. In management's opinion, no single
alternative (i.e. entering into a joint venture, the curtailment
of operations or shut down of one or more facilities, or the
divestiture of the unit as a whole) is more or less likely to
occur; however, the Company believes that it has suffered at
least a partial impairment of its investment in this unit.
Accordingly, it has recorded an estimate of the applicable
goodwill ($5.2 million) and other assets ($4.3 million) that
would be written down in the event the consolidation or shut-down
of one of the facilities becomes necessary. This does not fully
reserve for the potential write-off that would be necessary for
the complete closure or sale of the business in the event that
the Company is unable to curtail the operating losses in the
future.
Selected financial operating data of the commercial aircraft
maintenance unit is as follows (in thousands except number of
employees):
1994 1993 1992
Revenues $ 73,045 $ 57,288 $ 74,253
Operating losses $ (5,351) $ (6,629) $ (428)
Asset impairment provision $ (9,492) $ - $ -
Net assets (after write-down) including
Goodwill at December 31 $ 30,315 $ 44,354 $ 43,328
Backlog at December 31 $ 12,730 $ 11,368 $ -
Number of employees 634 701 631
Although the Company has made some progress to diversify
into non-defense business activities, the Company is still
heavily dependent on the Department of Defense. Due to the
procurement cycles of its customers (generally three to five
years), the Company's revenues and margins are subject to
continual recompetition. In a typical annual cycle approximately
20% to 30% of the Company's business will be recompeted and the
Company will bid on several new contracts. Existing contracts
can be lost or rewon at lower margins at any time and new
contracts can be won. The net outcome of this bidding process,
which in any one year can have a dramatic impact on future
revenues and earnings, is impossible to predict. Also, if the
U.S. Government budget is reduced or spending shifts away from
locations or contracts for which the Company provides services,
the Company's success in retaining current contracts or obtaining
new contracts could be significantly reduced. The Company's
Commercial Aviation business is likewise highly competitive and
subject to the economic conditions of the domestic and foreign
airline industry.
In summary, the Company continues to be highly leveraged,
and its ability to meet its future debt service and working
capital requirements is dependent upon increased future earnings
and cash flow from operations, the expansion of an accounts
receivable facility financing, continuation of ESOP stock
purchases in lieu of cash retirement contributions and the
reduction of its debt expense.
EMPLOYEE BENEFIT PLANS
The Company maintains several employee benefit plans
pursuant to which certain of the shares of Common Stock being
offered hereby may be offered or sold. The primary purpose of
these plans is to motivate the Company's employees and directors
to contribute to the growth and development of the Company by
encouraging them to achieve and surpass annual goals of the
Company and of the operations for which they are responsible.
The following is a summary description of each of these plans.
All capitalized terms, unless otherwise defined, have the
meanings ascribed to them in the employee benefit plan to which
they relate.
Savings and Retirement Plan ("SARP")
The most recent amendments to the SARP (originally adopted
in 1983) which added a Company match for certain investments in
Company Common Stock were adopted on March 28, 1995, to become
effective July 1, 1995.
Trustee
Merrill Lynch Trust Company, 265 Stevenson Avenue, Somerset,
NJ 08873, serves as trustee of the SARP, except that the Company
serves as trustee of the Company Stock Fund.
Administration
The Company administers the SARP through an Administrative
Committee consisting of T. E. Blanchard, J. H. Sullivan, and H.
M. Hougen, officers of the Company, whose address is 2000 Edmund
Halley Drive, Reston, VA 22091.
Eligibility and Participation
Generally, all employees (as defined in the SARP) are
eligible to participate in the SARP upon commencing employment,
except for employees in groups or units designated as ineligible.
As of December 31, 1994, there were approximately 4,492
participants in the SARP.
Contributions and Allocations
The SARP permits a participant to elect to defer a portion
of his or her compensation for the Plan Year and to have such
deferred amount contributed directly by the Company to the
participant's SARP account. Amounts deferred by participants,
including rollovers from qualified plans, totaled approximately
$9.0 million for the Plan Year ended December 31, 1994. Under the
terms of the SARP, deferred amounts are treated as contributions
made by the Company. The maximum amount of compensation that a
participant may elect to defer is determined by the SARP
Administrative Committee identified below, but in no event may
the deferral exceed $9,240 per year during 1995 (adjusted for
cost-of-living under rules prescribed by the Secretary of the
Treasury). For 1996, the limitation will be set by the Internal
Revenue Service. In addition to amounts deferred by
participants, the Company may, but is not obligated to, make a
matching contribution to the SARP accounts of those participants
who have elected to defer a portion of their compensation equal
to a percentage or percentages of the amounts which such
participants have elected to defer. This Company matching
contribution is determined periodically by the Board of Directors
and is allocated to the SARP accounts of those participants who
have elected to defer a portion of their compensation.
Commencing July 1, 1995, the Company will contribute 100% of the
first 1% of a participant's compensation deferred under the SARP
for investment in the Company Common Stock Fund and 25% of the
next 4% of such deferred compensation (the "Stock Match"). The
Company's Stock Match contribution to the SARP will be made in
shares of Common Stock unless the Board of Directors determines
to make the contribution in cash, which would then be used to
purchase Company Stock in the Internal Market. 850,000 shares of
Common Stock have been reserved for possible issuance in
satisfaction of the Company's Stock Match obligations during 1995
through 2001.
Certain acquired subsidiaries of the Company previously made
matching cash contributions to separately maintained 401(k)
qualified deferred savings plans without regard to the nature of
the investment of the employee's contribution. Effective January
1, 1995, these plans were merged into the SARP. In certain
instances, the prior matching contribution practices followed
under the predecessor plan will be continued by the Company,
either in addition or as an alternative to the Stock Match.
Company contributions to the SARP are made by the due date
(including extensions) for the Company's federal income tax
return for the applicable year except contributions resulting
from amounts deferred by participants, which must be made within
30 days of deferral. The Company's practice has been to make
matching contributions quarterly based on current participant
bi-weekly deferrals, and the Company plans to make the Stock
Match in conjunction with the applicable Trade Date. Any
additional Company contribution, if required, is made after the
end of the Plan Year.
An Eligible Employee may transfer to the trust fund
maintained for the SARP a rollover contribution from another
qualified retirement plan pursuant to applicable regulations and
Committee procedures. A participant in the SARP who has made a
deferral election may terminate or alter the rate of his or her
deferrals at any time under the terms of the SARP.
Investment of Funds
The SARP Administrative Committee is authorized to establish
a choice of investment alternatives including securities of the
Company, in which contributions to the SARP (including that
portion of compensation which participants elect to defer) may be
invested. The investment alternatives currently available to
participants in the SARP include a Company Stock Fund, and six
Merrill Lynch & Company funds ("Merrill Lynch Funds") described
below. Under the terms of the SARP, (i) a participant's entire
interest in his or her SARP account may be invested in the
Company Stock Fund or in a mixture of the Company Stock Fund
and/or any of the Merrill Lynch Funds, provided that, in order to
obtain the Stock Match, the matched portion of a participant's
compensation deferred under the SARP must be invested in the
Company Stock Fund that is not exchangeable for other investment
alternatives until after a period of 18 months. The Company's
Stock Match will also be invested in the Company's Stock Fund,
which contribution will not be allowed to be exchanged for
another investment alternative. Participants may elect at such
time, in such manner and subject to such restrictions as the SARP
Administrative Committee may specify, to have contributions
allocated or apportioned among the different investment
alternatives. Separate SARP accounts are established for each
investment alternative selected by a participant and each such
account is valued separately. Except for restrictions on
investments in the Company Stock Fund, participants may transfer
amounts from one investment alternative to one or more other
investment alternatives on a daily basis.
Investments in the Company Stock Fund (other than the
non-exchangeable Company contribution described in the preceding
paragraphs) may be exchanged into other investment choices
(subject to the 18-month limitation mentioned above) only on a
Trade Date. It is the current policy of the SARP Administrative
Committee to keep all amounts related to the Company's Stock Fund
invested in Common Stock, except for estimated cash-equivalent
reserves which are primarily used to provide future benefit
distributions, future investment exchanges and other cash needs
as determined by the SARP Administrative Committee. Residual
cash remaining after accounting for estimated cash reserves
generally will be used to purchase Common Stock. If cash
reserves in the Company Stock Fund are insufficient at any given
time to provide benefit distributions and/or investment
exchanges, shares held by the Company Stock Fund, the shares will
be offered for sale in the Internal Market. Exchanges out of the
Company Stock Fund may be deferred until such time, if ever, that
sufficient cash is available to make required benefit
distributions and provide for investment exchanges. Accordingly,
investment exchanges of participants' investments held in the
Company Stock Fund may be restricted. See "Market
Information--The Internal Market."
The following tables summarize as of the dates indicated,
the investment performance of each of Merrill Lynch's six
nationally traded mutual funds for the last six years. The
summary is based on an initial investment of $100 on each
investment alternative.
Corporate Bond Fund
% Increase
Unit Value From Prior Year
12/31/88 100.00 -
12/31/89 113.61 13.61%
12/31/90 121.53 6.97%
12/31/91 142.29 17.08%
12/31/92 153.00 7.53%
12/31/93 172.11 12.49%
12/31/94 163.40 (5.06%)
Capital Fund
Unit Value % Increase
12/31/88 100.00 -
12/31/89 122.98 22.98%
12/31/90 124.31 1.08%
12/31/91 155.00 24.69%
12/31/92 162.80 5.03%
12/31/93 185.12 13.71%
12/31/94 186.80 0.91%
Basic Value Fund
Unit Value % Increase
12/88 100.00 -
12/89 117.54 17.54%
12/90 102.18 (13.07%)
12/91 130.00 27.23%
12/92 143.47 10.36%
12/93 175.26 22.16%
12/94 178.71 1.97%
Retirement Preservation Trust Fund
Unit Value % Increase
12/88 100.00 -
12/89 108.70 8.70%
12/90 117.89 8.46%
12/91 126.94 7.67%
12/92 135.56 6.79%
12/93 143.70 6.01%
12/94 151.99 5.77%
Equity Index Trust
Unit Value % Increase
12/92 100.00 -
12/93 109.66 9.66%
12/94 110.97 1.19%
Global Allocation Fund
Unit Value % Increase
12/89 100.00 -
12/90 101.88 1.88%
12/91 131.17 28.75%
12/92 147.16 12.19%
12/93 178.08 21.01%
12/94 174.52 (2.00%)
Company Stock Fund
Because the Company's Common Stock
has not been publicly traded since 1988, there has not been any
historical market-determined price. However, the Board of
Directors has periodically determined the fair market value of
the stock for purposes of the Stockholders Agreement, and there
have been private share transactions based upon such
determination. Prior to September, 1988, the price was set by
the terms of the LBO and was based on a "package" consisting of
one share of Common Stock plus Warrants to purchase 6.6767
additional shares. The exercise price of the Warrants reduced
from $5.00 per share to $0.25 per share during the period 1988 to
1993 as the initial ESOP loan was paid down.
During the period September, 1988 through May, 1994, the
price was established by the Board based on the fair market value
of such a package. The Board's determination of the package
price was based on the most recent valuation of the Common Stock
by the ESOP Financial Advisor adjusted for the lack of liquidity
and absence of a control premium, and once set, typically
provided for monthly escalation of the price to reflect
anticipated increases in the value, pending subsequent reviews by
the Board. Since January 1, 1994, when the exercise price for
the Warrants was reduced to $0.25 per share, substantially all of
the Management Stockholders have exercised their Warrants.
Effective July 1, 1994, the Board discontinued the practice of
using a package value, and adopted the practice of establishing
the market value on the basis of the price of stock sold by the
Company to the ESOP, which is approved by the ESOP's Financial
Advisor. Set forth below is a table showing the equivalent price
of a share of Common Stock purchased by a Management Stockholder
at the Board-determined price on the date indicated, and assuming
that all the related Warrants in the "package" were exercised at
the minimum exercise price of $0.25:
Date Average price per share % Increase
July 1, 1988 $ 3.47 -
July 1, 1989 $ 3.79 9.22%
July 1, 1990 $ 5.20 37.20%
July 1, 1991 $ 5.72 10.00%
July 1, 1992 $ 7.68 34.27%
July 1, 1993 $ 7.97 3.78%
July 1, 1994 $11.86 48.81%
February 10, 1995 $14.60 23.10%
May 10, 1995 $14.90 2.05%
Vesting
Under the SARP as currently in
effect, each participant is 100% vested in those portions of his
or her SARP account which are attributable to the participant's
salary deferrals and earnings thereon. Entitlement to the Stock
Match will vest at the rate of 50% after two years of service and
100% after three years of service, provided the underlying
matched investment in the Company Stock Fund is held the
requisite 18-month period.
Loans
Loans are available from the SARP account to all
participants. Loans have a maximum limit of $50,000 reduced by
the participant's highest aggregate outstanding loan balance
during the preceding 12-month period. Loans are further limited
to 50% of a participant's vested interest in his or her eligible
accounts (these loans from SARP may not exceed the vested value
in the SARP less vested amounts invested in the Company Stock
Fund). Loans must (i) bear a reasonable rate of interest, (ii)
be adequately secured, (iii) state the date upon which the loans
must be repaid, which in any event may not exceed five years from
the date on which the loan is made, unless the proceeds are used
for the purchase of a principal residence, in which case
repayment may not exceed 30 years, and (iv) be amortized with
level payments, made not less frequently than quarterly, over the
term of the loan. The Company currently requires that loans be
repaid through payroll deductions. The loan documents provide
that 50% of the participant's vested account balances are
security for the loan, and the SARP, therefore, has a lien
against such balances. A loan will result in a withdrawal of the
borrowed amounts from the participant's interest in the Funds
against which the loan is made and, to the extent that cash
assets in accounts other than a Company Stock Funds are required,
a portion of the investment in the Company Stock Fund may need to
be transferred. Principal and interest payments on the loan are
allocated to the account(s) of the borrowing participant in
accordance with the current investment choices of the
participant.
Distributions and Withdrawals
If a participant's employment with the Company terminates,
the participant is entitled to receive a single distribution of
his or her entire interest in his or her SARP account as soon as
practicable following the date of such termination. In the event
a participant dies while employed by the Company, the SARP
Administrative Committee will direct the Trustee to make a single
distribution of the participant's entire interest in his or her
SARP account to the participant's spouse, or, if such spouse has
given proper consent or if the participant has no spouse, to the
Beneficiary designated by the participant. In the event the
Company determines that the participant has suffered a permanent
disability while employed by the Company, the Company will direct
the Trustee to make a single distribution of the participant's
entire interest in his or her SARP account to the disabled
participant.
Except in the case of qualifying hardship, no withdrawals
may be made from the salary deferral portion of a participant's
SARP account prior to his or her termination of employment unless
and until he or she attains the age of 59. Any withdrawals made
thereafter may be made only once in each Plan Year. In the
absence of a qualified court order to the contrary, a
participant's interest in the SARP may not be voluntarily or
involuntarily assigned or hypothecated. The Company has
established procedures for hardship withdrawals including (i)
definition of qualifying hardships, (ii) requirements for having
first withdrawn all voluntary after-tax contributions from any
other Company retirement plans and having received the maximum
loans available under such plans, and (iii) requirement for a
12-month suspension from making elective deferrals into SARP
following the hardship withdrawal.
All distributions, including withdrawals, from the SARP are
paid in cash, except that the portion of SARP balances
represented by Company Common Stock shall be distributed in kind,
subject to the Company's right of first refusal. See
"Description of Capital Stock -- Restrictions on Common Stock."
Employee Stock Ownership Plan
The ESOP was established effective January 1, 1988 as the
Company's principal retirement plan. It succeeded the DynCorp
defined benefit qualified Pension Plan which was terminated in
November, 1988, following the LBO. Following termination of the
Pension Plan, approximately $10 million of excess Pension Plan
assets were rolled over into the ESOP for the benefit of ESOP
participants who were also Pension Plan participants.
At the time of the establishment of the ESOP, it entered
into a Subscription Agreement with the Company under which it
agreed to purchase 4,123,711 shares of Common Stock for $24.25
per share. The purchases were made by the ESOP with funds
obtained under a $100 million loan from the Company. Upon
acquisition of the shares effective September 9, 1988, they were
held by the ESOP trustee to be allocated to employee participants
during the period from 1988 through 1993, pro rata to the ESOP's
projected pay-off of the Company loan.
During the period September, 1988, through December, 1993,
the Company made cash contributions to the ESOP of approximately
$16 million per year, which in turn was used by the ESOP to repay
the loan to the Company. The loan, including interest of
approximately $22.3 million, was repaid in its entirety effective
December 31, 1993.
In March, 1994, the ESOP purchased an additional 316,189
Common Shares from the Company. In June, 1994, the ESOP
purchased an additional 996,270 shares from the Company. All
shares of Common Stock acquired by the ESOP in 1994 were
allocated to ESOP participants during 1994. In March, 1995, the
ESOP purchased 1,208,059 additional shares from the Company,
which are expected to be allocated to participants' accounts in
1995 and 1996.
The Company plans to continue the ESOP as the Company's
principal retirement benefit; however, aggregate contributions
under the ESOP when added to the SARP Company match are not
intended to exceed the total amount of past ESOP contributions
expressed as a percentage of compensation. Consequently, the
overall combined ESOP contribution plus the amount of all annual
Company matches is not expected to exceed on the average 3% of
compensation -- approximately 1% representing the Company match
under the SARP and approximately 2% under the ESOP. However,
these percentages may vary depending on the nature of the
Company's business and overall compensation and benefit policies.
Trustees and Administration
The ESOP is administered by the ESOP Committee, consisting
of J. P. Schelling, a former employee of the Company, and L. E.
Emmerichs and J. G. Bonnevier, employees of the Company. Their
address is 2000 Edmund Halley Drive, Reston, VA 22091. The
members of the ESOP Committee also serve as trustees of the ESOP.
Eligibility and Participation
Generally, all employees, except groups or units designated
as ineligible, participate in the ESOP. As of December 31, 1994,
there were approximately 33,000 participants in the ESOP,
including terminated, vested participants.
Contributions, Allocations, and Forfeitures
For the Plan Year ended December 31, 1994, the Company
contributed approximately $17,100,000 to the ESOP. The amount of
the Company's annual contribution to participants' accounts in
the ESOP is determined by, and within the discretion of, the
Board of Directors, subject to certain limitations. See "General
Provisions of the ESOP and SARP." Participants may not make
voluntary contributions to the ESOP. The Company's current
practice has been to make pro-rata contributions quarterly.
Company contributions to the ESOP for each Plan Year are
generally allocated to the accounts of participants in the ratio
which each such participant's eligible compensation bears to the
total eligible compensation of all such participants.
Forfeitures, if any, of the non-vested portion of terminated
participants' accounts are allocated to the accounts of remaining
participants who are entitled to receive an allocation of the
Company contribution. Forfeitures are allocated in the ratio
which each such remaining participant's allocation bears to the
total allocation of all such remaining participants.
Investment of Funds
Although it is generally intended that the assets of the
ESOP will be held in a Company stock fund consisting primarily of
the Company's Common Stock, the ESOP may hold cash pending
purchase of Company Stock and current cash needs. The exact
number of shares of Common Stock, if any, which may be purchased
by the Trustee of the ESOP in the future will depend on various
factors, including any modifications to the ESOP adopted either
in response to changes or modifications in the laws and
regulations governing the ESOP or at the discretion of the
Company's management. Participants who have attained the age of 55
and have ten or more years of participation are entitled,
pursuant to the terms of the ESOP and ESOP Committee procedures,
to receive distributions of a percentage of their balances in
the ESOP. It is the current policy of the ESOP Committee to keep
all amounts related to the Company's Stock Fund invested in
Common Stock, except for estimated cash reserves which are
primarily used to provide future benefit distributions, future
investment exchanges and other cash needs as determined by the
ESOP Committee. If residual cash reserves in the ESOP are
insufficient to provide cash benefit distributions and/or
investment exchanges and the "put option " described below is not
applicable, the ESOP Committee intends to offer the shares for
sale in the Internal Market. Accordingly, investment exchanges
of participant's investments held in the ESOP may be restricted.
See "Market Information -- The Internal Market."
Vesting
The ESOP vesting schedule currently provides that a
participant's interest vests 50% after two years of service, 75%
after 3 years of service, and 100% after 4 years of service, so
that each participant's interest becomes fully vested after the
participant is credited with four years of service. A
participant's interest also becomes fully vested, notwithstanding
the fact that the participant has not yet been credited with four
years of service, at the time of such participant's attainment of
the age of 65, permanent disability, or death while employed by
the Company.
Distributions and Withdrawals
If a participant's employment with the Company terminates on
or after the date on which the participant attains the age of 65,
the participant is entitled to receive a distribution of his or
her entire interest in his or her ESOP account in accordance with
the following schedule: 20% per year commencing after the year
following such termination. In the event a participant dies
while employed by the Company, the Trustee will make a
distribution of the participant's interests in his or her ESOP
account to the participant's spouse or, if such spouse has given
proper consent or if the participant has no spouse, to the
beneficiary designated by the participant. In the event the ESOP
Committee determines that the participant has suffered a
permanent disability while employed by the Company, the ESOP
Committee may direct the Trustee to make a distribution of the
participant's interest in his or her ESOP account to the disabled
participant. Distribution may be made in cash and/or shares of
Common Stock at the direction of the Trustee and ESOP Committee
in accordance with the Plan.
If a participant's employment with the Company terminates,
other than by reason of permanent disability or death, prior to
the date on which the participant attains the age of 65, the
participant's vested interest in his or her Employee Stock
Ownership Plan account generally will be paid as follows. If the
participant's vested interest in his or her account is less than
100 shares, benefits are distributed as soon as practicable after
termination of employment. If his or her vested interest in the
account is 100 shares or more, the participant will receive a
distribution of his or her account commencing after his or her
fifth consecutive 12-month break in service occurs, in five
annual installments.
In the event that shares of Common Stock, at the time they
are distributed out of the ESOP, are not "Readily Tradable Stock"
(as that term is defined under Treasury Regulation Section
54.4975-7(b)(1)(iv)) or are subject to a "Trading Limitation" (as
that term is defined under Treasury Regulation Section
54.4975-7(b)(10)), then they will be subject to a "put option"
which gives the holder of such shares the right to require the
Company to purchase all or a portion of such shares at their fair
value during two limited time periods. The first of these
periods is the 60-day period following the date on which the
shares are distributed out of the ESOP and the second of these
periods is the 60-day period following notification by the
Company of the valuation of the Common Stock as soon as
practicable after the beginning of the Plan Year commencing after
such distribution. Such shares will also be subject to a right
of first refusal by the Company. See "Description of Capital
Stock -- Restrictions on Common Stock."
Under the terms of the Subscription Agreement between the
ESOP and the Company as amended, the Company is obligated through
December 31,1996, to pay under the aforementioned put option the
higher of the fair value determined by the ESOP's independent
financial advisor or $27.00 per share, provided that the
Company's obligation to pay at the level of $27.00 per share is
subject to a limitation that the difference between such fair
value and $27.00 shall in no event exceed $16 million in the
aggregate. As of February 1, 1995, the Company has paid a total
of $4.1 million of the $16 million to retiring or terminating
participants.
After December 31, 1996, or at any earlier time that the $16
million limitation is reached, any purchases by the Company at
times when shares distributed from the ESOP are not Readily
Tradable Stock, the Company will honor its put obligation by
paying for each such share the fair value required to be paid
pursuant to the ESOP plan document. As of December 31, 1994,
this price was determined to be $18.20 per share for shares
allocated in the years 1988 through 1993 and $14.60 for shares
allocated in 1994.
Because the Internal Market does not currently satisfy the
conditions necessary to permit the shares to be classified as
Readily Tradable Stock, the shares will continue to be subject to
the put option and will not be traded in the Internal Market,
unless a distributee has declined to exercise his put right. In
those instances in which Common Stock is distributed to
participants in lieu of cash, participants cannot be assured that
they will be able to sell their shares in any one quarterly Trade
Date or over any specific period of time or at the Formula Price
at the time of such sale. Accordingly, a participant's ability
to sell shares of Common Stock distributed out of the ESOP could
be adversely affected by any lack of liquidity in the Internal
Market. See "Market Information -- The Internal Market."
Participants are not permitted to make withdrawals under the
ESOP prior to termination of employment. In the absence of a
qualified domestic relations order to the contrary, a
participant's interest in the ESOP may not be voluntarily or
involuntarily assigned or hypothecated. Any permitted designee
will be subject to the same rules and limitations applicable to
the participant.
General Provisions of the ESOP and SARP
The ESOP and SARP (collectively, the "Plans") each contain
the following provisions:
Contribution Limitations
The maximum contribution for any Plan Year which the Company
may make to all Plans for the benefit of a participant (including
contributions to the SARP as a result of salary deferral
elections by participants), plus forfeitures, may not exceed the
lesser of (i) $30,000 or (ii) 25% of the participant's
compensation.
Administration
The Plans are administered, respectively, by the SARP
Administrative Committee and the ESOP Committee, whose members
are appointed by and serve at the discretion of the Company's
Board of Directors. The members of the Committees receive no
compensation from the Plans for services rendered in connection
herewith.
The Committees have the power to supervise administration
and control of each Plan's operations including the power and
authority to (i) allocate fiduciary responsibilities, other than
trustee responsibilities, among the Named Fiduciaries, (ii)
designate agents to carry out responsibilities relating to the
Plan, other than fiduciary responsibilities, (iii) employ legal,
actuarial, medical, accounting, programming and other assistance
as the ESOP Committee may deem appropriate in carrying out the
Plan, (iv) establish rules and regulations for the conduct of the
ESOP Committee's business and the administration of the Plan, (v)
administer, interpret, construe and apply the Plan and determine
questions relating to the eligibility, the amount of any
participant's service and the amount of benefits to which any
participant or beneficiary is entitled, (vi) determine the manner
in which Plan assets are disbursed and (vii) direct the Trustee
regarding investment of Plan assets, subject to the directions of
participants when provided in the Plans.
Pass Through Voting and Tendering of Common Stock
Each participant in the Plans has the right to instruct the
Trustee on a confidential basis as to how to vote his or her
proportionate interest in all shares of Common Stock held in the
various Plans. The Trustee will vote all allocated shares held
in the Plans, together with all unallocated shares held in the
ESOP, as to which no voting instructions are received in the same
proportion as the allocated shares in each Plan for which voting
instructions have been received are voted. The Committees are
required to notify participants of their pass through voting
rights prior to each meeting of stockholders.
In the event of a tender or exchange offer for the Company's
securities, each participant in the Plans has the right, under
current Plan procedures, to instruct the Trustee on a
confidential basis whether or not to tender or exchange his or
her proportionate interest in all shares of Common Stock held in
the various Plans. The Trustee will not tender or exchange any
allocated shares with respect to which no instructions are
received from participants. Shares held in the Plans which have
not yet been allocated to the accounts of participants will be
tendered or exchanged by the Trustee, on a Plan-by-Plan basis, in
the same proportion as the allocated shares held in each Plan are
tendered or exchanged.
The Trustee's duties with respect to voting and tendering of
Common Stock are governed by the fiduciary provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"). These
fiduciary provisions of ERISA may require, in certain limited
circumstances, that the Trustee override the votes, or decisions
whether or not to tender, of participants with respect to Common
Stock and to determine, in the Trustee's best judgment, how to
vote the shares or whether or not to tender the shares.
Trustee
Generally, the Trustee has all the rights afforded a trustee
under applicable law, although the Trustee generally may exercise
those rights at the direction of the Committee. Subject to this
limitation and those set forth in the Plans and master trust
agreement, the Trustee's rights include, but are not limited to,
the right to (i) invest and reinvest the funds held in the Plans'
trust in any investment of any kind, including qualifying
employer securities and qualifying employer real property as such
investments are defined in Section 407(d) of ERISA, and contracts
issued by insurance companies, including contracts under which
the insurance company holds Plan assets in a separate account or
commingles separate accounts managed by the insurance company,
(ii) retain or sell the securities and other property held in the
Plans' trust, (iii) consent or participate in any reorganization
or merger in regard to any corporation whose securities are held
in the Plans' trust (subject, in the case of the Company's
securities, to the participants pass-through voting rights and
right to instruct the Trustee in the event of a tender or
exchange offer) and to pay calls or assessments imposed on the
holder thereof and to consent to any contract, lease, mortgage or
purchase or sale of any property between such corporation and any
other parties, (iv) exercise all the rights of the holder of any
security held in the Plans' trust, including the right to vote
such securities (subject, in the case of the Company's
securities, to the participants' pass-through voting rights),
convert such securities into other securities, acquire additional
securities and exchange such securities, (v) vote proxies and
exercise any other similar rights of ownership, subject to the
Committee's right to instruct the Trustee as to how (or the
method of determining how) the proxies should be voted or such
rights should be exercised and (vi) lend to participants in the
Plans such amounts as the Committee directs.
The Trustee's compensation and all other expenses incurred
in the establishment, administration and operation of the Plans
are borne by the respective Plans unless the Company elects to
pay such expenses.
Administrative and Custodial Services
The Company has entered into an administrative services
agreement with Merrill Lynch, pursuant to which Merrill Lynch
performs specified administrative services for the SARP,
principally related to accounting and recordkeeping. Merrill
Lynch's fees for these administrative services are borne by the
SARP. Effective on or about August 1, 1995, the administrative
responsibility of Merrill Lynch will be assumed by Buck
Consultants, Inc.
Account Statements
Each participant is furnished with a statement of his or her
accounts in the respective Plans, no less than annually.
Amendment and Termination
The Company has reserved the right to amend each of the
Plans at any time and for any reason, except that no such
amendment may have the effect of (i) generally causing any assets
of the Plan trusts to be used for or diverted to any purposes
other than providing benefits to participants and their
beneficiaries and defraying expenses of the Plans, except as
permitted by applicable law, (ii) depriving any participant or
beneficiary, on a retroactive basis, of any benefit to which they
would otherwise be entitled had the participant's employment with
the Company terminated immediately prior to the amendment or
(iii) increasing the liabilities or responsibilities of a Trustee
or an investment manager without its written consent.
The Company has also retained the right to terminate any of
the Plans at any time and for any reason. In addition, the
Company may discontinue contributions to the Plans; provided,
however, that any such discontinuation of contributions shall not
automatically terminate the Plans as to funds and assets then
held by the Trustee.
ERISA
Each of the Plans is subject to ERISA, including reporting
and disclosure obligations, fiduciary standards, and the
prohibited transaction rules of Title I thereof. Since each
of the Plans is an individual account plan under ERISA, neither
of the Plans is subject to the jurisdiction of the Pension
Benefit Guaranty Corporation ("PBGC") under Title IV of ERISA and
the Plans' benefits are not guaranteed by the PBGC.
Federal Income Tax Consequences
Each of the Plans is qualified under Section 401(a) of the
Code. Qualification of the Plans under Section 401(a) of the
Code has the following federal income tax consequences:
(a) A participant will not be subject to federal income tax
on Company contributions to the Plans at the time such
contributions are made.
(b) A participant will not be subject to federal income tax
on any income or appreciation with respect to such participant's
accounts under the Plans until distributions are made (or deemed
to be made) to such participant.
(c) A participant and the Company will not be subject to
federal employment taxes on Company contributions to the Plans,
except as set forth below with respect to certain Company
contributions to the SARP.
(d) The Plans will not be subject to federal income tax on
the contributions to them by the Company and will not be subject
to federal income tax on any of their income or realized gains,
assuming that the Plans do not realize any unrelated business
taxable income.
(e) Eligibility for participation in the Plans will
preclude or restrict an employee from making deductible
contributions to an Individual Retirement Account ("IRA"),
depending on the employee's marital status and adjusted gross
income ("AGI") for the year. If an employee or his or her spouse
is covered by an employer-maintained retirement plan (such as any
of the Plans), an IRA deduction is available only if the
participant's AGI does not exceed a phase-out level. For married
couples, the phase-out of the IRA deduction begins at $40,000 of
AGI and there is no deduction if the participant's AGI exceeds
$50,000. The phase-out for single employees is $25,000/$35,000
of AGI. For AGI in the phase-out range, the IRA deduction limit
is reduced by the ratio of AGI in excess of $40,000 or $25,000,
whichever is applicable, to $10,000. AGI is determined before
any IRA deduction, but after any elective deferrals to the SARP.
To the extent that the IRA deduction is limited under these
provisions, a non-deductible IRA contribution is permitted (in an
amount equivalent to the reduction in the deductible IRA amount).
(f) Subject to the contribution limitations contained in
the Plans, the Company will be able to deduct the amounts that it
contributes under the Plans, with the amount of such deduction
generally equaling the amount of the contributions.
(g) Distributions from the Plans will be subject to federal
income tax under special, complex rules that apply generally to
distributions from tax-qualified retirement plans. In general, a
single distribution from any of the Plans will be taxable in the
year of receipt at regular ordinary income rates (on the full
amount of the distribution, exclusive of the amount of the
participant's voluntary, non-deductible contributions made to
those Plans which previously permitted such contributions) unless
the distributee is eligible for and elects (i) to make a
qualifying "rollover" of the amount distributed to an IRA or
another qualified plan or (ii) to utilize 10-year averaging,
5-year averaging or partial capital gains taxation of the
distribution. However, the tax on any portion of the qualifying
lump sum distribution represented by "net unrealized
appreciation" in Common Stock distributed shall be deferred until
a subsequent sale or taxable disposition of the shares, unless
the distributee elects not to have this deferral apply.
A "lump sum distribution," for purposes of eligibility for
deferral of tax on net unrealized appreciation, is defined as a
distribution of the employee's entire vested interest under the
Plan within one taxable year (i) on account of the participant's
death or other separation from service or (ii) after participant
has attained age 59. For a lump sum distribution to be eligible
for 5-year averaging, the participant also must have been a
participant in the Plan from which the distribution is made for
at least five years prior to the year of distribution and must
have attained age 59 when the distribution is received. Under a
special transition rule, an individual who had attained age 50 on
January 1, 1986, and who would otherwise be entitled to elect
5-year averaging (without regard to the age 59 requirement) may
instead make a one-time election of 10-year averaging (at 1986)
rates and may elect to have the pre-1974 portion of the
distribution taxed at 1986 capital gains rates. The special
5-year or 10-year averaging treatment, as well as partial capital
gains treatment, of lump sum distributions is applicable to a
lump sum distribution from a Plan only if all other lump sum
distributions (whether or not from the same Plan or Plans of a
similar type) received during the same taxable year by the
participant are treated in the same manner. Hence, for example,
if a participant receives a lump sum distribution from the SARP
and ESOP in the same taxable year, he or she could not elect to
use 5-year or 10-year averaging on the SARP distributions while
electing a rollover to an IRA of the distribution from the ESOP.
"Early" distributions from the Plans will result in an
additional 10% tax on the taxable portion of the distribution,
except to the extent the distribution (i) is rolled over into an
IRA or other qualified plan or (ii) is used for deductible
medical expenses. "Early" distributions are in-service
distributions (i.e., prior to termination of employment) prior to
the date the participant attains age 59 unless due to the
permanent disability of the participant, and distributions made
following termination of service unless due to the death of the
participant or made to a participant who terminated employment
during or after the calendar year the participant attained the
age of 55.
(h) A participant (or his or her spouse in the event of the
participant's death) who (i) receives a distribution from the
Plans (other than certain mandatory distributions after age 70)
and (ii) wishes to defer immediate tax upon receipt of such
distributions, may transfer (i.e., "rollover") all or a portion
thereof, exclusive of the amount of the participant's voluntary
nondeductible contributions (made to those Plans which previously
permitted the participant to make voluntary nondeductible
contributions) received in the distribution, to either an IRA or,
in the case of a participant, another qualified retirement plan.
To be effective, the "rollover" must be completed within 60 days
of receipt of the distribution. Alternatively, the participant
or spouse may request a direct rollover from the Plans to an IRA
or, in the case of a participant, to another qualified retirement
plan.
A participant (or his or her spouse) who does not arrange a
direct rollover to an IRA or another qualified plan will be
subject to mandatory federal income tax withholding at a rate of
20% of the taxable distribution, even if the participant or
spouse later makes a rollover within the 60-day period.
A participant (or his or her spouse) who makes a valid
"rollover" to an IRA will defer payment of federal income tax
until such time as such participant (or his or her spouse)
actually begins to receive distributions from the IRA. IRA
earnings accumulate on a tax-deferred basis until actually
distributed; however, IRA funds may not be withdrawn without
penalty until a participant (or his or her spouse) (i) attains
the age of 59, (ii) becomes disabled or (iii) dies. The Code
requires that distributions from an IRA or a qualified retirement
plan begin no later than April 1 of the taxable year following
the year in which an individual attains the age of 70, at which
time periodic distributions may continue for the participant's
lifetime or for a lifetime of the participant and the
participant's spouse.
(i) The Code imposes a 15% excise tax on "excess
distributions" to an individual from all qualified retirement
plans and IRAs (whether or not plans of the same employer). In
general, an "excess distribution" is a distribution or
distributions in excess of $112,500 in any calendar year
(adjusted for cost-of-living increases). This limit is increased
to $562,500 (also adjusted for cost-of-living) in the case of a
lump sum distribution as to which a qualified recipient elects
5-year or 10-year averaging treatment. Also, an individual was
entitled to elect on his or her 1988 federal income tax return to
exclude benefits accrued as of August 1, 1996, but these benefits
are considered in determining whether additional accrued benefits
are subject to the tax. For those individuals who did not elect
this special rule, the $112,500/$562,500 limit is increased to
$150,000/$750,000.
In addition to the federal income tax consequences
applicable to all of the Plans, the Deferred Fund of the SARP is
intended to be a qualified "cash or deferred arrangement" under
Section 401(k) of the Code. A participant in the SARP who elects
to defer a portion of his or her compensation and have the
Company contribute it to the SARP will not be subject to federal
income tax on the amounts contributed at the time the
contributions are made. However, these contributions will be
subject to social security taxes and certain federal unemployment
taxes. Elective deferrals by a participant to his or her SARP
account is limited to $7,000 annually (adjusted for
cost-of-living). This annual limit applies on an
employee-by-employee basis to all 401(k) plans (including plans
of other employers) in which the employee participates. For
calendar year 1995, the adjusted limit is $9,240.
Generally, the Company will be able to deduct the amounts
that it contributes to the SARP pursuant to employee elections to
defer a portion of their compensation, as well as any matching or
additional Company contributions it makes to the Deferred Fund.
The deduction will be equal to the amount of contributions made.
With respect to loans from the SARP commencing after
December 31, 1986, any interest paid by the participant will not
be deductible, regardless of the purpose of the loan or use of
the loan proceeds. Moreover, interest paid on any loan from any
of the Plans by a "key employee," as defined in Section 416(i) of
the Code, will not be deductible.
The foregoing discussion is intended only as a summary of
certain relevant federal income tax consequences and does not
purport to be a complete discussion of all of the tax
consequences of participation in the Plans. Accordingly,
participants should consult their own tax advisors with respect
to all federal, state and local tax effects of participation in
the Plans. Moreover, the Company does not represent that the
foregoing tax consequences will apply to any particular
participant's specific circumstances or will continue to apply in
the future and makes no undertaking to maintain the tax-qualified
status of the Plans.
1995 Employee Stock Purchase Plan
General
The 1995 Employee Stock Purchase Plan (the "Stock Purchase
Plan" or "ESPP") was adopted on May 10, 1995, to become effective
July 1, 1995. The Stock Purchase Plan is intended to qualify
under Section 423(b) of the Code. The Stock Purchase Plan
provides for the purchase of Common Stock by participating
employees through voluntary payroll deductions. At each Trade
Date, the Stock Purchase Plan will purchase for the account of
each participant that whole number of shares of Common Stock
which may be acquired from the funds available in the
participant's stock purchase account, together with the Company's
contribution described below. The Stock Purchase Plan is not
subject to ERISA.
Eligibility
Generally, all of the Company's employees are eligible to
participate in the Stock Purchase Plan. No employee, however,
who owns capital stock of the Company having more than five
percent of the voting power or value of such capital stock will
be able to participate. An employee's eligibility to participate
in the Stock Purchase Plan will terminate immediately upon
termination of employment with the Company.
Employees may participate in the Stock Purchase Plan by
completing a payroll deduction authorization in accordance with
Company policy. The minimum payroll deduction allowed is $7.00
per week and the maximum allowable deduction is $450 per week.
Further, no employee is entitled to purchase an amount of Common
Stock having a fair market value (measured as of its purchase
date) in excess of $25,000 in any calendar year pursuant to the
Stock Purchase Plan and any other employee stock purchase plan
that may be adopted by the Company.
Purchase of Shares/Discount
Shares of Common Stock purchased under the Stock Purchase
Plan will be acquired by the ESPP in the Internal Market. See
"Market Information -- The Internal Market." Contributions by
participants under the Stock Purchase Plan will be used by the
ESPP to purchase shares at a discount established from time to
time by the Compensation Committee, but not to exceed 15% of the
prevailing Formula Price. The Company will either pay the
discount portion to the ESPP in cash, or will deliver to the ESPP
a sufficient number of shares having a value equal on the
applicable Trade Date to the aggregate amount of the discount.
The Board of Directors has established the discount rate at 5%.
A total of 100,000 shares has been reserved for possible issuance
under the Plan in satisfaction of this contribution obligation.
Distribution and Withdrawals
Shares of Common Stock acquired under the Stock Purchase
Plan will be allocated to each participant's account immediately
following each quarterly Trade Date in which the acquisition
occurred.
Pursuant to the By-Laws, all shares of Common Stock
purchased pursuant to the Stock Purchase Plan will be subject to
the Company's right of first refusal in the event that the
participant desires to sell such shares other than in the
Internal Market. See "Description of Capital Stock --
Restrictions on Common Stock."
Participants may withdraw the money held in their stock
purchase accounts at any time prior to the acquisition of shares
of Common Stock therewith, although upon doing so the participant
will not be eligible to participate in the Stock Purchase Plan
until 12 months after such withdrawal. No interest will be paid
on the money held in the stock purchase accounts of the
participants.
Amendment and Termination
The Board of Directors of the Company may suspend or amend
the Stock Purchase Plan in any respect, except that no amendment
may (i) increase the maximum number of shares authorized to be
issued by the Company under the Plan, (ii) increase the Company's
contribution for each share purchased above 15% of the applicable
purchase price for such share, (iii) cause the Stock Purchase
Plan to fail to qualify under Section 423(b) of the Code or (iv)
deny to participating employees the right at any time to withdraw
from the Stock Purchase Plan and thereupon obtain all amounts
then due to their credit in their Stock Purchase Accounts. The
Stock Purchase Plan will terminate on December 31, 1999, unless
extended by the Board of Directors.
Administration
The Stock Purchase Plan is administered by the Compensation
Committee. Members of the Compensation Committee receive no
compensation from the Stock Purchase Plan for services rendered
in connection therewith. The current members of the Compensation
Committee are H. S. Winokur, Jr., R. E. Dougherty, and M. T.
Masin. The address of each such person is DynCorp, 2000 Edmund
Halley Drive, Reston, Virginia 22091-3436.
Federal Income Tax Consequences
For federal income tax purposes, no taxable income will be
recognized by a participant in the Stock Purchase Plan until the
taxable year of sale or other disposition of the shares of Common
Stock acquired under the Plan. However, there is some authority
to the effect that FICA and federal and state unemployment
insurance withholding may be required with respect to the
discount portion only. When the shares are disposed of by a
participant two years or more from the date such shares were
purchased for the participant's account by the ESPP, the
participant must recognize ordinary income for the taxable year
of disposition to the extent of the lesser of (i) excess of the
fair market value of the shares on the purchase date over the
amount of the purchase price paid by the participant (the
"Discount") or (ii) the amount by which the fair market value of
the shares at disposition or death exceeds the purchase price,
with any gain in excess of such ordinary income amount being
treated as a long term capital gain, assuming that the shares are
a capital asset in the hands of the participant. In the event of
a participant's death while owning shares acquired under the
Stock Purchase Plan, ordinary income must be recognized in the
year of death in the amount specified in the foregoing sentence.
When the shares are disposed of prior to the expiration of the
two-year holding period (a "disqualifying disposition"), the
participant must recognize ordinary income in the amount of the
Discount, even if the disposition is by gift or is at a loss.
In the case discussed above (other than death), the amount
of ordinary income recognized by a participant is added to the
purchase price paid by the participant and this amount becomes
the tax basis for determining the amount of the capital gain or
loss for the disposition of the shares.
Net capital gains are currently taxed at a maximum federal
income tax rate of 28%, compared to a maximum rate of 39.6% for
ordinary income. However, limitations on itemized deductions and
the phase out of personal exemptions may result in effective
marginal tax rates higher than 28% for net capital gains and
39.6% for ordinary income.
The Company will not be entitled to a deduction at any time
for the shares issued in satisfaction of the discount obligation,
if a participant holding such shares continues to hold his or her
shares or disposes of his or her shares after the required
two-year holding period or dies while holding such shares. If,
however, a participant disposes of such shares representing the
discount portion prior to the expiration of the two-year holding
period, the Company is allowed a deduction to the extent of the
amount of ordinary income includable in gross income by such
participant for the taxable year as a result of the premature
disposition of the shares.
The foregoing discussion is intended only as a summary of
certain relevant federal income tax consequences and does not
purport to be a complete discussion of all of the tax
consequences of participation in the Stock Purchase Plan.
Accordingly, participants should consult their own tax advisors
with respect to all federal, state and local tax effects of
participation in the Stock Purchase Plan. Moreover, the Company
does not represent that the foregoing tax consequences will apply
to any participant's specific circumstances or will continue to
apply in the future and makes no undertaking to maintain the
tax-qualified status of the Stock Purchase Plan.
1995 Stock Option Plan
General
The 1995 Stock Option Plan ("1995 Option Plan") was approved
by the Company's Board of Directors on February 10, 1995, to
become effective July 1, 1995. The 1995 Option Plan authorizes
the granting of non-qualified stock options with respect to an
aggregate of 1,250,000 shares of Common Stock, during the period
July 1, 1995 through December 31, 1999. The Plan will terminate
and all unexercised options will expire on December 31, 2007.
The exercise price of options granted under the 1995 Option
Plan is determined by the Compensation Committee and may not be
less than 100% of the most recent Formula Price of the Common
Stock on the date of grant. Upon the exercise of an option, the
exercise price is fully payable, in whole or in part, in cash or
in shares of Common Stock valued at the Formula Price on the date
of exercise. Any withholding required as a result of the
exercise of a non-qualified option may, at the discretion of the
Compensation Committee, be satisfied by withholding in shares of
Common Stock of the Company valued at the Formula Price on the
date of exercise. All options granted pursuant to the 1995
Option Plan are non-transferable except by will or the laws of
intestate succession.
Options granted under the 1995 Option Plan may be exercised
over a period specified in the stock option agreement (which
period may not exceed seven years), subject to Plan vesting
provisions described below. If an optionee's employment
terminates as a result of death, permanent disability, or
retirement before reaching age 65, all options may be exercised,
to the extent vested at the date of termination, during the six
month period following termination, but in no event after their
respective expiration dates. If an optionee retires at or after
age 65, all options, to the extent vested at the date of
retirement, may, for up to one additional year (but in no event
later than their respective expiration dates), be exercised by
the optionee or by his legal representative or permitted
assignee. Upon termination of employment for any other reason,
all options (whether or not vested) will terminate as of the date
of such termination of employment, unless otherwise authorized by
the Compensation Committee (but in no event shall the option be
exercisable for a period extending beyond 90 days following such
termination).
Eligibility and Participation
The persons eligible to receive options under the 1995
Option Plan are key employees and directors. No option may be
granted to any individual who, at the time the option is granted,
owns more than 10% of the total combined voting power of all
classes of capital stock of the Company.
Vesting of Options
The right to exercise options granted under the 1995 Option
Plan shall vest at the rate of 20% per year during the five year
period following the date of the grant. Options that are
forfeited due to termination of employment or expiration shall be
available for new grants under the Plan. All options shall
expire seven years after the date of grant unless earlier
exercised upon vesting. No grant of options will be made under
the 1995 Option Plan that permits exercise after more than seven
years from the date of the grant.
In the event of a change of control involving the Company,
all optionees will be guaranteed either the continuation of a
comparable stock option plan with comparable rights (including
identical rights with respect to options granted prior to such
change of control), or the right within a reasonable period of
time following such change of control, not to exceed one year, to
exercise all granted options under the 1995 Option Plan, whether
or not vested.
Amendment and Termination
The 1995 Option Plan may be amended, suspended or terminated
by the Board of Directors, except that no such amendment may,
without the approval of the holders of outstanding shares of the
Company having a majority of the general voting power, (i)
increase the maximum number of shares for which options may be
granted (other than by reason of changes in capitalization and
similar adjustments), (ii) change the provisions of the 1995
Option Plan relating to the establishment of the exercise price
(other than the provisions relating to the manner of
determination of fair market value of the Company's capital stock
to conform to any applicable requirements of the Code or
regulations issued thereunder), or (iii) permit the granting of
options to members of the Compensation Committee. No options
will be granted under the 1995 Option Plan after December 31,
1999.
General Provisions
All shares issued upon exercise of options granted under the
1995 Option Plan are subject to (i) the Company's right of first
refusal in the event that the optionee desires to sell his or her
shares other than in the Internal Market and (ii) the Company's
right of repurchase upon termination of the optionee's employment
or affiliation. See "Description of Capital Stock --Restrictions
on Common Stock." Only shares of Common Stock will be issued
upon exercise of options. See "Description of Capital Stock --
Common Stock."
Grants of stock options may be contingent upon a requirement
that such individuals purchase a specified number of shares of
Common Stock in the Internal Market at the prevailing Formula
Price. The Committee may also establish other terms relating to
vesting and exercise, such as a target Formula Price.
If the outstanding shares of the Common Stock of the Company
are changed into, or exchanged for a different number or kind of
shares or securities of the Company through reorganization,
merger, recapitalization, reclassification, or similar
transaction, or if the number of outstanding shares is changed
through a stock split, stock dividend, stock consolidation, or
similar transaction, an appropriate adjustment (determined by the
Board of Directors in its sole discretion) will be made in the
number and kind of shares and the exercise price per share of
options which are outstanding or which may be granted thereafter.
Administration
The 1995 Option Plan is administered by the Compensation
Committee. The Compensation Committee is appointed annually by
the Board of Directors, which may also fill vacancies or replace
members of the Compensation Committee. Subject to the express
provisions of the 1995 Option Plan, the Compensation Committee
has the authority to (i) interpret the 1995 Option Plan, (ii)
prescribe, amend and rescind rules and regulations relating to
the Option Plans, (iii) determine the individuals to whom and the
time or times at which options may be granted and the number of
shares to be subject to each option granted under the 1995 Option
Plan, (iv) determine the terms and conditions of the option
agreements under the 1995 Option Plan (which need not be
identical), and (v) make all other determinations necessary or
advisable for the administration of the 1995 Option Plan. In
addition, the Compensation Committee may, with the consent of the
affected optionees and subject to the general limitations of the
1995 Option Plan, make any adjustment in the exercise price, the
number of shares subject to, or the term of, any outstanding
option by cancellation of such option and a subsequent regranting
of such option, or by amendment or substitution of such option.
Options which have been so amended, regranted or substituted may
have higher or lower exercise prices, cover a greater or lesser
number of shares of capital stock, or have longer or shorter
terms, than the prior options. The members of the Compensation
Committee receive no compensation from the 1995 Option Plan for
services rendered in connection therewith.
Federal Income Tax Consequences
All options granted under the 1995 Option Plan are
non-qualified options. Generally, the optionee will not be taxed
upon grant of any non-qualified option but rather, at the time of
exercise of such option, the optionee will recognize ordinary
income for federal income tax purposes in an amount equal to the
excess of the fair market value at the time of exercise of the
capital stock purchased over the exercise price. The Company
will generally be entitled to a tax deduction at such time and in
the same amount that the optionee realizes ordinary income.
If capital stock acquired upon the exercise of a
non-qualified option is later sold or exchanged, then the
difference between the sale price and the fair market value of
such capital stock on the date which governs the determination or
ordinary income is generally taxable (provided the stock is a
capital asset in the holder's hands) as long term or short-term
capital gain or loss depending upon whether the holding period
for such capital stock at the time of disposition is more or less
than one year.
Exercise with Shares of Capital Stock
If payment of the exercise price of a non-qualified option
is made by surrendering previously owned shares of capital stock,
the following rules apply:
(a) No gain or loss will be recognized as a result of the
surrender of shares in exchange for an equal number of shares
subject to the non-qualified option;
(b) The number of shares received equal to the shares
surrendered will have a basis equal to the shares surrendered and
a holding period that includes the holding period of the shares
surrendered;
(c) Any additional shares received (i) will be taxed as
ordinary income in an amount equal to the fair market value of
the shares at the time of exercise, (ii) will have a basis equal
to the amount included in taxable income by the optionee, and
(iii) will have a holding period that begins on the date of the
exercise.
The foregoing discussion is intended only as a summary of
certain federal income tax consequences and does not purport to
be a complete discussion of all of the tax consequences of
participation in the 1995 Option Plan. Accordingly, holders of
options granted under the Option Plan should consult their own
tax advisors for specific advice with respect to all federal,
state or local tax effects before exercising any options and
before disposing of any shares of capital stock acquired upon the
exercise of an option. Moreover, the Company does not represent
that the foregoing tax consequences apply to any particular
option holder's specific circumstances or will continue to apply
in the future.
Executive Incentive Plan
General
The Company's current Executive Incentive Plan (the "EIP")
became effective in 1993. The Plan provides for the annual award
of discretionary bonuses based on the achievement of specific
financial and individual performance goals. The EIP will be
amended effective January 1, 1996, to provide for the payment
of up to 20% of each award in the form of shares of Common Stock,
based on the most recent Formula Price. 300,000 shares have been
reserved for possible issuance under these plans for calendar
years 1996 through 2000. The EIP is not subject to ERISA and is
not intended to be qualified under Section 401(a) of the Code.
Eligibility and Participation
The officers and approximately 70 of the key managerial
employees of the Company designated by the Compensation Committee
of the Board are eligible to participate in and receive bonuses
under the EIP.
Awards
Each year the Company establishes bonus pools representing
the aggregate targeted bonuses negotiated in advance with Plan
participants. Awards under the EIP are generally made based upon
the achievement of certain individual and financial performance
criteria. Awards under the EIP are made based on recommendations
of the CEO to the Compensation Committee. Awards of bonuses
under the EIP are generally distributed after the end of the
fiscal year to which the bonus relates. Pursuant to the By-Laws,
all shares of Common Stock awarded under the EIP will be subject
to the Company's right of first refusal and the Company's right
of repurchase upon termination of employment or affiliation. See
"Description of Capital Stock -- Restrictions on Common Stock."
Awards of bonuses, including potential shares of Common Stock may
also be subject to forfeiture, in whole or in part, in the event
of the termination of the recipient's employment or affiliation
with the Company prior to the date for payment of awards.
Pursuant to the EIP, bonuses to the Chief Executive Officer
must be approved by the Compensation Committee. Members of the Compensation
Committee are ineligible to receive awards under the EIP. For
services rendered during the fiscal year ended December 31, 1994,
a total of 56 individuals received an aggregate of approximately
$2.1 million in cash bonuses under the EIP. No shares of common
stock were issued.
Federal Income Tax Consequences
Awards under the EIP of cash bonuses and shares of Common
Stock that are not subject to forfeiture are taxable as ordinary
income to the recipient in the year received.
The foregoing discussion is intended only as a summary of
certain federal income tax consequences and does not purport to
be a complete discussion of all of the tax consequences of
participation in the Plans. Accordingly, recipients of awards
under the Plans should consult their own tax advisors with
respect to all federal, state, and local tax effects of
participation in the Plans. Moreover, the Company does not
represent that the foregoing tax consequences will apply to any
particular participant's specific circumstances.
Amendment and Termination
The EIP may at any time be amended or terminated by the
Board of Directors, except that no amendment or termination may,
without a recipient's consent, affect any bonus award previously
made to such recipient.
Administration
The EIP is administered by the Compensation Committee.
MANAGEMENT
Directors and Executive Officers
The directors and other executive officers of the Company are:
Herbert S. Winokur, Jr., 51 Director and Chairman of the Board
since 1988, term expires 1996. President, Winokur Holdings, Inc.
(investment company). Formerly Senior Executive Vice President,
Member, Office of the President, and Director, Penn Central
Corporation. Director of ENRON Corporation; NacRe Corp.; NHP,
Inc.; and Marine Drilling Companies, Inc.
Dan R. Bannister, 64* Director since 1985, term expires 1995.
Chief Executive Officer since 1985; President since 1984.
Director of Industrial Training Corporation.
T. Eugene Blanchard, 64* Director since 1988, term expires 1997.
Senior Vice President and Chief Financial Officer since 1979.
Russell E. Dougherty, 74 Director since 1989, term expires 1996.
Attorney, McGuire, Woods, Battle & Boothe (law firm). Retired
General, United States Air Force; served as Commander-in-Chief,
Strategic Air Command and Chief of Staff, Allied Command, Europe.
From 1980 to 1986 served as Executive Director of the Air Force
Association and Publisher of Air Force Magazine. Former member
of the Defense Science Board; Trustee of the Institute for
Defense Analysis; and Vice Chairman and Director of The Aerospace
Corp.
James H. Duggan, 59* Director since 1988, term expires 1996.
Executive Vice President since 1987; President of Advanced
Technology Services Sector since July, 1994; President of Applied
Sciences Group from 1991 to 1994.
Paul V. Lombardi, 53* Director since July, 1994, term expires
1997. Executive Vice President since 1994; President, Government
Services Sector since July 1994; Vice President 1992 to 1994;
President of Government Services Group 1992 to 1994. Senior Vice
President and Group General Manager, Planning Research
Corporation from 1990 to 1992. Senior Vice President and Group
General Manager, Advanced Technology Inc. from 1988 to 1990.
Michael T. Masin, 50 Director since November, 1994, term
expires, 1995. Vice Chairman of GTE Corporation since 1993.
Partner, O'Melveny & Myers, 1976 through 1993. Director of GTE
Corporation and Trust Company of the West. Member of the Board
of Trustees of American University; Member of Council on Foreign
Relations and a Member of Business Committee for Board of
Trustees of Museum of Modern Art.
Dudley C. Mecum II, 60 Director since 1988, term expires 1997.
Partner, G. L. Ohrstrom & Co. (investment company). Formerly
Chairman of Mecum Associates, Inc. Served as Group Vice
President and Director, Combustion Engineering, Inc. Director of
The Travelers Inc., Lyondell Petrochemical Company, Vicorp
Restaurants Inc., Fingerhut Companies, Inc., and Roper Industries
Inc.
David L. Reichardt, 52* Director since 1988, term expires 1995.
Senior Vice President and General Counsel since 1986. President
of Dynalectric Company, a subsidiary of DynCorp, from 1984 to
1986. Vice President and General Counsel of DynCorp from 1977 to
1984.
Patrick G. Deasy, 56* Vice President since 1993; President of
DynAir Services Inc. since 1985.
Gerald A. Dunn, 61* Vice President since 1973; Controller since
1967.
Mark C. Filteau, 44* President of Federal Sector, Information
and Engineering Technology since December 1, 1994. President of
PRC Public Sector, March 1992 to November 1994. Vice President
and Senior Vice President of BDM International from 1986 to 1992.
H. Montgomery Hougen, 60 Vice President since July, 1994;
Corporate Secretary and Deputy General Counsel since 1984.
Richard A. Hutchinson, 50 Treasurer since 1978.
Marshal J. Hyman, 49 Vice President since 1993; Director of
Taxes since 1986.
Marshall S. Mandell, 52 Vice President, Business Development,
Government Sector since July, 1994; Vice President Business
Development Applied Science Group from February 1992 to 1994.
Carl H. McNair, Jr., 61* Vice President since July, 1994;
President, Federal Sector, Enterprise Management since July,
1994; President, Support Services Division from 1990 to 1994.
Ruth Morrel, 40 Vice President, Law & Compliance since July,
1994; Group General Counsel from 1984 to 1994.
John H. Saunders, 38* Vice President, Finance since 1993;
Director of Corporate Finance since 1990; Vice President,
Finance, Government Services Group from 1987 to 1990.
Holton B. Shipman, Jr., 48* Vice President since July, 1994;
President, Federal Sector, Environmental, Energy & National
Security Programs since July, 1994.
Richard E. Stephenson, 59 Vice President, Technology &
Government Relations since July, 1994; Vice President Strategic
Planning, Government Services Group from 1991 to 1994.
John L. Sullivan, 59 Vice President of Human Resources,
Quality & Administration since January, 1995; Vice President of
Human Resources, Paramax Systems Corporation from 1986 to 1994.
Richard L. Webb, 62* Vice President since 1988; President of
DynAir Technical Services Group since 1993, President of Aviation
Services Group from 1985 to 1993.
Harold J. M. Williams, 58* Vice President since July, 1994;
President, Federal Sector, Aerospace Technology since July, 1994;
President, Aerospace Operations Division from 1993 to 1994; Vice
President Business Development Government Services Group from
1990 to 1993.
Robert G. Wilson, 53 Vice President and General Auditor since 1985.
* Officers designated by an asterisk are deemed to be officers
for purposes of Rule 16a-1(f), as promulgated in Release No.
34-28869.
EXECUTIVE COMPENSATION
The following table sets forth information regarding annual
and long-term compensation for the chief executive officer and
the other four most highly compensated executive officers of the
Company. The table does not include information for any fiscal
year during which a named executive officer did not hold such a
position with the Company.
<TABLE>
<CAPTION> Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (f) (g) (h) (i)
Restricted Securities All Other
Stock Underlying LTIP Compen-
Name and Principal Salary Bonus Award(s) Options/ Payouts sation
Position Year ($)(4) ($)(1) ($)(2) SARs ($) ($)(3)
<S> <C> <C> <C> <C> <C>
Dan R. Bannister 1994 350,000 165,000 27,159
President & Chief 1993 339,896 155,000 17,465
Executive Officer 1992 317,800 140,000 16,634
James H. Duggan 1994 243,147 95,000 19,875
Executive Vice President & 1993 248,736 90,000 12,813
Sector President 1992 234,688 80,000 13,767
Paul V. Lombardi 1994 240,405 95,000 19,394
Executive Vice President & 1993 219,663 100,000 105,000 11,960
Sector President 1992 47,859 60,000 105,000 2,338
T. Eugene Blanchard 1994 196,915 95,000 19,876
Senior Vice President & 1993 200,591 90,000 17,018
Chief Financial Officer 1992 189,131 75,000 16,634
David L. Reichardt 1994 190,547 95,000 17,906
Senior Vice President & 1993 193,371 90,000 11,793
General Counsel 1992 181,934 75,000 10,360
</TABLE>
(1) Column (d) reflects bonuses earned and expensed during year, whether
paid during or after such year.
(2) Value of restricted stock units determined in accordance with Restricted
Stock Plan. There is no provision to pay dividends on restricted stock
units. The following table reflects the number of restricted stock
units in the respective accounts of the named individuals, whether
vested or unvested, and the aggregate valuation as of December 31, 1994.
Name No. of Units Value ($)
Dan R. Bannister 54,661 994,830
James H. Duggan 58,212 1,059,458
Paul V. Lombardi 12,000 218,400
T. Eugene Blanchard 47,467 863,899
David L. Reichardt 32,030 582,946
(3) Column (i) includes individual's pro rata share of the Company's
contribution to the ESOP Trust, estimated for 1994, and the Company-paid
portion of group term-life insurance and split-premium life insurance
premiums covering the individual, as reflected in the following table.
ESOP Contributions ($) Insurance Premiums ($)
Name 1994 1993 1992 1994 1993 1992
Dan R. Bannister 6,832 8,912 8,912 20,327 8,553 7,722
James H. Duggan 6,832 8,912 8,912 13,043 3,901 4,855
Paul V. Lombardi 6,832 8,912 1,810 12,562 3,048 528
T. Eugene Blanchard 6,832 8,912 8,912 13,044 8,106 7,722
David L. Reichardt 6,832 8,912 8,912 11,074 2,881 1,448
(4) 1993 salary included special year-end adjustment.
Compensation of Directors
Non-employee directors of the Company receive an annual
retainer fee of $16,500 as directors and $2,750 for each
committee on which they serve. The Company also pays
non-employee directors a meeting fee of $1,000 for attendance at
each Board meeting and $500 for attendance at committee meetings.
Directors are reimbursed for expenses incurred in connection with
attendance at meetings and other Company functions.
Directors and Officers Liability Insurance
The Company has purchased and paid the premium for insurance
in respect of claims against its directors and officers and in
respect of losses for which the Company may be required or
permitted by law to indemnify such directors and officers. The
directors insured are the directors named herein and all
directors of the Company's subsidiaries. The officers insured
are all officers and assistant officers of the Company and its
subsidiaries. There is no allocation or segregation of the
premium as regards specific subsidiaries or individual directors
and officers.
Employment-Type Contracts
In September, 1987, the Company entered into
change-in-control severance agreements with Messrs. Bannister,
Duggan, Blanchard, and Reichardt, and certain other executive
officers of DynCorp (the "Severance Agreements"). Each Severance
Agreement provides that certain benefits, including a lump-sum
payment, will be triggered if such executive is terminated
following a change in control during the term of that executive's
Severance Agreement, unless such termination occurs under certain
circumstances set forth in the Severance Agreements. The
Severance Agreements expire on December 31, 1995, but they are
automatically extended unless the Board of Directors determines
otherwise. The amount of such lump sum payment would be equal to
2.99 times the sum of the executive's annual salary and the
average annual amount paid to the executive pursuant to certain
applicable compensation-type plans in the three years preceding
the year in which the termination occurs. Other benefits include
payment of any incentive compensation which has been allocated or
awarded but not yet paid to the executive for a fiscal year or
other measuring period preceding termination and a pro rata
portion to the date of termination of the aggregate value of
incentive compensation awards for uncompleted periods under such
plans. Each Severance Agreement also provides that, if the
aggregate of the lump sum payment to the executive and any other
payment or benefit included in the calculation of "parachute
payments" within the meaning of Section 280G of the Internal
Revenue Code exceeds the amount the Company is entitled to deduct
on its federal income tax return, the severance payments shall be
reduced until no portion of the aggregate termination payments to
the executive is not so deductible or the severance payment is
reduced to zero. The Severance Agreements also provide that the
Company will reimburse the executive for legal fees and expenses
incurred by the executive as a result of termination except to
the extent that the payment of such fees and expenses would not
be, or would cause any other portion of the aggregate termination
payments not to be, deductible by reason of Section 280G of the
Code.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Board of
Directors during 1994 were: Herbert S. Winokur, Jr., Chairman of
the Board and Director; and Russell E. Dougherty, Director, and,
as of November, 1994, Michael T. Masin, Director. None of the
members are current or former employees of the Company, and,
except for Mr. Winokur, none have any relationship with the
Company of the nature contemplated by Rule 404 of Regulation S-K.
Mr. Winokur is the President of Winokur Holdings, Inc.,
which is the managing partner of Capricorn Holdings, G. P., which
in turn is the general partner of Capricorn.
On February 12, 1992, the Company loaned $5,500,000 to
Cummings Point Industries, Inc. ("CPI"), a Delaware corporation
of which Capricorn owns more than 10%. The indebtedness is
represented by a promissory note (the "Note"), bearing interest
at the annual rate of 17%, which provides that interest is
payable quarterly but that interest payments may be added to the
principal of the Note rather than being paid in cash. The Note
was due six months after issuance, but it has been, and may
continue to be, automatically extended for three-month periods.
By separate agreement, Capricorn agreed to purchase the Note from
the Company upon three months' notice, for the amount of
outstanding principal plus accrued interest. The purchase
obligation is secured by certain common stock and warrants issued
by the Company and owned by Capricorn.
No executive officer of the Company serves on the board of
directors or compensation committee of any entity (other than
subsidiaries of the Company) whose directors or executive
officers served on the Board of Directors or Compensation
Committee of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Voting Securities
As of April 19, 1995, the Company had 8,715,200 shares of
Common Stock and 123,711 shares of Class C Preferred outstanding,
which constituted all the outstanding voting securities of the
Company. If all the shares issuable upon exercise of outstanding
warrants, all the shares issuable upon conversion of outstanding
Class C Preferred and exercise of related warrants, and shares
issuable as a result of immediate vesting and expiration of
deferrals under the former Restricted Stock Plan were to be
issued, the outstanding voting securities following such dilution
would consist of 13,567,837 shares of Common Stock (and no shares
of Class C Preferred). The following tables show beneficial
ownership of issued voting shares as a percentage of currently
outstanding stock and beneficial ownership of issued and issuable
shares as a percentage of common stock on a fully diluted basis
assuming all such conversions, exercises, and issuances.
Security Ownership of Certain Beneficial Owners
The following table presents information as of April 19,
1995, concerning the only known beneficial owners of five percent
or more of the Company's Common Stock and Class C Preferred.
<TABLE>
<CAPTION>
Amount & Amount &
Nature of Nature of Percent
Ownership of Ownership of of
Name and Address of Title of Outstanding Percent Diluted Diluted
Beneficial Owner Class Shares of Class Shares (3) Shares (3)
<S> <S> <C> <C> <C> <C>
Trustee of the DynCorp Common 6,235,687 71.5% 6,235,687 46.0%
Employee Stock Ownership Trust Direct(1) Direct(1)
c/o DynCorp
2000 Edmund Halley Dr.
Reston, VA 22091
Capricorn Investors, L.P.(2) Common 292,369 3.4% 4,117,127 30.3%
72 Cummings Point Road Direct Direct
Stamford, CT 06902
Capricorn Investors, L.P.(2) Class C 123,711 100% N/A -
72 Cummings Point Road Preferred Direct
Stamford, CT 06902
</TABLE>
(1) Shares are held for the accounts of participants in the ESOP. When
allocated to individual participant accounts, shares are voted upon
instruction of the individual participants. Unallocated shares and
shares for which no instructions have been received are voted
proportionately with instructed shares.
(2) Herbert S. Winokur, Jr., Chairman of the Board and a Director of the
Company, is the President of Winokur Holdings, Inc., which is the
managing partner of Capricorn Holdings, G.P., which in turn is the
general partner of Capricorn Investors, L.P.
(3) Assumes exercise of all outstanding warrants, conversion of Class C
Stock, exercise of warrants issuable upon such conversion, full vesting
of all remaining Restricted Stock Plan units, and distribution of
all deferred units under Restricted Stock Plan.
Security Ownership of Management(1)
Beneficial ownership of the Company's equity securities by
directors and nominees for election to the Board, and all current officers and
directors as a group, are set forth below:
<TABLE>
<CAPTION>
Amount & Nature Amount & Nature Percent
of Ownership Percent of Ownership of
Name and Title of Title of of Outstanding of of Diluted Diluted
Beneficial Owner Class Shares(2) Class(3) Shares(4) Shares(3)(4)
<S> <S> <C> <C> <C> <C>
D. R. Bannister Common 301,478 Direct} 3.5% 354,191 Direct} 2.7%
President & Director 7,356 Indirect} 7,356 Indirect}
T. E. Blanchard Common 146,019 Direct} 1.8% 193,486 Direct} 1.5%
Senior Vice President 14,292 Indirect} 14,292 Indirect}
& Director
R. E. Dougherty Common 1,870 Direct * 1,870 Direct *
Director
J. H. Duggan Common 122,306 Direct} 1.6% 179,330 Direct} 1.4%
Executive Vice 12,723 Indirect} 12,723 Indirect}
President & Director
P. V. Lombardi Common 5,275 Direct} * 17,275 Direct} *
Executive Vice 831 Indirect} 831 Indirect}
President & Director
Michael T. Masin -- -- -- 2,000 Direct *
Director
D. C. Mecum II Common -- -- -- 1,870 Direct *
Director
D. L. Reichardt Common 67,336 Direct} * 81,798 Direct} *
Senior Vice President 10,983 Indirect} 10,983 Indirect}
& Director
H. S. Winokur, Jr.(5) Common 292,369 Indirect 3.4% 4,117,127 Indirect 30.3%
Chairman of the
Board & Director Class C 123,711 Indirect 100% N/A --
Preferred
All officers and Common 908,937 Direct} 15.0% 1,201,548 Direct} 40.0%
directors as a group 400,294 Indirect} 4,225,052 Indirect}
Class C 123,711 Indirect} 100% N/A -- --
Preferred
</TABLE>
(1) Includes information as of April 19, 1995. Shares held by the ESOP
trustee but within individual voting control are included in the table,
whether or not vested.
