SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 2, 1995 Commission file number 1-5901
FAB INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2581181
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 Madison Avenue, New York, NY 10016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-592-2700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.20 par value American Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:Share Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]
The aggregate market value at February 20, 1996 of shares of the
Registrant's Common Stock, $.20 par value (based upon the closing price per
share of such stock on the Composite Tape for issues listed on the American
Stock Exchange), held by non-affiliates of the registrant was approximately
$130,984,000. Solely for the purposes of this calculation, shares held by
directors and executive officers of the Registrant and members of their
respective immediate families sharing the same household have been excluded.
Such exclusion should not be deemed a determination or an admission by the
Registrant that such individuals are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: At February 20,
1996, there were outstanding 5,897,259 shares of Common Stock, $.20 par value.
Documents Incorporated by Reference: Certain portions of the Registrant's
definitive proxy statement to be filed not later than April 1, 1996 pursuant to
Regulation 14A are incorporated by reference in Items 10 through 13 of Part III
of this Annual Report on Form 10-K.
<PAGE>
FAB INDUSTRIES, INC.
INDEX TO FORM 10-K
Item Number Page
PART I...............................................................1
Item 1. Business............................................. 1
Item 2. Properties..............................................3
Item 3. Legal Proceedings.......................................4
Item 4. Submission of Matters to a Vote of Security-Holders.....4
PART II..............................................................6
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters...............................................6
Item 6. Selected Consolidated Financial Data....................7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................8
Item 8. Financial Statements and Supplementary Data............10
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................10
PART III............................................................11
Item 10. Directors and Executive Officers of the Registrant....11
Item 11. Executive Compensation................................11
Item 12. Security Ownership of Certain Beneficial Owners and
Management...........................................11
Item 13. Certain Relationships and Related Transactions........11
PART IV.............................................................12
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K..........................................12
SIGNATURES......................................................... 16
<PAGE>
PART I
ITEM 1. BUSINESS
Fab Industries, Inc. and its subsidiaries (collectively, the
"Registrant") are engaged in the business of manufacturing and marketing warp
knit textile fabrics, raschel laces, circular knits, novelty knits, and
polyurethane coated bonded fabrics. In addition, the Registrant produces
comforters, sheets, blankets and other bedding products. The Registrant's
products are generally non-branded. The Registrant was incorporated under the
laws of the State of Delaware on April 21, 1966 and is a successor by merger to
previously existing businesses.
The Registrant's textile operations consist primarily of knitting and
finishing synthetic yarns on tricot and raschel warp knitting machines and
synthetic and natural yarns on circular double and single knit machines.
Products in which the Registrant's textile fabrics are used include a broad line
of ready to wear and intimate apparel for men, women and children; children's
sleepwear; activewear; recreational apparel; home furnishing applications;
over-the-counter fabrics sold to major fabric specialty chain stores; industrial
fabrics; upholstery fabrics for the residential and contract markets; and health
care and consumer product related applications.
The Registrant also utilizes its own textile fabrics in its Salisbury,
North Carolina manufacturing facility to produce flannel and satin sheets, as
well as blankets, comforters and other bedding products which the Registrant
sells to chain stores, department stores, specialty stores, catalogue and mail
order concerns, and domestic and foreign airlines. The Registrant also sells to
the institutional health-care markets.
The Registrant's Raval Lace Division manufactures raschel lace products
for sale to manufacturers of women's lingerie and women's and children's
apparel. There are also sales in the ribbon and craft, and home furnishings
trades. In addition, the Raval Lace Division produces over-the-counter lace
fabrics for sale to retailers.
Through its Raval Designer Lace Division, the Registrant produces a
more intricately designed lace on the Registrant's state-of-the-art, high-bar
electronic machinery. The Designer Lace products are used in women's better
designer lingerie, bridal wear, dresses, blouses and sportswear.
The Registrant's subsidiary, Gem Urethane Corporation, produces a line
of polyurethane coated fabrics and a variety of flame, adhesive and
ultrasonically bonded items. Products in which the Registrant's polyurethane
fabrics are used include shoes, luggage, apparel, accessories, women's handbags,
belts, health care, industrial and automotive products.
The Registrant engages in research and product development activities
which are directed to the creation of new fabrics and styles to meet the
continually changing demands of its customers. Direct expenditures in this area
aggregated $3,824,000, $4,347,000 and $4,184,000 in fiscal 1993, 1994 and 1995
respectively. Through these efforts, the Registrant has developed a full line of
proprietary knitted fabrics for sale to manufacturers of
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men's, women's and children's apparel, both domestically and in foreign markets.
Similarly, the Registrant has also developed a full line of proprietary sheets
and blankets, including specialty blankets for airlines.
While the Registrant utilizes various trademarks and trade names in
connection with the promotion and sale of its products, it does not believe that
the loss or expiration of any such trademark or trade name would have a material
adverse effect on its operations.
The Registrant's products are marketed primarily by its full-time sales
personnel, although the Registrant also utilizes the services of independent
representatives located throughout much of the United States and abroad.
Advertisements in various media, in cooperation with producers of yarn utilized
by the Registrant, are also employed as a marketing tool.
Historically, the Registrant's business reflects minor seasonal
variation. Somewhat higher sales are recorded in the second and third fiscal
quarters as a result of purchases by customers in anticipation of Fall and
Holiday apparel sales. The fourth and first fiscal quarter sales tend to be
lower as they are derived from apparel customer orders limited to those needed
to replenish smaller inventory requirements after Fall and Holiday sales and
prior to customer reorders for Spring and Summer fabrications.
The Registrant does not deem information relating to backlog of firm
orders to be material, as goods subject to such orders are shipped within a
relatively short time, usually two-to-ten weeks, depending on the availability
of yarn and other raw materials. On average, orders are filled within six weeks.
For fiscal 1995, the Registrant's aggregate sales to companies under
the common control of Sara Lee Corporation accounted for approximately 16% of
the Registrant's net sales. The receivables from this group of customers
represent approximately 22% of the Registrant's December 2, 1995 accounts
receivable balance. The Registrant's export sales are not material.
SUPPLIES OF RAW MATERIALS
The Registrant has not experienced difficulties in obtaining sufficient
chemicals, dyes and other raw materials and supplies required to maintain full
production; nor has it experienced difficulties in obtaining sufficient yarns.
The Registrant is not dependent upon any single source of supply and alternative
sources are available for most of the raw materials necessary to conduct its
business.
INVENTORIES
The Registrant is required to maintain adequate inventories of yarns
and other raw materials to insure an uninterrupted production flow. Greige and
finished goods must be maintained as inventory to meet varying customer demand
and delivery requirements. Credit terms available to customers normally exceed
credit terms extended by suppliers of raw materials, requiring the Registrant to
maintain adequate working capital.
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COMPETITION
The Registrant is engaged in a highly competitive business which is
based largely upon product quality, service and price and upon general consumer
demand for the finished goods in which the Registrant's products are utilized.
The Registrant believes that there are in excess of 20 other manufacturers for
its products. The Registrant believes that it is one of the major warp and
circular knit, raschel lace and urethane product manufacturers in the United
States. The proportion of imported textile goods sold in the United States has
increased substantially in the past few years, and has had an adverse impact on
domestically manufactured textile products and the number of domestic
manufacturers of such products. The Registrant's strong financial position and
increased capacity (the result of significant expenditures for production
equipment) have enabled it to capture a larger share of the now smaller domestic
textile market.
EMPLOYEES
The Registrant's employees who number approximately 1,600 are not
represented by unions. The Registrant considers relations with its employees to
be satisfactory.
ITEM 2. PROPERTIES.
The Registrant's manufacturing operations are conducted in facilities
owned by the Registrant in Lincolnton, Maiden, Cherryville and Salisbury, which
are all in North Carolina, and in facilities leased by the Registrant in
Amsterdam, New York. All of the Registrant's facilities are generally utilized
on a full-time, five to six day-a-week basis.
Knitting, dyeing-finishing and printing operations are conducted at the
Registrant's Lincolnton facility. These include warp and raschel knitting,
various types of dyeing, framing, lace separating, sueding, shearing, napping,
calendaring and heat- transfer printing. Dyeing-finishing operations are also
conducted at the Cherryville facility. The Lincolnton and Cherryville facilities
also process and serve as warehouses for greige goods, manufactured and shipped
from the Registrant's Amsterdam and Maiden plants.
At the Maiden plant facility, the Registrant conducts a variety of
manufacturing operations, including warping for the tricot and lace machines and
single and double knitting of fabrics. The Salisbury facility is the site of the
Registrant's consumer products and institutional products manufacturing, retail
and over- the-counter operations. The Registrant's Amsterdam facilities are
devoted to tricot warping and tricot knitting operations and warehousing.
Approximately 106,000 square feet in one of the Registrant's Amsterdam plants is
utilized for the production of urethane coated fabrics and laminating
operations.
The following table sets forth in summary fashion the location of each
of the Registrant's manufacturing facilities, its principal use, approximate
floor space, and, where leased, the lease expiration date. No facility owned by
the Registrant is subject to any encumbrance.
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<TABLE>
<CAPTION>
APPROXIMATE LEASE
LOCATION PRINCIPAL USE FLOOR SPACE EXPIRATION DATE
<S> <C> <C> <C>
Lincolnton, Dyeing and Finishing, 630,550 sq.ft. (1)
North Raschel and Tricot
Carolina Warp Knitting, Printing
and Warehouse
Lincolnton, Warehouse 55,000 sq. ft. (1)
North Carolina
Maiden, Warping, Circular Single 224,013 sq.ft. (1)
North Carolina and Double Knitting and
Warehouse
Salisbury, Manufacturing Finished 125,000 sq.ft. (1)
North Carolina Consumer Products and
Retail Over- the-Counter
Fabric
Amsterdam, Polyurethane Coating 106,000 sq.ft. 12/31/99 (2)
New York Manufacturing
Operations and Bonding
and Laminating
Amsterdam, Warping, Tricot Knitting 367,000 sq.ft. 12/31/06 (2)
New York and Warehouse
Cherryville, Dyeing and Finishing 197,000 sq. ft. (1)
North
Carolina
New York, Executive Offices and 33,000 sq. ft. 4/30/96 (3)
New York Showroom Facilities
</TABLE>
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(1) Owned by the Registrant.
(2) Capitalized building lease - See note 5 of Notes to Consolidated Financial
Statements.
(3) Registrant is currently negotiating a new lease.
All of the Registrant's facilities are constructed of brick, steel or
concrete and are considered by the Registrant to be adequate and in good
operating condition and repair.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Registrant
or any of its subsidiaries is a party or of which any of their respective
properties are the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not Applicable
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the
executive officers of the Registrant as of February 20, 1996.
NAME AGE POSITIONS AND OFFICES
Samson Bitensky...... 76 Chairman of the Board of Directors, President and
Chief Executive Officer
David A. Miller...... 58 Vice President-Finance and Treasurer
Stanley August....... 64 Vice President
Steven Myers......... 47 Vice President
Sherman S. Lawrence.. 77 Secretary and Director
Each of the Registrant's executive officers serves at the pleasure of
the Board of Directors and until his or her successor is duly elected and
qualifies.
SAMSON BITENSKY was among the founders of the Registrant in 1966 and
has served as Chairman of the Board of Directors and Chief Executive Officer of
the Registrant since such time. Mr. Bitensky has also served as President of the
Registrant since 1970.
DAVID A. MILLER has been employed by the Registrant since 1966 and has
served as its Controller from 1973 until December 7, 1995 and as Vice President
- - Finance and Treasurer since December 7, 1995. On December 6, 1995 Mr. Howard
Soren, Chief Financial Officer, Vice President-Finance and Treasurer of the
Registrant since 1972 retired from the Registrant.
STANLEY AUGUST has been employed by the Registrant since 1980 and
previously served as General Sales Manager of its Circular Knit Division and as
Vice President - Sales. Mr. August has served as Vice President - Fabric
Operations from 1987 until March 30, 1992 and as Vice President since March 30,
1992.
STEVEN MYERS, an attorney, has been employed by the Registrant in
various senior administrative and managerial capacities since 1982. He served as
Vice President - Sales for more than five years prior to May 1988 and has served
as Vice President since that time. Mr.
Myers is the son-in-law of Mr. Bitensky.
SHERMAN S. LAWRENCE has served as a Director of the Registrant since
1966 and as Secretary since 1968. Mr. Lawrence has been an attorney for in
excess of the past five years and also serves as co-counsel to the Registrant.
5
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Registrant's Common Stock is traded on the American Stock Exchange,
Inc. (ticker symbol - FIT). The table below sets forth the high and low sales
prices of the Common Stock during the past two fiscal years.
FISCAL 1995
First Quarter.................... $ 32 $30
Second Quarter................... $ 31 7/8 $ 29
Third Quarter.................... $ 32 3/4 $ 30 1/4
Fourth Quarter................... $ 31 3/4 $ 29
FISCAL 1994
First Quarter.................... $ 36 $ 33 3/8
Second Quarter................... $ 36 1/8 $ 33 7/8
Third Quarter.................... $ 34 7/8 $ 31 7/8
Fourth Quarter................... $ 32 3/4 $ 30 3/8
At February 20, 1996, there were approximately 736 holders of record
of Common Stock. For fiscal 1994, quarterly dividends of $.16 per share were
declared on March 18, 1994, June 16, 1994, August 18, 1994 and November 28,
1994. For fiscal 1995, a quarterly dividend of $.16 per share was declared on
February 13, 1995 and quarterly dividends of $.175 per share were declared on
May 22, 1995, August 21, 1995 and November 27, 1995. The payment of further cash
dividends will be at the discretion of the Board of Directors and will depend
upon, among other things, earnings, capital requirements and the financial
condition of the Registrant.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
<TABLE>
<CAPTION>
As at or for the fiscal year ended
December 2, December 3, November 27, November 28, November 30,
1995 1994(3) 1993 1992 1991
(In thousands, except share data)
<S> <C> <C> <C> <C> <C>
Net Sales .......... $ 182,000 $ 189,753 $ 189,586 $ 189,288 $ 185,560
Income before taxes
on income ........ 13,760 22,428 25,531 25,767 23,088
Net income ......... 9,410 15,093 17,006 16,917 15,488
Earnings per ....... 1.57 2.44 2.75 2.65 2.52
share(1)
Total assets ....... 161,027 163,133 157,499 138,952 140,119
Long-term debt ..... 678 731 799 822 862
Stockholders' equity 132,932 129,533 124,326 109,172 109,450
Book value per
share (1) (2) .... 22.42 21.52 19.98 18.01 17.70
Cash dividends
per share(1) ..... .685 .64 .64 .50 .50
Weighted average
number of shares
outstanding(1) .... 5,981,690 6,189,831 6,181,186 6,390,706 6,141,495
</TABLE>
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(1) Adjusted to give effect to a two-for-one stock split to holders of record as
of May 24, 1991.
(2) Computed by dividing stockholders' equity by the number of shares
outstanding at year-end.
(3) Fifty-three weeks.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales for the 1995 fiscal year were $182,000,000 as compared to
$189,753,000 in 1994, a decrease of 4.1%. The decline reflected an industry wide
slowdown in demand for knit fabrics as a result of weak consumer purchasing of
apparel at the national retail level as well as highly competitive market
conditions. Fiscal 1995 included 52 weeks of operations as compared to 53 weeks
in 1994, also contributing to the sales decline.
Average gross profit margins were 14.9% in fiscal 1995, as compared to
19.7% in 1994. Increases in the cost of raw materials (primarily fiber prices),
a less favorable product mix, and highly competitive market conditions have all
exerted downward pressures on profit margins. Plant operations were adversely
impacted by the current product mix and operating rates at manufacturing
facilities declined from year-ago levels. In addition, because of higher unit
inventory costs resulting from material price increases, LIFO inventory reserves
increased $893,000 during fiscal 1995 (with a corresponding charge to earnings),
as compared to an increase of $98,000 in the 1994 period.
Selling, general and administrative expenses declined by $420,000, and
as a percentage of sales remained relatively level at 9.5% for fiscal 1995 and
9.4% for 1994. The decline relates primarily to lower incentive based
compensation.
Interest and dividend income increased by 7.8% to $3,676,000 as against
$3,410,000 in fiscal 1994, as higher comparative returns more than offset lower
average available investment balances.
The Registrant had realized gains from the sale of investment
securities of $511,000 in fiscal 1995 as against losses of $473,000 in the 1994
period, as a result of improved market conditions.
The effective income tax rate for the year was 31.6% as against 32.7%
in 1994. The decline was primarily attributable to higher tax exempt interest as
a percentage of pre-tax income in fiscal 1995.
As a result of these factors, net income declined to $9,410,000 or 5.2%
of sales, from $15,093,000, or 8.0% of sales in fiscal 1994. Earnings per share,
which are based on the weighted average number of shares outstanding (5,981,690
vs 6,189,831), were $1.57 as compared to $2.44 in fiscal 1994. There was no
stock option related dilution in either year.
FISCAL 1994 COMPARED TO FISCAL 1993
Net sales for the 1994 fiscal year were $189,753,000 as compared to
$189,586,000 in 1993. An increase of 11.2% in fourth quarter shipments offset
the sales decline for the first nine months of fiscal 1994. Mid-year customer
demand, which had been adversely
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affected by postponement of scheduled deliveries by several large customers as
well as weak consumer purchasing at the retail level, strengthened in the final
quarter of fiscal 1994, which also contained an extra week. Improved comparative
shipments also continued into December and January of fiscal 1995.
Average profit margins declined from 20.4% in fiscal 1993 to 19.7% in
1994, primarily as a result of a less profitable product mix. Plant operations
were also adversely impacted by the changed product mix as operating rates at
certain related manufacturing facilities declined from fiscal 1993 levels. The
effect of changes in LIFO inventory reserves was negligible in both years.
Selling, general and administrative expenses, as a percentage of sales,
increased from 8.9% in fiscal 1993 to 9.4% as dollar expenditures rose 5.3% on
similar volume. The increase relates primarily to higher consulting fees as well
as sales associated expenses.
Other income decreased by $917,000 to $2,809,000. Although interest and
dividend income increased by 10% to $3,410,000 (mainly as a result of larger
balances available for investments), losses on marketable securities were
realized in the amount of $473,000 as compared to a gain of $738,000 in fiscal
1993. A series of increases in interest rates by the Federal Reserve Board as
well as expectations by financial markets of continued rising rates resulted in
declines in the market value of portions of the Registrant's investment
portfolio.
Notwithstanding a slight increase in the Federal statutory income tax
rate for fiscal 1994, the overall effective income tax rate declined to 32.7% as
against 33.4% for fiscal 1993. An increase in tax-exempt interest income
accounted for the decline.
As a result of these factors, net income declined by 11.2%, to
$15,093,000 from $17,006,000 in fiscal 1993. Earnings per share, which are based
on the average number of shares outstanding during the year, were $2.44 in
fiscal 1994 as compared to $2.75 in 1993. There was no stock option related
dilution in either year.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's principal source of funds continues to be cash flow
generated from operations. Net cash provided by operating activities in fiscal
1995 was $13,230,000 as compared to $18,587,000 in the comparative 1994 period.
This decrease relates principally to a decline of $5,683,000 in net income.
Capital expenditures for the current fiscal year were $5,215,000 as
against $7,364,000 in the 1994 comparable period. The Registrant purchased
additional high speed knitting machines and dyeing and finishing equipment to
increase manufacturing efficiencies and reduce unit costs, and also installed
energy conservation related equipment in its production facilities.
During fiscal 1995, the Registrant repurchased 144,931 shares of its
Common Stock at an average price of $31.18 per share, for a total outlay of
$4,519,000. Subsequent to the fiscal year-end, the Registrant repurchased an
additional 31,200 shares at an average price of $30.05 per share. The Registrant
intends to continue to purchase shares of its Common Stock from time-to-time as
market conditions warrant and price criteria are met.
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During fiscal 1995, the Registrant declared regular quarterly dividends
totaling $0.685 per share. In addition, the Registrant declared a regular
quarterly dividend of $0.175 per share payable March 8, 1996, to stockholders of
record as of February 23, 1996.
Stockholders' equity rose to $132,932,000, or $22.42 book value per
share, from $129,533,000, or $21.52 per share, at the previous fiscal year-end.
Management believes that the current financial position of the
Registrant is adequate to internally fund any future expenditures to maintain,
modernize and expand its manufacturing facilities, pay dividends and make
acquisitions of textile related businesses if criteria relating to indebtedness,
market expansion and existing management are met.
INFLATION
The Registrant does not believe the effects of inflation have had a
significant impact on the consolidated financial statements.
RECENT ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standard No. 121 "Accounting for Impairment of
Long-Lived Assets and for LongLived Assets to be Disposed of" ("SFAS No. 121").
SFAS No. 121 requires, among other things, impairment loss of assets to be held
and gains or losses from assets that are expected to be disposed of be included
as a component of income from continuing operations before taxes on income. The
Registrant will adopt SFAS No. 121 in fiscal 1996 and its implementation is not
expected to have a material effect on the consolidated financial statements.
In October 1995, the Financial Accounting Standards Board Issued
Statement of Financial Accounting Standard No. 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 encourages entities to adopt that
method in place of the provisions of Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB No. 25"), for all arrangements
under which employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts based on the
price of its stock. The Registrant does not anticipate adopting SFAS No. 123 and
will continue to account for such transactions in accordance with APB No. 25.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages F-1 and S-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See Part I, Item 4. "Executive Officers of the Registrant." Other
information required by this item is incorporated by reference from the
Registrant's definitive proxy statement to be filed not later than April 1, 1996
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended ("Regulation 14A").
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements: See the Index to Consolidated
Financial Statements at page F-2.
(2) Financial Statement Schedules: See the Index to Financial
Statements Schedules at page S-2.
(3) Exhibits.
EXHIBIT DESCRIPTION OF EXHIBIT
3.1 - Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
November 27, 1993 (the "1993 10-K").
3.2 - Amended and Restated By-laws, incorporated by
reference to Exhibit 3.2 to the 1993 10-K.
3.3 - Certificate of Amendment of Restated Certificate of
Incorporation, incorporated by reference to Exhibit 3.3
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 3, 1994 (the "1994 10-K").
4.1 - Specimen of Common Stock Certificate, incorporated by
reference to Exhibit 4-A to Registration Statement No.
2-30163, filed on November 4, 1968.
4.2 - Rights Agreement dated as of June 6, 1990 between
the Registrant and Manufacturers Hanover Trust
Company, as Rights Agent, which includes as Exhibit A
the form of Rights Certificate and as Exhibit B the
Summary of Rights to purchase Common Stock,
incorporated by reference to Exhibit 4.2 to the 1993
10-K
4.3 - Amendment to the Rights Agreement between the
Registrant and Manufacturers Hanover Trust Company
dated as of May 24, 1991, incorporated by reference to
Exhibit 4.3 to the 1993 10-K.
10.1 - 1987 Stock Option Plan of the Registrant, incorporated
by reference to Exhibit 10.1 to the 1993 10-K.
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10.2 - Employment Agreement dated as of March 1, 1993,
between the Registrant and Samson Bitensky, incor-
porated by reference to Exhibit 10.2 to the 1993 10 -K.
10.3 - Fab Industries, Inc. Hourly Employees Retirement Plan
(the "Retirement Plan"), incorporated by reference to
Exhibit 10.3 to the 1993 10-K.
10.4 - Amendment to the Retirement Plan effective December
11, 1978, incorporated by reference to Exhibit 10.4 to
the 1993 10-K.
10.5 - Amendment to the Retirement Plan effective December
1, 1981, incorporated by reference to Exhibit 10.5 to
the 1993 10-K.
10.6 - Amendment to the Retirement Plan dated November 21,
1983, incorporated by reference to Exhibit 10.6 to the
1993 10-K.
10.7 - Amendment to the Retirement Plan dated August 29,
1986, incorporated by reference to Exhibit 10.7 to the
1993 10-K.
10.8 - Amendment to the Retirement Plan effective as of
December 1, 1989, incorporated by reference to Exhibit
10.8 to the 1993 10-K.
*10.9 - Amendment to the Retirement Plan dated September
21, 1995.
10.10 - Fab Lace, Inc. Employees Profit Sharing Plan (the "Profit
Sharing Plan"), incorporated by reference to Exhibit
10.9 to the 1993 10-K.
10.11 - Amendment to the Profit Sharing Plan effective
December 1, 1978, incorporated by reference to Exhibit
10.10 to the 1993 10-K.
10.12 - Amendment dated December 1, 1985 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.11
to the 1993 10-K.
10.13 - Amendment dated February 5, 1987 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.12
to the 1993 10-K.
10.14 - Amendment dated December 24, 1987 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.13
to the 1993 10-K.
13
<PAGE>
10.15 - Amendment dated June 30, 1989 to the Profit Sharing
Plan, incorporated by reference to Exhibit 10.14 to the
1993 10-K.
10.16 - Amendment dated February 1, 1991 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.15
to the 1993 10-K.
*10.17 - Amendment dated September 1, 1995 to the Profit
Sharing Plan.
10.18 - Lease dated as of December 8, 1988 between
Glockhurst Corporation, N.V. and the Registrant,
incorporated by reference to Exhibit 10.16 to the 1993
10-K.
10.19 - Lease Modification Agreement dated April 2, 1991
between Glockhurst Corporation, N.V. and the
Registrant, incorporated by reference to Exhibit 10.17
to the 1993 10-K.
10.20 - Lease dated as of March 1, 1979 between City of
Amsterdam Industrial Development Agency and Gem
Urethane Corp., incorporated by reference to Exhibit
10.18 to the 1993 10-K.
10.21 - Lease dated as of January 1, 1977 between City of
Amsterdam Industrial Development Agency and
Lamatronics Industries, Inc., incorporated by reference
to Exhibit 10.19 to the 1993 10-K.
10.22 - Form of indemnification agreement between the
Registrant and its officers and directors, incorporated by
reference to Exhibit 10.20 to the 1993 10-K.
10.23 - Restricted Share Agreement dated October 1, 1991
between the Registrant and Steven Myers, incorporated
by reference to Exhibit 10.21 to the 1993 10-K.
10.24 - Restricted Share Agreement dated October 1, 1991
between the Registrant and Howard Soren, incorporated
by reference to Exhibit 10.22 to the 1993 10-K.
10.25 - Restricted Share Agreement dated October 1, 1991
between the Registrant and Stanley August, incor-
porated by reference to Exhibit 10.23 to the 1993 10-K.
10.26 - Registrant's Employee Stock Ownership Plan effective
as of Nov. 25, 1991, incorporated by reference to
Exhibit 10.24 to the 1993 10-K.
14
<PAGE>
*10.27 - Amendment dated September 21, 1995 to the
Employee Stock Ownership Plan.
10.28 - Registrant's Non-Qualified Executive Retirement Plan
dated as of November 30, 1990, incorporated by
reference to Exhibit 10.25 to the 1993 10-K.
21 - Subsidiaries of the Registrant incorporated by reference
to Exhibit 21 to the 1994 10-K.
*23 - Consent of BDO Seidman, LLP.
**27 - Financial Data Schedule pursuant to Article 5 of
Regulation S-X.
- -------------------------
* Filed herewith
** Filed with EDGAR version only
(b) Reports on Form 8-K: None
15
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-K ITEM 8
FISCAL YEARS ENDED DECEMBER 2, 1995, DECEMBER 3, 1994
AND NOVEMBER 27, 1993
F-1
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets F-4
Statements of income F-5
Statements of stockholders' equity F-6
Statements of cash flows F-7
SUMMARY OF ACCOUNTING POLICIES F-8 - F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-10 - F-20
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Fab Industries, Inc.
New York, New York
We have audited the consolidated balance sheets of Fab Industries, Inc. and
subsidiaries as of December 2, 1995 and December 3, 1994 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three fiscal years in the period ended December 2, 1995. We have also
audited the schedule listed in the index on page S-2. These consolidated
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and schedule. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Fab Industries, Inc.
and subsidiaries as of December 2, 1995 and December 3, 1994, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 2, 1995 in conformity with generally accepted accounting
principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
/s/ BDO Seidman, LLP
New York, New York
February 9, 1996
F-3
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 2, December 3,
1995 1994
ASSETS
CURRENT:
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 7,883,000 $ 11,143,000
Investment securities available-for-sale (Note 2) 54,674,000 6,181,000
Investment securities held-to-maturity (Note 2) - 12,604,000
Accounts receivable, net of allowance of $500,000
and $950,000 for doubtful accounts (Note 13) 35,217,000 32,590,000
Inventories (Note 3) 27,267,000 29,994,000
Deferred income taxes (Note 9) - 274,000
Other current assets 1,970,000 2,355,000
---------- -------------
TOTAL CURRENT ASSETS 127,011,000 95,141,000
INVESTMENT SECURITIES HELD-TO-MATURITY,
DUE AFTER ONE YEAR (NOTE 2) - 33,873,000
PROPERTY, PLANT AND EQUIPMENT - NET (NOTE 4) 31,579,000 31,932,000
OTHER ASSETS 2,437,000 2,187,000
---------- -----------
$161,027,000 $163,133,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable $ 12,661,000 $ 14,289,000
Corporate income and other taxes 1,886,000 2,014,000
Payable to broker (purchase of treasury stock) - 3,798,000
Accrued payroll and related expenses 4,295,000 4,787,000
Dividends payable 1,038,000 963,000
Other current liabilities 470,000 412,000
Deferred income taxes (Note 9) 246,000 -
---------- ---------
TOTAL CURRENT LIABILITIES 20,596,000 26,263,000
OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT
MATURITIES (NOTE 5) 678,000 731,000
OTHER NONCURRENT LIABILITIES 1,961,000 1,469,000
DEFERRED INCOME TAXES (NOTE 9) 4,860,000 5,137,000
----------- -----------
TOTAL LIABILITIES 28,095,000 33,600,000
COMMITMENTS (NOTES 8 AND 10)
STOCKHOLDERS' EQUITY (NOTES 2, 6, 7, 8, 9 AND 10):
Preferred stock, $1 par value
- shares authorized
2,000,000; none issued - -
Common stock, $.20 par value - shares authorized
15,000,000; issued 6,549,894 and 6,493,494 1,309,000 1,298,000
Additional paid-in capital 6,150,000 5,214,000
Retained earnings 152,473,000 147,154,000
Loan to employee stock ownership plan (8,697,000) (9,487,000)
Net unrealized holding gain (loss) on investment
securities available-for-sale, net of taxes 224,000 (314,000)
Unearned restricted stock compensation (228,000) (552,000)
Cost of common stock held in treasury - 619,635
and 474,704 shares (18,299,000) (13,780,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 132,932,000 129,533,000
------------ ------------
$161,027,000 $163,133,000
============ ============
</TABLE>
See accompanying summary of accounting
policies and notes to consolidated
financial statements.
F-4
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Fiscal year ended
December 2, December 3, November 27,
1995 1994 1993
<S> <C> <C> <C>
NET SALES (NOTE 13) $ 182,000,000 $ 189,753,000 $ 189,586,000
COST OF GOODS SOLD 154,956,000 152,372,000 150,906,000
------------ ------------ ------------
GROSS PROFIT 27,044,000 37,381,000 38,680,000
SELLING, SHIPPING AND ADMINISTRATIVE
EXPENSES 17,342,000 17,762,000 16,875,000
----------- ----------- -----------
OPERATING INCOME 9,702,000 19,619,000 21,805,000
----------- ----------- -----------
OTHER INCOME (EXPENSES):
Interest and dividend income (Note 12) 3,676,000 3,410,000 3,099,000
Interest expense (129,000) (128,000) (111,000)
Net gain (loss) on investment securities (Note 2) 511,000 (473,000) 738,000
---------- ------------ ------------
TOTAL OTHER INCOME 4,058,000 2,809,000 3,726,000
---------- ---------- -----------
INCOME BEFORE TAXES 13,760,000 22,428,000 25,531,000
TAXES ON INCOME (NOTE 9) 4,350,000 7,335,000 8,525,000
---------- ---------- ----------
NET INCOME $ 9,410,000 $ 15,093,000 $ 17,006,000
========== =========== ===========
EARNINGS PER SHARE $ 1.57 $ 2.44 $ 2.75
========== ============= =============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING 5,981,690 6,189,831 6,181,186
========== ============= =============
CASH DIVIDENDS DECLARED PER SHARE (NOTE 11) $ .685 $ .64 $ .64
========== ============== ===============
</TABLE>
See accompanying summary of accounting
policies and notes to consolidated
financial statements.
F-5
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Loan to Net
employee unrealized Unearned
Additional stock holding restricted
Number of paid-in Retained ownership gain stock
Total shares Amount capital earnings plan (loss) compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, November 28,
1992 $109,172,000 6,231,394 $1,246,000 $1,163,000 $122,971,000 $(11,067,000) $ - $(1,144,000)
Net income -
fiscal 1993 17,006,000 - - - 17,006,000 - - -
Cash dividends,
$.64 per share (3,983,000) - - - (3,983,000) - - -
Exercise of stock
options 3,817,000 246,300 49,000 3,768,000 - - - -
Purchase of treasury
stock (2,788,000) - - - - - - -
Compensation under
restricted stock
plan (Note 6) 312,000 - - - - - - 312,000
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000 - -
----------- ---------- --------- --------- ----------- ----------- ------ -----------
Balance, November 27,
1993 124,326,000 6,477,694 1,295,000 4,931,000 135,994,000 (10,277,000) - (832,000)
Net income -
fiscal 1994 15,093,000 - - - 15,093,000 - - -
Cash dividends,
$.64 per share (3,933,000) - - - (3,933,000) - - -
Exercise of stock
options 279,000 15,800 3,000 276,000 - - - -
Purchase of treasury
stock (7,023,000) - - - - - - -
Compensation under
restricted stock
plan (Note 6) 315,000 - - - - - - 315,000
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000 - -
Issuance of treasury
stock under restricted
stock plan - - - 7,000 - - - (35,000)
Net unrealized holding
loss on investment
securities available-
for-sale, net of taxes (314,000) - - - - - (314,000) -
----------- ---------- --------- --------- ----------- ----------- ------ -----------
Balance, December 3,
1994 129,533,000 6,493,494 1,298,000 5,214,000 147,154,000 (9,487,000)(314,000) (552,000)
Net income -
fiscal 1995 9,410,000 - - - 9,410,000 - - -
Cash dividends,
$.685 per share (4,091,000) - - - (4,091,000) - - -
Exercise of stock
options 947,000 56,400 11,000 936,000 - - - -
Purchase of treasury
stock (4,519,000) - - - - - - -
Compensation under
restricted stock
plan (Note 6) 324,000 - - - - - - 324,000
Change in net unrealized
holding gain (loss) on
investment securities
available-for-sale,
net of taxes 538,000 - - - - - 538,000 -
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000 - -
----------- ---------- --------- --------- ----------- ----------- ------ -----------
Balance, December 2,
1995 $132,932,000 6,549,894 $1,309,000 $6,150,000 $152,473,000 $ (8,697,000)$224,000 $ (228,000)
============ ========= ========= ========== =========== ============ ======= ==========
</TABLE>
Note: The Company has 2,000,000 shares of authorized, but unissued preferred
stock.
See accompanying summary of accounting policies and notes to consolidated
financial statements.
Treasury Stock
Number of
shares Cost
Balance, November 28,
1992 (169,692) $ (3,997,000)
Net income -
fiscal 1993 - -
Cash dividends,
$.64 per share - -
Exercise of stock
options - -
Purchase of treasury
stock (84,169) (2,788,000)
Compensation under
restricted stock
plan (Note 6) - -
Payment of loan from
ESOP (Note 8) - -
------- ----------
Balance, November 27,
1993 (253,861) (6,785,000)
Net income -
fiscal 1994 - -
Cash dividends,
$.64 per share - -
Exercise of stock
options - -
Purchase of treasury
stock (221,843) (7,023,000)
Compensation under
restricted stock
plan (Note 6) - -
Payment of loan from
ESOP (Note 8) - -
Issuance of treasury
stock under restricted
stock plan 1,000 28,000
Net unrealized holding
loss on investment
securities available-
for-sale, net of taxes - -
------- ---------
Balance, December 3,
1994 (474,704) (13,780,000)
Net income -
fiscal 1995 - -
Cash dividends,
$.685 per share - -
Exercise of stock
options - -
Purchase of treasury
stock (144,931) (4,519,000)
Compensation under
restricted stock
plan (Note 6) - -
Change in net unrealized
holding gain (loss) on
investment securities
available-for-sale,
net of taxes - -
Payment of loan from
ESOP (Note 8) - -
-------- -----------
Balance, December 2,
1995 (619,635) $(18,299,000)
========= ===========
Note: The Company has 2,000,000 shares of authorized, but unissued preferred
stock.
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 11)
<TABLE>
<CAPTION>
Fiscal year ended
December 2, December 3, November 27,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 9,410,000 $15,093,000 $17,006,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for doubtful accounts 400,000 300,000 600,000
Depreciation and amortization 5,568,000 5,425,000 5,366,000
Deferred income taxes (121,000) 402,000 (696,000)
Compensation under restricted
stock plan 324,000 315,000 312,000
Net (gain) loss on investment
securities (511,000) 473,000 (738,000)
Decrease (increase) in:
Accounts receivable (3,027,000) 2,793,000 (5,928,000)
Inventories 2,727,000 (5,672,000) 128,000
Other current assets 385,000 (37,000) (624,000)
Other assets (250,000) (175,000) (547,000)
Increase (decrease) in:
Accounts payable (1,628,000) 777,000 2,330,000
Accruals and other liabilities (122,000) (1,107,000) 1,276,000
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,155,000 18,587,000 18,485,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (5,215,000) (7,364,000) (4,942,000)
Proceeds from sales of investment securities 9,746,000 7,110,000 4,760,000
Acquisition of investment securities (10,350,000) (8,429,000) (26,057,000)
NET CASH USED IN INVESTING ACTIVITIES (5,819,000) (8,683,000) (26,239,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (8,317,000) (3,225,000) (2,788,000)
Principal repayment on loan to employee
stock ownership plan 790,000 790,000 790,000
Dividends (4,016,000) (6,953,000) (3,983,000)
Exercise of stock options 947,000 279,000 3,817,000
NET CASH USED IN FINANCING ACTIVITIES (10,596,000) (9,109,000) (2,164,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,260,000) 795,000 (9,918,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,143,000 10,348,000 20,266,000
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,883,000 $11,143,000 $10,348,000
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-7
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
BUSINESS:
Fab Industries, Inc. (the "Company") is a major manufacturer of knitted
textile fabrics, laces and finished home products as well as polyurethane coated
fabrics. Sales of textile products comprised substantially all of the Company's
sales in fiscal 1995, 1994 and 1993, and such sales were primarily made to
United States customers. Accordingly, the Company considers itself to be
operating in a single segment business.
PRINCIPLES OF CONSOLIDATION:
The financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned. Significant intercompany
transactions and balances have been eliminated.
FISCAL YEAR:
The Company's fiscal year ends on the Saturday closest to November 30. Fiscal
1995 and 1993 had fifty- two weeks, and fiscal 1994 had fifty three weeks.
RISKS AND UNCERTAINTIES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents, investment
securities, and trade receivables. The Company places its cash and cash
equivalents with high credit quality financial institutions. By policy, the
Company limits the amount of credit exposure to any one financial institution
and determines that, with respect to investment securities, each custodian
maintains appropriate insurance coverage to protect the Company's investment
portfolio. Concentrations of credit risk with respect to trade receivables are
limited due to the diverse group of manufacturers, wholesalers and retailers to
whom the Company sells (see Note 13). The Company reviews a customer's credit
history before extending credit. The Company has established an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information.
CASH EQUIVALENTS:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
INVESTMENTS:
Effective as of the fourth quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities". SFAS 115 addresses
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. Investments
in such securities are to be classified as either held-to-maturity, trading, or
available-for-sale.
F-8
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
Investment securities classified as available-for-sale are carried at fair
value with unrealized holding gains and losses, net of any tax effect, recorded
as a separate component of stockholders' equity. In fiscal 1994, the Company
classified certain investment securities as held-to-maturity. Due to changes in
management's investment philosophy during fiscal 1995, the Company has
transferred investment securities from the held-tomaturity to the
available-for-sale category. As a result, all investment securities are now
classified as available-for-sale. The effect of this change was to increase
stockholders' equity by $167,000, representing the net unrealized holding gain
on these securities, net of taxes, at the date of the change.
Gains and losses on sales of investment securities are computed using the
specific identification method.
The cumulative effect of adopting SFAS 115 was not material.
INVENTORIES:
Inventories are valued at the lower of cost or market. For a majority of the
inventories, cost is determined by the last-in, first-out (LIFO) method with the
balance being determined by the first-in, first-out (FIFO) method, which
approximates replacement cost (see Note 3).
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is computed
using principally the straight-line method. The range of estimated useful lives
is 15 to 33 years for buildings and building improvements, 4 to 10 years for
machinery and equipment, 10 years for leasehold improvements and 5 years for
trucks (see Note 4).
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are charged to expenses in the year incurred
and amounted to $4,184,000 $4,347,000 and $3,824,000 in fiscal 1995, 1994 and
1993, respectively.
TAXES ON INCOME:
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109),"Accounting for Income Taxes".
Provision is made for deferred income taxes which result from various
temporary differences, mainly relating to the use of accelerated depreciation
for tax purposes (see Note 9).
EARNINGS PER SHARE:
Earnings per share has been computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period.
REVENUE RECOGNITION:
The Company recognizes substantially all of its revenues upon shipment of the
related goods. Allowances for estimated returns are provided when sales are
recorded.
RECLASSIFICATION:
Certain fiscal 1994 and 1993 balances were reclassified to conform with the
fiscal 1995 presentation.