(2) Restricted stock units which have not been vested and converted into
shares of stock and distributed pursuant to the Company's Restricted
Stock Plan as of April 19, 1995 are not transferable by or within the
voting control of the participants. Such units are not included in
outstanding shares.
(3) An asterisk indicates that beneficial ownership is less than one percent
of the class.
(4) Assumes exercise of all outstanding warrants, conversion of Class C
Preferred, exercise of warrants issuable upon such conversion,
full vesting of all remaining Restricted Stock Plan units, and
distribution of all deferred units under Restricted Stock Plan.
(5) Includes securities owned by Capricorn. See preceding table for
relationship of Mr. Winokur thereto.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Dougherty is of counsel to the law firm of McGuire,
Woods, Battle & Boothe, which firm has provided legal services to
the Company from time to time.
Officers and directors who obtained securities through the
Company's Management Employees Stock Purchase Plan and Restricted
Stock Plan are subject to the Stockholders Agreement. Under the
terms of the Stockholders Agreement, the Company's securities can
not be sold individually to outside parties. Management
employees of the Company whose employment is terminated may elect
to retain their securities indefinitely, or under certain
circumstances may be required to sell such securities, at the
Formula Price, to the other parties to the Stockholders Agreement
or to the Company, and the Company is required to repurchase such
securities at the Formula Price, subject to restrictions imposed
by its Certificate of Incorporation and various financing
agreements. See "Description of Capital Stock -- Class C
Preferred Stock."
Indebtedness of Related Entities
See "Compensation Committee Interlocks and Insider
Participation" and "Business -- Factoring of Receivables."
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of 15
million shares of Common Stock, par value $0.10 per share, and
123,711 shares of Class C Preferred, par value $0.10 per share.
As of April 19, 1995, there were 385 holders of record of Common
Stock and one holder of record of Class C Preferred. The
authorized capital stock of the Company also includes 3,500,000
shares of 17% Redeemable Pay-in-Kind Class A Preferred Stock, Par
value $0.10 per share, all of the outstanding shares of which
were redeemed in February, 1992, and 620,000 shares of 18%
Redeemable Pay-in-Kind Class B Preferred Stock, par value $24.25
per share, all of the outstanding shares of which were redeemed
in July, 1989; no shares of either class are outstanding.
As of April 19, 1995, there were also outstanding 3.4
million Warrants to acquire an identical number of shares of
Common Stock at an exercise price of $0.25 per warrant. Warrants
were issued at the rate of 6.6767 Warrants for each share of
Common Stock acquired by certain management and other
stockholders on March 11, 1988 prior to the LBO, and 942,563
Warrants were issued to an affiliate of the lead bank financing
the LBO. A total of 5,066,009 Warrants were issued, of which
1,666,558 have been exercised or surrendered through April 19,
1995. Upon conversion of the Class C Preferred, 825,981
additional Warrants will be issued.
The following is a summary of certain of the detailed
provisions of the Certificate of Incorporation and by-laws of the
Company regarding the Company's capital stock. The summary is
not complete and is qualified in its entirety by reference to the
Certificate of Incorporation and to the by-laws, copies of which
are filed as exhibits to the Registration Statement of which this
Prospectus is a part.
Amendment of Certificate of Incorporation
The Board of Directors has recommended to the stockholders a
resolution amending the Certificate of Incorporation to increase
the authorized number of shares of Common Stock from 15 million
to 20 million. Approval of such amendment is expected, and the
amendment will be necessary in order to permit the company to
issue or sell a substantial portion of the shares being offered
hereby. The amendment will also eliminate the Class A and Class
B Preferred Stock currently authorized.
Common Stock
The holders of Common Stock are entitled to one vote per
share of each share held of record in elections for directors and
on all other matters required or permitted to be approved by a
vote of stockholders of the Company. Each share of Common Stock
is equal in respect of rights and liquidation and rights to
dividends and to distributions. Stockholders of the Company do not
and will not have any preferred or preemptive rights to subscribe
for, purchase or receive additional shares of any class of
capital stock of the Company, or any options or warrants for such
shares, or any rights to subscribe for or purchase such shares,
for any securities convertible into or exchangeable for such
shares, which may be issued, sold or offered for sale by the
Company.
Restrictions on Common Stock
The Board of Directors of the Company amended the By-Laws on
May 10, 1995, to provide that, as to any share of Common Stock
issued on or after May 11, 1995, such share may not be sold or
transferred by the holder thereof to any third party, other than
(1) by descent or distribution, (2) by bona fide gift, or (3) by
bona fide sale after the holder thereof has first offered in
writing to sell the share to the Company at the same price and
under substantially the same terms as apply to the intended sale
and the Company has failed or declined in writing to accept such
terms within 14 days of receipt of such written offer or has
refused to proceed to a closing on the transaction within a
reasonable time after such acceptance; provided, however, that
the sale to the third party following such failure, declination,
or refusal must be made on the same terms which were not
previously accepted by the Company and within 60 days following
such event, or the Company must again be offered such refusal
rights prior to a sale of such share; provided further, however,
that this right does not apply to (A) any transactions made at the
current Formula Price through the Internal Market; (B) any
transactions made at any time while the Common Stock is listed
for trading on a national securities exchange or on the
over-the-counter market; (C) sales to the ESOP; or (D) shares
which have been reissued to the holder in exchange for shares
issued prior to May 11, 1995 to the extent such previously issued
shares were not subject to any right of first refusal by the
Company or its shareholders.
Class C Preferred Stock
The Class C Preferred ranks senior and prior to the Common
Stock in the case of a liquidation, dissolution or winding-up of
the affairs of the Company, and bears annual dividends in the
amount of $4.365 per share, which while unpaid compound quarterly
at 18% per annum, but are only paid in the event of a liquidation
of the Company or the payment by the Company of dividends on its
Common Stock. The holder of the Class C Preferred is
entitled to convert each share of Class C Preferred into a share
of Common Stock upon the giving of appropriate notice. The
holder of Class C Preferred is entitled to vote, one vote for
each share of Class C Preferred, with the holders of the
outstanding shares of Common Stock of the Company; provided, that
each share of Class C Preferred is entitled to vote as a separate
class with respect to any proposal by the Company to create,
incur or assume indebtedness for borrowed money in excess of $15
million; guarantee or undertake any lease in the principal amount
of $2 million or more; issue additional shares of capital stock
(except to the extent necessary to satisfy obligations previously
approved with respect to the conversion of the Warrants); declare
or pay dividends; employ or terminate the Chief Executive
Officer; lend money or incur obligations to any officer, director
or stockholder in excess of $1.5 million; repurchase any of the
Company's securities in excess of fair market value of $250,000
per year, and certain other significant transactions. These
voting rights give the holder of the Class C Preferred the
ability to effectively control the Company with respect to
certain major corporate decisions. Consequently, actions that
might otherwise be approved by a majority of the holders of
Common Stock could be vetoed by the holder of the Class C
Preferred. See "Risk Factors -- Class C Preferred Stock Rights
and Preferences."
Stockholders Agreement
Capricorn, certain other investors and certain of the
management group of the Company who hold shares of Common Stock
are parties to the Stockholders Agreement. Under the terms of
the Stockholders Agreement, approximately 200 management
stockholders who own 2,695,385 or 20% of the fully diluted
outstanding shares of Common Stock have agreed, among other
things, to vote for the election of a Board of Directors
consisting of four management group nominees, four Capricorn
nominees and a joint nominee who would be elected if needed to
break a tie vote. Since the management group stockholders and
Capricorn, directly and through ESOP shareholdings, represent a
majority of the shares of Common Stock necessary to elect the
Company's Board of Directors, it is unlikely that other
stockholders acting in concert or otherwise will be able to
change the composition of the Board of Directors before March 11,
1999, the expiration date of the Stockholders Agreement. See
"Risk Factors -- Stockholders Agreement."
VALIDITY OF COMMON STOCK
The validity of the Common Stock offered hereby will be
passed upon for the Company by H. Montgomery Hougen, Vice
President, Corporate Secretary, and Deputy General Counsel. As
of April 19, 1995, Mr. Hougen owned of record 18,757 shares of
Common Stock and beneficially owned a total of 7,400 shares
through the Company's benefit plans.
EXPERTS
The financial statements and schedules included in this
Prospectus and elsewhere in this Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants,
as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as
experts in giving said reports.
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement
(which term shall include any amendments thereto) on Form S-1
under the Securities Act, with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information
set forth in the Registration Statement, certain items of which
are contained in exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration
Statement, including the exhibits thereto, and the financial
statements and notes and schedules filed as a part thereof.
Statements made in this Prospectus concerning the contents of any
document referred to herein are not necessarily complete. With
respect to each such document filed with the SEC as an exhibit to
the Registration Statement, reference is made to the exhibit for
a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such
reference.
The Registration Statement, including the exhibits thereto,
and the financial statements and notes and schedules filed as a
part thereof, as well as such reports and other information filed
with the SEC, may be inspected without charge at the SEC's
principal office at 450 Fifth Street, N.W., Washington, D.C.
20549, as well as at the Commission's regional offices, 75 Park
Place, New York, New York 10007 and Northwestern Atrium Center,
500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of all or part thereof may be obtained from those offices
upon payment of certain fees prescribed by the Commission.
The Company undertakes to provide, without charge, to any
person, including a beneficial owner, to whom a copy of this
Prospectus is delivered, upon the written or oral request of such
person, a copy of any document incorporated by reference into
this Prospectus, without exhibits (unless such exhibits are
incorporated by reference into such documents). Requests for
such copies should be directed to: DynCorp, 2000 Edmund Halley
Drive, Reston, Virginia 22091-3436; Attention: Corporate Secretary
(telephone (703) 264-9108).
COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to provisions described in Item 14 below, 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 Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
No dealer, salesperson or any other
person has been authorized to
give any information or to make any
representations other than
those contained in this Prospectus
in connection with the offer
contained herein, and, if given or
made, information or
representations must not be relied
upon as having been authorized PROSPECTUS
by the Company. This Prospectus
does not constitute an offer of
any securities other than those to
which it relates or an offer
to sell, or a solicitation of an
offer to buy, to any person in
any jurisdiction in which such
offer or solicitation is not
authorized, or to any person to
whom it is not lawful to make
such an offer or solicitation.
Neither delivery of this
Prospectus nor any sale made 11,969,313 Shares
hereunder at any time implies that
information contained herein is
correct as of any time subsequent
to the date hereof.
TABLE OF CONTENTS
DYNCORP
Prospectus Summary
Risk Factors
Use of Proceeds
The Company Common Stock
Selected Financial Data par value $0.10 per share
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
Business
Management
Beneficial Ownership of the Company's Stock
Certain Relationships and Related Transactions
Description of Capital Stock
Legal Matters
Experts
Available Information
Index to Consolidated Financial Statements
May 12.1995
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements
Balance Sheets at December 31, 1994 and 1993
Statements of Income for the three years ended December 31, 1994
Statements of Changes in Stockholders' Equity for the three years
ended December 31, 1994
Statements of Cash Flows for the three years ended December 31, 1994
Notes to Financial Statements
Report of Independent Public Accountants
To DynCorp:
We have audited the accompanying consolidated balance sheets of DynCorp (a
Delaware corporation) and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DynCorp and subsidiaries as
of December 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 16(b) of
the Form S-1 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
Washington, D.C.,
March 21, 1995.
ARTHUR ANDERSEN LLP
DynCorp and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
1994 1993
Assets
Current Assets:
Cash and short-term investments (includes restricted
cash and short-term investments of $8,748 in 1994
and $17,632 in 1993) (Notes 2 and 5) $ 12,404 $ 22,806
Notes and current portion of long-term receivables (Note 2) 393 235
Accounts receivable and contracts in process
(Notes 2, 3 and 5) 208,519 177,470
Inventories of purchased products and supplies,
at lower of cost (first-in, first-out) or market 6,354 6,467
Deferred income taxes (Note 12) 2,698 -
Other current assets 5,094 6,851
Total Current Assets 235,462 213,829
Long-term Receivables, due through 2004 (Note 2) 1,594 274
Property and Equipment, at cost (Notes 1, 4 and 16):
Land 5,394 5,539
Buildings and leasehold improvements 34,321 33,498
Machinery and equipment 68,803 64,907
108,518 103,944
Accumulated depreciation and amortization (48,156) (42,996)
Net property and equipment 60,362 60,948
Intangible Assets, net of accumulated amortization
(Notes 1, 11 and 17) 94,792 93,890
Other Assets (Notes 2 and 5) 10,120 13,515
Total Assets $402,330 $382,456
See accompanying notes.
DynCorp and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
1994 1993
Liabilities, Redeemable Common Stock and Stockholders' Equity
Current Liabilities:
Notes payable and current portion of long-term debt
(Notes 2 and 5) $ 3,344 $ 3,837
Accounts payable (Note 2) 25,529 25,376
Deferred revenue and customer advances (Note 1) 5,389 2,178
Accrued income taxes (Notes 1 and 12) 30 3,074
Accrued expenses (Note 6) 110,091 105,578
Total Current Liabilities 144,383 140,043
Long-term Debt (Notes 2, 5 and 17) 230,608 216,425
Deferred Income Taxes (Notes 1 and 12) 1,210 1,269
Other Liabilities and Deferred Credits (Note 2) 16,591 16,353
Total Liabilities 392,792 374,090
Commitments, Contingencies and Litigation (Notes 16 and 18) - -
Redeemable Common Stock
redemption value per share of $18.20 in 1994 and
$17.50 in 1993, 125,714 shares issued and outstanding
(Note 7) 2,288 2,200
Stockholders' Equity (Note 8)
Capital stock, par value ten cents per share -
Preferred stock, Class C, 18% cumulative,
convertible, $24.25 liquidation value,
123,711 shares authorized and issued and outstanding 3,000 3,000
Common stock, authorized 15,000,000 shares;
issued 7,894,569 shares in 1994
and 5,015,139 shares in 1993 789 502
Common stock warrants 11,486 15,119
Unissued common stock under restricted stock plan 9,923 10,395
Paid-in surplus 118,068 95,983
Retained earnings (deficit) (118,256) (105,425)
Common stock held in treasury, at cost; 459,309
shares and 173,988 warrants in 1994 and 285,987
shares and 178,100 warrants in 1993 (8,817) (5,840)
Cummings Point Industries Note Receivable (Note 9) (8,943) (7,568)
Total stockholders' equity 7,250 6,166
Total Liabilities, Redeemable Common Stock
and Stockholders' Equity $402,330 $382,456
See accompanying notes.
DynCorp and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31
(Dollars in thousands except per share data)
1994 1993 1992
Revenues (Note 1) $1,022,072 $953,144 $911,422
Costs and expenses:
Cost of services (Note 4) 978,204 913,587 883,276
Selling and corporate administrative 17,199 18,267 20,476
Interest expense 25,618 25,538 24,876
Interest income (2,468) (2,439) (2,418)
Aircraft maintenance facilities - consolidation
and asset impairment (Note 21) 9,492 - -
Other (Note 11) 10,934 9,324 5,860
Total costs and expenses 1,038,979 964,277 932,070
Loss before income taxes, minority interest
and extraordinary item (16,907) (11,133) (20,648)
Provision (benefit) for income taxes (Note 12). (5,206) 1,329 168
Loss before minority interest and extraordinary item(11,701) (12,462) (20,816)
Minority interest (Note 1) 1,130 952 -
Loss before extraordinary item (12,831) (13,414) (20,816)
Extraordinary loss from early extinguishment
of debt (Note 5) - - 2,526
Net loss (12,831) (13,414) (23,342)
Preferred Class A dividends declared and paid and
accretion of discount - - 959
Net loss for common stockholders $ (12,831)$ (13,414)$(24,301)
Loss Per Common Share (Note 14)
Primary and fully diluted:
Loss before extraordinary item $ (2.12)$ (2.87) $ (4.49)
Extraordinary item (0.49)
Net loss for common stockholders $ (2.12)$ (2.87) $ (4.98)
See accompanying notes.
<TABLE>
DynCorp and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31
(Dollars in thousands)
<CAPTION>
Unissued
Common Cummings
Stock Employee Point
Under Retained Stock Industries
Preferred Common Stock Restricted Paid-in Earnings Treasury Ownership Note
Stock Stock Warrants Stock Plan Surplus (Deficit) Stock Plan Loan Receivable
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $3,000 $ 474 $15,119 $ 9,688 $101,483 $ (67,710) $(3,241) $(32,215) $ -
Pay-in-kind Preferred Stock
Class A dividends (934)
Accretion of Preferred Stock
Class A discount and
discount and issuance costs (25)
Stock issued under Restricted
Stock Plan (Note 8) 17 (3,011) 2,994
Purchase of Preferred Stock Class A (8,047)
Treasury stock purchased (Note 8) (3,448)
Stock issued under the Management
Employees Stock Purchase Plan (Note 8) (22) 151
Accrued compensation (Note 8) 3,264
Payments received on Employee Stock
Ownership Plan (ESOP) (Note 10) 16,099
Cummings Point Industries note receivable
(Note 9) (5,500)
Accrued interest on note receivable (Note 9) (910)
Net loss (23,342)
Balance December 31, 1992 3,000 491 15,119 9,941 96,408 (92,011) (6,538) (16,116) (6,410)
Stock issued under Restricted
Stock Plan (Note 8) 11 (1,781) 1,770
Treasury stock purchased (Note 8) (1,980)
Stock issued under the Management
Employees Stock Purchase Plan (Note 8) 5 41
Accrued compensation (Note 8) 2,235
Payments received on Employee Stock
Ownership Plan (Note 10) 16,116
Contribution of stock to ESOP (Note 10) 437
Stock issued in conjunction with acquisition
(Note 17) (2,200) 2,200
Accrued interest on note receivable
(Note 9) (1,158)
Net loss (13,414)
Balance December 31, 1993 3,000 502 15,119 10,395 95,983 (105,425) (5,840) - (7,568)
Stock issued under Restricted
Stock Plan (Note 8) 9 (1,694) 1,685
Treasury stock purchased (Note 8) (57) (276) (2,690)
Stock issued under the Management Employees
Stock Purchase Plan (Note 8) (2) 32
Warrants exercised (Note 8) 147 (3,576) 3,797 (319)
Accrued compensation (Note 8) 1,222
Contribution of stock to ESOP (Note 10) 131 16,969
Accrued interest on note receivable (Note 9) (1,375)
Adjust redeemable common stock
to fair market value (Note 7) (88)
Net loss (12,831)
Balance December 31, 1994 $3,000 $ 789 $11,486 $ 9,923 $118,068 $(118,256) $(8,817) $ - $ (8,943)
See accompanying notes.
</TABLE>
DynCorp and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31
(Dollars in thousands)
1994 1993 1992
Cash Flows from Operating Activities:
Net loss $(12,831) $(13,414) $(23,342)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 27,077 19,818 19,372
Pay-in-kind interest on Junior
Subordinated Debentures (Note 5) 15,329 13,142 6,590
Loss on purchase of Junior
Subordinated Debentures (Note 5) - - 2,526
Deferred income taxes (2,258) 521 (2,114)
Accrued compensation under Restricted
Stock Plan 1,222 2,235 3,264
Noncash interest income (1,375) (1,158) (910)
Other 2,626 (2,820) (2,483)
Change in assets and liabilities, net
of acquisitions and dispositions:
Increase in accounts receivable and contracts
in process (16,495) (9,698) (14,904)
(Increase) decrease in inventories 113 (326) 280
(Increase) decrease in other current assets (1,250) 1,159 2,797
Increase (decrease) in current liabilities
except notes payable and current portion
of long-term debt (9,186) 1,161 4,268
Cash provided (used) by operating activities 2,972 10,620 (4,656)
Cash Flows from Investing Activities:
Sale of property and equipment 2,406 1,422 1,262
Proceeds received from notes receivable 98 558 1,353
Purchase of property and equipment (7,364) (5,423) (11,400)
Increase in notes receivable (Note 9) - - (5,934)
Increase in investments in affiliates - (99) (1,888)
Deferred income taxes from "safe harbor"
leases (Note 12) (499) (441) (314)
Assets and liabilities of acquired businesses
(excluding cash acquired) (Notes 1 and 17) (15,312) (10,890) (905)
Other (1,543) (738) (304)
Cash used by investing activities (22,214) (15,611) (18,130)
Cash Flows from Financing Activities:
Purchase of Class A Preferred Stock and
Junior Subordinated Debentures (Note 5) - - (42,466)
Treasury stock purchased (Note 8) (3,182) (1,980) (3,448)
Payment on indebtedness (5,110) (6,365) (41,040)
Refinancing proceeds (Note 5) - - 100,000
Deferred financing expenses (Note 5) - - (1,524)
Dividends paid on Class A Preferred Stock - - (861)
Treasury stock sold 159 46 108
Reduction in loan to Employee Stock Ownership
Plan (Note 10) - 16,116 16,099
Sale of stock to Employee Stock Ownership
Plan (Note 10) 17,100 - -
Other (127) - -
Cash provided by financing activities 8,840 7,817 26,868
Net Increase (Decrease) in Cash and Short-term
Investments (10,402) 2,826 4,082
Cash and Short-term Investments at Beginning
of the Year 22,806 19,980 15,898
Cash and Short-term Investments at End
of the Year $ 12,404 $ 22,806 $ 19,980
See accompanying notes.
DynCorp and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
(1) Summary of Significant Accounting Policies
Principles of Consolidation -- All majority-owned subsidiaries have
been included in the financial statements and all significant
intercompany accounts and transactions have been eliminated. Outside
investors' interest in the majority owned subsidiaries is reflected
as minority interest. Investments less than 50% owned are accounted
for using the equity method of accounting.
Contract Accounting -- Contracts in process are stated at the lower
of actual cost incurred plus accrued profits or net estimated
realizable value of incurred costs, reduced by progress billings.
The Company records income from major fixed-price contracts,
extending over more than one accounting period, using the percentage-
of-completion method. During performance of such contracts,
estimated final contract prices and costs are periodically reviewed
and revisions are made as required. The effects of these revisions
are included in the periods in which the revisions are made. On
cost-plus-fee contracts, revenue is recognized to the extent of costs
incurred plus a proportionate amount of fee earned, and on time-and-
material contracts, revenue is recognized to the extent of billable
rates times hours delivered plus material and other reimbursable
costs incurred. Losses on contracts are recognized when they become
known. Disputes arise in the normal course of the Company's business
on projects where the Company is contesting with customers for
additional funds because of events such as delays or changes in
contract specifications. For fixed-price contracts, such disputes,
whether claims or unapproved changes in the process of negotiation,
are recorded at the lesser of their estimated net realizable value or
actual costs incurred and only when realization is probable and can
be reliably estimated. Claims against the Company are recognized
where loss is considered probable and reasonably determinable in
amount.
It is the Company's policy to provide reserves for the
collectibility of accounts receivable when it is determined that it
is probable that the Company will not collect all amounts due and the
amount of reserve requirement can be reasonably estimated.
Property and Equipment -- The Company computes depreciation and
amortization using both straight-line and accelerated methods. The
estimated useful lives used in computing depreciation and
amortization on a straight-line basis are: building, 15-33 years;
machinery and equipment, 3-20 years; and leasehold improvements, the
lesser of the useful life or the term of the lease.
Accelerated depreciation is based on a 150% declining
balance method with light-duty vehicles assigned a three-year life
and machinery and equipment assigned a five-year life. Depreciation
and amortization expense was $8,964,000 for 1994, $9,670,000 for
1993, and $9,275,000 for 1992 (See also Note 4).
Cost of property and equipment sold or retired and the related
accumulated depreciation or amortization is removed from the accounts
in the year of disposal, and any gains or losses are reflected in the
consolidated statement of operations. Expenditures for maintenance
and repairs are charged to expense as incurred, and major additions
and improvements are capitalized.
Intangible Assets -- At December 31, 1994, intangible assets consist
of $91,824,000 of unamortized goodwill and $2,968,000 of value
assigned to contracts. Goodwill is being amortized on a straight-
line basis over periods up to forty years. Amortization expense
(including impairment write-off in 1994; see Note 21) was
$11,051,000, $3,990,000 and $2,953,000 in 1994, 1993 and 1992,
respectively. Amounts allocated to contracts are being amortized
over the lives of the contracts for periods up to ten years.
Amortization of amounts allocated to contracts was $2,051,000,
$3,555,000 and $4,566,000 in 1994, 1993 and 1992, respectively.
Cumulative amortization of $27,167,000 and $33,771,000 has been
recorded through December 31, 1994, of goodwill and value assigned to
contracts, respectively.
The Company assesses and measures impairment of intangible assets
including goodwill based on several factors including the probable
fair market value, probable future cash flows and net income and the
aggregate value of the business as a whole (See Note 21, Commercial
Aircraft Maintenance Facilities - Consolidation and Asset Impairment).
Income Taxes -- As prescribed by Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes" the Company
utilizes the asset and liability method of accounting for income
taxes. Under this method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of
existing assets and liabilities.
Postretirement Health Care Benefits -- The Company provides no
significant postretirement health care or life insurance benefits to
its retired employees other than allowing them to continue as a
participant in the Company's plans with the retiree paying the full
cost of the premium. The Company has determined, based on an
actuarial study, that it has no liability under Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions."
Postemployment Benefits -- The Company has no liability under
Statement of Financial Accounting Standard 112, "Employers'
Accounting for Postemployment Benefits," as it provides no benefits
as defined.
New Accounting Pronouncements -- The Financial Accounting Standards
Board issued Statement 114, "Accounting by Creditors for Impairment
of a Loan," and Statement 115, "Accounting for Certain Investments in
Debt and Equity Securities," in May 1993 and Statement 119,
"Disclosure About Derivative Financial Instruments," in October
1994. Statement 114 is required to be adopted in 1995 and Statements
115 and 119 in 1994. The Company holds no significant financial
instruments of the nature described in these pronouncements and
therefore believes the statements will not have a material effect on its
results of operations or financial condition.
The Company has adopted Statement of Position (SOP) 93-6,"Employers
Accounting for Employee Stock Ownership Plans," issued in November
1993 and effective for financial statements issued after December 15,
1993.
Consolidated Statement of Cash Flows -- For purposes of this
Statement, short-term investments which consist of certificates of
deposit and government repurchase agreements with a maturity of
ninety days or less are considered cash equivalents.
Cash paid for income taxes was $1,567,000 for 1994, $1,232,000
for 1993 and $4,054,000 for 1992.
Cash paid for interest, excluding the interest paid under the
Employee Stock Ownership Plan term loan, was $11,098,000 for 1994,
$11,706,000 for 1993 and $17,212,000 for 1992.
Noncash investing and financing activities consist of the
following (in thousands):
1994 1993 1992
Acquisitions of businesses:
Assets acquired $31,302 $31,675$ 3,524
Liabilities assumed (15,990)(17,198)(1,248)
Stock issued - (2,200) -
Notes issued and other liabilities - (1,382) (592)
Cash acquired - (5) (779)
Net cash 15,312 10,890 905
Pay-in-kind interest on Junior
Subordinated Debentures (Note 5) 15,329 13,142 6,590
Unissued common stock under
restricted stock plan (Note 8) 1,222 2,235 3,264
Capitalized equipment leases
and notes secured by property and equipment 3,088 5,294 1,792
Mortgage note assumed (Note 5) - - 19,456
(2) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate the value:
Accounts Receivable and Accounts Payable - The carrying amount
of accounts receivable and accounts payable approximates their
fair value due to the short maturity of these instruments.
Notes and long-term receivables - The carrying value is net of
valuation allowances and approximates the fair value of those
instruments.
Investments (included in "Other Assets") - The Company had
an investment in convertible debentures and preferred stock
of an untraded company. Based on the financial statements
of this business, the carrying value of these investments
approximated their fair value.
Long-term debt and other liabilities - The fair value of the
Company's long-term debt is based on the quoted market price for
its Junior Subordinated Debentures and the current rate as if the
issue date was December 31, 1994 for its Collateralized Notes.
For the remaining long-term debt (see Note 5) and other
liabilities the carrying amount approximates the fair value.
Cummings Point Industries, Inc. Note Receivable - The carrying
value approximates the fair value. (See Note 9.)
The estimated fair values of the Company's financial instruments
are as follows (in thousands):
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and short-term
investments $ 12,404 $12,404 $ 22,806 $ 22,806
Accounts receivable 208,519 208,519 177,470 177,470
Notes and long-term receivables 1,987 1,987 509 509
Investments - - 2,000 2,000
Accounts Payable 25,529 25,529 25,376 25,376
Long-term debt and other
liabilities 232,830 228,951 218,758 229,012
Cummings Point note receivable 8,943 8,943 7,568 7,568
(3) Accounts Receivable and Contracts in Process
The components of accounts receivable and contracts in process were
as follows (in thousands):
1994 1993
U.S. Government:
Billed and billable $111,950 $ 83,822
Recoverable costs and accrued profit on progress
completed but not billed 28,546 25,473
Retainage due upon completion of contracts 4,046 1,287
144,542 110,582
Commercial Customers:
Billed and billable (less allowances for doubtful
accounts of $3,992 in 1994 and $1,469 in 1993) 49,786 43,660
Recoverable costs and accrued profit on progress
completed but not billed 14,191 23,228
63,977 66,888
$208,519 $177,470
Billed and billable include amounts earned and contractually
billable at year-end but which were not billed because customer
invoices had not yet been prepared at year-end. Recoverable costs
and accrued profit not billed is composed primarily of amounts
recognized as revenues, but which are not contractually billable at
the balance sheet dates.
The Company performs substantial services for the commercial
aviation industry. Receivables from domestic and foreign airline and
leasing companies were approximately $35,226,000 and $38,700,000 at
December 31, 1994 and 1993, respectively.
(4) Depreciation of Property and Equipment
During 1994 the Company revised its estimate of the useful lives of
certain of the Commercial Sector's machinery and equipment to conform
to its actual experience with fixed asset lives. It was determined
the useful lives of these assets ranges from three to ten years as
compared to the two to seven year lives previously utilized. The
effect of this change was to reduce depreciation expense and net loss
for the year ended December 31, 1994 by approximately $2,115,000 or
$0.31 per share.
(5) Long-term Debt
At December 31, 1994 and 1993, long-term debt consisted of (in
thousands):
1994 1993
Contract Receivable Collateralized Notes,
Series 1992-1 $100,000 $100,000
Junior Subordinated Debentures, net of
unamortized discount of $4,793 and $5,175 102,658 86,947
Mortgages payable (see Note 20) 22,285 23,416
Notes payable, due in installments through
2002, 9.98% weighted average interest rate 6,993 6,689
Capitalized equipment leases 2,016 3,210
233,952 220,262
Less current portion 3,344 3,837
$230,608 $216,425
Debt maturities as of December 31, 1994, were as follows (in
thousands):
1995 ($18,206 extinguished with non-current assets $ 21,550
subsequent to December 31, 1994, Note 20)
1996 2,995
1997 102,327
1998 1,317
1999 339
Thereafter 105,424
$233,952
On January 23, 1992, the Company's wholly owned subsidiary, Dyn
Funding Corporation (DFC), completed a private placement of
$100,000,000 of 8.54% Contract Receivable Collateralized Notes,
Series 1992-1 (the "Notes"). The Notes are collateralized by the
right to receive proceeds from certain U.S. Government contracts and
certain eligible accounts receivable of commercial customers of the
Company and its subsidiaries. Credit support for the Notes is
provided by overcollateralization in the form of additional
receivables. The Company retains an interest in the excess balance
of receivables through its ownership of the common stock of DFC.
Additional credit and liquidity support is provided to the Notes
through a cash reserve fund. Interest payments are made monthly with
monthly principal payments beginning February 28, 1997. (The period
between January 23, 1992 and January 30, 1997 is referred to as the
Non-Amortization Period.) The notes are projected to have an average
life of five years and two months and to be fully repaid by July 30,
1997.
Upon receiving the proceeds from the sale of the Notes, DFC
purchased from the Company an initial pool of receivables for
$70,601,000, paid $1,524,000 for expenses and deposited $3,000,000
into a reserve fund account and $24,875,000 into a collection account
with Bankers Trust Company as Trustee pending additional purchases of
receivables from the Company. Of the proceeds received from DFC, the
Company used $38,112,000 to pay the outstanding balances of the
Employee Stock Ownership Plan term loan and revolving loan facility
under the Restated Credit Agreement and $33,280,000 was used for the
redemption of all of the outstanding Class A Preferred Stock plus
accrued dividends (the redemption price per share was $25.00 plus
accrued dividends of $.66). The Company expensed $1,432,000
(reported as an extraordinary loss) of unamortized deferred debt
expense pertaining to the term loan and revolving loan facility which
was paid in full. The Company also charged $8,047,000 of unamortized
discount and deferred issuance costs associated with the redemption
of the Class A Preferred Stock to paid-in surplus.
On an ongoing basis, cash receipts from the collection of the
receivables are used to make interest payments on the Notes, pay a
servicing fee to the Company, and purchase additional receivables
from the Company. Beginning February 28, 1997, instead of purchasing
additional receivables, the cash receipts will be used to repay
principal on the Notes. During the Non-Amortization Period, cash in
excess of the amount required to purchase additional receivables and
meet payments on the Notes is to be paid to the Company subject to
certain collateral coverage tests. The receivables pledged as
security for the Notes are valued at a discount from their stated
value for purposes of determining adequate credit support. DFC is
required to maintain receivables, at their discounted values, plus
cash on deposit at least equal to the outstanding balance of the
Notes.
Commencing March 30, 1994, the Notes may be redeemed in whole, but
not in part, at the option of DFC at a price equal to the principal
amount of the Notes plus accrued interest plus a premium (as
defined).
Mandatory redemption (payment of the Notes in full plus a premium)
is required in the event that (i) the collateral value ratio test is
equal to or less than .95 as of three consecutive monthly
determination dates and the Company has not substituted receivables
or deposited cash into the collection account to bring the collateral
value ratio above .95; or (ii) three special redemptions are required
within any consecutive 12-month period; or (iii) the aggregate stated
value of all ineligible receivables which have been ineligible
receivables for more than 30 days exceeds 7% of the aggregate
collateral balance and the collateral value ratio is less than 1.00.
Special redemption (payment of a portion of the Notes plus a
premium) is required in the event that the collateral value ratio
test is less than 1.00 as of two consecutive monthly determination
dates and the Company has not substituted receivables or deposited
cash into the collection account to bring the collateral value ratio
to 1.00.
Also, DFC may not purchase additional eligible receivables if the
Company has an interest coverage ratio (as defined) of less than
1.10; or if the Company has more than $40 million of scheduled
principal debt (as defined) due within 24 months prior to the
amortization date or $20 million of scheduled principal debt due
within 12 months prior to the amortization date.
At December 31, 1994, $8,748,000 of cash and short-term investments
and $124,220,000 of accounts receivable are restricted as collateral
for the Notes.
In September 1994, the Company negotiated an agreement which
provides for a $5,000,000 revolving letter of credit facility.
Advances under the letter of credit will bear interest at a per annum
interest rate equal to 1% plus the prime interest rate established by
the bank. For each letter of credit issued, the Company must assign
a cash collateral deposit in favor of the bank for 100% of the face
value of the letter of credit. The Company will pay a fee of 1.5%
per annum computed on the face amount of the letter of credit for the
period the letter of credit is scheduled to be outstanding. As of
December 31, 1994, $2,900,000 was on deposit in conjunction with this
letter of credit.
The Junior Subordinated Debentures (Debentures) mature on June 30,
2003, and bear interest of 16% per annum, payable semi-annually. The
effective interest rate, considering the original issue discount, is
19.4%. The Company may, at its option, prior to September 9, 1995,
pay the interest either in cash or issue additional Debentures. The
Debentures are subject to annual mandatory redemption beginning June
30, 1999. The Company may, at its option, redeem in whole or in
part, at any time, the Debentures at their face value plus accrued
interest. During 1994, 1993 and 1992, $15,329,000, $13,142,000 and
$6,590,000, respectively, of additional Debentures were issued in
lieu of cash interest payments.
Using a lottery selection method, the Company called for partial
redemption of $10,000,000 face value plus accrued interest for cash
redemption on August 10, 1992. The lottery resulted in redeeming
$9,698,000 face value of the Debentures. Open market purchases
during 1992 retired $219,000 of the Debentures. The related
unamortized discount, deferred debt expense and other expenses, net of
applicable income taxes, were reported as an extraordinary loss in
1992.
The Company obtained title to its corporate office building on July
31, 1992 by assuming a mortgage of $19,456,000. At the Company's
option, the interest on the mortgage may be computed from time to
time under one of three methods based on the Certificate of Deposit
Rate, LIBOR Rate or the Prime Rate, all as defined. Also, the
Company was required to pay additional interest through May 27, 1993.
The additional interest was the difference between a fixed rate of
9.36% and a floating rate based upon an imputed amount of
$31,900,000. The original mortgage maturity date was May 27, 1993;
however, as provided, the Company extended the mortgage to March 27,
1995 with an increase in the interest rate of 1/2% per annum plus an
extension fee (based on the principal amount of the mortgage
outstanding) of .42% on May 27, 1993 and .50% on March 27, 1994, all
as defined (see Note 20 Subsequent Events).
The Company acquired the Alexandria, VA headquarters of Technology
Applications, Inc. on November 12, 1993, in conjunction with the
acquisition of TAI. A mortgage of $3,344,000 bearing interest at 8%
per annum was assumed. Payments are made monthly and the mortgage
matures in April 2003. Additionally, a $1,150,000 promissory note
was issued. The note bears interest at 7% per annum. Payments under
the note shall be made quarterly through October 1998.
Deferred debt issuance costs are being amortized using the
effective interest rate method over the terms of the related debt.
At December 31, 1994, unamortized deferred debt issuance costs were
$1,015,000 and amortization for 1994, 1993 and 1992 was $324,000,
$328,000 and $420,000, respectively.
(6) Accrued Expenses
At December 31, 1994 and 1993, accrued expenses consisted of the
following (in thousands):
1994 1993
Salaries and wages $ 51,180 $ 43,698
Insurance 9,675 17,202
Interest 4,716 6,233
Payroll and miscellaneous taxes 10,205 10,412
Accrued contingent liabilities and
operating reserves 24,586 19,028
Other 9,729 9,005
$110,091 $105,578
(7) Redeemable Common Stock
In conjunction with the acquisition of Technology Applications,
Inc. in November 1993, the Company issued put options on 125,714
shares of common stock. The holder may, at any time commencing on
December 31, 1998 and ending on December 31, 2000, sell these shares
to the Company at a price per share equal to the greater of $17.50;
or, if the stock is publicly traded, the market value at a specified
date; or, if the Company's stock is not publicly traded, the fair
market value at the time of exercise.
(8) Stockholders' Equity
Class C Preferred Stock is convertible, at the option of the
holder, into one share of common stock, adjusted for any stock
splits, stock dividends or redemption. At conversion, the holders of
Class C Preferred Stock are also entitled to receive such warrants as
have been distributed to the holders of the common stock. Dividends
accrue at an annual rate of 18%, compounded quarterly. At December
31, 1994, cumulative dividends of $6,948,000 have not been recorded
or paid. Dividends will be payable only when cash dividends are
declared with respect to common stock and only in an aggregate amount
equal to the aggregate amount of dividends that such holders would
have been entitled to receive if such Class C Preferred Stock had
been converted into common stock. Each holder of Class C Preferred
Stock is entitled to one vote per share on any matter submitted to
the holders of common stock for stockholder approval. In addition,
so long as any Class C Preferred Stock is outstanding, the Company is
prohibited from engaging in certain significant transactions without
the affirmative vote of the holders of a majority of the outstanding
Class C Preferred Stock.
The Company initially issued warrants to the Class C Preferred
stockholders and to certain common stockholders to purchase a maximum
of 5,891,987 shares of common stock of the Company. Each warrant is
exercisable to obtain one share of common stock. The stockholder may
exercise the warrant and pay in cash the exercise price of $0.25 for
one share of common stock or may sell back to the Company a
sufficient number of the exercised shares to equal the value of the
warrants to be exercised. (The shares sold back to the Company
during 1994 were valued by the Board of Directors at $11.86 per
share.) During 1994, 1,471,470 warrants were exercised. Rights under
the warrants lapse no later than September 9, 1998.
The Company has a Restricted Stock Plan (the Plan) under which
management and key employees may be awarded shares of common stock
based on the Company's performance. The Company initially reserved
1,023,037 shares of common stock for issuance under the Plan. Under
the Plan, Restricted Stock Units (Units) are granted to participants
who are selected by the Compensation Committee of the Board of
Directors. Each Unit will entitle the participant upon achievement
of the performance goals (all as defined) to receive one share of the
Company's common stock. Units cannot be converted into shares of
common stock until the participant's interest in the Units has
vested. Vesting occurs upon completion of the specified periods as
set forth in the Plan. In 1994, 1993 and 1992, the Company accrued
as compensation expense $1,222,000, $2,235,000 and $3,264,000,
respectively, under the Plan which was charged to cost of services
and corporate administrative expenses.
The Company had a Management Employees Stock Purchase Plan (the
Stock Purchase Plan) whereby employees in management, supervisory or
senior administrative positions could purchase shares of the
Company's common stock along with warrants at current fair value.
The Board of Directors was responsible for establishing the fair
value for purposes of the Stockholders Agreement and the Management
Employees Stock Purchase Plan. The Stock Purchase Plan was
discontinued in 1994. Treasury stock, which the Company acquired
from terminated employees who had previously purchased the stock from
the Company, was issued to employees purchasing stock under the Stock
Purchase Plan.
In accordance with ERISA regulations and the Employee Stock
Ownership Plan Documents, the ESOP Trust or the Company are obligated
to purchase vested common stock shares from ESOP participants (see
Note 10) at the fair value (as determined by an independent
appraiser) as long as the Company's common stock is not publicly
traded. Participants receive their vested shares upon retirement,
becoming totally disabled, or death, over a period of one to five
years and for other reasons of termination over a period of one to
ten years, all as set forth in the Plan. In the event the fair
value of a share is less than $27.00, the Company is committed to pay
through December 31, 1996, up to an aggregate of $16,000,000, the
difference (Premium) between the fair value and $27.00 per share. As
of December 31, 1994, the Company has purchased 427,307 shares from
participants and has expended $3,969,000 of the $16,000,000
commitment. Based on the fair value of $18.20 per share at December
31, 1994, the Company estimates a total Premium of $8,500,000 and an
aggregate annual commitment to repurchase shares from the ESOP
participants upon death, disability, retirement and termination as
follows; $5,400,000 in 1995, $4,000,000 in 1996, $3,300,000 in 1997,
$6,300,000 in 1998, $5,800,000 in 1999 and $58,800,000 thereafter.
The fair value is charged to Treasury Stock at the time of
repurchase. The estimated Premium of $8,500,000 has been recorded as
Other Expense in the Consolidated Statement of Operations in 1989
through 1994 (see Note 11).
Under the DynCorp Stockholders Agreement which expired on March 11,
1994, the Company was committed, upon an employee's termination of
employment, to purchase common stock shares held by employees
pursuant to the merger (Management Investor Shares), through the
Stock Purchase Plan or through the Restricted Stock Plan. The share
price at December 31, 1994 for Management Investor shares and Stock
Purchase shares was $14.60 per common share and $14.35 ($14.60 per
common share less warrant exercise price of $0.25) for each
unexercised warrant. The price established for each Restricted Stock
Plan common share is the fair market value as set forth in the
appraisal of shares held by the ESOP. At December 31, 1994, 262,914
common shares were outstanding and 1,755,397 warrants were
unexercised. The share price for Restricted Stock Plan shares
($18.20 at December 31, 1994) is the fair value as set forth in the
appraisal of shares held by the ESOP. However, the Company may not
purchase more than $250,000 of Management Investor shares or
Restricted Stock shares in any fiscal year without the approval of
the Class C Preferred stockholders. A new Stockholders' agreement,
adopted March 11, 1994, contains similar repurchase obligations and
expires March 10, 1999.
(9) Cummings Point Industries Note Receivable
The Company loaned $5,500,000 to Cummings Point Industries, Inc.
("CPI"), of which Capricorn Investors, L.P. ("Capricorn") owns more
than 10%. The indebtedness is represented by a promissory note (the
"Note"), bearing interest at the annual rate of 17%, which provides
that interest is payable quarterly but that interest payments may not
be payable in cash but may be added to the principal of the Note.
The Note is subordinated to all senior debt of CPI. The Note, which
was issued February 12, 1992, was due three months thereafter;
however, the Company, at its option, has extended and may further
extend the maturity date in three month increments to no later than
February 12, 1996. By separate agreement and as security to the
Company, Capricorn has agreed to purchase the Note from the Company
upon three months' notice, for the amount of outstanding principal
plus accrued interest. As additional security, Capricorn's purchase
obligation is collateralized by certain common stock and warrants
issued by the Company and owned by Capricorn. The note has been
reflected as a reduction in stockholders' equity.
(10) Employee Stock Ownership Plan
In September 1988, the Company established an Employee Stock
Ownership Plan (the Plan). The Company borrowed $100 million and
loaned the proceeds, on the same terms as the Company's borrowings,
to the Plan to purchase 4,123,711 shares of common stock of the
Company (the "ESOP loan"). The common stock purchased by the Plan
was held in a collateral account as security for the ESOP loan from
the Company. The Company was obligated to make contributions to the
Plan in at least the same amount as required to pay the principal and
interest installments under the Plan's borrowings. The Plan used the
Company contributions to repay the principal and interest on the ESOP
loan. As the ESOP loan was liquidated, shares of the Company's
common stock were released from the collateral account and allocated
to participants of the Plan. As of December 31, 1993, the loan has
been fully repaid.
In accordance with subsequent amendments to the Employee Stock
Ownership Plan, the Company contributed an additional 25,000 shares
of common stock in December 1993 and in 1994 contributed cash of
$17,435,000 which the ESOP used to acquire 1,312,459 shares and to
pay interest and administrative expenses. The Company has an
agreement in principle with the ESOP to contribute up to $18,000,000
in cash or stock in 1995 to satisfy its funding obligations.
The Plan covers a majority of the employees of the Company.
Participants in the Plan become fully vested after four years of
service. All of the 5,461,170 shares acquired by the ESOP have been
either issued or allocated to participants as of December 31, 1994.
The Company recognizes ESOP expense each year based on contributions
committed to be made to the Plan. The Company's cash contributions
were determined based on the ESOP's debt service and other expenses.
Stock contributions are determined in accordance with the amended
agreement. In 1994, cash contributions to the ESOP were $17,435,000;
1993 cash and stock contributions were $16,608,000 and $437,000
respectively, and 1992 cash contributions were $17,275,000. These
amounts were charged to cost of services and selling and corporate
administrative expenses (including interest on the ESOP term loan of
$491,000 and $1,450,000 in 1993 and 1992, respectively).
(11) Other Expenses
Years Ended December 31,
(In thousands)
1994 1993 1992
Amortization of costs in excess
of net assets acquired $3,813 $4,830 $ 3,793
Provision for nonrecovery of
receivables 2,526 1,141 965
ESOP Repurchase Premium (Note 8) 1,323 1,507 2,787
Write-off of investment in
unconsolidated subsidiary (a) 3,250 - -
Legal and other expense accruals
associated with an acquired
business (1,830) 2,070 -
Environmental costs of divested
businesses (347) 366 1,000
Gain on sale of warrants obtained in
divestitures - - (756)
Other divested business
adjustments 2,665 (73) (1,600)
Miscellaneous (466) (517) (329)
Total Other $10,934 $9,324 $ 5,860
(a) In June 1994 the Company paid an additional $1,250,000 to
increase its holdings in an unconsolidated subsidiary from 40%
to 50.1% and the subsidiary concurrently borrowed $6.0 million
from another investor. The total acquisition cost exceeded
the underlying equity in net assets by $2,582,000. The
subsidiary's stockholders' agreement defined certain trigger
events which, upon their occurrence, transferred control of
the subsidiary from DynCorp to the other shareholders. These
trigger events occurred in the fourth quarter of 1994 and the
subsidiary's lenders called the loans in 1995. These actions,
coupled with financial and cash flow projections provided by
the subsidiary's management, have caused the Company to
determine that its investment has been permanently impaired.
As such, $3,250,100 representing the investment and excess
purchase price has been charged to Other Expense.
(12) Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Earnings (loss) before income taxes and minority interest (but
including extraordinary item - see Note 5) were derived from the
following (in thousands):
1994 1993 1992
Domestic operations $(15,297) $(11,240) $(23,378)
Foreign operations (1,610) 107 204
$(16,907) $(11,133) $(23,174)
The provision (benefit) for income taxes (and including
extraordinary item - see Note 5) consisted of the following (in
thousands):
1994 1993 1992
Current:
Federal $(3,061) $ 723 $ 416
Foreign 54 170 168
State 59 (85) 193
(2,948) 808 777
Deferred:
Federal (2,199) 500 (416)
State (59) 21 (193)
(2,258) 521 (609)
Total $(5,206) $ 1,329 $ 168
The components of and changes in deferred taxes are as follows (in
thousands):
<TABLE>
Deferred Deferred Deferred
Dec. 31, Expense Dec. 31, Expense Dec. 31, Expense
1994 (Benefit) 1993 (Benefit) 1992 (Benefit)
<S> <C> <C> <C> <C> <C> <C>
Increase due to federal rate change $ 402 $ - $ 402 $ (402) $ - $ -
Benefit of state tax on temporary differences
and state net operating loss carryforwards 5,574 (716) 4,858 (1,135) 3,723 (2,211)
Benefit of foreign, targeted jobs and AMT
tax credit carryforwards 2,812 (282) 2,530 (1,073) 1,457 -
Difference between book and tax method of
accounting for depreciation and amortization (167) (223) (390) 1,020 630 (398)
Difference between book and tax method of
accounting for income on U.S. Government
contracts (9,395) 551 (8,844) 1,195 (7,649) 2,988
Deferred compensation expense 4,069 1,347 5,416 (113) 5,303 (2,344)
Operating reserves and other accruals 25,389 (7,816) 17,573 (2,644) 14,929 (6,200)
Difference between book and tax method of
accounting for certain employee benefits 496 223 719 (1,243) (524) 73
Amortization of intangibles (1,073) 925 (148) (204) (352) (945)
Other, net (234) 55 (179) 173 (6) 186
Net deferred tax asset before
valuation allowance 27,873 (5,936) 21,937 (4,426) 17,511 (8,851)
Federal valuation allowance (14,262) 2,962 (11,300) 3,812 (7,488) 6,031
State valuation allowance (5,574) 716 (4,858) 1,135 (3,723) 2,211
Total temporary differences affecting
tax provision 8,037 (2,258) 5,779 521 6,300 (609)
Deferred taxes from "safe harbor"
lease transactions (6,549) (499) (7,048) (441) (7,489) (314)
Net deferred tax asset (liability) $ 1,488 $(2,757) $(1,269) $ 80 $(1,189) $ (923)
</TABLE>
The tax provision (benefit) differs from the amounts
obtained by applying the statutory U.S. Federal income tax rate
to the pre-tax loss amounts. The differences can be reconciled
as follows (in thousands):
1994 1993 1992
Expected Federal income tax benefit $(5,917) $(3,785) $(7,879)
Valuation allowance 2,962 3,812 6,031
State and local income taxes, net of
Federal income tax benefit - (42) -
Reversal of tax reserves for IRS examination (4,069) - -
Nondeductible amortization of intangibles
and other costs 2,331 1,552 2,300
Foreign income tax 54 84 99
Foreign, targeted job and fuel tax credits (734) (359) (222)
Other, net 167 67 (161)
Tax provision (benefit) $(5,206) $1,329 $ 168
During 1994, the Company reached a favorable settlement with
the IRS of disputes over tax deductions related to the leveraged
buyout in 1988. This settlement was formally approved by the IRS in
February 1995. Applicable tax reserves were reversed in the
fourth quarter of 1994.
In 1994, the federal tax benefit resulted from reversal of
tax reserves for the IRS examination and the tax benefit for
operating losses, net of a valuation allowance, less the federal tax
provision of a majority owned subsidiary required to file a separate.
Federal return. In 1993 and 1992 the Company did not record any
Federal income tax benefit because of the uncertainty regarding the
the level of future income. The Federal tax provision recognized in
those years was that of a majority owned subsidiary which is
required to file a separate return. Additionally, the Company
recognized a foreign income tax provision in 1994, 1993 and 1992 and
a state tax credit in 1992.
The Company's U.S. Federal income tax returns have been
cleared through 1984. The Internal Revenue Service completed an
examination of the Company's tax returns for the period 1985-88
and proposed several adjustments, the most significant of which
related to deductions taken by the Company for expenses incurred
in the 1988 leveraged buyout. The Company and the IRS settled
these proposed adjustments in 1994. Taxes and accrued interest
associated with these adjustments, which have not yet been
assessed, are approximately $6,000,000.
The Company has state net operating losses and various tax
credit carryforwards available to offset future taxable income
and income taxes. Following are the net operating losses and
foreign, targeted jobs and AMT tax credits by year of expiration
(in thousands):
Year of ATM Tax Targeted Jobs Foreign State Net
Expiration Credits Tax Credits Tax Credits Operating Losses
1996 81
1998 6,254
1999 272
2000 338
2003 55
2006 249
2007 314
2008 119 16,302
2009 118
No Expiration 1,659
$1,659 $ 800 $ 353 $22,949
(13) Pension Plans
Union employees who are not participants in the ESOP are covered
by multiemployer pension plans under which the Company pays fixed
amounts, generally per hours worked, according to the provisions of
the various labor contracts. In 1994, 1993 and 1992, the Company
expensed $2,440,000, $2,400,000 and $2,693,000, respectively, for
these plans. Under the Employee Retirement Income Security Act of
1974 as amended by the Multiemployer Pension Plan Amendments Act of
1980, an employer is liable upon withdrawal from or termination of a
multiemployer plan for its proportionate share of the plan's
unfunded vested benefits liability. Based on information provided
by the administrators of the majority of these multiemployer plans,
the Company does not believe there is any significant amount of
unfunded vested liability under these plans.
The Company makes contributions to a defined benefit pension plan
for employees working on one U.S. government contract. The plan is
accounted for in accordance with the requirements of Statement of
Financial Accounting Standards No. 87. The pension plan had assets
of $6,761,000 and projected benefit obligations of $7,607,000 at
September 30, 1994 (the plan's fiscal year end). This pension plan
remains in effect regardless of changes in contractors which may
occur as a result of the recompetition process.
(14) Loss Per Common Share
Primary loss per share is based on the weighted average number
of common and dilutive common equivalent shares outstanding during
the period. In addition, 1994 and 1993 include as outstanding
common stock, shares earned and vested but unissued under the
Restricted Stock Plan. For years 1994, 1993 and 1992 the
outstanding warrants and shares which would be issued under the
assumed conversion of Class C Preferred Stock have been excluded
from the calculation of loss per share as their effect is
antidilutive because of the losses incurred during the periods (see
also Note 8). The loss per common share for 1994, 1993 and 1992
includes the effect of the unpaid dividends on the Class C Preferred
Stock ($1,606,000 in 1994, $1,347,000 in 1993 and $1,129,000 in
1992) and, in addition, for 1992 the dividends paid on Class A
Preferred Stock. The average number of shares used in determining
primary loss per share was 6,802,012 in 1994, 5,141,319 for 1993
and 5,102,621 for 1992.
(15) Incentive Compensation Plans
The Company has several formal incentive compensation plans which
provide for incentive payments to officers and key employees.
Incentive payments under these plans are based upon operational
performance, individual performance, or a combination thereof, as
defined in the plans. Incentive compensation expense was $7,979,000
for 1994, $7,067,000 for 1993 and $6,058,000 for 1992.
(16) Leases
The Company has capitalized all significant leases which meet the
criteria for classification as capital leases, principally leases
for vehicles and equipment. Capitalized leases are amortized over
the shorter of the useful lives of the assets or the lease term.
Future minimum lease payments required under operating leases that
have remaining noncancellable lease terms in excess of one year at
December 31, 1994 and capitalized leases are summarized below:
Operating Capitalized
Leases Leases
Years Ending December 31,
1995 $11,174 $ 1,021
1996 8,659 661
1997 7,572 509
1998 6,672 105
1999 5,844 -
Thereafter 12,093 -
Total minimum lease payments $52,014 2,296
Less interest on capitalized leases 281
Present value of capitalized leases
as of December 31, 1994 (Note 5) $ 2,015
Net rent expense for leases, excluding amounts for capitalized
leases, was $22,117,000 for 1994, $16,553,000 for 1993 and
$14,706,000 for 1992.
(17) Acquisitions
On October 31, 1994, the Company acquired all of the issued and
outstanding shares of stock of CBIS Federal Inc. (CBIS) for a cash
payment of $8,159,000 including out of pocket costs. CBIS,
headquartered in Fairfax, Virginia, provides a full range of
services across the life cycle of information solutions and services
primarily to federal government civilian agencies and also to the
Department of Defense and state and local governments. The
acquisition was accounted for as a purchase and $5,868,000 of
goodwill was recorded which will be amortized over 40 years.
On November 12, 1993 the Company acquired Technology Applications,
Inc. Aggregate cash paid, notes issued and mortgages assumed
totaled $11,419,000 and 125,714 shares of common stock valued at
$2,200,000 were issued. The Company also acquired certain assets of
Science Management Corporation ("SMC") and NMI Systems Inc. ("NMI")
on February 18, 1993 and December 10, 1993, respectively, for an
aggregate of $5,352,000 in cash, notes and other liabilities.
The 1993 acquisitions were accounted for as purchases.
Goodwill of $6,083,000 was recorded and is being amortized over
periods up to 40 years. The allocation period for the NMI
acquisition still remains open at December 31, 1994 pending
resolution of certain billing rates used on U.S. Government
contracts.
Consolidated revenues, loss before extraordinary item, net loss
and loss per share for the years ended December 31, 1994 and 1993,
adjusted on an unaudited pro forma basis as if the above
acquisitions had been consummated at the beginning of the respective
periods, are as follows (in thousands except per share amounts):
1994 1993
Revenues $1,074,060 $1,066,043
Loss before extraordinary item $ ( 12,050) $ (12,282)
Net loss for common stockholders $ (13,656) $ (13,629)
Net loss per common share $ (2.01) $ (2.71)
Additionally, in June 1994, the Company paid an aggregate $4.0
million for a 25% interest in each of Composite Technology, Inc.
(CTI) and Gateway Passenger Services, L.P. Goodwill of $1,750,000
was recorded and will be amortized over periods up to 40 years.
(18) Commitments, Contingencies and Litigation
The Company is involved in various claims and lawsuits, including
contract disputes and claims based on allegations of negligence and
other tortious conduct. The Company is also potentially liable for
certain environmental, personal injury, tax and contract dispute
issues related to the prior operations of divested businesses. In
most cases, the Company has denied, or believes it has a basis to
deny liability, and in some cases has offsetting claims against the
plaintiffs or third parties.
Damages currently claimed by the various plaintiffs for these
items which may not be covered by insurance aggregate approximately
$22,000,000 (including compensatory and possible punitive damages
and penalties).
A former subsidiary, which discontinued its business activities in
1986, has been named as one of many defendants in civil lawsuits
which have been filed in various state courts against manufacturers,
distributors and installers of asbestos products. (The subsidiary
had discontinued the use of asbestos products prior to being
acquired by the Company.) The Company has also been named as a
defendant in several of these actions. At the beginning of 1992,
403 claims had been filed and during the year 1,785 additional
claims were filed with 73 claims being settled. In 1993, 709
additional claims were filed and 1,273 were settled. In 1994, 1,135
new claims were filed with 353 claims being settled. Defense has
been tendered to and accepted by the Company's insurance carriers.
The former subsidiary was a nonmanufacturer that installed or
distributed industrial insulation products. Accordingly, the
Company strongly believes that the subsidiary has substantial
defenses against alleged secondary and indirect liability. The
Company has provided a reserve for the estimated uninsured legal
costs to defend the suits and the estimated cost of reaching
reasonable no-fault liability settlements. The amount of the
reserve has been estimated based on the number of claims filed and
settled to date, number of claims outstanding, current estimates of
future filings, trends in costs and settlements, and the advice of
the insurance carriers and counsel.
The Company has retained certain liability in connection with its
1989 divestiture of its major electrical contracting business,
Dynalectric Company ("Dynalectric"). The Company and Dynalectric were
sued in 1989 by a former Dynalectric subcontractor. The subcontractor
has alleged that its subcontract to furnish certain software and
services in connection with a major municipal traffic signalization
project was improperly terminated by Dynalectric Company and that
Dynalectric is liable to the former subcontractor for a variety of
additional claims, the aggregate dollar amount of which have not
been formally recited in the subcontractor's complaint. Dynalectric
has also filed certain counterclaims against the former
subcontractor. The Company and Dynalectric believe that they have
valid defenses, and/or that any liability would be more than offset
by recoveries under the counterclaims. The Company has established
reserves for the contemplated defense costs and for the cost of
obtaining enforcement of arbitration provisions contained in the
contract.
The Company is a party to other civil lawsuits which have arisen
in the normal course of business for which potential liability,
including costs of defense, are covered by insurance policies.
The major portion of the Company's business involves contracting
with departments and agencies of, and prime contractors to, the U.S.
government and as such are subject to possible termination for the
convenience of the government and to audit and possible adjustment
to give effect to unallowable costs under cost-type contracts or to
other regulatory requirements affecting both cost-type and fixed-
price contracts. In management's opinion, there are no outstanding
issues of this nature at December 31, 1994 that would have a
material adverse effect on the Company's consolidated financial
position or results of operations.
The Company has recorded its best estimate of the liability that
will result from these matters. While it is not possible to predict
with certainty the outcome of the litigation and other matters
discussed above, it is the opinion of the Company's management,
based in part upon opinions of counsel, insurance in force and the
facts presently known, that liabilities in excess of those recorded,
if any, arising from such matters would not have a material adverse
effect on the results of operations or consolidated financial
position of the Company.
The Company is highly leveraged, and its ability to meet its future
debt service and working capital requirements is dependent upon
increased future earnings and cash flow from operations, the expansion
of an accounts receivable facility financing, continuation of ESOP
stock purchases in lieu of cash retirement contributions and the
reduction of its debt expense.
(19) Business Segment
The Company operates in one line of business: that of providing
management, technical and professional services to industry and
government organizations primarily to support the customers'
facilities and/or operations on a turn-key (full) service basis.
The Company has no significant foreign operations or assets
outside the United States. The largest single customer of the
Company is the U.S. Government. The Company had prime contract
revenues from the U.S. Government of $723 million in 1994, $663
million in 1993 and $674 million in 1992. Included in revenues from
the U.S. Government are revenues from the Department of Defense of
$551 million in 1994, $543 million in 1993 and $538 million in 1992.
No other customer accounted for more than 10% of revenues in any
year.
(20) Subsequent Events
On February 7, 1995, the Company sold its Corporate headquarters
to RREEF America Reit Corp. C and entered into a 12-year lease with
RREEF as the landlord. The proceeds from the sale-leaseback were
used to satisfy the mortgage on the building which was due to mature
on March 27, 1995. Since the Company had the intent to discharge
its obligation under the mortgage with noncurrent assets, the amount
has been included in long-term debt at December 31, 1994.
In separate transactions on January 20 and February 7, 1995, the
Company secured $24 million of equipment financing. The proceeds
raised will serve to reduce the balance of the 16% Subordinated
Debentures outstanding.
(21) Aircraft Maintenance Facilities - Consolidation and Asset
Impairment
The Company continues to evaluate its alternatives in respect to
the unsatisfactory performance by the Commercial Sector's aircraft
maintenance unit which posted its fourth consecutive year of
operating losses. The Company has engaged an investment advisor to
market the maintenance unit. The status of the unit presently
remains unresolved pending the outcome of discussions with potential
investors and a major customer. These discussions could result in
one of a number of alternatives, including the consummation of a
joint venture, the procurement of long-term contracts, sale of the
entire unit or, worst case, the failure to negotiate any transaction
at all. Current management projections indicate that the maintenance
unit should be profitable in 1995 with the exception of one site.
The Company believes that if it
is unable to consummate a satisfactory resolution through any of
these alternatives, the most likely course of action would be to
consolidate its operations by closing one of the heavy maintenance
facilities. In management's opinion, no single alternative (i.e.
entering into a joint venture, the curtailment of operations or shut
down of one or more facilities, or the divestiture of the unit as a
whole) is more or less likely to occur; however, the Company
believes that it has suffered at least a partial impairment of its
investment in this unit. Accordingly, it has recorded an estimate
of the applicable goodwill ($5.2 million) and other assets ($4.3
million) that would be written down in the event the consolidation
or shut-down of one of the facilities becomes necessary. This does
not fully reserve for the potential write-off that would be
necessary for the complete closure or sale of the business in the
event that the Company is unable to curtail the operating losses in
the future.
Selected financial operating data of the commercial aircraft
maintenance unit is as follows (in thousands except number of
employees):
1994 1993 1992
Revenues $73,045 $57,288 $74,253
Operating losses $(5,351) $(6,629) $ (428)
Asset impairment provision $(9,492) $ - $ -
Net assets (after write-down)
including Goodwill
at December 31 $30,315 $44,354 $43,328
Backlog at December 31 $12,730 $11,368 $ -
Number of employees 634 701 631
(22) Quarterly Financial Data (Unaudited)
A summary of quarterly financial data for 1994 and 1993 is as
follows (in thousands, except per share data):
<TABLE>
1994 Quarters 1993 Quarters
First Second Third Fourth First Second Third Fourth
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $259,537 $248,551 $244,928 $269,056 $231,560 $235,567 $239,013 $247,005
Gross profit 10,815 11,757 8,892 12,404 6,726 9,507 8,219 15,104
Earnings (loss) before income
taxes and minority interest (1,156) (259) (3,686) (11,806) (6,015) (2,548) (2,953) 383
Minority interest 249 311 226 344 118 386 113 335
Net loss for common stockholders (1,589) (930) (4,245) (6,067) (6,186) (2,979) (3,854) (395)
Loss per common share:
Primary and fully diluted:
Net loss for common
stockholders (0.36) (0.21) (0.59) (0.82) (1.26) (0.65) (0.82) (0.15)
</TABLE>
Quarterly data may not equal annual totals due to rounding
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Balance Sheets
(Dollars in Thousands)
ASSETS
December 31,
1994 1993
Current Assets:
Cash and short-term investments $ 8,937 $ 6,894
Accounts receivable and contracts in process,
net of allowance for doubtful accounts (Note 3) 35,689 20,723
Inventories of purchased products and supplies 977 513
Other current assets 5,027 3,718
Total current assets 50,630 31,848
Investment in and advances to subsidiaries and affiliates
affiliates 74,278 70,277
Property and Equipment, net of accumulated depreciation
and amortization 8,126 9,836
Intangible Assets, net of accumulated amortization 78,377 86,811
Other Assets 4,559 6,040
Total Assets $215,970 $204,812
The "Notes to Consolidated Financial Statements" of DynCorp and Subsidiaries
are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements"
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Balance Sheets
(Dollars in Thousands)
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY
December 31,
1994 1993
Current Liabilities:
Notes payable and current portion of long-term
debt (Note 2) $ 2,919 $ 3,392
Accounts payable 13,068 11,594
Advances on contracts in process 2,711 864
Accrued liabilities 64,303 71,855
Total current liabilities 83,001 87,705
Long-Term Debt (Note 2) 108,508 93,150
Other Liabilities and Deferred Credits 14,923 15,591
Total Liabilities 206,432 196,446
Commitments, Contingencies and Litigation - -
Redeemable Common Stock redemption value per share
of $18.20 in 1994 and $17.50 in 1993, 125,714 shares
issued and outstanding 2,288 2,200
Stockholders' Equity:
Capital stock, $0.10 par value:
Preferred stock, Class C 3,000 3,000
Common stock 789 502
Common stock warrants 11,486 15,119
Unissued common stock under restricted stock plan 9,923 10,395
Paid-in surplus 118,068 95,983
Deficit (118,256) (105,425)
Common stock held in treasury (8,817) (5,840)
Cummings Point Industries, Inc. note receivable (8,943) (7,568)
Total Stockholders' Equity 7,250 6,166
Total Liabilities, Redeemable Common Stock
and Stockholders' Equity $215,970 $204,812
The "Notes to Consolidated Financial Statements" of DynCorp and Subsidiaries
are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Statements of Operations
(Dollars in Thousands)
For the Years Ended December 31,
1994 1993 1992
Revenues $545,581 $552,662 $557,675
Costs and Expenses:
Cost of services 523,029 528,776 542,901
Selling and corporate administrative 10,654 10,994 12,534
Interest expense 15,243 14,950 14,608
Interest income (1,946) (1,969) (1,693)
Other (Note 3) 36,842 23,902 23,490
583,822 576,653 591,840
Loss before income taxes, equity
in net income of subsidiaries
and extraordinary item (38,241) (23,991) (34,165)
Benefit for income taxes (14,593) (1,561) (3,900)
Loss before equity in net income of subsidiaries
and extraordinary item (23,648) (22,430) (30,265)
Equity in net income of subsidiaries (10,817) (9,016) (9,449)
Loss before extraordinary item (12,831) (13,414) (20,816)
Extraordinary loss from early retirement
of debt - - 2,526
Net Loss (12,831) (13,414) (23,342)
Preferred Stock Class A dividends declared
and paid and accretion of discount - - 959
Net Loss for Common Stockholders $(12,831) $(13,414) $(24,301)
The "Notes to Consolidated Financial Statements" of DynCorp and Subsidiaries
are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
SCHEDULE I - Condensed Financial Information of Registrant
Statements of Cash Flows
(Dollars in Thousands)
For the Years Ended December 31,
1994 1993 1992
Cash Flows from Operating Activities:
Net loss $(12,831) $(13,414) $(23,342)
Adjustments to reconcile net loss from operations
to net cash provided by operating activities:
Depreciation and amortization 12,575 7,834 9,510
Pay-in-kind interest on Junior Subordinated
Debentures 15,329 13,142 6,590
Loss on purchase of Junior Subordinated Debentures - - 2,526
Deferred income taxes (59) 521 (666)
Accrued compensation under Restricted Stock Plan (329) 2,047 2,354
Noncash interest income (1,375) (1,158) (910)
Other (665) (1,936) (4,363)
Change in assets and liabilities, net of acquisitions
and dispositions and sale of accounts receivable in 1993:
Increase in accounts receivable and contracts
in process (14,966) (2,570) (10,173)
Increase in inventories (465) (93) (72)
(Increase) decrease in other current assets (1,309) 1,992 986
Increase (decrease) in current liabilities except notes
payable and current portion of long-term debt(4,097) (976) 6,690
Cash provided (used) by operating activities(8,192) 5,389 (10,870)
Cash Flows from Investing Activities:
Sale of property and equipment 660 829 130
Proceeds received from notes receivable - - 1,346
Purchase of property and equipment, net of
capitalized leases 1,734 (928) (2,381)
Increase in notes receivable - - (5,500)
Increase in investments in affiliates 1,500 - (1,888)
Other (1,334) 345 (221)
Cash provided (used) from investing activities 2,560 246 (8,514)
Cash Flows from Financing Activities:
Purchase of Preferred Stock Class A and
Junior Subordinated Debentures - - (42,466)
Treasury stock purchased (3,182) (1,979) (3,448)
Payment on indebtedness (3,914) (4,725) (41,010)
Accounts receivable sold (Note 3) - - 63,682
Dividends paid on Class A Preferred Stock - - (861)
Treasury stock sold 159 46 108
Reduction in loan to Employee Stock Ownership Plan - 16,116 16,099
Sale of stock to Employee Stock Ownership Plan 17,100 - -
Other financing transactions (38) - -
Change in intercompany balances, net (2,450) (14,021) 14,050
Cash provided (used) from financing activities 7,675 (4,563) 6,154
Net Increase (Decrease) in Cash and Short-term
Investments 2,043 1,072 (13,230)
Cash and Short-term Investments at Beginning
of the Year 6,894 5,822 19,052
Cash and Short-term Investments at End of the
Year 8,937 6,894 5,822
The "Notes to Consolidated Financial Statements" of DynCorp and
Subsidiaries are an integral part of these statements.