F-9
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CASH AND CASH EQUIVALENTS
- --------------------------------------------------------------------------------
Cash and cash equivalents at December 2, 1995 and December 3, 1994 consisted
of the following (in thousands):
1995 1994
------ ------
Cash $1,335 $ 1,490
Tax-free short-term debt instruments 6,548 9,653
------ ------
$7,883 $11,143
====== =======
NOTE 2 - INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
Investment securities available-for-sale at December 2, 1995 and December 3,
1994 consisted of the following (in thousands):
Gross Gross
Unrealized Unrealized
Cost Holding Gain Holding Loss Fair Value
1995:
Equities $ 1,814 $109 $(259) $ 1,664
U.S. Treasury obligations 52 - - 52
Tax-exempt obligations 47,769 578 (79) 48,268
Corporate bonds 4,665 116 (91) 4,690
------- ---- ----- -------
$54,300 $803 $(429) $54,674
======= ==== ===== =======
1994:
Equities $ 6,709 $313 $(841) $ 6,181
======= ==== ===== =======
At December 3, 1994, the carrying value and estimated fair values of
investment securities held-to-maturity were as follows:
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Loss Fair Value
U.S. Government securities $ 69 $ - $ - $ 69
Corporate bonds 5,800 8 (346) 5,462
Tax exempt obligations 40,608 18 (617) 40,009
---------- ------ ------- --------
$46,477 $26 $(963) $45,540
======= === ====== =======
F-10
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The carrying values and approximate fair values of investments in debt
securities available-for-sale, at December 2, 1995, by contractual maturity are
as shown below:
Cost Fair Value
Maturing in one year or less $11,321 $11,333
Maturing after one year through five years 31,711 32,117
Maturing after five years through ten years 9,454 9,560
------- -------
$52,486 $53,010
======= =======
Gross and net realized gains and losses on sales of investment securities
were:
1995 1994
---- ----
Gross realized gains $762 $ 640
Gross realized losses (251) (1,113)
---- ------
Net realized gain (loss) $511 $ (473)
==== ======
NOTE 3 - INVENTORIES:
- --------------------------------------------------------------------------------
Inventories at December 2, 1995 and December 3, 1994 consisted of the
following (in thousands, except for percentages):
1995 1994
------- ------
Raw materials $11,753 $12,817
Work-in process 7,675 7,908
Finished goods 7,839 9,269
------- -------
$27,267 $29,994
======= =======
Approximate percentage of inventories
valued under LIFO method 66% 66%
=== ===
Excess of FIFO valuation over LIFO valuation $ 7,903 $ 7,010
======== =======
F-11
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
Property, plant and equipment at December 2, 1995 and December 3, 1994
consisted of the following (in thousands):
1995 1994
-------- ------
Owned by the Company:
Land and improvements $ 698 $ 673
Buildings and improvements 12,668 12,362
Machinery and equipment 86,405 81,561
Trucks and automobiles 1,538 1,498
Office equipment 656 656
Leasehold improvements 808 808
-------- -------
102,773 97,558
Property under capital leases:
Land 18 18
Buildings and improvements 1,432 1,432
-------- --------
104,223 99,008
Less: Accumulated depreciation and amortization 72,644 67,076
-------- --------
$ 31,579 $31,932
======== =======
F-12
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - OBLIGATIONS UNDER CAPITAL LEASES
- --------------------------------------------------------------------------------
Obligations under capital leases at December 2, 1995 and December 3, 1994
consisted of the following (in thousands):
1995 1994
---- ----
Obligations under capital leases through 2006 payable in monthly
installments of $11 including interest at 10% per annum $706 $759
Less: Current maturities (included with other current
liabilities) 28 28
---- ----
$678 $731
==== ====
Aggregate installments on obligations under capital leases maturing after one
year are as follows:
Fiscal year ending (in thousands):
1997 $ 61
1998 67
1999 73
2000 79
Thereafter 398
----
$678
NOTE 6 - STOCK COMPENSATION PLANS:
- --------------------------------------------------------------------------------
Stock Option Plan:
Under the Company's 1987 stock option plan, the Company may grant to key
employees either nonqualified or incentive stock options to purchase up to a
maximum of 650,000 shares of common stock at the fair market value at the date
of the grant.
During fiscal 1995 and 1993, no options were granted. During fiscal 1994,
options covering 10,000 shares were granted.
During fiscal 1995, 1994 and 1993 options covering 56,400, 15,800 and 246,300
shares, respectively, were exercised and during the same period options for
1,800, 13,400 and 1,700 shares were cancelled.
As of the end of fiscal 1995, 1994 and 1993, respectively, the Company had
outstanding incentive stock options for the purchase of 129,200, 187,400 and
206,600 shares; 168,800, 167,000 and 163,600 shares were still available for
future grants. The exercise prices range from $15.44 to $33.88 per share,
expiring at various dates from 1996 to 2003.
F-13
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Plan:
During fiscal 1991, the Company approved a restricted stock plan which
awarded 60,000 shares of common stock previously held in its treasury to key
employees. Shares are awarded in the name of the employee, who has all rights of
a shareholder, subject to certain restrictions or forfeiture. Vesting occurs
over a five-year period from the date the shares were awarded. Dividends
associated with the shares will be held by the Company and will vest over the
same five-year period.
The shares were recorded at their quoted market value at the date of grant of
$26 per share, or $1,560,000. The compensation element related to the awarding
of such shares is recognized ratably over the five-year restriction period.
During fiscal 1994, an additional 1,000 shares were awarded under terms
similar to those described above.
Compensation expense related to the above restricted shares for fiscal 1995,
1994 and 1993 was $324,000, $315,000 and $312,000, respectively.
NOTE 7 - STOCKHOLDER RIGHTS PLAN
- --------------------------------------------------------------------------------
During fiscal 1990, the Company's Board of Directors adopted a Stockholder
Rights Plan ("Rights Plan"). The Rights Plan was subsequently amended in May
1991, following a 2 for 1 stock split. In connection with the Rights Plan, as
amended, the Company declared a dividend of one-half share purchase right (a
"Right") on each of its common shares. Each Right entitles the holders to buy
from the Company one-half of a common share for every share owned at an exercise
price of $60 per share. The Rights have a term of ten years and can only become
exercisable upon Board of Directors' approval if a person or group acquires 20%
of more of the Company's common shares, or announces that it intends to commence
a tender offer which would result in the ownership of 30% or more of the common
shares as defined in the Rights Plan. Until they become exercisable, the Rights
will be evidenced by the Common Stock certificates and will be transferred only
with such certificates. The Company is entitled to redeem the Rights at $.01 per
Right at any time prior to the Rights' becoming exercisable. Upon an acquisition
or similar transaction, the Rights will become exercisable at a 50% discount for
Common Shares of an acquiring person. The Rights attach to all of the Company's
common shares outstanding as of June 6, 1990, or subsequently issued, and expire
on June 6, 2000.
NOTE 8 - BENEFIT PLANS
- --------------------------------------------------------------------------------
Profit Sharing Plans:
A qualified plan, which covers the majority of salaried employees, provides
for discretionary contributions up to a maximum of 15% of eligible salaries. The
distribution of the contribution to the Plan's participants is based upon their
annual base compensation. Contributions for fiscal 1995, 1994 and 1993 were
$415,000, $538,000 and $633,000, respectively.
The Company established in fiscal 1990 a nonqualified, defined contribution
retirement plan for key employees who are ineligible for the salaried employees
qualified profit sharing plan. Contributions for fiscal 1995, 1994 and 1993 were
$123,000, $156,000 and $189,000, respectively.
F-14
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension Plan:
The Company's defined benefit plan covers all eligible hourly production
employees. The benefits are based on years of service. Contributions are
intended to provide benefits attributable to both past and future services.
The net periodic pension cost of the defined benefit plan for fiscal 1995,
1994 and 1993 is as follows (in thousands):
1995 1994 1993
---- ---- ----
Service cost $ 160 $ 182 $ 152
Interest cost on projected benefit obligation 162 148 136
Actual return on plan assets (1,024) 213 (200)
Net amortization and deferral 768 (525) (58)
------ ----- -----
Net periodic pension cost $ 66 $ 18 $ 30
====== ====== =====
The following table presents a reconciliation of the funded status of the
Plan for fiscal 1995 and 1994 (in thousands):
1995 1994
Accumulated benefit obligations including ------- ------
vested benefits of ($2,242) and ($1,533) $(2,560) $(1,826)
======= =======
Projected benefit obligation for service
rendered to date $(2,560) $(1,826)
Plans assets at fair value,
primarily listed stocks 3,432 2,702
------- ------
Projected plan assets in excess of benefit
obligation 872 876
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions (930) (844)
Unrecognized prior service cost 41 45
Unrecognized net asset at transition being
recognized over 11 years (84) (112)
$ ------ ------
Accrued pension costs included in other
current liabilities (101) $ (35)
======== ========
F-15
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The average discount rate was 8% in fiscal 1995 and 7% in fiscal 1994, and
the expected rate of return on assets for both fiscal 1995 and 1994 was 8%.
Employee Stock Ownership Plan:
On November 25, 1991, the Company established an Employee Stock Ownership
Plan (ESOP) which covers all full time employees who have completed one year of
service. On December 18, 1991, the ESOP purchased 340,000 shares of common stock
from the Chairman of the Board of Directors and President of the Company for
$34.875 per share, which represented 5.5% of the Company's then outstanding
common stock. The ESOP was funded by the Company, pursuant to a loan pledge
agreement dated December 18, 1991 for $11,857,000. The loan is payable by the
ESOP to the Company from contributions to be made in fifteen equal annual
principal installments plus interest at the prime rate. Employee rights to the
common shares vest over a seven-year period and are payable at retirement,
death, disability or termination of employment.
Annual principal installments of $790,000 plus interest at prime were paid by
the ESOP to the Company on August 1, 1995, August 2, 1994 and August 2, 1993.
The balance on the ESOP indebtedness at December 2, 1995 of $8,697,000 is
reflected as a reduction of the Company's stockholders' equity in the
consolidated balance sheet.
ESOP contributions are recorded for financial reporting purposes as the ESOP
shares become allocable to the Plan participants. All ESOP shares are considered
outstanding in the determination of earnings per share.
The portion of the common stock dividends declared relating to ESOP shares
totaled $229,000, $216,000 and $217,000 for fiscal 1995, 1994 and 1993,
respectively. Of these amounts, $60,000, $50,000 and $33,000 for fiscal 1995,
1994 and 1993, respectively, related to allocated shares and $169,000, $166,000
and $184,000 for fiscal 1995, 1994 and 1993, respectively, related to
unallocated shares. The dividends related to the unallocated shares are being
applied towards the $790,000 annual principal installments referred to above.
As of December 2, 1995 and December 3, 1994, ESOP shares information was as
follows:
1995 1994
----- ----
Allocated 102,281 77,312
Committed to be released 27,113 27,975
In suspense 204,639 231,752
-------- --------
Total shares held by ESOP 334,033 337,039
======== ========
F-16
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net charges to earnings for fiscal 1995, 1994 and 1993 were as follows
(in thousands):
1995 1994 1993
---- ---- ----
Contribution to ESOP $1,513 $1,332 $1,252
Less: Interest income on loan to ESOP 840 708 646
------- ------- -------
Net charge to earnings $ 673 $ 624 $ 606
====== ======= ======
The contribution to the ESOP is allocated between costs of goods sold and
operating expenses; the interest income is included in interest and dividend
income.
NOTE 9 - INCOME TAXES
- --------------------------------------------------------------------------------
Provisions for Federal, state and local income taxes for fiscal 1995, 1994
and 1993 consisted of the following components (in thousands):
1995 1994 1993
---- ---- ----
Current:
Federal $3,924 $6,104 $8,279
State and local 547 829 1,037
------ ------ ------
4,471 6,933 9,316
Deferred:
Federal and state (121) 402 (791)
------ ------ -------
$4,350 $7,335 $8,525
====== ====== ======
The net deferred tax liability at December 2, 1995 and December 3, 1994
consisted of the following (in thousands):
1995 1994
---- ----
Long-term Portion:
Gross deferred tax liability (asset) for:
Excess depreciation for tax purposes $5,835 $5,728
Future tax deductions for employee benefit plans (933) (596)
Other (42) 5
------- -------
Net long-term liability 4,860 5,137
------ ------
Current Portion:
Gross deferred tax liability (asset) for:
Allowance for doubtful accounts (92) (175)
Net unrealized holding (gain) loss on investment
securities available-for-sale,
included in stockholders' equity 150 (214)
Other 188 115
------- -------
Net current liability (asset) 246 (274)
------- -------
Net deferred tax liability $5,106 $4,863
====== ======
F-17
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The differences between the Company's effective tax rate and Federal
statutory tax rate for fiscal 1995, 1994 and 1993 arose from the following:
1995 1994 1993
(% of pretax income)
Federal tax expense at statutory rate 35.0% 35.0% 34.9%
State and local income taxes,
net of Federal benefit 3.0 2.7 2.6
Tax-free interest income and
dividends received deduction (6.2) (3.3) (2.6)
Other (0.2) (1.7) (1.5)
---- ---- ----
Effective tax rate 31.6% 32.7% 33.4%
==== ==== ====
NOTE 10 - COMMITMENTS
- --------------------------------------------------------------------------------
Stock Repurchase:
In March 1993, the Company entered into a five year agreement with the
Chairman of the Board of Directors and President ("Chairman"). The agreement
provides that, in the event of the Chairman's death, his estate has the option
to sell, and the Company the obligation to purchase certain stock owned by the
Chairman. The amount of stock subject to purchase is equal to the lesser of $7
million or 10% of the book value of the Company at the end of the year
immediately following his death, plus the $3 million proceeds from insurance on
his life for which the Company is the beneficiary.
Lease:
The Company leases its New York City offices and showrooms at minimum annual
rentals of $487,000 plus escalation and other costs, until April 1996 . The
Company is presently negotiating a new lease.
Rental expense for operating leases in fiscal 1995, 1994 and 1993 aggregated
$671,000, $662,000 and $644,000, respectively.
NOTE 11 - STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
Cash outlays for corporate income taxes and interest for fiscal 1995, 1994
and 1993 were as follows (in thousands):
Corporate
income taxes Interest
1995 $4,634 $129
1994 7,865 128
1993 8,346 111
F-18
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-cash investing and financing activities:
In fiscal 1995, a net unrealized holding gain of $374,000, less related
income taxes of $150,000, on investment securities available-for-sale, was
recorded as an increase in stockholders' equity.
In fiscal 1994, a net unrealized holding loss of $528,000, less related
income taxes of $214,000, on investment securities available-for-sale, was
recorded as a reduction of stockholders' equity.
As of December 3, 1994, treasury stock costing $3,798,000 had been purchased
for which the broker was not paid until fiscal 1995.
NOTE 12 - INTEREST AND DIVIDEND INCOME
- --------------------------------------------------------------------------------
Interest and dividend income for the past three fiscal years were as follows
(in thousands):
Interest Dividend
income income Total
1995 $3,546 $130 $3,676
1994 3,112 298 3,410
1993 2,848 251 3,099
NOTE 13 - MAJOR CUSTOMER
- --------------------------------------------------------------------------------
For fiscal 1995, 1994 and 1993, sales to a group of customers affiliated
through common control accounted for approximately 16%, 10% and 10% of net
sales, respectively. The receivables from this group of customers represented
approximately 22% and 11% of the December 2, 1995 and December 3, 1994 accounts
receivable balances, respectively.
F-19
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
Quarterly earnings were as follows (in thousands, except for earnings per
share):
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
Fiscal 1995:
Net sales $41,433 $48,318 $44,879 $47,370 $182,000
Cost of goods sold 35,324 40,146 38,485 41,001 154,956
Net income 1,978 3,139 1,919 2,374 9,410
Earnings per share $.33 $.52 $.32 $.40 $1.57
Fiscal 1994:
Net sales $40,584 $49,733 $47,595 $51,841 $189,753
Cost of goods sold 32,909 40,078 38,328 41,057 152,372
Net income 2,624 3,772 3,841 4,856 15,093
Earnings per share $.42 $.61 $.62 $.79 $2.44
F-20
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS SCHEDULE
FORM 10-K ITEM 14
FISCAL YEARS ENDED DECEMBER 2, 1995, DECEMBER 3, 1994
AND NOVEMBER 27, 1993
S-1
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONTENTS
SCHEDULE:
II. Valuation and qualifying accounts S-3
S-2
<PAGE>
SCHEDULE II
FAB INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ------ ------ ------ ------ ------
Additions
(1) (2)
Balance at Charged Balance
beginning to costs Charged to at end
Description of year and expenses other accounts Deductions of year
<S> <C> <C> <C> <C> <C>
Fiscal year ended December 2, 1995:
Allowance for doubtful accounts $ 950 $400 (i) - $(850)(ii) $500
==== ======== ======== ========== ====
Fiscal year ended December 3, 1994:
Allowance for doubtful accounts $1,600 $300 (i) - $(950)(ii) $950
====== ======== ======== ========== ====
Fiscal year ended November 27, 1993:
Allowance for doubtful accounts $1,400 $600 (i) - $(400)(ii) $1,600
====== ======== ======== ========== ======
</TABLE>
(i) Current year's provision.
(ii) Accounts receivable written-off, net of recoveries.
S-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FAB INDUSTRIES, INC.
(Registrant)
By: /s/ Samson Bitensky
----------------------
Samson Bitensky
Chairman of the Board, Chief Executive
Officer and President
February 27, 1996
------------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE DATE Capacity in Which Signed
/s/ Samson Bitensky February 27, 1996 Chairman of the Board, Chief
- --------------------- Executive Officer, President and
Samson Bitensky Director (Principal Executive Officer)
/s/ David A. Miller February 27, 1996 Vice President-Finance and Treasurer
- --------------------- (Principal Financial and Accounting
David A. Miller Officer)
/s/ Sherman S.Lawrence February 27, 1996 Secretary and Director
- ----------------------
Sherman S.Lawrence
/s/ Lawrence Bober February 27, 1996 Director
- ------------------
Lawrence Bober
/s/ Richard Marlin February 27, 1996 Director
- --------------------
Richard Marlin
/s/ Louis Feil February 27, 1996 Director
- --------------------
Louis Feil
/s/ Oscar Kunreuther February 27, 1996 Director
- --------------------
Oscar Kunreuther
16
FAB INDUSTRIES, INC.
HOURLY EMPLOYEES RETIREMENT PLAN
(AS AMENDED AND RESTATED AS OF DECEMBER 1, 1989)
<PAGE>
FAB INDUSTRIES, INC. HOURLY EMPLOYEES RETIREMENT PLAN
(AS AMENDED AND RESTATED AS OF DECEMBER 1, 1989)
PREAMBLE
WHEREAS, FAB INDUSTRIES, INC. (hereinafter referred to as the "Employer")
adopted the FAB INDUSTRIES, INC. Hourly Employees Retirement Plan (hereinafter
referred to as the "Plan") for the benefit of its Employees, effective as of
December 1, 1976; and
WHEREAS, the Employer reserved the right to amend the Plan; and
WHEREAS, the Employer heretofore amended the Plan from time to time and desires
to further amend the Plan in order to comply with the Tax Reform Act of 1986;
and
WHEREAS, it is the intent of the Employer that the Plan shall continue to be
established and maintained (1) as an employee benefit plan which is in full
compliance with the Employee Retirement Income Security Act of 1974 as amended
and all applicable regulations thereunder and (2) as a qualified plan under the
terms of Section 401(a) of the Internal Revenue Code of 1986, as amended from
time to time; and
NOW, THEREFORE, the Plan is hereby amended, effective as of December 1, 1989
except where otherwise noted, by restating the Plan in its entirety as follows:
1
<PAGE>
ARTICLE ONE -- DEFINITIONS
For purposes of the Plan, unless the context or an alternative definition
specified within another Article provides otherwise, the following words and
phrases shall have the meanings indicated:
1.1 "ACCRUED BENEFIT" shall mean the amount to which a Participant would be
entitled under the benefit formula in Section 4.1 at his Normal
Retirement Date, based upon his Years of Service which he has completed
by the date as of which he incurs a Break in Service.
1.2 "ACTUARIAL EQUIVALENT" shall mean a benefit that has a value equal to
any benefit otherwise payable under the Plan as determined by the
Actuary using the following factors:
Interest: 8-1/2% compounded annually
Mortality: 1971 Group Annuity Mortality Table
Provided, however, that with respect to the distribution to a
Participant of a benefit under the Plan in the form of an Actuarial
Equivalent lump sum, such lump sum shall, in no event, be less than the
amount determined as follows:
(a) by using an interest rate no greater than the "applicable interest
rate" if the Actuarial Equivalent lump sum using such rate does
not exceed $25,000, and
(b) by using an interest rate no greater than one hundred and twenty
percent (120%) of the "applicable interest rate" if the Actuarial
Equivalent lump sum determined using the "applicable interest
rate" exceeds $25,000; provided, however, that the lump-sum value
determined hereunder shall not be less than $25,000.
For purposes of this Section, the term "applicable interest rate" means
the interest rate that would be used as of the date of determination by
the PBGC in determining a lump-sum distribution upon Plan termination.
In the event the factors used to determine Actuarial Equivalent are
modified, a Participant's benefit, on or after the effective date of
such change, shall be the greater of (1) the Actuarial Equivalent of
the Accrued Benefit determined as of the day before the effective date
of the change in such factors, or (2) the Actuarial Equivalent of the
total Accrued Benefit as of the date of determination computed using
the new factors.
Notwithstanding the previous two paragraphs, effective for all
distributions from the Plan subject to Section 417(e) of the Code made
on or after June 1, 1995, the "applicable interest rate" means the
annual rate of interest on 30-year Treasury securities determined for
the first day of December preceding the date of distribution. In
addition, the applicable mortality table shall be used in determining
the Actuarial Equivalent lump sum amount hereunder. The term
"applicable mortality table" means the table described in Section
417(e)(3)(A)(I) of the Code.
2
<PAGE>
1.3 "ACTUARY" shall mean an actuary appointed by the Administrator under
whose supervision valuation reports and benefit calculations are
performed for the Plan. The actuary must be enrolled under Federal
practice.
1.4 "ADMINISTRATOR" shall mean the Plan Administrator appointed in
accordance with the provisions of Section 7.1.
1.5 "BENEFICIARY" shall mean any person, trust, organization or estate
designated by the Participant to receive a death benefit under the Plan
on the death of a Participant.
1.6 "BREAK IN SERVICE" shall mean a twelve (12)-month computation period
(as used for measuring Years of Service for vesting purposes) in which
an Employee or Participant is not credited with at least five hundred
and one (501) Hours of Service.
1.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.8 "COMPENSATION", for Plan Years beginning prior to December 1, 1992,
shall mean the earnings paid or accrued for the Employer's taxable year
inclusive of any bonus, overtime or commission. Amounts that excludable
from compensation pursuant to Section 415 of the Code and Treasury
Regulations thereunder shall be excluded.
For Plan Years beginning after November 30, 1992, "COMPENSATION" shall
mean the Participant's compensation as defined in Section 415(c)(3) of
the Code and Treasury Regulations Sections 1.415-2(d)(2) and (3).
Notwithstanding any provision contained herein to the contrary, only
the first $200,000 (or larger amount when prescribed by the Secretary
of the Treasury or his delegate) of each Participant's Compensation
shall be considered for all purposes under the Plan; provided, however,
that the dollar increase in effect on January 1 of any calendar year
shall be effective for the Plan Year beginning in such calendar year,
and the first adjustment to the $200,000 limitation shall be effective
on January 1, 1990. If the Plan determines Compensation over a period
of time which contains less than twelve (12) calendar months, then the
annual Compensation limit shall be the 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 twelve (12). In determining the
Compensation of a Participant for the purposes of this limitation, the
provisions of Code Section 414(q)(6) shall apply, except to the extent
that such rules shall only include the spouse of the Participant and
any lineal descendants of the Participant who have not attained age
nineteen (19) before the end of the Plan Year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is
exceeded, then (except for purposes of determining the portion of
Compensation up to the integration level of Code Section 401(l)), the
limitation shall be prorated among the affected individuals'
Compensation determined under this Section prior to the application of
this limitation.
For purposes of determining who is a Highly-Compensated Employee,
Compensation shall mean compensation as defined in Code Section
414(q)(7).
3
<PAGE>
For Plan Years beginning on or after December 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 Code Section
401(a)(17)(B). 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 December 1, 1994, any reference in
the Plan to the limitation under Code Section 401(a)(17) shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current
Plan Year, the Compensation for that prior determination period is
subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit is
$150,000.
1.9 "EFFECTIVE DATE." The Plan's initial Effective Date is December 1,
1976. The Effective Date of the restated Plan, on and after which it
supersedes the terms of the existing Plan document, is December 1,
1989, except where the provisions of the Plan shall otherwise
specifically provide. The rights of any Employee or Participant who
separated from the Employer's Service prior to that date shall be
established under the terms of the Plan and Trust as in effect at the
time of his separation, unless he subsequently returns to Service with
the Employer. Rights of spouses or Beneficiaries of such Participants
shall also be governed by those documents.
1.10 "EMPLOYEE" shall mean a common law employee of the Employer.
1.11 "EMPLOYER" shall mean FAB INDUSTRIES, INC., and any subsidiary or
affiliate of which, with the approval of the board of directors of FAB
INDUSTRIES, INC., has adopted the Plan and shall include any
successor(s) thereto which adopt the Plan. If, under state law, the
Employer at any time is not governed by directors but instead by its
stockholders, reference herein to the board of directors shall be
deemed to refer to the individual(s) empowered to vote on the
Employer's affairs.
1.12 "EMPLOYMENT DATE" shall mean the first date as of which an Employee is
credited with an Hour of Service, provided that in the case of a Break
in Service, his Employment Date shall be the first date thereafter as
of which he is credited with an Hour of Service.
1.13 "HIGHLY-COMPENSATED EMPLOYEE" shall mean any Employee of the Employer
who:
(a) was a five percent (5%) owner of the Employer (as defined in Code
Section 416(i)(1)) during the "determination year" or "look-back
year"; or
4
<PAGE>
(b) earned more than $75,000 (as increased by cost-of-living
adjustments) of Compensation from the Employer during the
"look-back year"; or
(c) earned more than $50,000 (as increased by cost-of-living
adjustments) of Compensation from the Employer during the
"look-back year" and was in the "Top-Paid Group" of Employees for
such year (as defined under Code Section 414(q)(4) and the
regulations promulgated thereunder); or
(d) was an officer of the Employer during the "look-back year" and
received Compensation during the "look-back year" from the
Employer in excess of fifty percent (50%) of the dollar
limitation under Code Section 415(b)(1)(A). The number of
officers shall be limited to the lesser of (i) fifty (50)
Employees; or (ii) the greater of three (3) Employees or ten
percent (10%) of all Employees. If the Employer does not have at
least one officer whose annual Compensation exceeds fifty percent
(50%) of the dollar limitation under Code Section 415(b)(1)(A),
then the highest paid officer of the Employer shall be treated as
a Highly- Compensated Employee.
An Employee who is in the group consisting of the one hundred (100)
Employees paid the greatest Compensation during the "determination
year" and also described in subsections (b), (c) or (d) above when
these subsections are modified to substitute "determination year" for
"look-back year", shall be deemed a Highly-Compensated Employee for the
determination year.
An Employee who separated from Service prior to the determination year
shall be treated as a Highly-Compensated Employee for the determination
year if such Employee was a HighlyCompensated Employee when such
Employee separated from Service, or was a HighlyCompensated Employee at
any time after attaining age fifty-five (55).
For purposes of this Section, the "determination year" shall be the
Plan Year for which a determination is being made as to whether an
Employee is a Highly-Compensated Employee. The "look-back year" shall
be the twelve (12) month period immediately preceding the determination
year. However, if the Employer shall elect, the "look-back year" shall
be the calendar year ending with or within the Plan Year for which
testing for the determination of which Employees are Highly Compensated
Employees is being performed, and the "determination year" (if
applicable) shall be the period of time, if any, which extends beyond
the "look-back year" and ends on the last day of the Plan Year for
which such testing is being performed (the "lag period"). If the "lag
period" is less than twelve (12) months, the dollar threshold amounts
specified in (b), (c) and (d) above shall be prorated based upon the
number of months in the "lag period".
If an individual is a member of the "family" (within the meaning of
Code Section 414(q)(6)(B)) of a five percent (5%) owner or of a
Highly-Compensated Employee in the group consisting of the ten (10)
Highly-Compensated Employees paid the greatest Compensation during the
"determination and/or look-back year," then such individual shall not
be considered a separate Employee, and any compensation paid to such
individual (and any contribution or benefit on behalf of such
individual) shall be treated as if paid to (or on behalf of) the five
percent (5%) owner or such Highly-Compensated Employee.
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1.14 "HOUR OF SERVICE" shall mean:
(a) each hour for which an Employee is paid or entitled to payment
for the performance of duties for the Employer. These hours shall
be credited to the Employee for the computation period in which
the duties are performed; and
(b) each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has been terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
involuntary military duty or leave of absence. No more than five
hundred and one (501) Hours of Service shall be credited under
this subsection for any single continuous period during which no
duties are performed (whether or not such period occurs in a
single computation period). Hours of Service under this
subsection shall be calculated and credited pursuant to section
2530.200b-2(b) and (c) of the Department of Labor Regulations
which are incorporated herein by this reference; and
(c) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
Hours of Service shall not be credited both under subsection (a)
or subsection (b), as the case may be, and under this subsection
(c). These Hours of Service shall be credited to the Employee for
the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award,
agreement or payment is made.
1.15 "LEASED EMPLOYEE" shall mean any person who, pursuant to an
agreement between the
Employer and any other person or organization, has performed services
for the Employer or for the Employer and related persons (determined in
accordance with Code Section 414(n)(6)) on a substantially full-time
basis for a period of at least one year, where such services are of a
type historically performed by employees in the business field of the
Employer. A person shall not be considered a Leased Employee if the
total number of Leased Employees does not exceed twenty percent (20%)
of the Nonhighly-Compensated Employees employed by the Employer, and if
any such person is covered by a money purchase pension plan providing
(a) a nonintegrated employer contribution rate of at least ten percent
(10%) of compensation as defined in Section 8.2(b)(2) of the Plan but
modified to include amounts contributed pursuant to a salary reduction
agreement which are excludable from the Employee's gross income under
Code Sections 125, 402(a)(8), 402(h) or 403(b), (b) immediate
participation, and (c) full and immediate vesting.
1.16 "NONHIGHLY-COMPENSATED EMPLOYEE" shall mean any Employee of the
Employer who is not a Highly-Compensated Employee.
1.17 "NORMAL RETIREMENT DATE" shall mean a Participant's sixty-fifth (65th)
birthday or, if later, the fifth (5th) anniversary of his initial
commencement of Plan participation; provided, however, the Normal
Retirement Date for a Participant who first commenced participation in
the Plan prior to the first Plan Year beginning on or after December 1,
1988 shall be the earlier of (i) the tenth (10th) anniversary of the
date the Participant commenced participation in the Plan, or (ii) the
fifth (5th) anniversary of the first day of the Plan Year beginning on
or after December, 1988.
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1.18 "PARTICIPATION" shall mean any Employee who has satisfied the
eligibility requirements of Article Three and who is participating
under the Plan.
1.19 "PLAN" shall mean the Plan as set forth herein and as it may be
amended from time to time.
1.20 "PLAN YEAR" shall mean the twelve (12)-consecutive-month period
beginning December 1 and ending November 30.
1.21 "SERVICE" shall mean service or employment with the Employer.
1.22 "TRUST" shall mean the Trust Agreement entered into between the
Employer and the Trustee forming part of this Plan, together with any
amendments thereto. "TRUST FUND" shall mean any and all property held
by the Trustee pursuant to the Trust Agreement, together with income
therefrom.
1.23 "TRUSTEE" shall mean the Trustee or Trustees appointed by the
Employer, and any successors thereto.
1.24 "VALUATION DATE" shall mean the annual date selected by the Actuary as
of which Plan assets are valued and liabilities determined for purposes
of an actuarial valuation.
1.25 "YEAR OF SERVICE" shall mean a twelve (12)-consecutive-month
computation period in which an Employee is credited with one thousand
(1,000) or more Hours of Service.
For purposes of eligibility to participate and to reparticipate
following a Break in Service, the date an Employee performs his first
Hour of Service shall be the beginning of the computation period.
Thereafter, the Plan Year that includes the last day of the initial
computation period shall be used as the computation period for purposes
of eligibility to participate in the Plan. Succeeding computation
periods shall be based on succeeding Plan Years.
For purposes of benefit accrual under Section 4.1 and for purposes of
determining a Participant's nonforfeitable right to his Accrued Benefit
under Section 4.5 and his Early Retirement Date under Section 4.3, the
twelve (12)-month period coincident with the Plan Year in which an
Employee is credited with one thousand (1,000) or more Hours of Service
shall be the computation period. Credit for a Year of Service shall be
granted on completion of the one thousandth (1,000th) Hour of Service
in each computation period.
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ARTICLE TWO--SPECIAL RULES RELATED TO SERVICE
2.1 CESSATION OF EMPLOYMENT AND RETURN TO SERVICE. An Employee who
returns to employment after a Break in Service shall retain credit for
his pre-Break Years of Service; provided, however, that if, when the
Employee incurred his Break in Service, he had not completed sufficient
Years of Service to be credited with a vested benefit under Article
Four, his pre-Break Years of Service shall be disregarded if the number
of consecutive Breaks in Service equal or exceed five (5).
If an Employee incurred a Break in Service prior to the Plan Year
commencing in 1985, the determination of such Participant's Years of
Service shall be governed by the rules in effect at his termination of
Service.
2.2 MATERNITY/PATERNITY FAMILY LEAVE OF ABSENCE. An Employee who is absent
from work for an approved leave of absence due to Parental, Family or
Medical Leave shall be credited with the number of Hours of Service
(not in excess of 501) equal to:
(a) the number of Hours of Service which otherwise would normally have
been credited to such Employee but for such absence; or
(b) in any case in which the number of Hours of Service described in
paragraph (a) cannot be determined, eight Hours of Service per day
of such absence.
In no event shall more than five hundred and one (501) of such hours be
credited by reason of such period of absence. The Hours of Service
shall be credited in the computation period (used for measuring Years
of Service for vesting purposes) which starts after the leave of
absence begins. However, the Hours of Service shall instead be credited
in the computation period in which the absence begins if it is
necessary to credit the Hours of Service in that computation period to
avoid the occurrence of a Break in Service.
For purposes of this Section 2.2, Parental, Family or Medical Leave
means absence from work for maternity or paternity reasons (1) by
reason of the pregnancy of the individual, (2) by reason of the birth
of the child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of such child
by such individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
Effective as of August 5, 1993, Parental, Family or Medical Leave shall
include an absence from employment, not to exceed 12 weeks, for which
an Employee is entitled to leave under Section 102(a) of the Family and
Medical Leave Act of 1993 for the maternity or paternity reasons stated
above or (A) to care for a spouse, child or parent who has a serious
health condition or (B) to care for the Employee's own serious health
condition.
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2.3 SERVICE IN EXCLUDED JOB CLASSIFICATION, WITH RELATED COMPANIES.
(a) Service while a Member of an Ineligible Classification of
Employees. An Employee who is a member of an ineligible
classification of Employees shall not be eligible to participate
in the Plan while a member of such ineligible classification.
However, if any such Employee is transferred to an eligible
classification, then for purposes of eligibility to participate in
the Plan under Section 3.1 and determining a Participant's
nonforfeitable right to his Accrued Benefit under Section 4.5,
such Employee shall be credited with any prior Years of Service
completed while a member of such an ineligible classification. For
this purpose, an Employee shall be considered a member of an
ineligible classification of employees for any period during
which: (i) he is a Leased Employee; or (ii) he is employed in a
job classification which is excluded from participating in the
Plan under Section 3.1.
(b) Service with Related Group Members. For each Plan Year in which
the Employer is a member of a "related group", as hereinafter
defined, an Employee's Years of Service (solely for purposes of
eligibility to participate in the Plan under Section 3.1 and
determining a Participant's nonforfeitable right to his Accrued
Benefit under Section 4.5) and with any one or more members of
such related group shall be treated as employment by the Employer.
The transfer of employment by any such Employee to another member
of the related group shall not be deemed to constitute retirement
or other termination of employment by the Employer for purposes of
the Plan, but the Employee shall be deemed to have continued in
employment with the Employer for purposes hereof, except for
benefits accrued under Section 4.1. For purposes of this
subsection (b), "related group" shall mean the Employer and all
corporations, trades or businesses (whether or not incorporated)
which constitute a controlled group of corporations with the
Employer, a group of trades or businesses under common control
with the Employer, or an affiliated service group which includes
the Employer, within the meaning of Code Sections 414(b), 414(c),
or 414(m), respectively, or any other entity required to be
aggregated under Code Section 414(o).
(c) Construction. This Section is included in the Plan to comply with
Code provisions regarding the crediting of Service, and not to
extend any additional rights to Employees in ineligible
classifications other than as required by the Code and regulations
thereunder.
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ARTICLE THREE--PLAN PARTICIPATION
3.1 PARTICIPATION. All Employees participating in the Plan prior to its
restatement shall continue to participate, subject to the terms hereof.
Each other hourly Employee shall become a Participant under the Plan
effective on the first day of the Plan Year or first day of the seventh
month of the Plan Year after (i) completing one (1) Year of Service and
(ii) attaining age eighteen (18).
In no event, however, shall any Employee participate under the Plan
while he is included in a unit of Employees covered by a collective
bargaining agreement between the Employer and the Employee
representatives under which agreement retirement benefits were the
subject of good faith bargaining.
3.2 REEMPLOYMENT OF FORMER PARTICIPANT. A Participant whose
participation ceased because of termination of employment will
immediately participate on returning to employment, if such Participant
had a nonforfeitable right under Article Four to any portion of his
Accrued Benefit derived from Employer contributions. If such reemployed
Participant was not vested under Article Four upon termination of
employment, he shall again become a Participant in accordance with the
provisions of Section 2.1 and Section 3.1.
3.3 TERMINATION OF ELIGIBILITY. In the event a Participant is no longer a
member of an eligible class of Employees and he becomes ineligible to
participate but has not incurred a Break in Service, such Employee
shall participate immediately upon returning to an eligible class of
Employees. If such Participant incurs a Break in Service, eligibility
will be determined under the Break in Service rules in Section 2.1 of
the Plan.
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee shall
participate immediately if such Employee has satisfied the eligibility
requirements of Section 3.1 and would have otherwise previously become
a Participant.
3.4 WAIVER OF PARTICIPATION. An Employee shall have the right to waive
participation in the Plan by executing a form which explains the
consequences of waiving participation hereunder. An Employee shall not
be entitled to waive participation in the Plan if his failure to
participate would jeopardize the Employer's ability to have this Plan
or any other retirement plan satisfy the minimum coverage requirements
of Section 410(b) of the Code.
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ARTICLE FOUR--PLAN BENEFITS
4.1 NORMAL RETIREMENT BENEFIT. Each Participant who retires at his Normal
Retirement Date shall be entitled to receive a monthly retirement
benefit determined as of such date. The amount of his monthly benefit
shall be equal to six dollars ($6.00) times his Years of Service up to
a maximum of forty (40). A Participant's right to his benefit shall be
nonforfeitable upon reaching his Normal Retirement Date and shall be
payable under the rules specified in Article Five.
4.2 LATE RETIREMENT BENEFIT. A Participant who remains in the employ of the
Employer after his Normal Retirement Date shall not be eligible to
receive a distribution until his actual retirement date, subject to the
provisions of Section 5.5 below. At the Participant's actual retirement
date, he shall be entitled to receive a monthly retirement benefit
determined under Section 4.1 based on his Years of Service credited as
of his actual retirement date.
4.3 EARLY RETIREMENT. A Participant who separates from Service after
becoming entitled to a nonforfeitable percentage of his Accrued Benefit
shall be entitled to elect to receive a distribution of an early
retirement benefit. The early retirement benefit shall be the Actuarial
Equivalent of the Participant's Accrued Benefit and may commence at any
time after the Participant's termination of Service, as elected by the
Participant. The early retirement benefit shall be payable under the
rules specified in Article Five.
4.4 DISABILITY RETIREMENT.
(a) Payment of Actuarial Equivalent in the Event of Disability. If a
Participant shall separate from Service with the Employer after
being credited with no less than ten (10) Years of Service by
reason of total and permanent disability, the Participant shall be
entitled to receive disability payments determined as of the date
of his disability retirement in an amount equal to his Accrued
Benefit. The monthly benefit shall not be reduced for the
commencement of payment before the Participant's Normal Retirement
Date. "Total and permanent disability" shall mean suffering from a
physical or mental condition that, in the opinion of the
Administrator, in accordance with uniform rules consistently
applied, and based upon appropriate medical advice and
examination, can be expected to prevent the Participant from
continuing his employment with the Employer in his pre-disability
capacity. Receipt of a Social Security Disability award shall be
deemed proof of total and permanent disability.
(b) Effect of Recovery From Disability. If, upon recover from
disability, a Participant is reemployed by the Employer, his Years
of Service up to the date of his retirement for disability shall
be restored and he shall commence to accrue benefits under the
Plan based upon his Years of Service both before his retirement
for disability and after his reemployment. However, the Plan
benefits to which he may become entitled thereafter shall be
reduced by the Actuarial Equivalent of the disability payments
received.
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<PAGE>
(c) Continuing Evidence of Disability. A disabled Participant may be
required to submit evidence of his continued eligibility for
disability income benefits at any time during disability
retirement prior to his Normal Retirement Date, but not more than
semiannually, to determine whether he is eligible for continuance
of the disability pension. In the event the disabled Participant
fails to submit evidence of his continued eligibility for such
disability benefits when requested, his disability pension shall
be discontinued until he submits such evidence.
4.5 VESTING. In the event that a Participant's Service with the Employer
terminates for reasons other than death, disability, Normal or Late
Retirement, such Participant shall have a nonforfeitable right to a
percentage of his Accrued Benefit as determined under the following
schedule. The benefit shall be payable under the rules specified in
Article Five.
YEARS OF SERVICE Vested Percentage
Less than 3 years 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
The nonvested portion of a Participant's Accrued Benefit shall be
forfeited as of the earlier of (i) the last day of the Plan Year in
which the Participant receives a distribution of his vested Accrued
Benefit or (ii) the last day of the Plan Year in which the Participant
incurs a Break in Service. The amount forfeited shall be used to reduce
Employer contributions under Section 6.1.
4.6 DEATH BENEFITS.
(a) Qualified Spousal Survivor Annuity. If a Participant dies while in
the employ of the Employer and is survived by his spouse, the
following minimum death benefit shall be provided under the Plan
to the Participant's spouse: a monthly benefit equal to the amount
which the Participant's spouse would have received if the
Participant had (i) separated from Service on the date of death,
(ii) survived to the earliest retirement age under the Plan, if
later than his attained age and (iii) commenced receiving benefits
under the joint and survivor annuity described in Section 5.2 on
the day prior to his death.
If a Participant who terminated employment, for any reason, with a
right to a deferred vested benefit should die prior to the
commencement of his benefit and be survived by his spouse, the
Participant's surviving spouse shall be entitled to receive a
minimum death benefit in an amount equal to that which the
surviving spouse would have received under the terms of the above
paragraph based on the Participant's vested Accrued Benefit as of
the date of his death.
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Such minimum death benefit shall be paid to the Participant's
surviving spouse during the remainder of his or her lifetime.
However, if the present value of such death benefit, as of the
date of the Participant's death, does not exceed $3,500,
distribution of such death benefit shall automatically be made, in
the form of an Actuarially Equivalent lump-sum payment, as soon as
practicable following the Participant's death.
(b) Death After Commencement of Benefit. If a Participant dies after
payment of benefits has commenced, no death benefit shall be
payable except as provided in the form of benefit elected by the
Participant under Article Five.
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ARTICLE FIVE-TIME AND MODE OF DISTRIBUTION
OF PLAN BENEFITS
5.1 NORMAL FORM OF BENEFIT. The pension formula under Section 4.1 is
calculated to produce a benefit in the form of equal monthly
installments, payable to the Participant during his lifetime, with
payments ceasing in the month of his death, subject to the succeeding
provisions of this Article Five. For a married Participant, the
provisions of Section 5.3 shall apply in lieu of this Section.
Alternatively, a Participant shall be permitted to select any of the
options in Section 5.3.
5.2 JOINT AND SURVIVOR ANNUITY. For any Participant who is married at his
"annuity starting date," his benefit under the Plan shall be paid in
the form of a "qualified joint and survivor annuity" unless the
Participant, with the consent of his spouse, elects to waive such form
of benefit during the period described in paragraph (d) below;
provided, however, that the consent of the Participant's spouse shall
not be required if the Participant selects the option set forth in
Section 5.3(c) and names his spouse as his Beneficiary. The requisite
spousal consent shall be in writing and must be witnessed by a Plan
official or notary public, and shall apply only to the Participant's
spouse who signs such waiver.
(a) The "qualified joint and survivor annuity" means an annuity for
the life of the Participant with a survivor annuity for the life
of the Participant's spouse equal to fifty percent (50%) of the
amount of the annuity payable during the joint lives of the
Participant and the Participant's spouse. The qualified joint and
survivor annuity shall be the Actuarial Equivalent of the
Participant's Accrued Benefit payable in the normal form specified
under Section 5.1.
(b) The Participant may elect to waive the qualified joint and
survivor annuity form of benefit at any time during the election
period. Such an election must be made in writing in a form
acceptable to the Administrator. However, an election to waive the
qualified joint and survivor annuity shall not take effect unless
(1) the Participant's spouse consents in writing to the election,
(2) the election designates a specific alternate Beneficiary, if
applicable, including any class of Beneficiaries or any contingent
Beneficiaries, which may not be changed without spousal consent
(unless the Participant's spouse expressly permits designations by
the Participant without any further spousal consent), (3) the
spouse's consent acknowledges the effect of the election, and (4)
the spouse's consent is witnessed by a Plan representative or a
notary public. In addition, a Participant's waiver of the
qualified joint and survivor annuity shall not be effective unless
the election designates a form of benefit payment which may not be
changed without spousal consent (or the Participant's spouse
expressly permits designation by the Participant without any
further spousal consent). Notwithstanding the foregoing, spousal
consent hereunder shall not be required if it is established to
the satisfaction of the Administrator that the spouse's consent
cannot be obtained because such spouse cannot be located, or
because of such other circumstances as may be prescribed in
regulations pursuant to Code Section 417.
(c) Any consent by a spouse obtained under this Section (or
establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to such spouse. A
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<PAGE>
consent that permits designations by the Participant without any
requirement of further consent by such spouse must acknowledge
that the spouse has the right to limit consent to a specific
Beneficiary, and/or a specific form of benefit where applicable,
and that the spouse voluntarily elects to relinquish either or
both of such rights. No consent obtained under this provision
shall be valid unless the Participant has received notice as
provided below. In addition, any waiver made in accordance with
this Section may be revoked at any time prior to the commencement
of benefits under the Plan. A Participant is not limited to the
number of revocations or elections that may be made hereunder.
(d) The "election period" under this Section shall be the ninety
(90)-day period prior to the "annuity starting date," which date
shall be the first day of the first period in which an amount is
payable as an annuity or, if such benefit is not payable as an
annuity, the first day on which the Participant may begin to
receive a distribution from the Plan.
(e) The Administrator shall provide to each Participant, no less than
thirty (30) days or more than ninety (90) days prior to the
election period, a written explanation of:
(1) the terms and conditions of the qualified joint and survivor
annuity;
(2) the Participant's right to make, and the effect of, an
election to waive such annuity;
(3) the right of the Participant's spouse regarding the
requisite spousal consent to an election to waive the
qualified joint and survivor annuity; and
(4) the right to make, and the effect of, a revocation of an
election to waive such annuity.
(f) Notwithstanding the provisions of this Section, the qualified
joint and survivor annuity requirements set forth above shall not
apply for any Participant whose present value of his vested
Accrued Benefit is $3,500 or less, as determined by use of the
applicable assumptions set forth in Section 1.2. For purposes of
determining whether a Participant's vested Accrued Benefit is
subject to the qualified joint and survivor annuity requirements
hereunder, the value of any amounts transferred from another
qualified plan to the Plan shall be aggregated with such vested
Accrued Benefit.
(g) Once payments have commenced hereunder, the form of benefit
payment may not be changed.
5.3 OPTIONAL FORMS OF BENEFIT PAYMENTS. In lieu of the normal forms of
benefit described under Sections 5.1 and 5.2, a Participant may elect
to receive (with the consent of his spouse, if required under Section
5.2) any of the alternative forms of benefit described below:
(a) A monthly benefit payable to and during the lifetime of the
Participant with payments ceasing in the month of the
Participant's death.
(b) A monthly benefit payable to and during the lifetime of the
Participant, and in the event of the Participant's death after
payments have commenced, but prior to the completion of one
hundred and twenty (120) monthly payments, the monthly payments
shall continue to be
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<PAGE>
paid to the Participant's designated Beneficiary until a combined
total of one hundred and twenty (120) monthly payments have been
received by the Participant and his Beneficiary. If the
Beneficiary predeceases the Participant, the balance of the
payments, if any, will be made to the Participant's estate or to
such other Beneficiary as the Participant may have designated.
(c) A monthly benefit payable to and during the lifetime of the
Participant, and in the event of the Participant's death after
payments have commenced, but prior to the completion of one
hundred and eighty (180) monthly payments, the monthly payments
shall continue to be paid to the Participant's designated
Beneficiary until a combined total of one hundred and eighty (180)
monthly payments have been received by the Participant and his
Beneficiary. If the Beneficiary predeceases the Participant, the
balance of the payments, if any, will be made to the Participant's
estate or to such other Beneficiary as the Participant may have
designated.
(d) A lump sum.
Any of the alternative forms of benefit set forth above (except
installment payments under Section 5.3(e)) shall be the Actuarial
Equivalent to the normal form of benefit described in Section 5.1.
Provided, however, that in no event shall a form of benefit hereunder
provide a benefit in excess of the amount permitted under Code Section
401(l) and the regulations promulgated thereunder.
Benefit elections shall be in writing and shall be filed in accordance
with uniform administrative procedures established by the
Administrator. If the Beneficiary dies after the election of an option
but prior to the commencement of payments to the Participant, the
election shall be null and void and the Participant may elect any
alternative form of payment. If the Beneficiary dies following the
commencement of monthly payments to a Participant under Section 5.3
(c), payment of the monthly income will continue only to the
Participant.
5.4 REVOCATION OR CHANGE OF OPTIONAL FORM. A Participant may revoke or
change any election previously made, or deemed to be made under this
Article Five, ninety (90) days prior to the date of commencement of his
benefits, in the form and manner prescribed by the Administrator. The
Administrator may waive such ninety (90)-day requirement.
5.5 TIME OF COMMENCEMENT OF RETIREMENT PAYMENTS. Except as otherwise
provided below, distribution of benefits to a Participant who retires
on or after his Normal Retirement Date, or who terminates employment as
a result of his "permanent and total disability" as defined in Section
4.4 above, or as a result of his early retirement as defined in Section
4.3, shall commence no later than sixty (60) days following the close
of the Plan Year in which such event occurred, unless the Participant
elects to defer receipt of his benefits subject to the provisions of
this Section. However, if the present value of the Participant's vested
Accrued Benefit exceeds $3,500 (as determined by use of the applicable
assumptions set forth under Section 1.2), distribution of his benefit
shall not commence prior to such Participant's Normal Retirement Date
unless the Participant otherwise elects in writing.
If a Participant terminates employment for any reason other than Normal
Retirement, early
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<PAGE>
retirement, disability or death, distributions of his benefits shall
commence as soon as administratively practical following the close of
the Plan Year in which he incurs a Break in Service. However, if the
present value of the Participant's vested Accrued Benefit exceeds
$3,500 (as determined by use of the applicable assumptions set forth
under Section 1.2), distribution of his benefit shall not commence
prior to such Participant's Normal Retirement Date unless the
Participant otherwise elects in writing.
The failure of a Participant to consent to a distribution while the
vested Accrued Benefit is immediately distributable shall be deemed to
be an election to defer commencement of payment of such benefit.
If a Participant receives a lump sum distribution from the Plan as a
result of terminating his employment, he shall, at such time as he
again becomes an Employee, have the right to restore his Accrued
Benefit to the extent forfeited upon the repayment to the Plan of the
full amount of the distribution, plus interest compounded annually at
the rate determined for purposes of Code Section 411(c)(2)(C) from the
date of distribution to the date of requirement. Such right of
repayment by the Participant shall terminate upon the earlier of (i)
five years from the individual again becoming an Employee, or (ii) the
completion of five consecutive Breaks in Service following the date of
distribution of the lump sum to the Participant.
Notwithstanding any provision contained herein to the contrary, a
Participant who is not vested in any portion of his Accrued Benefit
attributable to Employer contributions shall be deemed to have received
a distribution of such Accrued Benefit as of the end of the Plan Year
in which he incurs a Break in Service. In the event such Participant is
credited with an Hour of Service before incurring five consecutive
Breaks in Service, his vested Accrued Benefit previously deemed
distributed to him will be deemed repaid to the Plan.
A Participant may elect to defer receipt of his retirement benefits;
provided, however, that in no event shall the distribution commence
later than the April 1st following the end of the calendar year in
which the Participant attains age seventy and one-half (70 1/2), unless
the Participant attained age seventy and one-half (70 1/2) on or before
January 1, 1988 and was not a five percent (5%) owner of the Employer,
or the Participant signed a timely election form complying with the
provisions of Section 242(b) of TEFRA. For any Participant who signed
such a form, or who have attained age seventy and one-half (70 1/2) on
or before January 1, 1988 and was not a five percent (5%) owner,
payment must be made or commence by the later of the April 1st
following the calendar year of retirement or the April 1st following
the calendar year in which age seventy and one-half (70 1/2) is
attained.
5.6 SUSPENSION OF BENEFITS UPON RE-EMPLOYMENT. In the event that a retired
or terminated Participant is re-employed by the Employer, his monthly
benefit (if any) shall be suspended during the period of his
re-employment. Upon his subsequent retirement or other termination of
employment, his benefit (if any) shall be determined in accordance with
the applicable provisions of the Plan then in effect, with recognition
of his prior Service in accordance with such provisions and with
appropriate actuarial adjustment to reflect any benefits paid under the
Plan prior to his re-employment, but the amount of his benefit shall
not be less than if he had not been re-employed, nor shall it be
greater than the benefit he would otherwise have received had his
employment been continuous.
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5.7 NOTICE TO EMPLOYEES. If a Participant remains in the employ of the
Employer after his Normal Retirement Date thereby deferring the payment
of his monthly benefit, or if a retired or terminated Participant is
re-employed thereby resulting in the suspension of his monthly
retirement benefit, the Administrator shall notify the Participant of
the deferral or suspension of his benefit; such notice shall contain
such information and shall be given at such time as may be required by
applicable law or regulation.
5.8 DESIGNATION OF BENEFICIARY. Each Participant shall file with the
Administrator a designation of Beneficiary to receive payment of any
death benefits payable under an alternative payment option selected by
the Participant under Section 5.3 if such Beneficiary should survive
the Participant. However, no Participant who is married shall be
permitted to designate a Beneficiary other than his spouse unless the
Participant's spouse has signed a written consent witnessed by a Plan
representative or a notary public, which consent provides for a
designation of an alternate Beneficiary.
Subject to the above, Beneficiary designations may include primary and
contingent Beneficiaries, and may be revoked or amended at any time in
similar manner or form, and the most recent designations shall govern.
In the absence of an effective designation of Beneficiary, or if the
Beneficiary dies before complete distribution of the Participant's
benefits, all amounts shall be paid to the surviving spouse of the
Participant, if living, or to the Participant's estate. Notification to
Participants of the death benefits under the Plan and the method
designating a Beneficiary shall be given at the time and in the manner
provided by regulations and rulings under the Code.
5.9 MODE OF DEATH BENEFITS. The Beneficiary shall be allowed to designate
the mode of receiving benefits unless the Participant had designated in
writing a method of distribution. However, no designation of a payment
method by a Participant shall prevent the Participant's spouse from
receiving the qualified spousal survivor annuity, as described in
Section 4.5(a), provided such benefit shall otherwise be payable under
the Plan.
If payments start at the "required time" (as defined below), and if all
payments are to be made to or for the benefit of one or more natural
persons, the following distribution modes shall be available:
(a) a level pension, which is the Actuarial Equivalent of the death
benefit, payable for the Beneficiary's lifetime;
(b) a lump sum; and
(c) installment payments of the lump sum (in a manner similar to that
in Section 5.3(e)) paid over the life expectancy of the
Beneficiary. (If the Beneficiary is the spouse of the Participant,
the Beneficiary shall be permitted to recalculate such life
expectancy each year.)
The "required time" for commencement of payments shall be within one
year of the Participant's death or, in the case of a surviving spouse,
no later than the date on which the Participant would have reached age
seventy and one-half (70 1/2). (If a surviving spouse dies before
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distributions to the spouse begin, this paragraph shall be applied as
if the surviving spouse were the Participant.)
If payments start after the required time, or to the extent payments
are not designated to or for the benefit of a natural person, the
following distribution modes shall be available:
(a) lump sum; and
(b) payments of installments at such time and in such amount as
determined by the Beneficiary, provided that all amounts must be
paid within five (5) years of the Participant's death.
If a Participant dies after payments to him have commenced, any
survivor's benefit must be paid no less rapidly than the method of
payment in effect at the time of the Participant's death.
Nothing within this Section shall invalidate any Participant's previous
designation of a mode of paying death benefits, provided such
designation was made prior to January 1, 1984 and was in accordance
with all requirements announced by the Internal Revenue Service with
respect to the transitional rule established under Section 242(b) of
TEFRA. No modification of the mode set out in any such election shall
be allowed, however, unless it is in compliance with this Section 5.9.
5.10 MINIMUM DISTRIBUTION RULES.
(a) In the case of installment payments for distributions made to
comply with the provisions of Code Section 401(a)(9), the
following rules shall apply:
(1) Payments to Participant or to Participant and Surviving
Spouse. Payments shall commence no later than the date
provided for in Section 5.5. The amount to be distributed
each year shall be at least equal to the balance in a
segregated installment account, as of the preceding
Valuation Date, multiplied by the following fraction: the
numerator of the fraction shall be one (1) and the
denominator shall be the life expectancy of the Participant
(or joint life expectancies of the Participant and his
spouse) determined as of the Valuation Date preceding the
first payment and reduced by one (1) for each succeeding
year.
(2) Payments to Participant and Non-Spouse Beneficiary. Payments
shall commence no later than the date provided in Section
5.5. The amount to be distributed each year shall be at
least equal to the balance in the segregated installment
account, as of the preceding Valuation Date, multiplied by
the following fraction: the numerator of the fraction shall
be one (1) and the denominator shall be the joint life
expectancy of the Participant and his Beneficiary computed
as of the Valuation Date preceding the first payment and
reduced by one (1) for each succeeding year. Payments shall
be restricted under this option to ensure compliance with
the minimum distribution incidental death benefit
requirement of Code Section 401(a)(9) and the regulations
promulgated thereunder.
(3) Payments to Beneficiary. Payments shall commence no later
than the date provided for in Section 5.9. The amount to be
distributed each year shall be at least equal to
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the lump-sum value of the Participant's vested Accrued
Benefit as of the preceding Valuation Date multiplied by the
following fraction: the numerator shall be one (1) and the
denominator shall be the life expectancy of the
Participant's Beneficiary computed as of the Valuation Date
preceding the first payment and reduced by one (1) for each
succeeding year.
(4) Recalculation of Life Expectancy. If distribution is to be
made over the life expectancy of the Participant, or where
the Participant's spouse is his Beneficiary, the life
expectancy of the Participant's surviving spouse, or the
joint life expectancies of the Participant and his spouse,
such life expectancy or joint life expectancies may, at the
election of the Participant or his surviving spouse as the
case may be, be recalculated annually. Any such election
shall be irrevocable as to the Participant (and spouse, if
applicable) and shall apply to all subsequent years. In no
event, however, shall the life expectancy of a nonspouse
Beneficiary be recalculated.
5.11 ANNUITY INCOME. Subject to the provisions of Sections 4.6(a) and 5.2,
the Administrator may direct the Trustee to purchase from an insurance
company selected by the Administrator an annuity contract that will
provide the monthly income in an amount equal to that which the
Participant or Beneficiary is entitles under the Plan. In the event an
annuity contract is so purchased, the contract may either be assigned
to the Participant of his Beneficiary on a nontransferable basis or
held by the Trustee for the benefit of the Participant or his
Beneficiary.
5.12 ROLLOVERS TO OTHER PLANS OR IRAS. Notwithstanding any other provision
of the Plan to the contrary, as to any distribution made after December
31, 1992, a distributee may elect, at the time and in the manner
prescribed by the Administrator, to have any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan
specified by the distributee in a direct rollover.
For purposes of this Section 5.12, the following definitions shall
apply.
(1) 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:
(a) 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 beneficiary, or for a
specified period of ten years or more.
(b) any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and
(c) 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).
(2) Eligible Retirement Plan. An Eligible Retirement Plan is an
individual retirement account
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described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in
Code Section 403(a), or a qualified trust described in Code
Section 401(a), that accepts the distributee's Eligible Rollover
Distribution. 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.
(3) 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 qualified
domestic relations order as defined in Code Section 414(p), are
distributees with regard to the interest of the spouse or former
spouse.
(4) Direct Rollover. A direct rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the distributee.
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ARTICLE SIX--EMPLOYER CONTRIBUTIONS,
ROLLOVERS AND TRANSFERS FROM OTHER PLANS
6.1 EMPLOYER CONTRIBUTIONS. The Employer shall retain an Actuary to assist
it in determining the amount of contributions to be made under the
Plan. The contribution of the Employer may be paid to the Trustee on
any date or dates which the Employer may select, subject to the
requirements of applicable law, and shall be made in the form of cash
or checks made payable to the Trustee.
6.2 FORFEITURES. No forfeiture under the Plan shall be applied to increase
the benefits that any Participant or Beneficiary would otherwise
receive. Any amounts forfeited shall be held in the Trust Fund and used
to reduce the contributions of the Employer.
6.3 ROLLOVERS AND TRANSFERS OF FUNDS FROM OTHER PLANS. With the approval of
the Administrator, there may be paid over to the Trustee amounts which
have been held under other plans qualified under Code Section 401
either (a) maintained by the Employer which have been discontinued or
terminated with respect to any Employee, or (b) maintained by another
employer with respect to which any Employee has ceased to participate.
Any such transfer or rollover may also be made by means of an
Individual Retirement Account qualified under Code Section 408 where
the Individual Retirement Account was used as a conduit from the former
plan. Any amounts so transferred on behalf of any Employee shall be
nonforfeitable and shall be maintained under a separate Plan account,
to be paid in addition to amounts otherwise payable under the Plan. The
amounts of any such account shall be equal to the fair market value of
such account as adjusted for income, expenses, gains and losses. If an
Employee has not satisfied the eligibility requirements of Section 3.1
but has either transferred or rolled over an amount from another
qualified plan, such Employee shall be considered a Participant under
the Plan but only to the extent of such transferred or rolled over
amount.
Subject to the approval of the Administrator, the Trustee is authorized
to pay to the trustee or custodian of other qualified retirement plans
any nonforfeitable benefits attributable to Employer contributions
provided under the Plan for the benefit of any Participant upon the
terms and conditions set forth herein.
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ARTICLE SEVEN--ADMINISTRATION OF THE PLAN
7.1 PLAN ADMINISTRATOR.
(a) The Employer shall be the Plan Administrator, hereinbefore and
hereinafter called the Administrator and named fiduciary of the
Plan, unless the Employer, by action of its board of directors,
shall designate a person or Administrator of persons to be the
Administrator and named fiduciary. The administration of the Plan,
as provided herein, including the determination of the payment of
benefits to Participants and their Beneficiaries, shall be the
responsibility of the Administrator. The Administrator shall
conduct its business and may hold meetings, as determined by it,
from time to time. In the event more than one party shall act as
Administrator, all actions shall be made by majority decisions. In
the administration of the Plan, the Administrator may (1) employ
agents to carry out nonfiduciary responsibilities (other than
Trustee responsibilities) among its members. Actions dealing with
fiduciary responsibilities shall be taken in writing and the
performance of agents, counsel and fiduciaries to whom fiduciary
responsibilities have been delegated shall be reviewed
periodically.
(b) The expenses of administering the Plan and the compensation of all
employees, agents, or counsel of the Administrator, including
accounting fees, and actuarial fees, shall be paid by the Plan, or
by the Employer, if it so elects. No compensation may be paid by
the Plan to full-time Employees of the Employer.
(c) The Administrator shall keep a record of all its proceedings in
the form and to the extent requested by the board of directors of
the Employer. The Administrator shall obtain from the Trustee, not
less often than annually, a report with respect to the value of
the assets held in the Trust Fund, in such form as may be required
by the Administrator.
(d) The Administrator shall administer the Plan and adopt such rules
and regulations as, in the opinion of the Administrator, are
necessary or advisable to implement and administer the Plan and to
transact its business.
(e) Pursuant to procedures established by the Administrator, adequate
notice in writing shall be provided to any Participant or
Beneficiary whose claim for benefits under the Plan has been
denied within ninety (90) days of receipt of such claim. Such
notice shall set forth the specific reason for such denial, shall
be written in a manner calculated to be understood by the
claimant, and advice of the right to administrative review. If
such review is requested by the claimant or his authorized
representative within ninety (90) days after receipt by the
claimant of written notification of denial of his claim, the
Administrator shall afford a reasonable opportunity for a full and
fair review by the Administrator of the decision denying the
claim. The review shall focus on the addition facts, legal
interpretations or material, if any, presented by the claimant. A
hearing is not required under the review procedure.
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ARTICLE EIGHT--TRUST AGREEMENT
8.1 ESTABLISHMENT OF THE TRUST. The Employer and the Trustee hereby enter
into a Trust agreement which, except to the extent such trust agreement
is set forth in a valid separate and distinct document, is incorporated
herein and which establishes a Trust consisting of such sums of money
and other property as may from time to time be contributed or
transferred to the Trustee under the terms of the Plan, along with any
property to which any portion of the Trust Fund may from time to time
be converted, and which provides for the investment of Plan assets and
the operation of the Trust. This trust agreement, as amended from time
to time, shall be deemed part of the Plan, and all rights and benefits
provided to persons under the Plan shall be subject to the terms of the
Trust agreement. In the event the Employer has entered into a separate
and distinct trust agreement which is not incorporated in the terms of
this Plan, and such trust agreement, subsequent to its establishment,
becomes void or ceases to operate, the terms of this Article shall
become effective with respect to the Employer.
8.2 PURPOSE OF THE TRUST. The purpose of the Trust is to invest in and hold
property for the exclusive benefit of Participants and their
Beneficiaries. At no time shall the Trust be operated or construed in a
manner contrary to this purpose. The Trust shall be a separate entity
from the Employer and its assets. In no event shall the Trust Fund ever
be subject to the rights or claims of any creditor of the Employer. It
is expressly understood that the duties and obligations of the Trustee
shall be only those expressly stated in this Article.
8.3 DISTRIBUTIONS. The Trustee shall from time to time make distributions
from the Trust Fund to such persons, in such amounts, and in such
manner as the Administrator may direct in writing. Instructions to the
Trustee from the Administrator need not specify the purpose of the
distributions so ordered, and the Trustee shall not be responsible in
any way for the propriety of such distributions or for the
administration of the Plan. Any such instructions shall constitute a
certification that each distribution directed is one which the
Administrator is authorized to direct. The Trustee shall not be
responsible for the adequacy of the Trust Fund to meet and discharge
any liabilities under the Plan. If a dispute arises regarding who is
entitled to or should receive any distribution from the Trust Fund, the
Trustee may withhold, or cause the withholding of, such distribution
until the dispute has been resolved.
8.4 EXCLUSIVE BENEFIT.
(a) Except as the Administrator may authorize the Trustee to return
contributions to the Employer pursuant to the terms of the Plan,
no part of the Trust Fund shall be used for or diverted to
purposes other than for the exclusive benefit of Participants and
their Beneficiaries and for defraying expenses of the Plan and
Trust.
(b) The Employer shall have no beneficial interest in the assets of
the Trust, and no part of the Trust shall ever revert to or be
repaid to the Employer, directly or indirectly, except that upon
written request, the Employer shall have a right to recover
(1) a contribution to the Plan made by mistake of fact if such
contribution (to the extent
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<PAGE>
made by mistake of fact) is returned to the Employer within one
year after payment of such contribution;
(2) any contributions to the Plan conditioned upon initial
qualification of the Plan under Section 401(a) of the Code
if the Plan does not so qualify and such contributions are
returned to the Employer within one year after the denial of
qualification of the Plan and only if a determination letter
request is filed by the terms prescribed by law for filing
the Employer's tax return for the taxable year in which the
Plan is adopted;
(3) a contribution to the Plan which is disallowed as a
deduction under section 404 of the Code if such contribution
(to the extent disallowed) is returned to the Employer
within one year after the deduction is disallowed; and
(4) any residual assets due to a Section 415 excess contribution
upon termination of the Plan if all liabilities of the Plan
to Participants and their Beneficiaries have been satisfied
and the reversion does not contravene any provision of law.
(c) The previous paragraph shall not apply to a "qualified domestic
relations order," as defined in Section 414(p) of the Code, and
any other domestic relations orders permitted to be so treated by
the Trustee under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under any domestic relations orders it
determines to be qualified. To the extent provided under a
"qualified domestic relations order," a former Spouse of a
Participant shall be treated as the Participant's Spouse or
Surviving Spouse for all purposes under the Plan.
8.5 EXPENSES OF THE PLAN AND TRUST. All legal, administrative, taxes, and
other expenses of the Plan and Trust and the Trustee's fees (if any)
shall be paid from the Trust Fund except to the extent paid by the
Employer.
8.6 DUTIES AND RESPONSIBILITIES OF TRUSTEE. It shall be the duty of the
Trustee to hold in Trust the funds from time to time received by it,
and the Trustee shall have authority to manage and control the assets
of the Plan pursuant to the terms of the Plan, the Trust agreement, and
the funding policy and method determined by the Employer, except as
otherwise provided in Section 9.5. The Trustee shall discharge such
powers and duties for the exclusive purpose of providing benefits to
the Participants and Beneficiaries and defraying reasonable expenses of
administering the Plan, and shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims.
The Trustee shall diversify the investments of the Plan so as to
minimize the risk of large losses unless, under the circumstances, it
is clearly prudent not to do so. However, the Trustee may hold,
acquire, or invest in qualifying employer securities as defined in
Section 407(d)(5) of ERISA or qualifying employer real property as
defined in Section 407(d)(4) of ERISA (or both) to the extent that the
aggregate fair market value of such securities and property does not
exceed the limitations set forth in Section 407. The Trustee shall not
engage in any prohibited transactions as defined in the Code or ERISA.
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The Trustee shall not be liable for acquiring, retaining or selling any
investment or reinvestment made in accordance with a direction of the
Administrator as provided herein, nor for any loss or diminution of the
Trust Fund resulting from the Trustee's action or inaction pursuant to
a direction of the Administrator; nor shall the Trustee be liable for
any loss or diminution of the Trust Fund resulting from the Trustee's
inaction hereunder in the absence of proper directions from the
Administrator unless it shall have been judicially determined that any
such loss was due to the willful misconduct of the Trustee or its
failure to act in good faith in accordance with the provisions of this
agreement.
8.7 SPECIFIC POWERS AND DUTIES OF TRUSTEE. In addition to the powers and
duties conferred upon it by other provisions of the Plan and except to
the extent inconsistent with applicable law or with provisions of the
Plan and Trust, the Trustee shall have the following powers regarding
the Trust and Trust Fund:
(1) To sell at public or private sale, exchange, convey, transfer,
lease, or otherwise dispose of, and also to grant options with
respect to all or any part of any property at any time held in the
Trust Fund, for such considerations, in cash or in credit, and
upon such terms and conditions, as it shall deem advisable. In
connection with the purchase of securities, margin accounts may be
opened and maintained. If put or call options are traded, they
must be traded on and purchased through a national securities
exchange registered under the Securities Act of 1934, as amended,
or if the options are not traded on the national securities
exchange, they must be guaranteed by a member firm of the New York
Stock Exchange.
(2) To compromise or settle any claim in respect of any debt or other
obligation due to it as Trustee hereunder, to institute and
prosecute any and all legal proceedings (including foreclosure
proceedings) on behalf of the Plan, or to take any other action
for the purpose of enforcing any such claim, and to change the
rate of interest or extend the maturity date of any such debt or
obligation.
(3) To compromise or settle any claim with respect to any debt or
other obligation due to third persons from it as Trustee
hereunder; to define any and all legal proceedings in respect of
any such claim; and to change the rate of interest on, extend the
maturity date of, or otherwise modify the terms of any such debt
or obligation.
(4) To join in and become a party to, or to oppose any reorganization
(including any consolidation, merger, or other capital changes) of
any corporate securities which may at any time be held in the
Trust Fund, or any plan or agreement for the protection of the
interests of the holders of any such securities; to participate in
any such protective plan or agreement or any such reorganization
to the same extent and as fully as though it was the absolute and
individual owner of such securities; to deposit with any
Administrator or depositories pursuant to any such protective plan
or agreement or any such reorganization any securities held in the
Trust Fund; to make payments from the Trust Fund of and charges or
assessments imposed by the terms of any such protective plan or
agreement on any such reorganization; and to receive and continue
to hold in the Trust Fund any property allotted to the Trust Fund
by reason of the Trustee's participation therein.
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(5) To vote, in person or by general or limited proxy, on any
securities at any time held in the Trust Fund, at any meeting of
security holders, with respect to any business which may come
before the meeting; to execute general or limited proxies to one
or more nominees; as holder of said securities, to consent to,
approve and authorize any corporate act or proceeding, including
any merger on consolidation, lease, mortgage or sale of corporate
property, or dissolution or liquidation, whether or not proposed
at any such meeting; to execute such instruments as may be
necessary or appropriate therefore; and generally to exercise the
powers of an owner with respect to stocks, bonds, securities, or
other property.
(6) To exercise any conversion or subscription rights appurtenant to
any securities at any time held in the Trust Fund or to sell any
such rights.
(7) To execute, acknowledge and deliver any and all deeds, leases,
assignments and other instruments that it may deem necessary or
proper in the exercise of any of its powers under this agreement.
(8) To cause any property at any time held in the Trust Fund to be
registered in the name of a nominee of the Trustee, without
disclosure of the Trust, or to hold in bearer form any securities
at any time held in the Trust Fund so that they will pass by
delivery, but any such registration or holding by the Trustee
shall not release it from its responsibility for the safe custody
and disposition of the Trust Fund, in accordance with the terms
and provisions of this agreement.
(9) To improve, develop, repair, maintain, preserve and operate any
property held in the Trust Fund, or to invest and retain
qualifying employer real property and lease such property to the
Employer as permitted under the appropriate sections of ERISA and
Regulations promulgated thereunder.
(10)To borrow from time to time money from persons or others (but not
from a party in interest) for the purposes of the Trust created
hereby on such terms and conditions as the Trustee may deem
advisable.
(11)To employ suitable agents and counsel, and to pay their reasonable
expenses and compensation.
(12)To hold part or all of the Trust Fund uninvested in its own banking
department, if any, and the Trustee is further authorized to
deposit, at interest, such funds of the Plans as it may from time
to time deem appropriate in time deposits or savings accounts
bearing a reasonable interest rate, including, specifically,
deposits in the commercial banking departments in a Trustee bank.
(13)To invest and reinvest in bonds, notes, debentures, stocks,
options, mutual funds, life insurance policies, mortgages,
vendors' interest in contracts for sale of real property or other
property, real, personal or mixed, in such manner and to such
extent as is prudent under the circumstances.
(14)To transfer moneys and assets of the Trust into common trust funds
established for the Plan,
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including common trust funds held by a corporate Trustee (provided
the Trustee is a national banking association).
(15)To do all acts, whether or not expressly authorized herein, which
it may deem necessary and proper for the protection of the
property held hereunder, and to carry out the purposes of the
Plan.
(16)To hold up to ten percent (10%) of the fair market value of Plan
assets in qualifying employer securities as defined in Section
407(d)(5) of ERISA or qualifying employer real property as defined
in Section 407(d)(4) of ERISA.
If there is more than one Trustee designated and acting under this
Trust, all actions by the Trustee must be adopted by a majority of the
Trustees.
8.8 INVESTMENT MANAGER. Upon written notice to the Trustee and the
Administrator, the Employer may appoint one or more investment managers
as described in ERISA section 3(38), which shall have the power to
manage, acquire, or dispose of all or part of the Trust assets in
accordance with the provisions of the Plan and Trust agreement. The
Administrator and each such investment manager shall execute a written
agreement specifying the Trust assets to be managed and the investment
manager's duties and responsibilities with respect to such assets, and
in such agreement the investment manager shall acknowledge that it is a
fiduciary with respect to the Plan and Trust. The Administrator may
authorize each investment manager to give written instructions to the
Trustee with respect to acquiring, managing, and disposing of assets
managed by such investment manager, and the Trustee shall follow such
instructions and shall be under no duty to make an independent
determination regarding whether the instruction is proper. The fees and
expenses of an investment manager shall be paid by the Trust except to
the extent paid by the Employer.
8.9 COMPENSATION OF TRUSTEES AND AGENTS.
(a) The Trustee shall be entitled to reasonable compensation for its
services. Compensation shall be comparable to charges for similar
services made from time to time by other Trustees in the
geographic area in which the Trustee has its principal business.
(b) Any Trustee shall be entitled to reimbursement for expenses
properly and actually incurred in the administration of the Trust.
It may employ such agents, attorneys, accountants, or assistants
as it may from time to time deem necessary or advisable and fix
the compensation to be paid to them. Such counsel or other agents
may be counsel or other agents consulted or employed by the
Employer. The expenses of the Trustee and the compensation of the
persons so employed shall be paid by the Trust Fund or the
Employer, as the Administrator shall determine, on at least an
annual basis.
(c) An individual serving as Trustee who already receives full-time
pay from the Employer shall not receive compensation from the
Plan.
8.10 REPORTS OF TRUSTEE. The Trustee shall maintain records of receipts and
disbursements and shall render reports on at least an annual basis to
the Administrator and to Participants in
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such form and containing such information as it deems necessary,
provided that such information shall satisfy all applicable
requirements imposed by ERISA. The records and accounts of the Trustee
may be audited annually by an independent firm of certified public
accountants selected by the Administrator.
8.11 RESIGNATION, REMOVAL AND SUBSTITUTION OF TRUSTEE.
(a) A Trustee may resign at any time upon thirty days notice to the
Employer. A Trustee may be removed at any time by the Employer
upon five days written notice to the Trustee, with or without
cause. Upon resignation or removal of the Trustee, the Employer
shall appoint a successor Trustee which shall have the same powers
and duties as are conferred upon the Trustee hereunder. Upon the
delivery by a predecessor Trustee to the successor Trustee of all
property of the Trust Fund, less such reasonable amount as it
shall deem necessary to provide for its expenses, compensation,
and any taxes or advances chargeable or payable out of the Trust
Fund, the successor Trustee thereupon shall have the same powers
and duties as were conferred upon the predecessor Trustee. No
successor Trustee shall have any obligation or liability with
respect to the acts or omissions of its predecessors.
(b) In the event that a corporate Trustee merges or consolidates with
another corporation or sells or transfers substantially all of its
assets and business to another corporation, or is in any manner
reorganized or reincorporated, then the resulting or acquiring
corporation shall thereupon become the corporate Trustee hereunder
without the execution of any instrument and without the need for
any action by the Administrator, any Participant or Beneficiary,
or any other person having or claiming to have an interest in the
Trust Fund or the Plan.
(c) The Trustee shall be appointed by the Employer. The appointment of
a Trustee shall become effective as of the date the Employer
receives the Trust's written acceptance of the appointment. The
Trustee's signature on the Plan constitutes acceptance of the
appointment. The Employer shall appoint a new Trustee if a Trustee
fails to accept its appointment in writing.
8.12 AMENDMENT AND TERMINATION. The Employer shall have the right at any
time, by an instrument in writing, duly executed and acknowledged and
delivered to the Trustee, to modify, alter or amend this agreement, in
whole or in part, and to terminate the Trust, in accordance with the
express provisions of the Plan. In no event, however, shall the duties,
powers or liabilities of the Trustee hereunder be changed without its
prior written consent.
8.13 IRREVOCABILITY. Subject to the provisions of the Plan, the Trust is
declared to be irrevocable, and except as otherwise provided in Section
8.5, no part of the Trust Fund shall revert to or be recoverable by the
Employer or be used for or diverted to any purposes other than for the
exclusive benefit of Participants and Beneficiaries.
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8.14 PARTIES TO THE TRUST AGREEMENT.
(a) Any company which has adopted the Plan in accordance with the
terms thereof shall become a party to this agreement upon signing
the Plan or upon delivering a certified copy of a resolution to
the effect that it agrees to adopt the Plan, to become a party to
this agreement, and to be bound by all terms and conditions of the
Plan and this agreement, as then in effect and as may thereafter
be amended. The Administrator shall have the sole authority to
enforce this agreement and the Trustee shall in no event be
required to deal with any person except the Administrator. The
Trustee shall in all respects invest and administer the Trust Fund
as a single fund for investment and accounting purposes, without
identification as to individual Participants, Beneficiaries, or
Employers.
(b) Any corporation or other participating entity shall cease to be a
party to this agreement upon delivering to the Trustee a certified
copy of a resolution terminating its participation in the Plan. In
such event, or in the event of the merger, consolidation, sale of
property or stock, separation, reorganization or liquidation of
any corporation that is a party to this agreement, the Trustee,
until directed otherwise by the Administrator shall continue to
hold, in accordance with the provisions of this agreement, that
portion of the Trust Fund which, pursuant to the determination of
the Administrator, is attributable to the participation in the
Plan of the Employees and their Beneficiaries affected by such
termination or by such transaction.
8.15 TRUSTEE ACTION. If the Trustee consists of more than one person, the
Trustees shall act by a majority of their number. The Trustees may
authorize one or more specific Trustees to sign papers on their behalf.
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ARTICLE NINE--EARLY TERMINATION RESTRICTIONS
AND BENEFIT LIMITATIONS
9.1 BENEFIT RESTRICTIONS IN THE EVENT OF EARLY TERMINATION OF THE
PLAN.
(a) Except as may otherwise be provided by applicable law, Employer
contributions on behalf of any of the twenty-five (25) highest
paid Employees at the time the Plan is established and whose
anticipated annual benefit exceeds $1,500 shall be restricted as
provided in subsection (b) upon the occurrence of the following
conditions:
(1) The Plan is terminated within ten (10) years after its
establishment; or
(2) The benefits of such highest paid Employee become payable
within ten (10) years after the establishment of the Plan.
(b) Employer contributions which may be used for the benefit of an
Employee described in subsection (a) shall not exceed the greater
of $20,000, or twenty percent (20%) of the first $50,000 of the
Employee's average annual compensation during the last 5 years of
employment, multiplied by the number of year between the date of
the establishment of the Plan and:
(1) if Section 8.1(a)(1) applies, the date of the termination of
the Plan, or
(2) if Section 8.1(a)(2) applies, the date the benefits become
payable, or
(c) If the Plan is amended so as to increase the benefit actually
payable, in event of the subsequent termination of the Plan, or
the subsequent discontinuance of contributions thereunder, then
the provisions of the above paragraphs shall be applied to the
Plan as so changed as if it were a new plan established on the
date of the change. The original group of twenty-five (25)
Employees (as described in subsection (a) above) shall continue to
have the limitations in subsection (b) apply as if the Plan had
not been changed. The restrictions relating to the amendment shall
apply to benefits or funds for each of the twenty-five (25)
highest paid Employees on the effective date of such amendment
except that such restrictions need not apply with respect to any
Employee in this group for whom the normal annual pension or
annuity, provided by Employer contributions prior to that date and
during the ensuing ten (10) years and based on the Employee's rate
of compensation on that date, could not exceed $1,500.
The Employer contributions which may be used for the benefit of
the new group of twenty-five (25) Employees shall be limited to
the greater of:
(1) the Employer contributions (or funds attributable thereto)
which would have been applied to provide the benefits for
the Employee if the Plan had been continued without change;
or
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(2) $20,000; or
(3) the sum of (A) the Employer contributions (or funds
attributable thereto) which would have been applied to
provide benefits for the Employee prior to the amendment had
the Plan been terminated the day before the effective date
of amendment, and (B) an amount computed by multiplying the
number of years for which the current costs of the Plan
after that date are met by (i) twenty percent (20%) of the
first $50,000 of the Employee's annual average compensation,
or (ii) $10,000, whichever is smaller.
(d) Notwithstanding the above limitations, the following limitations
shall apply if they would result in a greater amount of Employer
contributions to be used for the benefit of the restricted
Employee:
(1) in the case of a substantial owner (as defined in Section
4022(b)(5) of ERISA), a dollar amount which equals the
present value of the benefit guaranteed for such Employee
under Section 4022 of ERISA or, if the Plan has not
terminated, the present value of the benefit that would be
guaranteed if the Plan terminated on the date the benefit
commences, determined in accordance with regulations of the
Pension Benefit Guaranty Corporation ("PBGC"); and
(2) in the case of the other restricted Employees, a dollar
amount which equals the present value of the maximum benefit
described in Section 4022(b)(3)(B) of ERISA (determined on
the earlier of the date the Plan terminates or the date
benefits commence, and determined in accordance with
regulations of PBGC) without regard to any other limitations
in Section 4022 of ERISA.
(e) Notwithstanding the otherwise applicable restrictions on
distributions of benefits incident to early Plan termination, a
Participant's otherwise restricted benefit may be distributed in
full upon depositing, with an acceptable depository, property
having a fair market value equal to one hundred and twenty-five
percent (125%) of the amount which would be repayable had the Plan
terminated on the date of the lump sum distribution. If the market
value of the property held by the depository falls below one
hundred and ten percent (110%) of the amount which would be
repayable if the Plan were then to terminate, additional property
necessary to bring the values of the property held by the
depository up to one hundred and twenty-five percent (125%) of
such amount shall be deposited.
(f) In lieu of the arrangement set forth in Section 9.1(e) above, and
notwithstanding the otherwise applicable restrictions of this
Section, the payment of a Participant's otherwise restricted
benefit may be distributed or transferred in one sum if the
following conditions are met. Prior to the Participant's
termination of employment, the Participant must enter into an
agreement with the Trustee, or the Participant must arrange for an
agreement between a third party (including the trustee of another
plan qualified under Section 401 of the Code) and the Trustee,
which states that, in the event the restrictions contained in this
Section become applicable, there shall be paid to the Trustee by
the Participant (or, in the case of his death, by his estate, or
by the third party, as appropriate) a sum equal to the actuarial
value of the amounts by which the Participant's monthly retirement
benefits would have been decreased during his then-remaining
lifetime pursuant to the provisions of this Section.
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(g) Notwithstanding the foregoing provisions of this Section 9.1, in
the event of the early termination of the Plan (as described
above) after December 31, 1990, the benefits to any of the
twenty-five (25) most highly compensated active and former
Highly-Compensated Employees shall be restricted such that the
annual payments shall be no greater than an amount equal to the
payment that would be made on behalf of any such Employee under a
single life annuity that is the Actuarial Equivalent of the
Employee's Accrued Benefit under the Plan.