See accompanying "Notes to Condensed Financial Statements."
DynCorp (Parent Company)
Schedule I - Notes to Condensed Financial Statements
December 31, 1994
1. Basis of Presentation
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the Condensed Financial Statements of the Registrant do not
include all of the information and notes normally included with financial
statements prepared in accordance with generally accepted accounting
principles. It is, therefore, suggested that these Condensed Financial
Statements be read in conjunction with the Consolidated Financial Statements
and Notes included elsewhere in this Annual Report on Form 10-K.
2. Long-term Debt
At December 31, 1994 and 1993, long-term debt consisted of (in
thousands):
1994 1993
Junior Subordinated Debentures, net of unamortized
discount of $4,793 and $5,175 $102,659 $86,947
Notes payable, due in installments through 1999,
9.98% weighted average interest rate 6,966 6,643
Capitalized equipment leases 1,802 2,952
111,427 96,542
Less current portion 2,919 3,392
$108,508 $93,150
Maturities of long-term debt as of December 31, 1994, were as follows (in
thousands):
1995 $ 2,919
1996 2,593
1997 1,907
1998 956
1999 185
Thereafter 102,867
$111,427
3. Accounts Receivable
At December 31, 1992, the Company had sold $63,682,000 of its accounts
receivable to Dyn Funding Corporation (DFC), a wholly owned subsidiary of the
Company. DFC was established in January, 1992 to issue $100,000,000 of
Contract Receivable Collateralized Notes (Notes) and to purchase eligible
accounts receivable from the Company and its subsidiaries. On an ongoing
basis, the cash received by DFC from collection of the receivables is used to
make interest payments on the Notes, pay a servicing fee to the Company and
purchase additional receivables from the Company (see Note 5 to Consolidated
Financial Statements included elsewhere in this Form 10-K).
The Company receives 97% of the face value of the accounts receivable sold
to DFC. The 3% discount from the face value of the accounts receivable is
recorded as an expense by the Company at the time of sale. In 1994 and 1993,
the Company recorded as expense $16,032,000 and $16,298,000 which is reflected
in "Other" in the accompanying "Statements of Operations" (in the
"Consolidated Statements of Operations" of DynCorp and Subsidiaries this
expense is offset by the gain recognized by DFC).
DynCorp and Subsidiaries
SCHEDULE II - Valuation and Qualifying Accounts
For the Years Ended December 31, 1994, 1993, and 1992
(Dollars in Thousands)
Balance at Charged to Charged Balance
Beginning Costs and to other Deduct- at End of
Description of period Expenses Accounts (1) ions Period
Year Ended December 31, 1994
Allowance for doubtful
accounts $1,469 $2,503 $ 367 $ 347 $3,992
Year Ended December 31, 1993
Allowance for doubtful
accounts $3,415 $1,141 $ 79 $3,166 $1,469
Year Ended December 31, 1992
Allowance for doubtful
accounts $2,532 $ 965 $ 254 $ 336 $3,415
(1) Includes recovery of prior year write-offs.
(2) Write-off of uncollectible accounts.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses payable by the Company in connection with
the sale of the Common Stock offered hereby are as follows:
Registration fee-Securities and Exchange Commission $61,498
Printing and engraving expenses 25,000
Blue sky fees and expenses (including counsel)
Accounting fees and expenses
Legal Fees and expenses
Miscellaneous
Total $
Item 14. Indemnification of Directors and Officers.
Section 102 of the General Corporation Law of the State of
Delaware ("GCL") allows a corporation to eliminate the personal
liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director,
except in cases where the director breached his duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or
a knowing violation of law, authorized the unlawful payment of a
dividend or approved an unlawful stock redemption or repurchase
or obtained an improper personal benefit. The Registrant's
Amended and Restated Certificate of Incorporation, a copy of
which is filed as an exhibit to this Registration Statement,
contains a provision which eliminates directors' personal
liability as set forth above.
The Amended and Restated Certificate of Incorporation of the
Registrant and the Bylaws of the Registrant provide in effect
that the Registrant shall indemnify its directors, officers and
employees to the extent permitted by Section 145 of the GCL.
Section 145 of the GCL provides that a Delaware corporation has
the power to indemnify its officers and directors in certain
circumstances.
Subsection (a) of Section 145 of the GCL empowers a
corporation to indemnify any director or officer, or former
director or officer, 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 or in the right of the
corporation), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or
proceeding provided that such director or officer acted in good
faith in a manner reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any
criminal action or proceeding, provided that such director or
officer had no cause to believe his or her conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to
indemnify any director or officer, or former director or officer,
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 such person acted in any of the
capacities set forth above, against expenses actually and
reasonably incurred in connection with the defense or settlement
of such action or suit provided that such director or officer
acted in good faith and in a manner reasonably believed to be in
or not opposed to the best interests of the corporation, except
that no indemnification may be made in respect of any claim,
issue or matter as to which such director or officer shall have
been adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the corporation unless and only
to the extent that the Court of Chancery or the court in which
such action was brought shall determine that despite the
adjudication of liability such director or officer is fairly and
reasonably entitled to indemnity for such expenses which the
court shall deem proper.
Section 145 further provides that to the extent a director
or officer of a corporation has been successful in the defense of
any action, suit or proceeding referred to in subsections (a) and
(b) or in the defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her
in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability
asserted against him or her or incurred by him or her in any such
capacity or arising out of his or her status as such whether or
not the corporation would have the power to indemnify him or her
against such liabilities under Section 145.
The Underwriting Agreement, filed as Exhibit 1 hereto, and
incorporated herein by reference, contains certain provisions
relating to the indemnification of the Registrant's directors,
officers and controlling persons.
Item 15. Recent Sales of Unregistered Securities.
On November 12, 1993, the Company sold 125,714 shares of
Common Stock to James I. Chatman, as partial purchase price for
the acquisition of stock of Technology Applications, Inc. The
price per share was $17.50, and the total price for the Common
Stock sold to Mr. Chatman was $2,199,995. The sale was exempt
from registration by reason of Rule 505 of Regulation S-K, as promulgated
under the Securities Act of 1933, as amended.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following is a list of exhibits to this
Registration Statement:
Exhibit
No. Description
3.1 Certificate of Incorporation of the Registrant, as amended
3.2 By-laws of the Registrant, as amended
4.1 Employee Stock Ownership Plan, as amended
4.2 Savings and Retirement Plan, as amended
4.3 1995 Employee Stock Purchase Plan
4.4 1995 Stock Option Plan
4.5 Executive Incentive Plan, as amended
4.6 Equity Target Ownership Policy
5 Opinion of H. M. Hougen
9 New Stockholders Agreement
10 Material contracts
12 Computation of Ratios
13 Annual Report to security-holders
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP
24 Powers of Attorney (included on signature page).
(b) Financial Statement Schedules.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the 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 the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the Company has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Commonwealth of Virginia,
County of Fairfax, on May 12, 1995.
DynCorp
By: Dan R Bannister, President and Chief Executive Officer
Dan R Bannister, President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature to this Amendment to Registration Statement appears
below hereby appoints Dan R. Bannister, David L. Reichardt and H.
Montgomery Hougen, and each of them, any one of whom may act
without the joiner of the others, as his or her attorney-in-fact
with full power of substitution and resubstitution to sign on his
or her behalf individually and in the capacity stated below, and
to sign and file all amendments and post-effective amendments to
this Amendment to Registration Statement and any and all other
documents that may be required in connection with the filing of
this Amendment to Registration Statement, which amendments may
make such changes and additions to this Amendment to Registration
Statement as such attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities act of 1933,
as amended, this Amendment to Registration Statement has been
signed by the following person sin the capacities and on the
dates indicated.
Signature Title
Herbert S. Winokur, Jr. Director and Chairman of the Board
Herbert S. Winokur, Jr.
Dan R. Bannister Director, President and Chief Executive Officer
Dan R. Bannister (Principal Executive Officer)
T. Eugene Blanchard Director,Senior Vice President and Chief Financial
T. Eugene Blanchard Officer (Principal Financial Officer)
Russell E. Dougherty Director
Russell E. Dougherty
Gerald A. Dunn Vice President and Controller
Gerald A. Dunn (Principal Accounting Officer)
James H. Duggan Director and Executive Vice President
James H. Duggan
Paul V. Lombardi Director and Executive Vice President
Paul V. Lombardi
Dudley C. Mecum II Director
Dudley C. Mecum II
Michael T. Masin Director
Michael T. Masin
David L. Reichardt Director, Senior Vice President and General Counsel
David L. Reichardt
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF DYNCORP
FIRST: The name of the corporation is DynCorp.
SECOND: Its registered office in the State of Delaware
is located at 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name and address of its registered
agent are The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801.
THIRD: The nature of the business, or objects or
purposes to be transacted, promoted or carried on are to engage
in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware (the "DGCL").
FOURTH: The total number of shares of capital stock
which the corporation shall have authority to issue is 19,243,711
shares, consisting of four classes of capital stock:
(i) 3,500,000 shares of 17% Redeemable Pay-in-Kind
Class A Preferred Stock, par value $0.10 per share (the "Class A
Preferred Stock");
(ii) 620,000 shares of 18% Redeemable Pay-in-Kind Class
B Preferred Stock, par value $24.25 per share (the "Class B
Preferred Stock");
(iii) 123,711 shares of Class C Convertible Preferred
Stock, par value $0.10 per share (the "Class C Preferred Stock";
and
(iv) 15,000,000 shares of Common Stock, par value $0.10
per share (the "Common Stock").
The designations, preferences, powers, qualifications, special or
relative rights or privileges of the Class A Preferred Stock,
Class B Preferred Stock, Class C Preferred Stock and Common Stock
shall be as follows:
A. Class A Preferred Stock
1. Rank. The Class A Preferred Stock shall, with respect
to the payment of dividends, mandatory redemption payments and
rights upon liquidation, dissolution or winding up of the affairs
of the corporation rank (i) senior and prior to the Class B
Preferred Stock (except with respect to mandatory redemption
payments for Class B Preferred Stock), the Class C Preferred
Stock, the Common Stock and to any other class or series of
capital stock of the corporation hereafter issued unless the
terms of such class or series of capital stock of the corporation
specifically provide that shares of such class or series shall
rank prior to or on a parity with the shares of Class A Preferred
Stock (shares of Class B Preferred Stock, Class C Preferred
Stock, Common Stock and any other class or series of capital
stock of the corporation hereafter issued the terms of which do
not specifically provide that shares of such class or series
shall rank prior to or on a parity with the shares of Class A
Preferred Stock are collectively referred to in this Section A of
Article FOURTH as the "Junior Securities"); (ii) on a parity with
any other class or series of capital stock of the corporation
hereafter issued for fair value as determined by the Board of
Directors the terms of which specifically provide that shares of
such class or series shall rank on a parity with the shares of
Class A Preferred Stock (shares of such class or series are
collectively referred to in this Section A of Article FOURTH as
the "Parity Securities"); and (iii) junior to any other class or
series of capital stock of the corporation hereafter issued with
the consent of the holders of a majority of the outstanding
shares of Class A Preferred Stock, Class B Preferred Stock and
Class C Preferred Stock pursuant to subparagraph (b) of paragraph
5 hereof the terms of which specifically provide that shares of
such class or series shall rank senior to shares of Class A
Preferred Stock (shares of such class or series are collectively
referred to in this Section A of Article FOURTH as the "Senior
Securities").
2. Dividends.
(a) From and after the date of issuance, the holders of
outstanding shares of Class A Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors,
to the extent permitted under the DGCL, and before any dividend
or other distribution is declared or paid with respect to the
outstanding Junior Securities, cumulative dividends payable
quarterly in arrears on March 31, June 30, September 30 and
December 31 in each year (each such date is referred to herein as
a "Dividend Payment Date" and the quarterly period between
consecutive Dividend Payment Dates is referred to herein as a
"Dividend Period") commencing on [June 30, 1988]. The per annum
dividend rate on outstanding shares of Class A Preferred Stock
shall be 17% of the Redemption Price per share thereof as defined
in subparagraph (a) of paragraph 4 hereof (the "Class A Rate").
The amount of dividends payable on shares of Class A Preferred
Stock shall be calculated (a) for each full quarterly Dividend
Period during which such shares are outstanding by dividing by
four the Class A Rate per share and (b) for each Dividend Period
which is less than a full quarter during which such shares are
outstanding by multiplying the Class A Rate by a fraction, the
numerator of which is the actual number of days elapsed in such
quarter and the denominator of which is 365. Such dividends
shall be payable to the holders of record of outstanding shares
of Class A Preferred Stock as their names shall appear on the
stock register of the corporation on such record date, not more
than sixty or less than ten days preceding each such Dividend
Payment Date, as shall be fixed by the Board of Directors in
advance of payment of each such dividend. Any dividend payments
made with respect to shares of Class A Preferred Stock for (i)
any Dividend Period ending prior to the seventh anniversary of
the date of the initial issuance of the Class A Preferred Stock
and (ii) that portion of the next succeeding Dividend Period
which ends on the seventh anniversary of the date of the initial
issuance of the Class A Preferred Stock, may be made, in the sole
discretion of the corporation, in cash or, in whole or in part,
in additional fully paid and nonassessable shares of Class A
Preferred Stock at the rate of 0.04 of a share for each $1.00 of
such dividend not paid in cash, and the issuance of such
additional shares of Class A Preferred Stock (notwithstanding the
amount of net proceeds received with respect to the Fractional
Shares (as hereinafter defined) as described below) shall
constitute payment in full of such dividend. All dividends paid
in cash, in additional shares of Class A Preferred Stock or in
any combination thereof shall be paid pro rata to the holders of
outstanding shares of Class A Preferred Stock entitled thereto.
All shares of Class A Preferred Stock issued as a dividend on the
outstanding shares of Class A Preferred Stock (including shares
sold pursuant to the next sentence), will when so issued be duly
authorized, validly issued, fully paid and nonassessable and free
of all liens and charges. In lieu of issuing certificates
representing fractions of a share of Class A Preferred Stock
("Fractional Shares") in payment of any dividend on Class A
Preferred Stock, at the option of the corporation, each record
holder of Class A Preferred Stock otherwise entitled to receive a
Fractional Share with respect to a dividend payable thereon,
shall receive payment in cash equal to such holder's
proportionate interest in the net proceeds received from the sale
or sales in the open market or pursuant to an auction process (at
the direction of the corporation) by an agent selected by the
corporation on behalf of all such holders of the Fractional
Shares otherwise payable as a dividend. If the corporation so
elects, the holders of Class A Preferred Stock shall have no
other right against the corporation related to such sale other
than the receipt of their proportionate interest in such sale.
(b) Dividends on outstanding shares of Class A
Preferred Stock shall be fully cumulative and shall accrue,
whether or not declared, from the respective dates of issuance of
such shares of Class A Preferred Stock until paid. Accumulated
unpaid dividends for past Dividend Periods may be declared by the
Board of Directors and paid to the holders of record of
outstanding shares of Class A Preferred Stock as their names
shall appear on the stock register of the corporation on such
record date, not more than sixty or less than ten days preceding
the date of payment, as shall be fixed by the Board of Directors,
whether or not such date is a Dividend Payment Date. Holders of
outstanding shares of Class A Preferred Stock shall not be
entitled to receive any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends to
which such holders are entitled as herein provided. No interest
or sum of money in lieu of interest shall be payable in respect
of any accumulated unpaid dividends on outstanding shares of
Class A Preferred Stock.
(c) Dividends shall not be paid on the outstanding
shares of Class A Preferred Stock for any Dividend Period in
which dividends for any prior Dividend Period have not been paid
in full on any Senior Securities or Parity Securities from time
to time outstanding; provided, however, that in the event such
failure to pay accrued dividends is with respect only to Parity
Securities, cash dividends may be declared, paid or set apart for
payment, without interest, pro rata on shares of the Class A
Preferred Stock and outstanding shares of such Parity Securities
so that the amounts of any cash dividends declared, paid or set
apart for payment on outstanding shares of Class A Preferred
Stock and outstanding shares of such Parity Securities shall in
all cases bear to each other the same ratio that, at the time of
such declaration, payment or setting apart for payment, the
amounts of all accrued but unpaid cash dividends on outstanding
shares of Class A Preferred Stock and outstanding shares of such
Parity Securities bear to each other.
(d) So long as any shares of Class A Preferred Stock
are outstanding, the corporation shall not (i) except as set
forth in subparagraph (c) of this paragraph 2, declare, pay or
set apart for payment any dividend on any outstanding Parity
Securities or Junior Securities (other than a dividend which is
payable in shares of Parity Securities or Junior Securities) or
(ii) except with respect to redemption payments for outstanding
shares of Class B Preferred Stock (a) make any payment on account
of, or set apart for payment, money for a sinking or other
similar fund for the purchase, redemption, retirement or other
acquisition for value of any of, or redeem, purchase, retire or
otherwise acquire for value any of, any outstanding Parity
Securities or Junior Securities or any convertible securities,
warrants, rights, calls or options exercisable for or convertible
into any Parity Securities or Junior Securities, (b) make any
distribution in respect of any outstanding Parity Securities or
Junior Securities or any convertible securities, warrants,
rights, calls or options exercisable for or convertible into any
Parity Securities or Junior Securities, in any such case either
directly or indirectly, and whether in cash, obligations or
shares of the corporation or other property (other than
distributions or dividends of a particular class or series of
Parity Securities or Junior Securities) or (c) permit any
corporation or other entity directly or indirectly controlled by
the corporation to purchase, redeem or otherwise acquire for
value any outstanding Parity Securities or Junior Securities or
any convertible securities, warrants, rights, calls or options
exercisable for or convertible into any Parity Securities or
Junior Securities, unless prior to or concurrently with such
declaration, payment, setting apart for payment, purchase,
redemption, retirement, other acquisition for value or
distribution described in clause (i) and clause (ii) above, as
the case may be, all accrued and unpaid dividends, if any, on
outstanding shares of Class A Preferred Stock to the date fixed
for such declaration, payment, setting apart for payment,
purchase, redemption, retirement, other acquisition for value or
distribution described in clause (i) and clause (ii) above shall
have been paid in full; provided, however, that nothing contained
herein shall limit or restrict the corporation from purchasing,
redeeming or otherwise retiring, to the extent required by law or
by contractual obligation, any shares of capital stock of the
corporation distributed by the corporation's employee stock
ownership plan to participants in such plan.
(e) Subject to the foregoing provisions of this
paragraph 2, the Board of Directors may declare and the
corporation may pay or set apart for payment dividends and other
distributions on any Parity Securities or Junior Securities and
may purchase or otherwise acquire any Parity Securities or Junior
Securities or any convertible securities, warrants, rights, calls
or options exercisable for or convertible into any Parity
Securities or Junior Securities and the holders of outstanding
shares of Class A Preferred Stock shall not be entitled to share
therein.
3. Liquidation.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, before any distribution or payment shall be made to
the holders of any outstanding Junior Securities, subject to the
rights of creditors, the holders of outstanding shares of Class A
Preferred Stock shall be entitled to be paid out of the assets of
the corporation available for distribution to stockholders, an
amount in cash equal to $25.00 per share, together with an amount
in cash equal to all accrued but unpaid dividends on such shares
to the date fixed for the liquidation, dissolution or winding up
of the affairs of the corporation; provided, however, that the
holders of outstanding shares of Class A Preferred Stock shall
not be entitled to receive such preferential liquidation payments
until the preferential liquidation payments on all outstanding
Senior Securities have been paid in full. Except as provided in
the preceding sentence, the holders of outstanding shares of
Class A Preferred Stock shall not be entitled to any distribution
in the event of the liquidation, dissolution or winding up of the
affairs of the corporation. If, upon any such liquidation,
dissolution or winding up of the affairs of the corporation, the
assets of the corporation available for distribution to the
holders of outstanding shares of Class A Preferred Stock and
outstanding Parity Securities shall be insufficient to permit the
payment in full to such holders and to the holders of any Parity
Securities of the full amount of the preferential liquidation
amounts to which they are then entitled, the entire assets of the
corporation thus available for distribution shall be distributed
among the holders of outstanding shares of Class A Preferred
Stock and Parity Securities ratably in proportion to the full
amount to which such holders would otherwise be entitled if such
assets were sufficient to permit payment in full. After the
payment of all preferential liquidation amounts to which the
holders of outstanding shares of Class A Preferred Stock shall be
entitled, such holders shall not be entitled to any further
participation in any distribution of the assets of the
corporation to its stockholders.
(b) For purposes of this paragraph 3, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the corporation
nor the consolidation or merger of the corporation with or into
any other corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the affairs of the
corporation.
4. Redemption.
(a) The outstanding shares of Class A Preferred Stock
shall be subject to optional redemption by the corporation, in
whole or in part, at any time and from time to time as
hereinafter provided in this subparagraph (a) of paragraph 4;
provided, however, that so long as any shares of Class B
Preferred Stock are outstanding, the Corporation may not make any
optional redemption of outstanding shares of Class A Preferred
Stock. The price at which outstanding shares of Class A
Preferred Stock may be redeemed pursuant to this subparagraph (a)
of paragraph 4 shall be $25.00 per share (the "Redemption
Price"), together with an amount in cash equal to all accrued but
unpaid dividends on such shares to the date fixed for such
redemption, without interest (each such date being referred to
herein as an "Optional Redemption Date"). The shares of
outstanding Class A Preferred Stock to be redeemed by the
corporation on any Optional Redemption Date shall be selected by
the corporation; provided, however, that to the extent
practicable such redemptions shall be made ratably among the
holders of outstanding shares of Class A Preferred Stock, in
proportion to the number of shares of Class A Preferred Stock
held by each such holder.
(b) Commencing June 30, 1999 and on each June 30
thereafter through June 30, 2003 (each such date being herein
referred to as a "Mandatory Redemption Date"), prior to the
payment of any required mandatory redemption payment then due
with respect to outstanding Junior Securities, the corporation
shall, to the extent permitted by the DGCL, redeem such number of
outstanding shares of Class A Preferred Stock as shall be equal
to 20% of the highest number of shares of Class A Preferred Stock
outstanding at any time. Notwithstanding the foregoing, the
holders of outstanding shares of Class A Preferred Stock shall
not be entitled to receive such mandatory redemption payments
until all required mandatory redemption payments then due with
respect to outstanding Senior Securities and Class B Preferred
Stock have been paid in full. The shares of outstanding Class A
Preferred Stock to be redeemed by the corporation on any
Mandatory Redemption Date shall be selected by the corporation;
provided, however, that to the extent practicable such
redemptions shall be made ratably among the holders of
outstanding shares of Class A Preferred Stock, in proportion to
the number of shares of Class A Preferred Stock held by each such
holder. The corporation shall, at its option as hereinafter
provided, be entitled to credit against the number of shares of
Class A Preferred Stock to be redeemed on any Mandatory
Redemption Date as provided in the immediately preceding
sentences, shares of Class A Preferred Stock acquired on or prior
to such Mandatory Redemption Date by the corporation through
purchase in the open market or privately, redemption pursuant to
subparagraph (a) of this paragraph 4, or otherwise and not
previously credited against any mandatory redemption obligations
of the corporation. Shares so acquired shall be credited against
the number of shares to be redeemed on each Mandatory Redemption
Date in the chronological order of such Mandatory Redemption
Dates. The price at which outstanding shares of Class A
Preferred Stock shall be redeemed pursuant to this subparagraph
(b) of paragraph 4 shall be the Redemption Price, together with
all accrued but unpaid dividends on such shares to the date fixed
for such redemption, without interest.
(c) Notice of redemption of outstanding shares of Class
A Preferred Stock pursuant to subparagraphs (a) or (b) of this
paragraph 4 shall be sent by or on behalf of the corporation,
postage prepaid, to the holders of record of outstanding shares
of Class A Preferred Stock selected for redemption not less than
thirty or more than sixty days prior to the applicable Optional
Redemption Date or Mandatory Redemption Date, as the case may be.
Such notice shall specify the applicable Optional Redemption Date
or Mandatory Redemption Date, as the case may be, the number of
shares of Class A Preferred Stock held by such holder which are
to be redeemed and the place at which such shares are to be
surrendered for redemption on the applicable Optional Redemption
Date or Mandatory Redemption Date, as the case may be. If less
than all of the shares of Class A Preferred Stock represented by
a certificate or certificates surrendered for redemption are to
be redeemed, the corporation shall issue and deliver to or upon
the written order of the holder of the certificate or
certificates surrendered for redemption a replacement certificate
or certificates representing the shares of Class A Preferred
Stock not redeemed as soon as practicable following the
applicable Optional Redemption Date or Mandatory Redemption Date,
as the case may be. Notice having been so given, from and after
the date specified in such notice as the Optional Redemption Date
or Mandatory Redemption Date, as the case may be, unless default
shall be made by the corporation on the applicable Optional
Redemption Date or Mandatory Redemption Date, as the case may be,
in providing funds for the payment of the Redemption Price
payable pursuant to such notice, all dividends on the shares of
Class A Preferred Stock thereby called for redemption shall cease
to accrue, and from and after the applicable Optional Redemption
Date or Mandatory Redemption Date, as the case may be, so
specified, unless default shall be made by the corporation as
aforesaid, all rights of the holders of the shares of Class A
Preferred Stock called for redemption, except the right to
receive the Redemption Price in respect of such shares, shall
cease and terminate.
(d) Shares of Class A Preferred Stock which have been
issued and reacquired by the corporation in any manner, including
shares purchased or redeemed pursuant to the provisions of this
paragraph 4, shall be cancelled and shall not be reissued, and
the stated capital of the corporation shall be reduced in
accordance with Sections 243 and 244 of the DGCL.
5. Voting Rights.
(a) Except as otherwise provided by the DGCL and by
subparagraphs (b) and (c) of this paragraph 5, the holders of
outstanding shares of Class A Preferred Stock shall not be
entitled to vote on or otherwise consent to any matter requiring
the vote or consent of the stockholders of the corporation under
the laws of the State of Delaware.
(b) So long as any shares of Class A Preferred Stock
are outstanding, the corporation will not (i) without the
affirmative consent or vote at an annual or special meeting of
stockholders (a "Vote") of the holders of at least a majority of
the outstanding shares of Class A Preferred Stock, Class B
Preferred Stock and Class C Preferred Stock (excluding treasury
shares and shares held by subsidiaries of the corporation),
voting as a class, create any class or series of capital stock
ranking prior to the Class A Preferred Stock as to dividends,
redemption payments or upon the liquidation, dissolution or
winding up of the affairs of the corporation, or (ii) without a
Vote of the holders of at least a majority of the outstanding
shares of Class A Preferred Stock (excluding treasury shares and
shares held by subsidiaries of the corporation), voting as a
class, amend, alter or repeal the corporation's Certificate of
Incorporation to affect adversely the powers, rights or
preferences of the shares of Class A Preferred Stock.
(c) In the event that the corporation shall be
delinquent in the payment of dividends with respect to shares of
Class A Preferred Stock in an aggregate amount equal to the
amount of dividends payable for at least four full Dividend
Periods, the holders of outstanding shares of Class A Preferred
Stock, voting as a class, shall be entitled to elect one director
of the corporation until all accrued dividends from prior
Dividend Periods shall have been paid. Upon the vesting of the
right of the holders of outstanding shares of Class A Preferred
Stock to elect one director, the maximum authorized number of
members of the Board of Directors of the corporation shall
automatically be increased by one and the one vacancy so created
shall be filled by vote of the holders of outstanding shares of
Class A Preferred Stock (either alone or together with the
holders of shares of any one or more other classes or series of
Parity Securities hereafter issued the terms of which provide for
the right to vote, together with the holders of outstanding
shares of Class A Preferred Stock, for one director in the event
of delinquent payment of four quarterly dividends, without
distinction as to class or series) as hereinafter set forth. If
there shall not be one director serving who has been elected by
the holders of outstanding shares of Class A Preferred Stock,
voting as a class (together with holders of Parity Securities, if
applicable), at any time when such holders shall be entitled to
elect one director of the corporation, a meeting of the
stockholders of the corporation shall be held for the election of
such director at the request in writing of any holder of
outstanding shares of Class A Preferred Stock (or Parity
Securities, if applicable), addressed to the Secretary of the
corporation, as soon as practicable after the receipt of such
request and after notice similar to that then provided in the
By-Laws of the corporation for holding a special meeting of
stockholders. At such meeting, the holders of outstanding shares
of Class A Preferred Stock (together with holders of Parity
Securities, if applicable) shall be entitled to elect one
director, and if at such meeting other directors are to be
elected, the holders of capital stock of the corporation entitled
to vote with respect to the election of such other directors
shall be entitled to elect the remaining directors, except as the
rights of the holders of such capital stock may be further
limited by the provisions of any other outstanding security, by
the Certificate of Incorporation or By-Laws of the corporation,
or by operation of the General Corporation Law of the State of
Delaware. At any meeting at which the holders of Class A
Preferred Stock (together with the holders of outstanding Parity
Securities, if applicable) shall be entitled to elect one
director, each holder of shares of Class A Preferred Stock (and
Parity Securities, if applicable) shall be entitled to one vote
per share, the holders of a majority of the then outstanding
shares of Class A Preferred Stock (together with the holders of a
majority of outstanding Parity Securities, if applicable) shall
be sufficient to constitute a quorum, whether present in person
or by proxy, and the vote of the holders of a majority of the
shares of Class A Preferred Stock (and the holders of a majority
of outstanding Parity Securities, if applicable) so present or
represented at any such meeting at which there shall be a quorum
shall be sufficient to elect one director. Whenever all
arrearages in payment of quarterly dividends on the shares of
Class A Preferred Stock shall have been paid, the shares of Class
A Preferred Stock shall thereupon be divested of the right to
elect one director as hereinabove provided and such director so
elected by the holders of shares of Class A Preferred Stock
(together with the holders of outstanding Parity Securities, if
applicable) shall thereupon cease to be a director of the
corporation (and the number of members of the Board of Directors
shall automatically be reduced accordingly) subject to revesting
in the event of subsequent arrearages which result in the right
to so elect one director under the first sentence of this
subparagraph (c) of paragraph 5.
B. Class B Preferred Stock
1. Rank. The Class B Preferred Stock shall, with respect
to the payment of dividends, mandatory redemption and upon the
liquidation, dissolution or winding up of the affairs of the
corporation rank (i) senior and prior to the Class C Preferred
Stock, the Common Stock and to any other class or series of
capital stock of the corporation hereafter issued unless the
terms of such class or series of capital stock of the corporation
specifically provide that shares of such class or series shall
rank prior to or on a parity with the shares of Class B Preferred
Stock (shares of Class C Preferred Stock, Common Stock and any
other class or series of capital stock of the corporation
hereafter issued the terms of which do not specifically provide
that shares of such class or series shall rank prior to or on a
parity with the shares of Class B Preferred Stock are
collectively referred to in this Section B of Article FOURTH as
the "Junior Securities"); (ii) on a parity with any other class
or series of capital stock of the corporation hereafter issued
for fair value as determined by the Board of Directors the terms
of which specifically provide that shares of such class or series
shall rank on a parity with the shares of Class B Preferred Stock
(shares of such class or series are collectively referred to in
this Section B of Article FOURTH as the "Parity Securities"); and
(iii) junior to the Class A Preferred Stock (except with respect
to redemption payments for Class B Preferred Stock), and to any
other class or series of capital stock of the corporation
hereafter issued with the consent of the holders of a majority of
the outstanding shares of Class B Preferred Stock and Class C
Preferred Stock pursuant to subparagraph (b) of paragraph 6
hereof the terms of which specifically provide that shares of
such class or series shall rank senior to shares of Class B
Preferred Stock (shares of Class A Preferred Stock and such class
or series are collectively referred to in this Section B of
Article FOURTH as the "Senior Securities").
2. Dividends.
(a) From and after the date of issuance, the holders of
outstanding shares of Class B Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors,
to the extent permitted under the DGCL and before any dividend or
other distribution is declared or paid with respect to the
outstanding Junior Securities, cumulative dividends payable
quarterly in arrears on March 31, June 30, September 30 and
December 31 in each year (each such date is referred to herein as
a "Dividend Payment Date" and the quarterly period between
consecutive Dividend Payment Dates is referred to herein as a
"Dividend Period") commencing June 30, 1988. The per annum
dividend rate on outstanding shares of Class B Preferred Stock
shall be 18% of the Redemption Price per share thereof as defined
in subparagraph (a) of paragraph 4 hereof (the "Class B Rate").
The amount of dividends payable on shares of Class B Preferred
Stock shall be calculated (a) for each full quarterly Dividend
Period during which such shares are outstanding by dividing by
four the Class B Rate per share and (b) for each Dividend Period
which is less than a full quarter during which such shares are
outstanding by multiplying the Class B Rate by a fraction, the
numerator of which is the actual number of days elapsed in such
quarter and the denominator of which is 365. Such dividends
shall be payable to the holders of record of outstanding shares
of Class B Preferred Stock as their names shall appear on the
stock register of the corporation on such record date, not more
than sixty or less than ten days preceding each such Dividend
Payment Date, as shall be fixed by the Board of Directors in
advance of payment of each such dividend. Any dividend payments
made with respect to shares of Class B Preferred Stock for any
Dividend Period ending on or prior to June 30, 1995 may be made,
in the sole discretion of the corporation, in cash or, in whole
or in part, in additional fully paid and nonassessable shares of
Class B Preferred Stock at the rate of 0.04124 of a share for
each $1.00 of such dividend not paid in cash, and the issuance of
such additional shares of Class B Preferred Stock
(notwithstanding the amount of net proceeds received with respect
to the Fractional Shares (as hereinafter defined) as described
below) shall constitute payment in full of such dividend. All
dividends paid in cash, in additional shares of Class B Preferred
Stock or in any combination thereof shall be paid pro rata to the
holders of outstanding shares of Class B Preferred Stock entitled
thereto. All shares of Class B Preferred Stock issued as a
dividend on the outstanding shares of Class B Preferred Stock
(including shares sold pursuant to the next sentence), will, when
so issued be duly authorized, validly issued, fully paid and
nonassessable and free of all liens and charges. In lieu of
issuing certificates representing fractions of a share of Class B
Preferred Stock ("Fractional Shares") in payment of any dividend
on Class B Preferred Stock, at the option of the corporation,
each record holder of Class B Preferred Stock otherwise entitled
to receive a Fractional Share with respect to a dividend payable
thereon, shall receive payment in cash equal to such holder's
proportionate interest in the net proceeds received from the sale
or sales in the open market or pursuant to an auction process (at
the direction of the corporation) by an agent selected by the
corporation on behalf of all such holders of the Fractional
Shares otherwise payable as a dividend. If the corporation so
elects, the holders of Class B Preferred Stock shall have no
other right against the corporation related to such sale other
than the receipt of their proportionate interest in such sale.
(b) Dividends on outstanding shares of Class B
Preferred Stock shall be fully cumulative and shall accrue,
whether or not declared, from the respective dates of issuance of
such shares of Class B Preferred Stock until paid. Accumulated
unpaid dividends for past Dividend Periods may be declared by the
Board of Directors and paid to the holders of record of
outstanding shares of Class B Preferred Stock as their names
shall appear on the stock register of the corporation on such
record date, not more than sixty or less than ten days preceding
the date of payment, as shall be fixed by the Board of Directors,
whether or not such date is a Dividend Payment Date. Holders of
outstanding shares of Class B Preferred Stock shall not be
entitled to receive any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends to
which such holders are entitled as herein provided. No interest
or sum of money in lieu of interest shall be payable in respect
of any accumulated unpaid dividends on outstanding shares of
Class B Preferred Stock.
(c) Dividends shall not be paid on the outstanding
shares of Class B Preferred Stock for any Dividend Period in
which dividends for any prior Dividend Period have not been paid
in full on any Senior Securities or Parity Securities; provided,
however, that in the event such failure to pay accrued dividends
is with respect only to Parity Securities, cash dividends may be
declared, paid or set apart for payment, without interest, pro
rata on shares of Class B Preferred Stock and outstanding shares
of such Parity Securities so that the amounts of any cash
dividends declared, paid or set apart for payment on outstanding
shares of Class B Preferred Stock and outstanding shares of such
Parity Securities shall in all cases bear to each other the same
ratio that, at the time of such declaration, payment or setting
apart for payment, the amounts of all accrued but unpaid cash
dividends on outstanding shares of Class B Preferred Stock and
outstanding shares of such Parity Securities bear to each other.
(d) So long as any shares of Class B Preferred Stock
are outstanding, the corporation shall not (i) except as set
forth in subparagraph (c) of this paragraph 2, declare, pay or
set apart for payment any dividend on any outstanding Parity
Securities or Junior Securities (other than a dividend which is
payable in shares of Parity Securities or Junior Securities),
(ii) make any payment on account of, or set apart for payment,
money for a sinking or other similar fund for the purchase,
redemption, retirement or other acquisition for value of any of,
or redeem, purchase, retire or otherwise acquire for value any
of, any outstanding Parity Securities or Junior Securities or any
convertible securities, warrants, rights, calls or options
exercisable for or convertible into any Parity Securities or
Junior Securities, (iii) make any distribution in respect of any
outstanding Parity Securities or Junior Securities or any
convertible securities, warrants, rights, calls or options
exercisable for or convertible into any Parity Securities or
Junior Securities, in any such case either directly or
indirectly, and whether in cash, obligations or shares of the
corporation or other property (other than distributions or
dividends of a particular class or series of Parity Securities or
Junior Securities), or (iv) permit any corporation or other
entity directly or indirectly controlled by the corporation to
purchase, redeem or otherwise acquire for value any outstanding
Parity Securities or Junior Securities or any convertible
securities, warrants, rights, calls or options exercisable for or
convertible into any Parity Securities or Junior Securities,
unless prior to or concurrently with such declaration, payment,
setting apart for payment, purchase, redemption, retirement,
other acquisition for value or distribution described in clauses
(i) through (iv) above, as the case may be, all accrued and
unpaid dividends, if any, on outstanding shares of Class B
Preferred Stock to the date fixed for such declaration, payment,
setting apart for payment, purchase, redemption, retirement,
other acquisition for value or distribution described in clause
(i) and clause (ii) above shall have been paid in full; provided,
however, that nothing contained herein shall limit or restrict
the corporation from purchasing, redeeming or otherwise retiring,
to the extent required by law or contractual obligation, any
shares of capital stock of the corporation distributed by the
corporation's employee stock ownership plan to participants in
such plan.
(e) Subject to the foregoing provisions of this
paragraph 2, the Board of Directors may declare and the
corporation may pay or set apart for payment dividends and other
distributions on any Parity Securities or Junior Securities and
may purchase or otherwise acquire any Parity Securities or Junior
Securities or any convertible securities, warrants, rights, calls
or options exercisable for or convertible into any Parity
Securities or Junior Securities and the holders of outstanding
shares of Class B Preferred Stock shall not be entitled to share
therein.
3. Liquidation.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, before any distribution or payment shall be made to
the holders of any outstanding Junior Securities, subject to the
rights of creditors, the holders of outstanding shares of Class B
Preferred Stock shall be entitled to be paid out of the assets of
the corporation available for distribution to stockholders, an
amount in cash equal to $24.25 per share together with an amount
in cash equal to all accrued but unpaid dividends on such shares
to the date fixed for the liquidation, dissolution or winding up
of the affairs of the corporation; provided, however, that the
holders of outstanding shares of Class B Preferred Stock shall
not be entitled to receive such preferential liquidation payments
until the preferential liquidation payments on all outstanding
Senior Securities have been paid in full. Except as provided in
the preceding sentence, the holders of outstanding shares of
Class B Preferred Stock shall not be entitled to any distribution
in the event of the liquidation, dissolution or winding up of the
affairs of the corporation. If, upon any such liquidation,
dissolution or winding up of the affairs of the corporation, the
assets of the corporation available for distribution to the
holders of outstanding shares of Class B Preferred Stock and
outstanding Parity Securities shall be insufficient to permit the
payment in full to such holders and to the holders of any Parity
Securities of the full amount of the preferential liquidation
amounts to which they are then entitled, the entire assets of the
corporation thus distributable shall be distributed among the
holders of outstanding shares of Class B Preferred Stock and
Parity Securities ratably in proportion to the full amount to
which such holders would otherwise be entitled if such assets
were sufficient to permit payment in full. After the payment of
all preferential liquidation amounts to which the holders of
outstanding shares of Class B Preferred Stock shall be entitled,
such holders shall not be entitled to any further participation
in any distribution of the assets of the corporation to its
stockholders.
(b) For purposes of this paragraph 3, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the corporation
nor the consolidation or merger of the corporation with or into
any other corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the affairs of the
corporation.
4. Redemption.
(a) The outstanding shares of Class B Preferred Stock
shall be subject to optional redemption by the corporation, in
whole or in part, at any time and from time to time as
hereinafter provided in this subparagraph (a) of paragraph 4,
provided that dividends on the Class A Preferred Stock for all
Dividend Periods ending on or prior to the date of such
redemption shall have been paid in full prior to such redemption.
The price at which outstanding shares of Class B Preferred Stock
may be redeemed pursuant to this subparagraph (a) shall be $24.25
per share (the "Redemption Price"), together with an amount in
cash equal to all accrued but unpaid dividends on such shares to
the date fixed for such redemption, without interest (each such
date being referred to herein as an "Optional Redemption Date").
The shares of outstanding Class B Preferred Stock to be redeemed
by the corporation on any Optional Redemption Date shall be
selected by the corporation; provided, however, that such
redemptions shall be made ratably among the holders of
outstanding shares of Class B Preferred Stock, in proportion to
the number of shares of Class B Preferred Stock held by each such
holder, to the extent practicable.
(b) The outstanding shares of Class B Preferred Stock
shall be subject to mandatory redemption by the corporation on a
single date (such date being herein referred to as the "First
Mandatory Redemption Date") beginning on the Initial B Redemption
Date (as such term is defined in the Credit Agreement dated as of
March 2, 1988 among the corporation, Bankers Trust Company as
Agent and the banks listed on Schedule I thereto, (as such
agreement is in effect on the date hereof, the "Credit
Agreement"), a copy of which is on file with the secretary of
corporation) and ending on the date occurring 90 days after such
Initial B Redemption Date; provided that such redemption may be
made only on the terms and subject to the conditions set forth in
Section 11.03(a)(ii) of the Credit Agreement, and provided
further that dividends on the Class A Preferred Stock for all
Dividend Periods ending on or prior to the First Mandatory
Redemption Date shall have been paid in full prior to such
redemption. The number of outstanding shares of Class B
Preferred Stock to be redeemed pursuant to this subparagraph (b)
of paragraph 4 shall be the number of shares, rounded to the
nearest whole share, obtained by dividing the dollar amount of
funds available for such redemption by the Redemption Price. The
shares of outstanding Class B Preferred Stock to be redeemed by
the corporation on the First Mandatory Redemption Date shall be
selected by the corporation; provided, however, that such
redemption shall be made ratably among the holders of outstanding
shares of Class B Preferred Stock, in proportion to the number of
shares of Class B Preferred Stock held by each such holder, to
the extent practicable. The corporation shall, at its option as
hereinafter provided, be entitled to credit against the number of
shares of Class B Preferred Stock to be redeemed on the First
Mandatory Redemption Date as provided in the immediately
preceding sentences, shares of Class B Preferred Stock acquired
on or prior to the First Mandatory Redemption Date by the
corporation through purchase in the open market or privately,
redemption pursuant to subparagraph (a) of this paragraph 4, or
otherwise. The price at which outstanding shares of Class B
Preferred Stock shall be redeemed pursuant to this subparagraph
(b) of Paragraph 4 shall be the Redemption Price, together with
all accrued but unpaid dividends on such shares to the date fixed
for such redemption, without interest.
(c) Commencing June 30, 1995 and on each June 30
thereafter through June 30, 1998 (each such date being herein
referred to as a "Mandatory Redemption Date"), prior to the
payment of any required mandatory redemption payment then due
with respect to outstanding Junior Securities, the corporation
shall, to the extent permitted by the DGCL, redeem such number of
outstanding shares of Class B Preferred Stock as shall be equal
to 25% of the number of shares of Class B Preferred Stock
outstanding at June 30, 1995 (or, if less than such number of
shares shall be outstanding on any such Mandatory Redemption
Date, all shares of Class B Preferred Stock outstanding on such
date). Notwithstanding the foregoing, the holders of
outstanding shares of Class B Preferred Stock shall not be
entitled to receive such mandatory redemption payments until (i)
all required mandatory redemption payments then due with respect
to outstanding Senior Securities, excluding the Class A Preferred
Stock, and (ii) dividends on the Class A Preferred Stock for all
Dividend Periods ending on or prior to the date of such
redemption shall have been paid in full. The shares of
outstanding Class B Preferred Stock to be redeemed by the
corporation on any Mandatory Redemption Date shall be selected by
the corporation; provided, however, that such redemptions shall
be made ratably among the holders of outstanding shares of Class
B Preferred Stock, in proportion to the number of shares of Class
B Preferred Stock held by each such holder, to the extent
practicable. The price at which outstanding shares of Class B
Preferred Stock shall be redeemed pursuant to this subparagraph
(c) of paragraph 4 shall be the Redemption Price, together with
all accrued but unpaid dividends on such shares to the date fixed
for such redemption, without interest.
(d) Notice of redemption of outstanding shares of Class
B Preferred Stock pursuant to subparagraphs (a), (b) and (c) of
this paragraph 4 shall be sent by or on behalf of the
corporation, postage prepaid, to the holders of record of
outstanding shares of Class B Preferred Stock selected for
redemption (i) in the case of the First Mandatory Redemption
Date, not less than ten or more than twenty days prior to the
First Mandatory Redemption Date and (ii) in the case of any
Optional Redemption Date or Mandatory Redemption Date, not less
than thirty or more than sixty days prior to the applicable
Optional Redemption Date or Mandatory Redemption Date, as the
case may be. Such notice shall specify the First Mandatory
Redemption Date or the applicable Optional Redemption Date or
Mandatory Redemption Date, as the case may be, the number of
shares of Class B Preferred Stock held by such holder which are
to be redeemed and the place at which such shares are to be
surrendered for redemption on the First Mandatory Redemption Date
or the applicable Optional Redemption Date or Mandatory
Redemption Date, as the case may be. If less than all of the
shares of Class B Preferred Stock represented by a certificate or
certificates surrendered for redemption are to be redeemed, the
corporation shall issue and deliver to or upon the written order
of the holder of the certificate or certificates surrendered for
redemption a replacement certificate or certificates representing
the shares of Class B Preferred Stock not redeemed as soon as
practicable following the First Mandatory Redemption Date or the
applicable Optional Redemption Date or Mandatory Redemption Date,
as the case may be. Notice having been so given, from and after
the date specified in such notice as the First Mandatory
Redemption Date, Optional Redemption Date or Mandatory Redemption
Date, as the case may be, unless default shall be made by the
corporation on the First Mandatory Redemption Date or the
applicable Optional Redemption Date or Mandatory Redemption Date,
as the case may be, in providing funds for the payment of the
Redemption Price payable pursuant to such notice, all dividends
on the shares of Class B Preferred Stock thereby called for
redemption shall cease to accrue, and from and after the First
Mandatory Redemption Date or the applicable Optional Redemption
Date or Mandatory Redemption Date, as the case may be, so
specified, unless default shall be made by the corporation as
aforesaid, all rights of the holders of the shares of Class B
Preferred Stock called for redemption, except the right to
receive the Redemption Price in respect of such shares, shall
cease and terminate.
(e) Shares of Class B Preferred Stock which have been
issued and reacquired by the corporation in any manner, including
shares purchased or redeemed pursuant to the provisions of this
paragraph 4, shall be retired and shall not be reissued, and the
stated capital of the corporation shall be reduced in accordance
with Sections 243 and 244 of the DGCL.
5. Exchange.
(a) At any time on or after (i) the First Mandatory
Redemption Date or (ii) if the corporation shall determine that
no shares of Class B Preferred Stock are redeemable pursuant to
subparagraph (b) of paragraph 4 of this Section B of Article
FOURTH, the date of such determination, each share of Class B
Preferred Stock shall be exchangeable, at the option of the
holder thereof, for 16% Pay-in-Kind Junior Subordinated
Debentures of the corporation due 2003 (the "Debentures"), which
Debentures shall be issued pursuant to the Indenture which also
governs all Debentures theretofore issued by the corporation or
an Indenture having substantially identical terms; provided
however, no such exchange shall be permitted (i) if a Default or
Event of Default exists under the Credit Agreement on the date of
any proposed exchange or would result from such exchange and (ii)
unless the corporation shall have delivered to the Required Banks
(as defined in the Credit Agreement) the opinions or letters
required by section 11.05 (vii)(b) of the Credit Agreement. The
number of Debentures for which a share of Class B Preferred Stock
shall be exchanged shall be equal to the number obtained by
dividing (a) the Redemption Price (as set forth in subparagraph
(a) of paragraph 4 in this Section B of Article FOURTH) per share
of Class B Preferred Stock to be exchanged, plus accrued and
unpaid dividends to the Exchange Date (as hereinafter defined)
payable thereon by (b) the market value of one of the Debentures
to be issued upon such exchange (determined as of the date of
exchange by a nationally recognized investment banking or
independent appraisal firm selected by the corporation and
reasonably satisfactory to a majority of the holders of the
shares of Class B Preferred Stock then being exchanged for
Debentures).
(b) To exercise such exchange option, the holder of
shares of Class B Preferred Stock shall surrender the certificate
or certificates representing the shares of Class B Preferred
Stock to be exchanged, duly endorsed for transfer to the
corporation, at the principal executive office of the corporation
and shall give written notice, postage prepaid, by certified or
registered mail, return receipt requested, or by hand delivery,
to the corporation at its principal executive office, of the
election of such holder to exchange all or a portion of the
shares of Class B Preferred Stock represented by the certificate
or certificates surrendered into Debentures which notice shall
set forth the name or names in which the certificate or
certificates representing the Debentures to be issued upon
exchange are to be issued. Exchange shall be deemed to have been
effected on the date of receipt by the corporation of such notice
together with the certificate or certificates surrendered for
exchange (the "Exchange Date"). As promptly as practicable
thereafter, the corporation shall issue to or upon the written
order of such holder, a certificate or certificates for the
aggregate principal amount of Debentures to which such holder is
entitled. The exchange of shares of Class B Preferred Stock into
Debentures shall be deemed to be effective, and such holder, or
the person or persons designated by such holder, shall cease to
be a holder of record of shares of Class B Preferred Stock and
shall be deemed to have become a holder of record of the
Debentures issuable upon exchange of such shares of Class B
Preferred Stock, on the applicable Exchange Date unless the
transfer books of the corporation are closed on such date, in
which event such holder shall be deemed to have become a holder
of record of Debentures issued upon exchange of the shares of
Class B Preferred Stock on the next succeeding date on which the
transfer books of the corporation are open. Upon exchange of
only a portion of the number of shares of Class B Preferred Stock
represented by a certificate or certificates surrendered for
exchange, the corporation shall issue and deliver to or upon the
written order of the holder of the certificate or certificates so
surrendered a new certificate or certificates representing the
number of shares of Class B Preferred Stock not so exchanged.
6. Voting Rights.
(a) Except as otherwise provided by the DGCL and by
subparagraphs (b) and (c) of this paragraph 6, the holders of
outstanding shares of Class B Preferred Stock shall not be
entitled to vote on or otherwise consent to any matter requiring
the vote or consent of the stockholders of the corporation under
the laws of the State of Delaware.
(b) So long as any shares of Class B Preferred Stock
are outstanding, the corporation will not, (i) without the
affirmative consent or vote at an annual or special meeting of
stockholders (a "Vote") of the holders of at least a majority of
the outstanding shares of Class B Preferred Stock and Class C
Preferred Stock (excluding treasury shares and shares held by
subsidiaries of the corporation), voting as a class, create any
class or series of capital stock ranking prior to the Class B
Preferred Stock but junior to the Class A Preferred Stock as to
dividends, mandatory redemption payments or upon the liquidation,
dissolution or winding up of the affairs of the corporation, or
(ii) without a Vote of the holders of at least a majority of the
outstanding shares of Class B Preferred Stock (excluding treasury
shares and shares held by subsidiaries of the corporation),
voting as a class, amend, alter or repeal the corporation's
Certificate of Incorporation to affect adversely the powers,
rights or preferences of the shares of Class B Preferred Stock.
(c) In the event that the corporation shall be
delinquent in the payment of dividends with respect to shares of
Class B Preferred Stock in an aggregate amount equal to the
amount of dividends payable for at least four full Dividend
Periods, the holders of outstanding shares of Class B Preferred
Stock, voting as a class, shall be entitled, as their sole
remedy, to elect two directors of the corporation until all
accrued dividends from prior Dividend Periods shall have been
paid. Upon the vesting of the right of the holders of
outstanding shares of Class B Preferred Stock to elect two
directors, the maximum authorized number of members of the Board
of Directors of the corporation shall automatically be increased
by two and the two vacancies so created shall be filled by vote
of the holders of outstanding shares of Class B Preferred Stock
as hereinafter set forth. If there shall not be two directors
serving who have been elected by the holders of outstanding
shares of Class B Preferred Stock, voting as a class, at any time
when such holders shall be entitled to elect two directors of the
corporation, a meeting of the stockholders of the corporation
shall be held for the election of such directors at the request
in writing of any holder of outstanding shares of Class B
Preferred Stock, addressed to the Secretary of the corporation,
as soon as practicable after the receipt of such request and
after notice similar to that then provided in the By-Laws of the
corporation for holding a special meeting of stockholders. At
such meeting, the holders of outstanding shares of Class B
Preferred Stock shall be entitled to elect two directors, and if
at such meeting other directors are to be elected, the holders of
capital stock of the corporation entitled to vote with respect to
the election of such other directors shall be entitled to elect
the remaining directors, except as the rights of the holders of
such capital stock may be further limited by the provisions of
any other outstanding security, by the Certificate of
Incorporation or By-Laws of the corporation, or by operation of
the DGCL. At any meeting at which the holders of Class B
Preferred Stock shall be entitled to elect two directors, each
holder of shares of Class B Preferred Stock shall be entitled to
one vote per share, the holders of a majority of the then
outstanding shares of Class B Preferred Stock shall be sufficient
to constitute a quorum, whether present in person or by proxy,
and the vote of the holders of a majority of the shares of Class
B Preferred Stock so present or represented at any such meeting
at which there shall be a quorum shall be sufficient to elect two
directors. Whenever all arrearages in payment of quarterly
dividends on the shares of Class B Preferred Stock shall have
been paid, the shares of Class B Preferred Stock shall thereupon
be divested of the right to elect two directors as hereinabove
provided and such directors so elected by the holders of shares
of Class B Preferred Stock shall thereupon cease to be directors
of the corporation (and the number of members of the Board of
Directors shall automatically be reduced accordingly) subject to
revesting in the event of subsequent arrearages which result in
the right to so elect two directors under the first sentence of
this subparagraph (c) of paragraph 6.
C. Class C Preferred Stock
1. Rank. The shares of Class C Preferred Stock shall,
upon the liquidation, dissolution or winding up of the affairs of
the corporation, rank (i) senior and prior to the Common Stock
and to any other class or series of capital stock of the
corporation hereafter issued unless the terms of such class or
series of capital stock of the corporation specifically provide
that shares of such class or series shall rank prior to or on a
parity with the shares of Class C Preferred Stock (shares of
Common Stock and any other class or series of capital stock of
the corporation the terms of which do not specifically provide
that shares of such class or series shall rank prior to or on a
parity with the shares of Class C Preferred Stock are
collectively referred to in this Section C of Article FOURTH as
the "Junior Securities"); (ii) on a parity with any other class
or series of capital stock of the corporation hereafter issued
for fair value as determined by the Board of Directors the terms
of which specifically provide that shares of such class or series
shall rank on a parity with the shares of Class C Preferred Stock
(shares of such class or series are collectively referred to in
this Section C of Article FOURTH as the "Parity Securities"); and
(iii) junior to the Class A Preferred Stock, the Class B
Preferred Stock and to any other class or series of capital stock
of the corporation hereafter issued with the consent of the
holders of a majority of the outstanding shares of Class C
Preferred Stock pursuant to subparagraph (c) of paragraph 5
hereof the terms of which specifically provide that shares of
such class or series shall rank senior to shares of Class C
Preferred Stock (shares of Class A Preferred Stock, Class B
Preferred Stock and any other class or series of capital stock of
the corporation hereafter issued the terms of which provide that
shares of such class or series shall rank prior to shares of
Class C Preferred Stock are collectively referred to in this
Section C of Article FOURTH as the "Senior Securities").
2. Dividends.
(a) From and after the date of issuance, the holders of
outstanding shares of Class C Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors,
to the extent permitted under the DGCL, cumulative cash dividends
in the amount of $4.365 per annum per share of Class C Preferred
Stock. Dividends on outstanding shares of Class C Preferred
Stock shall be fully cumulative and shall accrue, whether or not
declared, from the respective dates of issuance of such shares of
Class C Preferred Stock until paid. Accumulated unpaid dividends
shall compound quarterly from each March 31, June 30, September
30 and December 31 at the rate of 18% per annum. For purposes of
this Paragraph 2(a), shares of Class C Preferred Stock issued by
the corporation upon the consummation of the merger of DME
Holdings, Inc. into DynCorp shall be deemed to have been issued
on March 11, 1988. Dividends shall be computed on the basis of a
365-day year and the actual number of days elapsed.
(b) Accumulated and unpaid dividends shall be declared
by the Board of Directors and paid to the holders of record of
outstanding shares of Class C Preferred Stock on each dividend
payment date selected by the Board of Directors of the
corporation (each such date is referred to herein as a "Common
Dividend Payment Date") for payment of cash dividends on any
outstanding shares of Common Stock. On each Common Dividend
Payment Date, each holder of outstanding shares of Class C
Preferred Stock shall be entitled to receive dividends on its
shares of Class C Preferred Stock in an aggregate amount equal to
the aggregate amount of dividends that such holder would have
been entitled to receive if all of such holder's shares of Class
C Preferred Stock had been converted to Common Stock pursuant to
Paragraph 4 of this Section C of Article FOURTH immediately prior
to the payment of such dividend, provided that the aggregate
amount of such dividends shall not in any event exceed the
aggregate amount of accrued and unpaid dividends computed in
accordance with Paragraph 2(a) of this Section C of Article
Fourth. Such dividends shall be payable to the holders of record
of outstanding shares of Class C Preferred Stock as their names
shall appear on the stock register of the corporation on such
record date, not more than sixty or less than ten days preceding
each such Dividend Payment Date, as shall be fixed by the Board
of Directors in advance of payment of each such dividend. All
dividends shall be paid pro rata to the holders of outstanding
shares of Class C Preferred Stock entitled thereto. Dividends
shall not be declared or paid with respect to Class C Preferred
Stock except in connection with the payment of dividends on
Common Stock as provided in this Paragraph 2(b).
(c) Dividends shall not be paid on the outstanding
shares of Class C Preferred Stock for any period in which
dividends for the current or any prior period or mandatory
redemption payments due in the current or any prior period have
not been paid in full on any outstanding Senior Securities.
(d) Subject to the foregoing provisions of this
paragraph 2, the Board of Directors may declare and the
corporation may pay or set apart for payment dividends and other
distributions on any Parity Securities or Junior Securities and
may purchase or otherwise acquire any Parity Securities or Junior
Securities or any convertible securities, warrants, rights, calls
or options exercisable for or convertible into any Parity
Securities or Junior Securities and the holders of outstanding
shares of Class C Preferred Stock shall not be entitled to share
therein.
3. Liquidation.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, before any distribution or payment shall be made to
the holders of any outstanding Junior Securities, subject to the
rights of creditors, the holders of outstanding shares of Class C
Preferred Stock shall be entitled to be paid out of the assets of
the corporation available for distribution to stockholders, an
amount in cash equal to $24.25 per share, together with an amount
in cash equal to all accrued but unpaid dividends on such shares
to the date fixed for the liquidation, dissolution or winding up
of the affairs of the corporation; provided, however, that the
holders of outstanding shares of Class C Preferred Stock shall
not be entitled to receive such preferential liquidation payments
until the preferential liquidation payments on all outstanding
Senior Securities have been paid in full. Except as provided in
the first sentence of this paragraph, the holders of outstanding
shares of Class C Preferred Stock shall not be entitled to any
distribution in the event of the liquidation, dissolution or
winding up of the affairs of the corporation. If, upon any such
liquidation, dissolution or winding up of the affairs of the
corporation, the assets of the corporation available for
distribution to the holders of outstanding shares of Class C
Preferred Stock and outstanding Parity Securities shall be
insufficient to permit the payment in full to such holders and to
the holders of any Parity Securities of the full amount of the
preferential liquidation amounts to which they are then entitled,
the entire assets of the corporation thus distributable shall be
distributed among the holders of outstanding shares of Class C
Preferred Stock and Parity Securities ratably in proportion to
the full amount to which such holders would otherwise be entitled
if such assets were sufficient to permit payment in full. After
the payment of all preferential liquidation amounts to which the
holders of outstanding shares of Class C Preferred Stock shall be
entitled, such holders shall not be entitled to any further
participation in any distribution of the assets of the
corporation to its stockholders.
(b) For purposes of this paragraph 3, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the corporation
nor the consolidation or merger of the corporation with or into
any other corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the affairs of the
corporation.
4. Conversion.
(a) From and after the date of issuance, each share of
Class C Preferred Stock shall be convertible, at the option of
the holder thereof, into one fully paid and nonassessable share
of Common Stock, subject to adjustment as hereinafter set forth
in subparagraph (d) of this paragraph 4 and, to the extent
provided in subparagraph (e) of this paragraph 4, into a warrant
or option to purchase shares of Common Stock.
(b) To exercise such conversion option, the holder of
shares of Class C Preferred Stock shall surrender the certificate
or certificates representing the shares of Class C Preferred
Stock to be converted, duly endorsed for transfer to the
corporation, at the principal executive office of the corporation
and shall give written notice, postage prepaid, by certified or
registered mail, return receipt requested, or by hand delivery,
to the corporation at its principal executive office, of the
election of such holder to convert all or a portion of the shares
of Class C Preferred Stock represented by the certificate or
certificates surrendered into shares of Common Stock which notice
shall set forth the name or names in which the certificate or
certificates representing the shares of Common Stock to be issued
upon conversion are to be issued. Conversion shall be deemed to
have been effected on the date of receipt by the corporation of
such notice and the certificate or certificates to be surrendered
for conversion (the "Conversion Date"). As promptly as
practicable thereafter, the corporation shall issue to or upon
the written order of such holder, (i) a certificate or
certificates for the number of full shares of Common Stock to
which such holder is entitled and (ii) a certificate or
certificates or other appropriate instrument representing the
number of warrants and or options, if any, to which such holder
is entitled. The conversion of shares of Class C Preferred Stock
into shares of Common Stock shall be deemed to be effective and
such holder, or the person or persons designated by such holder,
shall be deemed to have become a holder of record of the shares
of Common Stock issuable upon conversion of such shares of Class
C Preferred Stock at the beginning of business on the applicable
Conversion Date unless the transfer books of the corporation are
closed on such date, in which event such holder shall be deemed
to have become a holder of record of the shares of Common Stock
issued upon conversion of the shares of Class C Preferred Stock
on the next succeeding date on which the transfer books of the
corporation are open. Upon conversion of only a portion of the
number of shares of Class C Preferred Stock represented by a
certificate or certificates surrendered for conversion, the
corporation shall issue and deliver to or upon the written order
of the holder of the certificate or certificates so surrendered a
new certificate or certificates representing the number of shares
of Class C Preferred Stock not so converted.
(c) No fractional shares of Common Stock shall be
issued upon conversion of shares of Class C Preferred Stock. In
lieu of issuing fractional shares of Common Stock upon conversion
of shares of Class C Preferred Stock, the corporation shall pay a
cash adjustment in respect of such fractional shares of Common
Stock equal to the fair market value thereof, as determined in
good faith by the Board of Directors of the corporation. The
corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of outstanding shares of
Class C Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all shares of Class C
Preferred Stock from time to time outstanding.
(d) The number of shares of Common Stock into which a
share of Class C Preferred Stock shall be convertible as set
forth in subparagraph (a) of this paragraph 4, shall be subject
to adjustment from time to time as follows:
(1) In case the corporation shall at any time subdivide
its outstanding shares of Common Stock or shall issue a dividend
or other distribution payable in shares of Common Stock, then
effective immediately after the effective date of such
subdivision or from and after the record date fixed by the Board
of Directors of the corporation for such dividend or other
distribution, as the case may be, the number of shares of Common
Stock issuable upon conversion of a share of Class C Preferred
Stock shall be adjusted to equal the sum of (i) that number of
shares of Common Stock issuable upon conversion of a share of
Class C Preferred Stock immediately prior to such date and (ii)
that number of shares of Common Stock as would have been issuable
on such shares as a result of such subdivision, dividend or
distribution, as the case may be, had such conversion occurred
immediately prior to such subdivision, dividend or distribution;
(2) In case the corporation shall at any time combine
its outstanding shares of Common Stock, then effective
immediately after the effective date of such combination the
number of shares of Common Stock issuable upon conversion of a
share of Class C Preferred Stock shall be adjusted to equal the
number obtained by multiplying the number of shares of Common
Stock issuable upon conversion of a share of Class C Preferred
Stock immediately prior to such date by the Combination Ratio (as
hereinafter defined). The Combination Ratio shall equal a
fraction, the numerator of which shall be the number of shares of
Common Stock issuable on such shares as a result of such
combination, had such such conversion occurred immediately prior
to such combination and the denominator of which shall be the
number of shares of Common Stock issuable upon conversion of a
share of Class C Preferred Stock immediately prior to such
combination.
(3) In case the corporation shall at any time
recapitalize or reclassify its capital stock, or in case of any
consolidation or merger of the corporation with or into any other
person (other than a consolidation or merger in which the
corporation is the continuing entity and which does not result in
any change in the capital stock of the corporation) or in case of
the sale or other disposition of all or substantially all the
assets of the corporation as an entirety to any other person,
then in each such case each outstanding share of Class C
Preferred Stock shall after such recapitalization,
reclassification, consolidation, merger, sale or other
disposition be convertible into the kind and number of shares of
capital stock or other securities or assets of the corporation or
of the entity resulting from such consolidation or surviving such
merger or to which such assets shall have been sold or otherwise
disposed of to which the holder thereof would have been entitled
if immediately prior to such recapitalization, reclassification,
consolidation, merger, sale or other disposition such holder had
converted its shares of Class C Preferred Stock. The provisions
set forth above shall apply to successive recapitalizations,
reclassifications, consolidations, mergers, sales or other
dispositions.
(e) In the case the corporation shall, at any time,
make a distribution to the holders of Common Stock of warrants or
options to purchase shares of Common Stock, then, effective from
and after the record date fixed by the Board of Directors of the
corporation for such distribution, upon the conversion of a share
of Class C Preferred Stock, the holder of such share shall be
entitled to receive, in addition to any shares of Common Stock
issuable upon such conversion, warrant(s) or option(s) (the
"Conversion Warrants") to purchase that number of shares of
Common Stock as would have been purchasable pursuant to the
warrant(s) or option(s) that such holder would have been entitled
to receive had the conversion occurred immediately prior to such
distribution; provided, however, the number of shares issuable
upon exercise of such Conversion Warrants shall be adjusted upon
issuance of such Conversion Warrants in accordance with the terms
thereof to reflect all such adjustments as would have been made
if such Conversion Warrants had been issued on the date of
original distribution of warrants or options to the holders of
Common Stock. Any such Conversion Warrants shall have terms
identical to the terms of the applicable warrants or options
previously issued to the holders of Common Stock (the "Underlying
Warrants"), provided that such Conversion Warrants shall be
exercisable, commencing on the date of their issuance pursuant to
this paragraph 4, for a number of years equal to the total number
of years during which the Underlying Warrants are or were
exercisable; and provided further that the exercise price per
share of Common Stock issuable upon exercise of the Conversion
Warrants shall, so long as any Underlying Warrants remain
outstanding and in effect, be equal to the exercise price per
Common Share under such Underlying Warrants, and thereafter shall
be adjusted in accordance with the terms of the Conversion
Warrants.
(f) Upon the occurrence of any event described in
subparagraph (d) or (e) of this paragraph 4, the corporation
shall promptly furnish to each holder of Class C Preferred Stock
a certificate of an officer of the corporation setting forth the
number of shares of Common Stock and/or Conversion Warrants
issuable upon conversion of such holder's Class C Preferred Stock
after all adjustments required by such subparagraph (d) or (e)
and a brief statement of the facts accounting for such
adjustment.
(g) All shares of Common Stock issued upon conversion
of shares of Class C Preferred Stock shall, upon issuance, be
duly and validly issued, fully paid and nonassessable and free
from all liens and charges. All accrued and unpaid dividends on
outstanding shares of Class C Preferred Stock surrendered for
conversion shall be forfeited.
5. Voting Rights.
(a) So long as any shares of Class C Preferred Stock
are outstanding, the holders of shares of Class C Preferred Stock
shall be entitled (voting, except with respect to those matters
enumerated below in subparagraph (d) of this paragraph 5,
together with the holders of outstanding shares of Common Stock
of the corporation as a class) to vote on or otherwise consent to
any matter requiring the voter consent of the stockholders of the
corporation under the laws of the State of Delaware.
(b) Each holder of outstanding shares of Class C
Preferred Stock shall be entitled to one vote for each share of
Class C Preferred Stock held of record by such holder on the
record date fixed by the Board of Directors of the corporation
for determining the stockholders of the corporation entitled to
vote or otherwise consent to any matter.
(c) So long as any shares of Class C Preferred Stock
are outstanding, the corporation will not, without the
affirmative consent or vote at an annual or special meeting of
stockholders of the holders of at least a majority of the
outstanding shares of Class C Preferred Stock (excluding treasury
shares and shares held by subsidiaries of the corporation),
voting as a class, create any class or series of capital stock
ranking prior to the Class C Preferred Stock but junior to the
Class B Preferred Stock as to dividends, mandatory redemption
payments or upon the liquidation, dissolution or winding up of
the affairs of the corporation, or amend, alter or repeal the
corporation's Certificate of Incorporation to affect adversely
the powers, rights or preferences of the shares of Class C
Preferred Stock.