The preceding paragraph shall not apply if:
(i) After payment of the benefit to an Employee described in the
preceding paragraph, the value of Plan assets equals or
exceeds 110% of the value of current liabilities (as defined
in Code Section 412(1)(7), or
(ii) the value of the benefits for an Employee described above is
less than 1% of the value of current liabilities.
9.2 LIMITATION OF BENEFITS.
(a) Rules: The following rules limit benefits payable under the Plan:
(1) The annual benefit otherwise payable to a Participant at any
time shall not exceed the maximum permissible amount (as
hereinafter defined). No Participant may accrue a benefit in
excess of that amount.
(2) If the Participant makes nondeductible Employee
contributions under the terms of the Plan, such
contributions, which are credited for the limitation year,
shall, except for purposes of subsection (3) below, be
treated as an annual addition to a qualified defined
contribution plan, for purposes of these rules.
(3) The limitation in subsection (1) shall be deemed satisfied
if the annual benefit payable to a Participant is not more
than $1,000 multiplied by the Participant's number of Years
of Service or portions thereof (not to exceed ten (10)) with
the Employer, provided the Participant has never
participated in a qualified defined contribution plan
maintained by the Employer.
(4) If a Participant is, or has ever been, covered under more
than one defined benefit plans maintained by the Employer,
the sum of the Participant's annual benefits from all such
plans may not exceed the maximum permissible amount.
Benefits shall be reduced under any other defined benefit
plan before under the Plan unless such plans are terminated,
in which event benefits shall be limited in the Plan.
(5) If the Employer maintains, or at any time maintained, one or
more qualified defined contribution plans, welfare benefit
funds, as defined in Code Section 419(e), or individual
medical accounts, as defined in Code Section 415(1)(2) which
provides an annual addition covering any Participant in the
Plan, the sum of the Participant's
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defined contribution fraction and defined benefit fraction
shall not exceed 1.0 in any limitation year. If the
limitations of Code Section 415(e) become applicable,
benefits under a defined contribution plan shall first be
provided before benefits under a defined benefit plan are
provided.
(6) In any Plan Year in which the Plan becomes a Super Top-Heavy
Plan (as defined in Section 10.2(b) below), the denominators
of the defined benefit fraction and defined contribution
fraction shall be computed using one hundred percent (100%)
of the dollar limitation instead of one hundred and
twenty-five percent (125%). In any year which the Plan is a
Top-Heavy Plan (but not a Super Top-Heavy Plan), the
limitations shall be similarly reduced, subject to the
special provisions in Section 10.4 which provide for
maintenance of the one hundred and twenty-five percent
(125%) limitations subject to added minimum accruals.
(b) Definitions: The following definitions are applicable to this
Section:
(1) Annual benefit: A retirement benefit under the Plan which is
payable annually in the form of a straight life annuity.
Except as provided below, a benefit payable in a form other
than a straight life annuity must be adjusted to an
actuarial equivalent straight life annuity before applying
the limitations of this Section, using the factors otherwise
used to establish Actuarial Equivalence under the Plan, and
in no event less than a five percent (5%) interest
assumption.
The annual benefit does not include any benefits
attributable to Employee contributions or rollover
contributions, or the assets transferred from a qualified
plan that was not maintained by the Employer. No actuarial
adjustment to the benefit is required for (A) the value of a
qualified joint and survivor annuity, (B) the value of
benefits that are not directly related to retirement
benefits (such as pre-retirement death benefits), and (C)
the value of post-retirement cost-of-living increases made
in accordance with the Federal income tax regulations, if
the Plan were ever to provide such benefits.
(2) Compensation: For purposes of determining maximum permitted
benefits under this Section, all of a Participant's earned
income, wages, salaries, and fees for professional services,
and other amounts received for personal services actually
rendered in the course of employment with the Employer
maintaining the Plan (including, but not limited to,
commissions paid to salesmen, compensation for services on
the basis of a percentage of profits, commissions on
insurance premiums, tips and bonuses), and excluding the
following:
(A) Employer contributions to a plan of deferred
compensation which are not included in the Employee's
gross income for the taxable year in which
contributed or Employer contributions under a
simplified employee pension plan (funded with
individual retirement accounts or annuities) to the
extent such contributions are deductible by the
Employee, or any distributions from a plan of
deferred compensation;
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(B) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property)
held by the Employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(C) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(D) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in Code Section
403(b) (whether or not the amounts are actually
excludable from the gross income of the Employee).
Compensation shall be measured on the basis of compensation
paid in the limitation year.
(3) Defined benefit fraction: A fraction, the numerator of which
is the sum of the Participant's projected annual benefits
under all the defined benefit plans (whether of not
terminated) maintained by the Employer, and the denominator
of which is the lesser of one hundred and twenty-five
percent (125%) of the dollar limitation in effect for the
limitation year under Code Section 415(b)(1)(A) or one
hundred and forty percent (140%) of the Participant's
Highest Average Compensation, including any adjustments
under Code Section 415(b). Provided, however, if a
Participant was a Participant as of the first day of the
first limitation year commencing after December 31, 1986, in
one or more defined benefit plans maintained by the Employer
which were in existence on May 6, 1986, the denominator of
this fraction shall not be less than one hundred and
twenty-five percent (125%) of the sum of the annual benefits
under such plans which the Participant had accrued as of the
end of the last limitation year commencing before January 1,
1987, disregarding any changes in the terms and conditions
of the plans after May 5, 1986. These provisions shall be
applicable only if the defined benefit plans, individually
and in the aggregate, satisfied the requirements of Code
Section 415 for all limitation years beginning before
January 1, 1987.
(4) Defined contribution fraction: 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), welfare benefit funds,
and individual medical accounts 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 this and all other
defined benefit plans, whether or not terminated, maintained
by the Employer), and the denominator of which is the sum of
the maximum aggregate amounts of the current and all prior
limitation years with the Employer (regardless of whether a
defined contribution plan was maintained by the Employer).
The maximum aggregate amount in any limitation year shall be
the lesser of one hundred and twenty-five percent (125%) of
the dollar limitation then in effect under Code Section
415(c)(1)(A) or thirty-five percent (35%) of the
Participant's
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compensation for such year.
(5) Employer: This term refers to the Employer that adopts the
Plan, and all members of a controlled group of corporations
(as defined in Code Section 414(b), as modified by Code
Section 415(h)), commonly-controlled trades or businesses
(as defined in Code Section 414(c) as modified by Code
Section 415(h)), or affiliated service groups (as defined in
Code Section 414(m)) of which the Employer is a part, or any
other entity required to be aggregated with the Employer
under Code Section 414(o).
(6) Highest Average Compensation: This means the average
compensation for the three (3) consecutive limitation years
with the Employer that produces the highest average.
(7) Limitation year: This shall mean the Plan Year.
(8) Maximum permissible amount: This shall mean an amount equal
to the lesser of $90,000 or one hundred percent (100%) of
the Participant's Highest Average Compensation. If the
annual benefit commences before the Participant attains his
Social Security retirement age (as defined in Section 216(1)
of the Social Security Act), then the $90,000 limitation
shall be reduced in accordance with the provisions of Code
Section 416(b)(2).
If the annual benefit commences after the Participant's
Social Security retirement age, the benefit may not exceed
the lesser of the Actuarial Equivalent of the maximum
benefit under Code Section 415(b)(1) commencing at the
Participant's Social Security retirement age or the
Participant's Highest Average Compensation. In determining
actuarial equivalence under this paragraph, the interest
rate assumption used shall be the lesser of the rate used to
establish the Actuarial Equivalent under the Plan or five
percent (5%).
Effective on January 1, 1988 and each January 1 thereafter,
the $90,000 limitation above shall be automatically adjusted
to the new dollar limitation determined in accordance with
Code Section 415(d) by the Commissioner of Internal Revenue
for that calendar year. The new limitation shall apply to
limitation years ending within the calendar year of the date
of the adjustment.
Notwithstanding the above provisions, if the Participant was
participating in the Plan on May 5, 1986, the maximum
permissible amount shall not be less than the Participant's
current Accrued Benefit.
If the annual benefit commences when the Participant has
less than ten (10) years of Service with the Employer or ten
(10) years of participation in the Plan, the maximum
permissible amount shall not exceed the lesser of:
(A) one hundred percent (100%) of the Participant's
Highest Average Compensation reduced by one-tenth
(1/10) for each Year of Service (or part thereof)
less than ten (10). The adjustments of this
subsection (A) shall be applied to the denominator of
the defined benefit fraction based upon Years of
Service. Years
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of Service shall include future Years of Service
occurring before the Participant's Normal Retirement
Date. Such future Years of Service shall include the
year which includes the date the Participant attains
his Normal Retirement Date, only if it can be
reasonably anticipated that the Participant will be
credited with a Year of Service for that year; or
(B) the maximum dollar limitation otherwise determined
above reduced by one tenth (1/10) for each year of
participation (or part thereof) less than ten (10).
To the extent provided by the Internal Revenue Service in
regulatory guidance, the limitation in subsection (B) above
shall be applied separately with each change in the benefit
structure of the Plan.
For purposes of this Section, a year of participation shall
be each year in which the Participant is included as a Plan
Participant under the Plan's eligibility provisions.
(9) Current accrued benefit: A Participant's annual benefit
(including optional benefit forms) accrued under the Plan,
determined as if the Participant had separated from Service
as of the end of the last limitation year beginning prior to
January 1, 1987 when expressed as an annual benefit within
the meaning of Code Section 415(b)(2), but determined
without regard to changes in the Plan after May 5, 1986 and
any cost-of-living adjustment occurring after May 5, 1986.
(10) Projected annual benefit: The annual benefit as defined in
subsection (1) to which the Participant would be entitled
under the terms of the Plan assuming:
(A) the Participant will continue employment until normal
retirement date under the Plan (or current age, if
later), and
(B) the Participant's compensation for the current
limitation year and all other relevant factors used
to determine benefits under the Plan will remain
constant for all future limitation years.
(11) Annual additions: The sum of the following amounts credited
to a Participant's account for the limitation year:
(A) Employer contributions;
(B) Employee after-tax contributions;
(C) Compensation reduction amounts under a Section 401(k)
plan;
(D) Forfeitures;
(E) Amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Code
Section 415(1)(2), which is part of a defined benefit
plan maintained by the Employer shall be treated as
annual additions to a defined
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contribution plan. Also, amounts derived from
contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which
are attributable to post-retirement medical benefits
allocated to the separate account of a Key Employee,
as defined in Code Section 419A(d)(3), under a
welfare benefit fund, as defined in Code Section
419(e), maintained by the Employer, shall be treated
as annual additions to a defined contribution plan.
(12) Annual additions shall be limited to the lesser of (A)
$30,000 (or, if greater, 1/4 of the dollar limitation in
effect under Code Section 415(b)(1)(A)), or (B) twenty-five
percent (25%) of the Participant's compensation for the
limitation year.
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ARTICLE TEN-AMENDMENT AND TERMINATION
10.1 AMENDMENT. The Employer reserves the right to amend, alter or modify
the Plan at any time, in whole or in part upon action of the board of
directors of the Employer. Any amendment approved by the board must be
in writing and be executed by the officer authorized by the board to
take such action. An amendment shall be effective when approved by
resolution of the board or at such other time specified by the board in
its resolution. No amendment (including a change in the actuarial basis
for determining optional or early retirement benefits) shall be made to
the Plan which shall:
(a) deprive any Participant without his consent of any portion of his
Accrued Benefit prior to the date of such action. Notwithstanding
the preceding sentence, a Participant's Accrued Benefit may be
reduced to the extent permitted under Code Section 412(c)(8). For
purposes of this paragraph, a Plan amendment which has the effect
of (1) eliminating or reducing an early retirement benefit or a
retirement-type subsidy, or (2) eliminating an optional form of
benefit, with respect to benefits attributable to Service before
the amendment shall be treated as reducing Accrued Benefits. In
the case of a retirement-type subsidy, these provisions shall
apply only with respect to a Participant who satisfied (either
before or after the amendment) the pre-amendment conditions for
the subsidy. In general, a retirement-type subsidy is a subsidy
that continues after retirement, but does not include a qualified
disability benefit, a medical benefit, a social security
supplement, a death benefit (including life insurance); or
(b) make it possible, exempt as provided in Sections 10.2 and 13.4,
for any part of the corpus or income of the Trust Fund (other than
such part as may be required to pay taxes and administrative
expenses) to be used for or diverted to purposes other than the
exclusive benefit of the Participants or their Beneficiaries; or
(c) alter the schedule for vesting in Accrued Benefits with respect to
any Participant who has completed three (3) or more Years of
Service for vesting purposes without his consent, or deprive any
Participant of the nonforfeitable part of his Accrued Benefit.
Notwithstanding the other provisions of this Section or any other
provisions of the Plan to the contrary, any amendment or modification
of the Plan may be made retroactively, if necessary or appropriate to
conform to or to satisfy the conditions of any law, governmental
regulation or ruling and to meet the requirements of the Employee
Retirement Income Security Act of 1974, as it may be amended.
10.2 TERMINATION OF THE PLAN. Subject to the provisions of Section 10.1, the
Employer reserves the right to discontinue contributions under the Plan
and to terminate the Plan in whole or in part with respect to a
specific group of Employees. In the event of full or partial
termination, Employees affected thereby shall have a nonforfeitable
right to their Accrued Benefits, to the extend funded. The
Administrator, upon termination, shall cause the assets of the Plan to
be allocated for the purposes set forth, and in the order of priorities
established by Section 4044 of ERISA. Any residual assets remaining
thereafter shall be returned to the Employer. The Employer shall not be
liable to Participants for benefits other than those which
39
<PAGE>
can be provided by the Plan's assets. If a partial termination of the
Plan is deemed to have occurred, this Section shall apply only to those
Participants affected by such partial termination.
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ARTICLE ELEVEN--TOP-HEAVY PROVISIONS
11.1 APPLICABILITY. The provisions of this Article shall become applicable
only for any Plan Year in which the Plan is a Top-Heavy Plan. The
determination of whether the Plan is a TopHeavy Plan shall be made each
Plan Year by the Administrator.
11.2 DEFINITIONS. For purposes of this Article, the following
definitions shall apply:
(a) "KEY EMPLOYEE": "Key Employee" shall mean any Employee or former
Employee (and the Beneficiaries of such Employee) who, at any time
during the determination period, was (1) an officer of the
Employer earning compensation (as defined in Code Section 416(i))
at least equal to fifty percent (50%) of the dollar limitation
under Code Section 415(b)(1)(A), (2) an owner (or considered an
owner under Code Section 318) of both more than a one-half percent
(1/2%) interest in the Employer and one of the ten (10) largest
interests in the Employer if such individual's compensation
exceeds the dollar limitation under Code Section 415(c)(1)(A), (3)
a five percent (5%) owner of the Employer, or (4) a one percent
(1%) owner of the Employer who has an annual compensation of more
than $150,000. For purposes of this Section, annual compensation
shall mean compensation as defined in Code Section 415(c)(3), but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the Employee's
income under Code Sections 125, 402(a)(8), 402(h) or 403(b). The
determination period of the Plan is the Plan Year containing the
determination date as defined in Section 11.2(c)(4) and the four
(4) preceding Plan Years.
The determination of who is a Key Employee (including the terms "5%
owner" and "1% owner") shall be made in accordance with Code Section
416(i)(1) and the regulations thereunder.
(b) "SUPER TOP-HEAVY PLAN": The Plan shall constitute a "Super
Top-Heavy Plan" if it meets the test for status as a Top-Heavy
Plan, where "90%" is substituted for 60%" at each place in Section
11.2(c).
(c) "TOP-HEAVY PLAN": The Plan shall constitute a "Top-Heavy Plan" if
any of the following conditions exist:
(A) The top-heavy ratio for the Plan exceeds sixty percent (60%)
and the Plan is not part of any required aggregation group
or permissive aggregation group of plans; or
(B) The Plan is part of a required aggregation group of plans
(but is not part of a permissive aggregation group) and the
top-heavy ratio for the group of plans exceeds sixty percent
(60%); or
(C) The Plan is a part of a required aggregation group of plan
and part of a permissive aggregation group and the top-heavy
ratio for the permissive aggregation group
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exceeds sixty percent (60%).
(1) If the Employer maintains one (1) or more defined
contribution plans (including any simplified employee
pension plan funded with individual retirement
accounts or annuities) and the Employer maintains or
has maintained one (1) or more defined benefit plans
which have covered or could cover a Participant in
the Plan, the top-heavy ratio is a fraction, the
numerator of which is the sum of account balances
under the defined contribution plans for all Key
Employees and the actuarial equivalents of accrued
benefits under the defined benefit plans for all Key
Employees, and the denominator of which is the sum of
the account balances under the defined contribution
plans for all Participants and the actuarial
equivalents of accrued benefits under the defined
benefit plans for all Participants. Both the
numerator and denominator of the top-heavy ratio
shall include any distribution of an account balance
or an accrued benefit made in the five (5)-year
period ending on the determination date and any
contribution due to a defined contribution pension
plan but unpaid as of the determination date. In
determining the accrued benefit of a non-Key Employee
who is participating in a plan that is part of a
required aggregation group, the method of determining
such benefit shall be either (i) in accordance with
the method, if any, that uniformly applies for
accrual purposes under all plans maintained by the
Employer or any member of the Employer's related
group (within the meaning of Section 2.5(b)), or (ii)
if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual
rate permitted under the fractional accrual rate of
Code Section 411(b)(1)(C).
(2) For purposes of (1) and (2) above, the value of
account balances and the actuarial equivalents of
accrued benefits shall be determined as of the most
recent Valuation Date that falls within or ends with
the twelve (12)-month period ending on the
determination date. The account balances and accrued
benefits of a Participant who is not a Key Employee
but who was a Key Employee in a prior year shall be
disregarded. The accrued benefits and account
balances of Participants who have performed no Hours
of Service with any Employer maintaining the plan for
the five (5)-year period ending on the determination
date shall be disregarded. The calculations of the
top-heavy ratio, and the extent to which
distributions, rollovers, and transfers are taken
into account shall be made under Code Section 416 and
regulations issued thereunder. Deductible Employee
contributions shall not be taken into account for
purposes of computing the top-heavy ratio. When
aggregation plans, the value of account balances and
accrued benefits shall be calculated with reference
to the determination dates that fall within the same
calendar year.
42
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(3) Definition of terms for Top-Heavy status:
(A) "Top-Heavy ratio" shall mean the following:
(1) If the Employer maintains one or more
defined contribution plans (including
any simplified employee pension plan
funded with individual retirement
accounts or annuities) and the Employer
has never maintained any defined benefit
plan which have covered or could cover a
Participant in the Plan, the top-heavy
ratio is a fraction, the numerator of
which is the sum of the account balances
of all Key Employees as of the
determination date (including any part
of any account balance distributed in
the five (5)-year period ending on the
determination date), and the denominator
of which is the sum of the account
balances (including any part of any
account balance distributed in the five
(5)-year period ending on the
determination date) of all Participants
as of the determination date. Both the
numerator and the denominator shall be
increased by any contributions due but
unpaid to a defined contribution pension
plan as of the determination date.
(B) "Permissive aggregation group" shall mean the
required aggregation group of plans plus any
other plan or plans of the Employer which, when
considered as a group with the required
aggregation group, would continue to satisfy
the requirements of Code Section 401(a)(4)
and/or 410.
(C) "Required aggregation group" shall mean (i)
each qualified plan of the Employer (including
any terminated plan) in which at least one Key
Employee participates, and (ii) any other
qualified plan of the Employer which enables a
plan described in (i) to meet the requirements
of Code Section 401(a)(4) and/or 410.
(D) "Determination Date" shall mean, for any Plan
Year subsequent to the first Plan Year, the
last day of the preceding Plan Year. For the
first Plan Year of the Plan, "determination
date" shall mean the last day of that Plan
Year.
(E) "Valuation Date" shall mean the last day of the
Plan Year.
(F) Actuarial equivalence shall be based on the
interest and mortality rates utilized to
determine actuarial equivalence when benefits
are paid from any defined benefit plan. If no
rates are specified in said plan, the following
shall be utilized: pre- and post-retirement
interest -- five percent (5%); post-retirement
mortality based on the Unisex Pension (1984)
Table as used by the Pension Benefit Guaranty
Corporation on the date of execution hereof.
43
<PAGE>
11.3 MINIMUM BENEFIT FOR ANY PLAN YEAR IN WHICH THE PLAN IS A TOP-
HEAVY PLAN.
(a) This minimum benefit shall be provided in the Plan for any Plan
Year in which the Plan is a Top-Heavy Plan, subject to the
provisions below. Each Participant who is a non-Key Employee and
who has been credited with at least one thousand (1,000) Hours of
Service shall accrue a benefit, to be provided solely by Employer
contributions and expressed as a life annuity and commencing at
Normal Retirement Date, of two percent (2%) of his or her highest
compensation averaged for the five (5) consecutive years for which
the Participant had the highest compensation (as that term is
defined in Section 9.2(b)). The minimum accrual shall be
determined without regard to any Social Security benefit provided
by Employer contributions under that system. If the benefit is
received by such Participation a form other than a single life
annuity, such Participant must receive by such Participant in a
form other than a single life annuity, such Participant must
receive an amount that is that form of benefit's Actuarial
Equivalent. If the benefit commences at a date other than at
Normal Retirement Date, it must be equal to the Actuarial
Equivalent of the minimum single life annuity benefit commencing
at Normal Retirement Date.
(b) A non-Key Employee shall mean any Employee or former Employee
including the Beneficiary of a deceased Employee or former
Employee who was not a Key Employee during the Plan Year ending on
the determination date or during the four (4) preceding Plan
Years.
(c) The minimum accrued benefit, when expressed as a life annuity
commencing at Normal Retirement Date, shall not exceed twenty
percent (20%) of the Participant's average compensation.
(d) The provisions in subsection (a) above shall not apply to any
Participant to the extent that the Participant is covered under
any other plan or plans of the Employer. It is intended that the
minimum benefit shall first be provided under any defined
contribution plan of the Employer in which the Employee is a
participant. In that event, the two percent (2%) defined benefit
accrual shall be fully offset by an allocation of Employer
contributions (and forfeitures) equal to five percent (5%) of the
Employee's compensation. A lesser allocation of Employer
contributions and forfeitures shall reduce the offset on a pro
rata basis.
(e) In any Plan Year in which (1) the Plan is a Top-Heavy Plan, but
not a Super Top-Heavy Plan, and (2) any existing Participant's
benefits would be in excess of the limits permitted by Section 8.2
of the Plan due to the utilization of the number "1" in the
defined benefit and defined contribution fractions rather than the
number "1.25," the following additional minimum benefits shall
apply. The minimum benefit in subsection (a) shall be increased
from 2% to 3%. The maximum limitation in subsection (c) shall be
raised from 20% to 30%. The amounts of 3% and 7.5% shall be
substituted for 2% and 5% in subsection (d).
(f) Any minimum accrued benefit required (to the extent required to be
nonforfeitable under Code Section 416(b)) may not be forfeited
under Code Sections 411(a)(3)(B) or 411(a)(3)(D).
44
<PAGE>
11.4 VESTING. The following minimum vesting schedule applies to the Plan in
any Plan Year in which the Plan is a Top-Heavy Plan, notwithstanding
the schedule set forth in Section 4.5. For vesting to be determined
under this schedule, an Employee must be credited with at least one (1)
Hour of Service in any Plan Year in which the Plan is a Top-Heavy Plan.
YEARS OF SERVICE Vested Percentage
2 20%
3 40%
4 60%
5 80%
6 years and thereafter 100%
The minimum vesting schedule applies to all benefits within the meaning
of Code Section 411(a)(7) except those attributable to Employee
contributions, if any, and elective deferrals, including benefits
accrued before the effective date of Code Section 416 and benefits
accrued before the Plan became a Top-Heavy Plan. Further, no reduction
in vested benefits may occur in the event the Plan's status as a
Top-Heavy Plan changes for any Plan Year. In addition, if a Plan's
status changed from a Top-Heavy Plan to that of a non-Top-Heavy Plan, a
Participant with three (3) or more Years of Service for vesting
purposes, shall continue to have his vested rights determined under the
schedule which he selects. Payment of a Participant's vested Accrued
Benefit under this Section shall be made in accordance with the
provisions of Article Five.
45
<PAGE>
ARTICLE TWELVE-MISCELLANEOUS PROVISIONS
12.1 PLAN DOES NOT AFFECT EMPLOYMENT. Neither the creation of the Plan nor
any amendment of it nor the creation of any fund or amount nor the
payment of benefits hereunder shall be construed as giving any legal or
equitable right to any Employee or Participant against the Employer,
its officers or Employees, or against the Trustee, and all liabilities
under the Plan shall be satisfied, if at all, only out of the Trust
Fund held by the Trustee. Participation in the Plan shall not give any
Participant any right to be retained in the employ of the Employer, and
the Employer hereby expressly retains the right to hire and discharge
any Employee at any time with or without cause, as if the Plan had not
been adopted, and any such discharged Participant shall have only such
rights or interests in the Trust Fund as may be specified herein.
12.2 SUCCESSOR TO THE EMPLOYER. In the event of the merger, consolidation,
reorganization or sale of assets of the Employer, under circumstances
in which a successor person, firm or corporation shall carry on all or
a substantial part of the business of the Employer, and such successor
shall employ a substantial number of Employees of the Employer and
shall elect to carry on the provisions of the Plan, such successor
shall be substituted for the Employer under the terms and provisions of
the Plan upon the filing in writing with the Trustee of its election to
do so.
12.3 MERGER OF PLANS. In the case of any merger or consolidation of the Plan
with, or transfer of the assets or liabilities of the Plan to, any
other plan, the terms of such merger, consolidation or transfer shall
be such that each Participant would receive (in the event of
termination of the Plan or its successor immediately thereafter) a
benefit which is not less than the benefit would have received in the
event of termination of the Plan immediately before such merger,
consolidation or transfer.
12.4 REPAYMENTS TO THE EMPLOYER. Notwithstanding any provisions of the Plan
to the contrary, and in the sole discretion of the Employer:
(a) Any Plan assets attributable to any contribution made to the Plan
by the Employer because of a mistake of fact shall be returned to
the Employer within one (1) year after the date of contribution.
(b) Any Plan assets attributable to any contributions made to the Plan
by the Employer for any fiscal year, for which initial Plan
qualification under the Code is denied, shall be refunded to the
Employer within one (1) year after the date such qualification of
the Plan is denied or within one (1) year of the resolution of any
judicial or administrative process with respect to the
disallowance.
(c) All Employer contributions hereunder are expressly contributed
based upon such contributions' deductibility under Code Section
404. Any Plan assets attributable to any contributions made to the
Plan by the Employer shall be refunded to the Employer, to the
extent the income tax deduction for such contribution is
disallowed. Such amount shall be refunded within one (1) taxable
year after the date of such disallowance or within one (1) year of
the resolution of any judicial or administrative process with
respect to the
46
<PAGE>
disallowance.
12.5 BENEFITS NOT ASSIGNABLE. Except as provided in Code Section 414(p) with
respect to "qualified domestic relations orders," the rights of any
Participant or his Beneficiary to any benefit or payment hereunder
shall not be subject to voluntary or involuntary alienation or
assignment.
12.6 DISTRIBUTION TO LEGALLY INCAPACITATED. In the event any benefit is
payable to a minor or to a person deemed to be incompetent or otherwise
under legal disability, or who is by sole reason of advanced age,
illness, or other physical or mental incapacity, incapable of handling
the disposition of his property, the Administrator, in its sole
discretion, may direct the Trustee to apply all or any portion of such
benefits, directly to the care, comfort, maintenance, support,
education or use of such person or to pay or distribute all or any
portion of such benefit to (a) the spouse of such person, (b) the
parent of such person, (c) the guardian, Administrator or other legal
representative, wherever appointed, of such person, (d) the person with
whom such person shall reside, (e) any other person having the care and
control of such person, or (f) such person. The receipt of any such
payment or distribution shall be a complete discharge of liability for
Plan obligations.
12.7 GOVERNING DOCUMENTS. A Participant's rights shall be determined under
the terms of the Plan as in effect at his date of separation from
eligible Service.
12.8 GOVERNING LAW. The provisions of the Plan shall be construed under the
laws of the state of the situs of the Trust, except to the extent such
laws are pre-empted by Federal law.
12.9 CONSTRUCTION. Wherever appropriate, the use of the masculine gender
shall be extended to include the feminine or neuter or vice versa; and
the singular form of words shall be extended to include the plural; and
the plural shall be restricted to mean the plural.
12.10 HEADINGS. The Article headings and Section numbers are included solely
for reason of reference. If there is any conflict between such headings
or numbers and the text of the Plan, the text shall control.
12.11 COUNTERPARTS. The Plan may be executed in any number of counterparts,
each of which shall be deemed an original; said counterparts shall
constitute but one and the same instrument, which may be sufficiently
evidenced by any one counterpart.
12.12 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN. In the event that all
or any portion of the distribution payable to a Participant or to a
Participant's Beneficiary hereunder shall, at the expiration of five
(5) years after it shall become payable, remain unpaid solely by reason
of the inability of the Administrator to ascertain the whereabouts of
such Participant or Beneficiary, after sending a registered letter,
return receipt requested, to the last known address, and after further
diligent effort, the amount so distributable shall be forfeited and
used to offset the Employer contributions to the Plan. In the event a
Participant or Beneficiary is located subsequent to the forfeiture of
his Accrued Benefit, such benefit shall be restored.
47
<PAGE>
ARTICLE THIRTEEN--MULTIPLE EMPLOYER PROVISIONS
13.1 ADOPTION OF THE PLAN. With the Employer's consent, the Plan may be
adopted by any other corporation or entity for its employees, which
adopting Employer shall be known as a "Participating Employer." All
assets may either be held within one Trust Fund, or each Participating
Employer may maintain a separate trust fund attributable to its portion
of Plan assets.
13.2 PLAN CONTRIBUTIONS. All contributions made by a Participating Employer,
as provided for in the Plan and unless modified by an instrument of
adoption, shall be determined separately by each Participating
Employer, and shall be paid to and held by the Trustee for the
exclusive benefit of the employees of such Participating Employer and
the Beneficiaries of such employees, subject to all the terms and
conditions of the Plan.
13.3 TRANSFERRING EMPLOYEES. The Administrator shall adopt equitable
procedures whereby contributions are equitably allocated in the case of
employees transferring from the employment of one Participating
Employer to another Participating Employer.
13.4 DELEGATION OF AUTHORITY. Each Participating Employer who has adopted
the Plan shall delegate to the Employer the right to name the
Administrator and Trustee of the Plan and the right to amend the Plan
to insure its continued qualified status.
13.5 TERMINATION. Any termination of the Plan or discontinuance of
contributions by any one Participating Employer shall operate with
regard only to the Participants employed by that Participating
Employer. All Employees affected thereby shall have a one hundred
percent (100%) nonforfeitable interest in their Accrued Benefit.
In the event any Participating Employer terminates its participation in
the Plan, or in the event that any such Participating Employer shall
cease to exist through sale, reorganization or bankruptcy, the Trust
Fund shall be allocated by the Trustee, in accordance with the
direction of the Administrator, into separate trust funds. Unless an
alternate means of disposition of Plan assets was specified in the
instrument of adoption by which the Participating Employer adopted the
Plan, the amounts to be allocated to the Trust of the terminating
Participating Employer shall be the lesser of:
(a) the valuation of that portion of the Trust Fund attributable to
the Participants of such terminating Participating Employer,
determined by crediting each of its contributions to the Plan with
its share of Plan earnings or losses and deducting all payments
made to its Employees; and
(b) the Actuarial Equivalent of Accrued Benefits of Participants
affected as of the date of transaction.
48
<PAGE>
IN WITNESS WHEREOF, the Employer and Trustees have caused this amendment and
restatement to be executed this day of , 1994.
FAB INDUSTRIES, INC.
By:
President
TRUSTEES:
Samson Bitensky
Howard Soren
ATTEST:
49
FAB INDUSTRIES, INC. EMPLOYEES PROFIT SHARING PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION.................................................................1
ARTICLE I - DEFINITIONS......................................................2
ARTICLE II - ELIGIBILITY AND PARTICIPATION...................................9
Section 2.1 Eligibility Requirements..........................9
Section 2.2 Participation.....................................9
Section 2.3 Years of Service for Eligibility Computation......9
ARTICLE III - CONTRIBUTIONS.................................................11
Section 3.1 Employer Contributions...........................11
Section 3.2 After-Tax Employee Contributions.................11
Section 3.3 Rollover Contributions...........................11
Section 3.4 Trustee-to-Trustee Transfers.....................11
Section 3.5 Deduction Limitation.............................11
ARTICLE IV - ALLOCATIONS, VALUATION AND VESTING.............................12
Section 4.2 Participants Who Will Receive an Allocation......12
Section 4.3 Allocation of Forfeitures........................12
Section 4.4 Allocation Limitations...........................12
Section 4.5 Valuation........................................17
Section 4.6 Vesting and Accrual..............................18
ARTICLE V - DISTRIBUTIONS...................................................21
Section 5.1 Distributions of Small Account Balances..........21
Section 5.2 Distributions While In-Service...................21
Section 5.3 Distributions Upon Separation From Service.......21
Section 5.4 Distributions Upon Retirement....................21
Section 5.5 Distributions Upon Death.........................21
Section 5.6 Distributions Upon Disability....................22
Section 5.7 Special Beneficiary Provisions...................22
Section 5.8 Consent of the Participant Required
for Distributions if
Account Balances Greater Than $3,500.............22
Section 5.9 Commencement of Benefits.........................23
Section 5.10 Required Distributions...........................23
Section 5.11 Annuity Contract.................................23
Section 5.12 Form of Distribution.............................24
Section 5.13 Trustee-to-Trustee Transfers.....................24
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TABLE OF CONTENTS (CONT'D)
PAGE
Section 5.14 Rollovers to Other Plans or IRAs.................24
ARTICLE VI - LOANS AND LIFE INSURANCE.......................................25
Section 6.1 Availability of Loans............................25
Section 6.2 Amount of Loans..................................25
Section 6.3 Terms of Loans...................................25
Section 6.4 Purchase of Life Insurance Contracts.............26
Section 6.5 Distribution of Insurance Contracts..............27
ARTICLE VII - PLAN ADMINISTRATION...........................................28
Section 7.1 Duties of the Employer...........................28
Section 7.2 The Committee....................................28
Section 7.3 Appointment of Advisor...........................28
Section 7.4 Powers and Duties of the Committee...............28
Section 7.5 Organization and Operation.......................29
Section 7.6 Claims Procedure.................................29
Section 7.7 Records and Reports..............................30
Section 7.8 Liability........................................30
Section 7.9 Reliance and Statements..........................31
Section 7.10 Remuneration and Bonding.........................31
Section 7.11 Committee Decisions Final........................31
ARTICLE VIII - TRUST AGREEMENT..............................................32
Section 8.1 Establishment of Trust...........................32
Section 8.2 Contributions to Trustee.........................32
Section 8.3 Purpose of Trust.................................32
Section 8.4 Distributions....................................32
Section 8.5 Exclusive Benefit................................32
Section 8.6 Expenses of the Plan and Trust...................33
Section 8.7 Duties and Responsibilities of Trustee...........33
Section 8.8 Specific Powers and Duties of Trustee............34
Section 8.9 Investment Manager...............................36
Section 8.10 Compensation of Trustee and Agents...............36
Section 8.11 Reports of Trustee...............................36
Section 8.12 Resignation, Removal and Substitution of Trustee.36
Section 8.13 The Committee....................................37
Section 8.14 Amendment and Termination........................37
Section 8.15 Irrevocability...................................37
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<PAGE>
TABLE OF CONTENTS (CONT'D)
PAGE
Section 8.16 Parties to the Trust Agreement...................37
Section 8.17 Trustee Action...................................38
Section 8.18 Participant-Directed Investments.................38
ARTICLE IX - AMENDMENT, TERMINATION AND MERGER..............................39
Section 9.1 Amendment........................................39
Section 9.2 Termination......................................39
Section 9.3 Merger, Consolidation or Transfer................39
ARTICLE X - TOP-HEAVY PROVISIONS............................................40
Section 10.1 Applicability....................................40
Section 10.2 Definitions......................................40
Section 10.3 Minimum Allocation...............................42
Section 10.4 Nonforfeitability of Minimum Allocation..........42
Section 10.5 Allocation Limitations...........................43
Section 10.6 Minimum Vesting Schedules........................43
ARTICLE XI - GENERAL PROVISIONS.............................................44
Section 11.1 Governing Law....................................44
Section 11.2 Power to Enforce.................................44
Section 11.3 Alienation of Benefits...........................44
Section 11.4 Not an Employment Contract.......................44
Section 11.5 Discretionary Acts...............................44
Section 11.6 Interpretation...................................44
ARTICLE XII - SIGNATURE PAGE................................................46
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<PAGE>
INTRODUCTION
Purpose.
The primary purpose of the Fab Industries, Inc. Employees Profit Sharing Plan
(the "Plan") is to provide Employees of Fab Industries, Inc. with retirement
benefits in recognition of the contribution of the Employees to the successful
operation of the Employer. The Plan is intended to be a profit sharing plan
which is qualified under section 401(a) of the Internal Revenue Code (the
"Code"), and its affiliated Trust is intended to be exempt from tax under
section 501(a) of the Code.
EFFECTIVE DATE.
The Plan was originally established effective November 27, 1963 and initially
restated December 1, 1984. The Plan was formerly known as the Fab Lace, Inc.
Employees Profit Sharing Plan. Pursuant to the terms of the Plan which permit
its amendment by the Employer, this document is a restatement, in its entirety,
of the Plan, generally effective December 1, 1989.
The terms of this document now set forth the controlling provisions of the Plan
for all persons who are Employees on or after the Effective Date; provided,
however, that to the extent required under section 411(d)(6) of the Code (and
related Treasury Regulations), the applicable provisions of the preceding Plan
documents are incorporated herein by reference.
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<PAGE>
ARTICLE I - DEFINITIONS
The following words and phrases, wherever capitalized, shall have the meanings
set forth below, unless the context in which they appear within the Plan clearly
indicates otherwise:
ACCOUNT(S) means the aggregate (or as otherwise specified) interest of a
Participant in the assets of the Trust. Each Participant's interest will be
segregated into one or more of the following Account(s), which will reflect, in
addition to contributions allocated thereto, appropriate allocations of
earnings, gains, losses, and expenses of the Trust:
o Employer Regular Contribution Account. The separate Account
maintained for each Participant to which are credited any Employer
Regular Contributions allocated to him and made in accordance with
Section 3.1.
o Rollover Account. The separate Account maintained for each
applicable Participant to which contributions are made under
Section 3.3.
The Administrator may, in its discretion, establish subaccounts within each
separate Account.
ADMINISTRATOR means the Committee designated by the Employer to administer the
Plan.
AFFILIATE means a member of a controlled group of corporations, within the
meaning of section 414(b) of the Code, which includes the Employer; a trade or
business (whether or not incorporated) which is in common control with the
Employer as determined in accordance with section 414(c) of the Code; or any
organization which is a member of an affiliated service group, within the
meaning of section 414(m) of the Code, which includes the Employer; and any
other organization required to be aggregated with the Employer pursuant to
section 414(o) of the Code.
AFTER-TAX EMPLOYEE CONTRIBUTIONS means contributions to the Plan made by an
Employee to the Plan on an after-tax, nondeductible basis.
BENEFICIARY means the person or persons or a trust affirmatively designated by
the Participant to receive all or a portion of such Participant's benefits in
the event the Participant dies leaving benefits payable to such a Beneficiary in
accordance with the provisions of Article V.
CODE means the Internal Revenue Code of 1986, as amended from time to time.
COMMITTEE means the person or persons described in Section 7.2.
COMPANY means Fab Industries, Inc. or any successor corporation by merger,
consolidation, or purchase which elects to adopt the Plan and Trust.
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<PAGE>
For each Plan Year, the Company shall determine the total amount of any Employer
contributions to be made to the Plan by all entities included in the definition
of Employer. Each such entity shall contribute to the Plan in the amount
determined by the Company.
COMPENSATION means all of each Participant's Compensation as defined in section
415(c)(3) of the Code and Treas. Reg. Sections 1.415-2(d)(2) and (3).
Notwithstanding the above, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction agreement and which
is not includible in the gross income of the Employee under sections 125,
402(e)(3), 402(h) or 403(b) of the Code.
Notwithstanding the above, for purposes other than allocations pursuant to
provision(s) providing for permitted disparity and/or Top-Heavy allocations,
Compensation shall be determined by excluding the following:
o Overtime pay
o Bonuses
o Fringe benefits (cash and non-cash)
o Reimbursements, or other expense allowances
o Moving expenses
o Deferred compensation
o Welfare benefits
o 25% of commissions
Compensation shall include only that Compensation which is actually paid to the
Participant during the determination period. Except as provided elsewhere in
this Plan, the determination period shall be the Employer's taxable year ending
within the Plan Year.
Effective for Plan Years beginning after December 31, 1988, the annual
Compensation of each Participant taken into account for purposes of determining
all benefits provided under the Plan for any determination period shall not
exceed $200,000 as adjusted by the Secretary at the same time and in the same
manner as under section 415(d) of the Code ("Compensation Limit"), except that
the dollar increase in effect on January 1 of any calendar year shall be
effective for years beginning in such calendar year. The Compensation Limit for
a determination period shall be the Compensation Limit in effect on the January
1 coinciding with or preceding such determination period. If Compensation is
determined on the basis of a 12-consecutive month period ending within the Plan
Year, then the applicable Compensation Limit is the Compensation Limit in effect
for the calendar year in which such 12-month period begins. If Compensation is
determined on the basis of a period of less than 12 calendar months, the
Compensation Limit shall be the annual Compensation Limit which would otherwise
be applicable multiplied by the ratio obtained by dividing by 12 the number of
full months in the short period. In determining the Compensation of a
Participant for purposes of the dollar limitation, the rules of section
414(q)(6) of the Code shall apply except that, 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. If as a result of the application of such rules the adjusted
limitation is exceeded, then (except for purposes of determining the portion
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<PAGE>
of Compensation up to the integration level as defined in Section 4.1, if
applicable), the limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined prior to the
application of this limitation. Notwithstanding the above, effective for Plan
Years beginning after December 31, 1993, the annual Compensation Limit shall not
exceed $150,000, adjusted for calendar years beginning after 1994 at the same
time and in the same manner as under section 415(d) of the Code, but only if and
when the aggregate of such potential adjustments totals at least $10,000, and
then only in amounts of $10,000, in the manner described in section 401(a)(17).
If Compensation for any prior determination period is taken into account in
determining an Employee's allocations or benefits for the current determination
period, the Compensation for such prior period is subject to the applicable
annual Compensation Limit in effect for that prior period. For this purpose, for
years beginning before January 1, 1990, the applicable annual Compensation Limit
is $200,000.