(d) So long as any shares of Class C Preferred Stock
are outstanding, the affirmative consent or vote at an annual or
special meeting of stockholders (or, in lieu of such a meeting,
the written consent) of the holders of at least a majority of the
outstanding shares of Class C Preferred Stock (excluding treasury
shares), voting as a class, shall be required for the corporation
to, or to permit any of its subsidiaries to:
(i) directly or indirectly, create, incur,
assume, guarantee or otherwise become liable with respect to
indebtedness for borrowed money in an aggregate amount
outstanding at any time in excess of $15,000,000 other than (A)
indebtedness under the Credit Agreement, as such agreement may be
amended from time to time, provided that, in the event that any
amendment to the Credit Agreement results in an increase in the
aggregate amount of commitments to loan funds under the Credit
Agreement (it being understood and agreed that neither the
extension of commitments then in effect nor the waiver or
extension of any commitment reduction shall constitute such an
increase in commitments), the amount of such increased
commitments shall be included in the $15,000,000 limitation set
forth in this paragraph 5(d)(i); (B) indebtedness evidenced by
16% Pay-in-Kind Junior Subordinated Debentures Due 2003,
including in-kind dividends thereon, Debentures issued in
exchange for shares of Class B Preferred Stock pursuant to the
applicable provisions of this Article FOURTH and in-kind
dividends thereon; (C) indebtedness under any interest rate
protection agreement entered into pursuant to Section 10.11 of
the Credit Agreement; and (D) indebtedness permitted under
Section 11.05 (x), (xi), (xii) or (xiii) of the Credit Agreement;
(ii) directly or indirectly, create, incur,
assume, guarantee or otherwise become or remain liable with
respect to (A) any agreement for the lease, hire or use of any
real or personal property required to be characterized as a
capital lease in accordance with generally accepted accounting
principles in an amount in excess of $2,000,000 or (B) any
agreement for the lease, hire or use of any real or personal
property required to be characterized as an operating lease in
accordance with generally accepted accounting principles in an
amount payable during the term of such lease in excess of
$2,000,000;
(iii) issue shares of capital stock (common or
preferred), capital stock equivalents, securities convertible
into capital stock, or options, warrants, or other rights to
acquire capital stock; provided, however, that the corporation
may (A) pay in-kind dividends on the Class A Preferred Stock and
the Class B Preferred Stock in accordance with the applicable
provisions of this Article FOURTH, (B) issue and sell up to
4,123,715 shares of Common Stock to an employee stock ownership
plan established by the corporation, (C) issue to Bankers Trust
Company or its designee pursuant to the terms of a warrant dated
March 11, 1988 issued by DME Holdings, Inc. to Pyramid Ventures,
Inc. a warrant or warrants to purchase up to 10% of the shares of
Common Stock of the corporation on a fully diluted basis (the
"Bank Warrant"), (D) issue and sell to the holders of Common
Stock, in connection with the sale of Common Stock to the
employee stock ownership plan, warrants entitling such holders to
acquire up to an aggregate of 5,066,275 additional shares of
Common Stock, provided that such aggregate number of shares shall
include a number of shares reserved for issuance upon the
exercise of warrants issuable upon conversion of the Class C
Preferred Stock in accordance with the terms of Paragraph 4(e) of
this Section C of Article FOURTH (the "Shareholder Warrants") and
(E) issue shares of Common Stock pursuant to the Bank Warrant and
the Shareholder Warrants.
(iv) declare, make or pay any dividends on any
shares of capital stock, by any means whatsoever, or purchase,
redeem, or otherwise acquire, any shares of its capital stock, or
set aside any funds for any such purpose; provided, however, that
the corporation may (A) pay dividends on the Class A Preferred
Stock, Class B Preferred Stock and Class C Preferred Stock in
accordance with the applicable provisions of this Article FOURTH,
(B) redeem the Class A Preferred Stock and the Class B Preferred
Stock in accordance with the applicable provisions of this
Article FOURTH, (C) repurchase, as and to the extent required by
law or contractual obligation, shares of Common Stock distributed
by the corporation's employee stock ownership plan to
participants in such plan, (D) repurchase shares of Common Stock
held by employees of the corporation (other than shares
distributed to employees by the corporation's employee stock
ownership plan), provided that the aggregate cost of such
repurchases pursuant to this clause D shall not exceed $250,000
in any fiscal year of the corporation, (E) exchange the Class B
Preferred Stock for the Debentures in accordance with the
applicable provisions of this Article FOURTH and (F) convert
shares of Class C Preferred Stock into shares of Common Stock and
warrants or options in accordance with the applicable provisions
of this Article FOURTH;
(v) employ or terminate the employment of the
chief executive officer or the chief operating officer of the
corporation or any executive officer reporting directly to either
of them, or materially alter the terms of any employment
agreement or other arrangement with the corporation of such
officer or officers;
(vi) directly or indirectly, lend any amount to,
incur any indebtedness to, or enter into any contracts material
to its business or operations with, any of its officers or
directors, any of its shareholders, any member of the immediate
families of such officers, directors or shareholders, or any firm
or corporation in which such persons have an ownership interest;
provided that the corporation may make advances and loans to
officers in the ordinary course of business in an aggregate
amount outstanding at any time not to exceed $1,500,000 and may
incur indebtedness to officers in the ordinary course of business
in form of deferred compensation and accrued vacation
compensation;
(vii) sell, lease, license, transfer or cause or
permit the sale, lease, license or transfer of the assets of the
corporation or its subsidiaries (other than (A) inventory in the
ordinary course of business or uneconomic or obsolete equipment
in the ordinary course of business (B) the Specialty Contracting
Business (as defined in the Credit Agreement) and (C) Scheduled
Asset Sales (as defined in the Credit Agreement)) if the
aggregate book value of such assets, when added to all other
assets sold, leased, licensed or transferred (excluding sales
described in clauses (A), (B) and (C) above) within the four
consecutive preceding fiscal quarters exceeds $2,000,000;
(viii) acquire, whether by purchase, lease,
license, merger, joint venture or otherwise, any assets (other
than inventory, materials and equipment in the ordinary course of
business) if the cost thereof, when added to the cost of all
other assets acquired during the four consecutive preceding
fiscal quarters, exceeds $2,000,000; or
(ix) alter or repeal those provisions of the
By-Laws of the corporation which pertain generally to the
election and duties of the directors of the corporation or which
affect the rights and powers of the shareholders of the
corporation.
D. Common Stock
1. Rank. The Common Stock shall, with respect to the
payment of dividends and upon the liquidation, dissolution or
winding up of the affairs of the corporation, rank (i) senior and
prior to any class or series of capital stock of the corporation
hereafter issued the terms of which specifically provide that
shares of such class or series shall rank junior to the shares of
Common Stock (shares of such class or series are collectively
referred to in this Section D of Article FOURTH as the "Junior
Securities"); (ii) on a parity with and any other class or series
of capital stock of the corporation hereafter issued the terms of
which specifically provide that shares of such class or series
shall rank on a parity with the shares of Common Stock (shares of
such class or series are collectively referred to in this Section
D of Article FOURTH as the "Parity Securities"); and (iii) junior
to the shares of Class A Preferred Stock, Class B Preferred
Stock, Class C Preferred Stock and to any other class or series
of capital stock of the corporation hereafter issued unless the
terms of such class or series of capital stock of the corporation
specifically provide that shares of such series or class shall
rank junior to or on a parity with shares of Common Stock (shares
of Class A Preferred Stock, Class B Preferred Stock, Class C
Preferred Stock and any other class or series of capital stock of
the corporation hereafter issued the terms of which do not
specifically provide that shares of such class or series shall
rank junior to or on a parity with the shares of Common Stock are
collectively referred in this Section D of Article FOURTH as the
"Senior Securities").
2. Dividends.
(a) From and after the date of issuance, the holders of
outstanding shares of Common Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, to the extent
permitted under the DGCL, cash dividends on each dividend payment
date selected by the Board of Directors of the corporation (each
such date is referred to herein as a "Dividend Payment Date"), in
such amounts as the Board of Directors shall from time to time
determine; provided, however, that no dividends on outstanding
shares of Common Stock shall be declared or paid unless,
concurrently with such declaration or payment, dividends in an
equal amount per share are also declared or paid, as the case may
be, on any outstanding Parity Securities. Such dividends shall
be payable to the holders of record of outstanding shares of
Common Stock as their names shall appear on the stock register of
the corporation on such record date, not more than sixty or less
than ten days preceding each such Dividend Payment Date, as shall
be fixed by the Board of Directors in advance of payment of each
such dividend. All dividends shall be paid pro rata to the
holders of outstanding shares of Common Stock entitled thereto.
(b) Dividends shall not be paid on the outstanding
shares of Common Stock for any period in which dividends for the
current or any prior period or mandatory redemption payments due
in the current or any prior period have not been paid in full on
any outstanding Senior Securities, or, with respect to the Class
C Preferred Stock, unless dividends thereon are paid concurrently
with such payment in accordance with Paragraph 2(a) of Section C
of this Article FOURTH.
3. Liquidation.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, after the payment of all preferential liquidation
payments on outstanding Senior Securities, subject to rights of
creditors, the holders of outstanding shares of Common Stock, the
holders of any warrants exercisable for shares of Common Stock
(to the extent the terms of such warrants entitle the holders
thereof to receive any assets of the corporation available for
distribution) and any other Parity Securities shall be entitled
to receive the entire assets of the corporation available for
distribution to such holders. Each such holder of outstanding
shares of Common Stock shall be entitled to receive that portion
of the assets of the corporation available for distribution which
the number of shares of Common Stock held by such holder bears to
the total number of shares of Common Stock and shares of any
Parity Securities outstanding on the effective date of such
voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the corporation.
4. Voting Rights. The holders of shares of Common Stock
shall be entitled to vote on or otherwise consent to any matter
requiring the vote or consent of the stockholders of the
corporation under the laws of the State of Delaware. Each holder
of outstanding shares of Common Stock shall be entitled to one
vote for each share of Common Stock held of record by such holder
on the record date fixed by the Board of Directors of the
corporation for determining the stockholders of the corporation
entitled to vote or otherwise consent to such matter.
FIFTH: The corporation is to have perpetual
existence.
SIXTH: The private property of the stockholders shall
not be subject to the payment of corporate debts to any extent
whatever.
SEVENTH: In furtherance, and not in limitation of the
powers conferred by statute, the Board of Directors is expressly
authorized:
To make, alter or repeal the By-Laws of the
corporation;
To authorize and cause to be executed mortgages and
liens upon the real and personal property of the corporation; and
To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper
purpose or to abolish any such reserve in the manner in which it
was created.
By resolution or resolutions passed by a majority of
the whole Board of Directors to designate one or more committees,
each committee to consist of two or more of the directors of the
corporation, which to the extent provided in said resolution or
resolutions or in the By-Laws of the corporation, shall have and
may exercise the powers of the Board of Directors in the
management of the business and affairs of the corporation, and
may have power to authorize the seal of the corporation to be
affixed to all papers which may require it. Such committee or
committees shall have such name or names as may be stated in the
By-Laws of the corporation or as may be determined from time to
time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the
holders of a majority of the capital stock issued and outstanding
having voting power given at a stockholders meeting duly called
for that purpose, or when authorized by the written consent of
the holders of a majority of the voting stock issued and
outstanding, to sell, lease or exchange all of the property and
assets of the corporation, including its good will and its
corporate franchises, upon such terms and conditions and for such
consideration, which may be in whole or in part shares of stock
in, and/or other securities of, any other corporation or
corporations, as its Board of Directors shall deem expedient and
for the best interests of the corporation.
The corporation may in its By-Laws confer powers upon
its Board of Directors in addition to the foregoing, and in
addition to the powers and authorities expressly conferred upon
it by statute.
EIGHTH: Meetings of stockholders may be held outside
the State of Delaware, if the By-Laws so provide. The books of
the corporation may be kept (subject to any provision contained
in the statutes) outside of the State of Delaware at such place
or places as may be from time to time designated by the Board of
Directors.
NINTH: The corporation reserves the right to amend,
alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
TENTH: No stockholder of this corporation shall have
any preemptive or preferential right, nor shall any stockholder
be entitled as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of capital stock
of the corporation of any class, whether now or hereafter
authorized, and whether issued for money or for a consideration
other than money, or of any issue of securities or obligations
convertible into stock.
ELEVENTH: In all elections of directors of the
corporation each holder of a share of Class C Preferred Stock of
the corporation and each holder of a share of Common Stock of the
corporation entitled to vote for the election of directors shall
be entitled to as many votes as shall equal the number of votes
which, except for the provisions of this Article ELEVENTH, such
holder would be entitled to cast for the election of directors
with respect to the number of shares of Class C Preferred Stock
or Common Stock, as the case may be, held by such holder which
are eligible to so vote multiplied by the number of directors to
be elected. Each holder of shares of Class C Preferred Stock and
each holder of a share of Common Stock entitled to vote for the
election of directors may cast all of such votes for a single
director or may distribute such votes among the number of
directors to be elected, or any two or more of them, as such
holder sees fit. No director so elected may be removed by the
stockholders of the corporation if the votes cast against his
removal would be sufficient to elect him at an election at which
the same total number of votes were cast in favor of such
director and the entire Board of Directors, or class of directors
of which such director is a member, were then being elected.
TWELFTH: The property, business and affairs of the
corporation shall be managed and controlled by the Board of
Directors. Subject to the other provisions of this Restated
Certificate of Incorporation providing for the expansion of the
number of directors constituting the whole Board of Directors in
certain circumstances, the number of directors of the corporation
shall not be less than nine (9), nor more than twelve (12), the
exact number of directors to be determined from time to time by
resolution of a majority of the whole Board of Directors, and
such exact number shall be nine (9) until otherwise determined by
resolution adopted by affirmative vote of a majority of the whole
Board of Directors. As used herein, the term "whole Board" means
the total number of directors which the corporation would have if
there were no vacancies. The Board of Directors shall be divided
into three classes, as nearly equal in number as the then total
number of directors constituting the whole Board permits, with
the term of office of one class expiring each year. The initial
term of office of directors of the first class shall expire at
the next succeeding annual meeting of stockholders of the
corporation; the initial term of office of directors of the
second class shall expire at the second succeeding annual meeting
of stockholders of the corporation; and the initial term of
office of directors of the third class shall expire at the third
succeeding annual meeting of stockholders of the corporation. At
the conclusion of each term, nominated directors of the class
whose term of office has expired shall stand for election for a
three year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining
term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year
in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office;
provided further that the policy regarding mandatory retirement
of directors shall be as established by a majority of the whole
Board of Directors, and any incumbent director reaching the
mandatory retirement age last established prior to his most
recent election to the Board of Directors shall be eligible to
serve only through the date he attains such mandatory retirement
age (regardless of the remaining term of such incumbent
director's class). Any vacancy on the Board of Directors that
results from an increase in the number of directors may be filled
by a majority of the whole Board of Directors, and any other
vacancy occurring in the Board of Directors may be refilled by a
majority of the whole Board of Directors, although less than a
quorum, or by a sole remaining director. Any director elected to
fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his
predecessor.
THIRTEENTH: A director of this corporation shall not
be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except that this Article THIRTEENTH shall not eliminate or limit
a director's liability (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 a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv)
for any transaction from which the director derived an improper
personal benefit. If the General Corporation Law of the State of
Delaware is amended after approval by the stockholders of this
Article THIRTEENTH to authorize corporate action further
eliminating or limiting the personal liability of directors, then
the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended
from time to time. Any repeal or modification of this Article
THIRTEENTH shall not increase the personal liability of any
director of this corporation or otherwise adversely affect any
right or protection of a director of the corporation existing at
the time of such repeal or modification. The provisions of this
Article THIRTEENTH shall not be deemed to limit or preclude
indemnification of a director by the corporation for any
liability of a director which has not been eliminated by the
provisions of this Article THIRTEENTH.
FOURTEENTH: (a) Each 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, by reason of the fact that he is
or was a director or officer 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, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest
extent authorized or permitted by the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be
amended, against all expense, liability and loss (including
attorneys fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and
reasonably incurred by such person in connection with such
action, suit or proceeding, and such indemnification shall
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 person; provided, however,
that, except as provided in this clause (a) of Article
FOURTEENTH, the corporation shall indemnify any such person
seeking indemnification in connection with an action, suit or
proceeding (or part thereof) initiated by such person only if
such action, suit or proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to
indemnification conferred in this clause (a) of Article
FOURTEENTH shall be a contract right and shall include the right
to be paid by the corporation the expenses incurred in defending
any such action, suit or proceeding in advance of its final
disposition; provided, however, that if the General Corporation
Law of the State of Delaware requires, the payment of such
expenses incurred by a director or officer in his capacity as
such in advance of the final disposition of any such action, suit
or proceeding shall be made only upon receipt by the corporation
of an undertaking by or on behalf of such director or officer to
repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this clause (a) of Article FOURTEENTH or
otherwise. The corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the
corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) If a claim under clause (a) of Article FOURTEENTH
is not paid in full by the corporation within thirty days after a
written claim has been received by the corporation, the claimant
may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is
required, has been tendered to the corporation) that the claimant
has not met the standards of conduct which make it permissible
under the General Corporation Law of the State of Delaware for
the corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including
its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances because he has met the applicable
standard of conduct set forth in the General Corporation Law of
the State of Delaware, nor an actual determination by the
corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action
or create a presumption that the claimant has not met the
applicable standard of conduct.
(c) The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its
final disposition set forth herein shall not be exclusive of any
other right which any person may have or hereafter acquire under
any statute, provision of the Certificate of Incorporation,
By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
(d) The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the corporation or another corporation, partnership,
joint venture, trust or other enterprise against any such
expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State
of Delaware.
EXHIBIT 3.2
DYNCORP BY-LAWS
ARTICLE I
Office
Section 1. The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware, and the name of the
resident agent is The Company Corporation.
Section 2. The Corporation may also have offices in the Reston area of
Fairfax County, Commonwealth of Virginia, and at such other places either
within or without the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
Stockholders' Meetings
Section 1. All meetings of the stockholders for the election of directors
shall be held at the office of the Corporation in the Reston area of Fairfax
County, Virginia, or at such other place either within or without the State of
Delaware as may be fixed from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such place and time as shall be stated in the notice of
the meeting or in a duly executed waiver of notice thereof.
Section 2. An annual meeting of stockholders shall be held on the second
Monday of May in each year if not on a legal holiday, and if a legal holiday
then on the next secular day following, at 1:30 p.m. or at such other date
and/or time as shall be designated by the Board of Directors and stated in the
notice of meeting, at which they shall elect directors by a plurality vote and
transact such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting or any special meeting shall
be served upon or mailed to each stockholder entitled to vote thereat at such
address as appears on the books of the Corporation, except as provided by the
statutes or these By-Laws, at least ten days prior to the meeting.
Section 4. At least ten days before every election of directors, a complete
list of stockholders entitled to vote at said election, arranged in
alphabetical order, with the address of each and the number of voting shares
held by each, shall be prepared by the Secretary. Such list shall be open at
the place where the election is to be held, during ordinary business hours,
for said ten days, to the examination of any stockholder for any purpose
germane to the meeting, and shall be produced and kept at the time and place
of election during the whole time thereof and subject to the inspection of any
stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of Incorporation,
may be called by the Chairman of the Board or the President and shall be
called by the President or Secretary at the request in writing of a majority
of the Board of Directors or at the request in writing of stockholders owning
a majority in amount of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Business transacted at all special meetings shall be confined to
the objects stated in the notice.
Section 7. The holders of at least one-third of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute, the Certificate of Incorporation, or these By-Laws. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 8. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or
represented by proxy and voting thereon shall decide any question brought
before such meeting, unless the question is one upon which by express
provision of the statutes or the Certificate of Incorporation, or these
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question.
Section 9. At any meeting of the stockholders, every stockholder having the
right to vote thereat shall be entitled to vote in person or by proxy
appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than three years prior to said meeting, unless said
instrument provides for a longer period. Each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the
books of the Corporation, and except where the transfer books of the
Corporation shall have been closed or a date shall have been fixed as a record
date for the determination of its stockholders entitled to vote, no share of
stock shall be voted on at any election of directors which shall have been
transferred on the books of the Corporation within twenty days next preceding
such election of directors. At the elections of directors of the Corporation,
each stockholder having voting power shall be entitled to exercise the right
of cumulative voting, if any, as provided in the Certificate of Incorporation.
Section 10. Unless otherwise provided by the statutes or the Certificate of
Incorporation, whenever the vote of stockholders is required or permitted to
be taken in connection with any corporate action, the meeting and vote of
stockholders may be dispensed with, if the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action if such meeting and vote were held shall consent in
writing to such corporate action being taken. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
Directors
Section 1. Subject to the provision of the Certificate of Incorporation, the
number of directors of the Corporation shall not be less than nine (9), nor
more than twelve (12), the exact number of directors to be determined from
time to time by resolution of a majority of the whole Board of Directors, and
such exact number shall be nine (9) until otherwise determined by resolution
adopted by affirmative vote of a majority of the whole Board of Directors. As
used in these By-Laws, the term "whole Board" means the total number of
directors which the Corporation would have if there were no vacancies. The
Board of Directors shall be divided into three classes, as nearly equal in
number as the then-total number of directors constituting the whole Board
permits, with the term of office of one class expiring each year. The initial
term of directors of the first class shall expire at the next succeeding
annual meeting, the initial term of directors of the second class shall expire
at the second succeeding annual meeting, and the initial term of directors of
the third class shall expire at the third succeeding annual meeting.
Thereafter at the conclusion of each term, each class of nominated directors
shall stand for election for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office; provided further that the policy regarding mandatory
retirement of directors shall be as established by a majority of the whole
Board of Directors, and any incumbent director reaching any mandatory
retirement age last established prior to his most recent election to the Board
of Directors shall be eligible to serve only through the date he attains such
mandatory retirement age (regardless of the remaining term of such incumbent
director's class).
Section 2. Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the whole
Board of Directors, and any other vacancy occurring in the Board of Directors
may be refilled by a majority of the whole Board of Directors, although less
than a quorum, or by a sole remaining director. Any director elected to fill
a vacancy not resulting from an increase in the number of directors shall have
the same remaining term as that of his predecessor.
Section 3. The property, business, and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute, the Certificate of Incorporation, or these
By-Laws directed or required to be exercised or done by the stockholders.
Committees of Directors
Section 4. The Board of Directors at its first meeting after each annual
meeting of the stockholders shall designate three or more of its members, to
include the Chairman of the Board and the Chief Executive Officer, if the
Chief Executive Officer is a member of the Board of Directors, who shall
constitute the Executive Committee of the Board of Directors. The Executive
Committee shall have and may exercise all of the powers of the Board of
Directors as may be lawfully delegated in the management of the business and
affairs of the Corporation and shall have the power to authorize the seal of
the Corporation to be affixed to all papers which may require it. The Board
of Directors may designate one or more of its members as alternate members of
the Executive Committee, who may replace any absent or disqualified member at
any meeting of the Executive Committee. In the absence or disqualification of
a member of the Executive Committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member; provided however, that in no event shall the Executive
Committee have the authority to consider or act upon matters concerning United
States Government security.
Section 5. The Board of Directors may, by resolution or resolutions passed by
a majority of the whole Board, designate one or more additional committees
consisting of two or more of the directors of the Corporation. Such
additional committee or committees shall have and may exercise such powers and
shall have such names as are provided in said resolution or resolutions.
Section 6. The committees shall keep regular minutes of their proceedings and
report the same to the Board when required.
Advisory Directors
Section 7. The Board of Directors may appoint advisory directors whose
experience and knowledge would be useful to the Board, said advisory directors
to be former members of the Board or current stockholders. Such advisory
directors shall be no more than four in number and shall serve at the pleasure
of the Board, with terms expiring as of each annual meeting of stockholders.
Advisory directors shall be given notice of and may attend meetings of the
Board of Directors but shall not be considered members of the Board of
Directors. Advisory directors shall have no right to vote and shall not be
counted in determining whether a quorum is present at any meeting. Advisory
directors shall not be charged with responsibilities, nor shall they be
subject to the liabilities of directors. An advisory director may be
appointed as an advisory member of any committee of the Board.
Compensation of Directors and Advisory Directors
Section 8. Directors or advisory directors, as such, shall not receive any
stated salary for their services but, by resolution of the Board, may be
allowed an annual retainer fee and/or a fixed sum for attendance at each
regular or special meeting of the Board, together with any expenses of
attendance; provided that nothing herein contained shall be construed to
preclude any director or advisory director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 9. Members of special or standing committees may, by resolution of
the Board, be allowed an annual retainer fee and/or a fixed sum for attending
committee meetings, together with any expenses of attendance.
Meetings of the Board
Section 10. The first meeting of the Board after each annual meeting of
stockholders shall be held at such time and place either within or without the
State of Delaware as shall be fixed by the vote of the stockholders at the
annual meeting or by the Board of Directors prior to the annual meeting, and
no notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a quorum shall be present,
or they may meet at such place and time as shall be fixed by the consent in
writing of all the directors.
Section 11. Regular meetings of the Board may be held without notice at such
time and place either within or without the State of Delaware as shall from
time to time be determined by the Board.
Section 12. Special meetings of the Board may be called by the Chairman of
the Board or by the President on one day's notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
Chairman of the Board or the President or the Secretary in like manner and on
like notice on the written request of two directors.
Section 13. At all meetings of the Board, the presence of four directors, or,
if fewer, a majority of the whole Board, shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be
the act of the Board of Directors, except as otherwise specifically provided
by statute, the Certificate of Incorporation, or these By-Laws. If a quorum
shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 14. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 15. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, members of the Board of Directors, or any committee, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the
meetings.
ARTICLE IV
Reimbursement and Indemnification of
Officers, Directors, and Advisory Directors
Section 1. The Corporation shall 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,
arbitrative, or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was or has agreed to become a
director, advisory director, officer, employee, or agent of the Corporation,
or is or was serving or has agreed to serve at the request of the Corporation
as a director, advisory director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, or by
reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges, expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him
or on his behalf in connection with such action, suit, or proceeding and any
appeal therefrom, 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, or 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 or,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. The Corporation shall 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 or has agreed to become a
director, advisory director, officer, employee, or agent of the Corporation,
or is or was serving or has agreed to serve at the request of the Corporation
as a director, advisory director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, or by
reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges, and expenses (including attorneys' fees) actually and
reasonably incurred by him or on his behalf in connection with the defense or
settlement of such action or suit and any appeal therefrom, 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, 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 of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
costs, charges, and expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Notwithstanding the other provisions of these By-Laws, to the
extent that a director, advisory director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, or proceeding referred to in this Article IV or in defense of
any claim, issue, or matter therein, he shall be indemnified against all
costs, charges, and expenses (including attorneys' fees) actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 4. Any indemnification under these By-Laws (unless ordered by a
court) shall be made by the Corporation unless a determination is made that
indemnification of the director, advisory director, officer, employee, or
agent is not proper in the circumstances, because he has not met the
applicable standard of conduct set forth in these By-Laws. Such determination
may 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 5. Costs, charges, and expenses (including attorneys' fees) incurred
by a person referred to in this Article IV in defending a civil or criminal
action, suit, or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit, or proceeding; provided, however, that
the payment of such costs, charges, and expenses incurred by a director,
advisory director, or officer in his capacity as a director, advisory
director, or officer (and not in any other capacity in which service was or is
rendered while a director, advisory director, or officer) in advance of the
final disposition of such action, suit, or proceeding shall be made only upon
receipt of an undertaking by or on behalf of the director, advisory director,
or officer to repay all amounts so advanced in the event that it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article IV. Such costs, charges, and
expenses incurred by other employees and agents maybe so paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate. The Board
of Directors may, in the manner set forth above, and upon approval of such
director, advisory director, officer, employee, or agent of the Corporation,
authorize the Corporation's counsel to represent such person in any action,
suit, or proceeding, whether or not the Corporation is a party to such action,
suit, or proceeding.
Section 6. Any indemnification or advance of costs, charges, and expenses
under these By-Laws shall be made promptly, and in any event within 60 days,
upon the written request of the director, advisory director, officer,
employee, or agent. The right to indemnification or advances as granted by
these By-Laws shall be enforceable by the director, advisory director,
officer, employee, or agent in any court of competent jurisdiction, if the
Corporation denies such request, in whole or in part, or if no disposition
thereof is made within 60 days. Such person's costs and expenses incurred in
connection with successfully establishing his right to indemnification, in
whole or in part, in any such action shall also be indemnified by the
Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of costs, charges, and expenses
under Section 5 of this Article IV where the required undertaking, if any, has
been received by the Corporation) that the claimant has not met the standard
of conduct set forth in these By-Laws, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, its independent legal counsel, and its
stockholders) to have made a determination prior to the commencement of such
action that the indemnification of the claimant is proper in the
circumstances, because he has met the applicable standard of conduct set forth
in these By-Laws, or the fact that there has been an actual determination by
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 7. The rights of indemnity provided in these By-Laws shall not be
deemed exclusive, and the Corporation may, by contract, the Certificate of
Incorporation, vote of stockholders or disinterested directors, or otherwise,
further indemnify directors, advisory directors, officers, employees, or
agents of the Corporation to the full extent permitted under the laws of the
State of Delaware or any other applicable laws, now or hereafter in effect,
both as to matters in such person's official capacity and as to action in
another capacity while holding such office, and the provisions of these
By-Laws shall inure to the benefit of a person who has ceased to be a
director, advisory director, officer, employee, or agent and to the benefit of
the heirs, executors, and administrators of such a person. All rights to
indemnification under these By-Laws shall be deemed to be a contract between
the Corporation and each director, advisory director, officer, employee, or
agent of the Corporation who serves or served in such capacity at any time
while these By-Laws are in effect. Any repeal or modification of these
By-Laws or any repeal or modification of relevant provisions of the Delaware
General Corporation Law or any other applicable laws shall not in any way
diminish any rights to indemnification of such director, advisory director,
officer, employee, or agent or the obligations of the Corporation arising
hereunder.
Section 8. The foregoing rights shall be available in respect of any claim,
action, suit, or proceeding whether or not based upon matters which antedate
the adoption or amendment of these By-Laws.
Section 9. If this Article IV or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director, advisory director, officer, employee,
and agent of the Corporation as to costs, charges, expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with
respect to any action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, including an action by or in
the right of the Corporation, to the full extent permitted by any applicable
portion of these By-Laws that shall not have been so invalidated and to the
full extent permitted by applicable law.
ARTICLE V
Notices
Section 1. Whenever, under the provisions of the statutes, the Certificate of
Incorporation, or these By-Laws, notice is required to be given to any
director or stockholder, it shall not be construed solely to mean personal
notice, but such notice may be given in writing, by mail, by depositing the
same in a post office or letter box, in a post-paid sealed wrapper, addressed
to such director or stockholder at such address as appears on the books of the
Corporation and such notice shall be deemed to be given at the time when the
same shall be thus mailed.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes, the Certificate of Incorporation, or these By-Laws, a waiver
thereof in writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE VI
Officers
Section 1. The officers of the Corporation shall be chosen by the Directors
and shall include a Chairman of the Board, a President, a Vice President, a
Secretary, a Treasurer and a General Auditor. The Board of Directors may also
choose one or more Executive Vice Presidents, one or more Senior Vice
Presidents, and additional Vice Presidents, and the Board of Directors or the
Chief Executive Officer may also choose one or more Assistant Vice Presidents,
Assistant Secretaries, and Assistant Treasurers. Two or more offices may be
held by the same person, unless the Certificate of Incorporation or these
By-Laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of the stockholders shall choose a Chairman of the Board from its
members, and a President, one or more Vice Presidents, a Secretary, and a
Treasurer, none of whom need be a member of the Board.
Section 3. The Board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the Board.
Section 4. The salaries of all officers, other than assistant officers, of
the Corporation shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If any office
becomes vacant for any reason, the vacancy may be filled as provided above.
The Chairman of the Board
Section 6. The Chairman of the Board shall preside at all meetings of the
stockholders, Board of Directors, and Executive Committee and shall be
ex-officio a member of all of the standing committees, excepting, however,
such Audit Committee or Committees as may be established by the Board of
Directors from time to time. He shall see that all votes and resolutions of
the Board are carried into effect. He shall also perform such other duties as
may from time to time be assigned to him by the Board of Directors or the
Executive Committee.
The President and Chief Executive Officer
Section 7. The President shall be the Chief Executive Officer of the
Corporation. He shall report to the Board of Directors and shall have active
and general charge and control of all affairs of the Corporation. He may
execute bonds, mortgages, and other contracts requiring a seal, under the seal
of the Corporation, except where required by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation. He shall also perform such other duties as the Executive
Committee or the Board of Directors shall prescribe.
Vice Presidents
Section 8. The Executive Vice President shall, subject to the direction of
the President, be responsible for the operations of the Corporation. He
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties as
the President, the Executive Committee, or the Board of Directors may
prescribe.
Section 9. The Senior Vice Presidents shall perform such duties as the
President, the Executive Committee, the Board of Directors, or the Executive
Vice President to whom they may report shall prescribe.
Section 10. The Vice Presidents shall perform such duties as the President,
the Executive Committee, the Board of Directors, or the Executive Vice
President or any Senior Vice President to whom they may report directly or
indirectly may prescribe.
The Secretary and Assistant Secretaries
Section 11. The Secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all votes and the minutes of
proceedings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors, and in his capacity as Secretary shall perform such
other duties as may be prescribed by the Board of Directors, the Executive
Committee, the Chairman of the Board, or the President. He shall keep in a
safe custody the seal of the Corporation and, when authorized by the Board,
affix the same to any instrument requiring it, and, when so affixed, it shall
be attested by his signature or by the signature of the Treasurer or an
Assistant Secretary or an Assistant Treasurer or such other officer who may be
so authorized by the Board of Directors.
Section 12. The Assistant Secretaries in the order designated from time to
time by the Secretary shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties as the Board of Directors shall prescribe.
The Treasurer and Assistant Treasurers
Section 13. The Treasurer shall have the custody of the corporate funds and
securities and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Executive Committee or the Board of Directors.
Section 14. He shall disburse the funds of the Corporation as may be ordered
by the Executive Committee or the Board, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at the regular meetings of the Board or whenever they may require it, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation.
Section 15. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board for the
faithful performance of the duties of his office and for the restoration to
the Corporation in case of his death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 16. The Assistant Treasurers in the order of their seniority shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties as the
Executive Committee or the Board of Directors shall prescribe.
General Auditor
Section 17. The General Auditor shall, subject to guidance from the Audit
Committee of the Board of Directors, organize and maintain an effective audit
program for the Corporation, including coordination of the internal audit
activities of the Corporation with those of the independent public accountants
who are called upon to certify the Corporation's annual financial statements.
The scope of the audit shall encompass all of the managerial, administrative,
financial, and operational functions of the Corporation.
ARTICLE VI
Certificates of Stock
Section 1. The certificates of stock of the Corporation shall be numbered and
shall be entered in the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by
the Chairman of the Board or the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer, transfer agent, or registrar at the date of
issuance. Any of or all the signatures on the certificate may be a facsimile.
Transfer of Stock
Section 2. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment, or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its
books.
Closing of Transfer Books
Section 3. The Board of Directors shall have the power to close the stock
transfer books of the Corporation for a period not exceeding sixty days
preceding the date of any meeting of stockholders or the date for payment of
any dividend or the date for the allotment of rights or the date when any
change or conversion or exchange of capital stock shall go into effect or for
a period not exceeding sixty days in connection with obtaining the consent of
stockholders for any purpose; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled
to notice of, and to vote at, any such meeting, and any adjournment thereof,
or entitled to receive payment of any such dividend, or any such allotment or
rights, or to exercise the rights in respect of any such change, conversion,
or exchange of capital stock or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights, or to give
such consent, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as aforesaid.
Registered Stockholders
Section 4. The Corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
Lost Certificate
Section 5. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
ARTICLE VII
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors, from time to time in its absolute discretion, thinks proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board shall think conducive to the interest of the Corporation,
and the Board may modify or abolish any such reserve in the manner in which it
was created.
Directors' Annual Statement
Section 3. The Board of Directors shall present at each annual meeting, and
when called for by vote of the stockholders at any special meeting of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
Checks
Section 4. All checks or demands for money and notes of the Corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
Fiscal Year
Section 5. The fiscal year shall begin the first day of January in each year.
Seal
Section 6. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization, and the words "Corporate Seal,
Delaware", and said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
Amendments
Section 1. These By-Laws may be altered, amended, or repealed at any regular
meeting of the stockholders or at any special meeting of the stockholders at
which a quorum is present or represented, provided notice of the proposed
alteration, amendment, or repeal be contained in the notice of such special
meeting, by the affirmative vote of a majority of the stock entitled to vote
at such meeting and present or represented thereat, or by the affirmative vote
of a majority of the Board of Directors at any regular meeting of the Board or
at any special meeting of the Board if notice of the proposed alteration or
repeal be contained in the notice of such special meeting.
Exhibit 4.1
(As amended through January 1, 1995)
DYNCORP EMPLOYEE STOCK OWNERSHIP PLAN
ARTICLE I: GENERAL
1.1 Nature of Plan. The purpose of the DynCorp Employee
Stock Ownership Plan, as adopted effective as of January l, 1988,
is to provide Employees of the Company and of Participating Units
with the opportunity to obtain beneficial interests in the stock
of the Company as set forth herein and in the Trust adopted as a
part of this Plan. Any corporation which shall, by merger,
consolidation, purchase or otherwise, succeed to substantially
all the business of DynCorp shall, upon such succession and
without any appointment or other action of the Trustee,
Committee, or DynCorp be and become the successor employer
hereunder.
The Plan and Trust are intended to qualify as a stock bonus
plan and trust which are qualified and exempt from taxation under
Sections 401(a) and 501(a) of the Code, and as an employee stock
ownership plan, as defined by Section 4975(e)(7) of the Code and
Section 407(d)(6) of the Act, designed to invest primarily in
shares of stock of the Company which meet the requirements for
"employer securities" under Section 409(l) of the Code and for
"qualifying employer securities" under Section 407(d)(5) of the
Act and to incur debt in order to purchase such shares, and all
provisions of the Plan and Trust shall be construed accordingly.
All Trust Fund assets acquired under the Plan as a result of
debt incurred to purchase Shares, Company contributions, income
and other additions to the Trust Fund shall be administered,
distributed, forfeited and otherwise governed by the provisions
of the Plan.
1.2 Name of the Plan and Trust. The Plan shall be known as
the "DynCorp Employee Stock Ownership Plan", and the Trust
established in connection with this Plan shall be known as the
"DynCorp Employee Stock Ownership Trust".
1.3 Effective Date. The effective date of this Plan is
January l, 1988.
1.4 Defined Terms. All capitalized terms used in this Plan
shall have the meanings set forth in Article II, unless the
context clearly indicates otherwise or such terms are not defined
in Article II.
ARTICLE II: DEFINITIONS
2.1 "Account" means the account (including any subaccounts
established from time to time under each such account) maintained
to record the interest of a Participant in the Trust Fund.
2.2 "Act" means the Employee Retirement Income Security Act
of 1974, as now in effect or as hereafter amended.
2.3 "Affiliate" means the Company and any entity affiliated
with the Company within the meaning of Sections 414(b), (c) or
(m) of the Code, or under Regulations, if any, prescribed under
Section 414(o) of the Code, except that for purposes of applying
the provisions of Article XI and Sections 17.5(a) and 17.6 with
respect to the limitation on contributions, Section 415(h) of the
Code shall apply.
2.4 "Anniversary Date" means the last day of each Plan
Year.
2.5 "Authorized Leave of Absence" means:
(a) a leave of absence authorized in writing by the
Affiliate under the Affiliate's standard personnel practices,
provided that all persons under similar circumstances must be
treated alike in the granting of such leaves of absence, and
provided further that the Employee returns within the period
specified in the leave of absence;
(b) an absence which shall entitle the Employee to be
reemployed by the Affiliate pursuant to the provisions of the
Military Selective Service Act of 1967, or any predecessor
thereof or successor thereto, provided that the Employee shall
return to the service of the Affiliate during the period within
which his employment rights are so guaranteed; and
(c) for a Participant who has at least one Year of
Service prior to transfer from employment with an Affiliate to
employment with a corporation, partnership, or joint venture
which is not an Affiliate but as to which entity the Company or
an Affiliate, or a combination thereof, owns at least fifty
percent of the voting stock or has at least fifty percent of the
voting control, such Participant's period of employment with such
entity.
2.6 "Beneficiary" means the beneficiary or beneficiaries
designated by a Participant pursuant to Article X to receive the
amount, if any, payable under the Plan upon the death of such
Participant, or, where there has been no such designation or an
invalid designation, the individual or individuals to whom such
amount is payable under the terms of this Plan.
2.7 "Board of Directors" means the Board of Directors of
the Company or authorized committee thereof.
2.8 "Break in Service" means the period of time commencing
on the date of a Termination of Service and ending on the
Employee's new Entry Date upon reemployment with the Company, an
Affiliate or any Participating Unit. Solely for purposes of
determining whether a Break in Service of 12 months has occurred,
an individual shall be credited with the Service which such
individual would have completed but for one of the following
causes:
(i) leaves of absence duly granted by the Company or
an Affiliate continuing for a period of not more than two years,
with all Employees under similar circumstances being treated
alike;
(ii) layoff for a lack of work or other cause
continuing for a period of not more than one year; and
(iii) a maternity or paternity absence, as
determined by the Committee in accordance with the Code and
Regulations; provided, however, that the Service so credited
shall not exceed the Service necessary to prevent a Break in
Service of 12 months, and that the individual shall timely
provide the Committee with such information as it shall require.
Service credited for a maternity or paternity absence shall be
credited in the twelve month period which commences on the date
the maternity or paternity absence begins if necessary to prevent
a Break in Service of 12 months during the 12 month period which
commences on the first anniversary of such absence. For purposes
of this Section 2.8, maternity or paternity absence shall mean an
absence from work by reason of the individual's pregnancy, the
birth of the individual's child or the placement of a child with
the individual in connection with the adoption of the child by
such individual, or for purposes of caring for a child for the
period immediately following such birth or placement.
2.9 "Code" means the Internal Revenue Code of 1986, as now
in effect or as hereafter amended. All citations to sections of
the Code are to such sections as they may from time to time be
amended or renumbered.
2.10 "Committee" means the committee provided for in Article
XIII.
2.11 "Company" means DynCorp, a Delaware corporation, and
any successor to such corporation.
2.12 "Compensation" means, unless otherwise indicated, base
salary or wages plus overtime and bonuses received by an Employee
during the Plan Year from a Participating Unit for services
performed for a Participating Unit, including any amount that is
deferred or reduced pursuant to a salary reduction agreement in
respect of which any Participating Unit makes contributions to a
qualified profit sharing or stock bonus plan which includes a
"qualified cash or deferred arrangement" (within the meaning of
Section 401(k) of the Code) or to a "cafeteria plan" (within the
meaning of Section 125 of the Code); provided, however, that
Compensation in excess of $200,000 (as automatically adjusted,
when applicable, to the extent permitted by the Code and
Regulations) shall not be taken into account.
2.13 "Disability" means that in the event the Committee
determines that a participant is totally and permanently
disabled, he will become 100% vested in his Account. For
purposes of this Section 2.13, a Participant shall be considered
totally and permanently disabled if by reason of bodily injuries
or sickness occurring before he terminates employment with a
Participating Unit he is unable to perform the duties of his
occupation and he satisfies either (a) or (b) below:
(a) He is eligible for and receiving disability
benefits under the Federal Social Security Act; or if he does not
have the quarters of coverage required to qualify for Social
Security disability benefits, he is sufficiently disabled so that
he would qualify for Social Security disability benefits if he
had the quarters of coverage required to qualify for Social
Security disability benefits;
(b) He is eligible for and receiving disability
benefits under a Participating Unit's long-term disability plan
or if he is not covered by a Participating Unit's long-term
disability plan, he is sufficiently disabled so that he would
qualify for disability benefits under a Participating Unit's
long-term disability plan if he were covered by a Participating
Unit's long-term disability plan.
All determinations of permanent and total disability
hereunder shall be made by the Committee in a uniform and
nondiscriminatory manner based on appropriate medical advice and
examination.
2.14 "Effective Date" means January l, 1988.
2.15 "Employee" or "Eligible Employee" means a person who is
an employee of a Participating Unit, excluding any such employee
who is a non-resident alien or who is included in a unit of
employees covered by a negotiated collective bargaining agreement
unless such agreement provides for his participation in the Plan.
A director of the Company is not eligible for participation
unless he is also an Employee.
2.16 "Entry Date" means the date of hire of an Employee.
2.17 "Exempt Loan" means any loan to the Plan or Trust not
prohibited by Section 4975(c) of the Code and Section 406 of the
Act because the loan meets the requirements set forth in Section
4975(d)(3) of the Code and Section 408(b)(3) of the Act, and the
Regulations promulgated thereunder, the proceeds of which loan
are used to finance the acquisition of Shares or refinance or
repay such a loan.
2.18 "Forfeiture" means the portion of a Participant's
Account which is forfeited under Article VII.
2.19 "IRS" means the United States Internal Revenue Service.
2.20 "Normal Retirement Date" means the date described in
Section 8.1.
2.21 "Participant" means any Employee who begins to
participate in the Plan as provided in Article III, and whose
participation is not terminated as provided in such Article.
2.22 "Participating Unit" means the Company and any
subsidiary, division, organization unit or other corporation or
entity affiliated or associated with the Company, if the Board of
Directors by appropriate action consents to the participation in
the Plan of such subsidiary, division, organization unit or other
corporation or entity affiliated or associated with the Company;
provided that the Board of Directors shall not give such consent
with respect to such adopting entity unless, with respect to such
entity, Shares held under the Plan then constitute "employer
securities" within the meaning of Section 409(l) of the Code and
"qualifying employer securities" within the meaning of Section
407(d)(5) of the Act. By its participation in the Plan, a
Participating Unit shall be deemed to appoint the Company as its
exclusive agent to exercise on its behalf all of the power and
authority conferred by the Plan or by the Trust Agreement upon
the Company and accepts the delegation to the Committee and the
Trustee of all the power and authority conferred upon them by the
Plan and the Trust Agreement. The authority of the Company, the
Committee and the Trustee to act as such agent or in accordance
with such delegation shall continue until the Plan is terminated
as to the Participating Unit and the relevant Trust Fund assets
have been distributed by the Trustee as provided in Article XIV
of the Plan.
2.23 "Pension Plan" means the Pension Plan for Employees of
DynCorp and Associated Companies as in effect on January 1, 1988,
as the same may be amended from time to time.
2.24 "Plan" means the DynCorp Employee Stock Ownership Plan,
as the same may be amended from time to time.
2.25 "Plan Administrator" means the Committee.
2.26 "Plan Year" means the period beginning on January 1 and
ending on December 31.
2.27 "Regulations" means the applicable regulations issued
under the Code, the Act or other applicable law, by the IRS, the
Department of Labor or any other governmental authority and any
temporary regulations or rules promulgated by such authorities
pending the issuance of final regulations.
2.28 "Retirement Date" means the date of a Participant's
Normal Retirement Date, Deferred Retirement Date, Disability
Retirement Date, or Early Retirement Date as provided in Article
VIII.
2.29 "Service" means employment on the payroll (whether or
not as an Employee) with an Affiliate and any period of an
Authorized Leave of Absence within the meaning of Section 2.5(c).
2.30 "Shares" means the common stock issued by the Company.
If the Board of Directors so resolves, or if the Board of
Directors has not so resolved and stock described in the first
sentence of this Section 2.30 does not satisfy the requirements
of both (i) Section 409(l) of the Code for "employer securities"
and (ii) Section 407(d)(5) of the Act for "qualifying employer
securities", then "Shares" shall also mean any stock satisfying
such requirements.
2.31 "Surviving Spouse" means the survivor of a deceased
former Participant to whom such deceased former Participant had
been legally married (as determined by the Committee) throughout
the one-year period ending on the earlier of (i) the date as of
which payments commence under the Plan, or (ii) the date of the
Participant's death. For purposes of Article X, if a Participant
becomes married within one year of the date as of which payments
commence under the Plan and remains married to that spouse for at
least a one-year period ending on or before the date of the
Participant's death, such Participant and his spouse shall be
treated as having been married throughout the one-year period
ending on the date as of which payments commence.
2.32 "Suspense Subfund" means the subfund established under
Section 6.2 as part of the Trust Fund to hold Shares purchased
with the proceeds of an Exempt Loan pending the allocation of
such Shares to individual Accounts.
2.33 "Termination of Service" means a termination of
employment with an Affiliate as determined by the Committee in
accordance with reasonable standards and policies adopted by the
Committee; provided, however, that the transfer of an Employee
from employment by an Affiliate to employment by another
Affiliate or a transfer of the nature described in Section 2.5(c)
shall not constitute a Termination of Service; and provided
further that a Termination of Service shall occur (i) on the date
as of which an Employee quits, is discharged, terminates his
employment in connection with his incurring a Disability,
retires, dies, or fails to return to employment at the expiration
of an Authorized Leave of Absence of more than 12 months duration
or (ii) in the case of an absence from employment with an
Affiliate for any other reason, on the date which is 12 months
after the date on which such absence commenced.
Notwithstanding the foregoing, an Employee who is absent on
account of service in the armed forces of the United States of
America shall not incur a Termination of Service in contravention
of federal law.
2.34 "Trust" means the DynCorp Employee Stock Ownership
Trust, created by the Trust Agreement entered into between the
Company and the Trustee.
2.35 "Trust Agreement" means the agreement by and between
the Company and the Trustee, as said Agreement may from time to
time be amended.
2.36 "Trustee" means the entity or individual(s) serving as
a trustee under the Trust Agreement.
2.37 "Trust Fund" means all Shares, cash and other
securities and all other assets deposited with or acquired by the
Trustee in its capacity as such hereunder, together with
accumulated income, subject to all liabilities incurred by the
Trustee in its capacity as such and less all disbursements made
in respect thereof.
2.38 "Valuation Date" means December 31, or any other date
during the Plan Year specified by the Committee, upon or as of
which the assets and liabilities of the Trust Fund are valued, as
prescribed by Section 5.6.
2.39 "Vested Interest" means the portion of a Participant's
Account which has become nonforfeitable pursuant to Sections 7.1,
7.3 and 17.4.
2.40 "Years of Service" means, subject to the requirements
of Section 1.410(a)-7(d)(iii) of the IRS Regulations, an
Employee's period of Service measured in years from his date of
hire or rehire (whichever is applicable) with an Affiliate (or
the date such Affiliate became affiliated with the Company, if
later than his date of hire or rehire, unless the Board
determines otherwise) to the applicable Termination of Service of
the Employee. If an Employee's Termination of Service occurs
prior to or on an anniversary date, and he is subsequently
rehired more than 12 months after such Termination of Service,
the Employee shall be recredited as of his rehire date (provided,
with respect to nonvested Employees, that such date occurs before
he has incurred five consecutive Breaks in Service of 12 months
each) with each prior Year of Service and with a partial Year of
Service for any other period of Service completed since (i) such
anniversary date, (ii) his hire date, (iii) his rehire date or
(iv) the date the Affiliate became affiliated with the Company,
whichever is applicable.
ARTICLE III: PARTICIPATION IN THE PLAN
3.1 Participation.
(a) Any individual shall become eligible to
participate when he becomes an Employee.
(b) An Employee shall participate in the Plan on the
later of (i) the Effective Date, or (ii) his Entry Date.
3.2 Participation and Adjustments. The Committee shall
take any necessary or appropriate action to ensure that each
Eligible Employee becomes a Participant under this Article III
and, if it is determined that an Eligible Employee has for any
reason not been made a Participant in the Plan or an
administrative adjustment is required, each such Employee shall
retroactively become a Participant or such administrative
adjustment shall be made. The Account of an Employee who
retroactively becomes a Participant or for whom an administrative
adjustment is made shall, upon becoming a Participant or upon
such adjustment, consist solely of the aggregate amount of
contributions which would have been allocated to his Account had
he become a Participant when first eligible.
3.3 Duration. The participation of a Participant shall end
when no further benefits are payable to him or on his account
under the Plan. However, subject to Sections 6.1(c) and 6.4, no
contributions shall be made for the benefit of, and no
contributions, allocations of transfers of assets from another
plan or Forfeitures shall be allocated, added or otherwise
credited to the Account of, such a Participant in the Plan after
the Plan Year in which he has a Termination of Service or
otherwise ceases to be an Employee and before the Plan Year, if
any, in which he is rehired as an Employee.]
ARTICLE IV: COMPANY CONTRIBUTIONS
4.1 Contributions to Trust Fund.
(a) Subject to Article XI hereof and the provisions of
any applicable loan or contribution agreement, the Participating
Units shall contribute to the Trust Fund for each Plan Year such
sum as the Board of Directors may, in its sole discretion,
determine. The Company may contribute all or part of the entire
amount due on behalf of each Participating Unit and charge the
amount thereof to the Participating Unit responsible therefor.
In any Plan Year, the contribution on behalf of the Participants
who are Eligible Employees of a Participating Unit, when
expressed as a percentage of the aggregate Compensation of such
Participants, may, but need not be, the same as the contribution
on behalf of the Participants who are Eligible Employees of
another Participating Unit; provided, however, that no such
percentage may be applicable in such Plan Years with respect to
less than 50 Participants unless the Board of Directors
determines that the Code and Regulations permit otherwise. Also
subject to the provisions of any applicable loan or contribution
agreement, the contribution under this Section 4.1 for any given
Plan Year shall be paid to the Trustee on a quarterly basis.
Subject to the foregoing provisions of this Section 4.1(a), the
contribution (if any) for any Plan Year shall be allocated except
as otherwise required by law among Participating Units as
follows:
(1) First, an amount shall be allocated to
Participating Units to the extent required under a negotiated
collective bargaining agreement.
(2) Second, the portion (if any) of the
contribution for any Plan Year not allocated under Section
4.1(a)(1) shall be allocated to the Participating Unit known as
the Aerospace Operations Field Teams. The amount of such
allocation shall be the amount of such portion which does not
exceed one and one-half percent of the base salary or wages
(excluding overtime and bonuses, but including any amount of such
base salary or wages that is deferred or reduced as described in
Section 2.12) paid in such Plan Year by such Participating Units
to Participants whose accounts are eligible under the terms of
the Plan to be credited with Shares for such Plan Year ("Eligible
Participants").
(3) Third, subject to Section 4.1(a)(4), the
portion (if any) of the contribution for any Plan Year not
allocated under Section 4.1(a)(1) or Section 4.1(a)(2) shall be
allocated to all Participating Units (other than those within the
scope of Section 4.1(a)(1)) pro rata based on each Participating
Unit's share of Compensation paid in such Plan Year to Eligible
Participants.
(4) If the foregoing allocation process would not
result in (i) satisfaction of the pertinent fringe benefit
requirements of the Service Contract Act of 1965, or (ii)
satisfaction of the minimum benefits safe harbor set forth in
Treasury Regulations 1.414(r)-5(g), as to one or more
Participating Units, the allocation to each Participating Unit
set forth in Section 4.1(a)(3) shall be reduced pro rata to the
extent necessary to provide an allocation amount which will
satisfy such requirements as to the Participating Unit for which
the requirements or safe harbor would otherwise would be
unsatisfied and such amount shall be so allocated; provided that
this Section 4.1(a)(4) shall not require that the allocation in
Section 4.1(a)(3) be reduced to below zero
(b) All or part of the contributions made under
Section 4.1(a) may be applied to repay any outstanding Exempt
Loan and interest thereon. The Committee may, subject to any
pledge or similar agreement, direct or determine the proportions
of such contributions which are applied to repay each such Exempt
Loan.
(c) All or part of the contributions made under
Section 4.1(a) may be used to purchase Shares allocated to the
Account of any Participant or Beneficiary in order to make a
distribution under Articles VIII, IX, or X to such Participant or
Beneficiary.
(d) At the sole discretion of the Board of Directors,
any part or all of a contribution to the Plan may be in the form
of Shares. To the extent that any contribution is made in the
form of Shares, such Shares shall be allocated in the same manner
as a contribution of cash (other than cash used for the repayment
of an Exempt Loan).
4.2 No Participant Contributions. No Participant shall be
allowed to contribute to the Trust Fund.
4.3 Transfers of Assets from Other Plans. Notwithstanding
the provisions of Section 4.1, in the event that assets are
transferred to the Plan from another plan which is qualified and
exempt from taxation under Sections 401(a) and 501(a) of the
Code, and the Committee determines that Section 4980(c)(3) of the
Code is applicable to such transfer, the Company shall not be
permitted to make contributions to the Trust Fund for any Plan
Year with respect to which such transfer is made or for any Plan
Year following such transfer until the "allocation requirements"
for any such Plan Year are satisfied. For purposes of the
preceding sentence the "allocation requirements" for any such
Plan Year are satisfied when, subject to the limitations
contained in Article XI, the maximum number of Shares which could
be released for such Plan Year from the Suspense Subfund in
connection with the use of such transferred amounts to repay an
Exempt Loan are allocated to the Accounts of Participants who
were participants in the plan from which the transfer is made.
Except to the extent otherwise required in connection with the
application to individual Accounts of the limitations contained
in Article XI, the number of Shares allocable to a Participant's
Account shall be the number of Shares which bears the same ratio
to the total Shares so released for such Plan Year and
attributable to the transfer as the "transfer factor" of such
Participant bears to the total "transfer factor" of all
Participants entitled to an allocation under this Section 4.3 for
that Plan Year. For purposes of the preceding sentence,
"transfer factor" refers to the product of a Participant's
Compensation for the Plan Year preceding the year of transfer and
the Participant's years of participation under the plan from
which the transfer is made. The Plan Administrator shall make
final, to the extent permitted by law, all estimated allocations
of assets pursuant to this Section.
4.4 Company Not Responsible for Adequacy of Trust Fund.
Except as and if required by applicable law, neither the Board of
Directors, any Affiliate, any Participating Unit, the Committee,
any member of the Committee, nor the Trustee shall be responsible
for the adequacy of the Trust Fund to meet and discharge Plan
liabilities.
ARTICLE V: TRUST FUND
5.1 Plan Assets. The Company has entered into the Trust
Agreement providing for the establishment of a single Trust to
hold the assets of the Plan. All contributions shall be paid
over to the Trustee and held pursuant to the provisions of the
Plan and the Trust Agreement.
5.2 Accounts. A Participant's interest in the Trust Fund
shall be reflected in his Account. One or more subaccounts may
be established under each Participant's Account for such purposes
as the Committee deems appropriate. Notwithstanding the
foregoing, the Trust Fund shall be treated as a single trust for
purposes of investment administration and payment of benefits,
and nothing contained herein shall require the physical
segregation of assets for any Account.
5.3 Investment of Trust Fund. The Trust Fund shall be
invested exclusively in Shares, except for cash or cash
equivalent investments held (i) for the limited purpose of making
Plan distributions to Participants and Beneficiaries, (ii)
pending the investment of contributions or other cash receipts in
Shares, (iii) pending use to repay an Exempt Loan and interest
thereon, (iv) for purposes of paying, under the terms described
in the Plan or Trust Agreement, fees and expenses incurred with
respect to the Plan or Trust and not paid for by the Company or
Participating Units or (v) in the form of de minimis cash
balances. To the maximum extent permitted by law, neither any
Participating Unit, Affiliate, the Committee nor the Trustee
shall have any responsibility or duty to time any transaction
involving Shares in order to anticipate market conditions or
changes in stock value, nor shall any such person have any
responsibility or duty to sell Shares held in the Trust Fund (or
otherwise to provide investment management for Shares held in the
Trust Fund) in order to maximize return or minimize loss.
Company contributions made in cash, and other cash received by
the Trustee, may be used to acquire Shares from shareholders of
the Company or directly from the Company. Any Shares acquired,
or released from the Suspense Subfund, with the proceeds of a
transfer of assets to the Plan described in Section 4.3 must
remain in the Plan until distributed to Participants in
accordance with Article VIII.
5.4 Exempt Loan.
(a) The terms of any Exempt Loan shall comply with
each of the following requirements:
(1) The terms shall be as favorable to the Plan
as the terms of a comparable loan negotiated at arm's length by
independent parties;
(2) The interest rate shall be no more than a
reasonable interest rate considering all relevant factors
including the amount and duration of the Exempt Loan, the
security and guarantee involved, if any, the credit standing of
the Plan and the guarantor of the Exempt Loan, if any, and the
interest rate prevailing for comparable loans;
(3) The Exempt Loan shall be without recourse
against the Plan;
(4) The Exempt Loan must be for a specific term;
(5) The Exempt Loan may not be payable at the
demand of any person except in the case of default;
(6) The only assets of the Plan that may be given
as collateral on the Exempt Loan are Shares acquired with the
proceeds of the same Exempt Loan or Shares used as collateral for
a prior Exempt Loan, which prior loan is repaid with the proceeds
of the same Exempt Loan;
(7) No person entitled to payment under the
Exempt Loan shall have any right to assets of the Plan other than
collateral given for that Exempt Loan, contributions made to the
Plan (other than contributions of employer securities) to enable
it to meet its obligations under that Exempt Loan and earnings
attributable to such collateral and such contributions, including
dividends on allocated Shares to the extent permitted by the law
("Eligible Earnings");
(8) The value of Plan assets transferred in
satisfaction of the Exempt Loan upon an event of default shall
not exceed the amount of the default;
(9) If the lender is a "disqualified person" (as
such term is defined in section 4975(e) of the Code), or a "party
in interest" (as such term is defined in Section 3(14) of the
Act), Plan assets may only be transferred upon default only upon
and to the extent of the failure of the Plan to meet the payment
schedule of the Exempt Loan;
(10) Upon payment of any portion of the balance
due on the Exempt Loan, the assets pledged as collateral for such
portion shall be released from encumbrance in accordance with
Section 6.3; and
(11) Payments made from the Trust Fund with
respect to the Exempt Loan during a Plan Year shall not exceed an
amount equal to the sum of amounts contributed to the Plan to pay
off an Exempt Loan by the Participating Units, Eligible Earnings
(as defined in Subsection (7) above) and transfers under Section
4.3 hereof, less any such payments made in prior Plan Years.
Such contributions and earnings shall be accounted for separately
in the books of accounts of the Plan maintained by the Committee
or the Trustee until the Exempt Loan is repaid.
(b) Any Exempt Loan must be primarily for the benefit
of Participants and their Beneficiaries.
(c) Notwithstanding any other provision of the Plan or
the Trust, all proceeds of an Exempt Loan shall be used, within a
reasonable time after receipt by the Trust, only for any or all
of the following purposes:
(1) To acquire Shares;
(2) To repay the same Exempt Loan; or
(3) To repay any previous Exempt Loan.
5.5 Legal Limitation. The Committee shall not be required
to engage in any transaction, including, without limitation,
directing the purchase or sale of Shares, which it determines in
its sole discretion might tend to subject itself, its members,
the Plan, any Participating Unit, or any Participant to liability
under federal or state laws.
5.6 Accounting and Valuation.
(a) Subject to the requirements of Section 5.6(e), the
fair market value of the assets of the Trust Fund shall be
determined by the Committee as of each Valuation Date, in
accordance with generally accepted valuation methods and
practices including, but not limited to, in the case of Shares,
the use of one or more independent investment bankers or
appraisers.
(b) The value of a Participant's Account as of any
Valuation Date shall equal the sum of:
(1) The aggregate value (as determined under
Section 5.6(a)) of all Shares previously allocated to such
Participant's Account as of the Anniversary Date coinciding with
or immediately preceding such Valuation Date;
(2) Subject to Section 5.6(c), the aggregate
value (as defined under Section 5.6(a)) of undistributed
dividends, if any, received during the Plan Year on Shares
allocated to such Participant's Account; and
(3) Such Participant's allocable share
(determined in accordance with the rules set forth in Section 6.4
for determining Participants' allocable shares of Shares released
from the Suspense Subfund) of the undistributed earnings, if any,
on all amounts contributed to the Trust Fund for purposes other
than the repayment of an Exempt Loan.
(c) Dividends payable, if any, with respect to Shares
held by the Trust Fund will be, in the discretion of the Board of
Directors (or, in the absence of action by the Board of
Directors, the Committee) and in conformity with the terms of the
Shares on which such dividends are paid, (1) to the extent
permitted by law and not inconsistent with any controlling loan
documents, used for the purpose of repaying one or more Exempt
Loans, (2) distributed from the Trust Fund to Participants or
their Beneficiaries not later than 90 days after the close of the
Plan Year in which they are paid to the Trust Fund, (3) paid
directly to such Participants or their Beneficiaries, (4)
retained in the Trust Fund and allocated pursuant to Section
5.6(b), or (5) paid or utilized in a combination of any or all of
the foregoing four options.
(d) The Committee shall establish accounting
procedures for the purpose of making the allocations, valuations
and adjustments to Participants' Accounts in accordance with
provisions of the Plan. From time to time, the Committee may
modify its accounting procedures for the purpose of achieving
equitable and nondiscriminatory allocations among the Accounts of
Participants in accordance with the provisions of the Plan.
(e) All valuations of Shares, where such Shares are
not readily tradable on an established securities market and
where such valuations relate to activities carried on by the
Plan, shall be made by one or more independent appraisers who
meet the requirements, if any, of the Code and Regulations. To
the extent and in the manner required by the Code and
Regulations, all independent appraisers, if any, making
appraisals pursuant to the foregoing sentence shall be registered
with the IRS.
(f) The determination of fair market value shall
consider, to the extent permitted by law (and in conformity,
where applicable, with the provisions of this Article V), the
same methodology used to value the initial purchase by the Trust
and shall, to the extent permitted by law, include enterprise
value as a valuation factor to the same extent that enterprise
value was taken into account as a valuation factor at the time of
such purchase of Shares.
5.7 Limitations on Trustee. Except where so provided in
the Trust Agreement or the Plan, the Trustee may act only as
directed by the Committee.
ARTICLE VI: ALLOCATION OF CONTRIBUTIONS TO THE TRUST FUND
6.1 Allocation of Contributions.
(a) The Account maintained for each Participant will
be credited as of each Anniversary Date with his allocable share
of (1) Shares purchased by the Trust Fund using cash contributed
by or on behalf of such Participant's employer (or contributed
directly to the Trust Fund) and (2) Shares released from the
Suspense Subfund pursuant to Section 6.3 and allocable to the
contribution made by or on behalf of such Participant's employer
pursuant to Section 6.4. Shares released from the Suspense
Subfund in connection with the application of a transfer of
assets described in Section 4.3 to repay an Exempt Loan shall be
allocated pursuant to Section 4.3. Shares released from the
Suspense Subfund in connection with the utilization by the Plan
of dividends on Shares to repay an Exempt Loan shall be allocated
pursuant to Section 6.4 and Forfeitures shall be allocated
pursuant to Section 7.4. A Participant who (i) terminates
Service after his or her Early or Normal Retirement Date, (ii)
begins receiving distributions in installments pursuant to
Section 8.5, and (iii) returns to Service prior to the completion
of such distributions, shall have future allocations credited to
a separate subaccount, the distribution of which shall commence
following his or her subsequent Termination of Service pursuant
to Article VIII.]
(b) For purposes of Section 6.1(a)(1), Shares
purchased by the Trust Fund for a Plan Year shall be considered
purchased with cash contributed by or on behalf of a
Participating Unit in the same proportion that the cash
contributed by or on behalf of such Participating Unit bears to
the total contributions made (in each case, for the purpose of
enabling the Plan to purchase Shares) by or on behalf of all
Participating Units for the Plan Year for such purpose. Except
as provided in Section 7.2, Shares purchased using cash
contributed by or on behalf of a Participating Unit shall be
allocated among Participants employed by such Participating Unit
and entitled to an allocation of Shares for such Plan Year in the
same proportion that the Compensation for the Plan Year that each
such Participant earned while an Eligible Employee of such
Participating Unit bears to the total Compensation for the Plan
Year that all such Participants earned while Eligible Employees
of such Participating Unit.
(c) A Participant shall be entitled to an allocation
for his first Plan Year of participation only if he is either:
(i) a Participant as of the Effective Date, or (ii) a Participant
during some portion of the last payroll period for such Plan
Year. Except for a Participant's first Plan Year of
participation, if a Participant is an Eligible Employee when his
employment terminates, the Participant, or his Beneficiary, as
the case may be, shall be entitled to an allocation for the Plan
Year in which the Participant's employment terminates regardless
of whether the Participant was an Eligible Employee on the last
day of such Plan Year.
(d) Allocations of Shares shall be expressed in terms
of numbers of whole and fractional interests in Shares.
(e) For any Plan Year, if a negotiated collective
bargaining agreement requires a Participating Unit to make
contributions with respect to the hours worked by an Employee
included in a bargaining unit covered by such agreement (his
"Hours Worked"), then, notwithstanding Sections 6.1(b) and 6.4,
and in lieu of the allocations otherwise provided thereunder, (i)
any Shares purchased with such contribution shall be allocated to
his Account and (ii) the number of Shares released from the
Suspense Subfund which shall be allocable to his Account shall be
the number of Shares which bears the same ratio to the total
Shares released for such Plan Year and allocable to the total
contribution made by or on behalf of his Participating Unit on
account of hours worked as his Hours Worked for the Plan Year
bear to the total hours worked (by all similarly situated
Participants) that gave rise to such total contributions.
6.2 Suspense Subfund. Shares acquired by the Trust Fund
through an Exempt Loan shall be added to and maintained in the
Suspense Subfund and shall thereafter be released from the
Suspense Subfund and allocated to Accounts of Participants as
provided in Sections 4.3, 6.3 and 6.4.
6.3 Release from Suspense Subfund. Shares acquired by the
Trust Fund with the proceeds of an Exempt Loan shall be released
from the Suspense Subfund as the Exempt Loan is repaid, in
accordance with the provisions of this Section 6.3.
(a) For each Plan Year until the Exempt Loan is fully
repaid, the number of Shares released from the Suspense Subfund
shall equal the number of unreleased Shares immediately before
such release for the current Plan Year multiplied by the "Release
Fraction". As used herein, the term "Release Fraction" shall mean
a fraction, the numerator of which is the amount of principal and
interest paid on the Exempt Loan for the Plan Year and the
denominator of which is the sum of the numerator plus the
principal and interest to be paid on such Exempt Loan for all
future years during the term of such Exempt Loan (determined
without reference to any possible extensions or renewals
thereof). For purposes of computing the denominator of the
Release Fraction, if the interest rate on the Exempt Loan is
variable, the interest to be paid in subsequent Plan Years shall
be calculated by assuming that the interest rate in effect as of
the end of the applicable Plan Year will be the interest rate in
effect for the remainder of the term of the Exempt Loan.
Notwithstanding the foregoing, in the event such Exempt Loan
shall be repaid with the proceeds of a subsequent Exempt Loan
(the "Substitute Loan"), such repayment shall not operate to
release all such Shares in the Suspense Subfund, but, rather,
such release shall be effected pursuant to the foregoing
provisions of this Section 6.3(a) on the basis of payments of
principal and interest on such Substitute Loan.
(b) If required by any pledge or similar agreement, or
if permitted by such pledge or agreement and required by the
Board of Directors pursuant to a one-time, irrevocable
designation (which shall be made, if at all, upon the making of
an Exempt Loan) by the Board of Directors, then, in lieu of
applying the provisions of Section 6.3(a) hereof with respect to
an Exempt Loan, Shares shall be released from the Suspense
Subfund as the principal amount of such Exempt Loan is repaid
(without regard to interest payments), provided the following
three conditions are satisfied:
(1) The Exempt Loan shall provide for payments
for each year of principal and interest at a cumulative rate that
is not less rapid at any time than level annual payments of such
amounts for ten years;
(2) The interest portion of any payment shall be
disregarded only to the extent it would be treated as interest
under standard loan amortization tables; and
(3) If the Exempt Loan is renewed, extended or
refinanced, the sum of the expired duration of the Exempt Loan
and the renewal, extension or new Exempt Loan period shall not
exceed ten years.