DEFINED BENEFIT PLAN means a pension plan maintained by the Employer which is
qualified under section 401(a) of the Code and which is not a Defined
Contribution Plan, except to the extent that it maintains separate accounts with
respect to which it is treated as a Defined Contribution Plan.
DEFINED CONTRIBUTION PLAN means a plan qualified under section 401(a) of the
Code and maintained by the Employer which provides for an account for each
individual who participates in the plan, from which account all benefits
attributable to amounts allocated to each such Participant's account (and any
income and expenses or gains or losses attributable to such accounts both
realized and unrealized) are paid.
DISABILITY means any medically determinable physical or mental impairment which
results in an inability to engage in any substantial gainful activity by reason
thereof and which may be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months. The
permanence and degree of such impairment must be supported by medical evidence.
Disability will be determined by a physician appointed by the Administrator.
EARLY RETIREMENT DATE means the date, ocurring before Normal Retirement Age, on
which an employee who is at least age 55 with no less than 10 Years of Service
actually retires from employment with the Employee.
EFFECTIVE DATE means the provisions of this amendment and restatement are
generally effective December 1, 1989, except for the retroactive effective dates
required by the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of
1986, the Omnibus Budget Reconciliation Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of
1989, or any final Regulations published and effective since the most recent
effective date of this Plan. Further, to the extent the Plan was operated in
accordance with the provisions of this amendment and restatement as of an
effective date earlier than that required by law, such date shall be the
Effective Date.
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<PAGE>
EMPLOYEE means any common law Employee of the Employer or any Affiliate. The
term Employee shall also include any Leased Employee deemed to be an Employee of
the Employer or any Affiliate described in the previous sentence as provided in
section 414(n) or (o) of the Code.
EMPLOYER means Fab Industries, Inc.; any successor through merger, consolidation
or purchase of substantially all of the assets or business of the entity which
is the Employer immediately prior to such succession which successor, within 90
days after such succession, agrees to continue this Plan; and any Affiliate
which adopts the Plan.
EMPLOYER REGULAR CONTRIBUTIONS means those contributions by the Employer as
described under Section 3.1 which are allocated to Participants' Employer
Regular Contribution Accounts, and does not include Qualified Matching or
Qualified Non-Elective Contributions (if any are made under the Plan).
ERISA means the Employee Retirement Income Security Act of 1974, as amended from
time to time.
FORFEITURES means the nonvested portion, if any, of a Participant's Account
created as a result of termination of employment by the Participant prior to the
time he becomes 100 percent Vested in his Account. A Forfeiture occurs on the
last day of the Plan Year in which the Participant's 5th consecutive One-Year
Break in Service occurs.
HIGHLY COMPENSATED EMPLOYEE means and includes active highly compensated
Employees and former highly compensated Employees.
An active highly compensated Employee includes any Employee who performed
service for the Employer during the determination year and who, during the
look-back year: (1) received Compensation from the Employer in excess of $75,000
(as adjusted pursuant to section 415(d) of the Code); (2) received Compensation
from the Employer in excess of $50,000 (as adjusted pursuant to section 415(d)
of the Code) and was a member of the top-paid group for such year; or (3) was an
officer of the Employer and received Compensation during such year in an amount
greater than 50 percent of the dollar limitation in effect under section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes:
(4) Each Employee who is: (i) described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and (ii) who
is one of the 100 Employees who received the most Compensation from the Employer
during the determination year; and (5) Employees who are owners of more than 5
percent of the Employer at any time during the look-back year or determination
year. If no officer has satisfied the Compensation requirement of (6) above
during either a determination year or look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee. For this
purpose, the determination year shall be the Plan Year. The look-back year shall
be the twelve-month period immediately preceding the determination year.
A former highly compensated Employee includes any Employee who separated (or was
deemed to have separated) from service prior to the determination year, who has
performed no service
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<PAGE>
for the Employer during the determination year, and who was a highly compensated
active Employee for either the year of his separation from service or any
determination year ending on or after the Employee's 55th birthday.
If any Employee is, during a determination year or look-back year, a member of
the family of either (i) an owner of more than 5 percent of the Employer who is
an active or former Employee or (ii) a Highly Compensated Employee who is one of
the 10 most Highly Compensated Employees ranked on the basis of Compensation
paid by the Employer during such year, then the family member and such owner or
Highly Compensated Employee shall be aggregated. In such case, the family member
and owner or Highly Compensated 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 owner
or Highly Compensated Employee. For purposes of this Section, family members
include 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 Compensated Employee (including the
determination 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 and the Regulations promulgated thereunder. For purposes of this
definition, the Employer shall include any Affiliate.
HOUR OF SERVICE means:
(1) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These
hours will be credited to the Employee for the computation period
in which the duties are performed;
(2) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including Disability), layoff, jury duty,
military duty or leave of absence. No more than 501 hours of
service will be credited under this paragraph for any single
continuous period (whether or not such period occurs in a single
computation period). Hours under this paragraph will be calculated
and credited pursuant to section 2530.200b-2 of the Department of
Labor regulations, which section is incorporated herein by this
reference; and
(3) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
hours of service will not be credited both under paragraph (1) or
paragraph (2), as the case may be, and under this paragraph (3).
These hours will be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or
payment is made.
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<PAGE>
For purposes of this definition, Employer includes any Affiliate. Hours of
Service will be credited for employment with other members of any affiliated
service group (under section 414(m)), controlled group of corporations (under
section 414(b)), or group of trades or businesses under common control (under
section 414(c)) of which the adopting Employer is a member, and any other entity
required to be aggregated with the Employer pursuant to section 414(o) of the
Code and the Regulations promulgated thereunder.
Hours of Service will also be credited with respect to any individual considered
an Employee for purposes of this Plan under section 414(n) of the Code and the
Regulations promulgated thereunder.
Hours of Service will be credited for all employment with the Employer
regardless of whether the Employee was at the time an eligible Employee.
Service will be determined on the basis of the actual hours for which an
Employee is paid or entitled to payment.
LATE RETIREMENT DATE means the date, occurring after Normal Retirement Age, on
which an Employee actually retires from employment with the Employer.
LEASED EMPLOYEE means any person (other than an Employee of the Employer) who
pursuant to an agreement between the Employer and any other person (the "leasing
organization") has performed services for the Employer (or for the Employer and
related persons determined in accordance with section 414(n)(6) of the Code) on
a substantially full-time basis for a period of at least one year, and such
services are of a type historically performed by Employees in the business field
of the Employer. Contributions or benefits provided to a Leased Employee by the
leasing organization which are attributable to services performed for the
Employer shall be treated as provided by the Employer.
A leased employee shall not be considered an Employee of the Employer if (i)
such Employee is covered by a money purchase pension plan maintained by the
leasing organization providing: (a) a non-integrated employer contribution rate
of at least 10 percent of Compensation, as defined in section 415(c)(3) of the
Code, but including amounts contributed pursuant to a salary reduction agreement
which are excludable from the Employee's gross income under section 125, section
402(e)(3), section 402(h) or section 403(b) of the Code, (b) immediate
participation, and (c) full and immediate vesting; and (ii) Leased Employees do
not constitute more than 20 percent of the Employer's non-highly compensated
workforce.
NON-HIGHLY COMPENSATED EMPLOYEE means an Employee who is not a Highly
Compensated Employee.
NORMAL RETIREMENT AGE means age 65.
ONE-YEAR BREAK IN SERVICE means a 12-consecutive month period during which the
Participant does not complete more than 500 Hours of Service.
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<PAGE>
Solely for purposes of determining whether a One-Year Break in Service has
occurred for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons shall receive credit for the Hours
of Service which would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be determined, eight
Hours of Service per day of such absence, to a maximum of 501 Hours of Service
for any one child-related absence. For purposes of this paragraph, an absence
from work for maternity or paternity reasons means an absence: (1) by reason of
the pregnancy of the individual; (2) by reason of a birth of a child of the
individual; (3) by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual; or (4) for
purposes of caring for such child for a period beginning immediately following
such birth or placement. The Hours of Service credited under this paragraph
shall be credited in the computation period in which the absence begins if
necessary to prevent a OneYear Break in Service in that period or, in all other
cases, in the following computation period.
PARTICIPANT means an Employee of the Employer who participates in the Plan
pursuant to Article II; a former Employee who participated in the Plan under
Article II and who continues to be entitled to a Vested benefit under the Plan;
or a former Employee who participated in the Plan under Article II, and who has
not yet incurred a One-Year Break in Service. For purposes of Section 5.14,
"Participant" shall include a former Participant, as well as a former
Participant's Surviving Spouse and Participant's or former Participant's Spouse
or former Spouse who is the alternate payee under a qualified domestic relations
order as defined in section 414(p) of the Code (who shall be deemed Participants
with respect to such Spouse's interest under the Plan).
PLAN means the Fab Industries, Inc. Employees Profit Sharing Plan, as set forth
herein.
PLAN YEAR means the 12-consecutive month period which begins on December 1 and
on each anniversary thereof.
REGULATIONS means the Treasury regulations pertaining to the Internal Revenue
Code of 1986, as amended from time to time.
REQUIRED DISTRIBUTIONS shall be made as described in Section 5.10 of the Plan.
SPOUSE means the Spouse or Surviving Spouse of the Participant, provided that a
former Spouse shall be treated as the Spouse or Surviving Spouse to the extent
provided under a "qualified domestic relations order" as defined in section
414(p) of the Code.
TOP-HEAVY shall have the meaning and effect described in Article X of the Plan.
TRUST means the Trust as established under Article VIII and maintained for
purposes of the Plan which is administered by the Trustee in accordance with the
provisions of the agreement of Trust between the Employer and the Trustee. If
the Trust is governed by a separate agreement entered into between the Employer
and the Trustee (which shall be incorporated by reference herein and become part
of the Plan), to the extent the terms of such Trust agreement conflict with the
Plan, the terms of the Trust agreement will control except to the extent that it
is necessary to follow
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<PAGE>
the terms of the Plan in order to maintain the qualified status of the Plan
under section 401(a) of the Code.
TRUSTEE means the party or parties named under the Trust who shall have
exclusive authority and discretion to manage and control the assets of the Plan.
Notwithstanding the above, to the extent the Plan expressly provides, the
Trustee shall be subject to the direction of the Committee and/or an Investment
Manager.
TRUST FUND means all money and other property received or held by the Trustee
under the trust, plus all income and gains and less all losses, expenses, and
distributions chargeable to the Trust assets.
VALUATION DATE means the last day of the Plan Year, in addition to any other
date specifically designated by the Committee, on which date the fair market
value of Trust assets shall be determined.
VESTED means nonforfeitable.
YEAR OF SERVICE means a 12-consecutive-month period during which an Employee is
credited with at least 1,000 Hours of Service. If a fractional Year of Service
is used in the Plan, there will be no Hours of Service requirement.
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ARTICLE II - ELIGIBILITY AND PARTICIPATION
SECTION 2.1 ELIGIBILITY REQUIREMENTS.
(a) Only Employees of an Employer will be eligible to participate in the
Plan.
(b) Notwithstanding any other provision of this Article, for the first Plan
Year only, nonexcluded Employees employed on the date the Plan is
restated will participate as of the restatement date.
(c) Notwithstanding any other provision of this Article II, all Employees and
former Employees who are Participants in the Plan as of the date
immediately preceding the Effective Date of this amendment and
restatement and who then have an Account balance (whether or not
nonforfeitable) shall continue their participation in the Plan as
restated. A former Employee who was a Participant in the Plan and who
received a distribution of his entire nonforfeitable Account balance on
account of termination of employment may again become eligible to
participate in the Plan upon reemployment either as a newly hired
Employee or by satisfaction of the eligibility provisions below.
(d) Employees become eligible to participate in the Plan upon attainment of
age 18 and completion of one Year of Service.
(e) Notwithstanding any other provision of the Plan, Employees included
within the following described classification(s) are excluded from
participation in this Plan:
o Employees in a unit of employees covered by a collective
bargaining agreement between the Employer and employee
representatives, if retirement benefits were the subject of good
faith bargaining and if two percent or less of the Employees of
the Employer who are covered pursuant to that agreement are
professionals as defined in section 1.410(b)-9(g) of the
Regulations. For this purpose, the term "employee representatives"
does not include any organization more than half of whose members
are Employees who are owners, officers, or executives of the
Employer.
o Hourly Employees
o Employees participating in Fab Industries, Inc. Executive
Retirement Plan.
o Leased Employees.
SECTION 2.2 PARTICIPATION.
An Employee will begin participation in the Plan on the first day of the Plan
Year in which the eligibility requirements set forth in Section 2.1 above are
satisfied.
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SECTION 2.3 YEARS OF SERVICE FOR ELIGIBILITY COMPUTATION.
- ----------- --------------------------------------------
(a) For purposes of determining Years of Service and One-Year Breaks in
Service for purposes of eligibility to participate in the Plan, the
initial eligibility computation period shall be the 12-consecutive month
period beginning on the date on which the Employee first performs an Hour
of Service for the Employer or an Affiliate ("employment commencement
date").
(b) Succeeding 12-consecutive month eligibility computation periods shall
commence with the first Plan Year which includes the first anniversary of
the Employee's employment commencement date, regardless of whether the
Employee is entitled to be credited with 1,000 Hours of Service during
the initial eligibility compensation period. An Employee who is credited
with 1,000 Hours of Service in both the initial eligibility computation
period (described above) and the first Plan Year which commences prior to
the first anniversary of the Employee's initial eligibility computation
period will be credited with two Years of Service for purposes of
eligibility to participate.
(c) Years of Service and One-Year Breaks in Service will be measured by the
same eligibility computation period.
(d) All Years of Service with the Employer or an Affiliate will be credited
for purposes of determining eligibility except the following:
(1) If an Employee has a One-Year Break in Service before satisfying
the eligibility requirements of the Plan, service before such
Break will not be taken into account.
(2) In the case of a Participant who has no nonforfeitable right to
any portion of an Account balance derived from Employer
Contributions, Years of Service before a period of consecutive
One-Year Breaks in Service will not be taken into account in
computing service for purposes of eligibility if the number of
such Participant's consecutive One-Year Breaks in Service in such
period equals or exceeds the greater of five or the Participant's
aggregate number of Years of Service. Such aggregate number of
Years of Service will not include any Years of Service disregarded
under the preceding sentence by reason of prior breaks in service.
If a Participant's Years of Service are disregarded pursuant to
the preceding paragraph, such Participant will be treated as a new
Employee for eligibility purposes. If a Participant's Years of
Service may not be disregarded pursuant to the preceding
paragraph, such Participant shall continue to participate in the
Plan or, if terminated, shall participate immediately upon
reemployment.
(3) In the case of any Participant who has a One-Year Break in
Service, Years of Service before such break will not be taken into
account for purposes of eligibility until the Employee has
completed a Year of Service after returning to employment.
Such Year of Service will be measured by the 12-consecutive month
period beginning on the date an Employee's employment and, if
necessary, Plan Years beginning with
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<PAGE>
the Plan Year which includes the first anniversary of the
reemployment commencement date. The reemployment commencement date
is the first day on which the Employee is credited with an Hour of
Service for the performance of duties after the first eligibility
computation period in which the Employee incurs a One-Year Break
in Service.
(e) In the event a Participant is no longer a member of an eligible class of
Employees and therefore becomes ineligible to participate but has not
incurred a One-Year Break in Service, such Employee will participate
immediately upon again becoming a member of an eligible class of
Employees. If such Participant incurs a One-Year Break in Service,
eligibility will be determined according to the break in service rules of
the Plan otherwise described in this Section 2.3.
An Employee who has not been, but who becomes, a member of an eligible
class of Employees shall participate in the Plan immediately upon
becoming a member of such class if such Employee has satisfied the
minimum age and service requirements necessary to become a Participant
under this Article II.
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<PAGE>
ARTICLE III - CONTRIBUTIONS
SECTION 3.1 EMPLOYER CONTRIBUTIONS.
Employer Regular Contributions:
Employer Regular Contributions will be limited to profits as determined by the
Committee. For each Plan Year the Employer may make an Employer Regular
Contribution to the Trust based on the total Compensation of all Participants
eligible to receive an allocation. The amount of the Employer Regular
Contribution shall be determined for each Plan Year by the Employer.
SECTION 3.2 AFTER-TAX EMPLOYEE CONTRIBUTIONS.
After-Tax Employee Contributions are not permitted under the Plan.
SECTION 3.3 ROLLOVER CONTRIBUTIONS.
(a) An Employee who is eligible to participate in the Plan under Section 2.1,
regardless of whether he has satisfied the participation requirements of
Section 2.2, may roll over into the Plan an eligible rollover
distribution (as defined in section 402(c) of the Code) from another
qualified plan, or from an individual retirement account in the manner
described in section 408(d)(3)(A)(ii) of the Code. If such rollover is
not a direct transfer as described in section 401(a)(31) of the Code, it
must be received by the Plan within 60 days of the date it was received
by the Participant from the distributing qualified plan or individual
retirement account.
(b) The Trustee shall develop such procedures, and may require such
information from an Employee desiring to make such a rollover, as he
deems necessary or desirable to determine that the proposed rollover will
meet the requirements of this Section. Upon approval by the Trustee, the
amount rolled over shall be deposited in the Trust and shall be credited
to the Employee's Rollover Account. Such Account shall share in
allocations of earnings, losses and expenses of the Trust Fund, but shall
not share in allocations of Employer contributions. The Employee's
Rollover Account shall be distributed in accordance with Article V.
(c) In the event of a rollover contribution on behalf of an Employee who is
otherwise eligible to participate in the Plan but who has not yet
satisfied the participation requirements of Section 2.2, such Employee's
Rollover Account shall represent his sole interest in the Plan until he
becomes a Participant.
SECTION 3.4 TRUSTEE-TO-TRUSTEE TRANSFERS.
(a) An Employee may not cause assets from the qualified plan of a prior
employer to be transferred directly by the trustee of such plan to the
Trustee of this Plan.
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<PAGE>
(b) A direct rollover as described in Section 5.13 shall not constitute a
trustee-to-trustee transfer for purposes of the Plan.
SECTION 3.5 DEDUCTION LIMITATION.
Employer contributions made with respect to any Plan Year under this Article III
are conditioned upon such contributions being deductible by the Employer for
such Plan Year under section 404 of the Code.
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ARTICLE IV - ALLOCATIONS, VALUATION AND VESTING
As of the Valuation Date, Employer Regular Contributions made under Section 3.1,
if any, shall be allocated to the Account of each Participant described in
Section 4.2 according to the ratio that such Participant's Compensation for the
Plan Year bears to the Compensation of all Participants for such Plan Year.
SECTION 4.2 PARTICIPANTS WHO WILL RECEIVE AN ALLOCATION.
- ----------- -------------------------------------------
(a) An allocation of Employer Regular Contributions shall only be made with
respect to those Participants who are employed on the last day of the
Plan Year and have performed at least 1,000 Hours of Service during the
Plan Year.
(b) No Participant will receive an allocation of Employer Matching
Contributions as none are provided under this Plan.
A Participant will not be denied an allocation on the basis of his having
attained Normal Retirement Age.
SECTION 4.3 ALLOCATION OF FORFEITURES.
Forfeitures, if any, will be added to Employer Regular Contributions, if any,
and the aggregate amount allocated to Participants based on the ratio of each
Participant's Compensation to all Participants' Compensation for the current
year.
SECTION 4.4 ALLOCATION LIMITATIONS.
(a) If a Participant does not participate in, and has never participated in,
another qualified plan maintained by the Employer, or a welfare benefit
fund, as defined in section 419(e) of the Code, maintained by the
Employer, or an individual medical account, as defined in section
415(l)(2) of the Code, maintained by the Employer, which provides an
Annual Addition as defined in subsection (d)(1), the following provisions
shall apply:
(1) The amount of Annual Additions which may be credited to the
Participant's Account for any Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount, as defined in subsection
(d)(9), or any other limitation contained in this Plan. If
contributions that would otherwise be contributed or allocated to
the Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the
amount contributed or allocated will be reduced so that the Annual
Additions for the Limitation Year will equal the Maximum
Permissible Amount.
(2) As soon as is 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
Section 415 Compensation for the Limitation Year.
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<PAGE>
(3) If there is an excess Annual Addition due to a reasonable error in
estimating a Participant's Compensation or due to the allocation
of Forfeitures (if any), or any other facts and circumstances as
determined by the Committee and which are found by the
Commissioner of Internal Revenue to justify the availability of
the procedures for correcting the excess as set forth in this
subsection, the excess will be corrected as follows:
(A) Any After-Tax Employee Contributions, to the extent their
return would reduce the excess, will be returned to the
Participant;
(B) If after the application of paragraph (A) an excess 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 to reduce Employer
contributions (including any allocation of Forfeitures for
such Participant) for the next Limitation Year, and each
succeeding Limitation Year if necessary;
(C) If after the application of paragraph (A) an excess 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 for the next Limitation Year, and
each succeeding Limitation Year if necessary;
(D) If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section, it will not
receive any allocation of the investment gains and losses of
the Trust. If a suspense account is in existence at any time
during a particular Limitation Year, all amounts in the
suspense account must be allocated and reallocated to
Participants' Accounts before any Employer or After-Tax
Employee Contributions may be made to the Plan for that
Limitation Year. The excess amount may not be distributed to
Participants or former Participants.
(b) If, in addition to this Plan, a Participant is covered under another
qualified Defined Contribution Plan maintained by the Employer, a welfare
benefit fund (as defined in section 419(e) of the Code) maintained by the
Employer, or an individual medical account (as defined in section
415(l)(2) of the Code) maintained by the Employer, which provides an
Annual Addition as defined in subsection (d)(1), during any Limitation
Year, the following provisions shall apply:
(1) The Annual Additions which may be credited to a Participant's
Account under this Plan for any such Limitation Year may not
exceed the Maximum Permissible Amount reduced by the Annual
Additions credited to such Participant's account under such other
plans and/or welfare benefit funds for the same Limitation Year.
If the Annual Additions with respect to the Participant under
other Defined Contribution Plans and welfare benefit funds
maintained by the Employer are less than the Maximum Permissible
Amount and the Employer contribution that would otherwise be
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<PAGE>
contributed or allocated to the Participant's Account under this
Plan would cause such Participant's Annual Additions for the
Limitation Year to exceed this limitation, the amount contributed
or allocated will be reduced so that the Annual Additions under
all such plans and funds for the Limitation Year will equal the
Maximum Permissible Amount. If the Annual Additions with respect
to the Participant under such other Defined Contribution Plans and
welfare benefit funds in the aggregate are equal to or greater
than the Maximum Permissible Amount, no amount will be contributed
or allocated to the Participant's Account under this Plan for the
Limitation Year.
(2) As soon as is 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
Section 415 Compensation for the Limitation Year.
(3) If, as a result of a reasonable error in estimating compensation,
Employee contributions, the allocation of Forfeitures, or other
facts and circumstances as determined by the Committee, a
Participant's Annual Additions under this Plan and such other
plans would include an amount in excess of the Maximum Permissible
Amount for a Limitation Year, the excess will be deemed to consist
of the Annual Additions last allocated, except that Annual
Additions attributable to a welfare benefit fund or individual
medical account will be deemed to have been allocated first
regardless of the actual allocation date.
(4) If an amount in excess of the Maximum Permissible Amount was
allocated to a Participant on an allocation date of this Plan
which coincides with an allocation date of another plan, the
excess attributed to this Plan will be the product of
(A) the total excess allocated as of such date and
(B) the ratio of (i) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under
this Plan to (ii) the total Annual Additions allocated to
the Participant for the Limitation Year as of such date
under this and all other qualified Defined Contribution
Plans maintained by the Employer.
(5) Any excess Annual Addition attributed to this Plan will be
disposed of in the manner described in subsection (a)(3).
(c) If the Employer maintains, or at any time maintained, a qualified Defined
Benefit Plan covering any Participant in this Plan, the sum of a
Participant's Defined Benefit Fraction and Defined Contribution Fraction
shall not exceed 1.0 in any Limitation Year. If the sum of the fractions
exceeds 1.0, the annual benefit provided under the Defined Benefit Plan
will be reduced until the sum of the fractions equals 1.0.
(d) Definitions:
(1) Annual Additions: The sum of the following amounts which are
credited to a Participant's Account for the Limitation Year:
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(A) Employer contributions,
(B) After-Tax Employee Contributions (if any),
(C) Forfeitures, and
(D) Amounts allocated, after March 31, 1984, to an individual
medical account, as defined in section 415(1)(2) of the
Code, which is part of a pension or annuity plan maintained
by the Employer, as well as amounts derived from
contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, attributable to
post-retirement medical benefits and allocated to the
separate account of a Key Employee, as defined in section
419(d)(3) of the Code, under a welfare benefit fund, as
defined in section 419(e) of the Code, maintained by the
Employer.
For this purpose, any excess applied under Sections (a)(3) or
(b)(5) in the Limitation Year to reduce Employer contributions
will be considered Annual Additions for such Limitation Year.
(2) Section 415 Compensation: For purposes of this Section, a
Participant's Earned Income (if any), wages, salaries, and fees
for professional services and other amounts received for personal
services actually rendered in the course of employment with the
Employer maintaining the Plan (including, but not limited to,
commissions paid to salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, and reimbursements, or
other expense allowances under a nonaccountable plan as described
in Regulation Section 1.62-2(c)), and excluding the following:
(A) Employer contributions to a plan of deferred compensation
which are not includible in the Employee's gross income for
the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to
the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred
compensation;
(B) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(C) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(D) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) toward the purchase of an
annuity contract described in section 403(b) of the Code
(whether or not the contributions are actually excludable
from the gross income of the Employee).
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For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of this Article, Section 415
Compensation for a Limitation Year is the compensation actually
paid or made available during such Limitation Year. Section 415
Compensation does not include accrued compensation unless it is
uniform and consistent and paid within two weeks.
Notwithstanding the preceding sentence, section 415 compensation
for a Participant in a Defined Contribution Plan who is
permanently and totally disabled (as defined in section 22(e)(3)
of the Code) is the compensation such Participant would have
received for the Limitation Year if the Participant had been paid
at the rate of compensation at which he was paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled Participant may be taken into
account only if the Participant is not a Highly Compensated
Employee (as defined in section 414(q) of the Code) and if
contributions made on behalf of such Participant are
nonforfeitable when made.
(3) Defined Benefit Fraction: A fraction, the numerator of which is
the sum of the Participant's Projected Annual Benefit under all
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 section 415 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 6, 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(s) 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 of the Code for all Limitation Years beginning before
January 1, 1987.
(4) Defined Contribution Dollar Limitation: $30,000 or, if greater,
one-fourth of the defined benefit dollar limitation set forth in
section 415(b)(1) of the Code, as indexed, as in effect for the
applicable Limitation Year.
(5) Defined Contribution Fraction: A fraction, the numerator of which
is the sum of the Annual Additions to the Participant's Account
under this and all other 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, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in section
419(e) of the Code, and
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<PAGE>
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 which also constituted Years of
Service with the Employer (regardless of whether a Defined
Contribution Plan was maintained by the Employer). The maximum
aggregate amount for any Limitation Year is the lesser of (A) 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 (B) 35 percent of the Participant's Section 415
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 6, 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,
multiplied by (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
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.
In determining the Defined Contribution Fraction under section
415(e)(3)(B) of the Code and pursuant to this Section of the Plan,
"100 percent" shall be substituted for "125 percent" unless the
minimum allocation percentage under section 416(c)(2)(A) of the
Code and Section 9.3.(a) of the Plan is increased from "three
percent" to "four percent" and the Plan would not be a Top-Heavy
Plan if "90 percent" were substituted for each reference to "60
percent" 9.2(b) of the Plan.
(6) Employer: For purposes of this Article, any entity that adopts
this Plan, and all members of a controlled group of corporations
(as defined in section 414(b) of the Code as modified by section
415(h)), all commonly controlled trades or businesses (as defined
in section 414(c) as modified by section 415(h)) or affiliated
service groups (as defined in section 414(m)) of which the
adopting Employer is part, and any other entity required to be
aggregated with the Employer pursuant to Regulations under section
414(o) of the Code.
(7) Highest Average Compensation: The average Section 415 Compensation
for the three consecutive Years of Service with the Employer which
produces the highest average. A Year of Service with the Employer
is the 12-consecutive month period defined in Article I of the
Plan.
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(8) Limitation Year: The Limitation Year is the Plan Year. All
qualified plans maintained by the Employer shall use the same
Limitation Year. If the Limitation Year is amended to a different
12-consecutive month period, the new Limitation Year shall begin
on a date within the Limitation Year in which the amendment is
made.
(9) Maximum Permissible Amount: The maximum Annual Addition that may
be contributed or allocated to a Participant's Account under the
Plan for any Limitation Year shall not exceed the lesser of:
(A) the Defined Contribution Dollar Limitation, or
(B) 25 percent of the Participant's Section 415 Compensation for
the Limitation Year.
The Section 415 Compensation limitation referred to in (B)
shall not apply to any contribution for medical benefits
(within the meaning of section 401(h) or section 419A(f)(2)
of the Code) which is otherwise treated as an Annual
Addition under sections 415(1)(1) or 419A(d)(2) of the Code.
If a short Limitation Year is created because an amendment
changes the Limitation Year to a different 12-consecutive
month period, the Maximum Permissible Amount shall not
exceed the Defined Contribution Dollar Limitation multiplied
by the following fraction:
Number of months in the short Limitation Year
12
(10) Projected Annual Benefit: The annual retirement benefit (adjusted
to an actuarially equivalent straight life annuity if such benefit
is expressed in a form other than a straight life annuity or
qualified joint and survivor annuity) to which the Participant
would be entitled under the terms of the Plan assuming:
(A) The Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if later),
and
(B) The Participant's Section 415 Compensation for the current
Limitation Year and all other relevant factors used to
determine benefits under the Plan will remain constant for
all future Limitation Years.
SECTION 4.5 VALUATION.
The assets of the Trust will be valued on each Valuation Date at fair market
value. On such date, the earnings and losses of the Trust will be allocated to
each Participant's Account according to the ratio of such Account balance to all
Account balances, or by utilizing any such other formula as is appropriate under
the circumstances.
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SECTION 4.6 VESTING AND ACCRUAL.
(a) Employer Regular Contributions:
The nonforfeitable percentage of a Participant's Account attributable to
Employer Regular Contributions is determined as follows:
The nonforfeitable
Year(s) of Service: percentage is:
1 10
2 20
3 30
4 40
5 60
6 80
7 100
(b) Employer Matching Contributions:
No Employer Matching Contributions are provided under this Plan.
(c) Notwithstanding the vesting schedule(s) specified above, an Employee's
right to his or her Accounts will be nonforfeitable upon attainment of
Normal Retirement Age, death, or Disability.
(d) For purposes of computing an Employee's nonforfeitable right to his
Account balance derived from Employer contributions, Years of Service and
One-Year Breaks in Service will be measured by the Plan Year.
(e) Years of Service before a One-Year Break in Service:
(1) In the case of a Participant who has incurred a One-Year Break in
Service, Years of Service before such break will not be taken into
account until the Participant has completed a Year of Service
after such One-Year Break in Service.
(2) In the case of a Participant who has 5 or more consecutive
One-Year Breaks in Service, all service after such One-Year Breaks
in Service will be disregarded for the purposes of vesting the
Employer-derived Account balance that accrued before such One-Year
Breaks in Service. Such Participant's pre-break service will count
in vesting the post-break Employer-derived Account balance only if
either:
(A) such Participant has any nonforfeitable interest in the
Account balance attributable to Employer contributions at
the time of separation from service, or
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<PAGE>
(B) upon returning to service the number of consecutive One-Year
Breaks in Service is less than the number of Years of
Service.
Separate Accounts will be maintained for the Participant's
pre-break and post-break Employer-derived Account balance. Both
Accounts will share in the earnings and losses of the Trust Fund.
If a Participant ceases to be employed but is then reemployed by
the Employer before a One-Year Break in Service occurs, he shall
continue to participate in the Plan in the same manner as if such
termination had not occurred.
(f) If a Participant ceases to be employed but is then reemployed by the
Employer after he has incurred a One-Year Break in Service, and such
individual had received a distribution of his entire Vested interest
(including where the Participant had no Vested amount in his Account)
prior to reemployment, his forfeited Account shall be restored only if he
repays the full amount distributed to him before the earlier of five
years after the first date on which the Participant is subsequently
reemployed by the Employer or the close of the first period of five
consecutive One-Year Breaks in Service commencing after the distribution.
If a distribution occurs for any reason other than a separation from
service, the time for repayment may not end earlier than five years after
the date of the distribution. In the event the former Participant repays
the full amount distributed to him, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by gains or
losses occurring after the Valuation Date preceding the distribution.
(g) If the Plan's vesting schedule is changed or amended, or the Plan is
amended in any way that directly or indirectly affects the computation of
the Participant's nonforfeitable percentage, each Participant with at
least three Years of Service with the Employer may elect, within a
reasonable period after the adoption of the amendment or change, to have
the nonforfeitable percentage computed under the Plan without regard to
such amendment or change. For Participants who do not have at least one
Hour of Service in any Plan Year beginning after December 31, 1988, the
preceding sentence shall be applied by substituting "five Years of
Service" for "three Years of Service" where such language appears.
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:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment becomes effective; or
(3) 60 days after the Participant is issued written notice of
amendment by the Employer or Plan Administrator.
Furthermore, if the vesting schedule of a Plan is amended, 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
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<PAGE>
effective, the nonforfeitable percentage (determined as of such date) of
such Employee's right to his Employer-derived accrued benefit will not be
less than the percentage computed under the Plan without regard to such
amendment.
(h) If a distribution is made at a time when a Participant has a
nonforfeitable right to less than 100 percent of the Account balance
derived from Employer contributions and the Participant may increase the
nonforfeitable percentage in the Account:
(1) A separate Account will be established for the Participant's
interest in the Plan as of the time of the distribution, and
(2) At any relevant time the Participant's nonforfeitable portion of
the separate Account will be equal to an amount ("X") determined
by the formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the above formula: P is the
nonforfeitable percentage at the relevant time, AB is the Account
balance at the relevant time, D is the amount of the distribution,
and R is the ratio of the Account balance at the relevant time to
the Account balance after distribution. "Relevant time" means the
time at which, under the plan, the Vested percentage in the
Account can not increase.
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<PAGE>
ARTICLE V - DISTRIBUTIONS
SECTION 5.1 DISTRIBUTIONS OF SMALL ACCOUNT BALANCES.
- ----------- ---------------------------------------
If a Participant terminates service, and the value of the Participant's Vested
Account balance derived from Employer and Employee contributions is not greater
than $3,500, the Participant will receive a distribution of the value of the
entire Vested portion of such Account balance and the nonvested portion will be
treated as a Forfeiture. If the value of a Participant's Vested Account balance
is zero, the Participant shall be deemed to have received a distribution of such
Vested Account balance.
SECTION 5.2 DISTRIBUTIONS WHILE IN-SERVICE.
In-service distributions shall not be permitted.
SECTION 5.3 DISTRIBUTIONS UPON SEPARATION FROM SERVICE.
- ----------- ------------------------------------------
The Trustee shall distribute to Participant in one lump sum, as soon as
administratively feasible, the value of the Participant's Vested Account
balance. The Trustee shall distribute the value of the Participant's Vested
Account balance immediately following separation from service.
SECTION 5.4 DISTRIBUTIONS UPON RETIREMENT.
In the event that an applicable retirement date has been reached, all Vested
amounts credited to the Participant's Account balance shall become
distributable. The distribution will be made in one lump sum. The distribution
will be made, as soon as administratively feasible, following the applicable
retirement date which will include the attainment of Normal Retirement Age,
Early Retirement Date or the Late Retirement Date.
SECTION 5.5 DISTRIBUTIONS UPON DEATH.
(a) Upon the death of a Participant, the Committee shall instruct the
Trustee, in accordance with this Article, to distribute the Account of a
deceased Participant to that Participant's Beneficiary. The Participant
shall not name as his Beneficiary someone other than his Spouse unless
and until the Participant and Spouse designate, in writing on a valid
waiver form provided by the Committee for such purpose, an alternate
Beneficiary, which designation shall be witnessed by a notary public. In
addition, the Participant may designate a Beneficiary other than his
Spouse if: (1) the Participant is legally separated or has been abandoned
and the Participant has a court order to such effect (and there is no
"qualified domestic relations order" as defined in section 414(p) of the
Code), or (2) the Participant has no Spouse, or (3) the Spouse cannot be
located. Where the Participant makes no designation, the Beneficiary
shall be the Spouse, and if there is no Spouse, the Beneficiary shall be
the Participant's estate. The Committee may require such proof of death
and such evidence of the right of other persons to be Beneficiaries as it
shall deem
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<PAGE>
proper under the circumstances. The Committee's determination of death
and of the right of any Beneficiary to receive payments shall be
conclusive.
(b) The designation of a Beneficiary shall be made on a form approved by the
Committee. A Participant may revoke or change his designation with the
Committee by filing a new designation form with the Committee. In the
event that no valid designation exists at the time of the Participant's
death, the death benefit shall be payable to the Participant's estate.
(c) If the Participant was eligible, but had not yet received a lump sum
distribution prior to his death, the Trustee will make the lump sum
distribution to the Beneficiary as if the Participant had not died.
(d) If the Participant dies before distribution of his interest has begun or
before age 70E1/2, his interest shall be made as a lump sum distribution
within one year of the death of the Participant.
SECTION 5.6 DISTRIBUTIONS UPON DISABILITY.
In the event of a Participant's total and permanent Disability, the Trustee
shall distribute, as soon as administratively possible, the value of the
Participant's Vested Account balance. The distribution will be made in one lump
sum as soon as administratively feasible following the determination of
Disability.
SECTION 5.7 SPECIAL BENEFICIARY PROVISIONS.
(a) Lost Beneficiary. If, after five years have expired following reasonable
efforts by the Committee to locate a Participant or his Beneficiary,
including sending a registered letter, return receipt requested to the
last known address, the Committee is unable to locate the Participant or
Beneficiary, then the amounts distributable to such Participant or
Beneficiary shall, pursuant to applicable state and Federal laws, be
treated as a Forfeiture under the Plan. Where a Participant or
Beneficiary is located subsequent to the Forfeiture, such benefits shall
be reinstated by the Committee, and shall not count as an Annual Addition
under section 415 of the Code.
(b) Minor Beneficiary. The Committee may instruct the Trustee to distribute a
sum payable to a minor instead to his or her legal guardian, or if there
is no guardian, to a parent or other responsible adult who maintains the
residence of the minor. In the alternative such distribution could be
made to the appropriate custodian under the Uniform Gifts to Minors Act
or Gift to Minors Act if applicable under the state laws of the state in
which the minor resides. Any payment in this format shall discharge all
fiduciaries involved in the distribution including the Trustee, Employer,
and Plan from liability in regard to the transaction.
(c) Alternate Payee. A Participant's rights and benefits shall be subject to
the rights afforded to an alternate payee under a qualified domestic
relations order. In connection with a proper qualified domestic relations
order under section 414(p) of the Code, a distribution
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<PAGE>
shall be permitted if such distribution is authorized by the qualified
domestic relations order even if the Participant has not achieved a
distributable event under the Plan.
SECTION 5.8 CONSENT OF THE PARTICIPANT REQUIRED FOR DISTRIBUTIONS IF ACCOUNT
- ----------- ----------------------------------------------------------------
BALANCES GREATER THAN $3,500.
----------------------------
If the value of a Participant's Vested Account balance derived from Employer and
Employee contributions exceeds (or at the time of any prior distribution
exceeded) $3,500, and the Account balance is immediately distributable, the
Participant (or where the Participant has died and the Surviving Spouse is the
Beneficiary, the Surviving Spouse) must consent to any distribution of such
Account balance. An Account balance is immediately distributable if any part of
the Account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains, or would have attained if not deceased,
the later of Normal Retirement Age or age 62.
The consent of the Participant shall not be required to the extent that a
distribution is required to satisfy section 401(a)(9) or section 415 of the
Code. In addition, upon termination of this Plan, if the Plan does not offer an
annuity option (purchased from a commercial provider) and if the Employer or any
entity within the same controlled group as the Employer does not maintain
another Defined Contribution Plan (other than an employee stock ownership plan
as defined in section 4975(e)(7) or 409 of the Code or a simplified employee
pension plan as defined in section 408(k) of the Code), the Participant's
Account balance 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 employee
stock ownership plan as defined as in section 4975(e)(7) or 409 of the Code or a
simplified employee pension plan as defined in section 408(k) of the Code), then
the Participant's Account balance will be transferred, without the Participant's
consent, to the plan if the Participant does not consent to an immediate
distribution.
SECTION 5.9 COMMENCEMENT OF BENEFITS.
Unless the Participant elects otherwise, distribution of benefits will begin no
later than the 60th day after the latest of the close of the Plan Year in which:
(1) the Participant attains age 65 (or Normal Retirement Age, if
earlier);
(2) occurs the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or
(3) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant, Spouse or
Beneficiary to consent to a distribution while a benefit is immediately
distributable, within the meaning of Section 5.8 of the Plan, shall be deemed to
be an election to defer commencement of payment of any benefit sufficient to
satisfy this Section.
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<PAGE>
SECTION 5.10 REQUIRED DISTRIBUTIONS.
(a) Because the Plan requires lump sum distributions for Participants who
separate before age 70 1/2, it generally complies with the required
distribution rules of section 401(a)(9). Any participant who participates
in the Plan after attaining age 70 1/2 must receive a distribution each
year equal to his Account balance divided by the Life Expectancy of such
Participant and his Beneficiary in accordance with the proposed
Regulations promulgated under section 401(a)(9) of the Code.
Distributions being made pursuant to an election under section 242(b)(2)
of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) will
continue to be made in such manner until such election is revoked as
provided by the proposed Regulations promulgated under section 401(a)(9)
of the Code.
SECTION 5.11 ANNUITY CONTRACT.
(a) Nontransferability of annuities. Any annuity contract distributed from
the Plan must be nontransferable.
(b) Conflicts with annuity contracts. The terms of any annuity contract
purchased and distributed by the Plan to a Participant or Spouse shall
comply with the requirements of this Plan.
SECTION 5.12 FORM OF DISTRIBUTION.
Distributions will be made in cash only except for the distribution of an
insurance policy or an annuity contract.
SECTION 5.13 TRUSTEE-TO-TRUSTEE TRANSFERS.
The Trustee of this Plan will not make a transfer of such Participant's
applicable Account balance to the trustee of another plan.
SECTION 5.14 ROLLOVERS TO OTHER PLANS OR IRAS.
- ------------ --------------------------------
Effective with respect to any distribution made on or after January 1, 1993 and
notwithstanding any provision of the Plan to the contrary that would otherwise
limit a Participant's election under this Section, a Participant may elect, at
the time and in the manner prescribed by the Administrator, to have any portion
of an eligible rollover distribution paid, in a direct rollover, to an eligible
retirement plan specified by the Participant.
Definitions:
(1) Eligible rollover distribution. An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the
Participant, except:
(A) any distribution that is one of a series of substantially equal
periodic payments (made not less frequently than annually) made
over the life (or life expectancy) of the
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<PAGE>
distributee or the joint lives (or joint life expectancies) of the
Participant and the Participant's designated Beneficiary, or over
a specified period of ten years or more;
(B) any distribution to the extent such distribution is required under
section 401(a)(9) of the Code; and
(C) 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).
(2) 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.
(3) Direct rollover. A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the Participant.
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<PAGE>
ARTICLE VI - LOANS AND LIFE INSURANCE
SECTION 6.1 AVAILABILITY OF LOANS.
Loans shall not be permitted under this Plan and the provisions of this Article
shall not be implemented unless and until the Committee shall otherwise so
determine in its discretion. In the event loans are in the future permitted
under the Plan, any such loan shall be subject to such conditions and
limitations as the Committee deems necessary for administrative convenience and
to preserve the tax-qualified status of the Plan.
SECTION 6.2 AMOUNT OF LOANS.
No loan to any Participant or Beneficiary can be made to the extent that such
loan when added to the outstanding balance of all other loans to the Participant
or Beneficiary would exceed the lesser of (a) $50,000 reduced by the excess (if
any) of the highest outstanding balance of loans during the one-year period
ending on the day before the loan is made, over the outstanding balance of loans
from the Plan on the date the loan is made, or (b) one-half the present value of
the nonforfeitable accrued benefit of the Participant. For the purpose of the
above limitation, all loans from all plans of the Employer and other members of
a group of employers described in sections 414(b), 414(c), 414(m), and 414(o) of
the Code are aggregated. Furthermore, any loan shall by its terms require that
repayment (principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond five years from
the date of the loan, unless such loan is used to acquire a dwelling unit which
within a reasonable time (determined at the time the loan is made) will be used
as the principal residence of the Participant. An assignment or pledge of any
portion of the Participant's interest in the Plan and a loan, pledge, or
assignment with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this paragraph.
SECTION 6.3 TERMS OF LOANS.
(a) Loans shall be made available to all Participants and Beneficiaries on a
reasonably equivalent basis.
(b) Loans shall not be made available to Highly Compensated Employees (as
defined in section 414(q) of the Code) in an amount greater than the
amount made available to other Employees.
(c) Loans must be adequately secured using not more than 50 percent of the
Participant's Vested Account balance, and must bear a reasonable interest
rate.
(d) No Participant loan shall exceed the present value of the Participant's
Vested accrued benefit.
(e) In the event of default, foreclosure on the note and attachment of
security will not occur until a distributable event occurs in the Plan.
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<PAGE>
(f) No loans will be made to any shareholder-employee. For purposes of this
requirement, a shareholder-employee means an Employee or officer of an
electing small business corporation (S corporation) who owns (or is
considered as owning within the meaning of section 318(a)(1) of the Code)
on any day during the taxable year of such corporation, more than 5
percent of the outstanding stock of the corporation.
(g) Loans granted or renewed on or after the last day of the first Plan Year
beginning after December 31, 1988 shall be made pursuant to a written
Participant loan program incorporated herein by reference which will
include the following:
(1) the basis on which loans will be approved or denied;
(2) procedures for applying for the loans;
(3) person(s) or position(s) authorized to administer the Participant
loan program;
(4) limitations, if any, on the types and amounts of loans offered;
(5) procedures under the program for determining the rates of
interest;
(6) the types of collateral which may secure a Participant loan; and
(7) the events constituting default and the steps that will be taken
to preserve Plan assets.
SECTION 6.4 PURCHASE OF LIFE INSURANCE CONTRACTS.
- ----------- ------------------------------------
(a) The Trustee shall apply for and will be the owner of any insurance
contract(s) purchased under the terms of this Plan. The insurance
contract(s) must provide that proceeds will be payable to the Trustee,
however the Trustee shall be required to pay over all proceeds of the
contract(s) to the Participant's designated Beneficiary if the insurance
was not purchased as a general investment of the Plan in accordance with
the distribution provisions of this Plan. Under no circumstances shall
the Trust retain any part of the proceeds if the insurance was not
purchased as a general investment of the Plan. In the event of any
conflict between the terms of this Plan and the terms of any insurance
contract purchased hereunder, the Plan provisions shall control.
(b) Any dividends or credits earned on insurance contracts will be applied,
within the taxable year of the Employer in which received or within the
next succeeding taxable year, toward the next premiums due before any
further Employer contributions are so applied.
Any dividends or credits earned on insurance contracts will be allocated
to the Participant's Account derived from Employer contributions for
whose benefit the contract is held.
(c) Contributions may be used to purchase life insurance on the Participant
subject to the following limitations:
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<PAGE>
(1) Ordinary life - For purposes of these incidental insurance
provisions, ordinary life insurance contracts are contracts with
both non-decreasing death benefits and nonincreasing premiums. If
such contracts are purchased, less than 1/2 of the aggregate
Employer contributions allocated to any Participant will be used
to pay the premiums attributable to them.
(2) Term and universal life - No more than 1/4 of the aggregate
Employer contributions allocated to any Participant will be used
to pay the premiums on term life insurance contracts, universal
life insurance contracts, and all other life insurance contracts
which are not ordinary life.
(3) Both ordinary and term or universal life insurance - The sum of
1/2 of the ordinary life insurance premiums and all other life
insurance premiums will not exceed 1/4 of the aggregate Employer
contributions allocated to any Participant.
SECTION 6.5 DISTRIBUTION OF INSURANCE CONTRACTS.
Insurance contracts on a Participant's life will be converted to cash or an
annuity or distributed to the Participant upon the commencement of the
distribution of benefits under this Plan.
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ARTICLE VII - PLAN ADMINISTRATION
SECTION 7.1 DUTIES OF THE EMPLOYER.
The Employer shall have overall responsibility for the establishment, amendment,
termination, administration, and operation of the Plan. The Employer shall
discharge this responsibility by appointing a Committee, to which shall be
delegated overall responsibility for administering and operating the Plan.
SECTION 7.2 THE COMMITTEE.
(a) The Committee shall be the "named fiduciary" (as defined in section
402(a)(2) of ERISA), the "Administrator" (as defined in section 3(16) of
ERISA and section 414(g) of the Code), and the agent for service of
process of the Plan.
(b) The Committee shall consist of officers or other Employees of the
Employer, or any other person(s) who shall be appointed by the Employer.
The members of the Committee shall serve at the direction of the
Employer. In the absence of such appointment, the Employer shall serve as
the Committee. Any member of the Committee may resign by delivering his
written resignation to the Employer and to the Committee, which shall
become effective upon the date specified therein. In the event of a
vacancy on the Committee, the remaining members shall constitute the
Committee with full power to act until the Employer appoints a new
Committee member. The Employer may from time to time remove any Committee
member with or without cause and appoint a successor thereto.
SECTION 7.3 APPOINTMENT OF ADVISOR.
The Committee may employ any such person or entity as it deems necessary to
assist in the administration of the Plan and provide services including but not
limited to tax advice, amendment, termination and operation of the Plan, and
advice concerning reports filed with the Internal Revenue Service. Any such
advisor shall not be the Administrator of the Plan (as defined in section 3(16)
of ERISA and section 414(g) of the Code).
SECTION 7.4 POWERS AND DUTIES OF THE COMMITTEE.
- ----------- ----------------------------------
(a) The Committee, on behalf of the Participants and Beneficiaries of the
Plan, shall enforce the Plan and Trust in accordance with the terms
thereof, and shall have all powers necessary to carry out such
provisions. The Committee shall interpret the Plan and Trust and shall
determine all questions arising in the administration and application of
the Plan and Trust. Any such interpretation or determination by the
Committee shall be conclusive and binding on all persons.
The Committee shall establish rules and regulations necessary for the
proper conduct and administration of the Plan, and from time to time,
shall change or amend these rules and
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regulations. The Committee shall also have the power to authorize all
disbursements by the Trustee from the Trust in accordance with the Plan's
terms.
(b) At the direction of the Committee, distributions to minors or persons
declared incompetent may be made by the Trustee directly to such persons
or to the legal guardians or conservators of such persons. The Employer,
the Committee, and the Trustee shall not be required to see to the proper
application of such distributions made to any of such persons, but his or
their receipt thereof shall be a full discharge of the Employer, the
Committee, and the Trustee of any obligation under the Plan or the Trust.
SECTION 7.5 ORGANIZATION AND OPERATION.
(a) The Committee shall act by a majority of its members then in office, and
such action may be taken either by a vote at a meeting or by written
consent without a meeting. The Committee may authorize any one or more of
its members to execute any document or documents on behalf of the
Committee, in which event the Committee shall notify the Employer, in
writing, of such authorization and the name or names of its member or
members so designated. The Employer thereafter shall accept and rely on
any documents executed by said member of the Committee or members as
representing action by the Committee until the Committee shall file with
the Employer a written revocation of such designation.
(b) The Committee may adopt such bylaws and regulations as it deems desirable
for the conduct of its affairs and may employ and appropriately
compensate such accountants, counsel, specialists, actuaries, and other
persons as it deems necessary or desirable in connection with the
administration and maintenance of the Plan. The Committee shall have the
authority to control and manage the operation and administration of the
Plan.
SECTION 7.6 CLAIMS PROCEDURE.
(a) A claim for benefits under the Trust shall be filed on an application
form supplied by the Committee. Written notice of the disposition of the
claim shall be furnished to the claimant within 90 days after an
application form is received by the Committee, unless special
circumstances (as determined by the Committee) require an extension for
processing the claim. If such an extension is required, the Committee
shall render a decision as soon as possible subsequent to the 90-day
period, but such decision shall not be rendered later than 180 days after
the application form is received by the Committee. Written notice of such
extension shall be furnished to the claimant prior to the commencement of
the extension indicating the special circumstances requiring such
extension and the date by which the Committee expects to render the
decision on the claim. In the event the claim is denied, the Committee
shall set forth in writing the reasons for the denial and shall cite
pertinent provisions of the Plan and Trust upon which the decision is
based. In addition, the Committee shall provide a description of any
additional material or information necessary for the claimant to perfect
the claim, an explanation of why such information is necessary, and
appropriate information as to the steps to be taken if the Participant or
Beneficiary wish to submit such claim for review as provided in (b)
below.
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(b) A Participant or Beneficiary whose claim described in (a) above has been
denied in whole or in part shall be entitled to the following rights if
exercised within 60 days after written denial of a claim is received:
(1) to request a review of the claim upon written application to the
Committee;
(2) to review documents associated with the claim; and
(3) to submit issues and comments in writing to the Committee.
(c) If a Participant or a Beneficiary requests a review of the claim under
(b) above, the Committee shall conduct a full review (including a formal
hearing if desired) of such request, and a decision on such request shall
be made within 60 days after the Committee has received the written
request for review from the Participant or the Beneficiary. Special
circumstances (such as a need for full hearing on request) can allow the
Committee to extend the decision on such request, but the decision shall
be rendered no later than 120 days after receipt of the request for
review. Written notice of such an extension shall be furnished to the
Participant or the Beneficiary prior to the commencement of the
extension. The decision of the Committee on review shall be set forth in
writing and shall include specific reasons for the decision as well as
specific references to the pertinent provisions of the Plan or Trust on
which the decision is based.
SECTION 7.7 RECORDS AND REPORTS.
(a) The Committee shall be entitled to rely upon certificates, reports, and
opinions provided by an accountant, tax or pension advisor, actuary or
legal counsel employed by the Employer or Committee. The Committee shall
keep a record of all its proceedings and acts, and shall keep all such
books of account, records, and other data as may be necessary for the
proper administration of the Plan. The regularly kept records of the
Committee, the Employer, and the Trustee shall be conclusive evidence of
a Participant's service, his Compensation, his age, his marital status,
his status as an Employee, and all other matters contained therein and
relevant to this Plan; provided, however, that a Participant may request
a correction in the record of his age at any time prior to his retirement
and such correction shall be made if within 90 days after such request he
furnishes a birth certificate, baptismal certificate, or other
documentary proof of age satisfactory to the Committee in support of this
correction.
(b) Each Participant and each Participant's designated Beneficiary must
notify the Committee in writing of his mailing address and each change
thereof. Any communication, statement or notice addressed to a
Participant or Beneficiary at the last mailing address filed with the
Committee, or if no address is filed with the Committee, the last mailing
address as shown on the Employer's records, will be binding on the
Participant and his Beneficiary for all purposes of the Plan. Neither the
Committee nor the Trustee shall be required to search for or locate a
Participant or a Beneficiary.
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<PAGE>
SECTION 7.8 LIABILITY.
(a) A member of the Committee shall not be liable for any act, or failure to
act, of any other member of the Committee, except to the extent that such
member:
(1) Knowingly participates in, or undertakes to conceal, an act or
omission of another Committee member, knowing that such act or
omission is a breach of fiduciary duty to the Plan;
(2) Fails to comply with the specific responsibilities given him as a
member of the Committee, and such failure enables another member
of the Committee to commit a breach of fiduciary duty to the Plan;
or
(3) Has knowledge of a breach of fiduciary duty to the Plan by another
member of the Committee, unless such member makes reasonable
effort under the circumstances to remedy such breach.
(b) Each member of the Committee shall be liable with respect to his own acts
of willful misconduct or gross negligence concerning the Plan. The
Employer may indemnify the Committee or each of its members for part or
all expenses, costs, or liabilities arising out of the performance of
duties required by the terms of the Plan or Trust, except for those
expenses, costs, or liabilities arising out of a member's willful
misconduct or gross negligence.
SECTION 7.9 RELIANCE AND STATEMENTS.
The Committee, in any of its dealings with Participants hereunder, may
conclusively rely on any written statement, representation, or documents made or
provided by such Participants.
SECTION 7.10 REMUNERATION AND BONDING.
(a) Unless otherwise determined by the Committee, the members of the
Committee shall serve without remuneration for services to the Plan and
Trust. However, all expenses of the Committee shall be paid by the Trust
except to the extent paid by the Employer. Such expenses shall include
any expenses incidental to the functioning of the Committee, including
but not limited to fees of accountants, legal counsel, and other
specialists, or any other costs entailed in administering the Plan.
(b) Except as required by ERISA or other federal law, the members of the
Committee shall serve without bond.
SECTION 7.11 COMMITTEE DECISIONS FINAL.
The decision of the Committee in matters within its jurisdiction shall be final,
binding, and conclusive upon the Employer and the Trustee and upon each
Employee, Participant, former Participant, Beneficiary, and every other person
or party interested or concerned.
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<PAGE>
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<PAGE>
ARTICLE VIII - TRUST AGREEMENT
SECTION 8.1 ESTABLISHMENT OF TRUST.
The Employer and the Trustee hereby enter into a Trust agreement which, except
to the extent such trust agreement is set forth in a valid separate and distinct
document, is incorporated herein and which establishes a Trust consisting of
such sums of money and other property as may from time to time be contributed or
transferred to the Trustee under the terms of the Plan, along with any property
to which any portion of the Trust Fund may from time to time be converted, and
which provides for the investment of Plan assets and the operation of the Trust.
This trust agreement, as amended from time to time, shall be deemed part of the
Plan, and all rights and benefits provided to persons under the Plan shall be
subject to the terms of the Trust agreement. In the event the Employer has
entered into a separate and distinct trust agreement which is not incorporated
in the terms of this Plan, and such trust agreement, subsequent to its
establishment, becomes void or ceases to operate, the terms of this Article VIII
shall become effective with respect to the Employer.
SECTION 8.2 CONTRIBUTIONS TO TRUSTEE.
The Trustee shall accept any cash, and may accept any other property tendered to
it as contributions hereunder, but shall not be under any duty nor have any
right to require the Employer or any other person to contribute to the Trust
Fund or to determine whether the amount of any contribution has been correctly
computed under the terms of the Plan.
SECTION 8.3 PURPOSE OF TRUST.
The purpose of the Trust is to invest in and hold property for the exclusive
benefit of Participants and their Beneficiaries. At no time shall the Trust be
operated or construed in a manner contrary to this purpose. The Trust shall be a
separate entity from the Employer and its assets. In no event shall the Trust
Fund ever be subject to the rights or claims of any creditor of the Employer. It
is expressly understood that the duties and obligations of the Trustee shall be
only those expressly stated in this Article.
SECTION 8.4 DISTRIBUTIONS.
The Trustee shall from time to time make distributions from the Trust Fund to
such persons, in such amounts, and in such manner as the Committee may direct in
writing. Instructions to the Trustee from the Committee need not specify the
purpose of the distributions so ordered, and the Trustee shall not be
responsible in any way for the propriety of such distributions or for the
administration of the Plan. Any such instructions shall constitute a
certification that each distribution directed is one which the Committee is
authorized to direct. The Trustee shall not be responsible for the adequacy of
the Trust Fund to meet and discharge any liabilities under the Plan. If a
dispute arises regarding who is entitled to or should receive any distribution
from the Trust Fund, the Trustee may withhold, or cause the withholding of, such
distribution until the dispute has been resolved.
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<PAGE>
SECTION 8.5 EXCLUSIVE BENEFIT.
(a) Except as the Committee may authorize the Trustee to return contributions
to the Employer pursuant to the terms of the Plan, no part of the Trust
Fund shall be used for or diverted to purposes other than for the
exclusive benefit of Participants and their Beneficiaries and for
defraying expenses of the Plan and Trust.
(b) The Employer shall have no beneficial interest in the assets of the
Trust, and no part of the Trust shall ever revert to or be repaid to the
Employer, directly or indirectly, except that upon written request, the
Employer shall have a right to recover:
(1) a contribution to the Plan made by mistake of fact if such
contribution (to the extent made by mistake of fact) is returned
to the Employer within one year after payment of such
contribution;
(2) any contributions to the Plan conditioned upon initial
qualification of the Plan under section 401(a) of the Code if the
Plan does not so qualify and such contributions are returned to
the Employer within one year after the denial of qualification of
the Plan and only if a determination letter request is filed by
the terms prescribed by law for filing the Employer's tax return
for the taxable year in which the Plan is adopted;
(3) a contribution to the Plan which is disallowed as a deduction
under section 404 of the Code if such contribution (to the extent
disallowed) is returned to the Employer within one year after the
deduction is disallowed; and
(4) any residual assets due to a section 415 excess contribution upon
termination of the Plan if all liabilities of the Plan to
Participants and their Beneficiaries have been satisfied and the
reversion does not contravene any provision of law.
(c) The previous paragraph shall not apply to a "qualified domestic relations
order," as defined in section 414(p) of the Code, and any other domestic
relations orders permitted to be so treated by the Trustee under the
provisions of the Retirement Equity Act of 1984. The Committee shall
establish a written procedure to determine the qualified status of
domestic relations orders and to administer distributions under any
domestic relations orders it determines to be qualified. To the extent
provided under a "qualified domestic relations order," a former Spouse of
a Participant shall be treated as the Participant's Spouse or Surviving
Spouse for all purposes under the Plan.
SECTION 8.6 EXPENSES OF THE PLAN AND TRUST.
- ----------- ------------------------------
All legal, administrative, taxes, and other expenses of the Plan and Trust and
the Trustee's fees (if any) shall be paid from the Trust Fund except to the
extent paid by the Employer.
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<PAGE>
SECTION 8.7 DUTIES AND RESPONSIBILITIES OF TRUSTEE.
- ----------- --------------------------------------
It shall be the duty of the Trustee to hold in Trust the funds from time to time
received by it, and the Trustee shall have authority to manage and control the
assets of the Plan pursuant to the terms of the Plan, the Trust agreement, and
the funding policy and method determined by the Employer, except as otherwise
provided in Section 9.5. The Trustee shall discharge such powers and duties for
the exclusive purpose of providing benefits to the Participants and
Beneficiaries and defraying reasonable expenses of administering the Plan, and
shall act with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character and
with like aims. The Trustee shall diversify the investments of the Plan so as to
minimize the risk of large losses unless, under the circumstances, it is clearly
prudent not to do so. However, the Trustee may hold, acquire, or invest in
qualifying employer securities as defined in section 407(d)(5) of ERISA or
qualifying employer real property as defined in section 407(d)(4) of ERISA (or
both) to the extent that the aggregate fair market value of such securities and
property does not exceed the limitations set forth in section 407. The Trustee
shall not engage in any prohibited transactions as defined in the Code or ERISA.
The Trustee shall not be liable for acquiring, retaining or selling any
investment or reinvestment made in accordance with a direction of the Committee
as provided herein, nor for any loss or diminution of the Trust Fund resulting
from the Trustee's action or inaction pursuant to a direction of the Committee;
nor shall the Trustee be liable for any loss or diminution of the Trust Fund
resulting from the Trustee's inaction hereunder in the absence of proper
directions from the Committee unless it shall have been judicially determined
that any such loss was due to the willful misconduct of the Trustee or its
failure to act in good faith in accordance with the provisions of this
agreement.
SECTION 8.8 SPECIFIC POWERS AND DUTIES OF TRUSTEE.
- ----------- -------------------------------------
In addition to the powers and duties conferred upon it by other provisions of
the Plan and except to the extent inconsistent with applicable law or with
provisions of the Plan and Trust, the Trustee shall have the following powers
regarding the Trust and Trust Fund:
(1) To sell at public or private sale, exchange, convey, transfer, lease, or
otherwise dispose of, and also to grant options with respect to all or
any part of any property at any time held in the Trust Fund, for such
considerations, in cash or in credit, and upon such terms and conditions,
as it shall deem advisable. In connection with the purchase of
securities, margin accounts may be opened and maintained. If put or call
options are traded, they must be traded on and purchased through a
national securities exchange registered under the Securities Act of 1934,
as amended, or if the options are not traded on the national securities
exchange, they must be guaranteed by a member firm of the New York Stock
Exchange.
(2) To compromise or settle any claim in respect of any debt or other
obligation due to it as Trustee hereunder, to institute and prosecute any
and all legal proceedings (including foreclosure proceedings) on behalf
of the Plan, or to take any other action for the purpose
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of enforcing any such claim, and to change the rate of interest or extend
the maturity date of any such debt or obligation.
(3) To compromise or settle any claim with respect to any debt or other
obligation due to third persons from it as Trustee hereunder; to define
any and all legal proceedings in respect of any such claim; and to change
the rate of interest on, extend the maturity date of, or otherwise modify
the terms of any such debt or obligation.
(4) To join in and become a party to, or to oppose any reorganization
(including any consolidation, merger, or other capital changes) of any
corporate securities which may at any time be held in the Trust Fund, or
any plan or agreement for the protection of the interests of the holders
of any such securities; to participate in any such protective plan or
agreement or any such reorganization to the same extent and as fully as
though it was the absolute and individual owner of such securities; to
deposit with any Committee or depositories pursuant to any such
protective plan or agreement or any such reorganization any securities
held in the Trust Fund; to make payments from the Trust Fund of and
charges or assessments imposed by the terms of any such protective plan
or agreement on any such reorganization; and to receive and continue to
hold in the Trust Fund any property allotted to the Trust Fund by reason
of the Trustee's participation therein.
(5) To vote, in person or by general or limited proxy, on any securities at
any time held in the Trust Fund, at any meeting of security holders, with
respect to any business which may come before the meeting; to execute
general or limited proxies to one or more nominees; as holder of said
securities, to consent to, approve and authorize any corporate act or
proceeding, including any merger on consolidation, lease, mortgage or
sale of corporate property, or dissolution or liquidation, whether or not
proposed at any such meeting; to execute such instruments as may be
necessary or appropriate therefore; and generally to exercise the powers
of an owner with respect to stocks, bonds, securities, or other property.
(6) To exercise any conversion or subscription rights appurtenant to any
securities at any time held in the Trust Fund or to sell any such rights.
(7) To execute, acknowledge and deliver any and all deeds, leases,
assignments and other instruments that it may deem necessary or proper in
the exercise of any of its powers under this agreement.
(8) To cause any property at any time held in the Trust Fund to be registered
in the name of a nominee of the Trustee, without disclosure of the Trust,
or to hold in bearer form any securities at any time held in the Trust
Fund so that they will pass by delivery, but any such registration or
holding by the Trustee shall not release it from its responsibility for
the safe custody and disposition of the Trust Fund, in accordance with
the terms and provisions of this agreement.
(9) To improve, develop, repair, maintain, preserve and operate any property
held in the Trust Fund, or to invest and retain qualifying employer real
property and lease such property to
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the Employer as permitted under the appropriate sections of ERISA and
Regulations promulgated thereunder.
(10) To borrow from time to time money from persons or others (but not from a
party in interest) for the purposes of the Trust created hereby on such
terms and conditions as the Trustee may deem advisable.
(11) To employ suitable agents and counsel, and to pay their reasonable
expenses and compensation.
(12) To hold part or all of the Trust Fund uninvested in its own banking
department, if any, and the Trustee is further authorized to deposit, at
interest, such funds of the Plans as it may from time to time deem
appropriate in time deposits or savings accounts bearing a reasonable
interest rate, including, specifically, deposits in the commercial
banking departments in a Trustee bank.
(13) To invest and reinvest in bonds, notes, debentures, stocks, options,
mutual funds, life insurance policies, mortgages, vendors' interest in
contracts for sale of real property or other property, real, personal or
mixed, in such manner and to such extent as is prudent under the
circumstances.
(14) To transfer monies and assets of the Trust into common trust funds
established for the Plan, including common trust funds held by a
corporate Trustee (provided the Trustee is a national banking
association).
(15) To do all acts, whether or not expressly authorized herein, which it may
deem necessary and proper for the protection of the property held
hereunder, and to carry out the purposes of the Plan.
(16) To hold up to 10 percent of the fair market value of Plan assets in
qualifying employer securities as defined in section 407(d)(5) of ERISA
or qualifying employer real property as defined in section 407(d)(4) of
ERISA.
If there is more than one Trustee designated and acting under this Trust, all
actions by the Trustee must be adopted by a majority of the Trustees.
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SECTION 8.9 INVESTMENT MANAGER.
Upon written notice to the Trustee and the Committee, the Employer may appoint
one or more investment managers as described in ERISA section 3(38), which shall
have the power to manage, acquire, or dispose of all or part of the Trust assets
in accordance with the provisions of the Plan and Trust agreement. The Committee
and each such investment manager shall execute a written agreement specifying
the Trust assets to be managed and the investment manager's duties and
responsibilities with respect to such assets, and in such agreement the
investment manager shall acknowledge that it is a fiduciary with respect to the
Plan and Trust. The Committee may authorize each investment manager to give
written instructions to the Trustee with respect to acquiring, managing, and
disposing of assets managed by such investment manager, and the Trustee shall
follow such instructions and shall be under no duty to make an independent
determination regarding whether the instruction is proper. The fees and expenses
of an investment manager shall be paid by the Trust except to the extent paid by
the Employer.
SECTION 8.10 COMPENSATION OF TRUSTEE AND AGENTS.
- ------------ ----------------------------------
(a) The Trustee shall be entitled to reasonable compensation for its
services. Compensation shall be comparable to charges for similar
services made from time to time by other Trustees in the geographic area
in which the Trustee has its principal business.
(b) Any Trustee shall be entitled to reimbursement for expenses properly and
actually incurred in the administration of the Trust. It may employ such
agents, attorneys, accountants, or assistants as it may from time to time
deem necessary or advisable and fix the compensation to be paid to them.
Such counsel or other agents may be counsel or other agents consulted or
employed by the Employer. The expenses of the Trustee and the
compensation of the persons so employed shall be paid by the Trust Fund
or the Employer, as the Committee shall determine, on at least an annual
basis.
(c) An individual serving as Trustee who already receives full-time pay from
the Employer shall not receive compensation from the Plan.
SECTION 8.11 REPORTS OF TRUSTEE.
The Trustee shall maintain records of receipts and disbursements and shall
render reports on at least an annual basis to the Committee and to Participants
in such form and containing such information as it deems necessary, provided
that such information shall satisfy all applicable requirements imposed by
ERISA. The records and accounts of the Trustee may be audited annually by an
independent firm of certified public accountants selected by the Committee.
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<PAGE>
SECTION 8.12 RESIGNATION, REMOVAL AND SUBSTITUTION OF TRUSTEE.
- ------------ ------------------------------------------------
(a) A Trustee may resign at any time upon thirty days notice to the Employer.
A Trustee may be removed at any time by the Employer upon five days
written notice to the Trustee, with or without cause. Upon resignation or
removal of the Trustee, the Committee shall appoint a successor Trustee
which shall have the same powers and duties as are conferred upon the
Trustee hereunder. Upon the delivery by a predecessor Trustee to the
successor Trustee of all property of the Trust Fund, less such reasonable
amount as it shall deem necessary to provide for its expenses,
compensation, and any taxes or advances chargeable or payable out of the
Trust Fund, the successor Trustee thereupon shall have the same powers
and duties as were conferred upon the predecessor Trustee. No successor
Trustee shall have any obligation or liability with respect to the acts
or omissions of its predecessors.
(b) In the event that a corporate Trustee merges or consolidates with another
corporation or sells or transfers substantially all of its assets and
business to another corporation, or is in any manner reorganized or
reincorporated, then the resulting or acquiring corporation shall
thereupon become the corporate Trustee hereunder without the execution of
any instrument and without the need for any action by the Committee, any
Participant or Beneficiary, or any other person having or claiming to
have an interest in the Trust Fund or the Plan.
(c) The Trustee shall be appointed by the Committee. The appointment of a
Trustee shall become effective as of the date the Committee receives the
Trust's written acceptance of the appointment. The Trustee's signature on
the Plan constitutes acceptance of the appointment. The Committee shall
appoint a new Trustee if a Trustee fails to accept its appointment in
writing.
SECTION 8.13 THE COMMITTEE.
The Employer shall certify to the Trustee from time to time the name(s) of the
person(s) constituting the Committee. All directions to the Trustee by the
Committee shall be in writing, properly certified by a Committee member. The
Trustee shall be entitled to rely without further inquiry upon all such written
directions received from the Committee.
SECTION 8.14 AMENDMENT AND TERMINATION.
The Committee shall have the right at any time, by an instrument in writing,
duly executed and acknowledged and delivered to the Trustee, to modify, alter or
amend this agreement, in whole or in part, and to terminate the Trust, in
accordance with the express provisions of the Plan. In no event, however, shall
the duties, powers or liabilities of the Trustee hereunder be changed without
its prior written consent.
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SECTION 8.15 IRREVOCABILITY.
Subject to the provisions of the Plan, the Trust is declared to be irrevocable,
and except as otherwise provided in Section 8.5, no part of the Trust Fund shall
revert to or be recoverable by the Employer or be used for or diverted to any
purposes other than for the exclusive benefit of Participants and Beneficiaries.
SECTION 8.16 PARTIES TO THE TRUST AGREEMENT.
- ------------ ------------------------------
(a) Any company which has adopted the Plan in accordance with the terms
thereof shall become a party to this agreement upon signing the Plan or
upon delivering a certified copy of a resolution to the effect that it
agrees to adopt the Plan, to become a party to this agreement, and to be
bound by all terms and conditions of the Plan and this agreement, as then
in effect and as may thereafter be amended. The Committee shall have the
sole authority to enforce this agreement and the Trustee shall in no
event be required to deal with any person except the Committee. Except to
the extent that the Trust allows self- directed accounts and individual
Participants (or their Beneficiaries) to direct the investment of their
Accounts, the Trustee shall in all respects invest and administer the
Trust Fund as a single fund for investment and accounting purposes,
without identification as to individual Participants, Beneficiaries, or
Employers.
(b) Any corporation or other participating entity shall cease to be a party
to this agreement upon delivering to the Trustee a certified copy of a
resolution terminating its participation in the Plan. In such event, or
in the event of the merger, consolidation, sale of property or stock,
separation, reorganization or liquidation of any corporation that is a
party to this agreement, the Trustee, until directed otherwise by the
Committee shall continue to hold, in accordance with the provisions of
this agreement, that portion of the Trust Fund which, pursuant to the
determination of the Committee, is attributable to the participation in
the Plan of the Employees and their Beneficiaries affected by such
termination or by such transaction.
SECTION 8.17 TRUSTEE ACTION.
If the Trustee consists of more than one person, the Trustees shall act by a
majority of their number. The Trustees may authorize one or more specific
Trustees to sign papers on their behalf.
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SECTION 8.18 PARTICIPANT-DIRECTED INVESTMENTS.
(a) A Participant or Beneficiary may elect in writing to have the Committee
direct the Trustee to invest and reinvest all of the Account balances
(Employer and Employee) on his behalf and all earnings thereon. The
direction will be with respect to any investment(s) or investment fund(s)
permitted under the Trust agreement and selected by the Committee in any
combination, specifying the percentage of each as permitted by the
Committee. This election shall become effective, and the Participant or
Beneficiary may thereafter change or revoke such election, at such times
as the Committee determines, under non- discriminatory rules.
(b) The Trustee and the Committee shall not be liable or responsible for any
loss resulting to the Participant's Accounts because of any sale or
investment directed by the Participant under this Section or because of
the failure to take any action regarding an investment acquired pursuant
to such elective investment. The Trustee and the Committee shall be
indemnified by the Participant from and against any personal liability to
which the Trustee and the Committee may be subjected due to carrying out
an elective investment directed by the Participant or for failure to act
in the absence of instructions from the Participant.
- 46 -
<PAGE>
ARTICLE IX - AMENDMENT, TERMINATION AND MERGER
SECTION 9.1 AMENDMENT.
(a) The Employer, by action of the Committee reserves the right to amend the
Plan and Trust, by resolution of the Employer, to the extent permitted
under the Code and ERISA. No amendment affecting the rights or duties of
the Trustee shall be effective without the written consent of the
Trustees.
(b) No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. Notwithstanding the
preceding sentence, a Participant's Account balance may be reduced to the
extent permitted under section 412(c)(8) of the Code. For purposes of
this paragraph, a Plan amendment which has the effect of decreasing a
Participant's Account balance 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.
SECTION 9.2 TERMINATION.
(a) The Employer intends to continue the Plan indefinitely and to fund the
Plan as required by law and its terms. However, the Employer reserves the
right to terminate the Plan at any time. If the Plan is totally or
partially terminated, or in the event of a complete discontinuation of
contributions under the Plan, a Participant whose participation in the
Plan is terminated as a result of such total or partial termination or
who is affected by the complete discontinuation of contributions to the
Plan shall be 100 percent Vested with respect to his Accounts, determined
as of the date of such total or partial termination.
(b) Upon termination of the Plan, the Employer shall allocate the assets of
the Plan, after the payment of or set aside for the payment of all
expenses, among the Participants and their Beneficiaries in accordance
with the Code and ERISA.
(c) Upon termination of the Plan, and after all liabilities of the Plan to
Participants and Beneficiaries have been satisfied, any residual assets
of the Plan due to a contribution in excess of section 415 limits shall
be distributed to the Employer provided such distribution does not
contravene any provision of the law or the Plan.
(d) The allocation of benefits under this Article shall be accomplished
either through the continuance of the Trust, the creation of a new Trust,
the payment of the benefits to be provided to the Participants or
Beneficiaries, or the purchase of annuity contracts, as determined by the
Employer.
SECTION 9.3 MERGER, CONSOLIDATION OR TRANSFER.
The Employer shall have the right at any time to merge or consolidate the Plan
with any other plan, or transfer the assets or liabilities of the Trust to any
other plan provided each Participant
- 47 -
<PAGE>
would (if the Plan were then terminated) receive a benefit immediately after
such merger, consolidation or transfer which would equal or exceed the benefit
the Participant would have been entitled to immediately before such merger,
consolidation or transfer (if the Plan were then terminated).
- 48 -
<PAGE>
ARTICLE X - TOP-HEAVY PROVISIONS
SECTION 10.1 APPLICABILITY.
The provisions of this Article X shall not apply to the Plan with respect to any
Plan Year in which the Plan is not Top-Heavy. If the Plan is or becomes
Top-Heavy in any Plan Year beginning after December 31, 1983, the provisions of
this Article will supersede any conflicting provisions in the Plan.
SECTION 10.2 DEFINITIONS.
(a) Key Employee: Any Employee or former Employee (and the Beneficiaries of
such Employee) who at any time during the "Determination Period" was (1)
an officer of the Employer if such individual's Annual Compensation
exceeds 50 percent of the dollar limitation under section 415(b)(1)(A) of
the Code, (2) an owner (or considered an owner under section 318 of the
Code) of one of the ten largest interests in the Employer if such
individual's Annual Compensation exceeds 100 percent of the dollar
limitation under section 415(c)(1)(A) of the Code, (3) a
more-than-5-percent owner of the Employer, or (4) a more-than-1-percent
owner of the Employer who has an Annual Compensation of more than
$150,000. "Annual Compensation" means compensation as defined in section
415(c)(3) of the Code, but including amounts contributed by the Employer
pursuant to a salary reduction agreement which are excludable from the
Employee's gross income under sections 125, 402(e)(3), 402(h) or 403(b)
of the Code. The "Determination Period" is the Plan Year containing the
Determination Date and the four (4) preceding Plan Years.
The determination of who is a Key Employee will be made in accordance
with section 416(i)(1) of the Code and the Regulations thereunder.
(b) Top-Heavy Plan: For any Plan Year beginning after December 31, 1983, this
Plan is Top- Heavy if any of the following conditions exists:
(1) If the Top-Heavy Ratio for this Plan exceeds 60 percent and this
Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of plans.
(2) If this Plan is a part of a Required Aggregation Group of plans,
but not part of a Permissive Aggregation Group of plans and the
Top-Heavy Ratio for the group of plans exceeds 60 percent.
(3) If this Plan is a part of a Required Aggregation Group and part of
a Permissive Aggregation Group of plans and the Top-Heavy Ratio
for the Permissive Aggregation Group exceeds 60 percent.
(c) Super-Top-Heavy Plan: A plan is Super-Top-Heavy if such a plan would be
Top-Heavy if "90 percent" were substituted for "60 percent" each place it
appears in (b) above.
- 49 -
<PAGE>
(d) Top-Heavy Ratio:
(1) If the Employer maintains one or more Defined Contribution Plans
(including any simplified employee pension plan) and the Employer
has not maintained any Defined Benefit Plan which during the
5-year period ending on the Determination Date(s) has or has had
accrued benefits, the Top-Heavy Ratio for this Plan alone or for
the required or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of the Account
balances of all Key Employees as of the Determination Date(s)
(including any part of any Account balance distributed in the
5-year period ending on the Determination Date(s)), and the
denominator of which is the sum of all Account balances (including
any part of any Account balance distributed in the 5-year period
ending on the Determination Date(s)), both computed in accordance
with section 416 of the Code and the Regulations thereunder. Both
the numerator and denominator of the Top-Heavy Ratio are increased
to reflect any contribution not actually made as of the
Determination Date, but which is required to be taken into account
on that date under section 416 of the Code and the Regulations
thereunder.
(2) If the Employer maintains one or more Defined Contribution Plans
(including any simplified employee pension plan) and the Employer
maintains or has maintained one or more Defined Benefit Plans
which during the 5-year period ending on the Determination Date(s)
has or has had any accrued benefits, the Top-Heavy Ratio for any
required or Permissive Aggregation Group as appropriate, is a
fraction, the numerator of which is the sum of Account balances
under the aggregated Defined Contribution Plan or Plans for all
Key Employees, determined in accordance with (1) above, and the
Present Value of accrued benefits under the aggregated Defined
Benefit Plan or Plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum of
the Account balances under the aggregated Defined Contribution
Plan or Plans for all Participants, determined in accordance with
(1) above, and the Present Value of accrued benefits under the
Defined Benefit Plan or Plans for all Participants as of the
Determination Date(s), are determined in accordance with section
416 of the Code and the Regulations thereunder. The accrued
benefits under a Defined Benefit Plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any
distribution of an accrued benefit made in the 5-year period
ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of Account balances
and the Present Value of accrued benefits will be determined as of
the most recent Valuation Date that falls within or ends with the
12-month period ending on the Determination Date, except as
provided in section 416 of the Code and the Regulations thereunder
for the first and second Plan Years of a Defined Benefit Plan. The
Account balances and accrued benefits of a Participant (a) who is
not a Key Employee but who was a Key Employee in a prior year, or
(b) 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
- 50 -
<PAGE>
taken into account will be made in accordance with section 416 of
the Code and the Regulations thereunder. Employee contributions
previously deductible under section 219 of the Code will not be
taken into account for purposes of computing the TopHeavy Ratio.
When aggregating plans, the value of Account balances and accrued
benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee
shall be determined under either (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.
(e) Permissive Aggregation Group: The Required Aggregation Group of plans
plus any other plan or plans of the Employer which, when considered as a
group with the Required Aggregation Group, would continue to satisfy the
requirements of sections 401(a)(4) and 410 of the Code.
(f) Required Aggregation Group: (1) Each qualified plan of the Employer in
which at least one Key Employee participates or participated at any time
during the Determination Period (regardless of whether the Plan has
terminated), and (2) any other qualified plan of the Employer which
enables a plan described in (1) to meet the requirements of sections
401(a)(4) or 410 of the Code.
(g) Determination Date: For any Plan Year subsequent to the first Plan Year,
the last day of the preceding Plan Year. For the first Plan Year of the
Plan, the last day of that year.
(h) Valuation Date: The date as defined in Article I of the Plan as of which
Account balances or accrued benefits are valued for purposes of
calculating the Top-Heavy Ratio.
(i) Present Value: Present Value shall be determined using the interest and
mortality rates specified in the applicable Plans. Notwithstanding the
foregoing, all determinations shall be made in accordance with section
416 of the Code and the Regulations promulgated thereunder.
- 51 -
<PAGE>
SECTION 10.3 MINIMUM ALLOCATION.
(a) Except as otherwise provided in (c) and (d) below, Employer contributions
and Forfeitures allocated on behalf of any Participant who is not a Key
Employee shall not be less than the lesser of three percent (four percent
if the Plan is super-Top-Heavy) of such Participant's Compensation, or in
the case where the Employer has no Defined Benefit Plan which designates
this Plan to satisfy section 401 of the Code, the largest percentage of
Employer contributions and Forfeitures, as a percentage of the first
$200,000 of the Key Employee's Compensation, allocated on behalf of any
Key Employee for that year. The minimum allocation is determined without
regard to any Social Security contribution. This minimum allocation shall
be made even though, under the Plan provisions, the Participant would not
otherwise be entitled to receive an allocation, or would have received a
lesser allocation for the year because of (1) the Participant's failure
to complete 1,000 Hours of Service (or any equivalent provided in the
Plan), or (2) the Participant's failure to make mandatory Employee
contributions to the Plan or (3) Compensation less than a stated amount.
(b) For purposes of computing the minimum allocation, Compensation means
Compensation as defined in Article I of the Plan.
(c) The provision in (a) above shall not apply to any Participant who was not
employed by the Employer on the last day of the Plan Year.
(d) The provision in (a) above shall not apply to any Participant to the
extent the Participant is covered under any other plan or plans of the
Employer and the minimum allocation or benefit requirement applicable to
Top-Heavy Plans will be met in the other plan or plans.
SECTION 10.4 NONFORFEITABILITY OF MINIMUM ALLOCATION.
The minimum allocation required (to the extent required to be nonforfeitable
under section 416(b)) may not be forfeited under sections 412(a)(3)(B) or
411(a)(3)(D) of the Code.