(c) If at any time there is more than one Exempt Loan
outstanding, then separate accounts may be established under the
Suspense Subfund for each such Exempt Loan. Each Exempt Loan for
which a separate account is maintained shall be treated
separately for purposes of the provisions governing the release
of Shares from the Suspense Subfund under this Section 6.3
(including for purposes of determining whether Section 6.3(a) or
Section 6.3(b) governs the release of Shares from any particular
Suspense Subfund) and for purposes of the provisions governing
the application of Participating Unit contributions to repay an
Exempt Loan under Section 4.1.
(d) Except as provided in Section 4.3, all Shares
released from the Suspense Subfund during any Plan Year shall be
allocated among Participants as prescribed by Section 6.4.
6.4 Allocation of Shares Released from Suspense Subfund.
Shares released from the Suspense Subfund for a Plan Year in
accordance with Section 6.3 shall be held in the Trust Fund on an
unallocated basis until allocated by the Committee as of the
Anniversary Date for that Plan Year. A Participant shall be
entitled to an allocation for his first Plan Year of
participation only if he is either: (i) a Participant as of the
Effective Date, or (ii) a Participant during some portion of the
last payroll period for such Plan Year. Except for a
Participant's first Plan Year of participation, if a Participant
is an Eligible Employee when his employment terminates, the
Participant, or his Beneficiary, as the case may be, shall be
entitled to an allocation for the Plan Year in which the
Participant's employment terminates regardless of whether the
Participant was an Eligible Employee on the last day of such Plan
Year. Except as provided in Section 4.3, the number of Shares
allocable to a Participant's Account shall be the number of
Shares which bears the same ratio to the total Shares released
for such Plan Year and allocable to the contribution made by or
on behalf of such Participant's Participating Unit as the
Compensation for the Plan Year of such Participant while an
Eligible Employee of such Participating Unit bears to the total
Compensation for the Plan Year of all Participants while Eligible
Employees of such Participating Unit entitled to an allocation
under this Section 6.4 for that Plan Year. If Shares are
released in connection with the utilization by the Plan of
dividends on Shares to repay an Exempt Loan, such Shares shall be
allocated for the Plan Year in which they are released (subject,
with respect to dividends on allocated Shares, to the
requirements, if any, of Section 404(k) of the Code and Section
5.6(b)(2) of the Plan) to each Participant's Account, if he is
entitled to an allocation under this Section 6.4, in the ratio
that his allocation of Shares bears to the total number of Shares
allocated to all Participants, as such Shares have been allocated
for such Plan Year pursuant to Section 6.1 but excluding any
allocation of Shares attributable to a transfer of assets
pursuant to Section 4.3. Subject to the provisions of the
foregoing sentence, the total Shares allocable to the
contribution of such Participant's Participating Unit shall be
the number of Shares which bears the same ratio to the total
Shares released from the Suspense Subfund for the Plan Year as
the contribution made by or on behalf of such Participant's
Participating Unit for the Plan Year bears to the total
contributions for the Plan Year made by or on behalf of all
Participating Units. All Shares in the Trust Fund, other than
Shares held in the Suspense Subfund as of an Anniversary Date,
must be allocated to Accounts as of the Anniversary Date.
6.5 Limitation on Allocations to Certain Participants.
Notwithstanding the foregoing provisions of this Article VI:
(a) If more than one-third of the Company's
contributions for a Plan Year which are deductible under Section
404(a)(9) of the Code would be allocated, within the meaning of
Section 415(c)(6)(C) of the Code, in the aggregate, to the
Accounts of Participants described in Section 414(q) of the Code,
then such allocations to the Accounts of Participants described
in Section 414(q) of the Code shall be reduced, pro rata, in an
amount sufficient to reduce the amounts actually allocated to the
Accounts of such Participants to an amount not in excess of
one-third of such deductible contributions with respect to such
Plan Year; and
(b) Any Shares which are prevented from being
allocated due to the restriction contained in Section 6.5(a)
shall be allocated as of the Anniversary Date pursuant to
Sections 6.1 and 6.4 as though those Participants described in
Section 414(q) of the Code did not participate in the Plan.
6.6 Stock Dividends, Splits, Recapitalizations, Etc. Any
Shares received by the Trustee as a result of a stock split,
dividend, conversion, or as a result of a reorganization or other
recapitalization of the Company shall be allocated as of the day
on which the Shares are received by the Trustee in the same
manner as the Shares to which they are attributable are then
allocated.
ARTICLE VII: VESTING
7.1 Vesting Schedule. For all purposes of the Plan, a
Participant's Vested Interest shall be the percentage of the
amount credited to his Account determined by the Committee from
the following vesting schedule on the basis of the number of
Years of Service which he has completed as of the date of his
Termination of Service.
Vested Interest in
Years of Service Participant's Account
Less than 2 years 0%
2 years but less than 3 50%
3 years but less than 4 75%
4 years or more 100%
Notwithstanding the foregoing, where
government regulations, including the Federal Procurement
Regulations and agency supplemental procurement regulations, or
contracts issued by government agencies require, for Participants
who are subject to such regulation or contract, that so much of
the Participant's Account as is attributable to a period of
service when the Participant is performing a government contract
shall be 100% vested for any such Participant who has completed
one Year of Service, then each such Participant shall be 100%
vested in that portion of his Account attributable to
contributions for the period during which he is subject to such
regulation or contract, upon completion of one Year of Service.
However, if for any Plan Year the application of the preceding
sentence would result in discrimination in favor of highly
compensated employees (as defined in Code Section 414(s)) in
violation of Code Section 401(a)(4), then for such Plan Year the
preceding sentence shall not apply to any such highly compensated
employee.
7.2 Forfeitures; Return to Employment. The unvested
portion of a Participant's Account shall be deemed to be a
Forfeiture upon the last day of the Plan Year in which the
Employee incurs a Break in Service of at least 12 months
duration. If the Employee has not had five consecutive Breaks in
Service of at least 12 months each when he returns to Service,
any amounts forfeited pursuant to the preceding sentence (but
with no earnings thereon) shall be reinstated, first from
Forfeitures, then, if necessary, from Shares otherwise released
from a Suspense Subfund in connection with the repayment of an
Exempt Loan, and then, if necessary, from Company contributions,
and shall be distributed upon his subsequent Termination of
Service in accordance with the applicable Plan provisions
(without regard to the prior Termination of Service). In the
event of a reinstatement, appropriate adjustments to take into
account any prior distributions shall be made in connection with
any subsequent determination of a Participant's Vested Interest.
If a Participant or former Participant has had five consecutive
Breaks in Service of at least 12 months each, there shall be no
reinstatement of any amounts forfeited by him pursuant to the
vesting schedule under Section 7.1.
7.3 Full Vesting. Notwithstanding Section 7.1, a
Participant who is then an Employee of the Company or an
Affiliate shall be fully vested in his Account on the earlier of
his Normal Retirement Date, his Disability Retirement Date or his
death.
7.4 Treatment of Forfeitures. All Forfeitures occurring
pursuant to Section 7.2 shall be used (1) to reinstate the
Account of a reemployed Participant in accordance with Section
7.2, (2) to reinstate the Account of a Participant whose Account
was understated due to an administrative error, and (3) any
remaining Forfeitures shall be allocated as of the last day of a
Plan Year to the Account of each Participant who is entitled to
an allocation of Shares for such Plan Year in the ratio that his
allocation of Shares bears to the total number of Shares
allocated to all Participants, as such Shares have been allocated
for such Plan Year pursuant to Section 6.1 but excluding any
allocation of Shares attributable to a transfer of assets
pursuant to Section 4.3. In the event of a Forfeiture of a
portion of a Participant's Account, Shares held in such Account
that were acquired with the proceeds of an Exempt Loan shall be
forfeited only after all other assets held in the Participant's
Account have been forfeited.
ARTICLE VIII: RETIREMENT BENEFITS
8.1 Normal Retirement Date. Subject to Section 8.2, any
Participant who is an Employee of the Company or an Affiliate
when he attains his Normal Retirement Date shall have a
nonforfeitable right to his Account and may retire on his Normal
Retirement Date, which shall be the Participant's attainment of
age 65.
8.2 Deferred Retirement Date. If a Participant remains an
Employee after his Normal Retirement Date, he shall participate
in the contributions and benefits of the Plan in the same manner
as any other Participant. The Deferred Retirement Date of a
Participant who remains an Employee after his Normal Retirement
Date shall be the first day of any month coincident with or
following the date of his Termination of Service.
8.3 Disability Retirement Date. A Participant shall be
considered, if he so elects, to have retired for the purposes of
the Plan on his Disability Retirement Date which shall be the
date of his Termination of Service on account of his Disability,
regardless of his age. The determination of the Committee as to
whether a Participant has a Disability and the date of such
Disability shall be final, binding and conclusive.
8.4 Early Retirement Date. A Participant shall be
considered, if he so elects, to have retired for the purposes of
the Plan on his Early Retirement Date which shall be the date of
his Termination of Service, provided that the sum of the
Participant's age and Years of Service equals or exceeds 75. If
on such date of his Termination of Service such sum is less than
75, then a Participant's Early Retirement Date shall be, if he so
elects, the subsequent date (if any) on which such sum equals 75.
8.5 Method of Distribution. Subject to Article XII and
Sections 8.7 and 9.1, distribution of a Participant's Vested
Interest shall be made in substantially equal periodic
installments not less frequently than annually (in a manner
prescribed by the Committee and uniformly applicable to all
Participants) over a period equal to the greater of (a) five
years, or (b) in the case of a Participant with an Account which
has a value in excess of $500,000 (as adjusted pursuant to
Section 409(o)(2) of the Code) on the Valuation Date coincident
with or immediately preceding the date distributions are
scheduled to commence, five years plus one additional year (but
not more than five additional years) for each $100,000 (as
adjusted pursuant to Section 409(o)(2) of the Code) or fraction
thereof by which the value of such Account exceeds $500,000 (as
adjusted pursuant to Section 409(o)(2) of the Code); provided,
however, that, unless prohibited by the terms of an Exempt Loan,
distributions with a value of less than the "Applicable Amount"
may be paid at the election of the Participant or his
Beneficiary, as applicable, in one single distribution. The
"Applicable Amount" shall be the amount, if any, established in a
uniform and nondiscriminatory manner by the Committee; provided
that the Applicable Amount, once established, may only be changed
in conformity with the requirements of Section 411(d)(6) of the
Code and the Regulations promulgated thereunder.
8.6 Distribution of Vested Interest.
(a) Distribution of a Participant's Vested Interest
from his Account will be made entirely in whole Shares, with the
value of any fractional interest in Shares paid in cash. To the
extent a distribution is to be made in Shares, any cash or other
property in a Participant's Account will be used to acquire
Shares for distribution. Notwithstanding the foregoing, if
applicable corporate charter or bylaw provisions restrict
ownership of substantially all outstanding Shares to Employees or
to a plan or trust described in Section 401(a) of the Code, then
any distribution of a Participant's Vested Interest shall be in
cash.
(b) Distribution to a Participant shall be based upon
the value of the Vested Interest in his Account on the Valuation
Date coinciding with or immediately preceding the date of
distribution.
8.7 Commencement of Benefits.
(a) General Rule For Determining Plan Year in which
Benefit Commences. Subject to Sections 8.7(c), 8.7(f), 8.7(h)
and 16.6, the payment of any benefit to which a Participant is
entitled under the Plan shall commence not later than the
earliest of:
(1) 60 days after the close of the Plan Year in
which the Participant has a Termination of Service on or after
the Participant's Retirement Date;
(2) 60 days after the close of the Plan Year in
which occurs the latest of (i) the 10th anniversary of the year
in which the Participant commenced Plan participation; (ii) the
Participant's 65th birthday; or (iii) the Participant's
Termination of Service;
(3) one year after the close of the Plan Year in
which the Participant dies; or
(4) unless subsequent to such Termination of
Service the Participant has again become an Employee, the close
of the fifth Plan Year following the Plan Year in which the
Participant's Termination of Service occurs, provided that
distribution of Shares held in a Participant's Account shall not
commence by reason of this Section 8.7(a)(4) prior to the close
of the Plan Year in which any Exempt Loan used to acquire such
Shares is repaid in full.
(b) Exception to General Rule. Notwithstanding the
provisions of Section 8.7(a), distribution to a Participant may
commence as soon as practicable after (i) the Participant's
Retirement Date, or the date a Participant who is not an Employee
attains age 65, if the Participant so elects in writing or (ii)
the date of his death if the Beneficiary so elects in writing.
If such an election is made, distribution of such Participant's
Vested Interest from his Account shall be made in installments
with (i) the number and timing of such installments (but not the
amounts thereof) determined pursuant to Section 8.5 and (ii) the
amount of each installment determined by dividing the value of
the Vested Interest in such Participant's Account as of the
Valuation Date coinciding with or next preceding the making of
such installment by the number of installments remaining to be
paid immediately preceding the making of such installment;
provided that the final installment shall in all events consist
of the full remaining Vested Interest in such Participant's
Account immediately prior to such installment.
(c) Deferral of Certain Payments until 65.
Notwithstanding any other provision of this Plan, if a
Participant's Vested Interest either (i) has a present value of
greater than $3,500 or (ii) is 100 Shares or more, payment of
benefits under this Plan to such Participant shall not commence
prior to the Participant's attainment of age 65 unless the
Participant consents in writing to an earlier commencement of
payments..
(d) Time for Commencement of Benefits within
Applicable Plan Year. To the extent consistent with the Code and
Regulations, in the case of any payment of benefit which is to
commence within a particular Plan Year in accordance with this
Section 8.7, payment shall commence as soon as practicable
following (i) the allocation, if any, of Shares released from the
Suspense Subfund for the prior Plan Year in accordance with
Article VI and (ii) the receipt by the Committee of data relating
to the Compensation of Participants in Participating Units and
such other information as the Committee may reasonably require to
determine the allocations to Participants' Accounts in accordance
with Article VI.
(e) Accelerated Commencement of Small Benefits. If,
as of the time such distribution would first be made to a
Participant in accordance with this sentence, (i) such
Participant has not again become an Employee, (ii) the value of
such Participant's Vested Interest (using the value per share
established as of the most recent Valuation Date) is not greater
than $3,500, and (iii) such Participant's Vested Interest is
smaller than 100 Shares, then distribution of such Vested
Interest shall be made in the form of a single distribution of
the entire Vested Interest then allocated to such Participant's
Account, as soon as practicable following (A) the occurrence of
the Participant's death or Retirement Date, or (B) the end of the
Plan Year following a Break in Service of at least 12 months
duration, as the case may be. If any Shares or other amounts are
allocated to his account following such distribution, such Shares
or other amounts shall be distributed to the Participant as soon
as practicable after such allocation is made and in no event
later than the date required for the commencement of benefits to
such Participant otherwise prescribed in Section 8.7(a).
(f) Latest Date for Commencement of Benefits. Except
as provided in Section 16.6, in no event may payments commence
later than the April l of the calendar year following the
calendar year in which such Participant attains age 70 1/2 and shall
be paid, in accordance with the Regulations, over a period not
extending beyond the life expectancy of such Participant or the
joint life expectancies of such Participant and his Beneficiary.
(g) Distributions Which Commenced Prior To Death. If
distribution of a Participant's benefit has commenced prior to a
Participant's death, and such Participant dies before his entire
benefit is distributed, the remaining portion of the
Participant's benefit shall be distributed at least as rapidly as
under the method of distribution in effect on the date of the
Participant's death.
(h) Administrative Delays. If the amount payable
cannot be ascertained, or, subject to the provisions of Section
16.6, the Participant cannot be located after reasonable efforts,
a payment retroactive to the date determined under the preceding
provisions of this Section 8.7 may be made not later than 60 days
after the earliest date on which the amount of such payment can
be ascertained under the Plan or the date on which the
Participant is located (whichever is applicable).
8.8 Diversification.
(a) "Qualified Election Period" means the six Plan
Year period beginning with the later of (i) the Plan Year in
which the Participant attains age 55; or, (ii) the Plan Year in
which the Participant first becomes a Qualified Participant.
(b) "Qualified Participant" means a Participant who
has attained age 55 and who has completed at least 10 years of
participation under the Plan. Periods of time following a
Termination of Service shall not be treated as participation for
purposes of this Section 8.8.
(c) A Qualified Participant may file a written
election with the Committee within 90 days after the close of
each Plan Year (the "Notice Period") during the first five Plan
Years of his Qualified Election Period to have twenty-five
percent of the shares of employer securities acquired by or
contributed to the Plan and allocated to his Account (less the
number of shares previously distributed pursuant to this Section
8.8) distributed to him in kind in the form of a single payment.
If a Qualified Participant makes a timely election to have shares
distributed, such shares shall be distributed no later than 90
days after the end of the Notice Period during which such
election was made.
(d) A Qualified Participant may elect during the
Notice Period of the sixth and final Plan Year of his Qualified
Election Period to have fifty percent of the shares of employer
securities acquired by or contributed to the Plan and allocated
to his Account (less the number of shares previously distributed
pursuant to this Section 8.8) distributed to him in kind in the
form of a single payment. If a Qualified Participant makes a
timely election to have shares distributed, such shares shall be
distributed no later than 90 days after the end of the Notice
Period during which such election was made.
(e) The diversification requirements of this Section
8.8 for any Plan Year shall be treated as having been satisfied
with respect to a Qualified Participant if such Participant fails
to file a timely election by the end of the applicable Notice
Period.
8.9 Straight Life Annuity. Notwithstanding any provision
of this Plan to the contrary, unless the provisions of Section
8.7(e) are applicable to such Participant, a Participant shall be
permitted, in his sole discretion, to elect to receive a
straight-life annuity on his life, commencing upon the later of
the date his benefits are otherwise due to commence or his
Retirement Date.
(a) Such election must be made in writing prior to the
time when benefits to the Participant would otherwise first
commence and shall apply to all subsequent distributions from the
Participant's Account unless the Participant revokes the
election, in writing and at a reasonable time prior to the
subsequent distribution date, as to subsequent distributions;
provided, however, that such election shall automatically be
revoked prospectively, at such time as the Plan Administrator has
been advised of the death of the Participant. Such election
shall otherwise be irrevocable.
(b) Upon receipt of such election, the Trustee shall,
as the contents of the Participant's Account become otherwise
distributable to the Participant according to the Plan, cause
Shares then distributable from such Account to be converted into
cash at the fair market value thereof and the proceeds, together
with any other cash then distributable from the Account, to be
used to purchase a nontransferable immediate or deferred payment
annuity from an insurance or annuity company selected by the
Committee. The annuity contract so purchased shall be delivered
to the Participant.
ARTICLE IX: DEATH BENEFITS
9.1 Death During a Period of Service. Subject to Section
8.6(a), upon the death of a Participant during a period of
Service, all amounts then credited to his Account shall be
distributed to the Participant's Beneficiary in accordance with
Sections 8.5 and 8.7.
9.2 Death After Termination of Employment. Upon the death
of a Participant after retirement, Disability or Termination of
Service, but prior to the distribution of his entire Vested
Interest, his Account shall be distributed to the Participant's
Beneficiary in accordance with Section 8.5.
9.3 Other Amounts. Any amounts credited to a Participant's
Account after his death shall be distributed as soon as
administratively practicable or, if later, at the time any
amounts previously credited are distributed in accordance with
the other provisions of this Article.
ARTICLE X: DESIGNATION OF BENEFICIARIES
10.1 Beneficiary Designation. Each Participant shall file
with the Committee a written designation of one or more persons
as the Beneficiary who, subject to Section 9.1, shall be entitled
to receive the amount, if any, payable under the Plan upon his
death. A Participant may from time to time revoke or change his
beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Committee.
Notwithstanding the foregoing, no designation of a Beneficiary
other than a Surviving Spouse by a Participant shall be given
effect unless such Participant's Surviving Spouse, if any, had
consented in writing to such designation and, unless otherwise
provided by the Committee in conformity with Section 417(a)(2)(A)
of the Code and the Regulations, to all future designations;
provided, that (a) spousal consent shall not be required where
the spouse cannot be located or on account of such other
circumstances, if any, as are set forth in the Regulations, and
(b) spousal consent, if required, must acknowledge the effect of
such designation and be witnessed by a Plan representative or
notary public. The last such designation received by the
Committee shall be controlling; provided, however, that no
designation, or change or revocation thereof, shall be effective
unless received by the Committee prior to the Participant's
death, and in no event shall it be effective as of a date prior
to such receipt. All decisions of the Committee concerning the
effectiveness of any beneficiary designation, and the identity of
any Beneficiary, shall be final. If a Beneficiary shall die
prior to receiving the distribution that would have been made to
such Beneficiary had such Beneficiary's death not occurred, and
no alternate Beneficiary has been designated, then for the
purposes of the Plan the distribution that would have been
received by such Beneficiary shall be made to the Beneficiary's
estate.
10.2 Failure to Designate Beneficiary. Subject to Section
9.1, if no beneficiary designation is in effect at the time of a
Participant's death, the payment of the amount, if any, payable
under the Plan upon his death shall be made to the Participant's
Surviving Spouse, if any, or, if the Participant has no Surviving
Spouse, to the Participant's estate. If the Committee is in
doubt as to the right of any person to receive such amount, the
Committee may direct the Trustee to retain such amount, without
liability for any interest thereon, until the rights thereto are
determined, or the Committee may direct the Trustee to pay such
amount into any court of appropriate jurisdiction, and such
payment shall be a complete discharge of the liability of the
Plan and the Trust therefor.
ARTICLE XI: MAXIMUM AMOUNT OF ALLOCATION
11.1 Application of Article XI. The provisions of this
Article XI shall govern notwithstanding any other provisions of
the Plan. Notwithstanding any other provision of this Article
XI, in no event shall allocations to Participants under the Plan
fail to comply with Section 415 of the Code.
11.2 Maximum Additions to Account. Annual additions to a
Participant's Account may not exceed the lesser of (a) $30,000 or
(b) 25 percent of the Participant's compensation (as defined in
Section 415(c) of the Code and the Regulations promulgated under
Section 415 of the Code), provided that said $30,000 limitation
shall be adjusted annually for increases in cost of living on or
after January l, 1988 in accordance with the Regulations. For
any Plan Year in which the conditions of Section 415(c)(6)(A) of
the Code are satisfied by the Plan, the limitations contained in
the preceding sentence shall be adjusted to the maximum amount
permitted under such Section of the Code. For this purpose, the
term "Annual Additions" shall mean the following amounts which,
without regard to this Article XI, would have been credited to
the Participant's Account for any Plan Year: (a) Company
contributions, which are used to repay principal on one or more
Exempt Loans, or to purchase Shares, which are deemed to be
allocated to such Participant's Account, (b) Forfeitures of
Shares not acquired with the proceeds of an Exempt Loan, which
Forfeitures arise under the Plan and are allocable to such
Participant in respect of such Plan Year, and (c) such other
amounts as may be required to be included under the Code and
Regulations. For purposes of this Section 11.2, the portion of
the contribution of a Participating Unit which is deemed
allocated to a Participant's Account shall be an amount which
bears the same ratio to the total contribution made by or on
behalf of such Participating Unit for such Plan Year which is
used to repay principal on one or more Exempt Loans, or to
purchase Shares, as the number of Shares allocated to such
Participant's Account on the Anniversary Date of such Plan Year,
bears to the total number of Shares allocated to the Accounts of
all Participants employed by such Participating Unit on the
Anniversary Date of such Plan Year. The term "Annual Additions"
shall not include any amounts credited to the Participant's
Account (i) resulting from rollover contributions, (ii) due to
Participating Unit contributions relating to interest payments on
an Exempt Loan, or (iii) attributable to a Forfeiture of Shares
acquired with the proceeds of an Exempt Loan.
11.3 Order of Reduction. After reducing the annual
additions to a Participant's account in any other defined
contribution plan maintained by a Participating Unit or an
Affiliate, if the amounts which would otherwise be allocated to a
Participant's Account still must be reduced by reason of the
limitations of Section 11.2, such reduction shall be made in the
following order of priority, but only to the extent necessary,
and such amounts shall be allocated as follows:
(a) Forfeitures of Shares not acquired with the
proceeds of an Exempt Loan arising under the Plan and allocable
to such Participant in respect of such Plan Year shall be
allocated to the Accounts of other Participants as of the end of
the Plan Year for which such reduction is made in the manner
provided for under Section 7.4 above; and then
(b) First, Shares which are attributable to amounts
transferred from other plans pursuant to Section 4.3 and, second,
Shares which are attributable to Company contributions shall be
allocated to a suspense account until a date prior to the end of
the first quarter of the succeeding Plan Year as selected by the
Committee (the "reallocation date") and then reallocated as of
the reallocation date: (i) for Shares attributable to assets
transferred from other plans pursuant to Section 4.3, to the
Participants who are, as of the reallocation date, eligible for
allocation pursuant to Section 4.3, and such reallocation shall
be made in accordance with Section 4.3; and (ii) for Shares
attributable to Company contributions, to the Participants who
are, as of the reallocation date, Employees of the Participating
Units described in Section 4.1(a)(3), and such reallocation shall
be made in accordance with Section 4.1(a)(3).
11.4 Additional Account Limitations.
(a) Subject to paragraph (c) of this Section 11.4, in
the event that, in any Plan Year and with respect to any
Participant, the sum of the "Defined Contribution Fraction" (as
defined in paragraph (b)) and the "Defined Benefit Fraction" (as
defined in paragraph (b)) would otherwise exceed 1.0, the benefit
payable under the defined benefit plan shall be reduced in
accordance with the provisions of that plan, but only to the
extent necessary to ensure that such limitation is not exceeded.
If this reduction does not ensure that the limitation is not
exceeded, then the annual addition to any defined contribution
plan, other than the Plan, shall be reduced in accordance with
the provisions of that plan but only to the extent necessary to
ensure that such limitation is not exceeded. If this reduction
does not ensure that the limitation is not exceeded, then the
Annual Addition to the Plan shall be reduced in accordance with
the provisions of the Plan, but only to the extent necessary to
ensure that such limitation is not exceeded.
(b) For purposes of paragraph (a) of this Section
11.4, the following terms shall have the following meanings:
(1) "Defined Contribution Fraction" shall mean,
as to any Participant for any Plan Year, a fraction, (A) the
numerator of which is the sum of Annual Additions, for the Plan
Year and all prior Plan Years, as of the close of the Plan Year
and (B) the denominator of which is the sum of the lesser of the
following amounts, determined for such Plan Year and for each
prior Plan Year in which a Participant had an Hour of Service and
was a Participant in the Plan (i) the product of 1.25 multiplied
by the dollar limitation in effect for such year under Section
415(c)(1)(A) of the Code, or (ii) the product of 1.4 multiplied
by the amount which may be taken into account under Section
415(c)(1)(B) of the Code with respect to the Participant for such
year; provided, however, that for years ending prior to January
l, 1976, the numerator of such fraction shall in no event be
deemed to exceed the denominator of such fraction; further
provided, that, at the election of the Committee, in determining
the Defined Contribution Fraction for Plan Years ending after
December 31, 1982, the portion of the denominator for all years
ending before January 1, 1983 with respect to each Participant
shall be an amount equal to the product of the denominator
determined as provided in (B) above (as in effect for the year
ending in 1982) for the year ending in 1982, multiplied by a
fraction, the numerator of which is the lesser of $51,875, or 25
percent of the Participant's compensation for the year ending in
1981 multiplied by 1.4, and the denominator of which is the
lesser of $41,500, or 25 percent of the Participant's
compensation for the year ending in 1981.
(2) "Defined Benefit Fraction" shall mean, as to
any Participant for any Plan Year, a fraction, (A) the numerator
of which is the projected annual benefit (determined as of the
close of the Plan Year and in accordance with the Regulations) of
the Participant under any defined benefit plan (as defined in
Sections 414(j) and 415(k) of the Code) maintained by the Company
or any Affiliate and (B) the denominator of which is the lesser
of (i) the product of 1.25 multiplied by the dollar limitation in
effect under Section 415(b)(1)(A) of the Code for such Plan Year
or (ii) the product of 1.4 multiplied by an amount equal to 100
percent of the Participant's average compensation for his high
three years within the meaning of Section 415(b)(3) of the Code
for such Plan Year.
(c) In the case of a Participant with respect to whom
the sum of the Defined Contribution Fraction and the Defined
Benefit Fraction exceeds 1.0 with respect to the last Plan Year
beginning before January l, 1983, an amount, determined in
accordance with the Regulations, may be subtracted from the
numerator of the Defined Contribution Fraction (not exceeding
such numerator) so that the sum of such Participant's Defined
Contribution Fraction and his Defined Benefit Fraction computed
under paragraph (a) of this Section 11.4 does not exceed 1.0 for
the last Plan Year beginning before January 1, 1983.
ARTICLE XII: RIGHTS AND OPTIONS CONCERNING DISTRIBUTED SHARES
12.1 Right of First Refusal.
(a) During any period when Shares are not publicly
traded, all distributions of such Shares from Accounts to any
participant or his Beneficiary (the "Distributee") by the Trust
shall be subject to a "right of first refusal" upon the terms and
conditions hereinafter set forth. The "right of first refusal"
shall provide that prior to any transfer (as determined by the
Committee) of the Shares, the Distributee must first offer to
sell such Shares to the Trust, and if the Trust refuses to
exercise its right to purchase the Shares, then the Company shall
have a "right of first refusal" to purchase such Shares. Neither
the Trust nor the Company shall be required to exercise the
"right of first refusal".
(b) The terms and conditions of the "right of first
refusal" shall be determined as follows:
(1) If the Distributee receives a bona fide offer
for the purchase of all or any part of his Shares from a third
party, the Distributee shall forthwith deliver (by registered
mail, return receipt requested) a copy in writing of any such
offer to the Committee and the Trustee. The Trustee (as directed
by the Committee) or the Company, as the case may be, shall then
have 14 days after receipt by the Committee of the written offer
to exercise the right to purchase all or any portion of the
Shares. Subject to Section 12.1(b)(2), the purchase price to be
paid by the Trust or the Company for the Shares shall be the
purchase price stated in the bona fide offer received by the
Distributee; and
(2) The selling price and other terms under the
"right of first refusal" must not be less favorable to the
Distributee than the greater of the value of the security
determined pursuant to the Regulations or the purchase price and
other terms offered by a buyer other than the Company or the
Trust, making a good faith offer to purchase the security from
the Distributee.
12.2 Put Option. If at the time of distribution, Shares
distributed from the Trust Fund are not treated as "readily
tradable on an established market" within the meaning of Section
409(h) of the Code and the Regulations, such Shares shall be
subject to a put option in the hands of a Qualified Holder by
which such Qualified Holder may sell all or any part of the
Shares distributed to him by the Trust to the Trust. Should the
Trust decline to purchase all or any part of the Shares put to it
by the Qualified Holder, the Company shall purchase those Shares
that the Trust declines to purchase. The put option shall be
subject to the following conditions:
(a) The term "Qualified Holder" shall mean the
Participant or Beneficiary receiving the distribution of such
Shares, any other party to whom the Shares are transferred by
gift or by reason of death, and also any trustee of an individual
retirement account (as defined under Code Section 408) to which
all or any portion of the distributed Shares is transferred
pursuant to a tax-free "rollover" transaction satisfying the
requirements of Sections 402 and 408 of the Code.
(b) During the "put option period", as hereafter
defined, with respect to any distribution of such Shares, a
Qualified Holder shall have the right to require the Company to
purchase all or a portion of the distributed Shares held by the
Qualified Holder. Such "put option period" shall commence on the
date of the distribution of such Shares and shall end on the 60th
day following the later of (i) the date of such distribution or
(ii) the date on which the Committee shall, pursuant to Section
5.6(a), have determined the fair market value of such Shares as
of the Valuation Date coinciding with or next preceding the
distribution thereof. The purchase price to be paid for any such
Shares shall be their fair market value determined (1) as of the
Valuation Date coinciding with or next preceding the exercise of
the put option under this Section 12.2(b) or, (2) in the case of
a transaction between the Plan and a "disqualified person" within
the meaning of Section 4975(e)(2) of the Code, as of the date of
the transaction.
(c) If a Qualified Holder shall fail to exercise his
put option right under Section 12.2(b), the option right shall
temporarily lapse upon the expiration of the "put option period".
As soon as practicable following the last day of the Plan Year in
which the "put option period" expires, the Company shall notify
the non-electing Qualified Holder (if he is then a shareholder of
record) of the valuation of the Shares as of that date. During
the 60-day period following receipt of such valuation notice, the
Qualified Holder shall again have the right to require the
Company to purchase all or any portion of the distributed Shares.
The purchase price to be paid therefor shall be their fair market
value determined (1) as of the Valuation Date coinciding with or
next preceding the exercise of the put option under this Section
12.2(c) or (2) in the case of a transaction between the Plan and
a "disqualified person" within the meaning of Section 4975(e)(2)
of the Code, as of the date of the transaction.
(d) The foregoing put options under Section 12.2(b)
and (c) shall not obligate the Plan or Trust in any manner if the
Trust declines to purchase all or any part of the Shares so
offered, and, in such event, shall be effective solely against
the Company.
(e) The period during which the put option is
exercisable does not include any time when a Qualified Holder is
unable to exercise it because the Company is prohibited from
honoring it by applicable Federal or state laws.
(f) Except as otherwise required or permitted by the
Code, the put options under Section 12.2 shall satisfy the
requirements of Section 54.4975-7(b) of the Treasury Regulations
to the extent, if any, that such requirements apply to such put
options.
12.3 Exercise of Put Option. A Qualified Holder must
exercise his put option in writing on a form supplied by the
Committee. Unless otherwise determined by the Committee, if a
Qualified Holder exercises his put option under Section 12.2,
payment for the Shares repurchased shall be made, (a) in the case
of a total distribution of a Participant's Account within a
single taxable year as described in Section 409(h)(5) of the
Code, (i) if the Vested Interest of the Participant has a value
of $3,500 or less, in one installment not later than 30 days
after exercise, or (ii) or if the Vested Interest of the
Participant has a value of more than $3,500, in accordance with
uniform rules established by the Committee, in substantially
equal periodic payments (not less frequently than annually) over
a period beginning not later than 30 days after the exercise of
the put option and not exceeding five years (provided that
adequate security and reasonable interest are provided with
respect to unpaid amounts) or, (b) in the case of other
distributions, not later than 30 days after such exercise. For
purposes of this Section 12.3, the interest rate shall be
determined by reference to the prevailing Prime Rate as listed in
the Wall Street Journal unless the Code requires a higher rate.
12.4 Other Rights. Except as provided in Sections 12.1,
12.2, 12.3 or 8.6(a), no Shares acquired with the proceeds of an
Exempt Loan may be subject to a put, call or other option, or
buy-sell or similar arrangement while held by or distributed from
the Plan. Rights and protection set forth in this Article XII
shall be non-terminable to the extent, if any, provided in
Section 15.1(d).
12.5 Actions To Carry Out the Rights and Options. The
Company shall take any and all actions as it may deem necessary
or desirable to effectuate and carry out the "right of first
refusal" and the put option provided under this Article XII,
including, but not limited to, the placing of appropriate legends
on the certificates representing the Shares and the issuance of
appropriate stop transfer instructions to the transfer agent for
Shares.
12.6 Stock Transfer Taxes. Subject to applicable law, the
stock transfer or similar taxes, if any, arising in connection
with the purchase of Shares pursuant to this Article XII shall be
the obligation of the purchaser of such Shares.
ARTICLE XIII: ADMINISTRATION OF THE PLAN
13.1 Powers and Duties of the Committee. The Committee
shall have general responsibility for the administration and
interpretation of the Plan (including but not limited to
complying with reporting and disclosure requirements, and
establishing and maintaining Plan records). Such interpretations
(including, without limitation, interpretations relating to the
determination of eligibility under the Plan and the disposition
of claims for benefits under the Plan) and other actions of the
Committee shall be afforded the maximum deference allowed by law.
The Committee shall engage such certified public accountants and
other advisers and service providers, who may be accountants,
advisers or service providers for the Company, as it shall
require or may deem advisable for purposes of the Plan.
To the extent that the Trust Fund is invested in assets
other than Shares, the Committee shall have the power to appoint
or remove one or more investment advisers and to delegate to such
adviser authority and discretion to manage (including the power
to acquire and dispose of) the assets of the Plan, provided that
(i) each adviser with such authority and discretion shall be
either a bank, an insurance company or a registered investment
adviser under the Investment Advisers Act of 1940, and shall
acknowledge in writing that it is a fiduciary with respect to the
Plan and (ii) the Committee shall periodically review the
investment performance and methods of each adviser with such
authority and discretion.
13.2 Powers and Duties of Trustee. The Trustee shall have
responsibility under the Plan for the management and control of
the assets of the Plan and shall have discretionary
responsibility for the investment and management of such assets;
provided, however, that the Trustee shall invest all assets in
Shares except as is otherwise required under an Exempt Loan
agreement or the terms of the Trust.
13.3 Named Fiduciary. The Committee shall be the named
fiduciary for purposes of the Act, except that (i) the Trustee
shall be the named fiduciary with respect to the exercise of
powers set forth in Section 13.2 of this Plan and Sections 4.2,
4.5 and 5.6 of the Trust, and (ii) each Participant shall be the
named fiduciary with respect to the exercise of voting and tender
or exchange offer rights for Shares held as part of the Trust
Fund to the extent such Participant is entitled to exercise such
rights pursuant to Article XI of the Trust Agreement and Section
16.20.
13.4 Agents; Report of Committee to Board. The Committee
may arrange for the engagement of such legal counsel, who may be
counsel for the Company, and make use of such agents and clerical
or other personnel as it shall require or may deem advisable for
purposes of the Plan. The Committee may rely upon the written
opinion of such counsel and the accountants engaged by the
Committee and may delegate to any such agent or to any
subcommittee or member of the Committee its authority to perform
any act hereunder, including, without limitation, those matters
involving the exercise of discretion, provided that such
delegation shall be subject to revocation at any time at the
discretion of the Committee. The Committee shall report to the
Board of Directors, or to a committee of the Board of Directors
designated for that purpose, as frequently as shall be specified
by the Board of Directors or such committee, with regard to the
matters for which it is responsible under the Plan.
13.5 Structure of Committee. The Committee shall consist of
three or more members, each of whom shall be appointed by, shall
remain in office at the will of, and may be removed, with or
without cause by, the Board of Directors. A majority of the
members of the Committee shall be Employees (who may also be
members of the Board of Directors). Any member of the Committee
may resign at any time. No member of the Committee shall be
entitled to act on or decide any matter relating solely to
himself or any of his rights or benefits under the Plan. In the
event that the Committee is unable to act in any matter by reason
of the foregoing restriction, the Board of Directors shall act on
such matter. The members of the Committee who are active
employees of a Participating Unit shall not receive any special
compensation for serving in their capacities as members of the
Committee but shall be reimbursed for any reasonable expenses
incurred in connection therewith. Except as otherwise required
by the Act, no bond or other security need be required of the
Committee or any member thereof in any jurisdiction. Any member
of the Committee, any subcommittee or agent to whom the Committee
delegates any authority, and any other person or group of
persons, may serve in more than one fiduciary capacity (including
service both as a trustee and administrator) with respect to the
Plan.
13.6 Adoption of Procedures of Committees. The Committee
shall establish its own procedures and the time and place for its
meetings, and provide for the keeping of minutes of all meetings.
A majority of the members of the Committee shall constitute a
quorum for the transaction of business at a meeting of the
Committee. Any action of the Committee may be taken upon the
affirmative vote of a majority of the members of the Committee at
a meeting or without a meeting, by mail, telegraph or telephone,
provided that all of the members of the Committee are informed by
mail, teletransmission or telegraph of their right to vote on the
proposal and of the outcome of the vote thereon.
13.7 Demands for Money. All demands for money from the Plan
shall be signed by a member of the Committee or such other person
or persons as the Committee may from time to time designate in
writing. This person shall cause to be kept full and accurate
accounts of receipts and disbursements of the Plan, shall cause
to be deposited all funds of the Plan to the name and credit of
the Plan, in such depositories as may be designated by the
Committee, shall cause to be disbursed the monies and funds of
the Plan when so authorized by the Committee and shall generally
perform such other duties as may be assigned to him from time to
time by the Committee.
13.8 Claims for Benefits. All claims for benefits under the
Plan shall be submitted in writing to, and within a reasonable
period of time decided by a majority of, the Committee. Written
notice of the decision on each such claim shall be furnished
reasonably promptly to the claimant. If the claim is wholly or
partially denied, such written notice shall set forth an
explanation of the specific findings and conclusions on which
such denial is based. A claimant may review all pertinent
documents and may request a review by the Committee of such a
decision denying the claim. Such a request shall be made in
writing and filed with the Committee within a reasonable period
of time, as specified by the Committee in writing from time to
time, after delivery to said claimant of written notice of said
decision. Such written request for review shall contain all
additional information which the claimant wishes the Committee to
consider. The Committee may hold any hearing or conduct any
independent investigation which it deems necessary to render its
decision, and the decision on review shall be made as soon as
possible after the Committee's receipt of the request for review.
Written notice of the decision on review shall be promptly
furnished to the claimant and shall include specific reasons for
such decision. For all purposes under the Plan, such decisions
on claims (where no review is requested) and decisions on review
(where review is requested) shall be final, binding and
conclusive on all interested parties as to participation and
benefit eligibility, the Employee's amount of Compensation and as
to any other matter of fact or interpretation relating to the
Plan.
13.9 Hold Harmless. To the maximum extent permitted by law,
no member of the Committee shall be personally liable by reason
of any contract or other instrument executed by him or on his
behalf in his capacity as a member of the Committee nor for any
mistake of judgment made in good faith, and the Company shall
indemnify and hold harmless, directly from its own assets
(including the proceeds of any insurance policy the premiums of
which are paid from the Company's own assets), each member of the
Committee and each other officer, employee, or director of the
Company to whom any duty or power relating to the administration
or interpretation of the Plan or to the management and control of
the assets of the Plan may be delegated or allocated, against any
cost or expense (including counsel fees) or liability (including
any sum paid in settlement of a claim with the approval of the
Company) arising out of any act or omission to act in connection
with the Plan unless arising out of such person's own fraud or
bad faith.
13.10 Service of Process. The General Counsel of the
Company or such other person as may from time to time be
designated by the Board of Directors shall be the agent for
service of process under the Plan.
13.11 Purchase of Shares; Valuation. The Committee
shall be the named fiduciary of the Plan with responsibility for
directing the Trustee as to whether and under what terms it shall
enter into an Exempt Loan or shall purchase or otherwise acquire,
or sell or otherwise dispose of, Shares. In the event that there
is no generally recognized market for Shares, the Committee shall
be the named fiduciary with responsibility for determining the
fair market value of the Shares, provided, that any such
determination shall be in accordance with applicable Regulations,
if any, and the Committee shall, in making such determination,
retain an independent appraiser to make such valuation on behalf
of the Committee in accordance with Section 5.6(e). In no event
may the Plan obligate itself to acquire securities from a
particular security holder at an indefinite time determined upon
the happening of an event such as the death of the holder.
ARTICLE XIV: WITHDRAWAL OF PARTICIPATING UNIT
14.1 Withdrawal of Participating Unit. Any Participating
Unit (other than the Company) may, with the consent of the Board
of Directors, withdraw from participation in the Plan by giving
the Committee and the Trustee prior written notice in a
resolution by its board of directors specifying a withdrawal date
which shall be the last day of a month at least 30 days (or such
other time as the Committee may permit) subsequent to the date
such notice is received by the Committee or the Trustee,
whichever receives such notice the latest. The Committee (a) may
require any Participating Unit to withdraw from the Plan, as of
any withdrawal date specified by the Committee, for the failure
of the Participating Unit to make proper Contributions or to
comply with any other provision of the Plan, and (b) shall
require a Participating Unit's withdrawal (i) upon complete and
final discontinuance of the contributions or (ii) unless the
Committee determines otherwise, at such time (if any) as the
Participating Unit ceases to be an Affiliate. In the event of
any such withdrawal, the Committee may promptly notify the IRS
and request such determination as counsel to the Plan may
recommend and as the Committee may deem desirable.
14.2 Distribution after Withdrawal. Upon withdrawal from
the Plan by any Participating Unit, no further contributions
shall be made under the Plan by or on behalf of any Participating
Unit, and, unless otherwise directed by the Committee, no amount
shall thereafter be payable under the Plan to or in respect of
any Participants then employed by such Participating Unit except
as provided under the regular distribution provisions of the
Plan. To the maximum extent permitted by the Act, any rights of
Participants no longer employed by such Participating Unit and of
former Participants and their Beneficiaries under the Plan shall
be unaffected by such withdrawal, and any transfers,
distributions or other dispositions of the assets of the Plan as
provided in this Article XIV shall constitute a complete
discharge of all liabilities under the Plan with respect to such
Participating Unit's participation in the Plan and any
Participant then employed by such Participating Unit.
All determinations, approvals and notifications referred to
above shall be in form and substance and from a source
satisfactory to counsel for the Plan. To the maximum extent
permitted by the Act, the withdrawal from the Plan by any
Participating Unit shall not in any way affect any other
Participating Unit's participation in the Plan.
14.3 Transfer to Successor Plan. No transfer of the Plan's
assets and liabilities to a successor employee benefit plan
(whether by merger or consolidation with such successor plan or
otherwise) shall be made unless (a) the Committee authorizes such
transfer and (b) each Participant would, if either the Plan or
such successor plan then terminated, receive a benefit
immediately after such transfer which (after taking account of
any distributions or payments to the Participants as part of the
same transaction) is equal to or greater than the benefit he
would have been entitled to receive immediately before such
transfer if the Plan had then been terminated. The Committee may
also request appropriate indemnification from the employer or
employers maintaining such successor plan before making such a
transfer.
14.4 Transfer of Shares in a Suspense Subfund.
Notwithstanding any provision of this Article XIV to the
contrary, any Shares allocated to a Suspense Subfund shall not be
transferred to a successor employee benefit plan except as is
required or permitted by the Committee in accordance With the
terms of an Exempt Loan and the Regulations.
ARTICLE XV: AMENDMENT OR TERMINATION OF THE PLAN AND TRUST
15.1 Right to Amend, Suspend or Terminate Plan.
(a) Subject to the provisions of paragraph (c) and any
applicable contribution or loan agreement, the Board of Directors
reserves the right at any time to amend, suspend or terminate the
Plan, any contributions thereunder, the Trust or any contract
issued by an insurance carrier forming a part of the Plan, in
whole or in part and for any reason and without the consent of
any Participating Unit, Participant, Beneficiary, Surviving
Spouse or other eligible survivor. Each Participating Unit by
its adoption of the Plan shall be deemed to have delegated this
authority to the Board of Directors. The Plan shall
automatically be terminated upon complete and final
discontinuance of contributions thereunder.
(b) The Committee may adopt any amendment which may be
necessary or appropriate to facilitate the administration,
management and interpretation of the Plan or to conform the Plan
thereto, or to qualify or maintain the Plan and the Trust as a
plan and trust meeting the requirements of Sections 401(a),
501(a) and 4975(e)(7) of the Code, Section 407(d)(6) of the Act
or any other applicable section of law and the Regulations issued
thereunder, provided said amendment does not have any material
effect on the currently estimated cost to the Company of
maintaining the Plan. Each Participating Unit by its adoption of
the Plan shall be deemed to have delegated this authority to the
Committee.
(c) No amendment or modification shall be made which
would retroactively (i) reduce in contravention of Section
411(d)(6) of the Code any accrued benefits or (ii) make it
possible for any part of the funds of the Plan (other than such
part as is required to pay taxes, if any, and administrative
expenses as provided in Section 16.19) to be used for, or
diverted to, any purposes other than for the exclusive benefit of
Participants and their Beneficiaries and Surviving Spouses and
other eligible survivors under the Plan prior to the satisfaction
of all liabilities with respect thereto.
(d) To the extent, if any, required under Section
54.4975-11(a)(3)(ii) of the Treasury Regulations, the rights and
protections provided under Sections 12.2 and 12.4 shall be
non-terminable.
(e) Except as otherwise required to meet the
requirements of the Act, the Code, or the Regulations, to the
extent that the contribution provisions of Article IV or the
allocation provisions of Article VI affect any contribution on
behalf of or any allocation to an Employee who is an officer of
the Company for purposes of Section 16 of the Securities Exchange
Act of 1934, as amended, no such contribution provision or
allocation provision may be amended within six months after the
date of any previous amendment of such provision having such
effect.
15.2 Retroactivity. Subject to the provisions of Section
15.1 (except Section 15.l(c)(i)), any amendment, modification,
suspension or termination of any provisions of the Plan may be
made retroactively if necessary or appropriate to qualify or
maintain the Plan, the Trust and any contract with an insurance
company which may form a part of the Plan as a plan and trust
meeting the requirements of Sections 401(a), 501(a) and
4975(e)(7) of the Code, Section 407(d)(6) of the Act or any other
applicable section of law and the Regulations issued thereunder.
15.3 Notice. Notice of any amendment, modification,
suspension or termination of the Plan shall be given by the Board
of Directors or the Committee, whichever adopts the amendment, to
the other and to the Trustee and all Participating Units.
15.4 No Further Contributions. Upon termination of the Plan
or a complete discontinuance of contributions, no Participating
Unit shall make any further contributions under the Plan and no
amount shall thereafter be payable under the Plan to or in
respect of any Participant except as provided in this Article XV.
To the maximum extent permitted by the Act, transfers,
distributions or other dispositions of the assets of the Plan as
provided in this Article shall constitute a complete discharge of
all liabilities under the Plan. The Committee shall remain in
existence and all of the provisions of the Plan which in the
opinion of the Committee are necessary for the execution of the
Plan and the administration, distribution, transfer or other
disposition of the assets of the Plan in accordance with this
Section 15.4 shall remain in force.
After (i) appropriate adjustment of the Accounts of
Participants who are employed as of the date of such termination
or complete discontinuance of contributions in the manner
described in Section 7.4 for any Forfeitures arising under the
Plan prior to such date and (ii) adjustment for profits and
losses of the Trust Fund to such date in the manner described in
Section 5.6, the interest of each Participant who is employed as
of such date in the amount, if any, credited to his Account shall
be nonforfeitable as of such date; provided that the Board of
Directors may by appropriate resolution provide that amounts
credited to the Accounts of other Participants shall be
nonforfeitable as of such date.
Upon or after the termination of the Plan, the Board of
Directors may maintain the Trust as an existing trust or may
terminate the Trust and upon such termination the Trustee may pay
in a single sum to each Participant the full amount credited to
his individual Account and the unallocated Shares in the Suspense
Subfund attributable to an Exempt Loan from the Company to the
Trust shall, to the extent permitted by the Code and Regulations,
be returned to the Company in full satisfaction of any
outstanding Exempt Loan from the Company to the Trust. Without
limiting the foregoing, any such distributions may be made in
cash, Shares, other property, or any combination, as the
Committee in its sole discretion may direct.
All determinations, approvals and notifications referred to
above shall be in form and substance and from a source
satisfactory to counsel for the Plan.
15.5 Partial Termination. In the event that a "partial
termination" (within the meaning of Section 411(d)(3) of the
Code) of the Plan has occurred then (i) the interest of each
affected Participant in his Account as to whom such termination
occurred shall thereupon be nonforfeitable, but shall otherwise
be payable as though such termination had not occurred and (ii)
the provisions of Sections 15.2, 15.3, 15.4 and 14.2 which in the
opinion of the Committee are necessary for the execution of the
Plan and the allocation and distribution of the assets of the
Plan shall apply; provided, however, that the Board of Directors,
in its discretion, subject to any necessary governmental
approval, may direct that the amounts held in the Accounts of
such Participants as to whom such partial termination occurred be
segregated by the Trustee as a separate plan and applied for the
benefit of such Participants in the manner described in Section
15.4 above.
ARTICLE XVI: GENERAL LIMITATIONS AND PROVISIONS
16.1 All Risk on Participants and Beneficiaries.
Participants and Beneficiaries shall assume all risk in
connection with any decrease in the value of the assets of the
Trust and the Participants' Accounts. Neither any Participating
Unit nor the Committee nor the Trustee shall be liable or
responsible for any decrease in the value of the assets of the
Trust and the Participants' Accounts.
16.2 Trust Fund is Sole Source of Benefits. The Trust Fund
shall be the sole source of benefits under the Plan, and, except
as otherwise required by the Act, the Company and the Committee
assume no liability or responsibility for payment of such
benefits, and each Participant, Beneficiary or other person who
shall claim the right to any payment under the Plan shall be
entitled to look only to the Trust Fund for such payment and
shall not have any right, claim or demand therefor against the
Company, the Committee or any member thereof, or any employee or
director of the Company.
16.3 No Right to Continued Employment. Nothing contained in
the Plan shall give any employee the right to be retained in the
employment of the Company or any of its subsidiaries or
affiliated or associated corporations or affect the right of any
such employer to dismiss any employee. The adoption and
maintenance of the Plan shall not constitute a contract between
the Company and any employee or consideration for, or an
inducement to or condition of, the employment of any employee.
16.4 Payment on Behalf of Payee. If the Committee shall
find that any person to whom any amount is payable under the Plan
is unable to care for his affairs because of illness or accident,
or is a minor, or has died, then any payment due him or his
estate (unless a prior claim therefor has been made by a duly
appointed legal representative) may, if the Committee so elects,
be paid to his spouse, a child, a relative, an institution
maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of
such person otherwise entitled to payment. Any such payment
shall be a complete discharge of the liability of the Plan and
the Trust therefor.
16.5 Non-Alienation. Except insofar as applicable law may
otherwise require or pursuant to a Qualified Domestic Relations
Order, no economic interest, expectancy, benefit, payment, claim
or right of any Participant or Beneficiary under the Plan and the
Trust shall be subject in any manner to any claims of any
creditor of any Participant or Beneficiary, nor to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind. If any person
shall attempt to take any action contrary to this Section 16.5,
such action shall be null and void and of no effect, and the
Trustee shall disregard such action and shall not in any manner
be bound thereby and shall suffer no liability on account of its
disregard thereof.
For purposes of the Plan, a "Qualified Domestic Relations
Order" means any judgment, decree or order (including approval of
a property settlement agreement) which has been determined by the
Committee in accordance with procedures established under the
Plan, to constitute a qualified domestic relations order within
the meaning of Section 414(p)(1) of the Code.
16.6 Missing Payee. If the Committee cannot ascertain the
whereabouts of any person to whom a payment is due under the
Plan, and if, after five years from the date such payment is due,
a notice of such payment due is mailed to the last known address
of such person, as shown on the records of the Committee or the
Company, and within three months after such mailing such person
has not made written claim therefor, the Committee, if it so
elects, after receiving advice from counsel to the Plan, may
direct that such payment and all remaining payments otherwise due
to such person be canceled on the records of the Plan and the
amount thereof applied to reduce the contributions of the
Participating Unit that had employed the Participant, and upon
such cancellation, the Plan and Trust shall have no further
liability therefor, except that, subject to applicable law, in
the event such person later notifies the Committee of his
whereabouts and requests the payment or payments due to him under
the Plan, the amounts so applied shall be paid to him as provided
herein.
16.7 Required Information. Each Participant shall file with
the Committee such pertinent information concerning himself, his
spouse and his Beneficiary, or other person as the Committee may
specify, and no Participant, or Beneficiary, or other person
shall have any rights.or be entitled to any benefits under the
Plan unless such information is filed by or with respect to him.
16.8 Subject to Trust Agreement. Any and all rights or
benefits accruing to any persons under the Plan shall be subject
to the terms of the Trust Agreement which the Company shall enter
into with the Trustee, providing for the administration of the
Trust Fund.
16.9 Subject to Insurance Contract. If the payment of any
benefit under the Plan is provided for by a contract with an
insurance company, the payment of such benefit shall also be
subject to all the provisions of such contract.
16.10 Communications to Committee. All elections,
designations, requests, notices, instructions, and other
communications from a Participating Unit, a Participant,
Beneficiary or other person to the Committee required or
permitted under the Plan shall be in such form as is prescribed
from time to time by the Committee, shall be mailed by first
class mail or delivered to such location as shall be specified by
the Committee, and shall be deemed to have been given and
delivered only upon actual receipt thereof by the Committee at
such location.
16.11 Communications from Participating Unit or
Committee. All notices, statements, reports and other
communications from a Participating Unit or the Committee to any
employee, Participant, Surviving Spouse, Beneficiary or other
person required or permitted under the Plan shall be deemed to
have been duly given when delivered to, or when mailed by first
class mail, postage prepaid and addressed to, such Employee,
Participant, Surviving Spouse, Beneficiary or other person at his
address last appearing on the records of the Committee, or when
posted by the Participating Unit or the Committee as permitted by
law.
16.12 Transfers and Rollovers. Neither the Plan nor the
Trust shall accept funds transferred, directly or indirectly from
any individual retirement account, an individual retirement
annuity or a retirement bond as described in Sections 408 and 409
of the Code.
16.13 Gender. Whenever used in the Plan, the masculine
gender includes the feminine.
16.14 Captions. The captions preceding the sections of
the Plan have been inserted solely as a matter of convenience and
in no way define or limit the scope or intent of any provisions
of the Plan.
16.15 Applicable Law. The Plan and all rights
thereunder shall be governed by and construed in accordance with
the Act and, to the extent state law is found to be applicable,
the laws of the State of Virginia.
16.16 Mistake of Fact. Notwithstanding any other
provisions herein contained, if any contribution is made due to a
mistake of fact, such contribution shall upon the direction of
the Committee, which shall be given in conformity with the
provisions of the Act, be returned to the Company or the parties
who made it, as directed by the Company, without liability to any
person (including, but not limited to, Participants and
Beneficiaries); provided, however, that this Section shall not
apply (i) with respect to any contribution made to enable the
Plan to repay principal or interest on any Exempt Loan made in
connection with the adoption of the Plan (unless such mistake of
fact relates to a misapplication of one or more controlling
agreements pertinent to one or more Exempt Loans) or (ii) where
the return of a contribution or contributions would jeopardize
the availability, with respect to any loan, of the interest
exclusion provided for under Section 133 of the Code.
16.17 Qualification of Plan. Notwithstanding any other
provisions herein contained, this Plan is entered into on the
condition that (a) the Plan, and the Trust Agreement established
hereunder shall be approved by the IRS as a qualified and exempt
plan and trust under the provisions of the Code and Regulations,
so that contributions to the Trust may be deducted for Federal
income tax purposes, within the limits of such Code and
Regulations, and be non-taxable to Participants and Beneficiaries
when contributed and (b) the Plan shall be approved by the IRS as
an "employee stock ownership plan" within the meaning of Section
4975(e)(7) of the Code. If such approval should be denied for
any reason (including failure to comply with any conditions for
such approval imposed by the IRS), contributions made after the
execution of the Trust Agreement and prior to such denial and all
assets in the Trust Fund shall be returned to the Company or the
party who made it, as directed by the Company, without any
liability to any person, within one year after the date of denial
of such approval. All remaining assets in the Trust shall be
returned to the Company.
16.18 Deductibility of Contributions. Notwithstanding
any other provisions herein contained, all contributions are
hereby expressly conditioned upon their deductibility under
Section 404 of the Code and Regulations, as amended from time to
time, and if the deduction for any contribution is disallowed in
whole or in part, then such contribution (to the extent the
deduction is disallowed) shall upon direction of the Committee,
which shall be given in conformity with the provisions of the
Act, be returned, without liability to any person, within one
year after such disallowance; provided, however, that this
Section shall not apply (i) with respect to any contribution made
to enable the Plan to repay principal or interest on any Exempt
Loan made in connection with the adoption of the Plan or (ii)
where the return of a contribution or contributions would
jeopardize the availability, with respect to any loan, of the
interest exclusion provided for under Section 133 of the Code.
16.19 Fees and Expenses. The expenses of administering
the Plan including (i) the fees of the Trustee for the
performance of its duties under the Trust, (ii) the expenses
incurred by any employee or member of the Committee in the
performance of their duties under the Plan (including reasonable
compensation for any legal counsel, certified public accountants
and any agents and cost of services rendered in respect of the
Plan), and (iii) all other proper charges and disbursements of
any employee or member of the Committee (including settlements of
claims or legal actions brought against any party, including the
Trustee, approved by the Company and the Committee, after
consulting with counsel to the Plan), are to be paid
proportionately by the Participating Units to the extent not paid
by the Company. In estimating costs under the Plan,
administrative costs may be anticipated. Any expenses and
disbursements of the Trustee (including the fees of its legal
counsel, certified public accountants and agents) shall be paid
by the Trustee unless paid by the Company.
16.20 Voting and Tender or Exchange Rights. Except as
otherwise required by the Act, the Code and Regulations, all
voting rights of Shares held by the Trust Fund shall be exercised
by the Trustee only as directed by the Committee, the
Participants or their Beneficiaries in accordance with the
following provisions of this Section 16.20:
(a) (1) If any Participating Unit has a registration
type class of securities (as defined in Section 409(e)(4) of the
Code), then, with respect to all corporate matters submitted to
shareholders, all Shares allocated and credited to the Accounts
of Participants shall be voted only in accordance with the
directions of such Participants as given to the Committee and
communicated in turn by the Committee to the Trustee, or as given
directly by such Participants to the Trustee. Each Participant
shall be entitled to direct the voting only of the Shares
(including fractional interests in Shares) allocated and credited
to his Account.
(2) If no Participating Unit has a registration
type class of securities (as defined in Section 409(e)(4) of the
Code), then, only with respect to corporate matters relating to a
corporate merger or consolidation, recapitalization (including
increases or decreases in the number of authorized shares of one
or more classes of capital stock, the creation of one or more new
classes of capital stock or the elimination of one or more former
classes of capital stock), reclassification, liquidation,
dissolution, sale of substantially all assets of a trade or
business, or such other similar transaction that Regulations
require, all Shares allocated and credited to the Accounts of
Participants shall be voted in accordance with the directions of
such Participants as given to the Committee and communicated in
turn by the Committee to the Trustee, or as given directly by
such Participants to the Trustee. Each Participant shall be
entitled to direct the voting only of the Shares (including
fractional interests in Shares) allocated to his Account.
(3) A Participant who gives directions for voting
pursuant to this Section 16.20 shall be deemed to be acting as a
"named fiduciary", as such term is defined in Section 402(a)(1)
of the Act.
(b) If Participants are entitled under Section
16.20(a) to direct the vote with respect to allocated Shares,
then, at least 30 days before each annual or special shareholders
meeting of the Company (or, if such schedule cannot be met, as
early as practicable before such meeting), the Committee, through
the Trustee, shall furnish to each Participant at his last known
address a copy of the proxy solicitation material sent generally
to shareholders, together with a form requesting confidential
instructions on how the Shares allocated to such Participant's
Account (including fractional Shares to 1/1000th of a Share) are
to be voted. Upon timely receipt of such instructions, the
Trustee (after combining votes of fractional Shares to give
effect to the greatest extent possible to Participants'
instructions) shall vote the Shares as instructed. The
instructions received by the Trustee from Participants shall be
held by the Trustee in strict confidence and shall not be
divulged or released to any person including officers or
Employees of any Participating Unit, or of any other Company.
(c) The Trustees shall vote the Shares for which no
instructions are received, including unallocated shares if any,
in the same proportion as the shares for which instruictions have
been received.
(d) The Trustee shall notify each Participant of each
tender or exchange offer for the Shares and utilize its best
efforts to distribute or cause to be distributed to each
Participant in a timely manner all information distributed to
shareholders of the Company in connection with any such tender or
exchange offer. Each Participant shall have the right from time
to time with respect to the Shares allocated to his Account
(including fractional Shares to 1/1000th of a Share) to instruct
the Trustee in writing as to the manner in which to respond to
any tender or exchange offer which shall be pending or which may
be made in the future for all Shares or any portion thereof. A
Participant's instructions shall remain in force until superseded
in writing by the Participant. The Trustee shall tender or
exchange whole Shares only as and to the extent so instructed and
shall aggregate Participants' responses with respect to
fractional Shares and tender or exchange fractional Shares in a
manner designed to comply with the aggregate responses of all
Participants with respect to such fractional Shares. If the
Trustee shall not receive instructions from a Participant
regarding any tender or exchange offer for Shares, the Trustee
shall have no discretion in such matter and shall not tender or
exchange any such Shares in response thereto. Unless and until
Shares are tendered or exchanged, the individual instructions
received by the Trustee from Participants shall be held by the
Trustee in strict confidence and shall not be divulged or
released to any person, including officers or Employees of any
Participating Unit, or of any other company; provided, however,
that the Trustee shall advise the Company, at any time upon
request, of the total number of Shares not subject to
instructions to tender or exchange.
(e) Except as may otherwise be required by ERISA,
neither the Committee nor the Trustee shall have the discretion
or power to sell, convey or transfer any unallocated Shares held
in the Trust Fund in response to a tender or exchange offer
unless a court of competent jurisdiction determines that the
Trustee is authorized to sell, convey or transfer any unallocated
Shares held in the Trust in response to any tender or exchange
offer. In exercising any discretion or power, the Committee
shall consider, to the extent permitted by applicable law,
including the Regulations, not only the potential increase in
value, if any, in the Accounts of the Participants as a result of
a tender or exchange of the unallocated Shares, but also the
impact of any change in the management or control of the Company
on the status of the Participants as Employees in the long run,
but not over the short run, including but not limited to whether
they will receive larger or smaller employee benefits than at
present under the Plan.
(f) A Participant's Beneficiary shall be entitled to
exercise all notice, voting, tender, or exchange rights provided
for in this Section 16.20 with respect to Shares allocated to the
Account of a deceased Participant as if such Beneficiary were the
Participant.
16.21 Exclusive Benefit of Participants and
Beneficiaries. In no event shall any part of the funds of the
Plan be used for, or diverted to, any purposes other than for the
exclusive benefit of Participants and their Beneficiaries under
the Plan except as permitted under Section 403(c) of the Act or
other applicable law. Upon the transfer by a Participating Unit
of any money to the Trustee, all interest of the Participating
Unit therein shall cease and terminate.
16.22 Additional Powers of the Committee.
Notwithstanding any provision of the Plan to the contrary, the
Committee shall have those additional powers, rights and
obligations provided under the Trust Agreement.
ARTICLE XVII: TOP HEAVY PROVISIONS
17.1 Top Heavy Plan. The Plan will be considered a Top
Heavy Plan for any Plan Year if it is determined to be a Top
Heavy Plan as of the "Determination Date", which is defined as
the last day of the preceding Plan Year or, with respect to the
first Plan Year, the last day of such Plan Year. Notwithstanding
any other provisions in the Plan, the provisions of this Article
XVII shall apply and supersede all other provisions in the Plan
with respect to a Plan Year with respect to which the Plan is
determined to be a Top Heavy Plan.
17.2 Definitions for Article XVII. For purposes of this
Article XVII and as otherwise used in this Plan, the following
terms shall have the meanings set forth below:
(a) "Aggregation Group" shall mean the group composed
of each qualified retirement plan of the Company or an Affiliate
in which a Key Employee is a participant and each other qualified
retirement plan of the Company or an Affiliate which enables a
plan of the Company or an Affiliate in which a Key Employee is a
participant to satisfy Sections 401(a)(4) or 410 of the Code.
The Aggregation Group referred to in the preceding sentence is
the "Required Aggregation Group". In addition, the Company may
choose to treat any other qualified retirement plan as a member
of the Aggregation Group if such Aggregation Group will continue
to satisfy Sections 401(a)(4) and 410 of the Code with such plan
being taken into account. The Aggregation Group referred to in
the preceding sentence is the "Permissive Aggregation Group".
For purposes of determining whether the Plan is part of an
Aggregation Group, all qualified retirement plans (whether or not
terminated) maintained by the Company or an Affiliate in which a
Key Employee or an Affiliate in which a Key Employee participates
in the Plan Year containing the Determination Date or any of the
preceding four Plan Years shall be taken into account to the
extent required by Section 416(g) of the Code and the Regulations
thereunder.
(b) "Key Employee" shall mean a "Key Employee" as
defined in Section 416(i)(1) and (5) of the Code or Regulations.
For purposes of determining which employee is a Key Employee,
compensation shall mean "compensation" as defined in Section
1.415-2(d) of the Regulations.
(c) "Top Heavy Plan" shall mean a "Top Heavy Plan" as
defined in Section 416(g) of the Code and Regulations, and the
Plan shall accordingly be considered a Top Heavy Plan for any
Plan Year for which the Top Heavy Ratio exceeds 60%.
(d) "Top Heavy Ratio" shall mean the ratio of (i) the
account balances (in the case of a defined contribution plan) and
present value of accrued benefits (in the case of a defined
benefit plan) for Key Employees under all plans in the
Aggregation Group to (ii) the account balances and present value
of accrued benefits for all employees in all plans in the
Aggregation Group, but without regard to the account balances and
accrued benefits, as applicable, for Key Employees who performed
no services for the Company or an Affiliate during the five-year
period ending on the Determination Date, calculated in accordance
with Section 416 of the Code and Regulations thereunder.
(e) "Non-Key Employee" should mean any employee who is
not a Key Employee.
17.3 Compensation. For any Plan Year that the Plan is a Top
Heavy Plan, only the first $200,000 (adjusted for Plan Years
beginning on or after January l, 1988, in accordance with
Regulations) of compensation shall be credited to a Participant.
17.4 Minimum Contribution and Vesting.
(a) Subject to Section 17.5, for each Plan Year that
the Plan is a Top Heavy Plan, the Company contribution (including
Forfeitures) allocable to the Account of each Participant who has
performed an Hour of Service at the end of the Plan Year and who
is not a Key Employee, shall not be less than the lesser of (i)
three percent of such Participant's compensation, within the
meaning of Section 415 of the Code, or (ii) the percentage at
which contributions and Forfeitures for such Plan Year are made
and allocated on behalf of the Key Employee for whom such
percentage is the highest. For the purpose of determining the
appropriate percentage under clause (ii), all defined
contribution plans required to be included in an Aggregation
Group shall be treated as one plan. Clause (ii) shall not be
applicable if the Plan is required to be included in an
Aggregation Group which enables a defined benefit plan also
required to be included in said Aggregation Group to satisfy
Sections 401(a)(4) or 410 of the Code.
(b) For each Plan Year that the Plan is a Top Heavy
Plan, each Participant with three or more Years of Service shall
be 100 percent vested in his Account.
17.5 Limitations on Contributions.
(a) For each Plan Year that the Plan is a Top Heavy
Plan, 1.0 shall be substituted for 1.25 as the multiplicand of
the dollar limitation in determining the denominator of the
defined benefit plan fraction and of the defined contribution
plan fraction for purposes of Section 415(e) of the Code.
(b) If, after substituting 90 percent for 60 percent
wherever the latter appears in Section 416(g) of the Code, the
Plan is not determined to be a Top Heavy Plan, the provisions of
paragraph (a) shall not be applicable if the minimum Company
contribution (including Forfeitures) allocable to the Account of
any Participant who is not a Key Employee as specified in Section
17.4 is determined by substituting "4" for "3".
17.6 Other Plans. The Committee shall, to the extent
permitted by the Code and in accordance with the Regulations,
apply the provisions of this Article XVII by taking into account
the benefits payable and the contributions made under any other
plans maintained by the Company or any of its subsidiaries or
affiliated or associated entities which are qualified under
Section 401(a) of the Code, to prevent inappropriate omissions or
required duplication of minimum benefits or contributions.
Exhibit 4.2
DYNCORP SAVINGS AND RETIREMENT PLAN
AMENDED AND RESTATED
AS OF JANUARY 1,1989
WHEREAS, DynCorp (hereinafter sometimes referred to as the "Company")
has previously adopted the Deferred Savings Plan of DynCorp and Participating
Subsidiaries (hereinafter referred to as the "Plan"), effective as of April 1,
1983, which is to continue to be funded through the medium of a Trust Fund;
and
WHEREAS, the Company desires to rename and amend and restate the Plan in
order to comply with the Tax Reform Act of 1986, the Omnibus Reconciliation
Acts of 1986 and 1987, the Revenue Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Reconciliation Act of 1989, and
the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93");
NOW, THEREFORE, the Company hereby renames, amends, and restates the
Plan, effective January 1, 1989, unless otherwise indicated, with such Plan to
be hereafter known as the DynCorp Savings and Retirement Plan, as follows:
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS
ARTICLE II - PARTICIPATION AND ENTRY DATE
2.01 Initial Eligibility.
2.02 Plan Participation.
2.03 Re-employment.
2.04 Change in Status.
ARTICLE III - CONTRIBUTIONS
3.01 Salary Deferral Contributions.
3.02 After-Tax Contributions.
3.03 Method of Contribution.
3.04 Matching Employer Contributions.
3.05 Discretionary Employer Contributions.
3.06 Non-Discrimination Test.
3.07 Forfeitures.
3.08 Maximum Contributions.
3.09 Time of Payment.
3.10 Annual Additions Limitation.
3.11 Return of Contribution.
3.12 Rollover/Direct Transfer Contributions.
3.13 Change of Contribution Rate and Suspension of Contributions.
ARTICLE IV - ADMINISTRATION OF FUNDS
4.01 Investment of Funds.
4.02 Investment Elections.
4.03 Change of Elections.
4.04 Restrictions on Changes.
4.05 Allocation of Contributions.
4.06 Valuation of Assets.
4.07 Voting of Shares.
4.08 Tender Offer Procedure.
4.09 ERISA Section 404(c) Plan.
4.10 Confidentiality.
4.11 Fiduciary Designation.
ARTICLE V - RETIREMENT BENEFITS
5.01 Normal Retirement Benefit.
5.02 Deferred Retirement Benefit.
5.03 Disability Retirement Benefit.
5.04 Payment of Benefits.
5.05 Installment Payments
5.06 Joint-and-Survivor Annuity
5.07 Life Annuity.
5.08 Additional Allocations on Retirement.
5.09 Crediting of Investment Earnings.
5.10 Common Stock.
ARTICLE VI - DEATH BENEFITS
6.01 Death Benefits.
6.02 Additional Allocations on Death.
6.03 Beneficiary Designation.
ARTICLE VII - VESTING AND SEPARATION FROM SERVICE
7.01 Vesting of Accounts.
7.02 Payment of Benefits to Terminated Participants.
7.03 Re-employment After Distribution and Restoration of Contributions.
ARTICLE VIII - WITHDRAWALS AND LOANS
8.01 Withdrawals While Employed.
8.02 Loans.
ARTICLE IX - ADMINISTRATION
9.01 Plan Administrator.
9.02 Administrative Procedures.
9.03 Other Plan Administrator.
9.04 Claims Procedures.
9.05 Expenses.
ARTICLE X - AMENDMENT, TERMINATION, AND MERGERS
10.01 Amendment.
10.02 Plan Termination.
10.03 Permanent Discontinuance of Employer Contributions
10.04 Suspension of Employer Contributions.
10.05 Mergers and Consolidations of Plans.
10.06 Former Participants in Merged Plans
ARTICLE XI - MISCELLANEOUS PROVISIONS
11.01 Non-Alienation of Benefits.
11.02 No Contract of Employment.
11.03 Severability of Provisions.
11.04 Heirs, Assigns, and Personal Representatives.
11.05 Headings and Captions.
11.06 Gender and Number.
11.07 Funding Policy.
11.08 Title to Assets.
11.09 Payment to Minors, etc.
11.10 Situs.
ARTICLE XII - TOP-HEAVY PROVISIONS
12.01 Top-Heavy Plan.
12.02 Minimum Contributions or Benefits.
12.03 Adjustment to Maximum Benefits.
12.04 Minimum Vesting
12.05 Discontinuance of Article.
ARTICLE I - DEFINITIONS 1.01 "Account" shall mean with respect to a
Participant all of the various accounts, as applicable, maintained to define
such Participant's proportionate interest in the Trust Fund as follows:
(a) A "Salary Deferral Contribution Account" includes the Salary
Deferral Contributions made on behalf of the Participant, the appreciation or
depreciation of the investments allocated to that Account, and the income
earned on such investments, less the expenses incurred as to such Account;
(b) An "After-Tax Contribution Account" includes the Participant's
After-Tax Contributions, the appreciation or depreciation of the investments
allocated to that Account, and the income earned on such investments, less the
expenses incurred as to such Account;
(c) A "Matching Employer Contribution Account" reflects the Matching
Employer Contributions allocated to the Participant, the appreciation or
depreciation of the investments allocated to that Account, and the income
earned on such investments, less the expenses incurred as to such Account;
(d) A "Discretionary Employer Contribution Account" reflects the
Discretionary Employer Contributions allocated to the Participant, the
appreciation or depreciation of the investments allocated to that Account, and
the income earned on such investments, less the expenses incurred as to such
Account;
(e) A "Rollover Contribution Account" reflects any rollover/direct
transfer contribution made in accordance with Section 3.12, the appreciation
or depreciation of the investments allocated to that Account, and the income
earned on such investments, less the expenses incurred as to such Account; and
(f) A "Stock Account" means an Account maintained for an individual
Participant reflecting the Participant's investment in Company Stock
1.02 "Affiliated Organization" shall mean (i) any corporation on or after the
date it becomes a member of a controlled group of corporations which includes
the Company, as determined under the provisions of Section 414(b) of the Code,
(ii) any trade or business, whether or not incorporated, on or after it comes
under common control with the Company, as determined under Section 414(c) of
the Code, (iii) any organization which is an affiliated service organization
within the meaning of Section 414(m) of the Code, and (iv) any other entity
required to be aggregated pursuant to regulations under Section 414(o) of the
Code.
1.03 "Age" or "age" shall mean the chronological age attained by the
Participant at his most recent birthday or as of such other date of reference
as set forth in this Plan.
1.04 "Board of Directors" shall mean the board of directors of the Company
and/or any authorized committee thereof.
1.05 "Break-in-Service" shall mean a twelve-month period commencing on the
day following an Employee's termination of employment with an Affiliated
Organization, or on each anniversary thereof, during which period such person
does not incur at least one Hour of Service.
1.06 "Code" means the Internal Revenue Code of 1986 as the same currently
exists, and as it may hereafter be amended or clarified by regulations,
rulings, notices or other publications of the Internal Revenue Service having
legal effect.
1.07 "Company Stock" means shares of the common stock of the Company.
1.08 "Compensation" shall mean, for any applicable period, base salary or
wages plus bonuses, overtime, and commissions received by an Employee for
services performed for an Employer, including any Salary Deferral
Contribution made on behalf of the Participant under this Plan, and any
contributions made by salary reduction to a plan established in accordance
with Section 125 or 129 of the Code. Compensation shall exclude premiums paid
to a life insurance plan of the Company for additional coverage above $50,000;
the value of Company car or commuting allowances; reimbursements for expenses;
and any other fringe benefits, and, for Highly-Paid Employees, shall also
exclude distributions of compensation deferred during a prior period and
earnings thereon, supplemental executive retirement plans, and long-term
incentive plan awards or distributions, such as restricted stock and stock
options.
For any Plan Year commencing after December 31, 1988, Compensation shall
not exceed $200,000, or such other maximum amount as set forth under Section
401(a)(17) of the Code, adjusted at the same time and in the same manner as
under Section 415(d) of the Code, except that the dollar increase in effect on
January 1 of any calendar year is effective for Plan Years beginning in such
calendar year and the first adjustment to the $200,000 limitation is effected
on January 1, 1990. If Compensation is determined over a Plan Year that
contains fewer than 12 calendar months, the annual compensation limit is an
amount equal to the annual compensation limit for the calendar year in which
the compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of living
in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. The
cost-of-living adjustment in effect for a calendar year applies to any period,
not exceeding 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.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only the spouse of the
Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year.
1.09 "Contribution" shall mean any or all of the various types of
contributions made under the Plan by Participants or the Employer, as
described below:
(a) "Salary Deferral Contribution" shall mean that portion of the
Contribution made to the Plan on behalf of a Participant by his Employer
through a salary reduction agreement, as described under Sections 2.02 and
3.01.
(b) "After-Tax Contribution" shall mean that portion of a
Participant's Contribution to the Plan which he elects to make independent of
a salary reduction agreement, as described under Section 3.02.
(c) "Matching Employer Contribution" shall mean a Contribution made by
an Employer as described under Section 3.04, based on a Participant's Salary
Deferral Contribution (including any Salary Deferral Contributions
re-characterized as After-Tax Contributions pursuant to Section 3.06).
(d) "Discretionary Employer Contribution" shall mean a Contribution
made by an Employer which is unrelated to any Participant Contributions, as
described under Section 3.05.
(e) "Qualified Non-elective Contribution" shall mean a Contribution
made by an Employer (other than those listed above) in order that the Plan
will satisfy the requirements of Section 3.06 for a Plan Year. The allocation
may be made to all Active Participants who are not Highly-Paid Employees or,
with respect to satisfaction of the ADP test, only to those Active
Participants who have made Salary Deferral Contributions for a Plan Year and
who are not Highly-Paid Employees. Such Contributions shall be treated as
Salary Deferral Contributions for all purposes under the Plan.
1.10 "Contribution Percentage" shall mean the percentage determined by
dividing (i) the sum of the Salary Deferral Contribution, After-Tax
Contribution, Matching Employer Contribution, and any Qualified Non-elective
Contribution used to satisfy the non-discrimination requirements of Section
3.06 or any combination of such Contributions, whichever is applicable, made
by or on behalf of a Participant for the applicable period by (ii) his
compensation as defined under Code Section 414(s). "ADP" shall sometimes be
used herein to refer to the average Contribution Percentage with respect to
Salary Deferral Contributions or amounts treated as Salary Deferral
Contributions. "ACP" shall sometimes be used herein to refer to the average
Contribution Percentage with respect to Matching Employer Contributions and
After-Tax Contributions, if applicable.
1.11 "Disability" shall mean a physical or mental condition of such severity
and probable prolonged duration as to cause the Participant to be unable to
continue his duties as an Employee. The existence of any Disability shall be
determined by a physician approved by the Plan Administrator or the Employer's
designated disability insurance carrier, based on medical evidence of a
physical or mental impairment that can be expected to last more than 12 months
or result in death, or on other uniform and non-discriminatory criteria as
established by the Plan Administrator. Notwithstanding the foregoing,
eligibility for Social Security Disability benefits or for long term
disability benefits under an insured plan sponsored by the Employer shall be
deemed conclusive proof of disability.
1.12 "Effective Date" of this Plan shall mean April 1, 1983. The effective
date of this amended and restated Plan is January 1, 1989.
1.13 "Eligible Employee" shall mean an Employee of an Employer.
Notwithstanding the foregoing, the term "Eligible Employee" shall not include
any person whose terms and conditions of employment are determined by
collective bargaining with a third party and with respect to whom inclusion in
this Plan has not been provided for in the collective bargaining agreement
setting forth those terms and conditions of employment, nor shall the term
"Eligible Employee" include any independent contractor or a leased employee.
1.14 "Employee" shall mean any employee of the Employer or an Affiliated
Organization, including a leased employee as defined under Section 414(n) of
the Code.
The term "leased employee" means any person (other than an employee of
the recipient organization) who pursuant to an agreement between the recipient
organization and any other person ("leasing organization") has performed
services for the recipient organization (including related persons determined
in accordance with Section 414(n)(6) of the Code) on a substantially full-time
basis for at least one year, and such services are of a type historically
performed by employees in the business field of the recipient organization.
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
organization if: (i) such employee is covered by a money purchase pension plan
providing immediate participation, full and immediate vesting and a
non-integrated employer contribution rate of at least ten percent (10%) of
compensation (as defined in Section 415(c)(3) of the Code, but including
amounts contributed by the employer pursuant to a salary reduction agreement
which are excludable from the employee's gross income under Section 125,
Section 402(a)(8), Section 401(h) or Section 403(b) of the Code). Also, the
leased employees must not constitute more than twenty percent (20%) of the
recipient organization's non-highly compensated workforce.
1.15 "Employer" shall mean DynCorp (hereinafter sometimes referred to as the
"Company"), and any successor thereto which adopts this Plan and joins in the
corresponding Trust Agreement. The term "Employer" shall also include any
subsidiary, division, organizational unit, or other entity affiliated or
associated with the Company or an Employer, including joint ventures, which,
with the consent of the Plan Administrator, adopts this Plan. The term
"Employer" shall not include any subsidiary or affiliate of the Company,
unless such subsidiary or affiliate is specifically designated as an Employer
in accordance with the foregoing sentence.
1.16 "Entry Date" shall mean the first day of every calendar month during
which the Plan remains in effect.
1.17 "ERISA" means the Employee Retirement Income Security Act of 1974 (P.L.
93-406), including all amendments thereto.
1.18 "Fund" or "Trust Fund" shall mean all of the assets of the Plan held by
the Trustees (or any nominees thereof) at any time under the Trust Agreement.
1.19 "Highly-Paid Employee" shall mean any Employee who during the current or
preceding Plan Year ("determination year" and "look-back year", respectively):
(a) was at any time a 5% owner of the Employer or an Affiliated
Organization; or
(b) received compensation for such Plan Year in excess of $75,000 or
such higher amount as provided under Section 414(q) of the Code, as adjusted
at the same time and in the same manner as under Section 415(d) of the Code;
or
(c) received compensation for such Plan Year in excess of $50,000 or
such higher amount as provided under Section 414(q) of the Code, as adjusted
at the same time and in the same manner as under Section 415(d) of the Code,
provided such compensation exceeded that of 80% of all Employees for the
applicable Plan Year; or
(d) was at any time an officer of the Employer or an Affiliated
Organization, and received compensation for such Plan Year in excess of
$45,000, as adjusted at the same time and in the same manner as under Section
415(d) of the Code (or, if higher, 50% of the amount in effect under Section
415(b)(1)(A) of the Code for such Plan Year).
For each Plan Year for which a determination in accordance with the
above paragraph is being made, any individual not described in sub-paragraph
(b), (c), or (d) for the preceding Plan Year (without regard to this
paragraph) shall not be treated as described in sub-paragraph (b), (c), or (d)
for the current Plan Year unless such individual is among the one-hundred
(100) highest paid Employees for the current Plan Year.
In no event shall the number of officers taken into account under
sub-paragraph (d) exceed the lesser of (i) fifty (50), and (ii) the greater of
(A) three or (B) 10% of the total Employees. Furthermore, if no officer of
the Employer or an Affiliated Organization is described in sub-paragraph (d)
for a Plan Year, then the highest paid officer shall be treated as described
in sub-paragraph (d) for such Plan Year.
The term "Highly-Paid Employee" shall include any highly paid former
employee who separated from service (or was deemed to have separated) prior to
the determination year, performs no service for the Employer during the
determination year, and was a Highly-Paid Employee for either the separation
year or any determination year ending on or after the Employee's 55th
birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a five percent (5%) owner who is an active or former
Employee or a Highly-Paid Employee who is one of the ten most highly
compensated Employees ranked on the basis of Compensation paid by the Employer
during such year, then the family member and the five percent (5%) owner or
top-ten Highly-Paid Employee shall be aggregated. In such case, the family
member and five percent (5%) owner or top-ten Highly-Paid Employee shall be
treated as a single Employee receiving compensation and plan contributions or
benefits equal to the sum of such compensation and contributions or benefits
of the family member and five percent owner or top-ten Highly-Paid Employee.
For purposes of this Section, family member includes the spouse, lineal
ascendants and descendants of the Employee or former Employee and the spouses
of such lineal ascendants and descendants.
The determination of who is a Highly-Paid Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
compensation that is considered, will be made in accordance with Section
414(q) of the Code. In determining the identity of Highly-Paid Employees for
a determination year, the Company may make the calendar year election provided
for in Answer 14(b) of Treasury Regulation 1.414(q)-IT.
1.20 "Hour of Service" shall mean the following:
(a) An Hour of Service includes each hour for which an Employee is
paid, or entitled to payment, for the performance of duties for the Employer
or an Affiliated Organization during the Plan Year.
(b) An Hour of Service includes each hour for which an Employee is
paid, or entitled to payment, (either directly or indirectly) by the Employer
or an Affiliated Organization 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), paid lay-off, 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 shall not constitute an Hour of Service, if such payment is made
or due under a plan maintained solely for the purpose of complying with
applicable workers compensation, 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.
(c) An hour worked at overtime or premium pay will count as only one
Hour of Service under the Plan.
(d) An Hour of Service includes each hour for which back pay,
irrespective of mitigation of damages, is either awarded to or agreed to by
the Employer. The same Hours of Service shall not be credited both under
paragraph (a) or paragraph (b), as the case may be, and under this paragraph
(d). Crediting of Hours of Service for each pay awarded shall be subject to
the limitations set forth in paragraphs (a), (b) and (c).
(e) For purposes of vesting, an Hour or Service includes any period of
leave of absence from work which commences after December 31, 1984 and which
is due to the pregnancy of the Employee, the birth of a child of the
Employee, the adoption of a child by the Employee, of the caring for a child
for a period beginning immediately following the birth or adoption of the
child; provided, however, that the period extending beyond the first
anniversary of such absence and ending on the day before the Employee returns
to work for the Employer.
(f) An Hour of Service shall also be credited for reasons other than
the performance of duties in accordance with Department of Labor Regulations,
Section 2530.200b-2(b). Further, the computation periods used for purposes of
crediting Hours of Service shall be in accordance with Department of Labor
Regulations, Section 2530.200b-2(c). If an Employer does not maintain hourly
records with respect to any Employee, such Employee shall be credited with 45
Hours of Service for each week in which he is entitled to be credited with an
Hour of Service.
1.21 "Merged Plan" shall mean a qualified plan previously maintained by an
Affiliated Organization which has been merged with or consolidated into this
Plan.
1.22 "Named Fiduciary" shall mean the Employer, the Trustees and the Plan
Administrator. Each named Fiduciary shall have only those particular powers,
duties, responsibilities and obligations as are specifically given him under
the Plan and/or the Trust Agreement.
1.23 "Non-Highly-Paid Employee" shall mean any Employee who during the
applicable period was not a Highly-Paid Employee.
1.24 "Normal Retirement Date" shall mean the date on which the Participant
has attained Age 65.
1.25 "Participant" shall mean any person who is eligible to receive benefits
under the Plan, including, if applicable, Beneficiaries and alternate payees
pursuant to QDROs. The term "Participant" shall include Active Participants
(Eligible Employees who have satisfied the participation requirements of
Section 2.02 as of an applicable Entry Date or who have made a Rollover
Contribution, and are not Terminated Vested Participants or Inactive
Participants), Terminated Vested Participants (former Employees who are
entitled at some future date to the distribution of benefits from this Plan),
and Inactive Participants (former Participants who are not Terminated Vested
Participants and who continue to be employed in a non-covered class by an
Employer or by an Affiliated Organization). Unless the QDRO expressly
provides otherwise, an alternate payee pursuant to a QDRO shall be treated as
a Terminated Vested Participant for purposes of Article 8.
1.26 "Plan" shall mean the DynCorp Savings and Retirement Plan as set forth
herein, and as the same may from time to time hereafter be amended.
1.27 "Plan Administrator" or "Administrator" shall mean the Company, or the
persons or committee named as such pursuant to the provisions of Article IX
hereof.
1.28 "Plan Year" shall mean a twelve-month period beginning on January 1st
and ending on each December 31st.
1.29 "QDRO" shall mean a qualified domestic relations order as such term is
defined under Section 414(p) of the Code.
1.30 "Reduced Compensation" shall mean Compensation reduced by any Salary
Deferral Contributions made by the Participant and also reduced by any
contributions made by salary reduction to a plan established in accordance
with Sections 125 or 129 of the Code.
1.31 "Service" shall mean employment on the payroll of an Affiliated
Organization during a period which would constitute an Hour of Service.
1.32 "Treasury Regulation" shall mean a regulation or temporary regulation
issued pursuant to the Code.
1.33 "Trust Agreement" shall mean the DynCorp Savings and Retirement Trust
Agreement as the same presently exists and as it may from time to time
hereafter be amended.
1.34 "Trustees" shall mean the party or parties so designated pursuant to the
Trust Agreement.
1.35 "Valuation Date" shall mean the last day of each Plan Year and any other
date as of which the Plan Administrator elects to make a valuation of Plan
Accounts.
1.36 "Vested Account Balance" shall mean so much of a Participant's Account
as is vested in accordance with Sections 7.01 and 10.02(a).
1.37 "Wage Base" shall mean the amount of compensation with respect to which
old age and survivors insurance benefits would be provided for a Participant
under the Social Security Act, as in effect for the calendar year in which the
Plan Year commences.
1.38 "Years of Service" shall mean an Employee's period of Service, measured
in years from his date of hire or rehire (whichever is applicable) with an
Affiliated Organization until his termination of employment with any
Affiliated Organization. If an Employee's employment is terminated before an
anniversary date and he is subsequently rehired before he has incurred five
twelve-month Breaks-in-Service, he will be re-credited as of his date of
rehire with each prior Year of Service and with a partial Year of Service for
any other period of Service completed since his hire date, rehire date, or
anniversary date, as applicable. All periods of Service shall be counted
regardless of whether or not such periods are continuous, but no single period
shall be counted toward more than one Year of Service.
ARTICLE II - PARTICIPATION AND ENTRY DATE
2.01 Initial Eligibility.
Each Eligible Employee who is a Participant immediately prior to the
effective date of this amended and restated Plan shall continue to participate
as of such effective date. Each other Employee shall be eligible to become a
Participant on the first Entry Date at least thirty (30) days following the
date he first becomes an Eligible Employee.
2.02 Plan Participation.
Each Employee who is eligible to participate in accordance with Section
2.01 shall complete such forms and provide such data as are reasonably
required by the Plan Administrator as a precondition to Plan participation.
In order to receive a Salary Deferral Contribution, a Participant must enter
into a salary reduction agreement to be effective as of an Entry Date,
electing to reduce his salary by an amount equal to his Salary Deferral
Contribution. Except as otherwise established by the Plan Administrator on a
non-discriminatory basis, a Participant's Salary Deferral Contribution for any
Plan Year shall not exceed the lesser of (i) 15% of his Compensation for the
Plan Year or portion of such Plan Year during which he was an Active
Participant, subject to the limitations set forth in Article III, and (ii)
$7,627, or such higher maximum contribution for a taxable year as may be
permitted under Section 402(g) of the Code. The Plan Administrator shall
determine the minimum and/or maximum permitted salary reduction. Any maximum
permitted salary reduction may apply to all Employees or to Employees of one
or more Employers or solely to those Employees of one or more Employers who
are Highly-Paid Employees. Participants shall make separate elections with
respect to Salary Deferral and After-Tax Contributions, and the election of
either type of contribution shall not, in any way, be contingent upon any
other election made under the Plan. By becoming a Participant, an Employee
shall for all purposes be deemed conclusively to have assented to the
provisions of the Plan, the corresponding Trust Agreement, and to all
amendments to such instruments.
2.03 Re-employment.
In the event a Participant terminates employment, and is re-employed, he
shall be eligible to be admitted or readmitted as an Active Participant on the
date of his re-employment or, if later, the Entry Date coincident with or next
following the date he becomes an Eligible Employee.
2.04 Change in Status.
In the event that a person who has been an Employee in an employment
status not eligible for participation in this Plan subsequently becomes
eligible by reason of a change in status, he shall be eligible to become a
Participant on the Entry Date coincident with or next following the date on
which he becomes an Eligible Employee.
ARTICLE III - CONTRIBUTIONS
3.01 Salary Deferral Contributions.
The Employer will make a Salary Deferral Contribution to the Plan for
each Active Participant who has entered into a salary reduction agreement, in
accordance with Section 2.02, as determined by such salary reduction
agreement. In addition, for any Plan Year, an Employer may elect to make a
Qualified Non-elective Contribution (including a qualified matching
Contribution) allocable only to those Participants who are Employees of the
Employer but are not Highly-Paid Employees, in order that the Plan will
satisfy requirements of Section 3.06 for such Plan Year. Any Contribution
made in accordance with the preceding sentence shall be allocated among
applicable Participants in proportion to the ratios of each such Participant's
Compensation or, with respect to satisfaction of the ADP test, only to those
Participants who have made Salary Deferral Contributions (under the same
allocation procedure used for Matching Employer Contributions or pro-rata).
Matching Employer Contributions used to satisfy the test described under
Section 3.06 must comply with Treasury Regulation 1.401(k)-1(b)(3).
"Excess Elective Deferrals" shall mean any Salary Deferral Contributions
which exceed the dollar limitation under Code Section 402(g). Such Excess
Elective Deferrals shall be treated as annual additions under the Plan unless
they are distributed in accordance with this Article.
A Participant may assign to this Plan any Excess Elective Deferrals made
during a taxable year of the Participant by providing fifteen (15) days
written notification to the Administrator of the amount of the Excess Elective
Deferrals to be assigned to this Plan. Such notice shall be provided no later
than the first March 1st following the close of the individual's tax year.
Excess Elective Deferrals with respect to the combination of Excess Elective
Deferrals and deferrals under another plan of deferred compensation of an
Employer or an Affiliated Organization may automatically be returned to the
Participant.
Notwithstanding any other provision of the Plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto, shall be
distributed no later than April 15th to any Participant to whose Account
Excess Elective Deferrals were assigned for the preceding year and who claims
Excess Elective Deferrals for such taxable year.
Excess Elective Deferrals shall be adjusted for any income or loss. The
income or loss allocable to Excess Elective Deferrals is the income or loss
allocable to the Participant's Account for the taxable year multiplied by a
fraction, the numerator of which is such Participant's Excess Elective
Deferrals for the year and the denominator of which is the Participant's
Salary Deferral Contribution Account without regard to any income or loss
occurring during such taxable year.
3.02 After-Tax Contributions.
With the consent of the Plan Administrator as to the Employer by which
an Employee is then employed, Participants may elect to make After-Tax
Contributions to the Trust for each Plan Year in amounts not less than one
percent (1%) of Compensation, nor more than ten percent (10%) of Compensation
for such Plan Year and all prior Plan Years during which the Plan was in
effect, reduced by the total After-Tax Contributions previously made by the
Participant not to exceed the maximums permitted under Section 3.06 and 3.10.
Such consent may be given in the Plan Administrator's sole discretion, but
shall be applied on a non-discriminatory basis and shall apply to all
Participants employed by the applicable Employer. After-Tax Contributions
shall not be used to reduce the Participant's taxable income.
3.03 Method of Contribution.
Salary Deferral and After-Tax Contributions may be made by periodic
payroll deductions or on such other basis as shall be determined from time to
time by the Plan Administrator. Nothing contained herein shall preclude the
Plan Administrator from not allowing Salary Deferral or After-Tax
Contributions to be made by any Participant in accordance with Section 3.06 or
from limiting the number of payroll periods in a Plan Year during which such
Contributions are permitted. A Participant may elect an increase or decrease
in his Salary Deferral Contributions or After-Tax Contributions, provided that
written notice of such change (including amendment of a salary reduction
agreement, if applicable) is submitted to the Plan Administrator at least 15
days in advance of the effective date, which date shall be the first day of a
calendar month. A Participant may cease Contributions as of any payroll
period upon 15 days' written notice.
No contributions may be made by or on behalf of any Participant during
any period that he is receiving long term disability benefits, worker's
compensation benefits or while the Participant is on a leave of absence for
which no Compensation is being paid from the Employer.
3.04 Matching Employer Contributions.
If authorized by the Plan Administrator, an Employer may elect, in its
sole discretion, to make Matching Employer Contributions, either in cash,
Company Stock, or a combination thereof, for a Plan Year to the Account of
each Active Participant employed by such Employer on whose behalf Salary
Deferral Contributions have been made during the Plan Year or, in the case of
Matching Employer Contributions in the form of Company Stock, to the Accounts
of Active Participants who have invested in such an Account during the Plan
Year.
3.05 Discretionary Employer Contributions.
For any Plan Year, an Employer may elect, in its sole discretion, to
make an additional Discretionary Employer Contribution to the Plan. If a
Discretionary Employer Contribution is made, then it shall be allocated on a
non-discriminatory basis as of the last day of the Plan Year to the Accounts
of Participants who were employed by the applicable Employer and retired at or
after age 65, retired due to a Disability or died during such Plan Year and
Active Participants who are employed by the Employer as of the last day of
such Plan Year. An individual who has terminated employment prior to the last
day of a Plan Year, but who is receiving severance pay as of such date, shall
not be deemed to be actively employed as of the last day of a Plan Year.
The amount allocated to each such Participant shall be an amount chosen
by the Employer to be allocated under (a) below. If any Discretionary
Employer Contribution remains, such amount shall be allocated in accordance
with (b) below.
(a) An amount shall be allocated equal to a percentage of each such
Participant's Compensation earned while a Participant for such Plan Year, plus
the same percentage of the excess of (i) such Participant's Compensation
earned while a Participant for the Plan Year above (ii) the Wage Base for such
Plan Year. However, the percentage of Compensation used for allocations above
the Wage Base shall not exceed 5.7% (or such other percentage which equals the
maximum percentage permitted under Code Section 401(l)).
(b) Any remaining Discretionary Employer Contribution shall be
allocated to each such Participant in proportion to the ratio that each such
Participant's Compensation earned while a Participant bears to such eligible
Compensation of all eligible Participants for the Plan Year.
3.06 Non-Discrimination Test.
For any Plan Year, the average Contribution Percentage for Highly-Paid
Employees determined based on Salary Deferral Contributions (ADP) and
separately based on the sum of After-Tax Contributions and any Matching
Employer Contributions (ACP) shall not exceed the greater of:
(a) 1.25 multiplied by the average Contribution Percentage for all
Eligible Employees who are not Highly-Paid Employees; or
(b) the lesser of (i) twice the average Contribution Percentage for
all Eligible Employees who are not Highly-Paid Employees; and (ii) the average
Contribution Percentage for all Eligible Employees who are not Highly-Paid
Employees, plus two percent (2%).
If the limitation described under subsection (b) above is applied with
respect to Salary Deferral Contributions, it shall not be applied with respect
to the sum of After-Tax Contributions and Matching Employer Contributions, and
vice-versa, except as otherwise permitted under the following Definitions and
Special Rules Section describing the multiple use test.
For purposes of this Section, an Excess Contribution shall mean the
excess of a Highly-Paid Employee's Salary Deferral Contribution (or amounts
treated as Salary Deferral Contributions) over the maximum amount of such
Contributions as provided under the above test.
For purposes of this Section, Excess Aggregate Contributions shall mean
the excess of the aggregate amount of After-Tax Contributions and Matching
Employer Contributions which were made on behalf of Highly-Paid Employees for
any Plan Year, over the maximum amount of such Contributions as provided under
the above test.
The Excess Contributions or Excess Aggregate Contributions, whichever is
applicable, shall be allocated by reducing the actual Contribution Percentage
of the Highly-Paid Employee with the highest actual Contribution Percentage.
Such Contribution Percentage shall be reduced until the Highly-Paid Employee
with the highest actual Contribution Percentage is equal to that of the
Highly-Paid Employee with the next highest actual Contribution Percentage or
until the above test is passed. This process shall be repeated until the test
is passed and such leveling method shall determine the amount of Excess
Contributions attributable to each Highly-Paid Employee. The Excess Aggregate
Contribution amount shall be determined after any Salary Deferral
Contributions are re-characterized as After-Tax Contributions.
Definitions and Special Rules:
"Aggregate Limit" shall mean the sum of (i) one hundred twenty-five
percent (125%) of the greater of the ADP of the Non-Highly-Paid Employees for
the Plan Year or the ACP of Non-Highly-Paid Employees under the Plan subject
to Code Section 401(m) for the Plan Year beginning with or within the Plan
Year of the cash or deferred arrangement ("CODA") and (ii) the lesser of two
hundred percent (200%) or two plus the lesser of such ADP or ACP. "Lesser" is
substituted for "greater" in (i) above and "greater" is substituted for
"lesser" after "two plus the" in (ii) if it would result in a larger Aggregate
Limit.
A multiple use method may be used in order to satisfy the
non-discrimination test if one or more Highly-Paid Employees participate in
both a CODA and a plan maintained by the Employer subject to the ACP test. If
the sum of the ADP and ACP of those Highly-Paid Employees subject to either or
both tests exceeds the Aggregate Limit, then the ACP of those Highly-Paid
Employees who also participate in a CODA will be reduced (beginning with such
Highly-Paid Employee whose ACP is the highest) so that the limit is not
exceeded. The amount by which each Highly-Paid Employee's Contribution
Percentage amount is reduced shall be treated as an Excess Aggregate
Contribution. The ADP and ACP of the Highly-Paid Employees are determined
after any corrections required to meet the ADP and ACP tests. Multiple use
does not occur if both the ADP and ACP of the Highly-Paid Employees does not
exceed 1.25 multiplied by the ADP and ACP of the Non-Highly Paid Employees.
Effective prior to the first Plan Year beginning after December 31,
1991, the Plan Administrator shall also have discretionary authority to
restructure the Plan and satisfy the above test based on specific common
attributes among Employees.
For purposes of determining the Contribution Percentage test, After-Tax
Contributions are considered to have been made in the Plan Year in which
contributed to the trust. Salary Deferral Contributions, Matching Employer
Contributions, and Qualified Non-elective Contributions will be considered
made for a Plan Year only if made no later than the end of the twelve-month
period beginning on the day after the close of the Plan Year.
The Employer shall maintain records sufficient to demonstrate
satisfaction of the above tests and the amount of Qualified Non-elective
Contributions, including qualified matching Contributions, if applicable, used
in the test.
The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
If in such Plan Year the Employer permits Participants to make After-Tax
Contributions, a Participant may treat his Excess Contributions under Section
3.01 as an amount distributed to the Participant and then contributed by such
Participant to the Plan as an After-Tax Contribution. Such re-characterized
amounts will remain non-forfeitable and subject to the same distribution
requirements as Salary Deferral Contributions. Amounts may not be
re-characterized by a Highly-Paid Employee to the extent that such amount, in
combination with other After-Tax Contributions made by that Employee, would
exceed any stated limit under the Plan on After-Tax Contributions.
Re-characterization must occur no later than 2 months after the last day
of the Plan Year in which such Excess Contributions arose and is deemed to
occur no earlier than the date the last Highly-Paid Employee is informed in
writing of the amount re-characterized and the consequences thereof.
Re-characterized amounts will be taxable to the Participant for the
Participant's tax year in which the Participant would have received them in
cash.
If a Highly-Paid Employee is subject to the family aggregation rules of
the Code, the combined actual Contribution Percentage (based on Salary
Deferral Contributions and separately based on After-Tax Contributions and
Matching Employer Contributions) for the family group shall be treated as one
Highly-Paid Employee. The combined actual Contribution Percentage shall be
determined as the combined actual Contribution Percentage of all eligible
family members.
The Excess Contributions or Excess Aggregate Contributions for the
family members shall be allocated in proportion to the ratio of such
Contributions for each family member.
Any distribution or forfeiture of Excess Contributions or Excess
Aggregate Contributions for any Plan Year shall be made based on the
respective portions of such amounts attributable to each Highly-Paid Employee.
Excess Contributions or Excess Aggregate Contributions shall be adjusted
for any income or loss. The income or loss allocable to such Contributions is
the income or loss allocable to the Participant's Account for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's Excess
Contributions or Excess Aggregate Contributions for the year and the
denominator of which is the Participant's Account attributable to satisfaction
of ADP and ACP test (as applicable) without regard to any income or loss
occurring during such Plan Year.
Notwithstanding the preceding paragraph, any other reasonable method for
computing the income allocable to Excess Contributions or Excess Aggregate
Contributions may be used, provided that the method is non-discriminatory, is
used consistently for all Participants and for all corrective distributions
under the Plan for the Plan Year, and is used by the Plan for allocating
income to Participants' Accounts.
Excess Contributions and Excess Aggregate Contributions shall be
forfeited, or if not forfeitable, distributed from the Participant's various
Accounts in proportion to the ratio of such Participant's applicable Accounts.
Excess Contributions shall be distributed from the Participant's Qualified
Non-elective Contribution Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Salary Deferral Account
and Matching Contribution Account.
Forfeitures of Excess Aggregate Contributions shall be applied to reduce
Employer Contributions in accordance with Section 3.07.
Excess Contributions or Excess Aggregate Contributions, plus any income
and minus any loss allocable thereto, shall be forfeited, or if not
forfeitable, distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Contributions were allocated for the
preceding Plan Year. If such excess amounts are distributed more than 2
months after the last day of the Plan Year in which such excess amounts arose,
a ten percent (10%) excise tax will be imposed on the Employer maintaining the
Plan with respect to such amounts to the extent required by law.
In the event that this Plan satisfies the requirements of Sections
401(k), 401(m), 401(a)(4), or 410(b) of the Code only if aggregated with one
or more other plans, or if one or more other plans satisfy the requirements of
such Sections of the Code only if aggregated with this Plan, then this Section
3.06 shall be applied by determining the Contribution Percentage of Employees
as if all such plans were a single plan. For Plan Years beginning after
December 31, 1989, plans may be aggregated in order to satisfy section 401(k)
or 401(m) of the Code only if they have the same Plan Year.
The ADP for any Participant who is a Highly-Paid Employee for the Plan
Year and who is eligible to have Salary Deferral Contributions (or amounts
treated as Salary Deferral Contributions for purposes of the ADP test)
allocated to his or her accounts under two or more arrangements described in
Section 401(k) of the Code that are maintained by the Employer, shall be
determined as if such Contributions were made under a single arrangement. If
a Highly-Paid Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
In the event that any provisions of this Section 3.06 are no longer
required or applicable for qualification of the Plan under the Code, then any
applicable provisions of this Section 3.06 shall thereupon be void.
3.07 Forfeitures.
Upon termination of employment for reasons other than retirement,
disability, or death, an Employee shall forfeit his unvested Contributions,
subject to reinstatement as described below.
As of the end of each calendar quarter, any forfeitures occurring during
such Plan Year resulting from an Employee's termination of employment shall
first be applied to restore the previously forfeited accounts, if applicable,
of former Terminated Vested Participants who have been re-employed.
Any portion of the total forfeiture not applied in accordance with the
preceding paragraphs may be used to reduce a Matching Employer Contribution
and allocated to remaining Active Participants in the same manner as provided
under Section 3.04.
Any portion of the total forfeiture remaining shall be treated as a
Discretionary Employer Contribution, and shall be allocated to remaining
Active Participants in the same manner as provided under Section 3.05.
Should a Participant who is not fully vested in his Matching Employer
Contribution and Discretionary Employer Contribution Accounts under Section
7.01 terminate employment, the resulting forfeiture of his Matching and
Discretionary Employer Contribution Accounts, combined with the distribution
of the vested portions thereof, shall be deemed a full distribution of such
Accounts.
If a terminated Participant who was not fully vested in his Matching
Employer Contribution and Discretionary Employer Contribution Accounts is
subsequently re-employed by the Employer prior to the occurrence of five
consecutive twelve-month Breaks-in-Service after the date of his termination
of employment, any amount forfeited shall be reinstated to his Account,
subject to the repayment requirements of Section 7.03.
3.08 Maximum Contributions.
Notwithstanding the above, the total amount of Salary Deferral
Contributions, Matching Employer Contributions, and Discretionary Employer
Contributions for any Plan Year shall not exceed an amount equal to fifteen
percent (15%) of the total Reduced Compensation of all Participants for such
Plan Year. The excess, if any, of fifteen percent (15%) of the total
Compensation of all Participants earned in any year commencing before January
1, 1987 above the actual aggregate Employer Contributions for such years may
be added to the total contribution provided the Plan was then in effect.
3.09 Time of Payment.
Matching Employer Contributions and Discretionary Employer Contributions
may be made at any time on or before the date required for deduction of such
Contributions on the Employer's Federal income tax return.
3.10 Annual Additions Limitation.
Notwithstanding the above provisions of this Article, in no event shall
the annual additions to a Participant's Account exceed the maximum amount
permitted under Section 415 of the Code, and all provisions of such Section
are hereby incorporated in the Plan by reference. The term "limitation year",
as defined under the Code, shall mean the Plan Year.
The term "Defined Contribution Fraction" shall mean a fraction, the
numerator of which is the sum of the annual additions to the Participant's
Account under all the defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all prior limitation years
(including the annual additions attributable to the Participant's
nondeductible employee contributions to all defined benefit plans maintained
by the Employer, whether or not terminated, and the annual additions
attributable to all welfare benefits funds, as defined in Section 419(e) of
the Code, and individual medical accounts, as defined in Section 415(1)(2) of
the Code, maintained by the Employer), and the denominator of which is the sum
of the maximum aggregate amounts for the current and all prior limitation
years of service with the Employer (regardless of whether a defined
contribution plan was maintained by the Employer). The maximum aggregate
amount in any limitation year is the lesser of 125 percent of the dollar
limitation determined under Sections 415(b) and (d) of the Code in effect
under Section 415(c)(1)(A) of the Code or 35 percent of the Participant's
compensation for such year.
If the Employee was a participant as of the end of the first day of the
first limitation year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in existence
on May 5, 1986, the numerator of this fraction will be adjusted if the sum of
this fraction and the defined benefit fraction would otherwise exceed 1.0
under the terms of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated using the fractions
as they would be computed as of the end of the last limitation year beginning
before January 1, 1987, and disregarding any changes in the terms and
conditions of the plan made after May 5, 1986, but using the Code Section 415
limitation applicable to the first limitation year beginning on or after
January 1, 1987.
The annual addition for any limitation year beginning before January 1,
1987, shall not be recomputed to treat all employee contributions as annual
additions.
The term "Defined Benefit Fraction" shall mean a fraction, the
numerator of which is the sum of the Participant's projected annual benefits
under all the defined benefit plans (whether or not terminated) maintained by
the Employer, and the denominator of which is the lesser of 125 percent of the
dollar limitation determined for the limitation year under Sections 415(b) and
(d) of the Code or 140 percent of the highest average compensation, including
any adjustments under Section 415(b) of the Code.
Notwithstanding the above, if the Participant was a participant as of
the first day of the first limitation year beginning after December 31, 1986,
in one or more defined benefit plans maintained by the Employer which were in
existence on May 5, 1986, the denominator of this fraction will not be less
than 125 percent of the sum of the annual benefits under such plans which the
participant had accrued as of the close of the last limitation year beginning
before January 1, 1987, disregarding any changes in the terms and conditions
of the plan after May 5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate satisfied the
requirements of Section 415 for all limitation years beginning before January
1, 1987.
As soon as administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be
determined on the basis of the Participant's actual compensation for the
limitation year.
If due to the maximum permitted above or as a result of the allocation
of forfeitures there is an excess amount, the excess will be disposed of as
follows:
(1) Any After-Tax Contributions, to the extent they would reduce the
excess amount, will be returned to the Participant;
(2a) If an excess amount still exists, and the Participant is covered
by the Plan at the end of the limitation year, the excess amount in the
Participant's Account will be used first to reduce the Participant's Salary
Deferral Contribution for such Plan Year (and the excess will be returned to
the Participant) and thereafter to reduce other Employer Contributions
(including any allocation of forfeitures) for such Participant in the next
limitation year, and each succeeding limitation year if necessary; or
(2b) If an excess amount still exists, and the Participant is not
covered by the Plan at the end of a limitation year, the excess amount will be
held unallocated in a suspense account. The suspense account will be applied
to reduce future Employer Contributions for all remaining Participants in the
next limitation year, and each succeeding limitation year if necessary.
If a suspense account is in existence at any time during a limitation
year pursuant to this Section, such account will not receive an allocation of
the trust's investment gains and losses. If a suspense account is in
existence at any time during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to Participant's Accounts
before any Employer or any employee contributions may be made to the Plan for
that limitation year. Excess amounts may not be distributed to Participants
or former Participants, except as provided below.
Notwithstanding the method for disposing of excess amounts as indicated
above, in the case where a reasonable error is made so that the limitations of
Section 415 are violated, the Plan may distribute Salary Deferral
Contributions (within the meaning of Section 402(g)(3) of the Code) to the
extent that the distribution would reduce the excess amounts in the
Participant's Account. These amounts are disregarded for purposes of the ADP
and ACP tests.
3.11 Return of Contribution.
Except as provided in Section 3.10 and this Section, and notwithstanding
any other provision of this Plan or of the Trust Agreement, the Employer
irrevocably divests itself of any interest or reversion whatsoever in any sums
contributed by it to the Trust Fund, and it shall be impossible for any
portion of the Trust Fund to be used for, or diverted to, any purpose other
than for the exclusive benefit of Participants or their Beneficiaries.
(a) If a contribution by the Employer is conditioned upon initial
qualification of the Plan or any amendment thereto under Section 401 of the
Code, and the Plan or any amendment thereto under Section 401 of the Code, and
the Plan or amendment does not so qualify, the contribution shall be returned
to the Employer within one year of the date of denial of such qualification or
of the failure to qualify.
(b) If a contribution made by the Employer is based upon a good faith
mistake of fact, the contribution shall be returned to the Employer within one
year after the payment of the contribution.
(c) If a contribution which is intended to be deductible for Federal
income tax purposes is determined to not be deductible and part or all of the
deduction is disallowed, the contribution, to the extent disallowed, shall be
returned to the Employer within one year after the disallowance of the
deduction.
(d) Earnings attributable to any mistaken or non-deductible
contribution may not be returned to the Employer, but losses attributable
thereto must reduce the amount to be so returned.
(e) If the withdrawal of the amount attributable to the mistaken or
nondeductible contribution would cause the balance of the individual Account
of any Participant to be reduced to less than the balance which would have
been in the Account had the mistaken or nondeductible amount not been
contributed, then the amount to be returned to the Employer must be limited so
as to avoid such reduction. In the case of a reversion due to initial
disqualification of the Plan, the entire assets of the Plan attributable to
Employer contributions may be returned to the Employer.
(f) A contribution may be returned to the Employer or an Employee,
whichever is applicable, in order to satisfy the requirements of Section 3.06.
3.12 Rollover/Direct Transfer Contributions.
(a) Direct Inter-Plan Transfers. Any Employee of an Employer
(including Employees who are not yet Eligible Employees) may, no less than 15
days following written notification to the Plan Administrator of such action,
direct the appropriate trustee of any qualified retirement plan of the
Employer or a former employer to distribute directly to the Trustee such
Participant's entire interest in the distributing plan, exclusive of any
after-tax contributions made by the Participant as an employee or participant
thereunder, provided that the transferor plan is not subject to the
requirements of Section 401(a)(11) of the Code, as a rollover or a direct
plan-to-plan transfer.
(b) Cash Transfers. Only cash, subject to outstanding loans, if any,
may be transferred in accordance with paragraph (a) of this Section. Property
other than cash cannot be transferred.
(c) Investment of Rollover Contribution Accounts. Rollover
Contribution Accounts shall be invested as provided under Section 4.01 of the
Plan.
(d) Direct Rollovers. This paragraph applies to distributions made on
or after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
paragraph, a distributee may elect, at the time and in the manner prescribed
by the Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover. Such distribution may commence less than 30
days after the notice required under Treasury Regulation 1.411(a)-1(k) is
given, provided that (i) the Plan 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
(ii) the Participant, after receiving the notice, affirmatively elects a
distribution.
For purposes of this Section, the following definitions shall apply:
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).
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.
Distributee: A distributee includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a QDRO, are distributees with regard to the interest of the spouse
or former spouse.
Direct rollover: A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributee.
3.13 Change of Contribution Rate and Suspension of Contributions.
A Participant may elect to change the percentage rate of his Salary
Deferral Contribution or After-Tax Contribution by executing a new salary
reduction agreement or written election, respectively. Such change will
become effective with the first pay check paid to the Participant during the
month following the Employer's receipt of such agreement or election or, if
later, the first pay check covering the payroll period including the date of
such receipt.
A Participant may elect to suspend all of his Salary Deferral
Contribution and/or After-Tax Contribution by executing a form approved by the
Plan Administrator; provided, however, that any suspension shall be for a
period of not less than three (3) months. Such suspension will become
effective for the payroll period ending after the date the Employer receives
the executed form. Contributions may be resumed following execution of a new
salary reduction agreement or written election.
ARTICLE IV - ADMINISTRATION OF FUNDS
4.01 Investment of Funds.
Participant Accounts will be invested as determined by the Plan Trustee,
unless the Plan Administrator elects to permit Plan Participants to direct the
investment of their Accounts, and directs the Trustees accordingly, in which
event such Participant Accounts will be invested as described below and in
Section 4.02 and 4.03. Should individual investment elections be permitted
under the plan, then the available investment alternatives may include any or
all of the alternatives described below:
(a) Common or capital stocks, bonds, convertible debentures or
preferred stocks, money market investments and other short term corporate and
government investments and fixed debt obligations of corporations and of
Federal, state, and local governments, or any pooled or mutual fund invested
in such instruments.
(b) One or more guaranteed interest funds which shall be invested
under a contract (or contracts) with a bank, or an insurance company licensed
in the state in which an office of the Employer is domiciled and whereby terms
of such contract guarantee both the repayment of principal and the payment of
interest at a pre-determined minimum rate for a fixed period of time. Any
such contract is subject to approval of the Plan Administrator and may be
renewed or discontinued in its discretion. Should such contract be
discontinued and should the Plan Administrator not enter into or instruct the
Trustee to enter into a successor contract providing similar guarantees as to
principal and interest, then any Participant whose Account was invested under
the contract shall be given the opportunity to make a new investment election.
(c) Any other managed fund which the Plan Administrator deems
appropriate for investment of plan assets.
(d) A fund invested in shares of Common Stock. Any dividends received
on such shares shall be reinvested in this fund. Contributions designated for
the fund, or dividends paid on shares held in the fund, shall be temporarily
invested in a short-term investment fund while the Trustee awaits the
opportunity to purchase additional shares. The shares of Common Stock from
time to time required to be acquired for the purposes of this Plan shall be
acquired by the Trustees by purchase in the open market, or, if applicable, in
an internal market maintained by the Company, at prevailing prices, or, if
directed by the Company, by contribution in kind or by purchase privately from
the Company or any other person at a price per share equal to the closing
market price per share at which the shares of Common Stock were sold on the
last business day preceding the day of the purchase; it being understood that
shares purchased from the Company may be either treasury shares or authorized
but unissued shares, if the Company shall make such shares available for that
purpose. Timing on purchases or sales of such shares shall be dependent upon
liquidity and ability of the Trustee to purchase or sell such shares for cash.
The Plan Administrator may, in its discretion, discontinue the use of
any investment alternatives maintained under the Plan, without obligation to
substitute new alternatives, provided that Participants with Accounts invested
in a discontinued investment alternative are given an opportunity to make an
election to transfer the affected portion of their Accounts to another
investment alternative permitted under the Plan.
4.02 Investment Elections.
If investment elections are permitted, then each Participant will
designate in which investment alternative or combination of alternatives he
desires his Contributions to be invested; provided, however, that the portion
invested in any alternative which he elects shall be one percent (1%) or any
multiple thereof, or such other percentage as may be designated by the Plan
Administrator.
4.03 Change of Elections.
Changes in investment elections shall (subject to Section 4.04) be
permitted, in the manner specified by the Plan Administrator. Following such
procedure, a Participant may alter his election with respect to the investment
of his future contributions and/or alter his election with respect to the
investment alternatives in which his prior contributions have been invested
and may direct the Trustee to transfer all or any portion of the balance in
his Account to any investment alternative or combination of alternatives.
4.04 Restrictions on Changes.
The Plan Administrator may, in its sole discretion, establish
restrictions, limitations or prohibitions with respect to changes in
investment elections, or transfers, permitted under the Plan. Any such
restrictions, limitations, or prohibitions which may apply to elections
related to, or transfers among, any or all investment funds maintained under
the Plan, shall be communicated in advance of their applicability to Plan
Participants, and shall apply in a non-discriminatory manner to all
Participants in similar circumstances.
4.05 Allocation of Contributions.
The Plan Administrator shall allocate Contributions to the Account of
each Participant as frequently as is administratively feasible.
4.06 Valuation of Assets.
As of each Valuation Date, the assets of the Trust shall be valued at
fair market value, and any gains or losses shall be allocated to the same
investment alternatives in which they arose.
4.07 Voting of Shares.
If a Participant's Account is invested in Common Stock, before each
annual or special meeting of shareholders of the Company, the Company shall
cause the Trustee to send to each Participant whose Account is invested in
Common Stock, a copy of the proxy solicitation material therefor, together
with a form providing confidential instructions to the Trustee on how to vote
the shares of Common Stock held within the Participant's Account. Upon
receipt of such instructions in conformance with said proxy solicitation
material, the Trustee shall vote the shares of Common Stock as instructed.
Instructions received from individual Participants by the Trustee shall be
held in strictest confidence and shall not be divulged or released to any
person, including officers or Employees of an Employer. The Trustees shall
vote the shares of Common Stock for which no instructions have been received
in the same proportion as the shares for which instructions have been
received.
4.08 Tender Offer Procedure.
In the event an offer is received by the Trustee (including, but not
limited to, a tender offer or exchange offer) to purchase any shares of Common
Stock held by the Trustee in the Trust, the Company shall cause the Trustee to
send to each Participant whose Account is invested in Common Stock such
information as will be distributed to shareholders of the Company in
connection with such offer, and to notify each Participant in writing of the
number of shares of Common Stock which are then credited to such Participant's
Account. The Trustee shall provide to each Participant a form requesting
confidential directions as to the manner in which the Trustee is to respond to
the offer with respect to shares of Common Stock allocated to such
Participant's Account. Upon timely receipt of such directions, the Trustee
shall respond as directed with respect to the tender or exchange of such
shares. Instructions received from individual Participants by the Trustee
shall be held in the strictest confidence and shall not be divulged or
released to any person, including officers or Employees of an Employer. The
Trustee shall not tender or exchange shares of Common Stock allocated to a
Participant's Account for which the Trustee has not received directions from
the Participant.
A Participant who has directed the Trustee to tender or exchange shares
of Common Stock allocated to such Participant's Account may, at any time prior
to the offer withdrawal date, direct the Trustee to withdraw such shares from
the offer prior to the withdrawal deadline, in which case the Trustee shall
carry out such directive.
In the event that shares of Common Stock held in a Participant's Account
are tendered or exchanged pursuant to this Section 4.08, the proceeds received
upon the acceptance of such tender or exchange shall be credited to such
Participant's Account, and shall be invested in the manner determined by the
Company or as otherwise provided in the Plan.
4.09 ERISA Section 404(c) Plan.
The Plan is intended to constitute a plan described in Section 404(c) of
ERISA and shall be administered in accordance with such intent. Beginning
with the Plan Year commencing January 1, 1994, the Plan shall be administered
in compliance with Department of Labor Regulations Section 2550.440c-1.
4.10 Confidentiality.
Information relating to the purchase, holding, and sale of Common Stock
in a Participant's Account and the exercise of voting, tender, and similar
rights with respect to such stock by Participants and their beneficiaries
shall be maintained in accordance with such procedures as the Administrator
shall establish designed to safeguard the confidentiality of such information,
except to the extent necessary to comply with Federal laws or state laws not
preempted by ERISA.
4.11 Fiduciary Designation.
Effective for Plan Years commencing on or after January 1, 1994, the
Administrator is designated as the Plan fiduciary responsible for ensuring
that the procedures implemented pursuant to Section 4.10 are sufficient to
safeguard the confidentiality of information described in that Section, that
such procedures are being followed, and that an independent fiduciary is
appointed to carry out activities which the Administrator determines involve a
potential for undue influence by any Employer upon Participants and
beneficiaries with regard to the direct or indirect exercise of shareholder
rights with respect to Common Stock. A Participant who gives instructions to
the Trustee pursuant to Sections 4.07 and 4.08 shall be deemed to be acting as
a "named fiduciary", as such term is defined in Section 402(a)(1) of ERISA.
ARTICLE V - RETIREMENT BENEFITS
5.01 Normal Retirement Benefit.
A Normal Retirement Benefit shall be payable to any Participant upon his
Normal Retirement, unless such Participant has elected to receive a Deferred
Retirement Benefit. Payment of the Normal Retirement Benefit shall commence
no later than 60 days following the last day of the Plan Year in which his
Normal Retirement Date occurs.
5.02 Deferred Retirement Benefit.
If a Participant so elects in writing to defer his receipt of benefits
until some date or event after his Normal Retirement Date, a Deferred
Retirement Benefit shall be payable to the Participant upon the occurrence of
such date or event.
5.03 Disability Retirement Benefit.
A Disability Retirement Benefit (collectively with Normal Retirement
Benefits and Deferred Retirement Benefits "Retirement Benefits") shall be
payable to any Participant who has suffered a Disability and who retires from
service of the Employer by reason of such Disability, Payment shall commence
no later than sixty (60) days following the last day of the Plan Year in which
such retirement occurs.
5.04 Payment of Benefits.
If, at the time a Retirement Benefit is payable, the total value of a
Participant's Vested Account Balance is less than $3,500, the Administrator
may direct the Trustee to distribute the Participant's Retirement Benefit in a
single lump sum, without any requirement for such Participant's consent.
For Active Participants, benefit payments as mandated by Code Section
401(a)(9) shall not commence later than the April 1st following the calendar
year in which the Participant attains age 70 or such later date as permitted
under the Code, unless the Participant was (i) over age 70 before January 1,
1988 and was not a 5% owner of the Employer during the Plan Year ending within
the calendar year in which the Participant attained age 66, or any subsequent
year, or (ii) the Participant made a designation under Section 242(b)(2) of
the Tax Equity and Fiscal Responsibility Act of 1982, in which event benefit
payments may commence after the April 1st following the calendar year in which
the Participant reaches age 70 but as soon after the Participant terminates
employment as is practical. All distributions required under this Section
shall be determined and made in accordance with the proposed or, if
applicable, final Treasury Regulations under Code Section 401(a)(9), including
the minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed or final Treasury Regulations.
If, at the time a Retirement Benefit is payable, the total value of a
Participant's Vested Account Balance is equal to or greater than $3,500, the
amount of his Vested Account Balance shall be paid in a lump sum, unless the
Participant elects in writing to receive Installment Payments, a Life
Annuity, or a Joint-and-Survivor Annuity, in which case payments shall be made
accordingly. No less than 30, and no more than 90. days before payment of the
Retirement Benefit of a Participant is due to commence, the Employer shall
explain to the Participant the material features of, and explain the relative
values of, a Joint-and-Survivor Annuity and other forms of benefits available
under the Plan. An election may be changed at any time by delivery of a
written change to the Administrator, up to the time the Administrator has
ordered payment of a Retirement Benefit by the Trustee or has paid for the
purchase of an annuity described below.
5.05 Installment Payments
A Participant may elect to receive his entire Vested Account Balance in
up to ten approximately equal annual installments ("Installment Payments"), as
elected by the Participant. Until such time as his entire Vested Account
Balance has been distributed by such method, the Account will continue to
incur appreciation and depreciation, earnings, expenses, and similar
adjustments, and the amount of each subsequent installment will reflect a
proportional amount of such adjustments.
5.06 Joint-and-Survivor Annuity
A Participant may elect to receive an annuity, payable monthly,
quarterly, semi-annually, or annually at the Participant's option, of a level
annual amount for his lifetime, with a provision for continuation of no less
than fifty percent (50%), up to one hundred percent (100%), of such amount
payable to the Participant's spouse for the duration of the spouse's lifetime
after the death of the Participant (a "Joint-and-Survivor Annuity"). The
Administrator will purchase the Joint-and-Survivor Annuity from a legal
reserve life insurance company in the name of the Participant with the
lump-sum value of the Participant's Vested Account Balance. Payments of the
annuity shall commence as soon as practicable following the date of such
purchase (the "Annuity Starting Date")
5.07 Life Annuity.
A Participant who is not married at the time payment of his Retirement
Benefit is due to commence, or who has received a Spousal Consent or qualifies
within one of the exceptions from the requirement for a Spousal Consent set
forth in the following paragraph, may elect to receive an annuity, payable
quarterly, semi-annually, or annually at the Participant's election, of a
level annual amount for his lifetime (a "Life Annuity"). The Administrator
will purchase the Life Annuity from a legal reserve life insurance company in
the name of the Participant with the lump-sum value of the Participant's
Vested Account Balance, and payments shall commence on the Annuity Starting
Date.
If a Participant is married at the time payment of his Retirement
Benefit is due to commence, he must receive a Joint-and-Survivor Annuity, in
lieu of a Life Annuity, unless (a) the Participant is legally separated from
the spouse, by order of a court; (b) the Participant has been abandoned by the
spouse, in accordance with local law; (c) the spouse consents in writing to
the election of a Life Annuity, within the 90-day period ending on such
commencement date (a "Spousal Consent"); (d) if the spouse is not legally
competent to give consent, the legal guardian of the spouse, including the
Participant if the Participant is such legal guardian, gives such Spousal
Consent on behalf of the spouse; or (e) it is established to the satisfaction
of the Plan Administrator that Spousal Consent cannot be obtained because the
spouse cannot be located. A Spousal Consent must be witnessed by a notary
public or by a person so designated by the Plan Administrator. A Spousal
Consent shall be irrevocable. Purchase of a Life Annuity on behalf of a
Participant in reliance upon information submitted by or on behalf of the
Participant, including a form of Spousal Consent, shall discharge the
responsibility of the Employer, the Plan Administrator, and the Trustees.
5.08 Additional Allocations on Retirement.
Any allocation for a Participant, made as of a Valuation Date subsequent
to the date of his retirement shall be paid to such Participant, or his
Beneficiary, as soon after such Valuation Date as is practical.
5.09 Crediting of Investment Earnings.
Investment earnings shall be credited to a Participant's Account through
the Valuation Date coincident with or last preceding the date that
distribution of the Account is made. No earnings shall be credited after such
Valuation Date.
5.10 Common Stock.
A Participant may elect to have the portion, if any, of his Vested
Account Balance attributable to a fund invested in Common Stock distributed
all in cash or all in kind or in a combination thereof. In the case of an
in-kind distribution, the value of fractional shares shall be paid in cash.
ARTICLE VI - DEATH BENEFITS
6.01 Death Benefits.
In the event of the death of a Participant who has not yet received
payment of his Vested Account Balance, the Vested Account Balance shall be
paid to his Beneficiary in a single lump sum. Any payment under this Section
shall be paid as soon as practicable at the Beneficiary's election and no
later than five years after the Participant's death. The distribution shall
be equal to the Participant's Vested Account Balance as of the Valuation Date
coincident with or immediately preceding the date of payment.
6.02 Additional Allocations on Death.
Any allocation for a Participant, made as of a Valuation Date subsequent
to the date of his death, shall be paid to such Participant's Beneficiary as
soon after such Valuation Date as is practical.
6.03 Beneficiary Designation.
"Beneficiary" shall mean the person or persons designated to receive any
death benefits which may become payable under the Plan, and shall include any
contingent beneficiary.
If a Participant has a qualified spouse, then such spouse shall
automatically be the Beneficiary eligible to receive the Account of the
Participant pursuant to the Participant's death, unless the Participant names
an alternate Beneficiary, and the qualified spouse has given a Spousal Consent
to the Participant's naming of an alternate Beneficiary, which consent must
acknowledge the effect of such designation. For purposes of this paragraph, a
qualified spouse is a spouse to whom the Participant is married at the date of
death and to whom the Participant has been married for at least one year.
Each Participant shall have the right by written notice to the Plan
Administrator, in the form prescribed by the Plan Administrator, to designate,
and from time to time to change the designation of, one or more Beneficiaries
and contingent Beneficiaries to receive any benefit which may become payable
under the Plan pursuant to his death, provided his qualified spouse, if any,
consents to the designation of an alternate Beneficiary as set forth in the
preceding sentence. A qualified spouse may also expressly permit a
Participant to subsequently change an alternative Beneficiary designation
without any further Spousal Consent.
If it is established to the satisfaction of the Plan Administrator that
there is no qualified spouse or that such spouse cannot be located, an
alternative Beneficiary designation will be deemed a proper election without
any Spousal Consent.
Any consent by a qualified spouse obtained under this provision (or
establishment that the consent of a qualified spouse may not be obtained)
shall be effective only with respect to such spouse. A consent that permits
designations by the Participant without any requirement of further consent by
the qualified spouse must acknowledge that such spouse has the right to limit
consent to a specific beneficiary, and a specific form of benefit where
applicable, and that the spouse voluntarily elects to relinquish either or
both of such rights. A revocation of a prior beneficiary designation may be
made by a Participant without the consent of the qualified spouse at any time
before the commencement of benefits. The number of revocations shall not be
limited.
In the event that a Participant who does not have a qualified spouse as
described above fails to designate a Beneficiary to receive a benefit under
the Plan that becomes payable pursuant to his death, or in the event that the
Participant is pre-deceased by all automatic or designated primary and
contingent beneficiaries, the death benefit shall be payable to the
Participant's estate.
ARTICLE VII - VESTING AND SEPARATION FROM SERVICE
7.01 Vesting of Accounts.
A Participant shall at all times be fully (100%) vested in his Salary
Deferral Contribution Account, After-Tax Contribution Account, and Rollover
Contribution Account, and in any restoration contributions made pursuant to
Section 7.03.
A Participant shall be vested in his Matching Employer Contribution
Account and his Discretionary Employer Contribution Account based on his Years
of Service in accordance with the following table:
Years of Service Vesting Percentage
Less than 2 0%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
Notwithstanding the foregoing, an Active Participant shall be fully
(100%) vested in his entire Account at his Normal Retirement Date, the date of
his retirement due to Disability, or the date of his death.
Notwithstanding the foregoing, where government regulations, including
the Federal Procurement Regulations and agency supplemental procurement
regulations, or contracts issued by government agencies require, for
Participants who are subject to such regulation or contract, that so much of
the Participant's Account as is attributable to a period of service when the
Participant is performing a government contract shall be 100% vested for any
such Participant who has completed one Year of Service, then each such
Participant shall be 100% vested in that portion of his Account attributable
to contributions for the period during which he is subject to such regulation
or contract, upon completion of one Year of Service. However, if for any Plan
Year the application of the preceding sentence would result in discrimination
in favor of Highly-Paid Employees in violation of Code Section 401(a)(4), then
for such Plan Year the preceding sentence shall not apply to any such
Highly-Paid Employee.
7.02 Payment of Benefits to Terminated Participants.
An Active Participant who is vested in any portion of his Account and
terminates employment prior to his Normal Retirement Date shall be deemed a
Terminated Vested Participant. Payment of his Vested Account Balance shall be
made in a single lump sum no later than sixty (60) days following the
Valuation Date coincident with or next following the Participant's Normal
Retirement Date. However, any such Participant may elect in writing that
payment of his vested Account be made as of any Valuation Date coincident with
or following the date of his termination of employment, provided that he makes
such election on or before the applicable Valuation Date.
A Terminated Vested Participant's Account shall continue to be credited
with investment earnings through the last Valuation Date coincident with or
immediately preceding the date that payment of the Account is made. No
earnings shall be credited after such Valuation Date.
If, after a Participant terminates employment, the total value of his
Vested Account Balance is $3,500 or less, the Administrator may direct the
Trustee to cash-out the Participant's entire Vested Account Balance in a
single lump sum after the Valuation Date coincident with or following the date
of his or her termination of employment, without any requirement for such
Participant's consent. and regardless of any election to the contrary by the
Participant
7.03 Re-employment After Distribution and Restoration of Contributions.
Any former Participant who once again qualifies as an Active Participant
and who has received a distribution of any portion of his Account attributable
to his prior participation in this Plan may restore to the Trustee the full
amount of the distribution he previously received which was derived from
Employer Contributions. In order to reinstate his full Matching or
Discretionary Employer Contribution Account, a re-employed Participant must
repay the full amount of the distribution from such Accounts prior to the
earlier of (i) the fifth anniversary of the date such participant is
re-employed or (ii) five consecutive twelve-month Breaks-in-Service after the
date of distribution. Any Participant who fails to make his restoration
contribution within such time period shall waive his right to the portion of
his Account which was not vested when he received his distribution.
ARTICLE VIII - WITHDRAWALS AND LOANS
8.01 Withdrawals While Employed.
In-service withdrawals may be made by Active or Inactive Participants,
but not by Terminated Vested Participants, upon 15 days' written notice, as
permitted below, but not more frequently than once per calendar month, in the
following order:
(a) A Participant may withdraw all or any portion of his After-Tax
Contribution Account as follows. Such withdrawal shall come first from
After-Tax Contributions made prior to January 1, 1987. Next, such withdrawal
shall be allocated proportionately between the Participant's After-Tax
Contributions made after December 31, 1986 and the investment earnings on such
contributions. A Participant may then withdraw the investment earnings on his
After-Tax Contributions made prior to January 1, 1987.
(b) After a Participant has withdrawn all of his After-Tax
Contributions Account, if any, he may withdraw all or any portion of so much
of his vested Matching Employer Contribution Account, Rollover Contribution
Account, and/or vested Employer Discretionary Contribution Account as has been
in such Account(s) for a period of at least two years.
(c) A Participant may withdraw all or any portion of (i) his Salary
Deferral Contribution Account for any reason after he has attained Age 59 and
prior to Age 59 solely in the event of a financial hardship and then solely to
the extent required to satisfy the hardship. The amount that may be
distributed due to a hardship may include the amount necessary to pay income
taxes or penalties resulting from the distribution. Such hardship must be an
immediate and heavy financial need of the Participant where such Participant
lacks other available resources. Expenses in connection with a death in a
Participant's immediate family would constitute such an immediate and heavy
financial need and the following conditions would automatically be deemed an
immediate and heavy financial need:
(i) medical expenses as described under Code Section 213(d)
incurred by the Participant, his spouse, or his dependents or obtainment of
medical care if the withdrawal is necessary for such persons to obtain medical
care;
(ii) costs directly related to the purchase of a primary
residence (excluding mortgage payments);
(iii) payment of tuition or related educational fees for the next
twelve months of post-secondary education for the Employee, his spouse, or his
dependents;
(iv) payment to prevent eviction of the Participant from a
primary residence or foreclosure of mortgage on his primary residence; and
(v) any other occurrence as authorized by Treasury Regulations,
Rulings, Notices, and other documents of general applicability.
A Participant must submit a written certification on the form prescribed
by the Plan Administrator that the hardship distribution is necessary to
satisfy an immediate and heavy financial need. The written certification must
indicate that the need cannot reasonably be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the employee's
assets, by cessation of Salary Deferral Contributions or After Tax
Contributions (if applicable) under the Plan, by other distributions or
nontaxable loans from plans maintained by the Employer or any other employer,
or by borrowing from commercial sources on reasonable commercial terms in an
amount sufficient to satisfy the need. The Employer must not have actual
knowledge to the contrary that the need cannot reasonably be relieved as
described above.
A Participant may not withdraw any investment earnings included in his
Salary Deferral Contribution Account which were accumulated after December 31,
1988, or any Qualified Non-elective Contributions (including investment
earnings), unless he has attained Age 59.
A Participant may not withdraw any portion of his Matching Employer
Contribution Account, except as set forth in (b) above, or his Discretionary
Employer Contribution Account for any reason prior to his retirement or other
termination of employment.
In no event will any hardship withdrawal of Salary Deferral
Contributions be granted until any applicable distributions and loans have
been taken from this Plan and from all other qualified retirement plans of the
Employer.