SECTION 10.5 ALLOCATION LIMITATIONS.
In determining the Defined Contribution Fraction under section 415(e)(3)(B) of
the Code and pursuant to Section 4.4 of the Plan, "100 percent" shall be
substituted for "125 percent" unless the minimum allocation percentage under
section 416(c)(2)(A) of the Code and Section 9.3.(a) of the Plan is increased
from "three percent" to "four percent" and the Plan would not be a TopHeavy Plan
if "90 percent" were substituted for "60 percent" each place it appears in
Section 9.2(b) of the Plan.
- 52 -
<PAGE>
SECTION 10.6 MINIMUM VESTING SCHEDULES.
(a) For any Plan Year in which this Plan is Top-Heavy, the vesting schedule
below will automatically apply to the 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. Further, no decrease in a
Participant's nonforfeitable percentage may occur in the event the Plan's
status as Top- Heavy changes for any Plan Year. However, this Section
does not apply to the Account balances of any Employee who does not have
an Hour of Service after the Plan has initially become Top-Heavy and such
Employee's Account balance attributable to Employer contributions and
Forfeitures will be determined without regard to this Section.
(b) The nonforfeitable interest of each Employee in his or her Account
balance attributable to Employer contributions shall be determined on the
basis of the following:
The nonforfeitable
Year(s) of Service: percentage is:
1 0
2 20
3 40
4 60
5 80
6 100
(c) If the vesting schedule under the Plan becomes subject to or is no longer
subject to the above schedule for any Plan Year because of the Plan's
Top-Heavy status, such shift is an amendment to the vesting schedule and
the election provided in Section 4.6(g) of the Plan shall be available.
- 53 -
<PAGE>
ARTICLE XI - GENERAL PROVISIONS
SECTION 11.1 GOVERNING LAW.
(a) The Plan and Trust are established under, and their validity,
construction, and effect shall be governed by, the laws of the State of
New York.
(b) The parties to the Trust intend that the Trust be exempt from taxation
under section 501(a) of the Code, and any ambiguities in its construction
shall be resolved in favor of an interpretation which will affect such
intention.
SECTION 11.2 POWER TO ENFORCE.
The Committee shall have authority to enforce the Plan on behalf of any and all
persons having or claiming any interest in the Trust or Plan.
SECTION 11.3 ALIENATION OF BENEFITS.
Benefits under the Plan shall not be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the
same shall be void, nor shall any such benefits be in any way liable for or
subject to the debts, contracts, liabilities, engagements or torts of any person
entitled to such benefits. This Section shall also apply to the creation,
assignment or recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order is
determined to be a "qualified domestic relations order" as defined in section
414(p) of the Code, or any domestic relations order entered before January 1,
1985.
SECTION 11.4 NOT AN EMPLOYMENT CONTRACT.
The Plan is not and shall not be deemed to constitute a contract between the
Employer and any Employee, or to be a consideration for, or an inducement to, or
a condition of, the employment of any Employee. Nothing contained in the Plan
shall give or be deemed to give an Employee the right to remain in the
employment of the Employer or to interfere with the right to be retained in the
employ of the Employer, any legal or equitable right against the Employer, or to
interfere with the right of the Employer to discharge or retire any Employee at
any time.
SECTION 11.5 DISCRETIONARY ACTS.
Any discretionary acts to be taken under the Plan with respect to the
classification of Employees, contributions, or benefits shall be
nondiscriminatory and uniform in nature and applicable to all persons similarly
situated.
- 54 -
<PAGE>
SECTION 11.6 INTERPRETATION.
(a) Savings Clause. If any provision or provisions of the Plan shall for any
reason be invalid or unenforceable, the remaining provisions of the Plan
shall be carried into effect, unless the effect thereof would be to
materially alter or defeat the purposes of the Plan.
(b) Gender. Wherever appropriate, pronouns of any gender shall be deemed
synonymous as shall singular and plural pronouns.
(c) Headings. Headings and titles of sections and subsections within the Plan
document are inserted solely for convenience of reference. They
constitute no part of the Plan itself and shall not be considered in the
construction of the Plan.
- 55 -
<PAGE>
ARTICLE XII - SIGNATURE PAGE
IN WITNESS WHEREOF, this Plan has been restated the day and year written below.
Signed, sealed, and delivered on this ist day of September, 1995, in the
presence of:
FAB INDUSTRIES, INC.
By /s/ Samson Bitensky
---------------------------------
Samson Bitensky, President
FAB LACE, INC.
By /s/ Samson Bitensky
---------------------------------
Samson Bitensky, President
/s/ Kym M. Hayes
- --------------------------
WITNESS AS TO EMPLOYER(S)
/s/ Samson Bitensky
------------------------------------
Samson Bitensky, Trustee
/s/ Kym M. Hayes (SEAL) /s/ Howard Soren
- -------------------------- ------------------------------------
WITNESS AS TO TRUSTEE(S) Howard Soren, Trustee
- 56 -
FAB INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective November 25, 1991
<PAGE>
FAB INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
SECTION PAGE
SECTION 1. PURPOSE...................................... 1
SECTION 2. DEFINITIONS.................................. 2
2.1 Account............................... 2
2.2 Active Member......................... 2
2.3 Affiliated Company.................... 2
2.4 Allocation Date....................... 2
2.5 Allocation Limit...................... 2
2.6 Annual Additions...................... 2
2.7 Beneficiary........................... 3
2.8 Board................................. 3
2.9 Break in Service...................... 3
2.10 Code.................................. 3
2.11 Committee............................. 3
2.12 Company or Participating Company...... 3
2.13 Company Contributions................. 4
2.14 Compensation.......................... 4
2.15 Disability or Disabled................ 4
2.16 Effective Date........................ 4
2.17 Employee.............................. 4
2.18 Employment Date....................... 5
2.19 ERISA................................. 5
2.20 ESOP Loan............................. 5
2.21 FAB................................... 5
2.22 Financed Stock........................ 5
2.23 Highly Compensated Employee........... 5
2.24 Hour of Service....................... 5
2.25 IRS................................... 5
2.26 Leased Employee....................... 5
2.27 Loan Suspense Account................. 6
2.28 Member................................ 6
2.29 Normal Retirement Age................. 6
2.30 Plan.................................. 6
2.31 Plan Entry Date....................... 6
2.32 Plan Year............................. 6
2.33 Qualified Plan........................ 6
2.34 Retire or Retirement.................. 6
2.35 Service............................... 6
2.36 Spouse................................ 7
2.37 Stock................................. 7
2.38 Trust or Trust Fund................... 7
2.39 Trust Agreement....................... 7
<PAGE>
FAB INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
(CONTINUED)
SECTION PAGE
SECTION 2.
2.40 Trustee............................................ 7
2.41 Trustee............................................ 7
2.42 Vested Interest.................................... 7
2.43 Year of Service.................................... 7
SECTION 3. MEMBERSHIP................................................ 8
3.1 Eligibility on Effective Date...................... 8
3.2 Eligibility After Effective Date................... 8
3.3 Automatic Enrollment by Committee.................. 8
3.4 Duration of Membership............................. 8
3.5 Accounts of Members................................ 9
3.6 Limitation of Interests of Members................. 9
SECTION 4. CONTRIBUTIONS TO THE PLAN................................. 10
4.1 Company Contributions.............................. 10
4.2 Release of Financed Stock and Allocation of
Financed Stock and Company Contributions to
the Accounts of Members.......................... 10
4.3 Return of Mistaken or Conditional Company
Contributions.................................... 11
4.4 Forfeitures........................................ 12
4.5 Member Contributions Prohibited.................... 12
SECTION 5. INVESTMENT OF CONTRIBUTIONS............................... 13
5.1 Investment in Stock................................ 13
5.2 Financed Stock..................................... 13
SECTION 6. VALUATION AND MAINTENANCE OF MEMBERS'
ACCOUNTS................................................ 15
6.1 Valuation of the Trust Fund........................ 15
6.2 Adjustment of Members' Accounts.................... 15
6.3 Administrative Expenses............................ 16
6.4 Taxes.............................................. 16
6.5 Other Expenses..................................... 16
6.6 Transactions with Disqualified Persons............. 16
<PAGE>
FAB INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
(CONTINUED)
SECTION PAGE
SECTION 7. VESTING OF COMPANY CONTRIBUTIONS....................... 17
7.1 Full Vesting.................................... 17
7.2 Vesting Upon Other Terminations of Service...... 17
7.3 Rules Applicable to Vesting..................... 17
SECTION 8. WITHDRAWALS FOR DIVERSIFICATION........................ 19
8.1 Withdrawal...................................... 19
8.2 De Minimis Exception............................ 19
SECTION 9. DISTRIBUTIONS UPON TERMINATION OF SERVICE.............. 20
9.1 Distributions Upon a Member's Termination of
Service by Reason of Retirement or Disability. 20
9.2Distributions Upon Other Terminations of Service.... 20
9.3Deferral Election................................... 20
9.4Distributions Upon Death............................ 21
9.5Minimum Required Distributions...................... 21
9.6Single Sum Stock Distributions...................... 21
9.7Current Dividends Distributions..................... 21
9.8Rollovers to Other Plans or IRAs.................... 22
SECTION 10. MAXIMUM AMOUNT OF ALLOCATION........................... 23
10.1 Limitation on Annual Additions 23
10.2 Priority of Reduction 23
10.3 Other Plans 23
SECTION 11. RIGHTS AND RESTRICTIONS APPLICABLE TO STOCK............ 24
11.1Voting............................................. 24
11.2Tender Offers...................................... 25
11.3Restrictions on Stock.............................. 26
11.4Cash Dividends..................................... 26
11.5Reasonable Actions................................. 27
11.6Right of First Refusal............................. 27
11.7Put Option......................................... 27
11.8Special Definition of Member....................... 28
<PAGE>
FAB INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
(CONTINUED)
SECTION PAGE
SECTION 12. DESIGNATION OF BENEFICIARIES.............................. 29
12.1 Selected Beneficiaries............................. 29
12.2 Spouse as Beneficiary.............................. 29
SECTION 13. TOP-HEAVY LIMITATIONS..................................... 30
13.1 Definitions........................................ 30
13.2 Top-Heavy Plan Years............................... 30
13.3 Aggregation with Other Plans....................... 31
SECTION 14. ADMINISTRATION OF THE PLAN................................ 32
14.1 The Committee...................................... 32
14.2 The Trustee........................................ 32
14.3 Agents............................................. 32
14.4 Formation of Committee............................. 32
14.5 Chairman........................................... 33
14.6 Demands for Money.................................. 33
14.7 Benefit Claims..................................... 33
14.8 No Personal Liability.............................. 34
14.9 Agent for Service of Process....................... 34
SECTION 15. WITHDRAWAL OF A PARTICIPATING COMPANY..................... 35
15.1 Procedures for Withdrawal.......................... 35
15.2 Contributions Upon Withdrawal...................... 35
15.3 Effect of Withdrawal............................... 36
15.4 Transfer of Plan Assets............................ 36
15.5 Determinations, Approvals and Notifications........ 36
SECTION 16. AMENDMENT OR TERMINATION OF THE PLAN
AND TRUST............................................... 37
16.1 Amendment, Suspension or Termination of the Plan... 37
16.2 Notice............................................. 37
16.3 Termination of the Plan............................ 37
<PAGE>
FAB INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
(CONTINUED)
SECTION PAGE
SECTION 7. GENERAL LIMITATIONS AND PROVISIONS.......................... 39
17.1 Decrease in Value of Trust Assets...................... 39
17.2 Sole Source of Benefits................................ 39
17.3 No Right to Employment................................. 39
17.4 Incompetency........................................... 39
17.5 Alienation............................................. 40
17.6 Avoidance of Escheat................................... 40
17.7 Filing Information..................................... 40
17.8 The Trust.............................................. 41
17.9 Communications to Fab and the Committee................ 41
17.10 Communications to Members............................. 41
17.11 Captions and References............................... 41
17.12 Governing Law......................................... 41
<PAGE>
FAB INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 1.
PURPOSE
The purpose of the Plan is to encourage employees to make and continue their
careers with the Company by providing eligible employees with a convenient way
to obtain a beneficial interest in Stock, all as set forth herein and in the
Trust Agreement adopted as a part of the Plan. The Plan and the Trust Agreement
established hereunder are intended to qualify as a plan and trust that
constitutes an "employee stock ownership plan" meeting the requirements of
Section 4975(e)(7) of the Code and Section 407(d)(6) of ERISA, and a "stock
bonus plan" meeting the requirements for qualification under Section 401(a) of
the Code, and the Trust is intended to be exempt from Federal income taxation
under Section 501(a) of the Code. The Plan is intended to invest primarily in
securities qualifying as "employer securities" under Section 409(1) of the Code
and Section 407(d)(1) of ERISA.
1
<PAGE>
SECTION 2.
DEFINITIONS
2.1 "ACCOUNT" shall mean the account established and maintained in
respect of a Member pursuant to Section 3.5.
2.2 "ACTIVE MEMBER" shall mean, with respect to each Allocation Date,
a Member who (i) has completed one (1) Year of Service during the
corresponding Plan Year and (ii) is in Service (except under
Section 2.35(ii)) on the Allocation Date.
2.3 "AFFILIATED COMPANY" shall mean the Company and, to the minimum
extent necessary under the Code, any entity that is required to be
aggregated with the Company under Section 414 of the Code (or any
successor thereto); provided, however, that solely for purposes of
Section 10, "Affiliated Company" shall also mean any other entity
(or any successor thereto) that is required to be aggregated with
the Company under Section 415(h) of the Code.
2.4 "ALLOCATION DATE" shall mean (i) the last day of each Plan Year
occurring before the date of termination specified by Fab under
Section 16, (ii) the last day of any month or months during a Plan
Year, as the Committee may from time to time determine, and (iii)
solely for purposes of Section 16, such termination date.
2.5 "ALLOCATION LIMIT" shall mean, as of each Allocation Date, that no
more than one- third (1/3) of the Annual Additions (except
forfeitures) attributed to Members' Accounts by reason of Section
4.2(c) are so attributed to the Accounts of Highly Compensated
Employees.
2.6 "ANNUAL ADDITIONS" shall mean, without regard to Section 10 for
each Plan Year, the sum of (i) the Company Contributions that are
directly credited to a Member's Account for a Plan Year in
accordance with Section 4.2(c) and (ii) a Member's allocable share
of the Company Contributions applied to the repayment of an ESOP
Loan for such Plan Year, determined as if such Company
Contributions had not been applied to the repayment of an ESOP
Loan, but rather had been allocated to the Accounts of Members in
accordance with Section 4.2(c); provided, however, that any
Company Contributions applied by the Trustee (not later than the
due date, including extensions for filing the Company's Federal
income tax return for that Plan Year) to pay interest on an ESOP
Loan, any forfeitures of Financed Stock, and any amounts allocated
to Member's Accounts under Section 4.2(b) shall not be included as
Annual Additions.
2
<PAGE>
2.7 "BENEFICIARY" shall mean the beneficiary or beneficiaries
designated pursuant to Section 12 to receive distribution payable
under Section 9.4, if any, upon the death of a Member.
2.8 "BOARD" shall mean the Board of Directors of Fab.
2.9 "BREAK IN SERVICE" shall mean, as determined by the Committee in
accordance with ERISA and the Code, a twelve (12) month period
commencing on the later of the Effective Date or a Member's
Employment Date, or any Plan Year commencing after such date,
during which a Member fails to complete five hundred one (501)
Hours of Service. A Member who is absent from Service due to the
pregnancy of the Member, the birth of a child of the Member, the
placement of a child with the Member in connection with adoption
of such child by the Member, or the caring for such child for the
period immediately following birth or placement and who is not
entitled to be credited with Hours of Service for such absence,
shall be credited, solely for purposes of determining whether the
Member has incurred a Break in Service, with the number of Hours
of Service for such absence that otherwise would have been
credited to the Member had he or she been performing duties during
the absence; provided, however, that in no event shall more than
five hundred one (501) Hours of Service be credited for any single
continuous period of absence described herein. If, during any
twelve (12) month period described herein, the Member has not yet
been credited with five hundred one (501) Hours of Service, then
the Hours of Service shall be credited in such period; in any
other case, the Hours of Service credited hereunder shall be
credited in the next following twelve (12) month period.
2.10 "CODE" shall mean the Internal Revenue Code of 1986, as now in
effect or as hereafter amended, and all applicable rulings,
guidelines or regulations (whether proposed, temporary or final)
promulgated thereunder. All citations to sections or other
references thereof are to such sections or other references as
they may from time to time be amended, renumbered, or superseded.
2.11 "COMMITTEE" shall mean the committe that administers the Plan as
provided for in Section 14.
2.12 "COMPANY OR "PARTICIPATING COMPANY" shall mean Fab, or any other
Affiliated Company (i) whose board of directors or equivalent
governing body shall have adopted the Plan and the Trust Agreement
by appropriate action and (ii) whose adoption thereof is approved
by the Board. Any such Participating Company which so adopts the
Plan shall be deemed thereby to adopt the Trust Agreement and to
appoint Fab and the Committee as its exclusive agents to exercise
on its behalf all of the power and authority conferred hereby, or
by the Trust Agreement, upon the Company or the Committee. The
authority of Fab and the Committee to act as such agents shall
continue until the Plan is completely terminated as to such
Participating Company and the relevant portion of the Trust Fund
has been distributed by the Trustee as provided in Section 15.3.
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2.13 "COMPANY CONTRIBUTIONS" shall mean contributions by the Company to
the Trust Fund pursuant to Section 4 and forfeitures treated as
Company Contributions under Section 4.4.
2.14 "COMPENSATION" shall mean, for each Plan Year, the "compensation"
(as defined under Section 415(c)(3) of the Code and Treas. Reg.
Section 1.415-2(d)(10)) paid to an Employee for the performance of
Service during such Plan Year, and, (i) except for purposes of
Sections 10 and 13, excludes any bonus and overtime, and
twenty-five percent (25%) of any Employee's commission income,
but, (ii) except for purposes of Section 10, includes any amounts
otherwise excludable from such individual's gross income for
Federal income tax purposes under Section 125 or Section 402(a)(8)
of the Code; provided, however, that the maximum amount of
Compensation taken into account for an Employee in any Plan Year
shall not exceed $200,000, as such amount is determined, and is
adjusted for any increase in the cost-of-living, under Section
401(a)(17) of the Code. Notwithstanding the above, effective
December 1, 1994, Compensation shall not exceed $150,000, adjusted
at the same time and in the same manner as under Section 415(d) of
the Code, but only if and when the aggregate of such potential
adjustments totals at least $10,000 and then only in amounts of
$10,000, as in the manner described in Section 401(a)(17) of the
Code.
In determining the Compensation of a Member for purposes of the
dollar limitation, the rules of Section 414(q)(6) of the Code
shall apply except that, in applying such rules, the term "family"
shall include only the Spouse of the Member and any lineal
descendants of the Member who have not obtained age nineteen (19)
before the close of the Plan Year. If as a result of the
application of such rules the adjusted limitation is exceeded,
then the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation
as determined prior to the application of this limitation.
2.15 "DISABILITY" OR "DISABLED" shall mean the inability of a Member to
adequately perform Service for an Affiliated Company due to a
physical or mental impairment which is expected to last at least a
year. Disability shall be determined by the Committee upon
competent medical evidence that such Disability existed at the
time the individual ceased to perform Service; provided, however,
that, upon notice by the Member, (i) the Committee shall request
the Medical Society of the County in which the Member performs
Service to designate a physician to examine the Member and to
determine whether he or she is Disabled, (ii) the physician's
report on the Member's medical examination shall be final and
binding on all parties and (iii) one-half (1/2) of all medical
fees and expenses arising from the examination shall be borne by
the Member.
2.16 "EFFECTIVE DATE" shall mean November 25, 1991.
2.17 "EMPLOYEE" shall mean any employee of the Company, as determined
by the Committee, but excluding any individual who is (i) included
in a unit of employees covered by a negotiated collective
bargaining agreement which does not provide for
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his or her membership in the Plan, (ii) a nonresident alien of the
United States or described in Section 861(a)(3) of the Code or
(iii) a Leased Employee.
2.18 "EMPLOYMENT DATE" shall mean the first date on which an Employee
or Leased Employee completes an Hour of Service.
2.19 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as now in effect or as hereafter amended, and all applicable
rulings, guidelines or regulations (whether proposed, temporary or
final) promulgated thereunder. All citations to sections or other
references thereof are to such sections or other references as
they may from time to time be amended, renumbered or superseded.
2.20 "ESOP LOAN" shall mean a loan or other extension of credit
(including any installment purchase obligation) used to finance
the acquisition of Financed Stock or to repay an existing ESOP
Loan, in accordance with Section 5.2, which loan may constitute an
extension of credit to the Trust from any person, including the
Company.
2.21 "FAB" shall mean Fab Industries, Inc. (or any successor thereto).
2.22 "FINANCED STOCK" shall mean shares of Stock acquired for the Trust
Fund with the proceeds of an ESOP Loan, as described in Section
5.2.
2.23 "HIGHLY COMPENSATED EMPLOYEE" shall mean a Member who is a "highly
compensated employee" within the meaning of Section 414(q) of the
Code.
2.24 "HOUR OF SERVICE" shall mean, as determined by the Committee in
accordance with ERISA and the Code, each hour during which an
individual performs Service (or is treated as performing Service
under Section 2.35) and, except in the case of layoffs, jury duty,
or military service, for which the individual is directly or
indirectly paid, or entitled to payment by an Affiliated Company
(including any back pay, irrespective of mitigation of damages);
provided, however, that in no event shall more than five hundred
one (501) Hours of Service be credited for purposes of Section 2.9
or Section 2.43 for any continuous period during which no Service
is performed.
2.25 "IRS" shall mean the United States Internal Revenue Service.
2.26 "LEASED EMPLOYEE" shall mean any person (other than an Employee)
who pursuant to an agreement between an Affiliated Company and any
other person (the "leasing organization") has performed services
for the Affiliated Company on a substantially full-time basis for
a period of at least one (1) year, and such services are of a type
historically performed by Employees in the business field of the
Affiliated Company. Contributions or benefits provided to a Leased
Employee by the leasing organization which are attributable to
services performed for the Affiliated Company shall be treated as
provided by the Employer.
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2.27 "LOAN SUSPENSE ACCOUNT" shall mean an account established and
maintained to hold shares of Financed Stock until such shares are
allocated to an individual Member's Account pursuant to Section
4.2.
2.28 "MEMBER" shall mean any Employee who is enrolled in the membership
of the Plan as provided in Section 3.
2.29 "NORMAL RETIREMENT AGE" shall mean the later of the date a Member
(i) attains age sixty-five (65) or (ii) the fifth (5th)
anniversary of the date an Employee first became a Member.
2.30 "PLAN" shall mean this Fab Industries, Inc. Employee Stock
Ownership Plan, as the same may be amended from time to time.
2.31 "PLAN ENTRY DATE" shall mean the June 1st or December 1st that an
Employee commences membership in the Plan in accordance with
Section 3; provided, however, that, for purposes of Section 3.1,
the Plan Entry Date shall be the Effective Date.
2.32 "PLAN YEAR" shall mean the fiscal year of Fab, the twelve (12)
month period commencing on each December 1. For purposes of
Section 415 of the Code (as applied under Section 10), the Plan
Year shall also be the "limitation year."
2.33 "QUALIFIED PLAN" shall mean a plan meeting the requirements of (i)
Section 401(a) of the Code, the related trust of which qualifies
for tax-exempt status under Section 501(a) of the Code, or (ii)
Section 403(a) of the Code.
2.34 "RETIRE" OR "RETIREMENT" shall mean a termination of Service
(other than by reason of death or Disability) by a Member on or
after the earlier of (i) his or her Normal Retirement Age or (ii)
the date he or she has both attained age sixty (60) and completed
ten (10) Years of Service.
2.35 "SERVICE" shall mean, as determined by the Committee, employment
(whether or not as an Employee) with an Affiliated Company. To the
extent and for the purposes determined by the Committee in
accordance with ERISA and the Code, Service includes (i) periods
of vacation and holidays, (ii) periods of layoff, (iii) other
periods of absence authorized by the employing Affiliated Company
for sickness, temporary disability, jury duty or personal reasons
and (iv) if and to the extent required by Federal law, service in
the Armed Forces of the United States. Service may also include
any period of a Member's prior employment by any organization
under such terms and conditions as the Committee may approve and
subject to any required IRS approval.
2.36 "SPOUSE" shall mean the person then legally married to a Member.
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2.37 "STOCK" shall mean the Common Stock, par value $0.20 per share, of
Fab that is listed on the American Stock Exchange, or such other
securities designated by Fab that qualify as "employer securities"
within the meaning of Section 409(l) of the Code and Section
407(d)(1) of ERISA.
2.38 "TRUST" OR "TRUST FUND" shall mean the trust established by Fab as
a part of the Plan.
2.39 "TRUST AGREEMENT" shall mean the agreement between Fab and the
Trustee that evidences the Trust, as the same may be amended from
time to time, or any successor agreement thereto.
2.40 "TRUSTEE" shall mean the trustee or trustees of the Trust
appointed by Fab, or any successor or successors, thereto;
provided, however, that no Trustee may be appointed by Fab
hereunder that is not a "bank", as defined in Section 202(a)(2) of
the Investment Advisors Act of 1940, with equity capital in excess
of $1,000,000.
2.41 "VALUATION DATE" shall mean (i) the Allocation Date for each Plan
Year, and (ii) the last day of any month or months during a Plan
Year (A) immediately preceding the date a Member's Vested Interest
is distributed in accordance with the provisions of Section 9, but
notwithstanding any other provision of the Plan to the contrary,
solely for purposes of determining the number of shares of Stock
under Section 9.7(b) or the amount of cash representing a
fractional share of Stock under Section 9.6, or (B) as the
Committee may otherwise from time to time determine.
2.42 "VESTED INTEREST" shall mean the portion of a Member's Account
that has become nonforfeitable pursuant to Section 7.
2.43 "YEAR OF SERVICE" shall mean, as determined by the Committee in
accordance with ERISA and the Code, a twelve (12) month period
during which an individual completes one thousand (1,000) Hours of
Service commencing on (i) solely for purposes of Section 3, his or
her Employment Date or (ii) the first day of any Plan Year
commencing on or after (or, for purposes of Section 2.2(i),
immediately before) his or her Employment Date; provided, however,
that, if a Member's Employment Date precedes December 1, 1990,
then an Employee's Years of Service for purposes of determining
his or her Vested Interest under Section 7, shall be determined by
reference to December 1, 1990 (and not his or her Employment Date)
under clause (ii) above. Years of Service of a Leased Employee
shall be counted solely for purposes of Section 3 and Section 7.
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SECTION 3.
MEMBERSHIP
3.1 ELIGIBILITY ON EFFECTIVE DATE
As of the Effective Date, each Employee who is eligible to
participate in either the Fab Lace, Inc. Employees Profit Sharing
Plan or the Fab Industries, Inc. Money Option Savings Plan shall
be automatically enrolled as a Member in the Plan.
3.2 ELIGIBILITY AFTER EFFECTIVE DATE
Each Employee not described in Section 3.1 shall be automatically
enrolled as a Member of the Plan as of the Plan Entry Date
coincident with or immediately following the later of the date on
which he or she (i) completes one (1) Year of Service, (ii)
attains age eighteen (18) or (iii) becomes an Employee.
3.3 AUTOMATIC ENROLLMENT BY COMMITTEE
The Committee shall take all necessary or appropriate action to
enroll each Employee eligible under this Section 3, and, if it is
determined that an Employee has for any reason not been enrolled
in the membership of the Plan in accordance with Section 3.1 or
Section 3.2, such Employee shall be retroactively enrolled on the
next following Allocation Date in accordance with the applicable
Section. On such Allocation Date, the Account of an Employee who
is retroactively enrolled shall be adjusted by crediting the
aggregate amount of Annual Additions, if any, which had not
otherwise been attributed to an Account established on his or her
behalf by reason of Section 4.2(c) on any prior Allocation Date
had he or she been enrolled when first eligible. No enrollment
forms shall be required to enroll an Employee; provided, however,
that the Committee may, in accordance with Section 17.7, require
an Employee to complete such Beneficiary designation forms, forms
to apply for benefits and such other forms as the Committee may
determine to be necessary or advisable.
3.4 DURATION OF MEMBERSHIP
The membership of a Member shall cease upon distribution of the
amount treated as his or her entire Vested Interest under Section
9 of the Plan, or, if earlier, his or her death.
3.5 ACCOUNTS OF MEMBERS
The Committee shall establish and maintain or cause to be
established and maintained in respect of each Member an Account
showing his or her interest under the Plan and in the Trust Fund
and all other relevant data pertaining thereto. Each Member shall
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be furnished with a written statement of his or her Account and
the value of his or her interest in the Trust Fund at least
annually and upon any distribution to him or her. In maintaining
or causing to be maintained the Accounts of Members under the
Plan, the Committee may conclusively rely on the valuations of the
Trust in accordance with the Plan and the terms of the Trust
Agreement.
3.6 LIMITATION OF INTERESTS OF MEMBERS
The establishment and maintenance of, or allocations and credits
to, the Account of any Member shall not vest in any Member,
Beneficiary, Spouse or other person, any right, title or interest
in the Account, the Trust Fund or to any Plan benefits except at
such times and upon such terms and conditions as expressly set
forth in the Plan and the Trust Agreement.
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SECTION 4.
CONTRIBUTIONS TO THE PLAN
4.1 COMPANY CONTRIBUTIONS
For each Plan Year, the amount and the timing of the Company
Contributions to be paid into the Trust Fund shall be determined
by Fab. Company Contributions may be either in cash, cash
equivalents or Stock, as determined by Fab; provided, however,
that the amount of Company Contributions made in cash for any Plan
Year shall be made at such times and in such amounts as shall be
sufficient to amortize the amount of the principal and interest
due with respect to any ESOP Loan.
4.2 RELEASE OF FINANCED STOCK AND ALLOCATION OF FINANCED STOCK AND
COMPANY CONTRIBUTIONS TO THE ACCOUNTS OF MEMBERS
(a) Financed Stock shall initially be credited to a Loan
Suspense Account and shall be allocated to Members' Accounts
only as payments of principal and interest on the ESOP Loan
are made by the Trustee. Company Contributions for any Plan
Year shall first be applied to pay any obligation with
respect to an ESOP Loan that will mature during such Plan
Year and then, if Fab so directs the Trustee, be applied to
prepay any other obligation with respect to an ESOP Loan.
The number of shares of Financed Stock to be released from
the Loan Suspense Account for allocation to the Members'
Accounts for a Plan Year shall be based upon the ratio that
the payments and interest on the ESOP Loan for that Plan
Year bears to the total projected payments of principal and
interest over the remainder of the repayment period of the
ESOP Loan or such other method permitted under the Code and
ERISA, as specified by Fab. If Fab elects for a Plan Year
that some or all of the cash dividends paid on Financed
Stock be applied to the repayment of an ESOP Loan, then any
Financed Stock released from the Loan Suspense Account
because of such repayment shall be allocated as if such cash
dividends were Company Contributions applied in accordance
with this Section 4.2(a) for such Plan Year.
(b) In the event that for any Plan Year (i) Fab elects to
require that some or all of the cash dividends paid on
shares of Stock credited to a Member's Account be applied to
the repayment of an ESOP Loan, (ii) an individual's return
to Service requires the recrediting of a forfeiture under
Section 9.2(b), (iii) a notification received by the
Committee requires the recrediting of a forfeiture under
Section 17.6, (iv) a retroactive enrollment requires
crediting an adjustment under Section 3.3, then, the Account
of such affected Member shall be credited with shares of
Financed Stock released from the Loan Suspense Account for
such Plan Year by application of Company Contributions under
Section 4.2(a), as of the Allocation Date for such Plan Year
(unless Section 9.7(b)(ii) applies), with
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a value, determined as of such date that is equal to the
amount of cash dividends so applied or the amount required
to be credited under Section 3.3, Section 9.2(b) or Section
17.6, as the case may be; provided, however, that in the
event such value of the shares of Financed Stock so released
is insufficient to make the full allocation required by this
Section 4.2(b), then any insufficiency shall be satisfied
first with Company Contributions not so applied (if any),
and then with Trust Fund earnings, in cash or in Stock, with
a value determined as of such date.
(c) As of the Allocation Date for each Plan Year but after any
required allocation under Section 4.2(b), any remaining
shares of Financed Stock released from the Loan Suspense
Account for such Plan Year under Section 4.2(a) and,
separately, any remaining amount of Company Contributions
not applied in accordance with Section 4.2(a), shall be
credited to the Accounts of Active Members in the proportion
that each such Active Member's Compensation for such Plan
Year bears to the aggregate Compensation of all such Active
Members for such Plan Year; provided, however, that, the
Allocation Limit shall not be exceeded for any Plan Year. In
the event that the Allocation Limit would otherwise be
exceeded, the amount that would have been allocated to the
Accounts of Highly Compensated Employees shall be reduced
pro rata until such limit is achieved. The amount of such
reduction shall then be allocated among the Active Members
who are not Highly Compensated Employees; provided, however,
that the Compensation of Highly Compensated Employees
-------- ------- shall not be considered in determining such
Active Members' pro rata shares of such allocation.
4.3 RETURN OF MISTAKEN OR CONDITIONAL COMPANY CONTRIBUTIONS
If any Company Contributions are made by mistake of fact, the
excess of the amount contributed over the amount that would have
been contributed had there not occurred a mistake of fact shall be
returned within one (1) year after payment of such Company
Contributions. Company Contributions are expressly conditioned on
their deductibility under Section 404(a)(1) or (3) of the Code
and, to the extent treated as disallowed as such, shall be
returned within one (1) year after such disallowance. This Plan is
established and maintained on the condition that the IRS shall
issue a favorable determination letter to the effect that the Plan
and Trust, and any amendments thereto, meet the qualification
requirements specified in Section 1 upon timely initial
application. If such approval should be denied for any reason
(including failure to comply with any conditions for such approval
imposed by the IRS), all Company Contributions made before such
denial shall be returned within one (1) year after such denial. In
the event that Company Contributions are returned in accordance
with this Section 4.3, a corresponding reduction, as determined by
the Committee, shall be made to the Accounts of affected Members
and no such affected Member, his or her Spouse or Beneficiary or
any other person shall have any rights to all or any portion of
the value represented by such reduction. Notwithstanding any other
provision of the Plan to the contrary, no portion of any Company
Contributions shall
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be returned to the Company if such portion has been previously
applied to the payment of principal or interest on an ESOP Loan.
4.4 FORFEITURES
As of the Allocation Date for each Plan Year, any forfeitures
arising during such Plan Year under Section 9.2(b), Section
10.2(b) or Section 17.6 shall be treated as Company Contributions;
provided, however, that in the event that a portion of a Member's
Account is forfeited under the Plan, any Financed Stock allocated
to his or her Account shall be forfeited last.
4.5 MEMBER CONTRIBUTIONS PROHIBITED
Members shall not be permitted or required to make contributions
under the Plan.
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SECTION 5.
INVESTMENT OF CONTRIBUTIONS
5.1 INVESTMENT IN STOCK
(a) Except as otherwise provided in this Section 5.1, Company
Contributions (other than contributions of Stock) received
by the Trustee and all other monies, securities or property
held by the Trustee under the Trust Agreement shall be
invested with reasonable promptness by the Trustee in shares
of Stock, except as otherwise applied under Section 4.2(a).
Dividends (other than those currently paid to Members
pursuant to Section 9.7 or Section 11.4, or applied to the
repayment of an ESOP Loan under Section 4.2(a)) and other
distributions received and gains realized on Stock held in
the Trust Fund shall be similarly invested or applied to the
acquisition of shares of Stock.
(b) If shares of Stock are not available for purchase, the
Trustee shall, to the extent not inconsistent with the
Plan's continued qualification as an "employee stock
ownership plan," within the meaning of Section 4975(e)(7) of
the Code and Section 407(d)(6) of ERISA, invest amounts held
by the Trust Fund in securities or investments other than
Stock.
(c) The Trustee may maintain cash reserves in the Trust Fund to
provide funds for (i) payment of expenses or taxes of the
Plan and the Trust under Section 6, (ii) distributions in
cash or (iii) repayments of principal and interest on an
ESOP Loan. Such reserves may be invested in cash, savings
accounts, certificates of deposit or other cash equivalent
investments in accordance with the terms of the Trust
Agreement.
(d) Any investments other than Stock may be made through the
medium of any common, collective or commingled trust fund
maintained by the Trustee which is qualified under Sections
401(a) and 501(a) of the Code, constituting a part of the
Plan and the Trust.
5.2 FINANCED STOCK
(a) On the Effective Date, the Trustee shall incur an ESOP Loan
as directed by Fab to finance the acquisition of shares of
Financed Stock for the Trust. Subsequently, Fab may direct
the Trustee to incur additional ESOP Loans from time to time
to finance the acquisition of shares of Financed Stock for
the Trust or to repay a prior ESOP Loan. The proceeds of an
ESOP Loan must be applied within a reasonable period of time
after their receipt to be invested in accordance with
Section 5.1, to repay such loan or to repay a prior ESOP
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Loan. The terms of any ESOP Loan, at the time such loan is
made, shall be at least as favorable to the Plan as the
terms of a comparable loan resulting from arm's-length
negotiations between independent parties. An ESOP Loan shall
be for a specific term, shall bear a reasonable rate of
interest and shall not be payable on demand except in the
event of default, in which event the value of Trust Fund
assets transferred to satisfy the default shall not exceed
the amount of the default; provided, however, that, if the
lender is a "disqualified person" (as defined in Section
4975(e)(2) of the Code) or a "party in interest" (as defined
in Section 3(14) of ERISA, a transfer of collateral upon
default shall be made only upon and to the extent of the
failure of the Plan to meet the payment schedule for the
ESOP Loan.
(b) The only Trust Fund assets may be pledged as collateral for
an ESOP Loan are the shares of Financed Stock allocated to
the Loan Suspense Account acquired with the proceeds of the
ESOP Loan or such shares used as collateral on a prior ESOP
Loan that was repaid with the current ESOP Loan and no
lender shall have recourse against Trust Fund assets other
than (i) such collateral, (ii) Company Contributions that
are made under the Plan to meet the obligations under the
ESOP Loan with respect to which no allocation under Section
4.2 has been made and (iii) dividends or other earnings
attributable to such collateral and the investment of such
Company Contributions; provided, however, that amounts
described in clause (iii) above not applied to repay any
ESOP Loan in accordance with Section 4.2(a) for a Plan Year
shall be allocated to Members' Accounts as earnings on the
Trust Fund in accordance with Section 4.2(b) or Section 6.
Any pledge of Financed Stock must provide for the release of
shares so pledged on a pro rata basis as the ESOP Loan is
repaid by the Trustee and as such shares of Financed Stock
are allocated to Members' Accounts as provided in Section
4.2.
(c) Amounts to be used to satisfy the obligations arising from
any ESOP Loan shall be accounted for separately by the Trust
until so used.
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SECTION 6.
VALUATION AND MAINTENANCE OF MEMBERS' ACCOUNTS
6.1 VALUATION OF THE TRUST FUND
(a) As of each Valuation Date, the Trust Fund shall be valued,
pursuant to the terms of the Plan and the Trust Agreement,
(i) to reflect first, any allocation involving Trust Fund
earnings under Section 4.2(b), (ii) then the effect of
dividends or other income received and accrued, realized and
unrealized profits and losses and all other transactions
during the period beginning after the next preceding
Valuation Date (or the Effective Date, if there is no
preceding Valuation Date) and ending on such Valuation Date
(the "Valuation Period"), but such valuation shall not
include any Company Contributions received during such
Valuation Period. Such valuation shall be conclusive and
binding upon all persons having an interest in the Trust
Fund.
(b) The Committee may appoint an independent appraiser to value
all or any part of the assets of the Trust Fund; provided,
however, that all valuations of shares of Stock which are
"not readily tradable on an established securities market"
(within the meaning of Section 401(a)(28)(C) of the Code)
shall be made by an independent appraiser meeting
requirements analogous to those under Section 170(a)(1) of
the Code. The Trustee, Fab, and the Committee may
conclusively rely upon the valuation prepared by any such
independent appraiser.
6.2 ADJUSTMENT OF MEMBERS' ACCOUNTS
On the basis of such valuation, the Committee shall adjust the
Members' Accounts as of each Valuation Date to reflect the
transactions taken into account under Section 6.1(a). For the
Valuation Period, such adjustments of Members' Accounts shall be
made by (i) deducting from each said Account the total of all
payments made from the Account during the Valuation Period, (ii)
adding to or deducting from, as the case may be, each Account such
proportion of each adjustment under Section 6.1 as the amount
credited to the Account as of the next preceding Valuation Date
bears to the total of the amounts in all of said Accounts as of
such preceding Valuation Date and (iii) adding, if such Valuation
Date is also an Allocation Date, to each Account the Member's
allocable share of any amounts treated as Company Contributions
(other than such amounts as are applied or to be applied to the
repayment of an ESOP Loan) for such Valuation Period or shares of
Financed Stock released from the Loan Suspense Account and
properly allocated to such Member's Account as of such Allocation
Date in accordance with Section 4.2. As of each Valuation Date,
the amount attributable to a Member's Account shall mean the
number of shares (including fractional shares) of Stock plus any
other property or cash properly credited to the Member's Account
as of such date.
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6.3 ADMINISTRATIVE EXPENSES
The expenses of administering the Plan, including (i) the fees and
expenses of any employee and of the Trustee for the performance of
its duties under the Plan or Trust, (ii) the expenses incurred by
the members of the Committee or their delegates in the performance
of their duties under the Plan (including reasonable compensation
for any legal counsel, appraisers, certified public accountants,
consultants and agents and the cost of services rendered in
respect of the Plan) and (iii) all other proper charges and
disbursements of the Trustee, the Company or the members of the
Committee (including settlements of claims or legal actions
approved by Fab) shall be paid out of the Trust Fund and allocated
to and deducted from the Members' Accounts by the Committee in
accordance with the provisions of Section 6.2, unless the Company
pays such expenses directly without reimbursement from the Trust
Fund.
6.4 TAXES
Taxes, if any, of any and all kinds whatsoever which are levied or
assessed on any assets held or income received by the Trust Fund,
shall be allocated to and deducted from the Members' Accounts.
6.5 OTHER EXPENSES
Brokerage fees, transfer taxes and any other expenses incident to
the purchase or sale of Stock by the Trustee shall be deemed to be
part of the cost of such Stock or deducted in computing the
proceeds therefrom, as the case may be.
6.6 TRANSACTIONS WITH DISQUALIFIED PERSONS
Notwithstanding any other provision of the Plan or the Trust
Agreement to the contrary, if a transaction involving Stock is
between the Trustee and a "disqualified person" (as defined in
Section 4975(e)(2) of the Code) or a "party in interest" (as
defined in Section 3(14) of ERISA), the value of the shares of
Stock subject to such transaction shall be determined as of the
date of such transaction.
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SECTION 7.