Upon a withdrawal for financial hardship, the Participant's Salary
Deferral Contributions shall be suspended for a minimum period of twelve
months, and the Participant shall not, for such period, be permitted to make
any elective contribution to any qualified or non-qualified deferred
compensation plan of the Employer, including any defined benefit retirement
plan or any stock option, stock purchase, or similar plan, but not including
contributions to a health or welfare benefit plan.. In addition, for the
taxable year following the year in which such a withdrawal is made, the
Participant's elective contributions to this and all other contributory plans
maintained by the Company, if any, shall be subject to the applicable limit
under Code Section 402(g) for that year minus the Participant's elective
contributions for the year of the hardship withdrawal.
8.02 Loans.
(a) Loans to Active or Inactive Participants, but not Vested
Terminated Participants, from their Accounts in amounts of not less than
$1,000 shall be allowed upon 15 days' written notice. No more than two Plan
loans may be outstanding to each Participant at any time.
(b) No Participant shall, under any circumstances, be entitled to
loans in excess of the lesser of (i) 50% of his Vested Account Balance,
excluding any portion thereof held in the form of Common Stock and excluding
the amount of his After-Tax Contribution Account, as of the Valuation Date
coincident with or immediately preceding the date on which the loan is made,
and (ii) $50,000 less the highest outstanding loan balance over the 12-month
period immediately preceding the issuance of the loan. For purposes of this
paragraph, all outstanding loans to a Participant under this Plan or any other
qualified retirement plan of the Employer shall be aggregated.
(c) Any loan to a Participant shall be evidenced by the Participant's
promissory note and secured by the pledge of the Participant's Account in the
Trust Fund and by the pledge of such further collateral as the Trustee deems
necessary or desirable to assure repayment of the borrowed amount and all
interest payable thereon in accordance with the terms of the loan.
(d) Interest shall be charged at an annual rate equal to the prime
interest rate in effect as of the date the loan is processed, plus one percent
(1%). The rate may be revised from time to time, but no more frequently than
quarterly. The Administrator shall have sole discretion in determining the
interest rate, and its decision shall be final and binding. Principal
repayments and interest payments shall be credited to the Account of the
Participant to whom the loan was made.
(e) Loans shall be for such term as the Participant elects, except
that loans shall not be for a period of less than one year or in excess of
five years unless they are made for the purposes of purchasing the primary
residence of the Participant. In no event shall a loan be for a period in
excess of 30 years or such longer period of time as established by the
Administrator to be used on a uniform and non-discriminatory basis.
(f) Loans shall be repaid in approximately level installments made no
less frequently than quarterly. The Plan Administrator may require that loans
be repaid by payroll deduction or any other convenient manner. The manner and
frequency of payment shall be determined by the Plan Administrator.
(g) If not previously repaid in full, the unpaid portion of any
outstanding loans (including interest thereon) shall be deducted at the time
of a distribution due to retirement, death, disability, or other termination
of employment, from the amount of the Account otherwise available to pay or
purchase any benefit to which a Participant (or his beneficiary) is entitled
under this Plan, and any other security pledge shall be sold as soon as is
practicable after such default by the Trustee at private or public sale. The
proceeds of such sale shall be applied first to pay the expenses of conducting
the sale, including reasonable attorney's fees, and then to pay any sums due
from the borrower to the Trust Fund, with such payment to be applied first to
accrued interest and then to principal. The Participant shall remain liable
for any deficiency, and any surplus remaining shall be paid to the
Participant.
(h) If a required periodic payment is not made within 60 days of the
date it was due, this shall be deemed a default, but foreclosure on the note
and attachment of security will not occur until a distributable event occurs
in the Plan.
ARTICLE IX - ADMINISTRATION
9.01 Plan Administrator.
The Plan shall be administered by the Company in accordance with its
provisions and for purposes of such Plan administration the Company is hereby
deemed to be Plan Administrator within the meaning of ERISA. All aspects of
Plan administration shall be the responsibility of the Plan Administrator,
except those specifically delegated to the Trustees or other parties in
accordance with provisions of the Plan or Trust Agreement.
9.02 Administrative Procedures.
The Administrator shall have discretionary authority based on a
reasonable interpretation of the Plan to determine the eligibility for
benefits and the benefits payable under the Plan, and shall have discretionary
authority to construe all terms of the Plan, including uncertain terms, to
determine questions of fact and law arising under the Plan and make such rules
as may be necessary for the administration of the Plan. Any determination by
the Plan Administrator shall be given deference in the event it is subject to
judicial review, and shall be overturned only if it is arbitrary and
capricious or an abuse of discretion. The Administrator may require
Participants to apply in writing for benefits hereunder and to furnish
satisfactory evidence of their date of birth and such other information as may
from time to time be deemed necessary.
The Plan Administrator shall appoint such Trustees, investment managers,
or other professional advisors as the Administrator, in its sole discretion,
deems necessary or appropriate.
9.03 Other Plan Administrator.
Anything to the contrary notwithstanding, the Company may appoint a
committee or an individual or individuals, whether or not employed by an
Employer, to carry out any of the duties of the Plan Administrator. Such
duties may include, but are not limited to, determining the eligibility of any
Employee for any benefits and the amount of such benefits under the Plan,
maintaining custody of all documents and elections made by an Employee,
directing the investment of any payment made by an Employer within any limits
which may be imposed by the Employer, and retaining suitable agents and
advisors. Any committee or individual shall be considered an agent of the
Employer with respect to the Plan and shall be indemnified by the Employer
against any and all claims, losses, damages, expenses, and liabilities arising
from any action or failure to act, except when the same is determined to be
due to the gross negligence or willful misconduct of such individual or a
member of a committee.
9.04 Claims Procedures.
(a) If a Participant or Beneficiary (hereinafter referred to as
"Claimant") is denied any vested benefits under this Plan, either partially or
in total, the Plan Administrator shall advise the Claimant of the method of
computation of his benefit, if any, and the specific reason for the denial.
The Administrator shall also furnish the Claimant at that time with:
(i) a specific reference to pertinent Plan provisions,
(ii) a description of any additional material or
information necessary for the Claimant to perfect his claim, if possible, and
an explanation of why such material or information is needed, and
(iii) an explanation of the Plan's claim review procedure.
(b) Within 60 days of receipt of the information stated in (a) above,
the Claimant shall, if he desires further review, file a written request for
reconsideration with the Administrator.
(c) So long as the Claimant's request for review is pending (including
the 60 day period in (b) above), the Claimant or his duly authorized
representative may review pertinent Plan documents and may submit issues and
comments in writing to the Administrator.
(d) A final and binding decision shall be made by the Administrator
within 60 days of the filing by the Claimant of his request for
reconsideration, provided, however, that if the Administrator, in its
discretion, determines that a hearing with the Claimant or his representative
present is necessary or desirable, this period shall be extended an additional
60 days.
(e) The Administrator's decision shall be conveyed to the Claimant in
writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the Claimant, with specific references
to the pertinent Plan provisions on which the decision is based.
9.05 Expenses.
Expenses incidental to loans shall be paid by the borrower. Brokerage
fees attributable to individually directed transactions may be charged to the
Account of the Participant directing such transaction. Other expenses of the
Plan shall be paid from the Trust Fund unless the Employer elects to pay such
expenses.
ARTICLE X - AMENDMENT, TERMINATION, AND MERGERS
10.01 Amendment.
The provisions of this Plan may be amended at any time and from time to
time by action of the Board of Directors; provided, however, that:
(a) no amendment shall increase the duties or liabilities of the Plan
Administrator or of the Trustee without the consent of such party;
(b) no amendment shall deprive any Participant or beneficiary of a
deceased Participant of any of the benefits to which he is entitled under this
Plan with respect to contributions previously made, nor shall any amendment
decrease the balance in any Participant's Account. For purposes of this
paragraph, a plan amendment which has the effect of decreasing the balance of
a Participant's Account or eliminating an optional form of benefit with
respect to benefits attributable to service before the amendment shall be
treated as reducing an accrued benefit;
(c) no amendment shall provide for the use of funds or assets held to
provide benefits under this Plan other than for the benefit of Employees and
their beneficiaries or provide that funds may revert to the Employer except as
permitted by law; and
(d) no amendment may change the vesting schedule with respect to any
Participant, unless each Participant with three or more Years of Service is
permitted to elect to have the vesting schedule which was in effect before the
amendment used to determine his vested benefit. 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; or
(iii) 60 days after the Participant is issued written notice of
the amendment by the Board of Directors.
In the case of an Employee who is a Participant as of the later of the
date such amendment is adopted or the date it becomes effective, the
non-forfeitable percentage (determined as of such date) of such Employee's
right to his Employer-derived accrued benefit will not be less than his
percentage computed under the Plan without regard to such amendment.
Each amendment shall be approved by the Board of Directors by resolution
and shall be filed with the Trustee.
10.02 Plan Termination.
(a) Right Reserved. While it is the Company's intention to continue
the Plan indefinitely, the right is, nevertheless, reserved to terminate the
Plan in whole or in part by action of the Board of Directors. Termination or
partial termination of the Plan shall result in full and immediate vesting of
each affected Participant in his entire Account, and there shall not
thereafter be any forfeitures with respect to any Participant for any reason.
Notwithstanding any other provision of this Plan, complete or partial
termination of the Plan shall not be conditioned solely upon any resolution or
other action of the Company, the Board of Directors or any other party.
(b) Effect on Retired Persons, etc. Termination of the Plan shall
have no effect upon payment of benefits due to former Participants, their
beneficiaries, and their estates. The Trustee shall retain sufficient assets
to complete any such payments due and shall have the right, including the
right to accelerate Installment Payments without the consent of the
Participant, upon direction by the Employer, to make such payments as of the
effective date of the Plan termination.
(c) Effect on Remaining Participants, etc. The Company shall instruct
the Trustees either (i) to continue to manage and administer the assets of the
Trust for the benefit of the Participants and their beneficiaries pursuant to
the terms and provisions of the Trust Agreement, or (ii) to pay over to each
Participant (and vested former Participant) the value of his Vested Account
Balance, and to thereupon dissolve the Trust.
Upon termination of this Plan, if the Company or any entity within the
same controlled group as the employer does not maintain another defined
contribution plan (other than an employer stock ownership plan as defined in
Section 4975(e)(7) of the Code), the Participant's Account may, without the
Participant's consent, be distributed to the Participant. However, if any
entity within the same controlled group as the Employer maintains another
defined contribution plan (other than an employer stock ownership plan as
defined in Section 4975(e)(7) of the Code), then the Participant's Account
will be transferred, without the Participant's consent, to the other plan if
She Participant does not consent to an immediate distribution.
10.03 Permanent Discontinuance of Employer Contributions
While it is the Company's intention to make substantial and recurrent
contributions to the Trust Fund pursuant to the provisions of this Plan, the
right is, nevertheless, reserved to at any time permanently discontinue
Employer contributions. Such permanent discontinuance shall be established by
resolution of the Board of Directors and shall have the effect of a
termination of the Plan, except that the Trustee shall not have authority to
dissolve the Trust Fund except upon adoption of a further resolution by the
Board of Directors to the effect that the Plan is terminated and upon receipt
from the Company of instructions to dissolve the Trust Fund pursuant to
Section 10.02(c).
10.04 Suspension of Employer Contributions.
The Employer shall have the right at any time, and from time to time, to
suspend Employer contributions to the Trust Fund pursuant to this Plan. Such
suspension shall have no effect on the operation of the Plan unless the Board
of Directors determines by resolution that such suspension shall be permanent.
A permanent discontinuance of contributions will be deemed to have occurred as
of the date of such resolution or such earlier date as is therein specified.
10.05 Mergers and Consolidations of Plans.
In the event of any merger or consolidation with, or transfer of assets
or liabilities to, any other plan, each Participant shall have a benefit in
the surviving or transferee plan (determined as if such plan were then
terminated immediately after such merger, etc.) that is equal to or greater
than the benefit he would have been entitled to receive immediately before
such merger, etc., in the Plan in which he was then a Participant (had such
Plan been terminated at that time). For the purposes hereof, former
Participants and beneficiaries shall be considered Participants.
10.06 Former Participants in Merged Plans
Notwithstanding any other provision of this Plan, in the case of a
Participant who was a participant in a Merged Plan, such Participant shall be
entitled to all benefits as to contributions made to such Merged Plan,
including all forms of benefits to which he was entitled under the Merged Plan
and all credit for Service toward vesting of Accounts, and the Plan
Administrator is authorized to make such interpretations and such exceptions,
on a non-discriminatory basis, as will prevent such merger from decreasing the
benefits due to any such Participant which are attributable to the time of his
participation in the Merged Plan.
ARTICLE XI - MISCELLANEOUS PROVISIONS
11.01 Non-Alienation of Benefits.
None of the payments, benefits, or rights of any Participant or
beneficiary shall be subject to any claim of any creditor, and in particular,
to the fullest extent permitted by law, all such payments, benefits, and
rights shall be free from attachment, garnishment, trustee's process, or any
other legal or equitable process available to any creditor of such Participant
or beneficiary. Notwithstanding the foregoing, the Plan Administrator shall
assign or recognize an alternate payee with respect to all or a portion of a
Participant's benefit, as may be required in accordance with a QDRO. The
Administrator shall develop such guidelines and procedures as it deems
appropriate to determine, in accordance with Section 414 of the Code, and
regulations issued pursuant thereto, whether, and in what manner, to comply
with any document it receives which is intended to be a QDRO. No Participant
or beneficiary shall have the right to alienate, anticipate, commute, pledge,
encumber, or assign any of the benefits or payments which he may expect to
receive, contingently or otherwise, under this Plan, except the right to
designate a beneficiary or beneficiaries as hereinbefore provided.
11.02 No Contract of Employment.
Neither the establishment of the Plan, nor any modification thereof, nor
the creation of any fund, trust, or account, nor the payment of any benefits
shall be construed as giving any Participant or Employee, or any person
whomsoever, the right to be retained in the service of the Employer, and all
Participants and other Employees shall remain subject to discharge to the same
extent as if the Plan had never been adopted.
11.03 Severability of Provisions.
If any provision of this Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provisions
had not been included.
11.04 Heirs, Assigns, and Personal Representatives.
This Plan shall be binding upon the heirs, executors, administrators,
successors, and assigns of the parties, including each Participant and
beneficiary, present and future.
11.05 Headings and Captions.
The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
11.06 Gender and Number.
Except where otherwise clearly indicated by context, the masculine and
the neuter shall include the feminine and the neuter, the singular shall
include the plural, and vice-versa.
11.07 Funding Policy.
The Plan Administrator, in consultation with the Company, shall
establish and communicate to the Trustees a funding policy consistent with the
objectives of this Plan and of the corresponding Trust. Such policy shall
reflect due regard for the emerging liquidity needs of the Trust. Such
funding policy shall also state the general investment objectives of the Trust
and the philosophy upon which maintenance of the Plan is based.
11.08 Title to Assets.
No Participant or Beneficiary shall have any right to, or interest in,
any assets of the Trust Fund upon termination of his employment or otherwise,
except as provided from time to time under this Plan, and then only to the
extent of the benefits payable under the Plan to such Participant out of the
assets of the Trust Fund. All payments of benefits as provided for in this
Plan shall be made from the assets of the Trust Fund, and neither the Employer
nor any other person shall be liable therefor in any manner.
11.09 Payment to Minors, etc.
Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such payment shall fully
discharge the Trustees, the Plan Administrator, the Employer and all other
parties with respect thereto.
11.10 Situs.
This Plan shall, to the extent not pre-empted by ERISA or other Federal
law, be construed according to the laws of the Commonwealth of Virginia, where
such state statutes may be applicable to an employee benefit plan.
ARTICLE XII - TOP-HEAVY PROVISIONS
12.01 Top-Heavy Plan.
For any Plan Year commencing in 1984 or thereafter, the Plan shall be a
Top-Heavy Plan, as such term is defined under Section 416 of the Internal
Revenue Code, if the Value of Accumulated Benefits for Key Employees under all
Aggregated Plans exceeds 60% of the Value of Accumulated Benefits for all
Group Participants under all Aggregated Plans, determined as of the
Determination Date immediately preceding such Plan Year. If the Plan is a
Top-Heavy Plan for a Plan Year and, as of the Determination Date immediately
preceding such Plan Year, the Value of Accumulated Benefits for Key Employees
under all Aggregated Plans exceeds 90% of the Value of Accumulated Benefits
for all Group Participants under all Aggregated Plans, then the Plan shall be
a Super Top-Heavy Plan for such Plan Year. For such purposes, the terms "Key
Employees" and "Group Participants" shall include all persons who are or were
Key Employees or Group Participants during the Plan Year ending on such
Determination Date or during any of the four (4) immediately preceding Plan
Years.
The value of Accounts and the present value of accrued benefits will be
determined as of the most recent Valuation Date that falls within or ends with
the 12-month period ending on the Determination Date, except as provided in
Section 416 of the Code for the first and second plan years of a defined
benefit plan. The Accounts and accrued benefits of a Participant (1) who is
not a Key Employee but who was a Key Employee in a prior year, or (2) who has
not been credited with at least one Hour of Service with any Employer
maintaining the Plan at any time during the 5-year period ending on the
Determination Date will be disregarded. The calculation of the top-heavy
ratio, and the extent to which distributions, rollovers, and transfers are
taken into account will be made in accordance with Section 416 of the Code.
Deductible employee contributions will not be taken into account for purposes
of computing the top-heavy ratio. When aggregating plans the value of
Accounts 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 Employer, or (b) if
there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of Section
411(b)(1)(c) of the Code.
For purposes of this Article, the following definitions shall apply in
addition to those set forth in Article I:
"Affiliated Employer Group" shall mean the Employer and each other
employer which must be aggregated with the Employer for purposes of Sections
414(b), 414(c) or 414(m) of the Code.
"Aggregated Plans" shall mean (i) all plans of the Employer or an
Affiliated Employer Group which are required to be aggregated with the Plan,
and (ii) all plans of the Employer or an Affiliated Employer Group which are
permitted to be aggregated with the Plan and which the Plan Administrator
elects to aggregate with the Plan, for purposes of determining whether the
Plan is a Top-Heavy Plan. A plan shall be required to be aggregated with the
Plan if such plan includes as a participant a Key Employee (and the
beneficiary of such employee) or if such plan enables any plan of the Employer
or of a member of the Affiliated Employer Group in which a Key Employee
participates to qualify under Section 401(a)(4) or Section 410 of the Code. A
plan of the Employer or the Affiliated Employer Group shall be permitted to be
aggregated with the Plan if such plan satisfies the requirements of Sections
401(a)(4) and 410 of the Code, when considered together with the Plan and all
plans which are required to be aggregated with the Plan. No plan shall be
aggregated with the Plan unless it is a qualified plan under Section 401 of
the Code. The required aggregation group shall include plans terminated
within the five year period ending on the Determination Date.
"Annual compensation" shall mean 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 excludable from the
Employee's gross income under Section 125, Section 402(a)(8), Section 402(h)
or Section 403(b) of the Code.
"Determination Date" shall mean the date as of which it is determined
whether a plan is a Top-Heavy Plan or Super Top-Heavy Plan for the Plan Year
immediately following such Determination Date. The Determination Date for the
Plan shall be:
(a) in the case of a defined benefit plan, the date as of which the
actuarial valuation of the Plan, as used for determination of minimum funding
standards under Section 412 of the Code, is performed; and
(b) in the case of a defined contribution plan, the last day of the
Plan Year.
"Group Participant" shall mean anyone who is or was a participant in any
plan included in the Aggregated Plans during the Plan Year which includes the
Determination Date or any of the four (4) immediately preceding Plan Years,
and who received compensation from an Employer during the five (5) year period
ending on the Determination Date. Any beneficiary of a Group Participant who
has received, or is expected to receive, a benefit from a plan included in the
Aggregated Plans shall be considered a Group Participant solely for purposes
of determining whether the Plan is a Top-Heavy Plan or Super Top-Heavy Plan.
"Key Employee" shall mean any employee or former employee of the
Employer or of an Affiliated Employer Group who during the Plan Year which
includes the Determination Date, or during any of the four (4) Plan Years
immediately preceding such Plan Year, was:
(a) an officer of the Employer whose compensation is at least $45,000
(or such higher amount as is permitted in accordance with the Code); or
(b) a five percent (5%) owner of the Employer; or
(c) a one percent (1%) owner of the Employer whose total annual
compensation from the Affiliated Employer Group exceeds $150,000; or
(d) an employee whose compensation equals or exceeds $30,000 (or such
higher amount as may be defined under Section 415(c)(1)(A) of the Code), and
whose ownership interest in the Affiliated Employer Group is among the ten
largest.
In no event shall a partner of an employer be considered an officer
under paragraph(a) above. Further, the number of officers counted under (a)
above as of any Determination Date shall not exceed the lesser of:
(1) the greater of (i) ten percent (10%) of the total number of
employees of the Affiliated Employer Group, and (ii) three ; and
(2) 50.
If the application of the preceding paragraph results in a reduction in
the number of officers to be included as Key Employees, then individuals who
are officers shall be eliminated from the group of Key Employees beginning
with the individual who had the lowest one-year compensation in the five (5)
year period including the Plan Year which includes the Determination Date, and
the four (4) immediately preceding Plan Years, and eliminating each individual
with the next higher one-year compensation in such period, until the maximum
number of officers remain in the Key Employee group.
In addition, the beneficiary of a Key Employee shall be deemed to be a
Key Employee.
"Non-Key Employee" shall mean an Employee who is not a Key Employee. An
Employee who was a Key Employee in a previous Plan Year but who is no longer a
Key Employee in the current Plan Year, shall not be considered a Non-Key
Employee for the current Plan Year.
"Value of Accumulated Benefits" shall mean:
(a) In the case of a Group Participant or beneficiary covered under a
defined benefit plan, the sum of
(i) the present value of the accrued pension benefit (as such
term is defined under the applicable plan) of the Group Participant or
beneficiary determined as of the Determination Date using reasonable actuarial
assumptions as to interest and mortality, and taking into account any
non-proportional subsidies in accordance with regulations issued by the
Secretary of the Treasury; plus
(ii) the sum of any amounts distributed to the Group Participant
and his beneficiary during the plan year ending on the Determination Date and
during the four (4) immediately preceding plan years.
(b) In the case of a Group Participant or beneficiary covered under a
defined contribution plan, the sum of the accounts of the Group Participant or
beneficiary under the plan as of the plan's Determination Date derived from:
(i) employee contributions credited to such accounts and
investment earnings thereon; and
(ii) employer contributions credited to such accounts and
investment earnings thereon; and
(iii) rollover contributions made prior to January 1, 1984, and
investment earnings thereon; and
(iv) any contributions which would have been credited to such
accounts on or before the Determination Date, but which were waived as
provided under the Code and resulted in a funding deficiency; and
(v) any amount distributed from the accounts described in (i)
through (iv) above during the Plan Year ending on the Determination Date, and
the four (4) immediately preceding Plan Years.
If the Plan is determined to be a Top-Heavy Plan or Super Top-Heavy Plan
as of any Determination Date, then it shall be subject to the rules set forth
in the remainder of this Article for the Plan Year next following such
Determination Date. If, as of a subsequent Determination Date, the Plan is
determined to no longer be a Top-Heavy Plan or Super Top-Heavy Plan, then the
rules set forth in the remainder of this Article shall no longer apply, except
where expressly indicated otherwise. Notwithstanding the foregoing, if the
Plan changes from being a Super Top-Heavy Plan to a Top-Heavy Plan, the rules
applicable to a Top-Heavy Plan shall apply.
"Year of Super Top-Heavy Service" shall mean a Year of Service of a
Participant which commenced in a Plan Year during which the Plan was a Super
Top-Heavy Plan.
"Year of Top-Heavy Service" shall mean a Year of Service of a
Participant which commenced in a Plan Year during which the Plan was a
Top-Heavy Plan.
12.02 Minimum Contributions or Benefits.
For any Plan Year in which the Plan is a Top-Heavy Plan the minimum rate
of contributions and forfeitures allocated to the account of any Participant
shall be the lesser of:
(a) The highest rate of employer contributions and forfeitures
(determined as a percentage of compensation as defined under Section 415 of
the Code) allocated to the account of any Key Employee; and
(b) 3% of such compensation.
Notwithstanding the above paragraph, if a Participant is also a
participant in another defined contribution plan of the Affiliated Employer
Group, all or a portion of the minimum allocation described above may be
provided under such other plan and the minimum allocation provided under this
Plan shall be eliminated or reduced accordingly. If the Employee is a
Participant in one or more defined benefit plans of the Affiliated Employer
Group, all or a portion of the minimum required benefits or allocations under
Section 416 of the Code may be provided under such plans as set forth in
regulations issued by the Secretary of the Treasury, and the minimum
allocation provided in the preceding paragraph shall be eliminated or reduced
accordingly. Employer contributions resulting from a salary reduction
election by an Employee shall not be counted toward meeting the minimum
required allocations under this Section. Matching Employer Contributions may
be used to satisfy the minimum required allocations under this Section, if
such contributions are not counted under the ACP test described in Section
3.06.
Participants who are Non-Key Employees and who are not separated from
service as of the last day of the Plan Year, and who have (1) failed to
complete 1000 Hours of Service (or the equivalent), (2) declined to make
mandatory contributions to the Plan, or (3) been excluded from the Plan
because such individual's compensation is less than a stated amount, are
considered Participants solely for purposes of this Section.
The minimum allocation required (to the extent required to be
non-forfeitable under Section 416(b)) may not be forfeited under Section
411(a)(3)(B) or 411(a)(3)(D).
12.03 Adjustment to Maximum Benefits.
If the Plan is a Top-Heavy Plan for any Plan Year, then the maximum
benefit which can be provided under Section 3.10 shall be determined by
substituting "1.00" for "1.25" in the applicable fractions. However, if the
Plan is not a Super Top-Heavy Plan for such Plan Year, than the preceding
sentence shall not apply provided that "4%" (or such higher rate as is
required by Treasury Regulations) is substituted for "3%" in the first
paragraph of Section 12.02.
12.04 Minimum Vesting
If the Plan is determined to be a Top-Heavy Plan for any Plan Year, then
an Active Participant's vested interest in his Account determined as of the
first day of such Plan Year, and determined as of any future date while the
Plan continues to be a Top-Heavy Plan, shall be no less than as determined
under the following Table:
Years of Service Vesting Percentage
Less than 2 years None
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 years or more 100%
If the Plan subsequently is determined to no longer be a Top-Heavy Plan,
then the above minimum vesting schedule shall not apply to any portion of a
Participant's Account which is accrued after the first day of the first Plan
Year in which the Plan is no longer a Top-Heavy Plan, provided that the
Account for any Participant with three (3) or more Years of Service as the
first date as of which the Plan is no longer a Top-Heavy Plan shall continue
to be vested in accordance with a schedule not less than the minimum vesting
schedule applicable during the period that the Plan was a Top-Heavy Plan.
The minimum vesting schedule applies to all benefits within the meaning
of Section 411(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.
12.05 Discontinuance of Article.
In the event that the provisions of this Article are no longer required
to qualify the Plan under the Code, then this Article XII shall thereupon be
void without the necessity of further amendment of the Plan.
IN WITNESS WHEREOF, and as evidence of the adoption of the foregoing,
the Company has caused this instrument to be executed by a duly authorized
officer as of this 8th day of November, 1994.
DYNCORP
By: H. Montgomery Hougen
H. Montgomery Hougen
Vice President & Corporate Secretary
AMENDMENT NO. ONE
TO THE
DYNCORP SAVINGS AND RETIREMENT PLAN
The DynCorp Savings and Retirement Plan is hereby amended in the following
respects, effective as provided below:
(A) Section 1.01(f) is deleted in its entirety effective as of July 1, 1995.
(B) Section 1.07 of the Plan is amended, effective as of July 1, 1995, to
read in its entirety as follows:
"1.07
"Company Stock" or "Common Stock" means shares of common stock of the
Company."
(C)Section 1.07A is added to the Plan, effective as of July 1, 1995 to read in
its entirety as follows:
"1.07A "Company Stock Fund" means an investment fund primarily invested in
Company Stock.
(D) Section 1.10 is amended, effective as of January 1, 1995, to read in its
entirety as follows:
"1.10 "Contribution Percentage" shall mean the percentage determined by
dividing (i) the sum of the Salary Deferral Contribution, After-Tax
Contribution, Matching Employer Contribution, and any Qualified Non-elective
Contribution used to satisfy the non-discrimination requirements of Section
3.06 or any combination of such Contributions, whichever is applicable, made
by or on behalf of a Participant for the applicable period by (ii) his
compensation, as defined under Code Section 414(s), earned while eligible to
participate in the Plan. "ADP" shall sometimes be used herein to refer to the
average Contribution Percentage with respect to Salary Deferral Contributions
or amounts treated as Salary Deferral Contributions. "ACP" shall sometimes be
used herein to refer to the average Contribution Percentage with respect to
Matching Employer Contributions and After-Tax Contributions, if applicable."
(E) Section 1.16 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"1.16 "Entry Date" shall mean, prior to July 1, 1995, the first day of
each calendar month. On and after July 1, 1995, the term Entry Date shall
mean the first day of each payroll period."
(F) Section 1.20A is added to the Plan, effective as of July 1, 1995, to
read in its entirety as follows:
"1.20A "Internal Market" means an arrangement administered and maintained by
the Company whereby individuals desiring to sell Company Stock and individuals
desiring to purchase Company Stock who are designated by the Company as
eligible to participate in the arrangement may execute sales and purchases of
Company Stock at a price established by the Board of Directors."
(G) Section 1.22A is added to the Plan, effective as of July 1, 1995, to
read in its entirety as follows:
"1.22A "Non-Company Stock Investment Fund" means an investment fund
primarily invested in assets other than Company Stock."
(H) Section 1.26 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"1.26 "Plan" shall mean the DynCorp Savings and Retirement Plan as set
forth herein, and as the same may from time to time hereafter be amended. The
Plan is a "profit sharing plan" as described in regulations under Section
401(a) of the Code."
(I) Section 1.35 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"1.35 "Valuation Date" shall mean the last day of each Plan Year and
any other date as of which the Plan Administrator elects to make a valuation
of Plan Accounts. On and after July 1, 1995, the term Valuation Date shall
mean with respect to portions of Plan Accounts invested in the Company Stock
Fund, the last day of each calendar quarter and any other date as of which the
Plan Administrator elects to make a valuation of such portions of Plan
Accounts."
(J) Section 2.01 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"2.01 Initial Eligibility.
Each Eligible Employee who is a Participant immediately prior to the
effective date of this amended and restated Plan shall continue to participate
as of such effective date. Each other Employee shall be eligible to become a
Participant on the first Entry Date following the date he first becomes an
Eligible Employee."
(K) The following paragraph is added to the end of Section 3.01, effective
as of January 1, 1989:
"Any Matching Employer Contributions attributable to Excess Elective
Deferrals, with the income allocable to such Matching Employer Contributions
calculated in accordance with regulations under Section 401(m) of the Code,
shall be withdrawn from the affected Participant's Matching Employer
Contribution Account and used by the Employer as future Matching Employer
Contributions or Discretionary Employer Contributions."
(L) Section 3.03 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
3.03 Method of Contribution/Change of Contribution Rate.
Salary Deferral and After-Tax Contributions may be made by periodic
payroll deductions or on such other basis as shall be determined from time to
time by the Plan Administrator. Nothing contained herein shall preclude the
Plan Administrator from not allowing Salary Deferral or After-Tax
Contributions to be made by any Participant in accordance with Section 3.06 or
from limiting the number of payroll periods in a Plan Year during which such
Contributions are permitted. A Participant may elect an increase or decrease
in his Salary Deferral Contributions or After-Tax Contributions, provided that
such election is made in the manner and within the time prescribed by the Plan
Administrator. Such election shall become effective as soon as practicable
after notice of the election is received by the Plan Administrator or its
delegate.
A Participant may elect to suspend all of his Salary Deferral
Contributions or After-Tax Contributions provided such election is made in the
manner and within the time prescribed by the Plan Administrator. Such
suspension shall become effective as soon as practicable after notice of the
Participant's election is received by the Plan Administrator or its delegate.
Any suspension of contributions pursuant to this Section shall continue for a
period of not less than 3 months. A Participant may elect to resume
contributions in the manner prescribed by the Plan Administrator.
No contributions may be made by or on behalf of any Participant during
any period that he is receiving long term disability benefits or worker's
compensation benefits or while the Participant is on a leave of absence for
which no Compensation is being paid from the Employer."
(M) Section 3.04 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"3.04 Matching Employer Contributions.
The Employer, at its discretion, shall make a Matching Employer
Contribution with respect to those Salary Deferral Contributions made on and
after July 1, 1995 by each Participant who has directed the investment of such
Salary Deferral Contributions in the Company Stock Fund. The Matching
Employer Contribution for each calendar quarter will equal 100% of the first
1% of the Participant's Compensation for the quarter contributed on the
Participant's behalf as a Salary Deferral Contribution and 25% of the next 4%
of the Participant's Compensation for the calendar quarter so contributed.
The Employer may make Matching Employer Contributions in the form of cash,
Company Stock or a combination thereof.
Notwithstanding any provision of this Section to the contrary, the
Employer shall, at its discretion, make a Matching Employer Contribution for
the calendar quarter with respect to each Participant who is employed by a
participating Employer that on or after July 1, 1995 does not make Matching
Employer Contributions in the form of Company Stock, in an amount equal to
100% of the first 1% of the Participant's Compensation for the quarter
contributed on the Participant's behalf as a Salary Deferral Contribution and
invested in the Company Stock Fund; 25% of the next 4% of the Participant's
Compensation for the calendar quarter so contributed and invested; 100% of the
first 2% of the Participant's Compensation for the quarter contributed on the
Participant's behalf as a Salary Deferral Contribution and invested among
Non-Company Stock Investment Funds; and 50% of the next 6% of the
Participant's Compensation so contributed and invested. Notwithstanding the
foregoing, in no event shall a Matching Employer Contribution exceed 5% of a
Participant's Compensation for a calendar quarter with any limitation on
Matching Employer Contributions applied first with respect to Matching
Employer Contributions on Salary Deferral Contributions invested in the
Non-Company Stock Investment Funds."
(N) The following shall be substituted for the last six paragraphs of
Section 3.06, effective as of January 1, 1989:
"Excess Contributions (adjusted for income or loss) shall be returned to
affected Highly-Paid Employees, to the extent not recharacterized. In
addition, any Matching Employer Contributions attributable to returned Excess
Contributions (adjusted for income or loss in the manner described in
regulations under Section 401(m) of the Code) shall be withdrawn from the
affected Participants' Matching Employer Contribution Accounts and used to
reduce future Employer contributions.
Excess Aggregate Contributions (adjusted for income or loss) that are
After-Tax Contributions shall be returned to affected Highly-Paid Employees.
Any Matching Employer Contributions attributable to returned After-Tax
Contributions (adjusted for income or loss in the manner described in
regulations under Section 401(m) of the Code) shall be withdrawn from the
affected Participants' Matching Employer Contribution Accounts and used to
reduce future Employer contributions.
Excess Aggregate Contributions (adjusted for income or loss) that are
Matching Employer Contributions not attributable to returned After-Tax
Contributions, shall be distributed to affected Highly-Paid Employees to the
extent vested. To the extent such Matching Employer Contributions are not
vested they shall be withdrawn from the affected Participants' Matching
Employer Contribution Accounts and used to reduce future Employer
contributions.
The return of Excess Contributions and Excess Aggregate Contributions
shall occur within 12 months following the end of the Plan Year in which the
nondiscrimination tests described in this Section are not satisfied and shall
be accomplished by a reduction in the respective Accounts' investments in the
Plan's investment funds in amounts determined by the Administrator.
In the event that this Plan satisfies the requirements of Sections
401(k), 401(m), 401(a)(4), or 410(b) of the Code only if aggregated with one
or more other plans, or if one or more other plans satisfy the requirements of
such Sections of the Code only if aggregated with this Plan, then this Section
3.06 shall be applied by determining the Contribution Percentage of Employees
as if all such plans were a single plan. For Plan Years beginning after
December 31, 1989, plans may be aggregated in order to satisfy Section 401(k)
or 401(m) of the Code only if they have the same Plan Year.
The ADP for any Participant who is a Highly-Paid Employee for the Plan
Year and who is eligible to have Salary Deferral Contributions (or amounts
treated as Salary Deferral Contributions for purposes of the ADP test)
allocated to his or her accounts under two or more arrangements described in
Section 401(k) of the Code that are maintained by the Employer, shall be
determined as if such Contributions were made under a single arrangement. If
a Highly-Paid Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
In lieu of applying the nondiscrimination test described in this Section
to a single group composed of all Eligible Employees as of the end of the Plan
Year, the Administrator may elect to separately apply the test to two groups
of Eligible Employees: one group consisting of those Eligible Employees who
have not completed the minimum age and service conditions described in Section
410(a) of the Code as of the end of the Plan Year, and the other group
consisting of the remaining Eligible Employees.
In the event that any provisions of this Section 3.06 are no longer
required or applicable for qualification of the Plan under the Code, then any
applicable provisions of this Section 3.06 shall thereupon be void."
(O) The last sentence of the second paragraph of Section 3.10 is amended,
effective as of January 1, 1989, to read in its entirety as follows:
"The maximum aggregate amount in any limitation year is the lesser of
(i) $30,000 or one-fourth of the dollar amount described in Section
415(b)(1)(A) of the Code as such amount may be adjusted pursuant to Section
415(d) of the Code, whichever is greater or (ii) 25% of the Participant's
compensation (within the meaning of Section 415(c)(3) of the Code and
regulations thereunder) for such year."
(P) The first clause of the eighth paragraph of Section 3.10 is amended,
effective as of July 1, 1995, to read in its entirety as follows:
"If due to the maximum permitted above there is an excess amount, the
excess will be disposed of as follows (before any reduction in annual
additions for the limitation year to the DynCorp Employee Stock Ownership
Plan):"
(Q) Subparagraph (2a) of Section 3.10 is amended, effective as of July 1,
1995, to read in its entirety as follows:
"(2a) If an excess amount still exists, and the Participant is covered
by the Plan at the end of a limitation year, the excess amount shall next be
adjusted as follows:
(i) first by a reduction in the Participant's Salary Deferral
Contribution Account by the amount of unmatched Salary Deferral Contributions
for the Plan Year, initially from those unmatched contributions invested among
Non-Company Stock Investment Funds, on a proportionate basis, and thereafter
from those unmatched contributions invested in the Company Stock Fund;
(ii) next by a reduction in the Participant's Salary Deferral
Contribution Account by the amount of matched Salary Deferral Contributions
for the Plan Year, initially from those matched contributions invested among
Non-Company Stock Investment Funds, on a proportionate basis, and thereafter
from those matched contributions invested in the Company Stock Fund; and by a
reduction in the Matching Employer Contributions attributable to matched
Salary Deferral Contributions and earnings for the Plan Year attributable to
such Matching Employer Contributions, initially from those Matching Employer
Contributions invested among Non-Company Stock Investment Funds (if any) and
thereafter from Matching Employer Contributions invested in the Company Stock
Fund;
(iii) next by a reduction in the Participant's Discretionary Employer
Contribution Account by the amount of any Discretionary Employer Contributions
for the Plan Year."
(R) The last paragraph of Section 3.10 is amended, effective as of July 1,
1995, to read in its entirety as follows:
"In the case where a reasonable error is made so that the limitations of
Section 415 are violated, the aggregate amount of any corrective adjustments
to the Salary Deferral Contribution Account of a Participant covered by the
Plan shall be accomplished by distributing the excess Salary Deferral
Contributions to the affected Participant. The aggregate amount of corrective
adjustments that are attributable to Matching Employer Contributions shall be
held in suspense and applied to reduce any later contributions by the Employer
on behalf of all Participants."
(S) Section 3.12 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"3.12 Rollover Contributions.
An Employee who has received or is entitled to receive an "eligible
rollover distribution" within the meaning of Section 402 of the Code from a
qualified retirement plan may, with the approval of the Plan Administrator,
contribute or, on and after January 1, 1993, authorize the direct rollover of,
all or part of such distribution to the Trust Fund for this plan, regardless
of whether he is presently eligible to contribute to this Plan; provided,
however, no such contribution may be made unless all of the following
conditions are satisfied:
(a) If the distribution is contributed by the Employee, such
contribution occurs on or before the 60th day following the Employee's receipt
of the distribution from the other plan;
(b) The amount contributed or included in the direct rollover is not
more than the distribution from the other plan less the amount, if any,
considered to be a return of employee after-tax contributions; and
(c) The contribution or transfer consists of cash via check (unless
the Plan Administrator authorizes another type of contribution or transfer).
The Plan Administrator may develop procedures, and may require the
information from the Employee desiring to make a rollover contribution or
direct rollover, as it deems necessary or desirable to determine that the
proposed rollover contribution or direct rollover shall satisfy the
requirements of this Section. Upon approval by the Plan Administrator, the
amount contributed or included in the direct rollover shall be credited to a
Rollover Contribution Account established on the Employee's behalf. Rollover
contributions shall be invested in the manner described in Section 4.02. Upon
a rollover contribution or direct rollover by an Employee who is not yet
making contributions to this Plan, his Rollover Contribution Account adjusted
for Plan earnings and losses attributable to that amount shall represent his
sole interest in this Plan until he begins making contributions."
(T) Section 3.13 is deleted in its entirety effective as of July 1, 1995.
(U) Section 4.01 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"4.01 Investment of Funds.
There shall be established within the Plan's trust fund one or more
separate investment funds selected by the Company, one of which shall be a
Company Stock Fund and the remainder which shall be Non-Company Stock
Investment Funds. The Company may add, modify, or eliminate investment funds
at its discretion without amending the Plan."
(V) Section 4.02 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"4.02 Investment Elections - Future Contributions.
A Participant may direct the investment of his future Salary Deferral
Contributions among any of the Plan's investment funds according to procedures
prescribed by the Plan Administrator. A Participant may direct the investment
of future Rollover Contributions among the Plan's Non-Company Stock Investment
Funds. In the absence of any investment direction by the Participant, a
Participant's Accounts shall be invested in the investment fund the Plan
Administrator directs.
Matching Employer Contributions attributable to Salary Reduction
Contributions made on or after July 1, 1995, and any investment earnings on
such Matching Employer Contributions, shall remain invested in the Company
Stock Fund at all times. Notwithstanding the foregoing, Matching Employer
Contributions made with respect to Salary Deferral Contributions of
Participants employed by Participating Employers that do not make Matching
Employer Contributions in the form of Company Stock on or after July 1, 1995,
shall be invested among the Plan's investment funds in the same proportions as
the Salary Deferral Contributions."
(W) Section 4.03 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
4.03 Change of Elections - Future Contributions.
A Participant may elect to change the investment of his future Salary
Deferral Contributions among the Plan's investment funds in the manner and at
the times prescribed by the Plan Administrator. Any such election shall be
effective as soon as practicable following receipt of the election by the Plan
Administrator or its delegate. Notwithstanding the foregoing or any provision
of Section 4.04 to the contrary, Salary Deferral Contributions which the
Participant elects to initially invest in the Company Stock Fund must remain
so invested for at least six full calendar quarters following the end of the
payroll period to which the contributions relate."
(X) Section 4.04 is amended, effective as of July 1, 1995, to read in its
entirety as follows:
"4.04 Change of Election - Current Accounts.
A Participant may elect to change the investment direction of the
balance of his Accounts, other than that portion of his Matching Contribution
Account attributable to Salary Deferral Contributions made on or after July 1,
1995 invested in the Company Stock Fund, among the Plan's investment funds at
such times and in accordance with procedures prescribed by the Plan
Administrator. A Participant's investment direction given pursuant to this
Section shall be given effect as soon as administratively practicable
following receipt of the investment direction by the Plan Administrator or its
delegate.
Notwithstanding the foregoing, a Participant, including a Terminated
Vested Participant, shall not be permitted to change investment of Accounts
from any Non-Company Stock Investment Fund to the Company Stock Fund.
With respect to a direction to change investment of Accounts from the
Company Stock Fund to Non-Company Stock Investment Funds, a sale of Company
Stock in satisfaction of the direction shall not occur before the trading
period on the Internal Market next following receipt of the investment
direction and shall be subject to the Trustee's ability to sell shares for
fair market value on the Internal Market. If the Trustee is unable to sell a
sufficient number of shares for fair market value on the Internal Market to
fully satisfy all outstanding Participant directions to change investment of
account balances from the Company Stock Fund to Non-Company Stock Investment
Funds and other directions requiring the sale of Company Stock, the Trustee
shall prorate the sale of shares among directing Participants' Accounts based
on the total number of shares in each Account required to be sold to fully
satisfy the investment direction over the total number of shares required to
be sold to satisfy all directions requiring sale of Company Stock. In such
event, no further action will be required by the Trustee in satisfaction of
the Participants' elections."
(Y) Section 5.04 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"5.04 Payment of Benefits.
If, at the time a Retirement Benefit is payable, the total value of a
Participant's Vested Account Balance is $3,500 or less, (and was not more than
$3,500 at the time of any prior distribution or in-service withdrawal) the
Administrator shall direct the Trustee to distribute the Participant's
Retirement Benefit in a single lump sum, without any requirement for such
Participant's consent.
If, at the time a Retirement Benefit is payable, the total value of a
Participant's Vested Account Balance is greater than $3,500, the portion of
his Vested Account Balance accrued on and after July 1, 1995 shall be payable
in a single lump sum payment. The portion of a Participant's Vested Account
Balance accrued prior to July 1, 1995 shall be paid in a lump sum, unless the
Participant elects in writing to receive Installment Payments, a Life Annuity,
or a Joint-and-Survivor Annuity, in which case payments shall be made
accordingly. No less than 30, and no more than 90 days before payment of the
Retirement Benefit of a Participant is due to commence, the Employer shall
explain to affected Participants the material features of, and explain the
relative values of, a Joint-and-Survivor Annuity and other forms of benefit
available under the Plan. An election may be changed at any time by delivery
of a written change to the Administrator, up to the time the Administrator has
ordered payment of a Retirement Benefit by the Trustee or has paid for the
purchase of an annuity described below.
Any benefits that become distributable to the Participant pursuant to
this Article shall be paid as soon as reasonably practicable after the
Participant's termination of employment subject, where applicable, to the
Trustee's ability to sell shares of Company Stock in which the Participant's
Accounts are invested for fair market value on the Internal Market. Unless
the Participant otherwise elects, benefits shall be paid no later than 60 days
after the end of the Plan Year in which occurs the latest of:
(i) the Participant's Normal Retirement Date;
(ii) the 10th anniversary of the commencement of his Plan
participation; or
(iii) his termination of employment.
Notwithstanding the foregoing, if the value of a terminating
Participant's Accounts following his termination of employment is more than
$3,500 (or was more than $3,500 at the time of any prior distribution or
in-service withdrawal), payments from the Participant's Accounts shall not be
made prior to the Participant's Normal Retirement Date, without the written
consent of the Participant obtained within 90 days prior to the date
distribution commences.
Notwithstanding any provision of the Plan to the contrary, an Active
Participant's benefits shall commence or otherwise be paid, in accordance with
Section 401(a)(9) of the Code and regulations thereunder, no later than April 1
of the calendar year immediately following the date he attains Age 70 1/2, even
if he is still employed, unless the Participant reached Age 70 1/2 prior to
January 1, 1988, and the Participant is not a greater than 5% owner (as
defined in Section 416(i) of the Code) at any time following the Plan Year
ending before the calendar year in which the Participant reached Age 66 1/2, in
which event the Participant's benefits shall commence no later than the first
day of April of the calendar year immediately following the date he retires.
Benefits shall be paid over a period not longer than the lives (or, if
applicable, joint life expectancies) of the Participant and any designated
Beneficiary. The Retirement Benefit or Vested Account Balance of a
Participant who is no longer employed shall commence or otherwise be paid, no
later than April 1 of the calendar year immediately following the date he
attains Age 70 1/2. Benefits attributable to the portion of the Participant's
Account accrued prior to July 1, 1995 shall be paid in the form of payment
elected by the Participant, but in no event in an amount less than required by
Section 401(a)(9) of the Code and regulations thereunder. If no election is
made, such benefits shall automatically be paid in a single lump sum.
Benefits attributable to the portion of the Participant's Account accrued on
and after July 1, 1995 shall be paid in a single lump sum."
(Z) Section 5.08 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"5.08 Additional Allocations on Retirement.
Except as otherwise provided in Section 5.05, any allocation for a
Participant, made as of a Valuation Date subsequent to the date of his
retirement, shall be paid to such Participant, or his Beneficiary, as soon
after such Valuation Date as is practical."
(AA) Section 5.10 is amended, effective as of July 1, 1995, to read in
its entirety as follows:
"5.10 Company Stock.
A Participant may elect to have the portion, if any, of his Vested
Account Balance accrued prior to July 1, 1995 and attributable to a fund
invested in Company Stock distributed all in cash or all in kind or in a
combination thereof. In the case of an in kind distribution, the value of a
fractional share shall be paid in cash. A Participant may elect to have that
portion of the Participant's Vested Account Balance accrued on and after July
1, 1995, and invested in Company Stock, distributed all in cash or all in
kind; provided however, any such distribution in cash shall be subject to the
Trustee's ability to sell the shares of Company Stock for fair market value on
the Internal Market. If the Trustee is unable to sell all the Company Stock
in the Participant's Accounts within the time required to make distribution of
the Participant's Accounts in accordance with Section 401(a)(14) of the Code,
distribution of the remaining Company Stock shall be made in kind.
On and after January 1, 1996, the portion of a Participant's Vested
Account Balance accrued prior to July 1, 1995 and invested in the Company
Stock Fund may be distributed in cash or in kind or in a combination thereof;
provided, however, a cash distribution of that portion of a Participant's
Accounts invested in Company Stock shall be subject to the Trustee's ability
to sell the shares of Company Stock allocated to the Participant's Accounts on
the Internal Market. If the Trustee is unable to sell all the Company Stock
in the Participant's Accounts within the time required to make distribution of
the Participant's Accounts in accordance with Section 401(a)(14) of the Code,
distribution of the remaining Company Stock shall be made in kind. The
provisions of this paragraph shall become operative only upon a determination
by the Internal Revenue Service that the terms of the Plan, including these
provisions, will continue to qualify under Section 401(a) of the Code."
(BB) Section 7.01 is amended, effective as of January 1, 1995, to read in its
entirety as follows:
"7.01 Vesting of Accounts.
A Participant shall at all times be fully (100%) vested in his Salary
Deferral Contribution Account, After-Tax Contribution Account, and Rollover
Contribution Account, and in any restoration contributions made pursuant to
Section 7.03.
A Participant shall be vested in his Matching Employer Contribution
Account and his Discretionary Employer Contribution Account based on his Years
of Service in accordance with the following table:
Years of Service Vesting Percentage
Less than 2 0%
2 but less than 3 50%
3 or more 100%
Notwithstanding the foregoing, a Participant formerly employed by
Meridian Corporation at the time of the merger of the Meridian 401(k) Plan
with this Plan, shall be vested in his Matching Employer Contribution Account
and Discretionary Employer Contribution Account based on his Years of Service
in accordance with the foregoing table; provided, however, for purposes of
determining his Years of Service, the Participant's third Year of Service
shall be determined in accordance with Section 1.38 or determined based upon
the Participant's completion of at least 1000 Hours of Service in a Plan Year
commencing after the Participant's completion of two Years of Service
(determined in accordance with Section 1.38), whichever will produce the
greater Years of Service.
Notwithstanding the foregoing, an Active Participant shall be fully
(100%) vested in his entire Account at his Normal Retirement Date, the date of
his retirement due to Disability, or the date of his death.
Notwithstanding the foregoing, where government regulations, including
the Federal Procurement Regulations and agency supplemental procurement
regulations, or contracts issued by government agencies require, for
Participants who are subject to such regulation or contract, that so much of
the Participant's Account as is attributable to a period of service when the
Participant is performing a government contract shall be 100% vested for any
such Participant who has completed one Year of Service, then each such
Participant shall be 100% vested in that portion of his Account attributable
to contributions for the period during which he is subject to such regulation
or contract, upon completion of one Year of Service. However, if for any Plan
Year the application of the preceding sentence would result in discrimination
in favor of Highly-Paid Employees in violation of Code Section 401(a)(4), then
for such Plan Year the preceding sentence shall not apply to any such
Highly-Paid Employee."
(CC) Section 7.02 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"7.02 Payment of Benefits to Terminated Participants.
An active Participant who is vested in any portion of his Account and
terminates employment prior to his Normal Retirement Date shall be deemed a
Terminated Vested Participant. Payment of his Vested Account Balance shall be
made no later than 60 days after the end of the Plan Year in which the
Participant's Normal Retirement Date occurs. However, a Terminated Vested
Participant may elect, in the manner prescribed by the Plan Administrator,
that his Vested Account Balance be paid as soon as practicable following his
Termination of Employment. If the value of the Terminated Vested
Participant's Vested Account Balance is not more than $3,500 (and was not more
than $3,500 at the time of any prior distribution or in-service withdrawal)
the Plan Administrator shall automatically direct that the Participant's
entire Vested Account Balance be distributed in a single lump sum as soon as
practicable following the Participant's termination of employment. If the
value of the Terminated Vested Participant's Vested Account Balance is more
than $3,500 (or was more than $3,500 at the time of any prior distribution or
in-service withdrawal) no payment shall be made prior to the Participant's
Normal Retirement Date without the written consent of the Participant obtained
no more than 90 days prior to the date payment is made. For purposes of this
Section, the transfer of a Participant's employment to a buyer, concurrent
with the sale of a subsidiary or trade or business of an Employer or Affiliate
to such buyer, or any other change in the Participant's employment status with
an Employer or Affiliated Organization not considered a "separation from
service" (within the meaning of Section 401(k)(2)(B) of the Code), will not be
considered a termination of the Participant's employment."
(DD) Section 8.01 is amended, effective as of January 1, 1989, to read in its
entirety as follows:
"8.01 Withdrawals While Employed.
In-service withdrawals of amounts not held as security for a loan from
the Plan may be made by Active or Inactive Participants, but not by Terminated
Vested Participants, in accordance with procedures prescribed by the Plan
Administrator, but not more frequently than once per calendar month, in the
following order:
(a) A Participant may withdraw all or any portion of his After-Tax
Contribution Account as follows. Such withdrawal shall come first from
After-Tax Contributions made prior to January 1, 1987. Next, such withdrawal
shall be made proportionately from Participant's After-Tax Contributions made
after December 31 1986 and investment earnings on After-Tax Contributions.
(b) After a Participant has withdrawn all of his After-Tax
Contributions Account, if any, he may withdraw all or any portion of the
amount of his vested Matching Employer Contribution Account accrued prior to
July 1, 1995 and vested Discretionary Employer Contribution Account accrued
prior to July 1, 1995 that has been in such Account(s) for a period of at
least two years.
(c) After a Participant has withdrawn all of his available Matching
Employer Contribution Account and Discretionary Employer Contribution Account,
if any, he may withdraw all or any portion of his Rollover Contribution
Account.
(d) After a Participant who has attained Age 59 1/2 has withdrawn all of
his available Rollover Contribution Account, if any, he may withdraw all or
any portion of his Salary Deferral Contribution Account provided however,
amounts accrued in the Participant's Salary Deferral Contribution Account may
only be withdrawn if invested in Non-Company Stock Investment Funds.
(e) After a Participant who has not attained Age 59 1/2 has withdrawn
all of his available Rollover Contribution Account and obtained all non-taxable
loans available from this Plan and all distributions and non-taxable loans
available from any other plans maintained by the Employer, he may withdraw so
much of his available Salary Deferral Contribution Account as is necessary to
alleviate a financial hardship, and the amount reasonably estimated as
necessary to pay income taxes or penalties resulting from the distribution.
Such hardship must be an immediate and heavy financial need of the Participant
where such Participant lacks other available resources. Expenses in
connection with a death in a Participant's immediate family would constitute
such an immediate and heavy financial need and the following conditions would
automatically be deemed an immediate and heavy financial need:
(i) medical expenses as described under Code Section 213(d)
incurred by the Participant, his spouse, or his dependents or obtainment of
medical care if the withdrawal is necessary for such persons to obtain medical
care;
(ii) costs directly related to the purchase of a primary
residence (excluding mortgage payments);
(iii) payment of tuition, related educational fees and room and
board expenses for the next twelve months of post-secondary education for the
Employee, his spouse, or his dependents;
(iv) payment to prevent eviction of the Participant from a
primary residence or foreclosure of mortgage on his primary residence; and
(v) any other occurrence as authorized by Treasury Regulations,
Rulings, Notices, and other documents of general applicability.
A Participant must submit a written certification on the form prescribed
by the Plan Administrator that the hardship distribution is necessary to
satisfy an immediate and heavy financial need. The written certification must
indicate that the need cannot reasonably be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the employee's
assets, by cessation of Salary Deferral Contributions or After-Tax
Contributions (if applicable) under the Plan, by other distributions or
non-taxable loans from plans maintained by the Employer or any other employer,
or by borrowing from commercial sources on reasonable commercial terms in an
amount sufficient to satisfy the need. The Employer must not have actual
knowledge to the contrary that the need cannot reasonably be relieved as
described above.
A Participant may not withdraw any investment earnings included in his
Salary Deferral Contribution Account which were accumulated after December 31,
1988, or any Qualified Non-elective Contributions (including investment
earnings), unless he has attained Age 59 1/2.
A Participant may not withdraw any portion of his Matching Employer
Contribution Account or his Discretionary Employer Contribution Account,
except as set forth in subparagraph (b) above, for any reason prior to his
retirement or other termination of employment.
In no event will any hardship withdrawal of Salary Deferral
Contributions be granted until any applicable distributions and loans have
been taken from this Plan and from all other qualified retirement plans of the
Employer.
Hardship withdrawals shall first reduce that portion of the affected
Participant's Salary Deferral Contribution Account, if any, invested in
Non-Company Stock Investment funds; next that portion of the Salary Deferral
Contribution Account invested in the Company Stock Fund but not yet invested
in Company Stock; and finally that portion of the Salary Deferral Contribution
Account invested in Company Stock. Notwithstanding any provision of this
Section to the contrary, withdrawal of amounts invested in shares of Company
Stock shall be subject to the Trustee's ability to sell such shares on the
Internal Market.
Upon a withdrawal for financial hardship, the Participant's Salary
Deferral Contributions shall be suspended for a minimum period of twelve
months, and the Participant shall not, for such period, be permitted to make
any elective contribution to any qualified or non-qualified deferred
compensation plan of the Employer, including any defined benefit retirement
plan or any stock option, stock purchase, or similar plan, but not including
contributions to a health or welfare benefit plan. In addition, for the
taxable year following the year in which such a withdrawal is made, the
Participant's elective contributions to this and all other contributory plans
maintained by the Company, if any, shall be subject to the applicable limit
under Code Section 402(g) for that year minus the Participant's elective
contributions for the year of the hardship withdrawal.
Notwithstanding any provision of this Section to the contrary, any
withdrawal from an Account invested in a Non-Company Stock Investment Fund
shall be conditioned upon such withdrawal being permitted without penalty
under the terms of such investment fund."
(EE) Subparagraphs (a), (b) and (c) of Section 8.02 are amended, effective as
of July 1, 1995, to read in their entirety as follows:
"8.02 Loans.
(a) Active or Inactive Participants who have not previously
defaulted on a loan from the Plan, (but not Vested Terminated Participants),
may obtain a loan from their Accounts in amounts of not less than $1,000 under
procedures prescribed by the Plan Administrator. No more than two Plan loans
may be outstanding to a Participant at any time.
(b) No Participant shall, under any circumstances, be entitled
to loans in excess of the lesser of:
(i) 50% of his Vested Account Balance;
(ii) $50,000 less the highest outstanding loan balance in
the preceding 12 month period over the outstanding loan balance on the day
immediately preceding issuance of the loan; or
(iii) the amount of the Participant's Accounts invested in
Non-Company Stock Investment Funds the terms of which permit withdrawals
without penalty, but excluding the amount of the Participant's After-Tax
Contribution Account, if any.
For purposes of this paragraph, all outstanding loans to a
Participant under this Plan or any other qualified retirement plan of the
Employer shall be aggregated.
(c) Any loan to a Participant shall be evidenced by the
Participant's promissory note and secured by the pledge of up to 50% of the
balance of the Participant's Accounts and by the pledge of such further
collateral as the Trustee deems necessary or desirable to assure repayment of
the borrowed amount and all interest payable thereon in accordance with the
terms of the loan. ..."
(FF) Subparagraph (d) of Section 8.02 is amended, effective as of January 1,
1989, to read in its entirety as follows:
"8.02 Loans.
(d) Interest on any loan shall be at a reasonable rate determined by
the Administrator commensurate with interest rates charged by persons in the
business of lending money for loans which would be made under similar
circumstances. The Administrator shall have sole discretion in determining
the interest rate, and its decision shall be final and binding. ..."
(GG) Subparagraphs (g) and (h) of Section 8.02 are amended, effective as of
January 1, 1989, to read in their entirety as follows:
"8.02 Loans.
(g) If not previously repaid in full, the unpaid portion of any
outstanding loans (including interest thereon) shall be deducted at the time
of a distribution due to retirement, death, disability, or other termination
of employment, from the amount of the Account otherwise available to pay or
purchase any benefit to which a Participant (or his beneficiary) is entitled
under this Plan.
(h) If a required periodic payment is not made within 60 days of the
date it was due, this shall be deemed a default. Upon a default, the entire
amount of unpaid loan principal and interest shall immediately become due and
payable. Without further action or notice to the Participant, the
Administrator may direct the Trustee to reduce the Participant's Plan Accounts
by the lesser of the total amount due and payable or the amount of the
Accounts pledged as security for the loan. The Administrator, at its
discretion, may delay the direction, for as long as it deems appropriate,
provided such delay is applied on a consistent basis that is not
discriminatory in favor of Highly-Paid Employees. Notwithstanding the
foregoing, no reduction in a Participant's Salary Deferral Contribution
Account shall occur upon the default of a Participant's loan until one of the
distributable events described in Code Sections 401(k)(2) or 401(k)(10) has
occurred. If such action does not fully repay the loan, the Administrator may
take such other action as may be necessary or appropriate to secure repayment,
including foreclosure upon other property, if any, pledged as security for the
loan. ..."
(HH) Subparagraph (i) of Section 8.02 is added, effective as of July 1, 1995,
to read in its entirety as follows:
"8.02 Loans.
(i) Loan proceeds shall be taken from that portion of a
Participant's Plan Accounts invested in Non-Company Stock Investment Funds in
the following order:
1) Rollover Contribution Account
2) Matching Employer Contribution Account
3) Discretionary Employer Contribution Account
4) Salary Deferral Contribution Account
Repayments of loan principal shall reduce the outstanding balance of the
loan and shall be credited to the Participant's Plan Accounts in reverse order
from which loan proceeds were taken until principal repayments equal the
amount of the proceeds taken from the respective Accounts. Interest payments
shall be credited to the Account from which loan proceeds were taken until
principal repayments to the Account equal the proceeds taken from the Account.
The Plan Account from which loan proceeds are last taken shall be
reduced proportionately from the applicable Account's investments in the
Non-Company Stock Investment Funds.
Repayments of loan principal and interest shall be invested among the
Plan's Non-Company Stock Investment Funds in the same proportion as the
Participant's then current investment election for Salary Deferral
Contributions among the Non-Company Investment Funds. If there is no such
current election, repayments of loan principal and interest shall be invested
in the investment fund the Plan Administrator directs."
(II) Section 9.06 is added to the Plan, effective as of January 1, 1993, to
read in its entirety as follows:
"9.06 Direct Rollovers of Accounts to Other Qualified Plans.
At the election of a Participant or surviving spouse who is eligible for
a distribution from the Plan on or after January 1, 1993, that is an "eligible
rollover distribution" (within the meaning of Section 402 of the Code), the
Administrator shall authorize the direct rollover of the distributed amount
from the trust fund of this Plan (i) in the case of a Participant, to an
"eligible retirement plan" (within the meaning of Section 401(a)(31) of the
Code) or (ii) in the case of a surviving spouse, to an "individual retirement
account" or "individual retirement annuity" (within the meaning of Section 408
of the Code). Direct rollovers shall be made according to the procedures
established by the Administrator conforming to the requirements of Section
401(a)(31) of the Code and regulations thereunder."
(JJ) The following is substituted for subparagraphs (b) and (c) of Section
10.02, effective as of January 1, 1989:
"10.02 Plan Termination.
(b) Disposition of Accounts Upon termination of the plan, the
Accounts of each affected Participant shall be distributed as soon as
administratively feasible in the manner provided in Article VI and VII through
payments from the trust or purchase of an annuity contract unless the Company,
in its discretion, and if permitted by the Code and the regulations
thereunder, directs that the Accounts of the affected Participants continue to
be held in the Trust Fund to be distributed upon each Participant's
retirement, death, disability, termination of employment or otherwise in
accordance with the terms of the Plan. The distribution of Accounts shall be
made in accordance with the Participant and spousal consent provisions of
Sections 411(a)(11) and 401(a)(11) of the Code to the extent the consent
provisions are applicable to Accounts having a value at the time of such
distribution or any prior distribution of more than $3,500.
Notwithstanding the foregoing, if the Company or any entity within
the same controlled group as the employer does not maintain another defined
contribution plan (other than an employer stock ownership plan as defined in
Section 4975(e)(7) of the Code), the Participant's Accounts may, without the
Participant's consent, be distributed to the Participant. However, if any
entity within the same controlled group as the Employer maintains another
defined contribution plan (other than an employer stock ownership plan as
defined in Section 4975(e)(7) of the Code), then the Participant's Account
will be transferred, without the Participant's consent, to the other plan if
the Participant does not consent to an immediate distribution."
SUMMARY OF CHANGES CONTAINED
IN AMENDMENT NO. ONE
TO THE
DYNCORP SAVINGS AND RETIREMENT PLAN
A.Section 1.01(f), defining the term "Stock Account," is deleted.
B. Section 1.07, defining the term "Company Stock," is amended to apply the
same definition to the term "Common Stock."
C. Section 1.07A is added to the Plan to define the term "Company Stock
Fund."
D. Section 1.10, defining the term "Contribution Percentage," is amended to
specify that only a Participant's compensation earned while eligible to
participate in the Plan will be taken into account in determining his
Contribution Percentage.
E. Section 1.16, defining the term "Entry Date," is amended to provide that
the term shall mean the first day of each payroll period.
F. Section 1.20A is added to the Plan to define the term "Internal Market."
G. Section 1.22A is added to the Plan to define the term "Non-Company Stock
Investment Fund."
H. Section 1.26, defining the term "Plan," is amended to specify that the
Plan is a profit sharing plan.
I. Section 1.35, defining the term "Valuation Date," is amended to specify
that Accounts invested in the Company Stock Fund shall be valued as of the
last day of each calendar quarter.
J. Section 2.01 is amended to specify that an Employee shall be eligible to
become a participant on the first Entry Date following the date he becomes an
Eligible Employee.
K. Section 3.01 is amended to specify that any Matching Employer
Contributions attributable to Excess Elective Deferrals returned to the
Participant shall be withdrawn from the Participant's Matching Employer
Contribution Account and used to reduce future Employer contributions.
L. Section 3.03 is amended to describe how Participants may suspend
contributions to the Plan and to describe the mechanics of Participants'
change of contribution elections in a way compatible with a voice response
system.
M. Section 3.04 is amended (i) to describe the general matching formula
that will apply on and after July 1, 1995; (ii) to specify that Matching
Employer Contributions are conditioned upon the Participant investing his
Salary Deferral Contributions in the Company Stock Fund; and (iii) to
describe the special matching formula applicable to Participants whose
Employers match Salary Deferral Contributions in the form of cash.
N. Section 3.06 is amended to describe the disposition of Excess
Contributions, Excess Aggregate Contributions and Matching Employer
Contributions attributable thereto upon failure of an ADP or ACP test, in a
manner compatible with the regulations under Sections 401(k) and 401(m) of the
Code.
O. The second paragraph of Section 3.10 is amended to accurately describe
the limits on annual additions to a defined contribution plan under Section
415 of the Code.
P. The eighth paragraph of Section 3.10 is amended to clarify that if a
reduction in annual additions to a defined contribution plan is needed, the
reduction shall occur first in the DynCorp Savings and Retirement Plan before
any reduction in contributions to the DynCorp Employee Stock Ownership Plan.
Q. Subparagraph (2a) of Section 3.10 is amended to describe the hierarchy
in which Plan accounts will be reduced if annual additions in excess of the
annual Section 415 limits occur.
R. The last paragraph of Section 3.10 is amended to describe the
disposition of any corrective adjustments to Salary Deferral Contribution
Accounts and Matching Employer Contribution Accounts needed to satisfy Code
Section 415.
S. Section 3.12 is amended to more clearly describe the circumstances under
which Rollover Contributions will be accepted by the Plan.
T. Section 3.13 is deleted. The information previously contained in
Section 3.13 describing suspension of contributions is now set forth in
Section 3.03, as amended.
U. Section 4.01 is amended to describe the establishment of a Company Stock
Fund and Non-Company Stock Investment Funds in the Plan.
V. Section 4.02 is amended to describe that Salary Deferral Contributions
may be invested among any of the Plan's investment funds including the Company
Stock Fund. Rollover Contributions may be invested only among the Plan's
Non-Company Stock Investment Funds. Matching Contributions attributable to
Salary Reduction Contributions made on or after July 1, 1995 will remain
invested in the Company Stock Fund at all times; provided, however, Matching
Employer Contributions on Salary Deferral Contributions made by Participants
whose Employers match Salary Deferral Contributions in the form of cash will
be invested among the Plan's investment funds, including the Non-Company Stock
Investment Funds, in the same proportions as the Participant's Salary Deferral
Contributions.
W. Section 4.03 is amended to specify that Salary Deferral Contributions
which the Participant elects to initially invest in the Company Stock Fund
must remain so invested for at least six full calendar quarters following the
end of the payroll period to which the contributions relate.
X. Section 4.04 is amended to provide (i) that a Participant may not
change the investment of accounts from any Non-Company Stock Investment Fund
to the Company Stock Fund; (ii) that a direction to change investment of
accounts from the Company Stock Fund to Non-Company Stock Investment Funds
shall be subject to the Trustee's ability to sell shares for fair market value
on the Internal Market; and (iii) to provide language describing the mechanics
for changing investment directions in a manner compatible with a voice
response system.
Y. Section 5.04 is amended to provide that the portion of a Participant's
Vested Account Balance accrued on and after July 1, 1995 shall be payable only
in a single lump-sum payment and to describe the payment of benefits payable
to both Active and terminated participants upon attainment of Age 70 1/2.
Z. Section 5.08 is amended to provide that any allocation for a Participant
made as of a Valuation Date following retirement shall be paid to such
Participant or beneficiary as soon as after such Valuation Date as
practicable.
AA. Section 5.10 is amended to provide that a Participant may elect to have
that portion of his Vested Account Balance accrued on and after July 1, 1995
distributed in cash or in kind, provided, however, cash distributions
attributable to Company Stock shall be subject to the Trustee's ability to
sell shares for fair market value on the Internal Market. If the Trustee is
unable to sell all the Participant's Company Stock within the time required to
make distributions under the terms of the Code, distribution of any remaining
stock shall be made in kind. On and after January 1, 1996, the foregoing
limitations shall also apply to that portion of the Participant's Vested
Account Balance accrued prior to July 1, 1995, subject to approval of the
limitations by the IRS.
BB. Section 7.01 is amended to describe the general vesting schedule and to
also describe the special vesting schedule that applies to former Participants
in the Meridian 401(k) Plan at the time of its merger with the DynCorp Savings
and Retirement Plan.
CC. Section 7.02 is amended to specify that an automatic distribution of a
Vested Account Balance of not more than $3,500 will occur only if the balance
was not more than $3,500 at the time of any prior distribution or in-service
withdrawal. This section is also amended to specify that a transfer of a
Participant's employment to a buyer upon the sale of a subsidiary trade of
business by the Company to the buyer, shall not be considered a termination of
employment for purposes of Section 401(k) of the Code.
DD. Section 8.01 is amended to (i) describe the hierarchy of accounts from
which in-service withdrawals may be taken and (ii) to describe that hardship
withdrawals from a Participant's Salary Deferral Contribution Account shall be
taken last from the amounts invested in Company Stock and subject to the
Trustee's ability to sell the shares on the Internal Market.
EE. Sections 8.02(a) and (b) are amended to provide that (i) only
Participants who have not previously defaulted on a loan may obtain a loan
from the Plan, and (ii) to provide that the maximum amount available for a
Plan loan will be limited to amounts invested in Non-Company Stock Investment
Funds which permit withdrawals, but excluding amounts in the Participant's
After-Tax Contribution Account if any.
FF. Section 8.02(d) is amended to simply state that interest on any loan
shall be at a reasonable rate determined by the Administrator commensurate
with interest rates that would be charged under similar circumstances by
persons in the business of lending money.
GG. Sections 8.02(g) and (h) are amended to describe the circumstances under
which outstanding Plan loans will be repaid in the event of the Participant's
retirement, death, disability or other termination of employment, or in the
event of a default on a loan.
HH. Section 8.02(i) is amended to describe the hierarchy in which loan
proceeds will be taken from Participants' Accounts and the manner in which
loan repayments will be allocated among Plan Accounts and Plan investment
funds.
II. Section 9.06 is amended to specify the circumstances under which a
Participant may elect a direct rollover of a Plan distribution to another
qualified plan, as required by Section 401(a)(31) of the Code.
JJ. Sections 10.02(b) and (c) are combined into Section 10.02(b) to clarify
that distributions upon Plan termination shall be made in accordance with the
requirements of Sections 411 and 401(a)
(11) of the Code.
Exhibit 4.3
DYNCORP 1995 EMPLOYEE STOCK PURCHASE PLAN
(Effective July 1, 1995)
The Purpose of this DynCorp 1995 Employee Stock Purchase
Plan (the "Plan") is to provide a method by which eligible
employees of DynCorp and its wholly owned subsidiaries, divisions
and business units, and other partially owned entitles so
designated by the Board of Directors or authorized committee
thereof, (the "Company") may purchase shares of Common Stock of
DynCorp ("Shares" or "Stock") by payroll deduction and at
favorable prices. As a result, eligible employees will be given
an opportunity to acquire an additional interest in the growth
and earnings of the Company and a further incentive to promote
the best interests of the Company.
1. ELIGIBILITY TO PARTICIPATE
All employees of the Company shall be eligible to
participate in the Plan, subject to limitations that are imposed
by the rules and regulations of the Securities and Exchange
Commission or similar state regulatory agencies (the "Securities
Laws"). Employees on temporary leave of absence may continue to
participate in the Plan provided authorization is given by the
Vice President of Human Resources or designee thereof, to the
extent of payroll deductions effected prior to such leave of
absence are available.
2. SHARES THAT MAY BE PURCHASED
No participant shall be permitted to purchase less than
$7.00 nor more than $450.00 of Stock, at the Plan Stock Price
discussed below, per week of participation in the Plan. In the
event the total of all Plan purchase authorizations during any
calendar quarter exceeds the total number of Shares that are
authorized to be purchased on behalf of all Plan participants
through the DynCorp Internal Stock Market (the "Internal Market")
on a scheduled trading date (a "Trade Date") for the Internal
Market, purchase authorizations shall be filled first up to
$150.00 per Trade Date, per participant, and the remainder shall
be filled on a pro-rata basis determined by the ratio of the
amount of each participant's unsatisfied purchase authorization
to the amount of all participants' unsatisfied purchase
authorizations as of such Trade Date. In the event there are not
sufficient Shares available in the Internal Market to fulfill the
first $150.00 per participant, purchase authorizations shall be
filled on a pro-rata basis based on the ratio of the amount of
each participant's purchase authorization up to $150.00 to the
amount of the aggregate of first $150.00 of all participants'
purchase authorizations. Any payroll deductions not used to
purchase Shares on a specific Trade Date as a result of the
foregoing limitations will be refunded to the participant,
without interest.
For example, if the total value of Shares available for purchase
on behalf of all Plan participants in the Internal Market on a
Trade Date equals $100,000, and the total of all purchase
authorizations resulting from payroll deductions under the Plan
during the quarter equals $125,000, of which $75,000 represents
individual participants' purchase authorizations for the first
$150.00 of Shares, all of those authorizations would be accepted
first, and the remaining $25,000 of Shares available for purchase
would be allocated on a pro-rata basis to the remaining $50,000
of Share purchase authorizations amounts in excess of $150. This
would mean that a purchaser with a quarterly payroll deduction
authorization of $500 would be entitled to purchase $325 of Stock
[$150 +(($500-$150) x ($25,000/$50,000))] on that Trade Date.
3. PLAN STOCK PRICE AND PAYROLL DEDUCTIONS
The purchase price of each share acquired under the Plan
shall be as determined from time to time by the DynCorp Board of
Directors, but in no event less than 85% of the fair market value
of the Stock as determined under the rules and procedures of the
Internal Market on each quarterly Trade Date (the "Plan Stock
Price"). The Plan Stock Price initially established by the Board
for Shares is 95% of the Internal Market fair market trading
price established under the rules of the Internal Market (the
"Market Price"), subject to change by the Board. Purchasers
under this Plan may acquire Shares only by means of individual
payroll deductions. The Company shall accumulate payroll
deductions of all participants on its financial books and records
during each calendar quarter and shall, no later than the
required settlement date following a Trade Date, (a) pay an
amount equal to all employee Plan deductions during the quarter,
less statutory withholding as required (if any) with respect to
the 5% discount (the "Discount") to the broker handling trades on
the Internal Market (the "Broker"), and (b) at the Company's
option, either (i) pay to the Broker a cash amount equal to the
Discount or (ii) transfer to the Broker or other custodian of
Plan-purchased Shares a number of Shares, either in certificated
or electronic form, equal in value to the amount of the aggregate
Discount of Shares purchased. The Broker shall, to the extent
Shares are available for purchase, purchase the required number
of Shares through the Internal Market on each Trade Date. No
interest will be paid on employee funds held under the Plan.
4. APPLICATION FOR ENROLLMENT IN PLAN -- WITHDRAWAL
Any eligible employee may enroll to participate in the Plan
electronically, with initial confirmation in writing, in such
form as DynCorp may prescribe. Employees may enroll at any time.
There will be no confirmation of the commencement or continuation
of payroll deductions other than the deduction information that
will appear on the participant's pay stub. Participants may
cancel their participation in the Plan at any time by giving
electronic notice to the Plan recordkeeper, in which event, all
payroll deductions that have not be invested will be refunded to
the participant at the earliest practicable time, unless the
participant specifically elects to have amounts accumulated to
date used to purchase Shares. Any participant who elects to
withdraw from the Plan will not be permitted to re-enroll for a
period of three months following withdrawal.
5. EMPLOYEE STATEMENTS -- QUARTERLY ALLOCATION
As soon as practicable after each Trade Date, the Plan
recordkeeper shall cause the appropriate number of Shares to be
allocated to the Stock ownership accounts of the Plan
participants, and each participant shall receive a quarterly
statement showing his or her ownership of Shares purchased under
the Plan and the fair market value of such Shares based on the
most recent Market Price. Fractional Shares may be allocated.
Any amounts of payroll deductions not used to purchase Shares
because of pro-rated purchases shall be carried over and added to
deductions authorized by the employee for subsequent quarterly
periods or, upon the employee's withdrawal from the Plan,
refunded to the employee in cash. Shares purchased under the
Plan will be held by the recordkeeper in uncertificated form.
6. DISPOSITION OF SHARES ACQUIRED UNDER THE PLAN
Shares acquired under the Plan must be held at least one
year following their purchase and may thereafter at any time be
sold in the Internal Market on any Trade Date, subject, however,
to applicable Securities Laws which may impose additional
limitations and holding periods and Section 8. Subject to the
other provisions of the Plan, a participant desiring to sell
Shares previously purchased under the Plan may sell Shares
through the Internal Market by notifying the Plan recordkeeper
accordingly. Also see discussion below concerning certain taxes
that may be payable if Shares purchased under the Plan are sold
less than two years after the date of purchase. Notwithstanding
the foregoing, participants may cause shares purchased under the
Plan to be issued in the name of the participant and another as
joint tenants with right of survivorship and may transfer
ownership of Shares purchased under the Plan by will or intestate
succession; provided, however, that the surviving owner or
beneficiary shall otherwise be subject to the provisions of the
Plan relating to first refusal and sale of Shares.
7. TAX MATTERS
The Plan is intended to qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code, as
amended (the "Code) and shall be interpreted in accordance with
Section 423.
8. RIGHTS ON TERMINATION OF EMPLOYMENT
In the event the employment by an employee-participant under
the Plan is terminated for any reason, DynCorp shall have a
right, exercisable in its sole discretion, to purchase from the
participant or his or her estate or legal representative any
Shares acquired under the Plan at the then-most-recent Market
Price; provided, however, if required under the state securities
laws of the state where the employee resides, such option shall
be exerciseable at the higher of the then-most recent Market
price or the participant's acquisition cost for such Shares.
Should DynCorp fail to exercise its option within 45 days of the
participant's termination, the participant shall have the option
of retaining the Shares or offering to sell the Shares in the
Internal Market on any Trade Date. Notwithstanding the foregoing
provisions, in no event will DynCorp be required or obligated to
maintain the Internal Market.
9. AMENDMENT AND TERMINATION OF THE PLAN
The term of this Plan shall commence on July 1, 1995, and
shall continue through December 31, 1999, unless extended or
earlier terminated by the Board of Directors of DynCorp. The
Board further reserves the right at any time to amend the terms
of the Plan; provided that such amendments shall in no event
adversely affect the right of participants to receive Shares
previously purchased under the Plan. In the event of the
termination of the Plan, all payroll deductions not previously
used to purchase Shares will be refunded to participants at the
earliest practicable time.
10. MISCELLANEOUS TERMS AND CONDITIONS
a. For purposes of this Plan, the adoption of this Plan as
of its effective date shall commence and constitute a continuing
"offer" for participants to participate in the Plan, and the
concurrent granting as of such date to the participant of an
option to purchase Shares through the Plan in accordance with its
terms.
b. For purposes of this Plan, a participant's enrollment
for payroll deductions pursuant to the Plan shall be deemed an
acceptance of the aforementioned option granted by DynCorp to the
employee-participant to purchase Shares pursuant to the Plan.
The provisions of the Plan to the contrary notwithstanding, if
any participant entitled to purchase Shares under the Plan would
be deemed for purposes of Section 423(b)(3) of the Code to own
Stock (including any number of Shares which such person would be
entitled to purchase hereunder and under any other similar plan
or stock option plan of the Company, the parent of the Company or
any subsidiary) possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company, the
maximum number of Shares which such participant shall be entitled
to purchase under the Plan shall be reduced to that number which,
when added to the number of Shares of the Company, which such
participant is so deemed to own (excluding any number of Shares
which such participant would be entitled to purchase hereunder)
is one less than such 5%, and any balance remaining in such
participant's Stock purchase account shall be refunded.
c. Notwithstanding any other provision of the Plan, if at
any time a participant is entitled to complete the purchase of
any Shares pursuant to the Plan, taking into account such
person's rights, if any, to purchase Stock under all other
employee stock purchase plans of the Company, the result would be
that during the then current calendar year, such participant
would have first become entitled to purchase under the Plan and
all other such plans a number of Shares which would exceed the
maximum number of Shares permitted by the provisions of Section
423(b)(8) of the Code, then the number of Shares which such
participant shall be entitled to purchase pursuant to the Plan
shall be reduced by the number which is one more than the number
of Shares which represents the excess, and any balance remaining
in such person's Stock purchase account shall be refunded.
d. This Plan shall be governed by the laws of the
Commonwealth of Virginia, without regard to the conflicts-of-law
provisions thereof.
e. Nothing herein shall be implied to constitute a
contract of employment for any person.
f. This Plan shall not become effective until approved by
vote of the shareholders of the Company.
Exhibit 4.4
DYNCORP 1995 STOCK OPTION PLAN
(Effective July 1, 1995)
1. PURPOSE OF PLAN
(a) The Board of Directors of DynCorp hereby adopts the
DynCorp 1995 Stock Option Plan as of the effective date specified
above to provide a means to encourage exceptional performance by
key members of the company's management team, and to provide a
mechanism for use in furtherance of the DynCorp Equity Target
Ownership Plan ("ETOP") which has been adopted concurrently with
this Plan.
(b) Equity ownership of DynCorp common stock ("Stock" or
"Shares") by key members of management is considered by the Board
to be an important element in securing superior performance by
management on behalf of all of the stockholders. While
management compensation is important, equity participation and
equity ownership provide additional valuable incentives to
achieve outstanding management performance which translates into
enhanced share value.
(c) Under the Plan, the Compensation Committee of the Board
of Directors (the "Committee" ) is authorized to approve periodic
grants of options to acquire Stock to key members of the
management organizations of the company and its various wholly
owned subsidiaries, divisions and strategic business units (the
"Company"). All grants under this Plan shall be made in strict
accordance with the terms of the Plan.
2. NAME AND TERM OF THE PLAN
The name of the Plan shall be the "DynCorp 1995 Stock Option
Plan" which shall be referred to herein as the "Plan". The term
of the Plan shall commence as of the effective date and continue
through a date which is seven (7) years from the date of the last
grant of options under the Plan; provided, that all options must
be granted under the Plan by June 30, 2000. The Plan has been
initially adopted as a so-called "non-qualified stock option
plan". See tax discussion below.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee which shall
have the sole authority in its complete discretion to interpret
the Plan and carry out its intent and purpose. The Committee
shall also have the right from time to time to amend the Plan.
See miscellaneous provisions below.
4. ELIGIBILITY - PARTICIPATION UNDER THE PLAN
(a) All full-time employees of the Company who are
participants under any Company-sponsored bonus or incentive
compensation plan, all members of the Board of Directors, and
other employees as approved by the Committee shall be eligible to
become participants under the Plan; provided, however, that the
granting of options under the Plan shall be within the sole
discretion of the Committee. In approving the granting of
options under this Plan, the Committee shall act on
recommendations of the DynCorp Chief Executive Officer who shall
in turn act on recommendations of the Company's Sector
Presidents. Specific recommendations by the Sector Presidents
shall be reviewed by the CEO who shall forward such
recommendations as he deems appropriate together with
recommendations for awards to non-operating participants to the
Committee for approval.
(b) In the granting of options under the Plan,
consideration may be given to the following nonexcluxive factors:
The obligations of the proposed optionee under the ETOP;
The ability of the proposed optionee to have a significant
positive impact on the Company's business success and improved
Stock value;
The potential for the proposed optionee to accept increased
responsibility within the Company;
The need to offer a competitive compensation and benefit package
in order to attract and retain qualified and highly motivated key
personnel; and
Performance and results
5. SHARES AUTHORIZED FOR ISSUANCE
A total of 1,250,000 shares of DynCorp Common Stock, par
value $0.10 per share, shall be authorized for issuance under the
Plan. When issued upon the valid exercise of options granted
under the Plan, such Shares shall be fully paid, non-assessable
shares of DynCorp's common stock. Options shall not be granted
for more than the total number of Shares authorized for issuance
hereunder from time to time; provided, that Shares represented by
forfeited options will be considered authorized again for
issuance hereunder.
6. MAKING OF GRANTS - PRICE
(a) Grants of options under the Plan shall be made only in
writing and shall only be valid if signed by the President or any
Senior Vice President of DynCorp. Recipients of grants shall be
entitled to receive same only upon the execution of an Optionee's
Agreement in the form appended as Attachment A to this Plan,
under which the optionee will agree to hold and exercise options
hereunder in accordance with the Plan. Among other things, the
Agreement will provide that upon termination of employment for
certain reasons, all unexercised options will be forfeited.
(b) Grants will be made in the following way, and in
accordance with the following guidelines:
Grants will be made only in increments of 100 Shares;
All grants will be subject to the vesting requirements of the
Plan described below;
The exercise price contained in all options issued under the Plan
shall be no less than the most recently determined fair market
value of the Stock as of the date of grant as determined in
connection with trading on the DynCorp Internal Stock Market (the
"Market Price");
Grants will be non-transferable except as specifically provided
and permitted under the Plan, and shall be exercisable only
during the specified term of the Plan;
Grants may be made without conditions (other than the execution
of the Optionee's Agreement) or with conditions approved by the
Committee -- such as a condition that the proposed optionee
acquire additional Shares in the DynCorp Internal Stock Market
("Internal Market"); and
Grants of options under the Plan may also be made conditional
upon a proposed optionee becoming an employee of the Company.
7. VESTING OF OPTIONS
(a) Options issued under the Plan may be exercised only
when the right to exercise vests under the Plan terms, and only
then to the extent of the vesting percentage. The right to
exercise options granted under the Plan shall vest over a period
of five (5) years following the grant of the option at the annual
rate of 20% of the options granted. For example, if an optionee
receives the grant of an option to purchase 1,000 Shares on June
30, 1995, he or she could exercise the option to the extent of
200 Shares after June 30, 1996, and to the extent of an
additional 200 Shares after each successive June 30th through
June 30, 2000.
(b) Options which are not exercised within seven (7) years
from the date of grant shall expire, and the optionee shall have
no further rights with respect to such options under the Plan or
otherwise.
(c) The Committee shall have the authority under this Plan
to grant options hereunder that are subject to special
performance vesting provisions. For example, notwithstanding the
fact that options hereunder are vested, exercise may be
conditioned upon any of the following additional performance
criteria:
The achievement of a specified stock price; or
The achievement of a specified percentage stock price increase
over the option price--e.g., vested options can only be exercised
in the event the price as of the exercise date is at least 25%
higher than the grant price.
Moreover, the Committee shall have the authority to grant
special vesting period reductions, contingent on the Company's
achievement of a specified stock price or percentage of increase
over the grant price. For example, options might be granted with
the understanding that in the event the stock price rose to some
specified price per share for at least two quarters, all of some
portion of unvested options should immediately vest.
8. MECHANICS FOR EXERCISING OPTIONS
An optionee may exercise a vested option by sending a
completed and signed Optionee Exercise Form (as prescribed by
DynCorp) to the DynCorp Corporate Secretary together with his or
her personal check in the amount of the exercise price times the
number of vested-option Shares that are being purchased. The
Corporate Secretary will either cause the Company to issue Shares
in the name of the optionee for each option exercised or will
cause such Shares to be purchased in the Internal Market and
recorded on the Optionee's Stock account within 10 days following
the next scheduled Internal Market trade day. Under the terms of
the Optionee Agreement, the optionee will specify whether the
Company shall withhold taxes as required upon the exercise of the
option from the Optionee's compensation, whether the optionee
shall pay such required amount in cash, or whether such
withholding shall be satisfied in Shares (at the market value).
See discussion below concerning taxation.
9. FORFEITURE OF CERTAIN UNEXERCISED OPTIONS - SHORTENING
OF OPTION PERIOD
The right to exercise vested options, and all interests in
unvested options, shall terminate and be forfeited in the event
an Optionee's employment is terminated for any reason except
retirement, death or disability; provided that the Committee in
its sole discretion may permit a terminated optionee a period of
no more than 30 days after termination of employment within which
to exercise previously vested options. In the event of the death
of an optionee, all unvested options shall immediately become
vested, and his or her estate or legal representative shall be
entitled to exercise any unexercised options; provided, that such
exercise must be made prior to the earliest to occur of the
expiration date of such options, or the 180th day after the
Optionee's death. An optionee who is permanently and totally
disabled as established by evidence satisfactory to the Committee
may exercise all options which are vested as of his or her
termination date; provided such exercise is made within the same
period described in the immediately preceding sentence. In the
event of an Optionee's retirement at age 65 or older, all options
shall immediately become vested, and the optionee shall have a
period of 360 days from his or her retirement date in which to
exercise such options. All other optionees who retire prior to
achieving the age of 65 years shall be entitled for a period of
180 days after retirement to exercise those options which were
vested as of his or her retirement date. All Shares obtained
pursuant to the exercise of options under these circumstances
following termination of employment due to death, disability or
retirement shall be subject to the Company's right of first
refusal to purchase such Shares at the prevailing Market Price,
which right shall be exercised by the Company in accordance with
the procedures set forth in the Optionee Agreement.
10. TAX INFORMATION
The Company will withhold from the Optionee's compensation,
or require as a condition of option exercise that the optionee
pay to the Company, an amount sufficient to comply with
applicable federal and state withholding statutes. DynCorp may,
however, permit optionees to satisfy withholding requirements, to
the extent permitted by law, through the transfer to the Company
of Shares having a fair market value equal to the withholding
requirement.
11. MISCELLANEOUS PROVISIONS
(a) The granting of an option shall impose no obligation
upon the optionee to exercise such option.
(b) Options shall not be transferable other than by will or
by the laws of descent and distribution and during an Optionee's
lifetime shall be exercisable only by such optionee.
(c) The aggregate number of Shares available for options
under the Plan, the Shares subject to any option, and the price
per share shall all be proportionately adjusted for any increase
or decrease in the number of issued Shares subsequent to the
effective date of the Plan resulting from (1) a subdivision or
consolidation of Shares or any other capital adjustment, (2) the
payment of a Stock dividend. If DynCorp shall be the surviving
corporation in any merger or consolidation, any option shall
pertain, apply, and relate to the securities to which a holder of
the number of Shares subject to the option would have been
entitled after the merger or consolidation. Upon dissolution or
liquidation of DynCorp, or upon a merger or consolidation in
which DynCorp is not the surviving corporation, this Plan or an
identical successor plan shall continue in force, or, should such
successor plan not be adopted or this Plan continued, all options
outstanding under the Plan shall immediately vest and each
optionee (and each other person entitled under the Plan to
exercise an option) shall have the right, immediately prior to
such dissolution or liquidation, or such merger or consolidation,
to exercise such Optionee's options in whole or in part. Upon
the consummation of any such dissolution, liquidation, merger, or
consolidation, all unexercised options shall terminate.
(d) The Board or Committee, by resolution, may terminate,
amend, or revise the Plan with respect to any Shares as to which
options have not been granted. Neither the Board nor the
Committee may, without the consent of the holder of an option,
alter or impair any option previously granted under the Plan,
except as authorized herein. Unless sooner terminated, the Plan
shall remain in effect for a period of five (5) years from the
date of the Plan's adoption by the Board. Termination of the
Plan shall not affect any option previously granted.
(e) As a condition to the exercise of any portion of an
option, DynCorp may require the person exercising such option to
represent and warrant at the time of such exercise that any
Shares acquired at exercise are being acquired only for
investment and without any present intention to sell or
distribute such Shares, if, in the opinion of counsel for
DynCorp, such a representation is required under the Securities
Act of 1933 or any other applicable law, regulation, or rule of
any governmental agency.
(f) DynCorp, during the term of this Plan, will at all
times reserve and keep available, and will seek or obtain from
any regulatory body having jurisdiction any requisite authority
necessary to issue and to sell, the number of Shares that shall
be sufficient to satisfy the requirements of this Plan. The
inability of DynCorp to obtain from any regulatory body having
jurisdiction the authority deemed necessary by counsel for
DynCorp for the lawful issuance and sale of its Stock hereunder
shall relieve the Company of any liability in respect of the
failure to issue or sell Stock as to which the requisite
authority has not been obtained.
(g) This Plan shall be governed by the laws of the
Commonwealth of Virginia, without regard to the conflicts-of-law
provisions thereof.
(h) Nothing herein shall be implied to constitute a
contract of employment for any person.
(h) The plan shall be become effective as of the effective
date upon approval by the DynCorp Board of Directors.
Exhibit 4.5
DynCorp
Executive Incentive Plan (EIP)
Revised January, 1995
I. PURPOSE
The purpose of the Executive Incentive Plan (the Plan) is to
motivate and reward key executives for their achievement of
preestablished, measurable objectives that have significant and
direct impact on the overall success of the company and its
business.
II. GENERAL DESCRIPTION
At the beginning of the Plan year, company and unit financial
objectives, individual objectives, and target incentive award
level will be established and confirmed in writing for each Plan
participant.
At the conclusion of the Plan year, the achievement of the
specified financial objectives and individual objectives will be
scored and weighted for each participant according to established
formulae to determine the actual incentive amount to be awarded.
III. RESPONSIBILITIES
A. The Corporate Vice President Human Resources is responsible
for administering the Plan.
B. Sector and Strategic Business Unit (SBU) Executives and
Corporate Staff Officers are responsible for nominating Plan
participants, recommending appropriate individual performance
objectives for Plan participants from their respective
organizations or functions, evaluating participant performance
and recommending individual incentive award amounts.
C. The CEO is responsible for approving Plan participants,
approving group financial and individual objectives, approving
individual target award levels, recommending actual incentive
payments, and recommending any deviations from the Plan.
D. The Compensation Committee of the Board of Directors (the
Committee) is responsible for amending the Plan, approving plan
participants, establishing company financial objectives, and
approving actual incentive payments.
IV. DEFINITIONS
A. Adjusted Operating Profit (AOP)
Operating profit plus incentive plan accruals less a Net Asset
Adjustment.
B. Average Net Assets
The average of the net assets assigned to the organizational unit
at the beginning of the Plan Year and at the end of each month
during the year through November. The net asset base will be the
total assets assigned to said operation reduced by any
non-interest bearing liabilities attributable to the unit, and
exclusive of intercompany accounts, marketable securities and
other non-operating accounts assigned to the Company.
C. Base Salary
The base annual salary rate of a participant as of January 1 of
the Plan year or, if later, the time he or she is approved as a
potential participant for a given year, exclusive of overtime,
per diem, bonuses, or any other premiums, special payments, or
allowances.
D. EBITDA
Earnings of DynCorp before deductions for interest, taxes,
depreciation, discontinued operations, and merger/acquisition
costs, as recorded on the books and records of the Corporation.
E. Net Asset Adjustment
The average net assets times a Net Asset Adjustment. The
percentage adjustment shall be at least equal to the weighted
average of the company's projected cost of debt capital for the
Plan Year. Only under extraordinary circumstances will this
percentage be set at less than 12%.
F. Operating Profit
Earnings of the applicable organizational unit (i.e., branch,
division, subsidiary, group, etc.,) after ESOP and after all
accruals, but before the Company's G&A Expense, Interest and
Dividend Income, Interest Expense, Net Asset Allocation and taxes
on income.
G. Plan Year
The period commencing January 1 and ending December 31 of the
year for which performance is being measured.
H. Target Award
The dollar amount that a participant is eligible to receive if
the combined weighted performance against company, organizational
unit and individual objectives equals an overall achievement
level of 100%.
V. ELIGIBILITY
Eligibility for participation in the Plan will be limited to key
executives in Corporate Headquarters and in the operating sectors
who have significant impact on company strategy, performance and
profitability and who hold selected positions as senior line
executives at the Sector, SBU or major P&L Center level, or as a
major staff functional head at the corporate, sector or SBU
level.
All participants in the Plan must be approved by the Committee
upon recommendation by the CEO.
A minimum of six months in an eligible position is required for
participation in the Plan. Participation for individuals with
less than six months must be approved by the CEO as an exception
to the plan.
With the exception of disability, retirement or death,
participants must be actively (on the payroll) employed on the
date the awards are paid in order to receive an incentive award.
At its sole discretion, DynCorp may make an award to a former
employee, or to the former employee's estate, in such amount as
the Company may deem appropriate.
Participation in the Plan terminates on the date the employee
terminates employment with the Company, whether voluntary or
involuntary.
Participation in the Plan precludes eligibility for participation
in any other annual incentive plan provided by the company.
VI. FUNDING
At the beginning of each Plan year, a target pool, equal to 100%
of the target award amounts for all participants, will be
established and accrued for during the year. The target pool
represents the maximum amount that can be awarded unless overall
company EBITDA achievement exceeds the plan objective. Payment
of an amount greater than or less than the target pool will be at
the sole discretion of the Committee.
VII. TARGET AWARDS
At the beginning of each Plan year, a target award, expressed in
the form of a dollar amount, will be established for each
participant based on the percentage of base salary applicable to
the salary grade to which he or she has been assigned. Target
awards range from approximately 30% to 60% (in 5% increments) of
the participant's base salary. Target awards that deviate from
the standard for a given position require CEO approval.
VIII. PERFORMANCE MEASUREMENT COMPONENTS
In order to reinforce the need for DynCorp executives to achieve
a balanced performance against financial and non-financial
criteria, incentive awards under the EIP will be based on team
and individual achievements in the following three areas:
A. The Financial Performance of DynCorp:
DynCorp will reward participants for the results of their
team efforts, as measured by the financial performance of the
company in relation to established financial objectives. This
component seeks to reinforce the need for participants to support
achievement of the company's objectives by sharing people,
technology, information, and resources across organizations.
The financial performance of the company will have a
weighting of 60% for Corporate Staff participants and 20% for all
other participants.
B. The Financial Performance of the Organizational Unit:
The financial performance of the appropriate Sector, SBU or
major P&L Center will be given the heaviest weighting in the
determination of incentive awards for participants from those
organizations in order to motivate and reward participants for
financial achievements over which they have the most direct
control and accountability.
The financial performance of the appropriate organizational
unit (i.e., Sector, SBU, or major P&L Center) will have a
weighting of 40% for Plan participants at that organization
level.
C. The Individual Performance of the Participant:
The individual performance of the Plan participant against
preestablished objectives is an important measurement component
that reinforces and rewards executives for their performance and
achievements in areas such as human resources management,
process/quality improvement, customer satisfaction and business
development. The Individual Performance factor will have a
weighting of 40% of which up to 1/2 (20%) may be discretionary
and the balance must be applied against pre-established
objectives.
The following table summarizes the weighting of each of
three performance measurement components:
TABLE 1
Weighting of Performance Measurement Components
PERFORMANCE MEASUREMENT & ORGANIZATIONAL WEIGHTING
Company Organizational
Financial Unit's Financial Individual
EIP Participant Performance Performance Performance
Corporate Staff
Executives 60% 40%
Sector, SBU & Major
P&L Executives 20% 40% 40%
IX. PERFORMANCE MEASUREMENT CRITERIA
A. Establishment and Measurement of Financial Objectives
At the beginning of each Plan year, specific financial objectives will
be established for company EBITDA and for AOP at the sector, SBU
and major P&L Center level. At the conclusion of the Plan year,
the financial performance of the company and of each
organizational unit will be measured in relation to the
applicable preestablished objectives. Performance will be
expressed as a percentage of the objective that was achieved.
In setting the financial objectives for purposes of the Plan, the
target for EBITDA and AOP should reflect an achievement
probability of approximately 80%. At this level of probability
an above average performance from the management team is required
in order to achieve the objectives A threshold achievement level
of 75% of the target objective for EBITDA and AOP will be
required in order for a formula award to be made relative to each
of these factors.
B. Establishment and Measurement of Individual Performance
Objectives
At the beginning of each Plan year, specific individual
performance objectives will be established and documented for
each participant. At year end, the individual's performance will
be measured in relation to these preestablished objectives to
produce an individual performance achievement level.
Individual performance objectives should be established according
to the following guidelines:
1. Each participant will have 6-8 written objectives that have
been jointly agreed to by the participant and his or her
supervisor.
2. Objectives will evolve from, respond to, and/or reflect the
company objectives established and communicated by the CEO.
Objectives covering each of the following areas will typically be
included;
Key operational objectives
Human resources management
Quality and process improvement
Business development
Customer satisfaction
3. Objectives will be both quantitative and qualitative in
nature and will include non financial as well as appropriate
financial related goals.
4. Objectives will be highly measurable.
5. Objectives will have performance criteria thoroughly
established in advance to enable individuals to monitor their own
performance in relation to their objectives, and to provide an
objective measurement at year-end.
At least 50% of the Individual Performance factor must be tied to
specific objectives which are documented and agreed upon.
X. AWARD DETERMINATION
Awards will be determined by weighting the Company's financial
performance percentage, the Organizational Unit's financial
performance percentage, and the individual performance percentage
by the percentages indicated in Table 1 above, adding the
resulting percentages together and then multiplying the target
award by the composite percentage. To illustrate, the formula
for determining the incentive award for an individual participant
at the Sector, SBU, or major P&L Center level is as follows:
Actual Award Amount =
[(Company Financial Performance Factor x .20) +
(Organizational Unit Financial Performance Factor x .40) +
(Individual Performance Factor x .40)]
x Target Award Amount
The maximum award for any participant will be 150% of the
established target amount. Actual award amounts will be rounded
to the nearest $100.00.
If the performance achievement level on either of the two
financial performance factors falls below the 75% threshold, the
participant will not generally receive an award for that
component. However, the CEO may on a discretionary basis
recommend the payment of awards where unusual or extraordinary
circumstances contributed to the below-threshold performance. If
the combined weighted achievement level for EBITDA and AOP does
not meet the stated threshold of 75%, the award for the
individual performance component shall also be at the discretion
of the CEO and the Committee.
Should a participant transfer to another organization during the
plan year, the final award will be jointly determined and
prorated for the time spent in each organization.
All incentive awards proposed under the Plan are subject to the
approval of the CEO and the Committee, who may at their
discretion adjust the amounts to be awarded in order to reflect
exceptional performance, performance that falls below objectives,
or other performance factors that affect or potentially affect
the ability of the company or any of its units to meet its
business and financial goals.
XI. ADMINISTRATION
Bonus awards will be calculated at the Sector level and submitted
to the Corporate Vice President Human Resources by the end of
January for company level consolidation and approval by the CEO
and the Committee. Documentation of objectives, accomplishments
and individual evaluations will be required to be submitted along
with the individual award recommendations.
Payments will be made in cash as soon as practical after the
Compensation Committee meeting in early March following final
year end closing.
Any exceptions to the Plan must be approved by the CEO.
Nothing in the plan or in any action taken hereunder shall affect
the Company's right to terminate at any time and for any reason
the employment of any employee who is a participant in the plan.
XII. SAMPLE AWARD CALCULATIONS
The examples on the following pages illustrate how the Plan
formula will be applied to calculate the incentive award for a
Corporate Staff executive and for a Division line executive.
A. Sample Award Calculation: Corporate Staff Executive
ASSUMPTIONS:
Base Salary $108,000
Target Award Percentage 30%
Target Award $ 32,400
Company Financial Performance Factor 80%
(EBITDA Act. $36M EBITDA Obj. $45M)
Individual Performance Factor 90%
AWARD CALCULATION:
(80% x .60) + (90% x .40) =
48% + 36.0% = 84.0%
Actual Award Amount (.84 x $32,400) = $ 27,216
B. Sample Award Calculation: Sector, Strategic Business Unit,
and major P&L center manager.
ASSUMPTIONS:
Base Salary $ 108,000
Target Award Percentage 30%
Target Award $ 32,400
Company Financial Performance 80%
Operational Unit Financial Performance 105%
(AOP Act. $10.5M AOP Obj. $10.0M)
Individual Performance Factor 75%
AWARD CALCULATION:
(80% x 20%) + (105% x 40%) + (75% x 40%) =
16% + 42% + 30% = 88%
Actual Award Amount (88% x $32,400) = $ 28,512
Exhibit 4.6
DYNCORP EQUITY TARGET OWNERSHIP POLICY
Effective July 1, 1995
BACKGROUND AND PURPOSE
In order to more closely align the interests of management
and the stockholders, the ownership of DynCorp common stock by
officers and key management members must be significant relative
to the executive's level of responsibility and compensation.
Accordingly, the Board of Directors has adopted the DynCorp
Equity Target Ownership Policy or "ETOP", the purpose of which
is to set forth and administer guidelines for minimum levels of
DynCorp Common Stock ("stock" or "share") ownership by a defined
group of covered executives .
The Board believes that the adoption of guidelines for
recommended levels of stock ownership over reasonable periods of
time, will result in long range improvements in company
performance and shareholder value.
COVERED EXECUTIVES
The following managers and key personnel will be covered by
the ETOP:
All Officers (except Assistant Officers) of DynCorp
All DynCorp Strategic Business Unit (SBU) Presidents and Vice
Presidents
All other managers and key personnel of DynCorp or any
wholly-owned subsidiary, division, or business unit of DynCorp
(or any less than wholly owned business as approved by the
Compensation Committee of the Board of Directors) including
Assistant Officers whose annual salary is $100,000 or more and
(i) are either a participant in the DynCorp Executive Incentive
Plan or (ii) are participants under a DynCorp stock option plan.
The foregoing managers and key executives shall be referred
to in this Policy as "Covered Executives". The Policy may be
modified by the Board in the future to apply to other employees.
The Compensation Committee of the Board will determine
whether certain executives and key managers who are hired for and
assigned to specific contracts may be exempted from the
requirements of the ETOP, or whether special goals shall be
established for such individuals considering their unique status.
SHARES THAT COUNT TOWARD ETOP GOALS
Personal Holdings, including...
Shares owned as of the effective date of this Policy;
Shares purchased directly in the DynCorp Internal Market;
Shares purchased under the DynCorp Stock Purchase Plan (ESPP);
Shares resulting from the vesting of units under the DynCorp
Restricted Stock Plan, including shares deferred for tax
purposes;
Shares obtained from the exercise of options granted under the
DynCorp 1995 or any subsequently adopted Stock Option Plan;
Shares allocated to the Covered Executive's account under the
terms of the DynCorp Employee Stock Ownership Plan, whether or
not vested;
Investments in stock through the DynCorp Savings and Retirement
Plan --the DynCorp qualified 401(k) deferred saving plan,
including Company-matching contributions;
Shares to which the Covered Executive is entitled under any
Company sponsored or approved arrangement for deferred income or
deferred delivery of shares, including shares held under IRAs;
Any of the above ownership by spouses, children and family
trusts; and
The amount of the spread (difference between grant price and most
recently determined higher fair market value) on vested options
granted under any Company stock option plan.
SHARES THAT DO NOT COUNT TOWARD ETOP GOALS
Unexercised options (except the "spread" mentioned above); and
Shares anticipated to be purchased under the ESPP.
STOCK OWNERSHIP REQUIREMENTS
The Policy's purpose is to encourage sound management and
operational practices that will directly benefit the value of the
Company's stock. Stock ownership by key managers is essential to
successfully instilling such practices, but the levels of
ownership must be reasonable in relation to the Covered
Executive's compensation.
Accordingly, the following stock ownership goals are
established:
Salary of $300,000 or more 3.0 times base salary
Salary of $200,000 up to $299,999 2.5 times base salary
Salary of $100,000 up to $199,999 1.5 times base salary
For purposes of the Policy, the value of a share will be
based on the most recent fair market value of DynCorp Common
stock determined in connection with the operation of the
Company's Internal Market, or the public market (if one exists),
or by the Board of Directors or authorized committee thereof in
the case of ESOP shares, and Restricted Stock Plan shares, or if
neither internal nor public markets exist. Covered Executives
will not be required to increase stock ownership as a result of a
temporary drop in the value of the stock. The Compensation
Committee shall determine when a drop in the stock price is
temporary.
The Compensation Committee of the Board shall review these
guidelines periodically and may make changes consistent with the
Company's organization or other market or competitive factors.
TIMEFRAME TO ACHIEVE OWNERSHIP
Covered Executives will use their best efforts to meet their
individual ownership targets within a period of seven (7) years,
commencing on the later of (i) January 1, 1996, or (ii) January
1 of the year following the calendar year during which a Covered
Executive becomes employed by the Company or any affiliate.
Transfers between such affiliate companies will be ignored for
purposes of the Policy.
In the event of financial needs that require a Covered
Executive to sell stock under conditions that could result in
the Covered Executive being unable to comply with the ETOP
guidelines, notification of the circumstances shall be given to
the Covered Executive's immediate superior or to the Vice
President of Human Resources. In the event the Covered Executive
intends to continue to work toward his or her ETOP goal
notwithstanding the sale of stock, the Compensation Committee may
make reasonable accommodations to the Policy requirements.
MEETING OWNERSHIP OBJECTIVES
The Compensation Committee of the Board will monitor the
progress of Covered Executives against the Policy requirements.
In this connection, the CEO will, no less than annually, report
to the Committee information regarding the stock ownership status
of the Covered Executives. The progress of Covered Executives
toward ETOP goals will be a factor in periodic evaluations of the
Covered Executive's performance.
NOTIFICATION UPON EMPLOYMENT
Since the ETOP is being adopted as an integral part of the
Company's overall employment criteria for Covered Executive-level
employees, all offers of employment to potential Covered
Executives shall include a written notification regarding
compliance with the ETOP together with a copy of the most recent
version of the Policy.
Exhibit 9
NEW STOCKHOLDERS AGREEMENT
THIS AGREEMENT is entered into effective the 11th day of
March, 1994, by and among the following parties:
DynCorp, a Delaware corporation with offices at 2000
Edmund Halley Drive, Reston, Virginia 22091
(herein, "DynCorp" or the "Company");
The Management Stockholders of DynCorp, represented by
the Management Stockholders Committee, c/o DynCorp, 2000 Edmund
Halley Drive, Reston, Virginia 22091
(herein, the "Management Stockholders"); and
The Private Investors in DynCorp, represented by
Herbert S. Winokur, Jr. (the "Investors' Representative"),
President of Winokur Holdings, Inc., Managing Partner of
pricorn Holdings, L.P., General Partner of Capricorn Investors,
L.P., a Delaware limited partnership with offices at 2 Cummings
Point Road, Stamford, Connecticut 06902
(herein, the "Investors").
RECITALS:
A. On or about March 11, 1988, each of the Investors and
certain of the Management Stockholders purchased shares of common
stock and common stock warrants of DME Holdings, Inc, which in
turn were exchanged on September 9, 1988 for common stock of the
Company, par value $0.10 per share (the "Common Shares"), and
warrants to acquire Common Shares ("Warrants"). In addition,
other Management Stockholders and DynCorp employees purchased
Common Shares and Warrants under the DynCorp Management Employees
Stock Purchase Plan or from other Management Stockholders during
the period between September 9, 1988 and the date of this
Agreement. During the period May, 1990 through December, 1993,
certain Management Stockholders and other employees of the
Company were also awarded restricted stock units under the
DynCorp Restricted Stock Plan (the "RSP") which in turn have been
or will be exchanged for Common Shares.
B. On September 9, 1988, the Company established an
Employee Stock Ownership Plan (the "ESOP"), effective January 1,
1988. During the period September 9, 1988 through December 31,
1993, the ESOP acquired from the Company a total of 4,148,711
Common Shares, which have been fully allocated to the accounts of
employee participants under the ESOP as a retirement benefit. On
March 26, 1991, the Company and the ESOP Trustee entered into an
amendment to the ESOP Subscription Agreement, under which the
Company agreed to contribute an additional 625,000 Common Shares
to the ESOP, or to fund the purchase of so many Common Shares by
the ESOP, during 1994 and to pay, to retiring and terminating
employees who sold their Common Shares to the ESOP or the Company
through 1996, a premium representing the difference between the
amount of $27.00 and the put purchase price determined in
accordance with the ESOP, if such amount should be lower than
$27.00, provided that the aggregate premium amount so paid would
not exceed $16,000,000.
C. On March 11, 1988, the Investors and other private
investors purchased $8,495,000 of the Company's Common Shares and
Warrants, $10,000,000 of the Company's Class B Preferred Stock
(all of which was redeemed on July 25, 1989), and $3,000,000 of
the Company's Class C Preferred Stock (the "Class C Preferred
Stock"), which is convertible into 123,711 Common Shares and
825,981 Warrants. In addition, on September 9, 1988, the Company
issued approximately $55,000,000 of 16% Pay-in-Kind Debentures
and $26,200,000 of 17% Pay-in-Kind Class A Preferred Stock to the
former public stockholders of DynCorp. The Class A Preferred
Stock was redeemed on February 27, 1992. The current balance of
the 16% Debentures is approximately $92,100,000.
D. On September 9, 1988, the Company issued to Pyramid
Investments, Ltd, an affiliate of Bankers Trust Company, in
consideration of loan and letter of credit commitments totalling
$190,000,000, a warrant (the "Pyramid Warrant") convertible into
942,563 Common Shares. The Pyramid Warrant was acquired by
Capricorn Investors, L.P., one of the Investors, on September 28,
1990. (Hereafter, the term "Warrant" shall include the Pyramid
Warrant unless specifically indicated to the contrary.)
E. As of the date of this Agreement, the ownership of the
Company's Common Shares is as follows (assuming the conversion of
the Class C Preferred Stock, exercise of the Warrants, and
distribution of remaining restricted stock units):
Number of Shares Percentage
ESOP 3,816,841 33.7%
Management Stockholders 2,867,726 25.3%
Investors 4,503,994 39.8%
Others 129,865 1.1%
F. The ESOP has purchased 316,189 of the Company's Common
Shares for allocation during 1994, and the Company is obligated
to sell or contribute at least 308,811 additional shares for
allocation in 1994. After such allocation, assuming the
conversion of the Class C Preferred Stock and the exercise of the
Warrants, the ownership of the Company's Common Shares would be
substantially as follows:
Number of Shares Percentage
ESOP 4,441,841 37.2%
Management Stockholders 2,867,726 24.0%
Investors 4,503,994 37.7%
Others 129,865 1.1%
G. As of March 11, 1988, the parties entered into a
Stockholders Agreement (the "Original Stockholders Agreement")
under which they agreed to the composition of the Company's Board
of Directors, to certain restrictions on the sale of Common
Shares, and to a procedure for the purchase of securities of
retiring, disabled, and terminating Management Stockholders by
other Management Stockholders, the Investors, or the Company.
Since the inception of the Original Stockholders Agreement, the
Company, the Investors, or other Management Stockholders have
repurchased Common Shares and Warrants having an aggregate value
of $2,516,600 from such retiring, disabled, or terminating
Management Stockholders, which includes all the Common Shares and
Warrants offered for purchase under the Original Stockholders
Agreement through December 31, 1993.
H. The Management Stockholders, the Investors, and the
Company now wish to enter into a new stockholders agreement for
the purpose of facilitating the establishment of a limited
internal market for the Common Shares and, pending establishment
of the internal market, to provide for the disposition of
Management Stockholder and Investor Common Shares and Warrants
upon retirement, termination, or in the event of any other
planned liquidation of such Common Shares.
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged concurrently with the execution
of this Agreement, the undersigned parties to this Agreement
hereby agree as follows:
1. Composition of the Board of Directors - The Investors
and the Management Stockholders agree that the composition of the
Board of Directors of the Company shall be as currently
constituted, subject to the understanding that the Board shall
consist of an equal number of directors nominated by each of (a)
Capricorn, acting on behalf of the Investors, and (b) the
Management Stockholders Committee, acting on behalf of the
Management Stockholders, plus one director to be elected in
accordance with the following procedures, if applicable.
Capricorn, acting on behalf of the Investors, and the Management
Stockholders Committee, acting on behalf of the Management
Stockholders, shall, upon the request of a majority of the entire
Board of Directors, jointly select an additional or "tie-breaker"
member of the Board, to serve until expiration of his term in
accordance with the Company's certificate of incorporation or
until removed by unanimous vote of all the directors except such
"tie-breaker" member. Each Investor and Management Stockholder
agrees to vote his or her Common Shares and Class C Preferred
Stock in favor of the nominees nominated for election in
accordance with this provision.
2. Participation in Internal Stock Market - The Company,
the Investors, and the Management Stockholders agree to use their
best efforts to establish a limited internal stock market at the
earliest practicable time for the trading of Common Shares (the
"Internal Market"). It is understood that the timing of the
Internal Market will depend on the availability of sufficient
numbers of sellers and buyers who are ready and willing to engage
in purchases and sales of Common Shares at a market price. The
viability of such a market will therefore be determined by the
level of Company earnings, the Company's future prospects, and
the ability of the Company to secure independent professional
appraisals of the fair market value of the Common Shares so as to
attract buyers and sellers to the Internal Market. Since many of
these circumstances are beyond the Company's direct control,
there can be no guarantee that an Internal Market for Common
Shares can be established or, if established, that such a Market
can be sustained on a basis sufficient to continue to attract
future buyers and sellers. Once established, the Internal Market
will be considered to be suspended only when so suspended by
formal resolution of the Board of Directors of the Company. The
Company shall have no obligation to initiate or maintain the
Internal Market if a public market for Common Shares exists or is
contemplated within a 120-day period.
3. Restrictions on Sales Outside the Internal Market -
In consideration of the proposed establishment of the Internal
Market and the other commitments of the Company set forth herein,
the Investors and Management Stockholders agree that they will
not sell or offer to sell any Common Shares, Warrants, or Class C
Preferred Stock outside of the Internal Market, except as
permitted under paragraphs 4 or 5 below. Certificates
representing Common Shares, Warrants, and Class C Preferred Stock
shall bear restrictive legends described in paragraph 12.
4. Permitted Sales of Common Shares and Warrants -
Notwithstanding the restrictions described in paragraphs 2 and 3
above, and without regard to the existence of the Internal
Market, the following sales of Common Shares and Warrants shall
be permitted:
(a) Any sale in response to a tender offer or other
offer to acquire pro rata or otherwise more than 30% of the
authorized and outstanding Common Shares and Warrants, or any
sale in response to any offer to buy (regardless of quantity or
percentage) made by the Company, the ESOP, or any other qualified
or non-qualified benefit plan maintained by the Company;
(b) Any sale made as part of a public offering of
Common Shares that has been registered with the Securities
Exchange Commission or through a public market on which the
Common Shares are registered to trade;
(c) Any sale or exchange of Common Shares and/or
Warrants in connection with a recapitalization, reorganization,
spin-off, or split-off of the Company or parts thereof, involving
only parties to this Agreement and/or the ESOP;
(d) Any sale or transfer of Common Shares or Warrants
to any member of a Management Stockholder's or an Investor's
immediate family or legal representative, including a transfer
pursuant to a domestic relations order, or to any majority-owned
affiliate of any Investor or an owner of or investor in any
Investor organization, provided such transferee has agreed in
writing to be bound by the terms of this Agreement (a "Permitted
Transferee");
(e) Any sale or transfer in accordance with paragraph
5 below concerning retiring, disabled, deceased, or otherwise
terminated Management Stockholders; and
(f) Any other sale or disposition of Common Shares
approved by a majority of the Board of Directors.
Sales, exchanges, or transfers under (c) and (d) above shall be
conditioned upon the agreement by the transferee to be bound by
the terms of this Agreement. No sales or transfers of Class C
Preferred Stock shall be permissible; however, upon conversion of
the Class C Preferred Stock, the underlying Common Shares and
Warrants shall be subject to this paragraph 4.
5. Disposition of Common Shares Owned by Retiring and
Certain Other Management Stockholders - Management Stockholders
who retire or otherwise terminate their employment with the
Company, other than those described in (c) below, and the
representatives of deceased Management Stockholders, will be
entitled to dispose of their Common Shares and Warrants through
transactions in the Internal Market. Until such time as the
Internal Market is established, or during any period when such
Internal Market may be suspended, the following procedures will
apply with respect to Common Shares and Warrants owned by
retiring, terminating, or deceased Management Stockholders.
(a) Management Stockholders who retire on or after a
"Retirement Date" as defined in the ESOP, Management Stockholders
whose positions are eliminated as part of a reduction-in-force,
and representatives of deceased Management Stockholders shall
have the option, exercisable on a one-time basis as to all or any
portion of their holdings of Common Shares or Warrants and within
a reasonable time before or after the event which gives rise to
such option, of (i) retaining their Common Shares and Warrants or
(ii) offering such Common Shares and Warrants in accordance with
the procedures set forth in paragraph 6 below. Prior to the
establishment of the Internal Market, or during any period such
Internal Market is suspended, the price for such offered Common
Shares and Warrants shall be the fair market value as of such
time determined from time to time by the Board of Directors (the
"Board-Determined Fair-Market-Value Price").
(b) Management Stockholders who voluntarily elect to
leave the employ of the Company under circumstances other than
those described in (a) above shall be required to resell their
Common Shares and Warrants in accordance with the procedures set
forth in paragraph 6 below, at the Board-Determined
Fair-Market-Value Price.
(c) Management Stockholders whose employment with the
Company is terminated for cause shall be required to resell their
Common Shares and Warrants to the Company at the lower of the
Board-Determined Fair-Market-Value Price or the Management
Stockholder's original cost for such securities; provided that
payment therefor shall be made in four equal annual installments
commencing one year after the date of termination and shall
further be subject each year to such restrictions regarding
securities repurchases as may be contained in any Company debt
instrument and the rights and preferences of the Class C
Preferred Stock.
(d) Management Stockholders who elect to retain Common
Shares and Warrants under (a)(i) above, or their legal
representatives or Permitted Transferees, shall be entitled to
participate in the Internal Market and shall further be entitled
to participate as a purchaser in any Periodic Offer (as hereafter
defined), in accordance with, but subject to all Management
Stockholder obligations under, this Agreement.
6. Procedures for Offering Common Shares for Sale - The
following procedures shall be followed to effect sales of Common
Shares and Warrants pursuant to paragraphs 5(a) and (b):
(a) Prior to the time the Internal Market is
initiated, or during any period such Internal Market is
suspended, any Management Stockholder entitled to sell Common
Shares and Warrants in accordance with paragraphs 5(a) and (b)
above shall notify the Corporate Secretary in writing regarding
the number of Common Shares and Warrants to be sold and the
circumstance of such sale. In cases where a Management
Stockholder is required to sell, the Corporate Secretary may so
notify the Management Stockholder. Periodically, but no less
frequently than once per year, the Corporate Secretary shall
initiate the appropriate procedures outlined below (the "Periodic
Offer"). Securities shall be offered first to the other
Management Stockholders and then to the Investors, at the
Board-Determined Fair-Market-Value Price. Sales and purchases
shall be allocated on a pro rata basis, based respectively on the
total numbers of securities then being offered by each seller and
the respective holdings of the prospective purchasers. Trades
shall be settled as soon as practicable.
(b) Any Common Shares or Warrants not sold under the
above procedure shall be purchased by the Company at the
Board-Determined Fair-Market-Value Price; subject, however, each
year to such restrictions on securities repurchases as may be
contained in any Company debt instrument or the rights and
preferences of the Class C Preferred Stock. Payments for such
purchases will normally be made as soon as practicable following
the end of the year, following calculation of the effect of
annual limitation restrictions; provided, however, that as to
Common Shares and Warrants purchased by the Company from
Management Stockholders selling their Common Shares and Warrants
pursuant to paragraph 5(b) above, payment therefor shall be made
in four annual increments commencing no earlier than the year
following the year of termination of employment. Securities not
sold to other Management Stockholders or Investors or purchased
by the Company in the course of a Periodic Offer as a result of
such restrictions shall, at the seller's request, be carried over
until the following Periodic Offer(s), and the same procedures
shall be repeated.
(c) Sales in the Internal Market shall be in
accordance with such procedures as shall be approved by the Board
of Directors in keeping with sound industry practices for
securities transactions. Without specifying in particular the
procedures to be adopted, the Company intends to use its best
efforts to establish an Internal Market which will engage in
trades based on an independently determined fair market price
(the "Internal Market Price") no less than two times a year. The
maintenance of the Internal Market may, among other things, be
dependent upon the ability of the Internal Market to sustain a
minimum volume of trades on each trading date. The Company shall
have no obligation to continue the Internal Market once it is
established. The cost of maintaining the Internal Market shall be
recovered through the assessment of reasonable commissions only
on sales of Common Shares and Warrants through the Internal
Market. The Company shall have no obligation to maintain the
Internal Market during any period when a public market for the
Common Shares exists.
(d) Notwithstanding the provisions of (a), (b), and
(c) above, if a Management Stockholder or legal representative or
Permitted Transferee thereof sells Common Shares obtained
directly by such Management Stockholder as a distribution from
the RSP, whether effected through the Internal Market at the
Internal Market Price or under the procedures described in (a)
above based on the Board-Determined Fair-Market-Value Price, and
if the Internal Market Price or the Board-Determined
Fair-Market-Value Price, as applicable, is lower than the most
recent annual or quarterly ESOP Control Premium Share Valuation
(hereafter defined), the Company shall be obligated to pay to the
selling Management Stockholder or representative an additional
amount per Common Share equal to the difference between the
Internal Market Price or the Board-Determined Fair-Market-Value
Price, as applicable, and the most recent annual or quarterly
ESOP Control Premium Share Valuation. This obligation shall only
apply to the first sale of any Common Shares received by the
Management Stockholder upon conversion of Units awarded under the
RSP; it shall be extinguished following either (i) the first sale
of any of any such RSP-derived Common Shares by such Management
Stockholder, his estate or heir(s), or Permitted Transferee, or
(ii) any transfer of the RSP-derived Common Shares to any party
other than a Permitted Transferee. For purposes of this
paragraph, the surrender or conversion of restricted stock units
for payment of withholding and payroll taxes shall not constitute
a "sale", and Control Premium Share Valuation shall mean the most
recent ESOP share valuation provided by the ESOP's independent
financial advisor, which includes a so-called control block or
enterprise value premium. Such valuation as of December 31, 1993
is $17.99 per share.
7. Management Stockholders Committee - There is hereby
established a Management Stockholders Committee, the membership
of which shall consist of the individuals identified on Exhibit A
hereto. In the event any of the named members of the Committee
shall refuse or be unable to serve, a simple majority of the
Committee shall have the authority to select a replacement member
from among those who are Management Stockholders. A member of
the Committee may be removed by a vote of two-thirds of the
members of the Committee. The Committee members shall serve
without compensation and shall be authorized to make any and all
decisions required to be made by the Management Stockholders
Committee under this Agreement. No Committee member shall have
any liability to any Management Stockholder for any of his or her
acts or omissions while serving as a Committee member, each
Management Stockholder signatory to this Agreement hereby
agreeing to hold such Committee members harmless from any and all
liability to such Management Stockholder related to service on
the Committee.
8. Reports - During the term of this Agreement, each
Management Stockholder and Investor shall be entitled to receive
copies of the following reports and financial information:
(a) The most recent Form 10-K or Form 10-Q filed with
The Securities and Exchange Commission (upon request);
(b) DynCorp Employee Annual Report; and
(c) Selected quarterly financial and operational data.
9. Exercise of Warrants - In partial consideration of
the undertakings of the Management Stockholders and Investors
under this Agreement, the Company agrees, during the period
between the individual Management Stockholder's or Investor's
execution of a copy of this Agreement and June 1, 1994, to pay
for the exercise of Warrants with previously issued Common
Shares, at the rate of $11.86 per Common Share. Investors or
Management Stockholders who do not avail themselves of this
opportunity shall be free to pay a cash price for exercise of the
Warrants or retain the Warrants, which may be exercised at any
time through September 9, 1998 at the regular warrant exercise
price of $0.25 per Warrant; however, if an individual elects to
pay cash for exercise of a portion of the Warrants held directly
by such individual, the election must be so made for all Warrants
held by such individual. The foregoing proviso shall not apply
to Warrants held in a trust or individual retirement account.
10. Term of Agreement - The term of this Agreement shall
commence on March 11, 1994, and shall continue through March 10,
1999, unless earlier terminated by agreement on behalf of the
parties hereto. No amendment to this Agreement shall be valid
unless reduced to writing and signed on behalf of all parties.
For purposes of termination or amendment, the Management
Investors shall be represented by the Management Stockholders
Committee, and the Investors shall be represented by the General
Partner of Capricorn Investors, L.P.
11. Adherence to this Agreement - A Management
Stockholder or an Investor, respectively, shall become a
Management Stockholder or Investor party to this Agreement only
upon personally executing a copy of the signature page of this
Agreement and delivering such executed copy to the Corporate
Secretary of the Company.
12. Legends and Stop Transfer Orders - Each Management
Stockholder and Investor agrees that substantially the following
legends shall be placed on certificates representing Common
Shares and Warrants held by them:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE RESTRICTIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED
AS OF MARCH 11, 1994, A COPY OF WHICH IS ON FILE AT THE OFFICE OF
THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES UNLESS THE
ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE ISSUER STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND OTHER STATE SECURITIES LAW OR THAT THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT.
13. Public Market - If the Company shall have filed (a) a
registration statement relating to any class of its securities
pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and (b) a
final registration statement on Form S-1, S-2, or S-3, relating
to its Common Shares pursuant to the requirements of the
Securities Act of 1933 (the "Securities Act"), the Company shall
file the reports required to be filed by it under the Securities
Act, the Exchange Act, and the rules and regulations adopted by
the Securities and Exchange Commission (the "Commission")
thereunder, to the extent required from time to time to enable
Management Stockholders or Investors to sell Common Shares in the
public securities market, within the limitation of the exemptions
provided by Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. During any period when the
Common Shares are tradable on a national securities exchange or
in the over-the-counter market, the Company shall have no
obligation to maintain the Internal Market.
14. Registration Rights - In the event that the Company
files for registration on Form S-1, S-2, or S-3 under the
Securities Act for a public offering of Common Shares which
includes shares being sold by any Management Stockholders or
Investors, the Company shall notify all Management Stockholders
and Investors of such intent and afford them the opportunity to
participate in such registration and public sale, from time to
time and pro rata with other offerors, based on the ratio of the
number of Common Shares held by each interested seller to the
number of Common Shares (fully diluted, on an after-sale basis)
available for registration at such time; provided, however, that
the parties who participate in such registration shall be
responsible with other participating sellers for a proportional
share of underwriting expenses, pro rata according to the total
number of shares sold on behalf of all participating sellers and
shall be subject to any restrictions, such as stand-still
obligations, that may be applicable to the registration and sale;
and provided further, however, that the underwriter shall have
the full authority, in its sole discretion, to determine the size
and composition of any public offering.
15. Specific Performance - The parties hereto each
acknowledge and agree that, in the event of any breach of this
Agreement, the non-breaching party would be irreparably harmed
and could not be made whole by monetary damages. It is
accordingly agreed that such parties, in addition to any other
remedy to which they may be entitled at law or in equity, shall
be entitled to compel specific performance of this Agreement in
any action instituted in the United States District Court for the
Eastern District of Virginia, or, in the event such court would
not have jurisdiction for such action, in any court of the United
States or any state having subject matter jurisdiction. The
parties hereto each consent to personal jurisdiction in any such
action brought in the United States District Court for the
Eastern District of Virginia and to service of process upon it in
the manner set forth in paragraph 19.
16. Entire Agreement; Amendments - This Agreement
contains the entire understanding of the parties with respect to
the subject matter hereof. There are no restrictions,
agreements, promises, warranties, covenants, or undertakings with
respect to such matters other than those expressly set forth
herein or as set forth in the Company's Certificate of
Incorporation. This Agreement supersedes all prior agreements
and understandings among the parties with respect to its subject
matter, including specifically the Original Stockholders
Agreement, except for the provisions thereof which remain in
effect pursuant to paragraph 13 thereof. This Agreement may not
be amended except by an instrument in writing signed on behalf of
all of the parties hereto. Any agreement to any extension or
waiver on the part of a party hereto shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
For all purposes of this paragraph 16, the Management
Stockholders Committee shall be empowered to act on behalf of the
Management Stockholders, and the Investors' Representative shall
be empowered to act on behalf of the Investors.
17. Interpretation - The paragraph headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
18. Severability - Every provision of this Agreement is
intended to be severable. If any term or provision hereof is
illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of this
Agreement.
19. Notices - All notices hereunder shall be in writing
and shall be deemed to have been given or made when delivered
personally or when transmitted by telex or telecopy, or three
days after the date deposited in the mail, first-class mail,
registered or certified, return receipt requested and postage
prepaid to the party at the address set forth below or such other
address as any party hereto may have furnished to the others in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt:
To the Company: DynCorp
2000 Edmund Halley Drive
Reston, Virginia 22091
Attention: T. Eugene Blanchard
or, where specified: Attention: Corporate Secretary
To the Management Management Stockholders Committee
Stockholders: c/o DynCorp
2000 Edmund Halley Drive
Reston, Virginia 22091
Attention: David L. Reichardt, Esq.
To the Investors: Capricorn Investors, L.P.
72 Cummings Point Road
Stamford, Connecticut 06902
Attention: Herbert S. Winokur, Jr.
Any notice hereunder shall be deemed to have been given to each
Management Stockholder if given to the Management Stockholders
Committee, and to each Investor if given to the Investors'
Representative at the addresses set forth above.
20. Governing Law - This Agreement shall be governed by
and construed in all respects in accordance with the laws of the
State of Delaware, without regard to the principles of conflicts
of laws thereof which might refer such interpretation to the laws
of a different state or jurisdiction.
21. Counterparts - This Agreement may be executed
simultaneously in one or more counterparts, each of which shall
be deemed to be an original but all of which together shall
constitute one and the same instrument.
22. Assignment - No party hereto may assign or delegate
or otherwise transfer any of its rights hereunder, and any
agreement, act, or deed purporting to effect any such assignment,
delegation, or transfer without such prior written consent shall
be void; provided however that such prohibition shall not exclude
assignment by operation of law, such as by merger of a party into
another corporation.
23. Binding Effect - Subject to the provisions of
paragraph 22, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns.
24. No Third-Party Beneficiaries - The provisions of this
Agreement are intended solely for the benefit of the parties
hereto, and no other party is entitled to any rights, benefits,
or privileges created hereunder.
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered as of the date first above written.
DYNCORP
By: Dan R. Bannister, President
Dan R. Bannister, President
CAPRICORN INVESTORS, L.P.
By: Herbert S. Winokur, Jr.
Herbert S. Winokur, Jr., President
of Winokur Holdings, Inc., Managing
Partner of Capricorn Holdings,
L.P., General Partner of Capricorn
Investors, L.P.
SECURITY INSURANCE COMPANY OF HARTFORD
By:
Title:
GUARANTY NATIONAL INSURANCE COMPANY
By:
Title:
MANAGEMENT STOCKHOLDERS:
Print: Print:
Print: Print:
Print: Print:
Print: Print:
Print: Print:
Print: Print:
Exhibit A
Management Stockholders Committee
Dan R. Bannister
T. Eugene Blanchard
David L. Reichardt
<TABLE>
Exhibit 12
DynCorp and Subsidiaries
Computation of Ratios
(Dollars in Thousands)
<CAPTION>
(1) Ratio of earnings to fixed charges
For the Year Ended December 31,
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Fixed Charges
Interest on debt $12,405 $16,341 $24,145 $24,894 $24,912
Amortization of discount 2,941 2,569 731 644 706
and expenses
Interest element of rentals 4,481 4,993 4,902 5,518 7,372
$19,827 $23,903 $29,778 $31,056 $32,990
Earnings
Loss from continuing operations
and before income taxes and
extraordinary items $(18,942) $(18,592) $(20,648) $(11,133) $(16,907)
Interest on debt 12,405 16,341 24,145 24,894 24,912
Amortization of debt discount
and expense 2,941 2,569 731 644 706
Interest element of rentals 4,481 4,993 4,902 5,518 7,372
Minority interest (pre-tax) - - - (1,441) (1,660)
885 5,311 9,130 18,482 14,423
Deficiency in earnings available to
cover fixed charges $(18,942) $(18,592) $(20,648) $(12,574) $(18,567)
</TABLE>
(2) Ratio of long term debt to equity
Total long-term debt $230,609
Total equity $7,250
Ratio of long-term debt to equity 31.8 : 1
EXHIBIT 21
April 1995
SUBSIDIARIES OF DYNCORP
Name of Subsidiary (Active)
Aerotherm Corporation
Air Carrier Services, Inc.
DAPSCO Inc.
Dyn Funding Corporation
Dyn Marine Services, Inc.
Dyn Marine Services of Virginia, Inc.
Dyn/Mexico Holdings, Inc.
Dyn Network Management, Inc.
Dyn Pacific Aerospace Services, Inc.
Dyn Realty Corporation
Dyn Systems Technology, Inc.
DynAir CFE Services, Inc.
DynAir de Mexico S.A. de C.V.
DynAir Euroservices(UK) Ltd.
DynAir Euroservices (Italia) S.p.A
DynAir Fueling Inc.
DynAir Fueling of Nevada Inc.
DynAir Maintenance, Inc.
DynAir Services Inc.
DynAir Services Russia Inc.
DynAir Tech of Arizona, Inc.
DynAir Tech of Florida, Inc.
DynAir Tech of Texas, Inc.
DynAir Technologies International, Inc.
DynCorp Advanced Repair Technology, Inc.
DynCorp Advanced Technology Services,Inc.
DynCorp Aerospace Operations, Inc.
DynCorp Aerospace Operations (UK) Ltd.
DynCorp Aviation Services, Inc.
DynCorp/DynAir Corporation
DynCorp Environmental, Energy & National Security Programs, Inc.
DynCorp of Colorado, Inc.
DynCorp Information & Engineering Technology, Inc.
DynCorp International Services GmbH
DynCorp International Services Inc.
DynCorp International Services Ltd.
DynCorp Viar Inc.
DynCorp West Virginia Inc.
DynTel Corporation
General Systems Engineering,Inc.
Grupo DynCorp de Mexico
Kwajalein Services, Inc.
TAI Realty Corporation
Other Affiliated Companies
Advanced Repair Technology International Ltd.
Business Mail Express, Inc.
DynKePRO L.L.C.
DynMcDermott Petroleum Operations Company
Name of Subsidiary (Inactive)
Anedyn, Inc.
Anedyn Power Company
Audio Technical Services Inc.
Cinco Investors, Ltd
Dyn Logistics Services Inc.
DynAir Caribbean Services, Inc.
DynAir Technical Services, Inc.
Dynalectron Corporation
Dynalectron Systems Inc.
Electric Utility Construction, Inc.
Fuller-Austin Insulation Company
OLDHD Systems, Inc.
Pacific TSD Corporation
Sea Mobility Inc.
395146 Alberta Ltd.
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use
of our reports (and to all references to our Firm) included in or
made a part of this registration statement.
May 12, 1995
Washington, D. C.
ARTHUR ANDERSEN LLP
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature to this Amendment to Registration Statement appears
below hereby appoints Dan R. Bannister, David L. Reichardt and H.
Montgomery Hougen, and each of them, any one of whom may act
without the joiner of the others, as his or her attorney-in-fact
with full power of substitution and resubstitution to sign on his
or her behalf individually and in the capacity stated below, and
to sign and file all amendments and post-effective amendments to
this Amendment to Registration Statement and any and all other
documents that may be required in connection with the filing of
this Amendment to Registration Statement, which amendments may
make such changes and additions to this Amendment to Registration
Statement as such attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities act of 1933,
as amended, this Amendment to Registration Statement has been
signed by the following person sin the capacities and on the
dates indicated.
Signature Title
Herbert S. Winokur, Jr. Director and Chairman of the Board
Herbert S. Winokur, Jr.
Dan R. Bannister Director, President and Chief Executive Officer
Dan R. Bannister (Principal Executive Officer)
T. Eugene Blanchard Director,Senior Vice President and Chief Financial
T. Eugene Blanchard Officer (Principal Financial Officer)
Russell E. Dougherty Director
Russell E. Dougherty
Gerald A. Dunn Vice President and Controller
Gerald A. Dunn (Principal Accounting Officer)
James H. Duggan Director and Executive Vice President
James H. Duggan
Paul V. Lombardi Director and Executive Vice President
Paul V. Lombardi
Dudley C. Mecum II Director
Dudley C. Mecum II
Michael T. Masin Director
Michael T. Masin
David L. Reichardt Director, Senior Vice President and General Counsel
David L. Reichardt