VESTING OF COMPANY CONTRIBUTIONS
7.1 FULL VESTING
(a) Each Member who attains Normal Retirement Age while in
Service or who terminates Service by reason of Retirement,
Disability or death shall have a one hundred percent (100%)
Vested Interest in the amount credited to his or her
Account.
(b) Each Member in Service affected by a complete termination of
the Plan under Section 16.3, or a "partial termination" of
or "permanent discontinuance of contributions" to the Plan
under Section 15.1(b), shall have a one hundred percent
(100%) Vested Interest in the amount allocated to his or her
Account, as adjusted under the provisions of Section 16 and
Section 15.3, respectively.
7.2 VESTING UPON OTHER TERMINATIONS OF SERVICE
Any Member to which Section 7.1 does not apply shall have a Vested
Interest, as determined by the Committee, in the portion of the
amount credited to his or her Account determined from the
following vesting schedule on the basis of the number of full
Years of Service which he or she has completed as of the date of
his or her termination of Service.
VESTING SCHEDULE
Full Years of Service Percentage
Less than 1........................................ 0%
1 but less than 2.................................. 10%
2 but less than 3.................................. 20%
3 but less than 4.................................. 30%
4 but less than 5.................................. 40%
5 but less than 6.................................. 60%
6 but less than 7.................................. 80%
7 or more ......................................... 100%
7.3 RULES APPLICABLE TO VESTING
If a Member returns to Service following a Break in Service, then,
his or her Years of Service before such return shall be counted,
in addition to his or her Years of
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Service following such return, in determining his or her Vested
Interest in the amounts credited to his or her Account on or after
his or her return to Service; provided, however, that, if a Member
who had no Vested Interest at the time of his or her termination
of Service returns to Service following five (5) or more
consecutive Breaks in Service, such Member's Years of Service
prior to such Breaks in Service shall not be taken into account in
determining such Member's Vested Interest in amounts credited to
his or her Account on or after his or her return to Service.
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SECTION 8.
WITHDRAWALS FOR DIVERSIFICATION
8.1 WITHDRAWAL
Subject to Section 8.2, during the first Plan Year that a Member
both (i) is at least age fifty-five (55) and (ii) has been an
Active Member for at least ten (10) Plan Years after the November
30th coincident with or next preceding the Effective Date, he or
she may elect to withdraw, on written notice to the Committee
during the ninety (90) day period following such Plan Year, and
each of the next five (5) Plan Years, a number of whole shares of
Stock determined in accordance with the following formula:
D = P (X + Y) - Y, where
D = the number of shares of Stock that may be
withdrawn under this Section 8.1, rounded to the
nearest whole integer;
P = twenty-five percent (25%) (fifty percent (50%) for
the last Plan Year);
X = the number of shares of Stock credited to the
Member's Account as of the Allocation Date for the
Plan Year; and
Y = the number of shares of Stock previously withdrawn
by the Member under this Section 8.1.
Any shares of Stock which a Member so elects to receive shall be
distributed to the Member not later than one hundred eighty (180)
days following the Allocation Date for the Plan Year to which the
election applies.
8.2 DE MINIMIS EXCEPTION
A Member shall not be entitled to make a withdrawal under Section
8.1 if the value of Stock allocated to such Member's Account, when
added to the value of any other "employer securities" under
Section 409(1) of the Code acquired after 1986 and credited to the
Member's account in any other "employee stock ownership" meeting
the requirements of Section 4975(e)(7) of the Code that is
maintained by an Affiliated Company, does not exceed $500, or such
greater amount as may be specified by the IRS under the Code. For
purposes of this Section 8.2, the value of the Stock or such other
employer securities shall be determined as of the Allocation Date
for the first Plan Year with respect to which a Member would
otherwise be entitled to make a withdrawal under Section 8.1.
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SECTION 9.
DISTRIBUTIONS UPON TERMINATION OF SERVICE
9.1 DISTRIBUTIONS UPON A MEMBER'S TERMINATION OF SERVICE BY REASON OF
RETIREMENT OR DISABILITY
If a Member terminates Service by reason of Retirement or
Disability, such Member shall be entitled to a distribution of his
or her Vested Interest and, unless the member elects otherwise in
accordance with Section 9.3, such distribution shall be determined
as of the Allocation Date coincident with or next following the
date of such termination of Service and made as soon as
practicable thereafter, but in no event later than ninety (90)
days following such Allocation Date.
9.2 DISTRIBUTIONS UPON OTHER TERMINATIONS OF SERVICE
(a) Subject to the following provisions of this Section 9.2, if
a Member terminates Service for a reason other than death or
one specified in Section 9.1, such Member shall be entitled
to a distribution of his or her Vested Interest and, unless
the Member elects otherwise in accordance with Section 9.3,
such distribution shall be determined as of the Allocation
Date coincident with or next following the date of such
termination of Service and made no later than ninety (90)
days following such Allocation Date.
(b) Any excess of the amount credited to such terminating
Member's Account over his or her Vested Interest shall be
treated as a forfeiture under Section 4.4 for the Plan Year
during which such Member terminates Service. If the
terminated Member returns to Service prior to incurring five
(5) consecutive Breaks in Service, the amount of such
forfeiture shall be recredited to such Member's Account
(along with imputed earnings, gains or losses, if any, on
such forfeiture in the event the terminated Member had made
a deferral election under Section 9.3) as of the Allocation
Date coincident with or next following the terminated
Member's return to Service.
9.3 DEFERRAL ELECTION
If a Member who has not attained Normal Retirement Age is entitled
to a distribution under Section 9.1 or Section 9.2, and the value
of his or her Vested Interest equals or exceeds $3,500 as of the
Allocation Date the distribution is to be determined in such
Section, such Member may elect to defer receipt of such
distribution by specifying a later Allocation Date occurring
before or next following his or her Normal Retirement Age with
respect to which the preceding provisions of this Section 9 are to
be applied, through advance notice to the Committee; provided,
however, that no distribution shall be made hereunder if the
Member returns to Service before such specified Allocation Date.
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9.4 DISTRIBUTIONS UPON DEATH
Notwithstanding the foregoing provisions of this Section 9 to the
contrary, in the event of the death of a Member, his or her
Beneficiary shall be entitled to a distribution of the Member's
Vested Interest, determined as of the Allocation Date coincident
with or next following the date of the Member's death and made no
later than ninety (90) days following such Allocation Date.
9.5 MINIMUM REQUIRED DISTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary,
all distributions under the Plan shall be made in compliance with
the minimum distribution and timing of distribution requirements
under Section 401(a)(9) of the Code. To the extent required by
Section 401(a)(9) of the Code, the distribution of the Vested
Interest of each Member of the Plan shall be made no later than
April 1 of the calendar year following the calendar year in which
the Member attains age seventy and one-half (70-1/2).
9.6 SINGLE SUM STOCK DISTRIBUTIONS
Any benefit payable under this Section 9 shall be distributed in a
single sum from the Trust Fund in whole shares of Stock
(containing such legends and upon such terms and conditions and
restrictions as the Committee may direct) together with any cash
either awaiting investment in Stock or representing a fractional
share of Stock.
9.7 CURRENT DIVIDENDS DISTRIBUTIONS
(a) Unless Section 11.4 otherwise applies, in the event a
Member's Vested Interest is to be distributed during a Plan
Year in accordance with the foregoing provisions of this
Section 9, then, the amount of cash dividends paid to the
Trustee by Fab during that same Plan Year with respect to
such shares of Stock (including cash representing any
fractional share) to be distributed ("Current Dividends")
shall be treated in the same manner as the Member's Vested
Interest solely for purposes of this Section 9, except as
provided in Section 9.7(b).
(b) (i) Notwithstanding Section 9.6, the amount of Current
Dividends to be distributed to a Member under Section
9.7(a) shall be distributed in a single cash sum unless
Fab has made the election described in Section
4.2(b)(i) with respect to such Current Dividends.
(ii) In that event, Section 9.6 shall apply, but the number
of shares of Stock to be distributed that represent the
amount of Current Dividends shall be determined as of
the applicable Valuation Date.
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9.8 ROLLOVERS TO OTHER PLANS OR IRAS
Effective with respect to any distributions made on or after
December 1, 1993 and notwithstanding any provision of the Plan to
the contrary that would otherwise limit a Member's election under
this Section, a Member may elect, at the time and in the manner
prescribed by the Committee, to have any portion of an Eligible
Rollover Distribution paid, in a Direct Rollover, to an Eligible
Retirement Plan specified by the Member.
Definitions:
(1) An "ELIGIBLE ROLLOVER DISTRIBUTION" is any distribution of
all or any portion of the balance to the credit of the
Member, except:
(a) any distribution that is one of a series of
substantially equal periodic payments (made not less
frequently than annually) made over the life (or life
expectancy) of the distributee or the joint lives (or
joint life expectancies) of the Member and the
Member's Beneficiary, or over a period of ten (10)
years or more;
(b) any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and
(c) the portion of any distribution that is not
includable in gross income (determined without regard
to the exclusion of net unrealized appreciation with
respect to employer securities).
(2) 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.
(3) A "DIRECT ROLLOVER" is a payment by the Plan to the Eligible
Retirement Plan specified by the Member.
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<PAGE>
SECTION 10.
MAXIMUM AMOUNT OF ALLOCATION
10.1 LIMITATION ON ANNUAL ADDITIONS
Notwithstanding any other provision of the Plan to the contrary,
Annual Additions attributed to a Member's Account for any Plan
Year may not exceed the lesser of: (i) $30,000, as such amount is
adjusted for any applicable increases in the cost-of-living under
the Code or (ii) twenty-five percent (25%) of the Member's
Compensation for such Plan Year.
10.2 PRIORITY OF REDUCTION
(a) To the maximum extent necessary, before-tax deferrals under
Code Section 402(a)(8) made on behalf of a Member under any
Qualified Plan maintained by an Affiliated Company shall be
returned to the Member before any Annual Additions which
would otherwise be allocated to a Member's Account on an
Allocation Date are reduced by reason of Section 10.1;
provided, however, any Annual Additions attributable to
shares of Financed Stock shall be last reduced.
(b) Any Annual Additions reduced under Section 10.2(a) shall be
allocated on the next Allocation Date first, to the extent
permissible under Section 10.1, to the affected Member's
Account and any remaining portion of such amount shall be
treated as a forfeiture under Section 4.4; provided,
however, that the Compensation of the affected Member from
whose Account the forfeiture arose shall in no event be
considered in determining any Active Member's pro rata share
of any allocation under Section 4.2(c).
10.3 OTHER PLANS
The Committee shall, to the extent required by the Code, apply the
limitations contained in this Section 10 by taking into account
the benefits payable and the contributions made under any other
Qualified Plan which is maintained by an Affiliated Company and,
if such other plan is a defined benefit plan, the sum of the
defined benefit plan fraction and the defined contribution plan
fraction (as described in Section 415(e) of the Code) shall not
exceed 1.0.
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SECTION 11.
RIGHTS AND RESTRICTIONS APPLICABLE TO STOCK
11.1 VOTING
Notwithstanding any other provision of the Plan or the Trust
Agreement to the contrary, all shares of Stock (including
fractional shares) held in the Trust Fund shall be voted by the
Trustee at the direction of Members in accordance with this
Section 11.1.
(a) Before each annual or special meeting of stockholders of
Fab, the Committee shall cause to be promptly sent to each
Member who has shares of Stock credited to his or her
Account (without regard to whether the Member has a Vested
Interest in such Stock), on the record date of such meeting,
all materials that a shareholder of Fab would have received
with respect to such meeting, including, but not limited to,
notices, proxies, financial statements and Fab's proxy
solicitation materials, together with a form directing the
Trustee on how to vote. Each Member shall have the right to
direct the Trustee with respect to the voting of the total
number of shares of Stock allocated to his or her Account as
of the last Valuation Date prior to such annual or special
meeting of the shareholders of Fab. In addition, each Member
shall separately have the right to direct the Trustee with
respect to the voting at such annual or special meeting such
portion of any other shares of Stock held in the Trust Fund
as is equal to the product of (i) the total number of such
other shares of Stock held in the Trust Fund, multiplied by
(ii) a fraction, the numerator of which is the total number
of shares of Stock credited to such Member's Account as of
such Valuation Date, and the denominator of which is the
total number of shares of Stock held in the Trust Fund that
are credited to all Members' Accounts as of such Valuation
date.
(b) In the event of Stock must be voted prior to the first
allocation of Stock held in the Trust Fund to Active
Members' Account as of the first Allocation Date, each
individual who is a Member as of the Plan Entry Date next
preceding the date of such annual or special meeting of the
shareholders of Fab, shall have the right to direct the
Trustee with respect to the voting at such annual or special
meeting of an equal number of the shares of Stock held in
the Trust Fund.
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(c) All voting directions under this Section 11.1 shall be given
to the Trustee in writing in such form and manner as the
Committee shall prescribe and shall remain in strict
confidence of the Trustee. Upon receipt of such directions,
the Trustee shall vote the shares of Stock in accordance
therewith. Any shares of Stock with respect to which no
Member direction is received shall not be voted by the
Trustee.
(d) In the event consents, authorizations or other such
solicitations are made with respect to Stock in lieu of a
meeting, then the Trustee's vote or action on any such
solicitation with respect to Stock held in the Trust Fund
shall be directed by Members to the maximum extent
practicable in a manner that is consistent with this Section
11.1.
11.2 TENDER OFFERS
In the event any transaction which is evidenced by the filing of a
Statement on Schedule 14D-1 under the Securities Exchange Act of
1934, as amended, with the Securities and Exchange Commission, or
in the event of any other similar transaction (a "Tender Offer"),
including, but not limited to, a "self-tender", then,
notwithstanding any other provision of the Plan or the Trust
Agreement to the contrary, all, any part or none of the shares of
Stock (including fractional shares) held in the Trust Fund shall
be tendered and sold or exchanged pursuant to such Tender Offer by
the Trustee at the direction of Members in accordance with this
Section 11.2.
(a) Promptly upon written receipt of such Tender Offer, the
Trustee shall notify each Member in writing of such Tender
Offer and the principal terms thereof and shall cause to be
delivered to each Member copies of all materials that the
Trustee would receive as a shareholder with respect to such
Tender Offer, including, but not limited to, prospectuses
and financial statements.
(b) Each Member shall have the right to direct the Trustee to
tender and sell or exchange, pursuant to such Tender Offer,
all or any part of that number of shares of Stock credited
to the Member's Account as of the most recent Valuation
Date. In addition, such Members shall have the right to
direct the Trustee to tender and sell or exchange, pursuant
to such Tender Offer, such portion of any other shares of
Stock held in the Trust Fund as is equal to the product of
(i) the total number of such shares of Stock held in the
Trust Fund multiplied by (ii) a fraction, the numerator of
which is the total number of shares of Stock credited to
such Member's Account as of such Valuation Date, and the
denominator of which is the total number of shares of Stock
held in the Trust Fund credited to all Members' Accounts as
of such Valuation Date. In the event a Member fails to
submit instructions to the Trustee, such Member shall be
deemed to have elected not to tender those shares of Stock
to which the instruction would have related. Such
instructions shall be given to the Trustee
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in such form and manner as the Trustee shall prescribe. Any
such directions shall remain in the strict confidence of the
Trustee.
(c) Subject to Section 11.2(d), the Trustee shall tender, sell
or exchange, to the extent that the Tender Offer is
accepted, that number of shares of Stock for which valid and
timely directions to do so have been received and not
subsequently been revoked by Members prior to the expiration
date of the Tender Offer to which such directions relate. In
addition, the Trustee shall withdraw, prior to the
withdrawal date of the Tender Offer, that number of shares
of Stock for which the Trustee receives directions to
withdraw.
(d) Except as to shares of Stock sold or tendered under this
Section 11.2, the Trustee is prohibited from tendering or
otherwise selling or exchanging, or depositing or forwarding
for sale or exchange, any shares of Stock held by it
pursuant to the Plan and the Trust Agreement, and from
making any purchases of shares of Stock pursuant to the Plan
and Trust Agreement, during the pendency of the Tender
Offer.
11.3 RESTRICTIONS ON STOCK
Shares of Stock held or distributed by the Trustee may include
such legends and restrictions on transferability as Fab or the
Committee may reasonably require in order to assure compliance
with applicable Federal and state securities laws and the terms of
this Plan or the Trust Agreement. To the maximum extent permitted
by ERISA and the Code, shares of Stock shall also be subject to
the provisions of any applicable stockholders' or similar
agreement. No shares of Stock held or distributed under the Plan
may be subject to a put, call or other option or buy-sell or
similar arrangement, except as provided in this Section 11 and the
provision of Section 11.6, Section 11.7 and this Section 11.3
shall be non-terminable and shall continue to be applicable to
shares of Stock upon termination of the Plan or upon the Plan
ceasing to meet any qualification requirements specified in
Section 1.
11.4 CASH DIVIDENDS
Fab, in addition to having the right to elect to apply cash
dividends on shares of Stock allocated to any Member's Account as
provided in Section 4, may elect that such dividends be paid
currently to any Member either directly by Fab or by the Trustee
not later than ninety (90) days following the Plan Year during
which such dividend was paid; provided, however, that Fab may
elect that any such cash distribution to Members be paid only on
shares of Stock in which such Members have a Vested Interest.
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11.5 REASONABLE ACTIONS
The Committee shall take all reasonable actions to assure that as
of each Valuation Date (or other such date) specified in the
foregoing provisions of this Section 11, the Trustee has an
accurate list of all Members and the number of shares of Stock
(including fractional shares) credited to their Accounts. for
purposes of this Section 11, Fab and the Committee agree to render
any reasonably necessary and appropriate assistance that the
Trustee requests to assure a proper distribution of cash
dividends, an accurate and confidential collection and tabulation
of directions and, for purposes of Section 11.2, a timely tender
by the Trustee in accordance with such directions, including, but
not limited to, reasonable compliance with registration
requirements under applicable Federal and state securities laws.
11.6 RIGHT OF FIRST REFUSAL
In the event the proviso under Section 6.1(b) applies, shares of
Stock distributed under the Plan shall be subject to a "right of
first refusal." The right of first refusal shall provide that
prior to any subsequent transfer, such Stock must first be offered
in writing to Fab and then if refused by Fab, to the Trustee, at
the value determined for purposes of the Plan under Section
6.1(b); provided, however, that a bona fide written offer of a
greater amount from an independent prospective buyer shall be
deemed to establish the fair market value of such stock for this
purpose. The right of Fab or the Trustee to acquire the Stock
under this Section 11.6 shall expire fourteen (14) days after the
date Fab receives the offer to exercise the right of first refusal
on the same terms offered by a prospective buyer. A Member
entitled to a distribution of Stock may be required to execute an
appropriate stock transfer agreement (evidencing the right of
first refusal) prior to receiving a certificate for Stock.
11.7 PUT OPTION
In the event the proviso under Section 6.1(b) applies, a Member
holding shares of Stock distributed under the Plan may elect, by
filing a request with the Committee (i) no later than sixty (60)
days following such distribution, or if such request is not made,
(ii) during a period of at least sixty (60) days commencing on the
first anniversary of such distribution to have Fab (or, if the
Committee so directs and the Trustee consents, the Trustee)
purchase any such shares of Stock at the value determined under
Section 11.6. Fab (or, if the Committee so directs and the Trustee
consents, the Trustee), in its sole discretion, may pay for such
Stock either in a lump sum or in ratable annual installments over
a period not exceeding five (5) years, with interest payable at a
reasonable rate on any unpaid installment balance as determined by
Fab (or, if the installments are to be paid from the Trust Fund,
by the Committee, with the Trustee's consent). Notwithstanding the
foregoing, Fab or the Trustee (if the Committee so directs and the
Trustee consents) may (or shall, if required under the Code or
ERISA) offer to purchase any shares of Stock distributed under the
Plan from any Member at any other time, at the value determined
under Section 11.6.
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11.8 SPECIAL DEFINITION OF MEMBER
For purposes of this Section 11, the term "Member" shall include a
Member, or, in the event a Member with an Account had died, the
Member's Beneficiary, or, if the Member is otherwise legally
incapacitated with respect to all or any portion of his or her
Account, such other person whom the Committee may deem to have the
legal capacity to manage the Member's affairs, and for purposes of
Section 11.6 and Section 11.7, the term "Member" shall also
include any donee who has received Stock as a gift from the Member
or the custodian or trustee of an individual retirement account
that holds Stock for the benefit of the Member by reason of a
"rollover" of the Member's Plan distribution under Section
402(a)(5) of the Code.
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SECTION 12.
DESIGNATION OF BENEFICIARIES
12.1 SELECTED BENEFICIARIES
Each Member may file with the Committee a notarized designation of
one or more persons as the Beneficiary who shall be entitled to
receive the amount, if any, payable under Section 9.4 upon the
Member's death. Subject to Section 12.2, a Member may from time to
time revoke or change his or her Beneficiary designation without
the consent of any prior Beneficiary by filing a new designation
with the Committee. The last such designation form 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 Member's death and
in no event shall it be effective as of a date prior to such
receipt.
12.2 SPOUSE AS BENEFICIARY
Notwithstanding any provision of Section 12.1 to the contrary, any
Beneficiary designation or revocation or change of Beneficiary
designation made or outstanding with respect to a Member must be
made with the notarized consent of the Member's Spouse, if any. If
no Beneficiary designation under this Section 12 is in effect at
the time of a Member's death, or if the Beneficiary so designated
fails to survive such Member, the Beneficiary shall be the
Member's Spouse, if any, or if there is no Spouse, the Member's
surviving issue, per stirpes, or if there is no such issue, the
Member's estate. If the Committee is in doubt as to the right of
any person to receive any benefits, the Committee may direct the
Trustee to (i) retain such amount, without liability for any
interest thereon, until the rights thereto are determined or (ii)
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 Fund therefor.
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SECTION 13.
TOP-HEAVY LIMITATIONS
13.1 DEFINITIONS
When used in this Section 13, the following terms shall have the
following meanings:
(a) "Account Balance" shall mean, for the first Plan Year, the
value of the Member's Account as of the Allocation Date for
the Plan Year, and, for any other Plan Year, the value of
the Member's Account as of the Allocation Date for the next
preceding Plan Year increased by the aggregate amount of all
withdrawals and distributions made from such Account during
the immediately preceding five (5) Plan Years.
(b) "Key Employee" shall mean, for a Plan Year, any individual
who would be considered a "key employee" under Section
416(i) of the Code.
(c) "Top-Heavy" shall mean, for a Plan Year, that the aggregate
Account Balances of Key Employees exceed sixty percent (60%)
(or ninety percent (90%) in the event the Plan is "Super
Top-Heavy") of the aggregate Account Balances of all
Members, determined, (i) with respect to the first Plan
Year, as of the corresponding Allocation Date and (ii) with
respect to any other Plan Year, as of the Allocation Date of
the next preceding Plan Year, taking into account, to the
extent either required or permitted by the Code, the accrued
benefits under each Qualified Plan of an Affiliated Company
in which a Key Employee participates and each other
Qualified Plan which enables the Plan to qualify under
Section 401(a) of the Code.
13.2 TOP-HEAVY PLAN YEARS
Notwithstanding any other provision of the Plan to the contrary,
if the Plan is TopHeavy for a Plan Year, then the following
provisions shall apply, but only to the extent required by the
Code.
(a) The Annual Additions to the Account of each Active Member
(determined without regard to Section 2.2(i)) who is not a
Key Employee shall be no less, as a percentage of
Compensation, than the lesser of (i) the largest such
percentage for a Key Employee or (ii) three percent (3%);
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(b) For any Member who has completed an Hour of Service during
any Plan Year in which the Plan is Top Heavy, the vesting
schedule in Section 7.2 shall be applied by assuming each
Member in Service otherwise having a "vesting percentage" of
at least thirty percent (30%) under such schedule is
credited with one (1) additional completed Year of Service;
(c) The requirements of Section 10.3 shall be satisfied for such
Plan Year by making appropriate adjustments to the defined
benefit plan fraction and the defined contribution plan
fraction to reflect the additional restrictions imposed by
Section 416(h)(1) of the Code. Notwithstanding the
foregoing, this Section 13.2(c) shall not apply if the Plan
is Super Top-Heavy for such Plan Year and "four percent
(4%)" is substituted for "three (3)" with respect to the
minimum allocation provided under Section 13.2(a).
13.3 AGGREGATION WITH OTHER PLANS
If any other Qualified Plan must be or otherwise is considered in
determining whether the requirements of Section 13.2(a) or (c)
have been met, appropriate adjustments in accordance with the Code
shall be made for the benefits or contributions provided each
Member who is not a Key Employee under each such Qualified Plan.
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SECTION 14.
ADMINISTRATION OF THE PLAN
14.1 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). The Committee has
the sole authority to make all decisions, determinations or
interpretations the Committee may deem necessary or advisable in
connection with the matters under the Plan it has specific or
general responsibility of and all such decisions, determinations
or interpretations shall be made in the sole discretion of the
Committee and shall be final, binding and conclusive on all
interested persons.
14.2 THE TRUSTEE
Fab shall have the power to appoint, remove or change the Trustee
and the Trustee shall have responsibility under the Plan for the
management and control of the assets of the Trust Fund. The
Committee shall periodically review the performance and methods of
the Trustee.
14.3 AGENTS
The Committee shall engage such legal counsel, certified public
accountants or other experts, who may be employed by any
Affiliated Company, and make use of such agents and clerical or
other personnel of any Affiliated Company as the Committee shall
require or may deem advisable for purposes of the Plan and the
Trust. The Committee may rely upon the written option of such
counsel, accountants or other experts. The Committee 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, however, that such delegation shall be
subject to revocation at any time by the Committee. The Committee
shall report to the Board, or to a committee of such Board
designated for that purpose, at such times as may be designated by
the Board or committee thereof, with regard to the matters for
which the Committee is responsible under the Plan.
14.4 FORMATION OF COMMITTEE
The Committee shall consist of not less than three (3) and not
more than seven (7) 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. Any member of the Committee may
resign at any time. No member of the Committee shall be entitled
32
<PAGE>
to act on or decide any matter relating solely to himself or
herself or solely to any of his or her rights or benefits under
the Plan. The members of the Committee 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
ERISA, no bond or other security need be required of the Committee
or any member thereof in any jurisdiction. Any person may serve on
the Committee, and 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 with respect to the Plan.
14.5 CHAIRMAN
The Committee shall elect or designate its own Chairman, 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, at the
discretion of its Chairman or such other member of the Committee,
without a meeting, by mail, telegraph or telephone, provided that
all of the members of the Committee are informed by mail,
telegraph or telephone of their right to vote on the proposal and
of the outcome of the vote thereon.
14.6 DEMANDS FOR MONEY
All demands for money of the Plan shall be signed by an officer or
officers of Fab, or such other person or persons as the Committee
may from time to time designate in writing, who shall cause to be
(i) kept full and accurate accounts of receipts and disbursements
of the Trust Fund, (ii) deposited all funds of the Trust Fund to
the name and credit of the Trustee or the Trust Fund, in such
depositories as may be designated by the Committee, (iii)
disbursed the monies and funds of the Trust Fund so authorized by
the Committee and (iv) performed such other related duties as may
be assigned to him or her from time to time by the Committee.
14.7 BENEFIT CLAIMS
All claims for benefits under the Plan shall be submitted in
writing to, and within a reasonable period of time decided by, one
(1) person designated in writing by the Chairman 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, including
references to specific provisions of the Plan or the Trust
Agreement, upon 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 in
writing and filed with the Committee within a
33
<PAGE>
reasonable period of time, as specified by the Committee from time
to time, after delivery to such claimant of notice of said
decision. Such 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 or advisable 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 persons as to any matter or interpretation
relating to the Plan.
14.8 NO PERSONAL LIABILITY
To the maximum extent permitted by ERISA, no member of the
Committee shall be personally liable by reason of any contract or
other instrument executed by him or her, or on his or her behalf,
in his or her capacity as a member of the Committee not 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 Trust Fund may be delegated or allocated,
against any cost or expense (including any sum paid in settlement
of a claim with the approval of Fab) arising out of any act or
omission to act in connection with the Plan or the Trust Fund
unless arising out of such person's own fraud or bad faith.
14.9 AGENT FOR SERVICE OR PROCESS
The Chairman of the Committee or such other person as may from
time to time be designated by the Board shall be the agent for
service of process under the Plan.
34
<PAGE>
SECTION 15.
WITHDRAWAL OF A PARTICIPATING COMPANY
15.1 PROCEDURES FOR WITHDRAWAL
(a) Any Participating Company may withdraw from its
participation in the Plan by giving the Board, the Committee
and the Trustee prior notice specifying a withdrawal date
which shall be the last day of a month at least sixty (60)
days subsequent to the date such notice is received by the
Board. The Board may terminate any Participating Company's
participation in the Plan, as of any withdrawal date it
specifies, for any reason, including, but not limited to,
the failure of the Participating Company to make proper
Company Contributions or to take appropriate action to
assure compliance with any other provision of the Plan or
with any applicable legal requirements. Notice of any
withdrawal of a Participating Company from the Plan by the
Board shall be given to the Committee, the Trustee and the
withdrawing Participating Company.
(b) Notwithstanding the foregoing, (i) the transfer of a
Participating Company or a division, facility, operation or
trade or business of a Participating Company to an entity
that is not an Affiliated Company or (ii) a "partial
termination" or "permanent discontinuance of contributions"
of the Plan under Section 411(d)(3) of the Code, as
determined by the IRS, with respect to a group of Members,
shall be treated as a withdrawal of a Participating Company
for purposes of this Section 15 without further action by
the Board or any Participating Company.
15.2 CONTRIBUTIONS UPON WITHDRAWAL
Upon the withdrawal of any Participating Company, no further
Company Contributions or allocations under Section 4.2(c) on
behalf of affected Members shall be made for Plan Years with
Allocation Dates occurring after the date of withdrawal, and no
amount shall thereafter be payable under the Plan to or in respect
of any affected Members except as provided in this Section 15. To
the maximum extent permitted by ERISA and the Code, any rights of
Members who had been or are employed by other Participating
Companies shall be unaffected by such withdrawal and any
transfers, distributions or other dispositions of the assets of
the Plan as provided in this Section 15 shall constitute a
complete discharge of all liabilities under the Plan with respect
to such Participating Company's participation in the Plan and with
respect to any affected Member, Spouse or Beneficiary.
35
<PAGE>
15.3 EFFECT OF WITHDRAWAL
Upon a Participating Company's withdrawal from the Plan, the
Committee may direct, in accordance with ERISA and the Code, that
the Accounts of affected Members may continue to be maintained by
the Plan, or, after payment of or provision for expenses and
charges and appropriate adjustment of the Accounts of all such
Members as described in Section 16.3(e) (as if the withdrawal date
were the termination date), the value of such Accounts may be paid
from the Trust Fund in the manner described in Section 16.3(f) or
transferred, subject to Section 15.4(b) to a successor Qualified
Plan.
15.4 TRANSFER OF PLAN ASSETS
(a) To the maximum extent permitted by ERISA and the Code, Fab
may direct that (i) this Plan be merged or consolidated with
another Qualified Plan, (ii) the Accounts, in whole or in
part, of one (1) or more Members be transferred to another
Qualified Plan or (iii) that assets or liabilities of
another Qualified Plan be transferred to this Plan.
(b) Notwithstanding any other provision of the Plan or the Trust
Agreement to the contrary and to the extent required by
ERISA or the Code, no transfer of any of the Plan's assets
or liabilities to a successor Qualified Plan or transfer of
another Qualified Plan's assets or liabilities to this Plan
(whether by merger or consolidation with such Qualified Plan
or otherwise) shall be made unless each Member would, if
either this Plan or such Qualified Plan then terminated,
receive a benefit immediately after such transfer which
(after taking account of any distribution or payments to
them as part of the same transaction) is equal to or greater
than the benefit he or she would have been entitled to
receive immediately before such transfer if this Plan had
then been terminated. The Committee may also condition any
such transfer upon prior receipt of appropriate
indemnification from the employer or employers maintaining
such other Qualified Plan.
15.5 DETERMINATION, APPROVALS AND NOTIFICATIONS
All determinations, approvals and notifications that the Committee
may deem necessary or appropriate with respect to the withdrawal
of a Participating Company or any transaction contemplated by
Section 15.4 shall be in form and substance and from a source
satisfactory to the Committee.
36
<PAGE>
SECTION 16.
AMENDMENT OR TERMINATION OF THE PLAN AND TRUST
16.1 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
(a) To the maximum extent permitted by ERISA and the Code, Fab
reserves the right, as of a date specified by Fab, to amend,
suspend or terminate, either prospectively or retroactively,
the Plan, any Company Contributions thereunder, or the
Trust, in whole or in part, and for any reason and without
the consent of any Participating Company, Member, Spouse,
Beneficiary or other person. Notwithstanding the foregoing,
the Plan and Trust shall automatically be terminated without
further action by Fab in the event that there is a Tender
Offer (as defined in Section 11.2) or other event (other
than the repayment of an ESOP Loan) that directly or
indirectly results in no shares of Financed Stock being held
in the Loan Suspense Account.
(b) The Committee may adopt amendments to the Plan which may be
necessary or appropriate to facilitate the administration,
management or interpretation of the Plan, or to conform the
Plan thereto, or to qualify and maintain the Plan as a
Qualified Plan or to comply with any other applicable law
(including ERISA); provided, however, that such amendments,
in the estimation of the Committee, do not have any material
effect on the currently estimated cost of the Company of
maintaining the Plan or are not inconsistent with Fab's
personnel or fiscal policies.
(c) Each Participating Company, by its adoption of the Plan,
shall be deemed to have delegated the authority granted in
this Section 16 to Fab and the Committee.
16.2 NOTICE
Notice of any amendment, modification, suspension or termination
of the Plan, specifying the effective date of such action shall be
given by Fab or the Committee to each other and to the Trustee,
and all Participating Companies.
16.3 TERMINATION OF THE PLAN
(a) Upon termination of the Plan, no Company shall make any
further Company Contributions or allocations under Section
4.2(c) under the Plan Years with Allocation Dates that would
otherwise have occurred after the termination date, which
shall be the last Allocation Date for the Plan, and no
amount shall thereafter be payable under the Plan to or in
respect of any Member except as provided in this Section 16.
To the maximum extent permitted by ERISA and
37
<PAGE>
the Code, transfers, distributions or other dispositions of
the assets of the Plan as provided in this Section 16 shall
constitute a complete discharge of all liabilities under the
Plan and the Trust Fund. 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 Trust Fund and the administration and
distribution, transfer or other disposition of the assets of
the Trust Fund in accordance with this Section 16.3 shall
remain in force.
(b) In the event that the Plan is terminated, first, any amounts
allocated to the Loan Suspense Account, any proceeds
therefrom and cash dividends on shares of Financed Stock
held in the Loan Suspense Account shall be applied to
satisfy any outstanding ESOP Loan obligation in its
entirety, and any such amounts remaining after full
satisfaction of such obligation shall be treated as earnings
on the Trust Fund in accordance with Section 16.3(e).
(c) Then, any Company Contributions (including any cash
dividends on shares of Financed Stock allocated to Members'
Accounts that Fab elects to so apply in accordance with
Section 4.2(b)(i)) shall be allocated in accordance with
Section 4.2 as of the last Allocation Date; provided,
however, that, for purposes of the allocation under Section
4.2(c), Section 2.2(i) shall not apply.
(d) In the event that the Plan is terminated while there are any
amounts held in suspense under Section 10.2 after
application of the foregoing provisions of this Section 16,
such amounts shall be applied to the outstanding balance of
any ESOP Loan, and any amounts remaining after full
satisfaction of such obligation shall be returned to Fab.
(e) Then, the Trust Fund and each Member's Account shall be
adjusted to reflect (i) payment of or provision for all
expenses and charges referred to in Section 6.3 and Section
6.4 and (ii) adjustment for earnings, profits and losses of
the Trust to the last Allocation Date in the manner
described in Section 6.1.
(f) Upon receipt by the Committee of IRS approval of such
termination, Fab shall direct that the full current value of
each Member's Account shall be paid, to the extent
reasonably possible in accordance with Section 9.6, as soon
as practicable thereafter from the Trust to each Member (or,
in the event of the death of a Member, the Beneficiary
thereof), unless and to the extent, Fab directs that any or
all of the Members' Accounts, or any portion thereof, be
transferred, subject to Section 15.4(b), to a successor
Qualified Plan. All determinations, approvals and
notifications referred to above shall be in form and
substance and from a source satisfactory to the Committee.
38
<PAGE>
SECTION 17.
GENERAL LIMITATIONS AND PROVISIONS
17.1 DECREASE IN VALUE OF TRUST ASSETS
Each Member, Spouse, Beneficiary or other person shall bear all
risks in connection with any decrease in the value of the assets
of the Trust Fund and the Member's Account, and neither the
Company nor the Committee nor any member thereof, nor any employee
or director of the Company, shall be liable or responsible
therefor.
17.2 SOLE SOURCE OF BENEFITS
The Trust shall be the sole source of benefits under the Plan and,
except as otherwise required by ERISA, the Company and the
Committee, assume no responsibility for payment of such benefits,
and each Member, Spouse, 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 or the
Committee, or any member thereof, or any employee or director of
the Company.
17.3 NO RIGHT TO EMPLOYMENT
Nothing contained in the Plan shall give any employee the right to
be retained in the employment of any Affiliated Company 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 any Affiliated Company and any employee or
consideration for, or an inducement to or condition of, the
employment of any employee.
17.4 INCOMPETENCY
If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to care for his or her affairs
because of illness or accident, or is a minor, or has died, then
any payment due him or her, or his or her 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 or
her 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.
39
<PAGE>
17.5 ALIENATION
Except insofar as may otherwise be required by law, no amount
payable at any time under the Plan and the Trust shall be subject
in any manner to alienation by anticipation, sale, transfer,
assignment, bankruptcy, pledge, attachment, charge or encumbrance
of any kind nor in any manner by subject to the debts or
liabilities of any person, and any attempt to so alienate or
subject any such amount, whether presently or thereafter payable,
shall be void. If any person shall, or attempt to, alienate, sell
transfer, assign, pledge, attach, charge or otherwise encumber any
amount payable under the Plan and Trust or any part thereof or if,
by reason of his or her bankruptcy or other event happening at any
such time, such amount would be made subject to his or her debts
or liabilities or would otherwise not be enjoyed by him or her,
then the Committee, if it so elects, may direct that such amount
be withheld and that the same or any part thereof be paid or
applied to or for the benefit of such person, his or her Spouse,
children or other dependents, or any of them, in such manner and
proportion as the Committee may deem proper.
17.6 AVOIDANCE OF ESCHEAT
If the Committee cannot ascertain the whereabouts of any person to
whom a payment is due under the Plan, and if, after eighteen (18)
months 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
(3) months after such mailing, such person has not made written
claim therefor, the Committee, if it so elects, may direct that
such payment and all remaining payments otherwise due to such
person be cancelled on the records of the Plan and the amount
thereof applied as a forfeiture under Section 4.4 for the Plan
Year in which the Committee makes such direction and, upon such
cancellation, the Plan and the Trust shall have no further
liability therefor except that, in the event such person later
notifies the Committee of his or her whereabouts and requests the
payment or payments due to him or her under the Plan, the amounts
so applied shall be paid to him or her no later than ninety (90)
days following the Allocation Date coincident or next following
the date such notification is received by the Committee, in a
single sum distribution as provided in Section 9.6.
17.7 FILING INFORMATION
Each Member or other interested person shall file with the
Committee such pertinent information concerning himself or
herself, his or her Spouse and his or her Beneficiary as the
Committee may specify, and no Member, Beneficiary, or other person
shall have any rights or be entitled to any benefit under the Plan
unless such information is filed by or with respect to him or her.
40
<PAGE>
17.8 THE TRUST
(a) The Trust Agreement constitutes a part of the Plan. Any and
all rights or benefits accruing to any person under the Plan
shall be subject to the terms of the Trust Agreement.
(b) Except as otherwise provided in this Plan, in no event shall
any part of the Trust Fund be used for or diverted to any
purposes other than for the exclusive benefit of Members and
their Beneficiaries under the Plan.
17.9 COMMUNICATIONS TO FAB AND THE COMMITTEE
All elections, designations, requests, notices, instructions and
other transmittals or communications from a Participating Company,
a Member, Beneficiary or other person to Fab or the Committee
required or permitted under the Plan shall be in writing, made in
accordance with such procedures as the Committee or Fab may
establish, shall be in such form as is prescribed from time to
time by Fab or the Committee, shall be mailed by first class mail
or delivered to such location as shall be specified by Fab or the
Committee and shall be deemed to have been given and delivered
only upon actual receipt thereof by such party, at the location
specified thereby.
17.10 COMMUNICATIONS TO MEMBERS
All notices, statements, reports and other transmittals or
communications from aEParticipating Company or the Committee to
any Employee, Member, Beneficiary or other person required or
permitted under the Plan shall be in writing and deemed to have
been duly given when delivered to, or when mailed by first class
mail, postage prepaid and addressed to, such Employee, Member,
Beneficiary or other person at his or her address last appearing
on the records of the Company or the Committee.
17.11 CAPTIONS AND REFERENCES
The captions preceding in 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 provision of the Plan. Except
where indicated to the contrary, all references to Sections are to
Sections of this Plan.
17.12 GOVERNING LAW
The Plan and all rights thereunder shall be governed by and
construed in accordance with ERISA and the laws of the State of
New York.
41
<PAGE>
IN WITNESS WHEREOF, this plan has been duly executed by an authorized officer of
the Company on the Effective Date and is hereby reexecuted this 21st day of
September 1995, to include amendments mandated by the Unemployment Compensation
Amendments of 1992 and the Omnibus Budget Reconciliation Act of 1993.
FAB INDUSTRIES, INC.
[SEAL]
By /s/ Samson Bitensky
-----------------------------------
Attest Samson Bitensky , President
/s/ Kym M. Hayes
- -----------------------
Secretary
42
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Fab Industries, Inc.
New York, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Registration Statement on Form S-8 filed June 28,
1993, the Registration Statement on Form S-3 filed January 31, 1992 and the
Registration Statement on Form S-8 filed June 9, 1989 of our report dated
February 9, 1996 relating to the consolidated financial statements and schedule
of Fab Industries, Inc. and subsidiaries appearing in the Company's Annual
Report on Form 10-K for the year ended December 2, 1995.
We also consent to the reference to us under the caption "experts" in
the Prospectus forming a part of such Registration Statements.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
New York, New York
February 26, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<CURRENCY> U.S. Dollars
<S> <C>
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<PERIOD-START> DEC-4-1994
<PERIOD-END> DEC-2-1995
<EXCHANGE-RATE> 1
<CASH> 7,883
<SECURITIES> 54,674
<RECEIVABLES> 35,717
<ALLOWANCES> 500
<INVENTORY> 27,267
<CURRENT-ASSETS> 127,011
<PP&E> 104,223
<DEPRECIATION> 72,644
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0
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<COMMON> 1,309
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<SALES> 182,000
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<CGS> 154,956
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<OTHER-EXPENSES> 17,342
<LOSS-PROVISION> 400
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<INCOME-PRETAX> 13,760
<INCOME-TAX> 4,350
<INCOME-CONTINUING> 9,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 9,410
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